Don’t just back the horses . . . events firm is a winner worldwide
NEXT month’s Cheltenham Festival is one of the highlights of the horseracing calendar. Attended by more than 250,000 aficionados each year, it is lively, exciting and takes months of organisation.
Arena Events plays a crucial role in the process. The company listed on Aim in July last year at 55p. The shares are 60p today and should increase materially over the next few years. Chief executive Greg Lawless is highly ambitious and has a well thought-through plan to expand the business.
Arena can trace its roots back 250 years to 1761 when Sir Richard Edgington began selling tents, flags and decorations for public occasions. Today, the company works on top sporting fixtures such as the London Marathon a nd music festivals, from Glastonbury to the Dubai Jazz Festival, which closed on Friday.
These are annual contracts, many of which date back several decades. But there are episodic events too, such as the London Olympics, the Rio Olympics and the 2014 Football World Cup. The company even sets up ice-skating rinks during the winter on sites such as the Tower of London and Hampton Court.
In the past, Arena was primarily responsible for providing large marquees and similar structures. Recently however, it has branched out.
At Cheltenham, for example, Arena starts off by erecting a 400 ft triple-decker marquee, complete with lifts, a glass handrailed staircase and attractive interior design.
Designed to host corporate guests, the marquee looks like a permanent building and Arena has already been working on it for several weeks.
Once the external structure is complete, the company goes several stages further, adding tables, chairs, soft furnishings, even cutlery and crockery so event planners just need to organise the food, drink and, of course, the guests.
Arena is one of very few companies to offer such a comprehensive service. Most competitors provide one or two elements of the complete package and are locally based. Arena operates across the world, with sites on the East Coast of America, Hong Kong, Kuala Lumpur and the Middle East.
The company has grown both organically and through acquisition over the years but most of its purchases have centred on businesses responsible for building marquees and temporary scaffolding, as these tend to be the first products that event planners book.
Looking ahead, Lawless is keen to expand the business by moving into new parts of the world – particularly the US West Coast – and selling more complete packages.
Today, around half of Arena’s UK revenues come from these comprehensive offers but overseas, that drops to less than 20 per cent.
Over time that percentage should i ncrease s i gnifi cantl y as t he tents to tea trolley offer is cost effective and means that event planners need to deal with just one supplier.
Arena is also keen to ensure that it is busy all year round, filling out the calendar both by operating in regions where it is warm in the winter – such as Dubai and Kuala Lumpur – and by expanding its presence in areas such as music festivals and cold-weather activities like skating.
The company has done well in recent years, building a reputation for high quality products and service. Shareholders who invested in the flotation include blue-chip names such as BlackRock and Hargreave Hale.
Lawless himself owns more than 5 per cent of the company and a further 32 senior executives are tied in with shares and options. Results for 2017 will be announced in April and analysts expect revenues of £ 100 million, profits of £4.5 million and a 1.4p dividend. This year, sales are set to rise to £107 million, with profits up 31 per cent to almost £6 million and a hike in the dividend to 1.8p. Midas verdict: The industry in which Arena operates is highly fragmented with most competitors offering one or two services in one or two locations. This presents Arena with multiple opportunities f or growth. Lawless, a chartered accountant turned business entrepreneur, has ambitions to create a global company. He has run successful firms in the past and leading shareholders have confidence he can do it again, particularly as sporting and musical events are increasingly popular.
At 60p the shares are a buy.