Aeorema Communications (LSE:AEO) — Investor Presentation

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

0:28 Good morning. Thank you. Good to be back again. So following our trading update last week, we're gonna do a presentation, a mix of people who do not know us. So excuse the fact I might have explained stuff down to the guys and girls that know us. Hello again. So are we in communications? Where are we? We're a global award winning strategic communications group. We are based in London. It's the mothership, but New York and Amsterdam are two other offices, 60 plus employees, and over sixty years of trading. But what do we actually do? And in its simplest form, you have a brand, a business, or organization that wanna connect to an audience, primarily in a live medium, we do that process. Strategy, creativity, delivery, conferences, exhibitions, road shows, brand experiences.

1:17 That's what we do. Later in the deck, I'll show you some examples of our recent work to give you a better idea of exactly what type of work we do. I I'm the CEO, proud to be a CEO of AEOREMA and of our two trading companies. Been around for forty odd years with lots of brands, and I have been running agencies since the age of 21. In the industry, we have two brands that are known. Twenty first is the bigger part of the business, which is based in London, New York, and Amsterdam. As it says here, strategy to delivery, content, moving image, creating the best brand experiences, and winning multiple awards. Eventpool is our sister agency, a beautiful boutique agency, another part of the live business, which is around venue search, incentive travel, and high net worth kind of meetings. They complement our services as a broad spectrum in that live event production space.

2:11 Like the slides, you know, on on the aim, hopefully, fairly unique that we are profitable, robustly growing, cash positive. We pay dividends. We have a very strong management team, and we lead in the markets. It's not just us saying that, our industry peers saying that. We win lots of awards and the best awards. Some of the most pictures is rewards in our industry, and we have a big CSR policy to be net zero by twenty fifth. For the first time, I'm gonna introduce Jamie, my FD, who's gonna give you a trading update. Jamie joined us in 2018, sits, us on the board and works obviously across the business both in America and The UK. Trading update. Over to Jamie. Thank you, Steve, and welcome all.

2:57 First time as mentioned, but I'm here to give a trading update. So let's start with a I'm sure most of you are aware, disappointing h one. Revenue down 500,000 and a loss of a 250,000. But on more positive notes, page two, a near record in terms of profits and certainly record in terms of revenue. Extremely busy May and June. Delivered 14, activations at Cannes Lions, as Steve will go through later in this deck, as well as multiple other events in June for a number of professional service companies. For the full year, we are expecting profit revenue, sorry, of no less than 20,000,000, broadly in line with last year, and, unfortunately, profits of no less than £400,000 down on a million pounds last year.

3:54 This ultimately due to a number of reasons. One, over hiring. We scaled up on the anticipation that growth would continue. Unfortunately, revenue has stalled in the year just gone. We've also, as I shall explain, on the slide where we've just come from, we've witnessed within the industry a number of delays in decision making and spending from our clients, most notably, the tech industry, as I'm sure you're all aware and have seen in the news.

4:29 A number of the tech companies have made redundancies. We've had knock on effect of cut budgets and delays in spending. We've most most notably £2,000,000,000 of contracted work, which we expected to fall within f y twenty four, is now being delivered in f y twenty five.

4:52 Where else have we come from? So we've experienced since post COVID reopening business to employee. This covers most professional services. It's returned in person, and we're seeing growth in this area, partner conferences, etcetera, among professional services. And then business to business, b to b, this covers most notably our tentpole events. So CAM Lines being the predominant, CES in Las Vegas in January, OMR in Germany in May, and a number of others throughout the year. This is where our account model has really come into its fore. We're starting to get foresight with all our clients regarding what events they're attending during the year, and this has really helped us with forecasting moving forward.

5:41 So that's where we've come from, and this is where we're going or where we are. Sorry. Near record h two profits as mentioned, an intention to maintain our dividend policy. And early indications at f y twenty five, we'll see an improvement in profitability. Why, you may ask? Well, we've adjusted our business model. So, predominantly, revenue falls 60% in h two and, 30% in h one. So we have taken the steps post year end to reduce our headcount. That's across the board. So that includes direct salaries and indirect salaries to help rebalance the company as we move forward.

6:27 And, hopefully, this will have an impact on our profits moving forward. We're also reviewing our indirect costs. So, you know, marketing new business and trying to make sure that we're spending money where appropriate and reducing any waste. So, hopefully, this will pay dividends for the year to come. And I'll pass you back across to Steve. Thanks, James. So as James says, the pipeline for '25 is looking strong.

6:56 Clients returning back to kind of pre pandemic patterns. I've talked about it earlier and some other presentations around the seasonality coming back. So we're now with a better lock on when the hotspots are in the year. America continues to develop and grow. We're actually producing four events in September next this September coming up, so it gives you an indication of growth there. Current planning kind of within the brand itself, we're looking at doing a bit of a refresh and put some IP around our process and our approach, and we're gonna launch that probably in the next month or so. So watch this space of your presentation on that. And as Jamie says, we're just restructuring and reducing costs. We have such rapid growth for the last few years. It's probably just time to take stock, regroup, refocus, retune, and and go back to kind of, you know, generating more significant profits as we have done in the past.

7:45 Summary on that is, obviously, cash is strong at 3,100,000 in the bank. We're committed to paying dividends. That just showed confidence in the business. Our reputation in the industry continues to grow and is strong and recognized by our peers both in The US and Europe. Nimble, I think the fact that we saw Nimble and agile enough to go to flex and adapt to the market conditions is a key part of our strengths. As I said, pipeline is strong. The bookings are looking very healthy.

8:13 Relationships with our clients are as sticky as ever. Can't say we report any client losses, which is great. And outlook is continue that momentum as we go continue to grow over the years. Just a reminder, our vision around our our core strategy is obviously to be, you know, a a leading fully integrated brand experience agent offices in multiple markets. North America's a big growth for us, but Europe and Middle East is also a potential target for us. Culture in this world with the employee being king is to maintain and attract the best talent. So one on a level about what our culture is, but also maintaining an environment where talent can thrive and do the best they can. And, of course, back to growth, continue to grow, and attract our clients along that journey.

9:03 Little snapshots. I've shown this before, but it's worth noting that we swim in a very big pool. The UK market's 42,000,000,000. US itself is a 103,000,000,000, maybe two and a half times big, hence why we're in America. And globally, it's 800,000,000 plus. I think these stacks have actually grown. I think it's forecast to grow by another 30% in the next few years.

9:24 We do shout a lot about our what I call our shiny bright kind of can line 10 part activations that I'll show you later. But it's also very key that you also know we have a very strong internal professional service division that produces big partner companies with some of the biggest consultancies and legal firms in the world and represents 40% of our work. And as Jamie says, we would see that return back to normal levels of annual events, which is great as a big contributor. And that's how the business is growing back healthy again. And, of course, our b two b world is a is a 60%, so, you know, just over half, but it's significant and continues to grow. Our footprint and our activations, this is a list of events we've done recently. It continues to grow, so pretty much we can offer it anywhere in the world and have credentials in case issues and talent to supply that.

10:12 Let's talk about Lions. I know we talk about Lions a lot. So Cat Lions, for those of you who don't know, is a big festival held in Cannes. It's called the great and good marketing and advertising world. It is seen in the Oscar of the marketing world. It's like the Super

10:26 Bowl of creativity, and we produced 14 activations last June. Over 30,000 people attend this event. The outreach online is goes into the millions, and these are of the brands we have worked with and we continue to work with. One particular brand that we're very proud of is StagWorld. StagWorld came to us to with their first activation in 2023 where we reduced the team an amazing activation. Year two is likely this is our second album. Year two is to come back bigger, better, bolder, braver, and we did that. It's a truly great collaboration with Stagborn team to create what was seen as the best activation you can and the biggest activation you can.

11:12 I will run the video. Can you run the next video, please?

11:31 Big dreams. I got big dreams just like baby. And I'm more of one of those high class pre Madonna athletes. I've been joining forces with the lights of an exit. Yo, Elon. What's up, baby? What's going on?

12:14 My name is Flyjay Johnson. My middle name a hustler. Group of people with a vibe, energy. You don't get better than that. So that gives you a good idea of the activation. It has been seen as the best activation ever done in Canada. Isn't that our saying? This includes film festival. 17,000 guests through over five days. The stag world are super delighted and commercially been a huge success. Just to give you a snapshot, 32 panel sessions, a 160 interviews. We have had had it tunnel climbing our climbing wall, meetings in floating boxes. It was an amazing experience, and I'm super proud that we delivered that.

13:02 Needless to say, success in that radiates out,

13:06 and it's just hit is a a view of the beach. The wood in the beach is quite fun, by way. A lot. The sea comes in. Anyway, so you you may be familiar with people don't know us. The Wall Street Journal, we've always produced a big activation in the port in Cannes. This year, we couldn't because the port's been demolished and we referred. So we found a new building.

13:26 So we did Cannes Twenty Twenty Four in a new structure. And, again, just as successful credit to my team and credit to Wall Street Journal. It's such a fantastic client, again, collaborating with us to produce another brand experience for General House. This is what we did last year. So this year, we'll run a video. I'll show you this.

14:30 Quite a different activation, much different kind of audience demographic. And I've said before, Wall Street Journal will produce probably over 30 events in the year from and we're actually going to New York for the unit in Unga, The United Nations for in September. The success again is is it's just so nice to get such global report from our clients. Again, if you can read here, making it one of the best activations that we've done. June 21. We have a fantastic relationship with them. Slight different. One of our clients, Snowflake, and we're filling them slowly there. Big cloud based, American based business. Slightly different approach to this, slightly smaller activation, but just as effective. Was a bit more guerrilla, as I said, the old marketing days, a bit more ambient, a bit more playful.

15:23 Again, we're on the video. Let me show you.

15:29 And we are back at Cannes Lions reporting live as the biggest players in the ad world descend on the French Riviera. Oh, sorry. We've got some disruption. Is that Robbie? Are you getting this? Is that a snowflake in June?

16:54 So that gives you kind of a spread of the types of work we're doing in Lines. As I say, Cannes Lines is basically a convention where the brands, marketing brands, and the world come together. But as I've said before in previous presentations where there are other temporal events, that's the terminology our clients use, throughout the world.

17:15 CES invades online marketing voxels in Germany. So we are targeting all these to kind of repeat our success in Cannes. I'm delighted to say that we are activating at these places already and have recently talked them. Basel and Mobile World Congress, New York, Week, Mobile World Congress, and South by Southwest is another target for

17:33 us. As I said before, COMMUNICATIONS last year, it's a great success. We're running that again in September in New York. So credit to the New York team. That's another big global event for the great news who have come together to talk about climate and all the challenging that. And for our own CSR credentials and our own DNI policy, it's a great brand to be working with. And then finally, that, you know, we continue to be thought leaders in the industry where we continue to expand our brand playbook. We've done a thought leadership piece around the South by Southwest, why you should go there. Or recently, transit ports on canned lines, again, why you should go there and successes. And, of course, underpinning all that is we wanna work with an agent in such as ourselves. We, as I say, won lots of awards since last time. We won some more awards, best creative concept for StagWorld, best conference, and global ace of the year nominations that we hope to hear in the next couple of weeks if you want. That's just a testament to the quality of the standard we do. And going back to that reputation piece, we are feared by our competitors and loved by our clients.

18:36 Just to summarize again, you know, we are profitable, robust in our growth, cash positive, dividend paying, great management team, market leading and more winning net zero. So what's not to like? Very proud to say that. Thank you. Questions, please? Fantastic. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions just using the Q and A tab situated on the right hand corner of your screen. Just while the team take a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q and A, can be accessed via your investor dashboard. Steve Jamie, as you can see, had a number of questions submitted throughout today's presentation. Thank you to the investors for submitting those. Could I ask you just to click on that Q and A tab and where appropriate to do so, read out the question and give your response and I'll pick up from you at the end? Okay. I'm just looking to I think a good question is, can you provide more details on the cost reduction and rebalancing program?

19:38 What specific measures have been taken, and how will this impact probability five g 2025? Jamie, you wanna answer that? Sorry. Yes. I was sorry. Was looking for your questions. So this is covering cost reductions and rebounds. Yeah. So we've we know look. We understood that we'd overhired in the previous year, and so we've rectified that. So from July, we obviously had to deliver in June. And then since July, we've we've acted upon upon that, consulted with all our departments, and made the correct reductions when necessary across the board. So that covers, direct, salaries, direct individuals.

20:23 So, you know, working in the events department, our moving image department, our creative department. And we've also made reductions, in our indirects, so covering operations and HR. These were essentially necessary. We we'd scaled up in expectation that growth would continue, the growth we've seen over the last three years post COVID, and, unfortunately, that didn't materialize. So, look, we've made a significant reduction, and we expect that to have an impact on the year ahead. We hope that there's you know, that's gonna there's you know, we have quiet periods in the year, and we don't utilize the the the the headcount we had. So, hopefully, we're gonna utilize the resources we now have, match where the revenue falls, and hopefully, that's gonna have an impact.

21:17 We also acutely aware that we we need to reduce costs elsewhere. So we have been actively looking at our indirect costs. You know, that covers marketing, new business, and assessing where we can reduce costs moving forward to help improve profitability. So that's those are steps we've taken, and we will continue to review that throughout the year and try and make improvements wherever we can. Thanks, Jamie. I'll just add to that. We haven't it's such rapid growth. So there's a time for a slightly refocus and we adjust and then we can add cost center to kinda maintain your revenue, but also maintain our profits, which Jamie has done. Another question. Well, what are the timing drivers for the increase in the cash balance from 2.4 in 2023 and three 0.1 in 2024?

22:06 I can answer that. I think as Jamie has already said, we had a mega second half, the most profitable second half we ever had. And a lot of that work was constrained in the last six weeks of the year. Hence, we had a lot of revenue and a lot of prepaid contracts. So, basically, there's just more cash in the business because we just did more work. It's as simple as it has. Significantly more than the same period last year. What are the early indicators suggested improvement in profitability? Well, as I said, look, the the the pipeline for 2025 is looking strong. You know, we're adjusting our cost base. So, you know, even the same revenue with this next year, then our profits would be higher because, basically, it's less in our cost center. We we live in interesting times, but we're very confident, and the rebooking pace, particularly from Canada, has been actually very, quick.

22:58 So we're seeing kind of a little foresight coming up for other events coming up in the year. More questions? James says, you mentioned maintaining the policy. How do you do how do you balance maintaining the okay. Here we go. You mentioned maintaining the dividend policy. How do balance maintaining this with your needs of reinvesting growth? It is a balance, but we are very cash positive, and we do have cash in the bank. We don't have any debt. So while we're in a position to reward our investors, we also believe it's a sign of confidence. But, you know, the dividends are sensible, and it's all for investment. The other side of the coin is, you know, the biggest dividend will be growing the business. So there is a line between those two. And, you know, as as the dividend spread is very flat throughout the business. There's no major receiver that's it's just a fair way to, you know, my opinion.

23:51 Adam c. The market's clearly more difficult to have some of your posts have been fared. I would say the industry is going through another phase of change. The the adjustments that we are doing is quite common across similar agencies, depending on what the industry sector is. But as you know, America is such a big piece of anyone's client mix. Those adjustments and those delays and that short termism that we're seeing beginning of end of, actually, last year, beginning of this year, has affected everybody. They were going through the similar sort of evolution, if you like, in client's buying pattern. Doesn't make it doesn't make you feel better, but at least you know how people are going through the same thing. How important is it is for the company to be net zero by 2013? It is now a business critical part of your business.

24:40 The the brands that we work with and brands that we want to work with have a very strict DNI and sustainability policy that, you know, unless you are proven to be on that journey and proven it to actually demonstrating it with actual results and mission, you will not be selected as a partner. So that's the number one thing. Secondly, as a brand and as an agency that tries to attract the best talent, it's also driven by our culture here because we believe in it. So it's a key thing, and and it is is is a investment that actually pays dividends on lots of it, but it's quite a key thing. And then the creative agency, particularly in our world where there's deemed quite a lot of waste that we're building things once and not using it again. We have to be aware. Your president, sir James says, your president of major events like Cannes, Lions, and your all very positive, but how do you look at to leverage your reputation to win new business?

25:38 Awards are one of our tools for the marketing team to go out to market. We have a very proud to say we have a very strong and active and successful marketing team. Part of our investments over the last two years and part of our sunk cost was in a a very sophisticated back end marketing system with a CRM function that is paying dividends now. So we feed that into them. And and reputation is everything. The the halo effect and the referral part of the business is still a big driver of business, so we'll continue to leverage out and shout from the rafters. We win a lot of awards. We're quite unusual. We win a lot of awards. So we will leverage out and use that as a USP going forward. It also feeds into I mentioned earlier what we're going through a a brand reflex or refresh. We're looking at our DNA and looking at actually what makes us tick. And we're kinda codifying that and putting some IP around that to actually go to market.

26:33 And, again, just based on our experience, they're doing great work. I I would just add to that that Cannes Lions is the the foot in the door for us in terms of getting our new business director in front of new clients. He came out of the Cannes with at least 15 new briefs, can lines, but also a number of tent poles throughout the year. So can lines, you know, we just showcase that we can take new clients to stag well, showcase the work that we do, and it's a fantastic opportunity to build our reputation, to win new business, new briefs, and just get ourselves in front of clients, not just for Cannes Lions, but for a number of events throughout the year. So, yeah, we we leverage that quite a lot. There's not many more questions, really.

27:21 So any more for any more? Just if you wanna just scroll up just to make sure nothing further has come through there, Steve. So they come from the top down. Is that Yeah. If you if you scroll, I think I'm not sure if we got any more through. If you scroll there, you'll be able to see that. You you may see a couple of others come through. Okay. Well, let's call that a day. Thank you, Jamie. Thank you, IT. We'll be back. And, again, watch out for any RNS releases, and thank you for your time. We'll speak to you again. Take care. Thank you very much. Fantastic. Steve, Jamie, thanks indeed for updating investors today. Could I please ask today. It should only take a few moments to complete and that is greatly valued by the company. On behalf of the management team in Room Of Communications PLC, we'd like to thank you for attending today's presentation. Good morning to you all.