Arena Events Group PLC (LON:ARE) is excitingly poised to use its IPO enhanced strength (FY17 net debt/EBITDA of just 1.1x) to accelerate a well-defined, proven strategy. International replication of its successful integrated UK model is likely to be a prime move, facilitated by prestigious reference customers and highly fragmented markets. Meanwhile trading continues to be encouraging with 2017 adj. EBITDA up 25% and a ‘healthy’ Q1, bolstered by two acquisitions and the promise of more. Valuation appears undemanding (6x 2018e EV/EBITDA), while a progressive dividend policy offers almost 4% yield.
At full-bore
In 2017, its first year as a public company, Arena delivered 18% revenue increase at improved margin. Impressively, the majority came from organic growth and new contract wins (especially in the US but progress was across the board) with the rest from currency and UK acquisitions. Capex and efficiencies drove the 110bp gain in gross margin which led to 25% higher EBITDA, adjusted for exceptional costs of £4.9m relating mainly to the IPO and restructuring in the US and UK. After £56m IPO proceeds, low year-end net debt (£11.5m) afforded a 0.9p final dividend in line with management’s intended balance between capital investment and dividends.
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