Aeorema Communications (LSE:AEO) — Interim Results

0:00 Good morning and welcome to the AEOREMA COMMUNICATIONS PLC Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Steve Kwa. Good morning to you, sir. Good

0:31 morning. Thank you, and welcome. Hopefully, some new years and old years. So this is an update in our investor announcement yesterday. I'm gonna take you through kinda give you some color to our last announcement. For those who don't know, I'm the CEO of twenty first in the AEOREMA COMMUNICATIONS. I'm the happy founder. You'll also meet Jamie Blackwood, who's RFD. Gonna take you a little bit of an intro for ARIMA for those who don't know us. And those who do know us, it may be a bit of a repeat, but apologies for that. A little bit about the market trends at the moment. Jamie gives some more color on the results and actual numbers, bit of an outlook for the future, and some of our latest work, and then we'll have q and a at the end. For those who don't know who we really are and what we do, we are global award winning strategic communications group. We have offices in London, New York, and Cannes over 60 employees and sixty years worth of experience in the management team. So we are we look quite young for age.

1:33 What does that actually mean? What do we actually do? We get asked that a lot. So, basically, in the simplest form, if you're a brand or organization or have have an audience need to connect in a live format, that's what we do. So via conference, an exhibition, brand experience, a webinar such as this, we connect brands with audiences, and our expertise in doing that is why brands come back to us and work with us. We work very globally. I'm happy to say that we pretty much have a global reach across the globe, working pretty much all the markets that require our needs. Just a reminder on the investment case for the the AIM fans, we are profitable. We are a robust growth plan. We make cash. We pay dividends.

2:19 We have a great management team. We are seen as leaders in the markets, and we win lots of awards for our great work, and we are very believe in diversity inclusion. Market trends. One must say there is quite a lot of disruption in the world. The geopolitical kind of landscape is ever evolving, and it is tough. But despite that, we are winning new work and, new clients, and we continue to grow, which is reassuring for our shareholders.

2:52 When we last spoke, there was focus and there was an election time, I think, last November, which kind of created some disruption in the market. But what we how we responded to that was trying to maintain and retain our clients, which we've done very well. There are pressures in the margin. We'll show you in a little bit later about how we're actually focusing on rebalancing our operational costs and looking how we can improve our performance, be more agile, and bring our commercial. I'll then hand over to Jamie now who's going to talk you through our results that we announced yesterday morning. Thank you, Jamie. Thank you, Steve, and good morning all. I'm here to just run through the key highlights from the interim accounts that we released the market yesterday.

3:37 These are for the period July to December 2024. So let's take a look. Revenues. So revenue was up 10% year on year at £7,200,000. This is very much on the back of successful new wins, new clients in The US. So The US is very much a growth area at the moment. Three new clients, three new projects within h one, which helped to, yeah, to the record year. As you can see from this graph, a record h one and year on year growth. Just a reminder that h one is is our weaker period in terms of revenue, and h two is always a stronger stronger period, especially with the work that we do at Cannes Lines in June.

4:30 But we're certainly seeing September become a busier month, and we expect that to continue going forward. And then just looking at the loss for the period, significantly down on last year. It should be noted that, as Steve mentioned, there is continued pressure on margins, inflationary pressure. We use a lot of freelancers, and rates have suddenly come up over the last few years. And there's been wage inflation over the last four years, which has put increased pressure on margins and just managing client expectations. But despite that and despite the the the restructure that we went through during the period, we cut our headcount by 20%, down 15 since the start of the new financial year.

5:21 Despite that, the loss has fallen. That's been helped by a focus on driving down indirect costs, a focus on internal budgets, and just a bit of financial discipline. So, yeah, the loss is down compared to the previous period.

5:38 And the cash balance as of today of £2,750,000, and an average cash position over the last twelve months of £2,000,000, which reflects our financial stability and strength.

5:56 As announced in the market release yesterday, it's the board's intention to begin a share buyback program. In due course, this will be up to equivalent of 5% of the group's share capital, and a announcement will be made in due course with further details. But the board felt this reflected its confidence in the business and the group's financial resilience, especially moving forward. As also announced, the group is changing its year end. Currently, thirty thirtieth of June. We'd be moving to the December 31 with an extended eighteen month period to the end of 12/31/2025. This should help with reporting.

6:45 As mentioned, June is our busiest period, and it's certainly a strain in terms of the audit and reporting to the market when the final week of the year is our busiest year busiest month. Sorry. And, also, as mentioned, the board is very much committed to paying a dividend based on the interim results for the twelve months of 06/30/2025 rather than waiting for the eighteen month period ended 12/31/2025. And I'll pass you back to Steve who will go through the outlook. Thanks for that, Jamie. Delighted to report our first record half h one, as Jamie says. So a little bit color about our growth journey and how we actually are growing the business.

7:31 An interesting slide just points out our average project size has been grown dramatically to about 200,000. Lots of reasons behind that, our investment in our account team, but more the fact that we're selling much more consultative services, more of our fees for our time and our thinking, and growing our kind of client relationship over a period of twelve, twenty four months. So that's encouraging trend. The cross fertilization, these are two trading brands, shift for twenty first being the Mothership, our lead brand, an agency in New York and Canada, London, and Eventful, who is our kind of more boutique specialist for incentive travel venue search. They cross fertilized beautifully. We work very well together, sometimes unusually. That doesn't happen in the group, but for us, it's a very synergistic relationship, which proves very fruitful for our business.

8:23 Diversity. We have quite a lot of noise around the work we're doing in Canada lines. That's because we can talk about that. But a large part of our business is also b two e, which is class conferences and working with different types of brands. So there is diversity in our revenue stream, which also kind of feeds into the strength of our performance. We're not reliant on one type of industry and one type of brand, which is very reassuring. Our client base is also quite mixed. 70% of our base is b two b, and 30%, as I say, is in professional services. Again, two very different markets, but all global brands.

9:04 Power growth success is we retain our clients and retain and develop and grow. And we are partners with a lot of our brands, and particularly the last twenty four months, we have pretty much nearly a 100% retention rate, which has been the mission in these kind of politically uncertain times to continue business as normal. The outlook is strong. We predict and the industry generally globally is predicting an 80% increase in number of in person events by brands, either power of in person events, the power of live events, and live experiences, and the things that we do are actually paying fruits for the the marketing and growth plans for our brands, which is very healthy.

9:53 We're seeing a spend we've returned to the sorry. Seeing a return and spend to our technology sector. Last year, there was a quite a lot of disruption with a lot of the big tech brands, probably everyone knew that in the news. That is settled down now, and we're seeing growth back with our technology clients, which is very encouraging. Just recently, within the last month, we've signed three large new multinational clients, one in the pharma sector, one in the fitness sector, and one in the technology sector, which again just goes back to business is strong. And for those who are probably aware, we have a tempo kind of a campaign, our Cannes Alliance, and we successfully were at the Davos beginning this year with the World Economic Forum. Very successful, and we're getting bookings again for those next year.

10:47 And we've done a lot of internal kind of reviewing of our proposition. And audience above all is a super strong kind of rationale and our proposition, and it's kind of our DNA and how we operate, which we're launching we've soft launched that with some our clients. It's been very successful, and we're go to market pretty soon moreover.

11:08 Confidence in our pipeline. H three, which is our extended year, which is the latter part of this, is very strong. So we're seeing good confidence with our clients. We're seeing buying patterns coming back, and we're seeing strength in in bookings and needs, which is very encouraging.

11:28 Financials, just to repeat. So, look, we have cash in the bank, 2,790,000. As Jamie has said, our average has always been 2,000,000. That does put us in a very strong confident position, one with our suppliers and our clients and our and ourselves. Dividends. We are a dividend paying business, and we continue to do that. Our reputation is super strong. With our clients, we're also in the industry, so we still attract the best talent. Nimble is a feature now that you have to be in today's kind of agency world, becoming much more agile and adapting to changes we see, and that's shown in our results. Our pipeline is strong. Our relationships with our clients is super super sticky, and our outlook is looking very good for the rest of this year. I will end on a case study of Smarty, which kind of optimizes how we work with a brand. Smarty came to us with a very small project.

12:24 We have grown that relationship to multiple projects over a calendar year, and then that relationships in a contract over three years. It started with a small activation at CES Las Vegas. We then went to Cannes Lines with Smartly, and then we did a huge premier event for them in New York, the sales conference, resulting in signing a contract for doing it again this year and the year after. Smartly are a brilliant partner brand. They have absolutely locked into kind of our values. We understand them, and it's a true partnership. And this is how we work with a lot of our brands. And going back to that growth in our average project size, that is the reason. We

13:05 sit very much at the high level decision process within the organization, and we can offer our value and our expertise. I will run you a video. Smartly, this was an event in November in New York. The the American part of the business is growing very strongly, by the way. The the three client wins I mentioned earlier have actually come out of The US, and that continues to be a big growth part of our business. Smartly was a their premier first time they came up with a an event, which is to talk to all their clients and existing connections. It was a c suite high profile event. It was the first time they've done it, and we worked them from the ground up to develop, ideate, design, and produce the event. Huge success.

13:55 Great to work on as well. So there's a lot to be a of fun. We shall run the video, please. Welcome to Advance. Today's conversations will show us how to surprise and delight consumers, to fuel business growth, to drive forward to the next era of brand love and advertising for good. People follow purpose, and I think purpose drives performance. What is advertising for good for Meta? It's around being the power and the force to move positive change in the advertising industry in general. There's really not a more exciting place to be right now at the intersection of content, of culture, of data, of tech, of AI.

14:39 We are in the business of invention, and we're in the business of doing things differently. This new era ahead of us that is more personalized and more creative than ever before will change everything. We're experiencing a tectonic shift in creativity. Focusing more on creativity just opens so many more doors. The future of advertising is strong and vibrant and innovative. Innovative. We can power advertising for good. Let's think differently. Let's advance together. A brilliant event.

15:27 Hugely successful, great fun, and as I say, building on a brilliant relationship going forward. I shall now remind everybody that, again, the investment case is still super strong, particularly in AIM, as in we're paying dividends. We're very profitable. We're robust. We are cash positive. Great management team, market leading. We We win win lots of awards, and we respect the world around us. That is the end of our session, but let's have some questions and hand over to q and a. Perfect, Steve, Jamie thanks very much for your presentation. Ladies and gentlemen please do continue to submit your questions and you can do so just by using the Q and A tab which is situated on the top right hand corner of your screen. But just while the company take a few moments through the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

16:21 As you can see, we have received a number of questions throughout today's presentation. And Steve, if I could hand back to you just to share the Q and A, that would be great and then I'll pick up to me at the end. Thank you. I should read the question out. Revenue has increased compared to the previous period. What are the key drivers behind this change?

16:41 Two two factors. The the our American operation continues to grow, and the the new wins in h one were actually down to our American office, which contributed to basic to new clients. They're also growing our client relationship with some existing clients with the drivers behind it. But it's new wins and new business primarily behind that.

17:04 Are there any specific business activity sectors outperforming underperforming expectations. Well, no one's underperforming, but happy to say the American operation is going strong. And, obviously, there's a lot lot going on in America. So despite that, we are pleasantly surprised that Pokano is kind of business as usual, and brands are just getting on with the business of their business.

17:34 The interims mentioned specific cost saving measures, operational changes. How effective have these been so far? Are there more to come? The the changes we made were actually probably impacted more just the beginning of our first half of this year, so we activated them this year. They are having the benefits. They were gonna full benefits of the cost reductions next year. Are there more to come? We are constantly reviewing kind of the operational model. I don't think there'd be more significant operational changes, but that's paying dividends now, and we'll pay benefits in the future. The question

18:25 Jonathan c, is the fall in margin stabilizing or is the decline likely to be an ongoing issue? Or do you do you manage to believe they can recover to previous levels? The the margins are stabilizing. We're seeing an improvement this year. Our ambition is to get back to those levels of previous margins. There there's a certain amount of margin pressure on suppliers. Suppliers can easily put their prices up immediately.

18:55 It's harder for us to pass it on to our clients, but over a period of time, that will rinse itself out, and our ambition to get back to around previous levels to improve those. Does the change of year end mean broker resource for forecast will be more likely? Absolutely more likely. Many reasons why we changed our end of the year. For those who know our business, the busiest day and the busiest month was actually the last day of our financial year, which puts all sorts of pressures on management of the actual projects, also reporting the accounting. So now we have now put the busiest part of our year in the middle of our year. We hopefully have some better foresight and forecasting, which we can share with the market.

19:43 Is the company investing in AI technology or digital transformation to enhance efficiency and service quality? Yes. We are. We have our internal AI steering group to keep an eye on developments, but we are certainly using it in our production line, in our process line, in our creative line. People are becoming advocates of chat GPT and AI tools. It is making so many impacts in inroads operationally. The other side of the coin is that it's actually impacting how we actually run events and actually the technology we can use at events, which is very exciting. Are there any competitive threats, new market entrants, or set to consolidations that could impact the business?

20:32 Well, there's always challenges in the market. There's always people chasing after us. We are still seen as a little bit of a leader and brand groundbreaker, a little bit of an outlier in the agency world, we need to to do. I wouldn't say there's any unusual threats that are beyond normal running a business. I do hear that other agencies are finding it slightly tougher in the market. So because we are in a strong financial robust position, we could be more more considered in our running our business, which makes us even more stronger. Industries or geographies are showing the strongest growth and which are lagging?

21:18 Have I asked that question? America. America is showing great growth. The rest of the industry is business as usual despite the sort of geopolitical disruption at the moment, both home home in home and abroad. I'm just looking to I think that's most of the questions. Let me see if there's any more. Maybe maybe repeat. How does the cost reduction rebalance in program contribute to the improvement? That's fine. You're done. Sorry. Okay. I think that's all all one more at the end.

22:11 High impressive revenue growth and indirect cost management, but your gross margin is obviously the area that is declining. Are there levers you can pull to improve gross margin either through increases in price and cost delivery, or will clients not stomach increased price these things? As I said before, there's a focus on getting back to kind of the margins that we used to enjoy in previous years. The the pressure on margins is leveling out, and we're going through a process around how we rationalize and improve our fee structure to improve that position. It's it's across the industry, by the way. It's not unique to us. We're actually doing better than most as a margin percentage, but we will improve that. Will clients stomach increase prices? They will stomach prices so they see the value. It's not just a matter of improving your number. We can demonstrate better value. We'll get better margins back.

23:12 Okay. Think I've answered all the questions there. Perfect. Steve, Jamie, you very much for answering those questions from investors. Of course, the company can review all the questions that have been submitted today, we will publish out the responses on the investor meet company platform. But just before redirecting investors, provide you their feedback, so that's particularly important to you both. Steve, could I just ask you for a few closing comments? Yeah. The the agency as we are at the moment is in a very strong robust position, just to reemphasize that. We are seeing great growth in our pipeline going forward. A lot of outside shareholders assume that, you know, the world we live in is having a direct impact in everything we do. It is.

24:02 But as I've said before, we are making internal changes to improve our margins. We're getting a good strong pipeline, and we're changing kinda how we operate, which is fantastic. So bring it on. Steve, Jamie, thank you once again for updating investors today. Could I please ask investors not to close this session? As you know, we automatically redirected to provide your feedback in order the management team can better understand your views and expectations. It's gonna take a few minutes to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Aura Communications PLC, we'd like to thank you for attending today's presentation, and good morning to you all.