Aeorema Communications (LSE:AEO) — Investor update

0:01 Good afternoon, and welcome to the AEOREMA COMMUNICATIONS PLC Investor Update. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO, Steve Kwa. Good afternoon. Afternoon, and thank you. Welcome, and thanks for joining us in our presentation. We're gonna give a brief update on ARIMA and our progress, and then Jamie will give you some more detail on our results we announced on Tuesday. But for those of you who don't know us, we are a global, award winning strategic communications group. What do we actually do is around the live brand experience. And in the simple forms, we have a brand with an audience. We connect them to together via via a conference or a brand activation or an exhibition or a a dinner or or a meeting.

1:02 We have a mothership office in London based also at New York, where I'm actually presenting from, and in the South Of France in Canada. Our mission, simply put, is to inspire audiences everywhere through the live medium. Myself, I'm the CEO, and together with Jamie, our group FD will present more details on our numbers. But quick update. Delighted to say, h one for this year was our record first half and our best numbers ever. First air activations in Possible Miami, which is another activation space, activation in the South By Southwest, lots of multiyear contract signings, and a record delivery of canned lines. For those who don't know, it is a big exhibition in the South Of France where we did 17 separate activations.

1:49 Record revenue for the first half of 17,000,000, I'm delighted to say, of profits of 1,500,000. That is representing a 200% profit increase on our h one year on year. And absolutely our best profit achieved ever since we actually listed the name back in 2002. So a great achievement, and my thanks to the team and clients for doing that. And as we announced, in the week, forecasting our best year ever again, record revenue of no less than 23,000,000 and our PBT of no less than just over 1,000,000. And, hopefully, these further upgrades as we develop projects because our year is not finished yet. Just point out a little AEO snapshot where we would say this, but we have undervalued.

2:35 And it's probably worth putting some numbers around the fact. Our market cap is 6,900,000, but we have 3,100,000 of cash in the bank. So our enterprise value at 3,800,000 on a profit of one point o six does, I think, believe that we are very undervalued in the market. Our share buyback scheme reflects that and our confidence going forward, which we launched earlier this year, and we will continue to do that and being successful. And, obviously, for existing shareholders, obviously, your piece of the pie increases. It just underlines our confidence on ourselves, and we will look forward to doing more of that. Interim results, I'll hand over to Jamie who'll give you some more detail on the numbers, and I'll come back and give you a bit more snapshot of where we're going and a little bit example of the work we're working at the moment. So thank you.

3:22 Over to Jamie. Thank you, Steve, and welcome, everybody. So, yeah, as Steve mentioned, record revenue for a six month period announced yesterday of £17,500,000, and this compares to £13,200,000 for the same period last year. And this is very much off the back of a very strong Lions. For anybody who's not aware, Cannes Lions is a festival, every June, and we we delivered 17 activations with 17 different clients across that week, the the most we've ever delivered. So that that... That's really driven revenue this year, and Cannes Lions for us continues to grow, But it was also supported by large events that we delivered throughout the period, including our first time we've activated at South by Southwest in Austin, Texas, and first time we've activated at Possible Miami for existing clients.

4:22 So... And also just to add that, of those 17 clients, all of them repeating plus a few that were new clients. So we're going going very strong in kinda lines, and we expect that to grow as we move forward. And, obviously, off the back of that record revenue, profit before tax, was £1,500,000, as Steve mentioned, a massive increase on last year, driven by revenue, but also driven by the, the efficiencies we've made. Steve will cover later on. We cut our headcount by 33% over the last twenty four months, and still being able to deliver that record revenue. So that's really supported the profit before tax. And as you can see, the underlying profit before tax margin has more than doubled as a consequence. So a record period, and a very healthy strong cash position, £4,800,000 at the end of June, very much supported by the the strong current lines.

5:21 But as you can see, an average cash balance over that twelve month period of £3,100,000. As a as a model, we typically charge our clients 50 to 90% upfront, which means that we're always in a strong healthy position and intend to pay our suppliers post event. So we're always in a very healthy position in terms of cash position. And that that... That's the interim. So let me pass you back to Steve. Mhmm. So Momentum, I mean, why are making such great progress? We are reaping the benefits of our rebalance. As Jaime said, we did a cost reduction in headcount and some other costs over twenty four months ago. We're seeing the full benefit of that. And, hopefully, those of who are tracking us, you'll see our revenue has increased where our headcount dropped. So that's a good sign, and that means anything that comes in from an increase in revenue will see our margin to continue to increase.

6:14 Is a good solid base for us to work from. We flex The UK and US mix because we have a UK HQ, and we service a lot of our global clients at the London hub with an office in The US. We work in a very efficient way, but with our cost valuations around staff that we kinda manage from an effective point of view. Clients can buy very well from The US and The UK, and that can... Continues to give us a bit of an edge with, US based agencies. Cannes lines is, our dominant kind of market at the moment, but we're only holding only 30% of the top tier accounts. But it does feed into a lot of our other kind of tempo events where I could give some much more color on.

7:01 It's a massive kind of growth engine for us. And to be clear, it's not just one event. We're doing 17 different brands and 17 different projects, so it's a nice bit of work. And more importantly, when it comes to our financial year change, it's now in the middle of our middle of our financial year, so not the end of our financial year. I'll give you some more detail on that going forward. As I said, Lions itself is actually a growth opportunity still for us. We have not hit all the market yet, and there's still a good 70% of the market that we can target, which is fantastic for us. We continue to grow that. And as Jamie says, our repeat business is so strong. We can start forecasting more confidence for next year, which we have done in the past, And it gives us a great platform to kinda build and be smart around how we actually plan the rest of the year.

7:54 Just to kind of give you some more color around what we mean around Care Alliance and those who don't know what that means, In our industry, they are called tentpole events. These are big exhibitions or Canada Lions Festival or CES in New York, in Vegas, should I say, advertising week in New York, south by Southwest. They're... This is a ecosystem that all brands kinda go to. So from Caroline, it does feed out to these other brands, and they all kinda cross fertilize. So we're just scraping the surface with the other events around possible within our first activation world economic form in Davos and CES, and that continues to grow. So, hopefully, from this slide, you can see how they're all interconnected, can lines with 17 brands. We have 17 opportunities to reach out, and that's really just the tip of the iceberg.

8:43 And a typical journey with a client is that we start off with one of these smaller activations. So here is an actual real client of ours that we started in 2024, a small activation in Vegas. Then it goes to a bigger activation alliance, then we do a conference in New York, then we go back to Vegas, and goes it back to alliance. And, actually, the size of the activations and the kind of program with the clients make them very sticky with us, and this is kind of our growth plan. I'll give you some more color around the size of projects we do. Needless to say, we have a client list to die for, but also we are very cash positive. We typically ask for our clients to pay 75 percent upfront, so we have very derisked kind of growth plan, and it's kind of self financing.

9:30 Needless to say, because of the quality of our clients, we look back. We've had net zero bad debts in the last fifteen years, which is quite remarkable. It's clearly important for you guys to know that the management and the board have 38% of the equity. So we've got a lot of skin in the game. So we're fairly motivated around kind of improving the shareholder value and all kind of owners of the business. As we have done in the past, we have a commitment to dividends. And as a AIM listed company, making profits with cash in the bank, paying dividends, we're probably one of the exceptions, and we'll continue to do that and have a progressive dividend policy to repay the loyalty of our shareholders and the value in the business. This is quite an interesting slide.

10:16 This shows you the frequency and size of average project over the last sort of five or six years. If look at 2020, we were doing, like, a 131 projects, and the average price was £42,000 a project. Woah. To where we are now, where our average price is just under 500,000 for a project, we're doing 50 projects. So does that mean? We are being smarter, more selective, and going for bigger ticket projects. 50 projects needs less overhead to run than a 131 projects. The size of the project itself leads you to be more engaged with the client because it's a high value project, and then we tend to get more repeat business. And we are aggressively pushing for three year contracts. It's been quite successful to kinda get that certainty going forward.

11:02 And just reflects, obviously, the size and the value and the reputation in the industry, which is fantastic. AI and the impact of AI and the value of live formats are more important than ever. So in our medium and in the marketing space of a live event, a conference, an exhibition, an activation, a video, that that value, that live engagement piece has been elevated and is made much at at the the top of the marketing table. The Bellwether reports, events emerged as a leading category for greater market investment, outperforming all other segments. So that's TV, above the line, outdoor, social. So... And that's the Bill Weather reports. And for those who don't know, that's the industry standard for our industry. So we're in a fantastic place.

11:51 We keep our clients for a very long time. Our beautiful accounts team, which we spend a lot of time investing in, maintains and grows and looks after our clients. Our retention is super high. We don't lose clients. We just build and grow in a nice orderly fashion. And to that point that Jamie made about repeat business, because these tempo events are fixed calendar events, clients plan for them. They're not an ad hoc conference. So, therefore, what tends to happen is we are working on event and calendar lines for 2026, and then we're talking about 2027 as we finish the first event. So, therefore, we're getting rebookings and reconfirmations pretty immediately. And as calendar lines grow and the other events grow, there's a certain amount of pressure from clients to book us early to get in with us, so... Which is fantastic.

12:45 Continue to win awards in our industry. The CN awards are one of the highlights of the industry. We won experiential agency of the year, which is the biggest award, and the creative team of the year awards for the seventh year. I mean, mean, there's a nice story around that. For six years in a row, we won creative team of the year. It became known as the, cheer for twenty first ARIMA award. Last year, we actually made a public statement saying we're standing down to let someone else win. Someone else won, and we came back again this year, and then we won it again. So, hopefully, that just shows the quality of the team, the quality of the work, and our reputation in the industry. And as I present from New York, we are having another busy September. September in in New York seems to be, again, another peak period in the year.

13:36 We're actually working for the second year for advertising week. We are back again for Climate Week for a third year, I and think we announced we've got a three year contract with them. Big, huge activation here. Bullshit Journal and Unger. We had Zelensky as our guest speaker yesterday for our third year. And back with a smartly advanced with a third big customer summit, which we're doing in two weeks' So that hopefully gives you a snapshot around our business. The kind of key highlights I would like to say is around the fact that we are profitable. We are cash rich. We pay dividends. We're strong. We win awards. We're market leading. I think I wanna make a point around the first half and the difference it's made for us to change our financial year. Our financial year used to be June to July, where the last of the last month was our busiest time by moving our financial year to a calendar year. In our first six months, we've made our profits. We've done our turnover, and we're in the middle of the year, which means we can plan efficiently, don't have to be very efficient with our team and staff. And then for the next six months, it will all add to the bottom line, which is quite a big change for us.

14:45 So that's me done. So any questions, please. Fire away. David b, how much of the recent margin improvement is structural, and how much is driven by event timing and mix? I'd say it's both. I think the... Obviously, changing our operational cost and reducing that cost, so it affects the margin. There's been a big push with our team as well to improve margins, and and the scale of the project and the quality of work kinda feeds into that. David b. What proportion of clients are engaging with AEOREMA on a year round basis, and how much greater visibility does that provide? Great question. I would say the lion's share of our clients have moved to that model.

15:32 I would say it's a good 80 or 90% that if they're doing more than one event in a year, they're talking us about... To us about multiple events. It typically tends to stand, start with an event at one of the different temples. It could be at CS, then it morphs to can lions or it goes to possible. But it's a great mix. One from a planning point of view, from an account management point of view, from a quality point of view, so we can manage that going forward. Some more questions. Anyone else want to ask any more questions? Give it a couple of seconds, Steve. And if not, if I may just ask you for some closing comments. Thank you, Paul. AEOREMA is clearly competing and winning against some big global agencies.

16:23 What do you think enables agent AEOREMA to do that? Are there still things you can add to your offering to grow further? There's always things to add to our offer. Let's go back to the competing agencies. Yes. We are quite proud that we are independent. Clients like that. We're very specialized, and we are punching, some would say, against, you know, multi global thousand people agencies and winning constantly. Part of our strength is maintaining that specialized ninja like approach to a client's need by having the scale and the depth that they're confident to give a multi million man project. We are looking at, obviously, where our kinda core verticals are and our service offering, but we're very conscious of specializing in what we're good at.

17:15 Opportunity to expand that would probably be around the m and a trial and what companies we probably can acquire in the future. To that point, David, would you consider acquisitions as part of your growth strategy, or is it a priority currently to organic expansion? I would say the last twenty four months was to get a house much stronger in order. That is showing now. So organically, our profit's improving. Increasing our revenue. But, absolutely, now is probably more earnestly to look at the m and a front or the acquisition front. As you see, we've got a bit of a war chest of cash. There's a... There's an opportunity in the market. We're going strong and great depending on on your market sector. Some agencies are struggling, but they're working in The Middle East or even UK based agencies. I think the point I wanna make is a lot of our clients and a lot of our work, 90% is outside The UK, so not so bumpy here around kind of economic conditions.

18:10 And the companies we're working for are growing and thriving in an industry, so going back to the quality of stuff. Thanks for that question, David. Any more questions? Simon or? Is this cash past surplus of business requirements? And if so, would you consider returning cash to shareholders? Well, universally, by doing a shareholder buyback, that's kinda happening in a certain way. We we are keeping that cash. One, it's great security. It gives you a lot of confidence in the business. Means you don't go after and keep chasing work just to hit revenue, which is important, we would consider returning cash if it's the right thing to do. But I think to my point earlier, if we're gonna do a typical acquisition, there are certainly some cash needed upfront, and there'd be a strong earn out going forward.

19:03 That is probably more value. And, obviously, dividends is the other way we could pay back to shareholders, and we'll continue with that policy going forward. Okay, Steve. I think for today, we'll conclude the q and a then. If there are any further questions that come through, we'll be able to review those post the meeting as well. But, Steve, if I could just ask you to wrap up the meeting. Thank you. Yeah. I mean, thank you for the time. Hopefully, you've seen, you know, the huge progress we made in improving profits, shaping our business to be strong and robust. We are growing. We're generating healthy profits. You can see from our plan that there's a lot of growth left in the business. We are undervalued, so we'll keep pushing for that kind of valuation back again.

19:53 The the reason we have a lot of cash in the business is we are pretty profitable, so therefore, we'll use that going forward. The the market is growing. We are are growing. The team are robust. Got a superb management team underneath us. America, we've just started really scratching the surface now in, probably, year three. You can see our snapshot in September, how we're actually doing four significant events. That will continue to grow. So what's my underlying message? Profitable and growing. And in a name market, that's important. And I think the referral wind up is that the AIM rules have changed around the m and a front. There's actually more opportunities for us. I don't know if you guys are familiar, but previously, it had to be of a certain size to risk... Avoid an RTO.

20:44 That has changed slightly, that we can be looking at different size agencies that don't really affect our core business. That means we don't do an RTO. So there's actually a lot of opportunity there. So steady as she goes. It's a great industry, and it's great. Thank you. Fantastic. Steve, Jamie, thank you very much indeed for updating investors today. Could you please ask investors not to close the session as you know be automatically redirected to provide your feedback which help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you.