Aeorema Communications (LSE:AEO) — Investor Presentation

0:01 Good afternoon, and welcome to the AEOREMA COMMUNICATIONS PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated right in the 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 received in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. Now I'd like to hand you over to CEO, Steve Quirk. Good afternoon to you, sir.

0:31 Hi. Thanks, Ali, and good to be back. I think this is my third time. Obviously, I'm excited to be back. Got another presentation. It'd be a mixture of stuff for people who don't know AEOREMA that well, but also an update for some of our lower followers to kinda tell them about the progress we're making. For those who don't know us and for our loyal supporters that do, AEOREMA COMMUNICATIONS is a global all winning strategic communications group. I'll explain what that mean later on. Office in London, New York, and Amsterdam are about 70 strong at the moment, and over six years combined management experience in the team. I am the CEO, proud to be the CEO, and I have been leading agencies for the last forty years. I actually started my first agency at the tender age of 21, and I worked with major brands.

1:22 No doubt. I can share some of that experience later. So what do we actually do? If you can run the video, Ali. We connect brands with an audience. It's it's it's a lot of different kind of opportunities and projects. So, basically, if have a brand, they wanna connect an audience in that live space. So if you have a conference or an exhibition or a brand experience, a presentation, that is what we do. That is a mixture of great creative, strong strategic insights, brilliant delivery, and logistics. And we work across the globe for many brands, and I'll give you some color on that in my presentation, later on. I'll give you an update on where we're progressing in The US. Next slide, please. So here's our share price.

2:11 This shows our trend, which is upwards. We've had a little bump in the road in our last two interns, and I'll give you some color around that. But the investment case is still just as strong. We are profitable. We are still growing. We generate cash and are cash positive. We do pay dividends, and we continue to pay dividend policy. Have a strong team. We believe we are market leading. We had a great win this morning. Award winning being part of our kind of DNA, and net zero commitment to fund for a lot of our clients. We do have two kind of brands that operate in our space. So we've got Cheerful twenty first, which has put in a large entity, which is our brand experience division and, as I've described, connects brands with audiences.

2:56 We have a beautifully formed eventful, which is our little sister agency that specializes in more venue search and incentive travel and probably the different parts of the events market, which complements us very well. Top level, our vision hasn't changed since we last spoke to you. Our strategy has continued to grow, strengthen our position in the markets, expansion globally, but The US, as we have said, and Europe is very strong for us. The US is a big piece of that pie. Culture, very important to attract the right talent and be an agency of choice for our employees and our consultants and continue to grow, obviously. And that is by maintaining a great client base and building on that, with our strategic and long term relationships that we are building.

3:42 Intune snapshot. We did report and indicated actually in November that we had a lot of work shift into our second half. So we made a loss in our first half in h one. And h two forecast, we're looking at about $6.50 profit for the second half. So overall, revenue is around gonna be 90,000,000 plus. We're predicting, and we forecast some profits no less than $404,400,000, shall I say. And we got still two months left in the year. Not as good as last year, but still strong, but we had a lot of investment and a lot going on. I'll give you some indications where we're going. And here's kind of our growth chart, which continues, hopefully, to go in an upward direction going forward. It's worth kind of pointing out some of the headlines that impacted kind of our our latest interims.

4:32 We are investing heavily in the firm. So we're investing and growing and still making in profits. That does also impact the bottom line, particularly in The US. There was a lot of disruption, if you look at the headlines here, in our one of our client bases and one of our verticals is tech market and professional services. If remember, at end of last year, lots of redundancies and layoffs and restructuring. That impacted us not from losing work, but delays in their decision making and reforming of their marketing divisions, which we have seen that finish now, and hence why a lot of our work moved into our second half. And the the the sort of bigger relevant points is that about £2,000,000 worth of contracted work has moved into our next financial year. And that's really what the difference is in our revenue going forward.

5:18 We're also seeing a bit of a trend back to normal. I know everyone talks about post COVID, but the echoes of COVID still echo, but we are seeing a seasonality coming back to kind of the the events we're working on and more settled, tempo work coming forward, which will help us plan better for next year. Headlines. I'm sorry to say that pipeline for 2025 is still strong. We are, as I say, returning back to kind of pre pandemic patterns. I'll explain a little bit more what that means. Our investment in our accounting is helping us grow our business strongly. We have maintained and added new clients. We haven't lost any clients, which are quite key to get that point across, and The USA is growing. Current planning is that we are seeing the benefits of our recent investments.

6:03 We are set up for growth, and there will be fewer one off costs that we've incurred in the last twelve, twenty four months, which should be good news for our shareholders. And just to remind everybody that, actually, typically, our first half is weaker than our second half, and this is kind of a split. H one's about one third of our revenue. H two is two thirds of which one third of it as in June, which is around our can activations and our end of year activation for some of our other brands. So how things stand? We've got cash in the bank on the March 25 at 3,700,000. We're still gonna pay dividends. Our reputation continues to grow. We're adapting. You know? It's an ever moving kind of fluid running an agency to do with client demands and temper and change in direction. We are doing that. Our pipeline is strong. Our relationships are actually stronger than ever. We're very sticky with clients.

6:51 And as I said, our momentum will continue going forward for next financial year 2025. Just a reminder, we work in a very big pool of revenue. This is actually from 2022. This has grown. So in The UK industry, our event sector is about $442,000,000,000. We reckon The US is 103,000,000,000. That's predicted to be 800,000,000,000 global industry. That's predicted to grow actually by 20% in the next five years.

7:22 For this presentation, a little bit of focus on our b two e as well. A lot of our kind of high profile work and what we can show is not b two b, but b two e is a big part of our business, and we can't really show as much work because a lot of the the work we do is confidential. And for the jargon, b two b is actually brands and organizations talking to their own staff. Big management conferences, big partner conferences, all hands. But we're seeing that regularity coming back again, which is great, which we can plan better. But just interesting to see our split of work. It accounts about 40% of our work and 30% of our client base. And then on the b two b side, everyone kinda knows. Knows as well the stag rolls and the can lines of this world is a 60% of work. So it's a nice split, and they're very different revenue streams. So take that as comfort as in we're not reliant on also, you know, one particular type of business, which is good for us.

8:12 And we're coming to the fact it's gonna be our busiest year in Lyons. I was gonna run a video to give you a bit of flavor for some of the other kind of b to b stuff. If you could run the video, Ali, please go ahead. Thank you.

9:03 So just a little spanking, and here's some here's some images. Again, a lot of our work is very confident, so these are random, but it gives you an idea of another part of the business that we haven't actually showcased that much, which is the conference and the B2B side, which is very key to us. So as I said, CanLions is not a busiest year yet. We've actually got 14 activations, in Lions this year, which is an increase from last year. And as we announced earlier in the week on an RNS announcement, we reappointed Stagwell Beach, which is fantastic, which is one of the best activations. We're going back bigger and better, and we have a array amazing relationship with Stagwell and team as a. Agency. I'll show you on the video again just as a reminder. So we're gonna this is 2023, and we're hoping we'll show you next 2024 next time we meet. So one b t three, please.

10:38 Fantastic. As I said before, one of the biggest activations last year, hugely successful. We're going to so much currency in the industry, and, again, we're coming back bigger and better for the stag board team. So we look forward to that. I also wanted to show you kind of another can of can of of that doesn't necessarily need to be the biggest or the showiest, but it's clever and really creative. This is where we work with a brand that want to create, you know, for a impact in a different way, and we took over a shop. It was actually a shop that can shut, and we created a pop up experience for our client, TripleLift. We did some gooeyer activities. I just wanna show you another end of the spectrum of different sort of size and shape of the event we do, and this is what we did last year again in Canada. We run VT o four. I'll give you an idea.

12:15 So on a great activation, as I say, we took over a shot and created this whole immersive experience for our clients. Huge amount of marketing traction. Delighted. We're looking forward to, again, working with them again. I'm just touching on our time on tempo kind of strategy, which I have discussed before. And then for those who don't know what a tentpole is, these are big annual events that happen globally where a lot of our brands go. Cannes Lines, for example, is a big tentpole event. And here's a selection of other tentpole events which we're targeting, but I'm

12:46 delighted to say that we are going to the UNGR activation next year. We are working in the CES. We're doing two activations in OMR in May. We've done our first activation in Art Basel. We're going to New Mexico. I'm gonna show you a case issue later on Climate Week and the World Congress. So we are doing what we say we're gonna do. We are targeting these events, these activations, the temples, and actually doing delivering some great activations there. South by Southwest is possible. Possible is quite a new activation. We're targeting in South by Southwest. The team and I flew over four weeks ago to Austin. We had about 15 client meetings. On the back of that, we created a whole white paper that we're using ourselves and marketing tool. Just shows you we're getting a lot of traction. And, again, one of many streams of the business, but something we're focusing on. And, again, our global footprint expands. Japan was quite interesting.

13:34 Great place to speak. Share another event. So talking about the American experience and the American side, Climate Week is a massive event that held in New York. We've been commissioned again to do that again for next year. This is the event we did last year. As it says, Climate Week, the biggest kind of get together of activists and high level profile government representatives to talk about climate change. Great for us to win the work. Great for our kind of DNI policy to kinda support this. I will show you a video. It was over three days. We had six six thousand delegates. We had over 584 event sessions. Quite a huge undertaking. Credit to my team for delivering that. I run the video. Also to say, this is a video that we shot with our team and edited in our studio because we also have a big moving image division. But I'll show you some of our work. D t five, please. Thank you.

14:33 The Earth's delicate balance is shifting. It's more critical than ever to come together and discuss our future. New York City is where people go to be heard. We demand the change. Climate week is the largest annual gathering of its kind, where climate action takes center stage. Scientists, policymakers, activists, and everyday citizens come face to face with the most pressing environmental issues of our time. We all gonna be defeated by our mother earth. The City Of New York plays host to the conversations that matter, speeding up progress and championing change. How are we going to avoid tragedy? More than 584 events tackle everything from agriculture and the impact on indigenous communities to eco anxiety and fighting misinformation.

15:31 More than 6,000 people connect with decision makers to unpack and address climate concerns in real time. I've had enough, and I'm sick and tired of this. And those not in Manhattan could watch and interact from anywhere in the world. Global events like climate week keep environmental action at the very top of the international political agenda and helps foster discussion at grassroot level. You know what to do. We all have a part to play in enacting urgent change for our people and planet. Friends, we can. We will. Wonderful. Delighted in part of that, to support that. I'm very proud to be back again next year.

16:18 Incidentally, the voice over artist is actually one of our team in New York. We are multitalented, certainly in our office. And here's some visuals in that. Huge logistical exercise. You can imagine 6,000 guests over five days. Then we win loads of awards. Yay. And then these are our freshest ones. And these are big awards, particularly the drum awards that she won about three months ago. Huge recognition. That's a global award. On the right, creative team a year for six years in a row. Unheard of. But, obviously, if you guys are following our RNS release, we won our first big award in America. So one, brilliant to win that. Two, it's a hugely recognized award in America. And third, more importantly, that just shows we're getting traction there and getting recognition there.

17:06 The mission is always for the American agency to grow, have its own kind of entity and persona, and that's going great guns. And this just cements us in that world, and I'm very proud to win that on behalf of Stagwell and team. And let's not forget Eventful, who I do with sister agency, who specialize in a sense of travel and venue search. Came out of COVID gangbusters. COVID had a big impact on them, but coming out, they're really strong. Delighted to say that the collaboration and the cross selling between the business is really strong and healthy and keeps increasing. We are finding business for them. They're finding business for us. They're increasing the percentage of fee based business. Traditionally, they worked on a commission basis, which they're working on, but they're actually adding a fee based. And the result of that is they've actually hired two more team and continue to complement our profit on the bottom line.

17:57 So just in summary, our h one twenty twenty foot are really not a clear picture of our growth evolution. It was a cause really by retiming events and contractual work. I hope you can understand that. We just see it a bump in the road. Sticky clients and growing reputation in The US particularly is great. We're we're appointed by a lot of our marquee clients to do the same and more. Partner of choice for many AEO brands, winning awards, as I just said, and entering new markets such as South by Southwest and CES and OMI, etcetera. Financially buying. As I say, cash in the bank is strong. Seeing the benefit of our recent investments, set up a future growth, fewer one off costs. You know, we've already invested in IT. We've invested in consultancy. That's that's this is a one off cost that won't happen again. Maintaining our dividend policy, and strong outlook and strong expecting a strong remainder for the rest of the year.

18:48 So and on the slide again, the investment case, profitable, growing, cash positive, dividend paying, great team, market leading with loads of awards, and net zero by 2023. So there's a snapshot of us. I will go to questions now. Have I seen this? Perfect, Steve. Thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. Just while Steve takes a few moments to read 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. As you can see, we have received questions throughout today's presentation. And, Steve, if I could just hand back to you just to read out those questions and give responses where it's appropriate to do so, I'll pick up from you at the end.

19:35 K. So me look at a question. It's a good question. I've been asked actually by shareholders in the past. Admin costs have gone up significantly. Why is that? I actually wouldn't say they've gone up significantly. I think there's been a comparison with '21, which is the year COVID, where admin costs were around 500,000, and our admin costs were just under 2,000,000 now. That's gone up in line with our revenue. So when we're turning about 5,000,000, our admin costs are around 10%, and now we're doing 20,000,000. It's still about minus 10%. So I'd say they've gone up, in relation to our revenue and our investment. So they're not unusual in our opinion. How's The USA going? Do you see that as being the main focus of business in a few years' time? USA is going great.

20:26 As you can see, winning an award, getting more American based clients. This is it is our major investment. You know, we are setting up, you know, growing a team there. Office space in the Rockefeller Center, marketing, and a lot of our energy is going to develop that. We see that as a very successful future for us. There's also a halo effect of being in America that we get a lot of American clients working in Europe. If you actually analyze a lot of our clients that we're doing already in the European operations, we're actually American based. That's going great. An interesting question. Stagwell, a large and acquisitive company. AEOREMA COMMUNICATIONS valued at 6,000,000. What price, if any, would you consider as a tempting offer for the company?

21:12 I can't say. I can't say interesting, and everyone's for sale, Michael. So, watch your space. I think if someone made an offer that was beneficial for every all the shareholders and benefit for the future of the business, then we consider that. You make a big point about getting to NetZero at 2030. Why is that important to the company? Said it before, I said it again. All global brands and organizations and any brands that we wanna work with, more importantly, will put the DNI policy, your CSR policy first as in selecting an agency to work with, and we have to match their brand values. So it's hugely important to us on a commercial level. More importantly, from a personal brand value level, it's important to my team and how we operate. So that's why there's lot of investments going into that.

22:06 It is a business function. You cannot ignore that. Not gonna say it's a business advantage. You don't have it, you'll be at a disadvantage. So I think it's very key for us. And in this day and age, the plan is in how we operate and how we look after our staff and how we work in the world is more important than ever. And that is why we drive that, and that's why we value this so much when it comes to the top. Here's an interesting one. How will AI impact your business in the future? Good one. Well, it's already an impact on the business. We've been using AI for the last couple of years. We see it as a great tool and enabler. We're becoming quite experts in it. It helps create a team. From our point of view, it's a plus, so it does make things more efficient. It changes by the month, how it impacts, but it's it's been a great tool for ideation and creating stuff at certain levels. We don't see it replacing the human creativity, and until they change the fact that you need need to see someone eye to eye in a meeting room, we hope the live experience won't be impacted by that. But we'll certainly ride that wave.

23:11 Accordingly, we have an internal if you don't know, but we have an internal ID department that kind of specializes in future trends, they are being one of their subjects. We have a steering group around that. Can you explain what when you mean delays and change in trends that impacted the current financial year, how do delays just revert to the current financial year? What does like to impact financial year 2025? Was it a long term trend? Okay. The the the the bigger answer to that is that and and, you know, as a milestone for the industry's, you know, live was COVID. Coming out of COVID, post COVID, it was crazy. And there was no rhyme or reason or temper or sequence events. Everyone was catching up. What we are seeing now, is a return to the normal cycle stuff, which means we can help plan for that.

24:00 So that is just coming back to normal. There was obviously disruption, particularly in the ad tech sector in the beginning of in the last year, we see that ending. So, hopefully not hopefully. We know that the the the the schedule on diary and dates of events is kinda getting back to kinda what we normally expect. So we're seeing, you know, that being able to easier plan for resourcing within the business and obviously kind of schedule kind of how we deliver these events. At this stage, do you envision an increase in dividend again this year? Well, we said we're gonna have a dividend. We'll we'll review review that. There's just as many shareholders who basically say don't have a dividend because you rather invest in us. But, well, we intend to give a dividend out, and we'll analyze that, and that'd be subject to kinda how, our planning goes for the investment in the business.

24:56 Given your emphasis on adaptability and forward planning, what strategies are you undertaking to maintain your competitive edge? Good question. You never stand still in this business. You have to be constantly one step ahead. I think we were one step ahead of most agencies coming out of COVID, and we continue to do that. But, specifically, we are actually going through a refocus and a little bit of a rebrand internally about our proposition to take it to the next level. There will be probably another investor show in June, which we will share that with the with the wider audience, but we're looking at actually how we can maintain that competitive edge. That is the life part of any every agency. Obviously, winning the awards and credibility and that kind of emphasize of that and keeping the best at them keeps us going forward.

25:51 I've got any more questions. Does that have a sync? Oh, it's the last question. Colin c. How do you assess the impacts of your future strategic investments and future growth opportunities? Simply put, bottom line profit, ultimately. There's certain amount of certain KPIs we have within the business. But, ultimately, we wanna be a profitable growing business, and that's ultimately how we measure stuff. Winning awards is nice. Delivering shareholder value back is more important, and the health of the business, maintaining our cash, and it's constantly assessed. We have quite a robust marketing and measurement tool internally that assesses where we're going in the business.

26:42 And then and then that's kind of touches and everything to do with market positioning. Obviously, clients who won, and then we do quite a lot of development with our clients on feedback as well. Hopefully, I answered that question. Perfect, Steve. I might just jump in there. Thank you very much for answering all of those questions from investors. And, of course, the company can review all the questions for today, and we'll publish their responses on the investor meet company platform. But just before redirecting investors, provide you with their feedback, which is particularly important to yourself and the company. Steve, could I just ask you for a few closing comments? Yeah. Look. Great to present back. Really good to give you some color. I know we've had conversations with some investors based on our interims. I think that the view is obviously it really is a bump in the road. We haven't lost any business.

27:28 It's just diaries moving, which, you know, we can't control. If we had lost work and the business had gone down, that'd be a different conversation. It is not that. The investment continues to grow in the business. America's getting traction, and we're still going gangbusters. We're gonna have our busiest time ever in this May and June, which is a great end to the year. And if you look at a like for like profit for our second half, we're probably gonna be the same, if not better than last year. So it's going, from our point of view, great, and we'll continue to do that. And, yeah, we'll continue to communicate to the wider audience. And, yeah, and I still think we're undervalued, and we will continue to kind of increase our share price. We'll speak to you later. Thank you for that. Perfect, Steve. Thank you once again for updating investors today.

28:14 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. This will then take a few moments to complete, but I'm sure it'll be greatly valued by Steve and the company. Behalf of the management team of AEOREMA COMMUNICATIONS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.