Facilities By Adf (LSE:ADF) — Half Year Results

0:01 Good afternoon, and welcome to the FACILITIES BY ADF PLC Half Year Results Investor Presentation. Throughout the quarter 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 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 will publish their responses when it's appropriate to do so. Before we begin, I'd like to make the following poll.

0:29 I'd now like to hand you over to Martin Proctor, CEO. Good afternoon to you, sir. Good afternoon. Thank you for that. Good afternoon, everybody, and welcome to Saffner's presentation. So I'll just start off with, giving you a brief of our highlights. So ADF continues to work with many of the world's largest film and TV companies supplying productions such as The Diplomat, Slow Horses, The Witcher, Hijack, and The Gentleman. A resilient performance in h one twenty four with revenues at $15,200,000.17 percent ahead of h two twenty three, and adjusted EBITDA at 250000064% ahead of h two twenty three as the industry begins to normalize. We recommenced organic growth, our organic growth program having put CapEx plans on hold over the strike and subsequent resettlement period, and fully integrated location one acquired in December 22 with a significant increase in joint production activity.

1:26 We also, you might have seen last week, acquired AutoTrac Portable Roadways on the September 10 to extend ADF's one stop shop reach. And we have a healthy acquisition pipeline as we continue to review all opportunities in line with strategy and acquisition criteria. The underlying market drivers continue to provide confidence that demand will continue to grow over the medium and long term, and, f y twenty four proposed interim dividend of a 0.5 a pence per share. If we can move on to the next slide, please, some information about our market. So as I just mentioned, a strong resilient market in The UK with continued investment in UK production facilities and the industry. It's estimated that over 9,500,000,000 is expected to be invested in London alone in the next few years. Spend in The UK on film and high end TV, at 2,900,000,000 in q two twenty four, up from 900,000,000 for a 01/24.

2:29 Pinewood Studios recently reported a revenue revenue in q two twenty four, up 38% on q two twenty three. And last week last week, you may have seen that Warner Brothers Discovery announced that more than 6,000,000 subscribers signed up to the streaming service in the third quarter. Also in in August, Amazon Prime acquisition of Brace Studios is further evidence of expanding market, and the government continues to support and remains very compelling with the corporation tax and business rates concessions for the industry. A bit about ADF's strengths. So we have high value productions and customers, the industry leading quality of service and fleet, highly efficient and fit for purpose facilities and locations with room for growth, and an extremely, extreme exemplary, sorry, exemplary net promoter score not less than 80% since measurements began in f y twenty one, and we're currently at 87%, which I think is world class.

3:37 The competitive landscape, it remains the same. The facilities market continues to be dominated by two volume suppliers, ADF and Translux International, with turnovers of circa 35,000,000, followed by two middle tier suppliers, movie makers, and Onset with a turnover of circa 15,000,000 each. And below this, there are a plethora of smaller family businesses. We just move on to the next slide to our customer base. Six months to the 06/30/2024, ADF worked on 38 productions across H 124, 46 in H 123, and the average revenue per production in H 124 was 304,000 as opposed to 361 in H 123.

4:23 This does not include location 1. The largest platform in H 124 was the BBC, which reflected the general switch of work from US streamers to UK domestic producers over the course of the the activism, rights of strike and the subsequent resettlement period. The booking lead time reduced to circa three to four months, but as the period progressed, this has begun to extend to twenty twenty four full year and outlook for f y twenty five. For f y twenty four, the order book continues to build in terms of volume and size of productions as the market normalizes, and the order book for f y twenty five is likewise building and significantly ahead of previous years. Moving on to the next slide, please. Let's talk a bit now about, growth strategy, and this is organic.

5:12 So during h one twenty four, ADF put its major CapEx plans on hold, preserve cash as the market normalized. During h one twenty four, ADF added 14 units and disposed of three units from the fleet. At the start of f y twenty four, a ADF had 703 units, and by the end of h one twenty four, this had increased to 714 units. We continue to work with PanelTex to develop a prototype of new artist trailers with an aim of purchasing units in f y twenty five. And with the resumption of high volumes of trade in h two, we have commenced a limited increase in CapEx predominantly with DAF. A bit about our m and a, growth strategy. So as I mentioned earlier, location one acquired in 2022, our first opportunity is now fully integrating into ADF systems and processes and is delivering the expected efficiencies, having consolidated IT systems, insurance, HR support, financial procedures, and reporting sales and CRM platforms.

6:15 Location one opened two new depots at ADF sites in Wales and Longcross and one new site in Glasgow. And during h one twenty h one twenty four, ADF and location one jointly worked on 32 productions out of 38.

6:32 Next slide, please. So Autotrack Portable Roadways. Autotrack is The UK's leading supplier of portable railways to the film and TV industry, and we acquired them on the September 10 in a deal worth up to 21,300,000. We are continuing to assess other m and a opportunities in line with our investing criteria and IPO commitments, and we currently have several active pipeline opportunities at various stages of development with it with parallel and diversified business activities, but all still broadly in the film and TV and outdoor broadcast. So next slide, some a bit of information about AutoTrac. So AutoTrac is the market leading supplier of portable roadways to the world's largest production companies and streaming platforms in the TV and film industry, one of the largest privately owned suppliers of panels to The UK TV segment sector with a client base of a hint 165 plus built up over thirty years. A diversified revenue streams with panels also supplied to festivals, events, construction industry, and other outdoor events, and adds f y twenty three revenues of 8,300,000 and adjusted EBITDA of 4,300,000 and is expected to be significantly EPS accretive following AutoTrac's integration into the group.

7:59 Move on to the fundraise. ADF raised pros gross proceeds of 10,500,000 to fund the acquisition of a 100% of AutoTrac, A strong pipeline of attractive near term bolt on acquisition opportunities remains, and the acquisition of AutoTrac is a further endorsement of ADF aspirations to generate a £100,000,000 revenue in the medium term. And with that, I'll hand over to Neil Evans, our chief financial officer, who will start who will go through the profit and loss slides with you. Hi there, everyone. Yes. A quick walk through, p and l for h one. As we highlighted in the recent fundraise, first half of this year was impacted by a reset in the industry after the strikes in h two last year, and that reset has taken a bit longer than we would have liked.

8:48 Last year, while the strikes were ongoing, ADF had to aggressively go after every production in the market, but so was everyone else, of course. But we were very successful in getting work in the circumstances, but we did have to offer discounts at a higher level than we are used to. And so it's been a a similar situation in h one this year. The work available was mostly kind of similar UK domestic productions in h one while the major US streamers realigned all their schedules, studio time, scripts, actors, availability, funding, etcetera.

9:24 However, there is good progression now and momentum across the summer months in h two in terms of the volume of work. So for h one, revenue was 15,200,000, which was 17% up on h two last year. But as you can see, it's well down on h one last year prior to the strikes, which was actually a record period for ADF in terms of revenue and profitability. The gross margins improved from 30% in h two last year to 36% in h one this year as the volume of work starts to build. We run the business very tightly, you know, over the entire period. And for h one this year, we can pay it back to essential activities.

10:10 And we finished h one with an EBITDA of 2,500,000, which is up from 1,500,000 in h two last year. There's no corporation tax payable this year or certainly this year because of our kind of excess brought forward capital ounces. There's just a small credit movement on deferred tax. And also so the the loss after tax was no 600,000 for h one this year compared to a loss of 1,800,000 in h two last year. In terms of dividends, we paid a final dividend for h for last year of 0.9p per share, and we'll be paying an interim dividend for f y '24 of 9.5p per share on the October 25. And obviously, that'd be based on, you know, a net kind of significantly increased number of shares following the recent placing.

11:04 So that's the p and l. Just flip on to the balance sheet. Starting with fixed assets then, CapEx, page one was relatively low compared to the last couple of years for ADF and really limited to some existing commitments that we couldn't really push forward. We only spent 1,200,000, and that was spent mainly on generators, some school rooms, and toilets, which we're short of. We financed point seven of that via high purchase, and we paid the remaining 500,000 in cash. As Miles mentioned, we added just 14 units, and we also sold three older tractor units. So the net increase was 11 in total. And by the end of h one, we had 714 assets.

11:51 Moving further down the balance sheet then, high purchase agreements at the end of h one totaled 14,700,000, and that's down from 16,300,000 at the end of last year. And just to reemphasize, these are not operating leases or, you know, the these are assets that we own from the outset. Also, on the balance sheet, we have IFRS assets and associated leases, which is almost entirely made up of the capitalized value of our long cross property lease. The lease liability at the end of h one was 8,600,000. There's no other debt in the business. So the net debt position at the end of h one, excluding those f IFRS leases, was 13,000,000. That's down a little bit from the end of f y twenty three, and it's 13,500,000.

12:42 In terms of current assets, the increase in trade payables and trade receivables, you can see there, from h two last year to the end of June this year, is is purely down to the lower operating levels at the end of December last year due to the strikes and also due to the Christmas hiatus. So, really, you have to compare the June figures this year with the June figures last year, which is kinda more in line. So that's it on the balance sheet. Just flip on to the cash flow. So our EBITDA of 2,500,000 turned into an operating cash inflow of 2,700,000, which is what we'd hope to see. And the main cash movements below that then were HP repayments of 2,800,000 and those IFRS lease payments of 1,500,000, which is effectively our rent for those properties.

13:36 As mentioned, we also paid 500,000 in cash for fixed assets. And the final dividend for last year, which you mentioned, that was actually 728,000, and that was paid in h one this year. Overall, therefore, there was a cash outflow of 1,800,000, and that meant cash balance at the end of h one were 1,700,000. Let's run through the finances. I'll hand over to Miles now just to kind of summarize. Okay. So just to summarize and bring about the outlook. So ADF, the leading provider of premium production facilities, to ever growing film and high end TV industry. We offer a progressive dividend policy. A limited supply of premium production facilities gives ADF a strong commercial advantage, and The UK remains a world leading destination for film and TV production.

14:28 Strong market drivers and business model provides a platform for sustainable growth and strong earning visibility due to the increased demands, scale of productions, booking lead times reemerging after strikes and subsequent resettlement period. And we've invested in the right teams and resources to enable our ability to pay.

14:49 Aspirations, as said earlier, of a 100,000,000 revenue in the medium term and a complementary acquisition opportunities as part of our growth strategy. And we'll, pause for some questions. Miles and Neil, 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. But just for the company to take a few moments to see 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, Marzan, if I could hand over to you to read out those questions, that'd be great, and then I'll pick up from you at the end. Okay. First question from John S. Given the acquisition of Autotrac Portable Roadways, how significant is the events and infrastructure market as part of your strategy to what diverse few revenue streams beyond film and high end TV? Okay.

15:44 That's a good question. First, I'll just emphasize that in terms of ADF and off city vehicles, we're not looking to diversify into those areas. We're sticking with t television and film as it's quite unique to our our vehicles. However, having been through the strikes, looking at, AutoTrac and some other acquisitions in our pipeline, we thought after having endured the strikes that it would be sensible for us to look at some businesses that have some diversity and other income streams. So a business like AutoTrac is perfect for that because it is established in the industry. It's well established as being going for thirty years, but it also has a a footprint in in the events. So if you can imagine, they do things like, I don't know, Cheltenham, Ascot,

16:40 internationals, large sporting events, where there are marquees and catering. So everything from the Olympics, the Christmas fairs, then Christmas fair, Harry Potter Christmas fair. So lots of events. And, also, they work in construction and with crane companies. So when when they go into schools to move, portable classrooms, they have to put tracking down to put cranes on, etcetera. So they've got a, a bit of diversity there, which appeals to us. They've grown a very healthy business there, but we feel that with with our infrastructure, we're able and the ability to put CapEx into that business, we are able to grow not just their market share in the TV and film industry, but also increase their market share in events, and their diversified markets.

17:30 So I hope that's answered that question. Next question. It's John s again. With long standing relationships with major production companies, how do you plan to strengthen these partnerships, and are there any new opportunities with global streaming platforms or traditional studios? So that's good another good question. But the the answer to that is that most of our customers, the majority of our customers, in fact, are line producers, producers, executive producers, and transport captains, and these are predominantly self employed. And they move between production companies and streamers. So although we are preferred suppliers and preferred suppliers lifts with NBCUniversal, Apple, Netflix, Ice TV, BBC, The people that that make the decision to use us on a production are the producers and the production managers and the line producers who are self employed and and move around.

18:26 So if I give you an example of that, one of our customers, we one of the last job the last job we did with them was for was with Lucasfilm Oh, is that right? And Star Wars, and now we're doing Marvel film. So they move around constantly, and we go where they go. Hope hopefully, that answers that. Next question. Tom f, do you have an estimate of the synergies of the recent acquisition, and do you see scope for similar synergies for further m m m and l opportunities? Yep. So we do.

19:12 A big thing with these businesses that we've we've acquired to date is that we have the advantage of having just a monthly time to productions. Location one and Autotrack, their lead time is four to five weeks. So, you know, we're talking with productions that are starting next March, April, May, June. These guys don't know about those. It obviously gives us vision of what's the requirements are going to be like, and we got we have an understanding of which productions we'll be working on. And then we can talk to those productions, and we can offer offer them the one stop shop and the opportunity to for multiple bookings. So the the the big thing there is awareness of which productions. And then the the actual synergies within our business is just about utilizing our assets. So we have, obviously, we have a health and we have a transport department, a human resource department, administrative department. So kind of all the assurances can come under one roof. All the transport, maintenance, purchasing, servicing can come under one roof.

20:24 Human all the human resource issues and sales. So we have a CRM system called Salesforce that we utilize that we currently work and share with location one, and now we obviously share with AutoTrac. So they they are the the the main synergies. And, as I said, the the the big thing there and the advantage for these companies coming into work working under the under the ADF group is the is the advanced notice of productions. Steven Kay, with significant investment in your vehicle fleet, how do you balance between maintaining fleet quality and managing costs?

21:10 And what are your strategies to ensure efficient fleet utilizations as productions ramp up. Right. So the unlike AutoTrac and our friends at Location 1, our business is a bit more complicated because all our vehicles have to be MOT'd and have to be serviced every twelve weeks. So when these vehicles go out on a production, maybe let's talk as example, they go out on the gentleman and they film for thirty weeks. For that period of time they're out, they need to be serviced. We get them we have them get them MOT before they go out, so there's no issue with that. But at the end of that period, when they do come back and don't forget that these vehicles are out there working. They're not doing so much necessarily much mileage.

22:00 So to give you an idea of that, general haulage companies, vehicles that work in in general haulage tends to do up to a 150,000 miles a year. Our average mileage is 25,000 because they're predominantly parked on a base, and they don't move very far. So the big difference for us is that the vehicles, costume trucks, makeup trucks, production offices, they are working spaces where there are teams of people working in those vehicles for long periods of time, and they're going to get knocked about and cupboard doors come off, etcetera, etcetera, and and there's gonna be wear and tear. So when vehicles come back after, being out on a production for a long period of time, we have to put them through a prep clean and prep process where they come back in, damages assessed, repaired.

22:45 So when they go out again, the the functionality, everything is is and the standard is high interior wise, and the the the maintenance side in terms of the mechanical side, the MOTs are done in their service before they go out. So that's something that we've that we've been doing for a long time now, and and it's a smooth transition from when they come back in and they go back out. A big thing about our vehicles is that everything is quite unique, and it's they're not our vehicles aren't things that you can go you can buy at a dealership down the road, so they're bespoke. They're fitted out and bespoke, so they hold a lot of value. So to give you an idea, earlier in the year, in January, we sold two makeup trailers that we bought, from a Canadian company in 2014 for £45,000, and we sold them in January 2024 for £35,000.

23:46 So they hold a lot of value, and then the smaller suppliers or we'd we'd try and sell them out in into Europe. We'll buy those vehicles, and then they'll refurbish them and then put them out. Next question. Tom f. Any update on a one potential impact on your business? I recall you talking about the new Gladiator films superimposing the crowd in the coliseum using small sections of extras and film during this there's no it it is as it was when we last spoke that it there's no advancement there. And I think I I probably told you this last time. These these productions and these actors, they have image rights, and they're a bit like footballers and sports people, and they're very, very highly controlled.

24:35 So we don't see any any real advancement or risk in that in terms of the general filming, just in areas where they're using it for extras like in the Gladiator where they're superimposing for the crowd. Another question, John s. Is AutoTrac's CAPIC profile similar to ADF? I'll let Neil answer that. Sure. I mean, the profile, but they they do wanna spend some money next year. They've been down already with kind of a begging vote. But they they run the business very carefully over the last couple of years, and and they pay for everything out of their cash balance. I know they haven't financed anything. So they have run, basically, for the last year, okay, except then there's been a strike, which has depressed sales at the limit of their stock and their inventory.

25:28 So with the the effect of the strike proceeding for them, really, May, June, and July, they've been at the highest level of sales they can be at, really, with the with the level of inventory they've got. And then they've actually been hiring in equipment from their competitors to service demand. About 10% top 10% of their sales has actually been provided by a competitor. So they know they're not making the margin then on those additional sales where they're hiring in. So that they know and they could see their order book now to the end of the is very false. They do wanna spend some money. And what they propose is to spend £2,500,000 in the first quarter of next year, £500,000 on some vehicles to move stock around, and then 2,000,000 to buy another load of panels. And then, you know, the the panels themselves are £1,000 each.

26:24 So they they get about 2,000 panels, and that'll take them from about 17 or 18,000 panels up to 20,000 panels. But, you know, there's a lead time on the vehicles, which is a bit on its own sort of critical path in a way. There's no point buying the the panels if they haven't got the vehicles to move around. So they they gotta go hand in hand. So, yes, q one next year, they will spend 2,500,000, and and that way you set them up then into an sort of, you know, 15 to 20% more capacity for for 2025. Are there any more questions? I don't know if there are any more.

27:10 Myles and Neil, I think that's all of them. Thank you very much for answering the questions you can from investors. Of course, the company can review the questions submitted today and we'll publish those responses on the Investor Me company platform. Just before redirecting investors to provide you their feedback, which is particularly important to you both, Miles, and could I just ask you for a few closing comments? Well, thank you for taking the time to join us today. What I would like to say is that the the outlook for us is is very extremely positive, We're really pleased with our recent acquisition. And as I said earlier, we have a couple more in the pipeline which are gonna help us get to where we want to be in terms of our objective of of having a 100,000,000 turnover by 2026. Thank you for joining today, and, we look forward to seeing you next time.

27:57 Miles and Neil, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations? This won't take a few moments complete, but some should be greatly valued by the company. On behalf of the management team of facilities by ADF PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.