04 AVESCOGROUPPLC ANNUAL REPORT 2009
www.avesco.com
Financial Review
John Christmas
OVERVIEW
RESULTS In 2008, the Group invested a net £23.8m in new
The12monthsended30September2009has
TheKeyPerformanceIndicatorsusedtomanagethe equipment. Whilst this figure was significantly lower
beenaverydifficulttradingperiodforthe
businesscompriserevenue,margin,tradingprofit in 2009 at £11.5m, the full year depreciation effect
Group.Theglobaleconomicsituationhas
andnetdebt.Marginisthepercentagederivedby of last year’s investment has seen depreciation rise
resultedinasignificantcurtailingofthetypeof
dividingthegrossprofitbytherevenue.Trading by £3.5m in 2009 to £19.6m (2008: £16.1m). The
eventsonwhichourcompanieswork,withonly
profitorlossisanAlternativePerformanceMeasure pricing pressures referred to above have meant
sportandsomeareasoftheentertainment
thatexcludesvariousnontradingitemsfrom that we have not recovered these additional costs
industryremaininglargelyunaffected.
operatingprofitleavingfiguresthatmoreaccurately through an improved margin; indeed, margins
Consequentlywehaveexperiencedarevenue
reflectourunderlyingtradingperformance.The have declined from 35% to 30% on a constant
decline,onayearonyearconstantcurrency
majoritemsexcludedthisyearcomprise currency basis.
basis,ofsome15%.
impairmentofgoodwill(£(0.9)m,2008:nil),the
amortisationofintangibleassetsthataroseonpast
Operating expenses have been an area of
Our competitors appear to have been similarly acquisitions(£(0.4)m,2008:£(0.7)m),restructuring
considerable focus for the Board. Staff numbers
affected, resulting in a surplus of available costs(£(0.6)m,2008:£(1.0)m)andtherelated
were reduced by 10% to 651 by the year end (2008:
equipment and services in the market, with impairmentofcertainjobspecifictangiblefixed
727) and our Cardiff operation was closed down in
consequential downward pressures on pricing assets(£(0.3)m,2008:nil).Lastyearwealso
the spring. As a result and if the recent start up
and margins. Across the Group as a whole we excludedagainof£7.2mthatarosewhenwe
businesses in Hong Kong, Shanghai and
have seen a 5% reduction in our margins on a acquiredCharterBroadcastinApril2008fora
Barcelona are excluded, the Group operating costs
constant currency basis. Undoubtedly the considerationconsiderablybelowthe£9.6mfair
were held back to prior year levels (at constant
reduction would have been worse were it not for valueofitsnetassets.
currency rates) .
the significant asset purchases made in the
previous year, which enabled us to service more of
Revenuefortheyearwas£90.2m(2008:£94.8m).
DEVELOPMENTANDDIVISIONALPERFORMANCE
our business from our own equipment.
Theoperatinglosswas£(12.1)m(2008:profitof
Inlookingatourdivisionalperformance,theoverall
£7.4mwhichincludedthe£7.2mbenefitinrespect
constantcurrencyrevenuedeclinewasfairlyuniform,
The Group’s main internal costs consist of asset oftheexcessofthefairvalueoftheassetsinCharter
withCreativeTechnology(“CT”)down16%,FullService
depreciation and people. Steps taken during the Broadcast).Thetradinglosswas£(9.8)m(2008:
down13%andBroadcastServicesdown15%.
year to reduce these costs included the disposal of profitof£1.6m). Aftertakingaccountofnetinterest
certain older or less utilised assets, staff costsof£(1.1)m(2008:£(0.9)m),thelossbefore
Although most of our CT locations performed well
redundancies, an office closure and a Group wide incometaxwas£(13.2)m(2008:£6.5mprofit).The
in the circumstances, CT’s divisional performance
pay cut. basicanddilutedlosspersharewas(54.9)p(2008:
was impacted by a significant reduction in revenue
21.6pearnings).Nodividendisproposed.
in the US where the economic downturn was most
Nevertheless the Group recorded a significant loss
acutely felt. Combined with the absence of any
for the period, with consequential write downs in The 2009 Group revenue of £90.2m (2008:
major sporting events in the period, CTUS
goodwill and intangible assets. £94.8m) represents an overall decline of some 5%.
experienced a 27% fall in revenue. Across the
However, when the 2008 figures are restated in
division as a whole, revenue was £53.3m (2008:
The Group balance sheet remains in good shape,
sterling using the average exchange rates that we
£54.0m, £63.1m in constant currency), the margin
with gearing below 55% and committed bank
have used in 2009 (rates against sterling for the
dropped by 5% to 26% and, although operating
facilities for the next three years. During the year
main currencies being $1.559 and€1.150 in 2009
expenses were kept in check, a trading loss of
our banking covenants were also renegotiated so
compared to $1.972 and€1.317 for the previous
£(4.5)m for the year resulted (2008: £0.6m profit).
that our covenant headroom going forward is
year) the decline is closer to 15%. As a group we
more generous.
benefit from major international sporting events
RevenueinourFullServiceDivisionwas£19.3m
which tend to occur in “even” years. In 2008 we
(2008:£20.6m,£22.1minconstantcurrency).This
generated over £7m of turnover from the Olympics
divisionislessaffectedthanCTorBroadcast
in Beijing and the European Football
Servicesbytheabsenceoflargesportingeventsin
Championships held in Austria and Switzerland. If
“odd”yearsand,withthegeneralnatureofitswork
revenue from these events is eliminated together
beingatthesmallerendofthescaleandutilising
with nearly £3m of incremental revenue in our
lessexpensiveequipment,resultedinmargins
“start up” businesses in Hong Kong, Shanghai and
beingmaintainedataroundthe40%level.However
Barcelona, our underlying decline in revenue is
thebuildupofouroperationsinActionBarcelona
around 11.5%, which more accurately reflects the
andMCLLondonmeantthatoperatingexpenses
effect of the recession on our various businesses.
increasedby£0.7monaconstantcurrencybasis.
Theseadditionalcostscombinedwiththereduction
inrevenuesawtradinglossesintheFullService
Divisionincreaseto£(2.7)m(2008:£(0.8)m).
John Christmas FINANCIAL DIRECTOR:
Going forward into 2010, there are grounds for cautious
optimism for the Group. As an “even” year, we will
have the benefits of both the Winter Olympics in February and
the FIFA World Cup in South Africa in June and July.
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