ANNUAL REPORT 2011 AVESCO GROUP PLC
www.avesco.com
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Chief Executive’s Revew Ian Martin
The 12 months ended 30 September 2011 have witnessed another period of strong growth for the Avesco Group. This performance reflects various strategic decisions and actions that we have taken over the last few years to develop the Group to meet the challenges and requirements of a global economy with a more international spread of customers and events.
As we have developed the Group, we have sought to provide our clients with the same high quality levels of service, wherever they require it, whether it be locally, nationally or internationally. In recent years we have seen the increasing effects of globalisation as new markets have opened up across the world. We have recognised the importance of being able to support our customers in these new geographical areas and have taken steps to ensure that we have the financial and technical capability to meet these exciting new business opportunities.
At the higher end of our markets, we have seen a demand for increasingly large and complex events. We are being asked to work at opening ceremonies and other showcase events, providing creative and innovative solutions to large and often international live audiences. The in-depth knowledge and experience that we are able to bring to events is often a crucial factor in winning this business and to building trust, confidence and stronger relationships with our customers. Of course, we must also be able to offer the best technology for the job and our investment decisions are key to ensuring that we achieve a high utilisation of equipment and good financial returns.
We also made the decision to concentrate our attention on organic growth and start ups in our underlying businesses. Although this route can be tougher than the instant boost of an acquisition, it has given us the advantage that we can build the business exactly as we want it and around our own management team, writing off the costs of this expansion against the profit of the day. Individually, many of these businesses are now starting to yield a good return and may be at the point where collectively they will start to enhance our profitability and cash flow.
In the last five years, we have grown the business at an average of over 15% per annum, doubling the turnover in that period. We have achieved this growth despite maintaining relatively low debt levels and without any material additional equity funding or weakening of the balance sheet.
Our strategy has meant that Avesco is now a stronger, better positioned Group as a result. Over the last few years, we have invested significantly in our people and capability. We have accelerated the development of our ability to service our customers wherever they are located and wherever they wish to stage events. We are only part way through this journey but I believe that we have built a strong foundation to continue our impressive growth.
CREATIVE TECHNOLOGY (CT) In the year in which it celebrated its 25th anniversary, Creative Technology, the Group’s largest business, grew revenues to £80.5m (2010: £69.1m) and trading profits increased to £1.5m (2010: £0.8m). The results of the division were driven by an outstanding performance from CTUS. In CT Europe, steps were taken to merge various operational activities in the UK, Germany, Holland and the Middle East to bring about closer cooperation and planning between the various offices and to improve efficiency and utilisation. Overall, CT Europe produced another good performance with CT Germany in particular making excellent progress. With the opening of an office in Qatar, CT now operates from 17 locations around the world, leaving the business well placed to offer customers both a local and international capability while also providing the Group with exposure to new and important emerging markets. As the offices in the Middle East and Asia Pacific move beyond their start-up phase and begin to make a more positive financial impact, we have a very solid foundation from which to drive further growth from the CT division.
FULL SERVICE Our Full Service businesses have seen a welcome turnaround and have returned to profitability with a trading profit of £0.4m (2010: loss of £0.7m). Full Service is one of the Group’s most competitive markets and the achievement during the past year is testament to the growing recognition of the MCL brand as a provider of a top quality service at a competitive price. The division’s largest business is in the UK, where great strides have been made to build on strong customer relationships and to target new business opportunities. New inventory IT systems are being introduced in the UK, which should produce improvements in asset utilisation and will be rolled out to the operations in the Netherlands and Spain. A number of partnerships have been entered into with conference centre and hotel venues to provide on-site services, opening up a steady flow of new business to add to the division’s existing work in the conference and corporate event market.
Our Full Service business in Monaco has been operating in an increasingly competitive market with strong price pressures. Although we looked at acquisition opportunities to bring greater scale to the business, we eventually decided to accept an offer for the company and the sale was successfully completed in December 2011, at a price approximating to net asset value.
BROADCAST SERVICES Collectively our Broadcast Services division, which comprises Presteigne Charter and Fountain Studios, saw reduced profitability with trading profit dropping to £0.8m (2010: £2.1m) as Presteigne Charter suffered an expected “odd year” dip in its revenues. Presteigne Charter is a key supplier to many broadcasters at major sporting events but, as these tend to take place in even years, 2011 was always going to be a challenging year. However, the coming summer brings the prospect of the UEFA Euro 2012 football championships and London 2012 Olympics and, therefore, promises to be a busy period for Presteigne Charter. 2011 was in contrast a highly successful year for Fountain Studios, our television studios in London. Fountain enjoyed its busiest year ever, with high levels of utilisation of its facilities resulting in record profitability.
CONCLUSION Moving forward into 2012, we have good reason to believe it will be a year of significant progress for the Group. Although the economic conditions look uncertain, we have substantial forward momentum and the additional benefit of many large events this year.
Longer term, we believe that Avesco is well placed to meet any of the shifts in our market and to continue to grow by building on our international network, adding additional services, retaining our culture, maintaining a strong balance sheet and never forgetting to give our customers a world-class service.
IAN MARTIN CHIEF EXECUTIVE 12 January 2012
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