Arena Events Group Plc reports 184% EBITDA growth in 2019 and 5.7 pp EBITDA Margin growth from 4.2% to 10.0%
11 Feb 2020 • About Arena Events Group Plc (
$ARE) • By InTwits
Arena Events Group Plc reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
- Arena Events Group Plc is a growth stock: FY2019 revenue growth was 20.5%, 5 year revenue CAGR was 13.9% at FY2019 ROIC 3.8%
- EBITDA Margin is quite volatile: 10.0% in FY2019, 4.2% in FY2018, 5.1% in FY2017, 7.1% in FY2016, 9.2% in FY2015
- Arena Events Group Plc has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.8%. At the same time it's a lot of higher than industry average of 3.8%.
- CAPEX is quite volatile: £12m in FY2019, £11m in FY2018, £7m in FY2017, £4m in FY2016, £7m in FY2015
- The company has potentially unprofitable business model: ROIC is 3.8%
- It operates with high leverage: Net Debt/EBITDA is 3.4x while industry average is 2.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Arena Events Group Plc's Revenue jumped on 20.5%. Revenue growth was accelerating on average by 5.3 pp per annum in FY2015-FY2019. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.6 pp from -2.9% to -1.3% in FY2019. During the last 5 years EBITDA Margin bottomed in FY2018 at 4.2%.
Gross Margin showed almost no change in FY2019. During the last 5 years Gross Margin topped in FY2017 at 32.5% and was declining since that time. SG&A as a % of Revenue decreased on 3.0 pp from 31.0% to 28.0% in FY2019. During the last 5 years SG&A as a % of Revenue topped in FY2017 at 32.2% and was declining since that time.
Net Income margin increased on 2.5 pp from -1.5% to 1.0% in FY2019. Net Income margin followed a growing trend at 1.2 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 7.3% in FY2019. Arena Events Group Plc's CAPEX/Revenue increased on 2.9 pp from 4.4% in FY2016 to 7.3% in FY2019. It's average CAPEX/Revenue for the last three years was 7.3%. Arena Events Group Plc invested a big chunk of EBITDA (73.5%) to CAPEX to fuel its growth.
Return on investment
The company operates at low ROIC (3.8%) and ROE (2.4%). ROIC increased on 3.8 pp from 0% to 3.8% in FY2019. ROE increased on 5.5 pp from -3.2% to 2.4% in FY2019. During FY2015-FY2019 ROIC bottomed in FY2018 at 0%. During FY2015-FY2019 ROE bottomed in FY2016 at -150% and was growing since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.4x and Debt / EBITDA is 3.9x. Net Debt / EBITDA decreased on 0.1x from 3.5x to 3.4x in FY2019. Debt jumped on 131% while cash increased on 8%.
Arena Events Group Plc has short term refinancing risk: cash is only 73.6% of short term debt.
Valuation and dividends
The company's trades at EV/EBITDA 5.4x and P/E 19.2x.
Financial and operational results
FY ended 30 Nov -0001
Arena Events Group Plc ($ARE) key annual financial indicators| mln. £ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 85.8 | 93.2 | 109.6 | 135.0 | 162.7 | 20.5% |
| Gross Profit | 23.7 | 29.3 | 35.6 | 41.8 | 50.0 | 19.6% |
| SG&A | 22.7 | 28.3 | 35.3 | 41.8 | 45.5 | 8.9% |
| EBITDA | 7.9 | 6.6 | 5.6 | 5.7 | 16.2 | 184.2% |
| Net Income | -3.0 | -3.9 | -3.2 | -2.0 | 1.7 | |
Balance Sheet
|
|---|
| Cash | 1.9 | 1.6 | 4.3 | 7.5 | 8.1 | 8.0% |
| Short Term Debt | 2.3 | 1.9 | 0.7 | 0.7 | 11.0 | 1,471.4% |
| Long Term Debt | 44.7 | 63.3 | 16.0 | 26.8 | 52.6 | 96.3% |
Cash flow
|
|---|
| Capex | 6.7 | 4.1 | 6.7 | 11.3 | 11.9 | 5.3% |
Ratios
|
|---|
| Revenue growth | 1.2% | 8.6% | 17.6% | 23.2% | 20.5% | |
| EBITDA growth | -0.2% | -16.3% | -15.2% | 1.8% | 184.2% | |
|
|---|
| Gross Margin | 27.6% | 31.4% | 32.5% | 31.0% | 30.7% | -0.2% |
| EBITDA Margin | 9.2% | 7.1% | 5.1% | 4.2% | 10.0% | 5.7% |
| SG&A, % of revenue | 26.4% | 30.4% | 32.2% | 31.0% | 28.0% | -3.0% |
| Net Income Margin | -3.4% | -4.2% | -2.9% | -1.5% | 1.0% | 2.5% |
| CAPEX, % of revenue | 7.8% | 4.4% | 6.1% | 8.4% | 7.3% | -1.1% |
|
|---|
| ROIC | 3.4% | 1.7% | 0.4% | 0.0% | 3.8% | 3.8% |
| ROE | -59.1% | -150.3% | -11.5% | -3.2% | 2.4% | 5.5% |
| Net Debt/EBITDA | 5.7x | 9.6x | 2.2x | 3.5x | 3.4x | -0.1x |
Peers in Diversified Support Services
Below we provide Arena Events Group Plc benchmarking against other companies in Diversified Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | | -3.8% | -44.5% | 5.1% | 11.2% |
| |
|---|
| Median (1 company) | | -3.8% | -44.5% | 5.1% | 11.2% |
|---|
| Arena Events Group Plc ($ARE) | | 8.6% | 17.6% | 23.2% | 20.5% |
Top companies by Gross margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | 12.8% | 8.4% | 14.9% | 14.3% | 15.5% |
| |
|---|
| Median (1 company) | 12.8% | 8.4% | 14.9% | 14.3% | 15.5% |
|---|
| Arena Events Group Plc ($ARE) | 27.6% | 31.4% | 32.5% | 31.0% | 30.7% |
Top companies by EBITDA margin, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | 3.7% | -6.6% | 4.3% | 4.6% | 4.6% |
| |
|---|
| Median (1 company) | 3.7% | -6.6% | 4.3% | 4.6% | 4.6% |
|---|
| Arena Events Group Plc ($ARE) | 9.2% | 7.1% | 5.1% | 4.2% | 10.0% |
Top companies by CAPEX/Revenue, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | 0.3% | 0.3% | 0.5% | 0.2% | 0.3% |
| |
|---|
| Median (1 company) | 0.3% | 0.3% | 0.5% | 0.2% | 0.3% |
|---|
| Arena Events Group Plc ($ARE) | 7.8% | 4.4% | 6.1% | 8.4% | 7.3% |
Top companies by ROIC, %
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | 6.1% | -43.2% | -5.7% | 4.6% | 10.3% |
| |
|---|
| Median (1 company) | 6.1% | -43.2% | -5.7% | 4.6% | 10.3% |
|---|
| Arena Events Group Plc ($ARE) | 3.4% | 1.7% | 0.4% | 0.0% | 3.8% |
Top companies by Net Debt / EBITDA
| Top | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Sureserve Group Plc ($SUR) | -0.5x | | 0.2x | 1.3x | 0.7x |
| |
|---|
| Median (1 company) | -0.5x | | 0.2x | 1.3x | 0.7x |
|---|
| Arena Events Group Plc ($ARE) | 5.7x | 9.6x | 2.2x | 3.5x | 3.4x |
