Arena Events Group has said it is taking a more conservative outlook for 2019 after its share price was sent tumbling by the announcement of a significant reduction in the overall profitability of its UK division.
The Arena Group provides integrated events solutions, designing and delivering complete temporary environments for leading international sporting and cultural occasions. Arena yesterday (Thursday) provided a trading update for its financial year ending December 31, 2018, detailing the difficulties experienced by its UK arm.
Arena said it has experienced strong revenue growth across the UK, US and Middle East divisions with acquisitions contributing as expected. However, whilst the UK structures and scaffolding business exceeded revenue expectations, an increase in new and one-off projects resulted in the division experiencing operational issues, resulting in what Arena said were materially higher incremental costs to service these events to the company’s standard.
Furthermore, cost synergies in relation to the integration of three warehouses in the UK have taken longer than anticipated and these are now expected to be realised during 2019. Arena said the operational issues are now being addressed, including a number of senior management changes within the division. However, these issues have led to what Arena said is a “material reduction” in the overall profitability of the UK division.
The announcement has seen Arena Events Group’s share price on the London Stock Exchange take a substantial hit. Arena’s price had been tracking at around 58p per share earlier this week, but yesterday’s news saw it fall to a low of 36.38p. The share price stood at 39.74p as trading opened today (Friday).
Arena said it expects full-year revenues to be in-line with expectations but as a result of the increased costs in the UK division in the fourth quarter, the board now projects adjusted EBITDA to be in the range of £12m (€13.6m/$15.5m) to £12.5m.
Arena added that due to a significant proportion of the group’s earnings traditionally being delivered during the last quarter of the year, it is considering moving its financial year end to achieve a more balanced split.
Looking forward, Arena said it enters 2019 with a number of new contracted projects and a full year contribution from acquisitions which is expected to result in a material increase in earnings for the year to December 31, 2019. However, as a result of the impact of the UK operational issues, wider economic uncertainty and a prudent view on the timing of a number of large potential one off contracts, its board is taking a more conservative outlook for 2019.
Greg Lawless, Arena Events Group CEO, said: “Whilst the operational issues in the UK division are clearly disappointing, we remain confident in the group’s strategy and long-term prospects and are pleased to announce that we have recently secured contracts for the 2019 Rugby World Cup and the 2020 Olympics which gives the board confidence in the future prospects for the group.”
Arena, which recently completed the installation of 6,800sqm of event infrastructure at London’s O2 Arena for tennis showpiece the ATP Finals, will announce its audited 2018 results in April.