Avesco Results And Board Change

Good interim results underpin our expectation of very strong profits growth in FY12. Avesco is a major beneficiary of the Olympics but also of a more general trend to live events, internationally. The departing CEO has presided over a successful period of growth and we believe that Avesco is in good shape to deliver sustained profitability, with the potential 2013 Disney payout (worth up to 140p) an added attraction.

Interim results showed like-for-like revenue up 12% and normalised PBT of £1.4m (FY11: loss of £0.3m). Creative Technology performed strongly and Full Service benefited from the prior year restructuring. Our full year estimates are unchanged, with H2 benefiting from major events in the UK: the Diamond Jubilee (Avesco provided the giant screens in Trafalgar Square and St James’s Park), Euro 2012 and the Olympics.

The announcement was accompanied by news that CEO Ian Martin is leaving after a successful 10 years at the helm. He has presided over a decade of organic growth and international expansion, albeit with ups and downs in profitability in what is inherently a cyclical business. The head of CT Europe (David Crump) has been promoted to the board (after 25 years with the group), a new non-exec appointed (Carmit Hoomash) and a decision about a new CEO will be made in due course.

Management’s confidence in the future is reflected in the introduction of a 1.0p interim dividend. FY13 will be a quieter ‘odd’ year, reflected in our revenue estimate, but the risk to profit estimates is probably on the upside as underlying margins are improving. The verdict on the Disney/Celador case is still expected in 2013. We will release a full Outlook report shortly. After drifting back slightly in the last few months the shares stand below the 146p NAV and an 8.7x FY12e EV/EBIT multiple is undemanding, even before the hoped-for US$60m Disney windfall (worth 140p per share).

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