Aeorema Communications (LSE:AEO) — Investor Presentation

0:01 Good afternoon, and welcome to the AEOREMA COMMUNICATIONS PLC Investor Presentation. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Steve Kwa. Good afternoon to you. Good afternoon. Thank you. And welcome, viewers. We're back again. We have an update presentation from just to reemphasize our interims from three weeks ago, we announced, and, obviously, we did an RNS reach out message yesterday morning. So give you a color to that.

0:52 And myself on the call, CEO, Steve Kwa of AEOREMA COMMUNICATIONS, and and Jamie, our finance director, will be doing the presentation. For those who don't know who we are, and welcome back people who do know who we are, we are global, all winning strategic communications group. Happy to say our London office is New York and Kent. Over 60 employees, and we've been going for over sixty years with our management team. What does that actually mean as a as a group? So we're in marketing services, we're in the live space and where an audience wants to be connected with a brand. That is what we do. We help business communicates around a conference or a brand exhibition or a webinar or a meeting or an exhibition, that's what we do, and we do that globally.

1:43 Happy to say that we have a footprint, as I say, in North America, strong in in Middle Europe and the rest of the world, which is great. Just wanna make the investment case as we are an aim, that we are profitable, robust business, generate cash. We pay dividends as we announced. We'll do a three p dividend later this year in November. I do have a strong management team. We are seen as market leading in our industry and win lots of rules, all supported by a strong and sustainable policy. I will hand over to Jamie who will do our updates on our interim results to give you some of the more depth to that, and I'll follow that up with some examples of our work and a little snapshot of where we are as a business. Thank you, Steve, and welcome, everybody.

2:29 I'm here to just provide a overview of the interim results we announced, just over three weeks ago, just to highlight that we did extend our year end, during the year. So our new year end is the end of December, and we are reporting for the twelve month period to the end of June. So just to run you through the numbers, our revenue was broadly in line with last year at just over £20,000,000. This is on the back of another strong June. That's our busiest period of the year. Lots of work at Cannes Lions and a lot of events around under in that period. And we also had a quite a strong h one in terms of revenue as well. Underlying profit before tax, so this is stripping out the restructuring costs that we I will talk discuss in shortly, was $65,015,000 pounds, 41% increase on the profit before tax last year, £437,000.

3:29 Profit before tax, when including the restructuring cost, was £366,000 compared to £437,000 last year, so a deduction. But just to cover the cost reductions that we've taken place during the year, we started this process late last summer looking to build a more efficient and profitable business for the future. So we undertook a lot of redundancies during the year to create a leaner cost base and support improved efficiency and profitability moving forward into 2026. So those those costs are what, have been stripped out of the underlying profit.

4:16 As always, we have a strong cash position. We, we invoice all our clients upfront, typically 75%, and this allows us to maintain a strong cash balance at the year end period end, sorry, I should say. It was 3,100,000, and this is brought in line with last year as well. And probably a more important number is the average cash balance during the twelve month period was £2,100,000. So a very healthy position, which gives us a lot of confidence and support going forward. And as Steve mentioned, the dividend policy was maintained. So an interim dividend of 3 p per share was declared for the twelve month period, and this will be paid at the end of November. So a healthy period and lots more to follow, which Steve will now cover.

5:07 Sorry. And sorry. Continue growth. Sorry. So what does our story say so far? Very happy to say that we do have exceptional client retention year on year. I we rarely lose clients and continue to build with net new clients and also get much more embedded, with our clients in very senior relationships that can tend to lead to more twelve, twenty four month kind of relationships. And that's part of our growth going forward, and that's part of our success in particularly North America, which I'll come on to in a second. I think it's important to note that our average project size has increased fairly dramatically over the last five years.

5:53 And there's a few key points here. That means we have a a more efficient engine for less headcount for the size of the project. It does take the same amount of effort to kinda manage a smaller value project as well as a bigger project. So there's flex there. But more importantly, going back to the relationship piece, you tend to start off with a smaller project with clients, and as your account grows, your project grows in value. And that just shows our growth. Hence why if you don't lose your clients, you will increase your value to projects, and that's quite significant for us. Also, we're quite keen not to be busy fools and then be more efficient with our use of our resources. I wanna mention AI. First of all, that we are fully embracing all the AI advantages operationally internally with our creative team and our production team and our legal team, and that's making inroads to our efficiency possible.

6:48 It's also worth noting that AI is our client too, particularly in our tech sector. We're working with some of the leading AI developers, leading AI, if you like, platform providers based on AI. So we are seeing a growth by Fortune being in that section too. But probably more relevant is also is contra contributing to the value of the live part of our business. In marketing services, you've heard a lot of digital disruption. We don't do digital. We do live. And I think I said several times before, in the marketing mix, the value of in person communications with brands and marketers is becoming even stronger, and we're seeing a growth in both value projects, importance projects, and we've certainly not seen a reduction in projects. North America success.

7:33 Our reach announcement yesterday just to give you kind of some snapshots of a very busy September. Just as busy in some ways as cans, which I think would be kind of company to some of our shareholders. It's not just can. We are busy in other areas. We've been in North America for five years now, and it is really starting to pay dividends in our success and growth, particularly around our net new clients to new client relationships. Here's a snapshot. Literally, in the last eight weeks, we produced eight major events for eight different brands of a whole broad range of genres from an advertising summit in New York, United Nations work for Wall Street Journal, an immersive consumer event in the city, global roadshow, Chicago, New York, Cincinnati, and then please read more here. So that's just the proof in the pudding where we were zero five years ago for this month even to eight in the in the last eight weeks, and that continues to grow.

8:33 For example, Instacart, and just a note here is putting our foray into the more consumer world, to use marketing jargon. Our existing client base is b two e, I. E, brands talking to their internal staff or b two b brands talking to their clients. In this case, Instacart are talking to their consumer clients. If you don't know who Instacart are, they're The US largest grocery delivery service, I guess, similar to a delivery route or on a card. Very short turnaround, conversations down the can, and we did produce their first kind of constant activation in New York, where over a thousand guests Turned out to be a hugely beneficial experience for them. It was themed in going back to the nineties. Massive success, loads of news, and a delight of clients. And just cements ourselves in kind of another genre of work for us.

9:22 Wall Street Journal, as you people who know us, is a long term client, and it continues to expand. Again, it's Unger, United Nations General Assembly in New York. Think for the fourth year in a row, just to show continuity, we produced their activation in the Rockefeller Center. I think they had a number of guests coming through the the three week period three day period, should I say. Again, hugely successful for us. One of several action activation to do for Wall Street Journal in a year. And just wanna point out the level of importance. For example, their guest is the chief sustainability officer from Google, and you'll see them in our further events where these are the most high profile, highly valued, and cannot fail events. It's just a testament, part of my creativity and our delivery to the trust in in our delivery.

10:13 Smartly, a brilliant collaborative client with us. We helped launch their first advanced event last year. We did it again for the second year in Brooklyn. Smartly are one of the leaders in AI creatively led kind of advertising services. A brilliant partner. We do multiple events from in Can and CS, but advanced 2020 provides the second year in a row. Again, you know, we have the most high level kind of audience here. And within this, we also have other introductions. So we did four activations with TikTok, Snapchat, Pinterest, and Adobe, not to name it, which is a bit of trust. Climate Week New York, cities of Climate Group. Again, massive global event, other production company behind Climate Week that produced that event in New York.

11:02 It's the probably in the biggest event in the calendar where New York has taken over. We did the opening ceremony. You can see this is Mark Ruffalo producing one of these presentations. But, again, it was a large event they've ever done. The number speaks themselves, 200 speakers, over a 100 journalists, just under 5,000 articles, 700, 1,700 touch points within New York itself, and an advertising reach of over 30 people. Alongside that, we had a surprise event, which is a global new summit for and the president of Canada, prime minister of Bahamas. So, again, it just shows the level of quality. These are events that cannot fail, and they're streamed globally.

11:49 Always nice to get good feedback. This is typical, our feedback. We have glowing reports every time. We have a whole book of great stuff. But it's out it was nothing without the great team delivering. I must say I'm proud to have a really engaged, embedded creative team and production team. The outlook is strong. We have a huge confidence in our pipeline as mentioned. We're looking at 2026. There is, the fact that we are made quite a few decisions. Part of it, the eighteen month period, was to get a calendar year so we can give forecasts. And as we close September, as we close contracts, we will be giving that forecast this side of Christmas, around November, hopefully, to give you guidance for the market going forward, and that's something we've working to. So now with an annual year, with an annual contract, and then the pipelines, we see a very strong pipeline going forward, and I'm delighted with the growth in our existing clients and our net new clients.

12:48 Just to emphasize, obviously, the products and the quality that we do is exemplary, but we have a really strong marketing and sales team and have a really strong accounting, which is part of the success. So I hope you can see it's all starting to kinda restart paying fruition in North America, which is a a massive growth part for our business. Just to remind ourselves, as as Jamie says, we are cash positive and very strong, which gives us confidence in our investments, but also we nurture that cash. It's good security for our business and for our shareholders. Paying dividends is important to us because we're confident, but also with all the trust and, engagement of our shareholders, which we enjoy. Our reputation continues to grow. We're certainly feared by our competition and love our loved by our clients. No longer that can continue.

13:37 And nimble. I think, you know, we had a massive rapid growth, partly rebalancing to get back some of that nimbleness that nimbleness. I can't say that. Or agility, but also being in the right size and scale to kind of do global events. Is strong, relationships are super strong, and our outlook was great. And we're looking, and we will be doing forecast in the very near future. Thank you. So, really, questions? Yes. That's great. Steve, Jamie, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. And while the company take a few moments to review those submitted today, I would like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

14:26 I'm Steve Jamies. You can see we have received a number of questions throughout today's presentation. And, Steve, before I now hand back to you and kindly ask you to read out the questions where appropriate, and I'll pick up from you at the end. Thank you. Okay. I'll answer the first. I think myself and Jamie can answer. So our forecast of '26 is now available. As we said, we are working on that as we close a busy September. We now have contracts and sites for next year, and we will be doing forecasting in the future. The share buyback has clearly not worked. Will you consider a tender if you believe the shares are cheap? I'll pass that to Jamie to answer that. Yeah. I mean, the the the share buyback that we announced in May has been disappointing. The limitations on price and volume, which we can purchase at.

15:13 I've been restriction, and I've had multiple discussions with our brokers, we will continue to evaluate that. In terms of a tender, it has been raised with me previously by investors. I have shared that with the board discussion, and the opinion was that it's it's it's probably too expensive at this time. But, again, all all cards are on the table, and we will continue to evaluate our options moving forward. Yeah. Just and the high fees around the tender, again, we were looking at that, but I think the value is put anywhere through it. We have a bigger scale thinking further down the line. But, again, it's not the table.

16:00 Next question. Where do you see growth coming from? Well, organically with our clients, going back to the client retention piece, so just naturally, we're keeping much more secure with our clients. We are negotiating twelve, twenty four more com contracts, which gives them more confidence in forecasting. And America now really is gaining traction. You can see the actual volume of work that's going through it, and we see North America. And North America brands as well, particularly, as a growth market for us. It's a good question. Will US tariffs have much impact on you? Hasn't really had any impact on us as such, again, by Fortune. Most of our US clients, one, are US based, and we're obviously, we have a US based office, so we are an American brand anyway.

16:51 Their manufacturing and the supply chain aren't affected by it because they're offering services like we are, so we haven't seen any direct impact in in that at all. It was great to receive the update on Monday, Ken, about your growing success in North America. Can we expect more updates of this kind as you gain more traction there and elsewhere? Absolutely. I think just news out to the market, we will try and use that channel as much as we can. We have kind of gone, as you say, for some rebalancing, so now we're kind of on our next phase in how we're broadcasting. So absolutely, there'll be more comes from us. One for Jamie, actually. With a healthy cash balance, are you looking to to no. This is more more for me, actually. With a healthy cash balance, are you looking to do any acquisitions anytime soon?

17:41 If so, what areas might you look to strengthen? Well, obviously, we're always looking at opportunities. I've said it before, but we're very cautious about that. I believe that most acquisitions are quite high risk. But the considerations are the obvious ones, you know, is it geographically advantageous to us? Is it a new market sector or a new industry, or is it a great talent, or is it a good offer? Some of our agencies aren't doing as well as we are. There's one I saw a question. With a healthy cash balance oh, that's it. This is one for Jamie. With a healthy can't we have basically, Jamie, are we doing anything with our money?

18:32 What what we have in as a cash balance? Yeah. Absolutely. We we tend to spend sorry. Spend. We tend to move most of our money to The US where we get a healthier interest rate, and obviously, that's just it's occurring interest. Top my head is roughly four, four and a half percent. And, yeah, we're always looking out for opportunities. And I think there's scope to work closely with some of the board members see if there's opportunities to improve that improve that moving forward. Absolutely. Yes. We there's always room to for improvement, I guess. But, yeah, we are we do move it to where the interest is highest, and we will continue to evaluate that. Some more questions coming in.

19:25 One's about five eight payback. Okay. David s, you mentioned less clients but moving to higher value projects. So what happens if a client comes back with a smaller cinder project? Are you just turning the business away? Well, there's always a commercial decision about turning business away. We are certainly turning our businesses projects that we don't think are of value to us. Client relationship and size of project aren't necessarily hand in hand. We will do small projects that we see as an upside, and most of our clients have grown that way. It's just that our projects are just bigger in general as in as in our perception of the type of work we do, but also, I think, kind of the the type of client we're working as well and their needs. How do you see growth in The US locations going in the next few years?

20:16 Oh, so starting East Coast, West Coast is quite a focus for us. The the learnings we've had in America is having boots in the ground in locations is very important, but geographically, your team can be based anywhere. They're so used to flying across from, you know, East Coast to West Coast is is is further away than London. So there'll be more to do where we think some of our temples are. As you know, a lot of events happened in in New York, which we're activating on. Now we're seeing more in San Francisco, California before we look into that. What else? In the announcement this week, you mentioned you have a twenty first version, major step to brand to consumer experiences. Do you see this as an area of the industry expanding to further?

21:09 So that's referring to the Instacart event that we did in New York. Yeah. Again, that b that word b to c is something that we have all the skills and capability of. It's just something we have pushed for. And as we look at expanding our portfolio services, b two c is certainly in our remit. Going back to the acquisition question, that would be one of the kind of the basics in the are they strong in b two c, but we're seeing as that as an organic growth going forward. Think we're going running out of questions, guys. You don't mention Eventful very often. Is it growing? Are you happy with its performance? Eventful is a small little boutique agency that does wash its face, but feeds us, those are clients, and the impact's actually more than cheaper twenty four's actual revenue.

21:58 And as a portfolio services, it's a very good door opener to say we offer everything from venue search to actual delivery. Why was the company so I'm gonna ask I'll ask you tougher questions. Why was the company so unagile that the cost of restructure was circa 250,000? Yeah. So I think we have said it before. We had a rapid growth plan, and our growth year on year was increasing. And it was called the Trump election and the labor election, and tech said they're going for a lot of turmoil two years ago that impacted our plans. Okay? So we had too much capabilities, so we've adjusted that. That's the reason.

22:48 So, therefore, we adjusted quite quickly, and you see that coming back, and you'll see that in our forecast and. A good question, Jonathan. I know who you are. Anyway, I think that's the end of that session, guys. So That's great, Steve. Jamie, thank you for addressing all those questions for investors today. And, of course, the company can review your questions submitted today, and we'll publish those responses on the investment company platform. But, Steve, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments? Look. As I say, in in our position as one of the profitable dividend sharing companies in name, but look at our growth and look at our success. We are feeling very confident about the future.

23:36 Fact that we're gonna be putting forecast out and the fact that we rearrange kind of our calendar year, the fact that we're actually getting more streamlined, the fact that we're keeping the business, the proof's in the pudding. So, again, I do thank our shareholders for the support. We have great dialogue with them. We do listen. So, hopefully, the feedback and how we present ourselves and make an impact. As I've mentioned, Alan joining us and the ball has been a great thing for us to give us new kind of fresh eyes on how we approach the market. But, yes, the future looks very strong and very bright as we have said, and we'll continue to say so. Standby. Thank you. That's great. Steve, Jamie, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations?

24:28 This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of AEOREMA COMMUNICATIONS PLC, we would like to thank you for attending today's presentation, and good afternoon to you all.