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Under the spotlight – Arena Events Group

With a summer of sports kicking off in the UK and Europe, a host of world class events will again draw an influx of tourists from around the globe to British soil to get their slice of the action. UK based events such as the Formula One British Grand Prix, Henley Royal Regatta, Royal Ascot and Wimbledon see close to 600,000 visitors annually.

What most of us don’t think about is the logistics, resources and planning with hosting such events. Behind the seamless presentation of various events is months and sometimes years, crafting every single detail.

Arena Events Group (ARE) is a leader of turn-key, managed solutions for event organisers across sporting, cultural and corporate events. Arena as we know it was established in 2000, however the group’s history can be tracked back as far as 1761.

The company listed on AIM in July 2017 with an initial market cap of £62mil and share price of 55p, however today, Arena has a share price (at time of writing) of 60.55p, giving them a market cap of £72.05m.

Staging, structures and seating is the backbone of Arena’s services with structures accounting for ~74% of revenue and seating ~20%. This division of the events sector makes up 26% of the overall UK events market, however Arena owns just 7% of this.

A global company; Arena’s core market is the UK which makes up 43% of its sales worldwide. This is followed closely by the US which makes up 40% however they also have presence in the Middle and Far East and Asia.  Annually, Arena are involved in 300 events across 15 different countries.

In recent years, the company has experienced considerable growth, and this is attributed to Arena reducing its reliance on ‘one off’ large scale events (such as the London Olympics and Rugby World Cup) and investing in leveraging the demand for temporary structures. Arena’s core strategy has been to focus on annually recurring events which make up 70% of their revenue. A low customer concentration means the top 10% contracts for Arena make up just 20% of their total revenue.

The company’s growth has also been fuelled by increasing regulations with health and safety that have favoured Arena as an experienced and well invested events supplier. Arena’s strong performance history means they have never lost a multi-year contract.

Arena’s longest standing client is Wimbledon and the group’s involvement in ‘The Championships’ remains after 68 years. This is followed by a 31-year partnership with ‘The Open’, 21 years with the PGA European Tour and 31 years with Cheltenham Races.

In 2007, the group underwent an MBO (Management buy-out) and in 2012 the group secured external investment from MML Capital Partners and Sports Investment Partners (SIP) which enabled the company to expand worldwide. Since then, Arena has integrated seven diverse acquisitions to become a top five operator in the global events market.

On the 29 March (2018), the Group’s US subsidiary, Arena Americas announced that the US Attorney’s Office was formally charging one of the company’s previous customers for a violation related to the Small Business Set-Aside Program. The initiative was designed to support the development of small businesses, however the client of Arena (Americas) won a USD $4m, 10-year US Department of Defence contract and engaged Arena Americas to deliver on this. If found in breach, Arena could face a fine of between USD $1m – $8m.

The announcement of legal action has had an obvious negative affect on the share price, hitting a 12-month low of 49p, which followed a high of 65.95p prior to the news.

“At the time of the announcement, the share price tumbled, however this has recovered well since. They have no other similar contracts so we see the risk of additional potential fines as low and it would appear that the market has factored in a fine in the low single digit millions. We do not anticipate this to have a long-term impact on the group.”  Rob Wiegold, Shard Capital Stockbrokers.

Meanwhile, Arena have recently released their 2017-year end annual results which showed a group revenue increase of 18% to £109.6m. 2017 also saw Arena win the largest contract in its history with the US PGA; a five-year contract worth up to USD $40m.