Facilities by ADF (LSE:ADF) — Half year results for the six months ended 30 June 2026

0:00 Good morning, and welcome to the FACILITIES BY ADF PLC Half Year Results Investor Presentation. Your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Nicola Piercy. Good morning to you. Good morning, everyone, and thank you for joining us as we share our first half twenty twenty six results and outlook for facilities by ADF. I'll start by sharing the highlights for the half. Will Wurslow, our CFO, will then take you through the financials in detail, and I'll then close with our strategic priorities and outlook.

0:50 Moving to the next slide, please. I'm really proud of the fact that FACILITIES BY ADF continues to demonstrate best in class physical production facilities and services across the film and television industry, including expert on location hire from location one and portable roadway solutions from Autotrack across The UK. We are trusted by global content studios, production companies, and independent producers alike, having delivered services for major productions across the half, including slow horses for Apple, the gentleman for Netflix, rivals for Disney plus, and the upcoming Clayface feature film for DC studios in addition to many more independent productions.

1:38 That trust extends right across the industry, including household names, Sky, Netflix, NBC, Fruita Disney, Apple, Amazon MGM, Channel five, f four, Paramount Plus, Warner Brothers, eight twenty four, Universal, and many, many more. At ADF, we operate a medium, a modern, sorry, premium fleet of around 730 vehicles, made up costume and artist trailers, production offices, and technical vehicles with regional expertise spanning the whole of The UK. We think of ourselves as a studio on wheels, providing the services necessary to support quality productions wherever they need to be. Our net promoter score of 89 reinforces our customer facing operational excellence, genuinely world class, and it's that level of satisfaction that drives the repeat business across our client portfolio.

2:38 It reflects the scale, quality, and compliance we bring to every production we work on. And our people are at the core of everything we do, and we're extremely lucky to have such a dedicated and passionate team across the whole of the business. Our ambition remains to be a one stop shop across our family of companies, ADF, LocationOne, and AutoTrac, simplifying the production process and creating efficiencies for our clients. That gives us a strong basis for growth. We've built a modern premium fleet to meet our strategic needs, and our focus now is on capitalizing on that service excellence and industry expertise across the group, increasing utilization to improve ROCE and free cash flow and continuing to build the unique integrated offering that positions us so well for the next phase of growth.

3:34 With that context set, let me turn to how we performed across the half. Next slide. It is key to acknowledge the market backdrop for the first half of the year because it's important context for the numbers that follow. UK film and high end TV production spend fell 15.6% year on year over the period according to the latest BFI data, which was published in August. Against that backdrop, our revenue came in at 16,600,000, down 4.6%. So while revenue is lower year on year, we have been resilient against the wider market contraction. ADF itself was down 13.4%, which reflects its concentration in high end TV.

4:24 That part of the market felt this contraction most acutely with a decline of 20.6%, again, according to BMI. What I'm genuinely encouraged by is that Location 1 and Auto Track both grew through the half, up 6.713.7% respectively. That's real validation of the extended breadth of clients we've been building across the group. Turning to operational and strategic progress, we've identified our group strategic priorities and have already begun implementing them. We've enhanced our group sales team, which is already driving cross selling, and we're continuously sharpening our commercial discipline. We've introduced our deluxe trailer proposition to meet the needs of our expanding client base.

5:13 And we've reinvigorated our marketing strategy to extend our impact in the market, including having reshaped to deliver one cohesive solution to market where it can really positively impact our clients. We've activated sponsorships and social media campaigns amongst many other key activations. And it's a delight to see that our Net Promoter Score held at 89. Well, actually, in fact, up two points year on year. In a half where the market contracted around us, holding and improving that score really reiterates that customer excellence remains a genuine differentiator for our business. Looking ahead, we've already commenced further group efficiencies in h two f four twenty six, and we expect these to deliver material cost savings in the medium term.

6:06 We've mapped out a medium term strategic plan for the business, and encouragingly, our f y twenty seven order book and pipeline is already up four and a half percent year on year. That's early evidence that our reinvigorated commercial disciplines coupled with improving open pipeline are pointing in the right direction for the outlook for 2027. With that as the backdrop, I'll hand over to Will to take you through the financial detail. Okay. Thank you, Nick. Good morning, everybody. So turning firstly to the key financial metrics, for the half. So starting with group revenue, this was £16,600,000 down 4.6% against £17,400,000 in 2025.

6:54 As you heard earlier, that compares to a UK film and HGTV production market contracted by 15.6% over the same period. Adjusted EBITDA was $1,700,000 against $2,200,000 a year ago. That decline reflects operating deleverage. And by that, I mean lower revenue moving through a largely fixed cost base. And that's an area that we're addressing directly through a cost efficiency program that is expected to deliver material cost savings in 2027. Loss before tax was £3,300,000 compared with £2,000,000 in H1 twenty twenty five. I'll bridge that movement in more detail on the next slide. But the two main drivers are the reduction in EBITDA previously mentioned and a revised depreciation policy. Net debt was $14,500,000 up from $13,200,000 a year earlier. Again, I'll take you through the components shortly.

7:46 And leverage reduced to 1.7 times, down from two times in 2025. Operating cash flow was $1,300,000 lower than last year, but in line with lower profitability. Utilization excluding vehicles off the road was 61%, up from 51% in 2025 and for total assets was 38%, down from 42% in H1 twenty twenty five. The vehicle off road program, and by this, I mean taking underutilized vehicles off the road and placing them on sawn, commenced in May 2025 and is generating savings in the region of £400,000 a year. The ex vehicle off road utilization metric is a key KPI for us. It tells us what utilization would be if the fleet was right sized.

8:32 And finally, return on capital employed improved to 4.5%, up 150 basis points year on year as the fleet base continues to unwind. Next slide, please. So now looking at the P and L in more detail, starting with revenue by business. ADF generated CAD9.3 million, down 13.9%. This is the part of the group most directly exposed to UK film and HETV production spend, which itself fell by 15.6% as we've already covered. So ADF's performance was slightly ahead of that market contractions. By contrast, our two other businesses both grew Location one up 6.7% and AutoTrac up 13.7% year on year, validating the group's strategy to build revenue streams less correlated to film and HDTV production volumes.

9:26 Gross margin was down was 29%, down from 33%, which reflects the operational gearing in the business, a largely fixed cost base absorbing those lower volumes. As mentioned, we have further cost actions underway in the second half of twenty six specifically to address this, and these are expected to deliver material cost savings over the medium term. Admin expenses reduced to 3,100,000 from 3,600,000 down 13.9%, reflecting both strong cost control and the benefits of restructuring carried out in the second half of twenty twenty five. That brings adjusted EBITDA to 1,700,000 against 2,200,000 a year early. But overlying depreciation increased to 3,700,000 increased to 3,700,000 from 3,200,000, up 15.6% after we shortened the useful economic lives on certain fleet assets to smooth out p and l volatility from disposals.

10:22 And that's already been validated by a small profit on disposals in the first half of this year. Finance expenses reduced $700,000 from $1,000,000 as our higher purchase liabilities continue to mature and roll off. So net of exceptional items that gives a loss before tax of 3,300,000 against 2,000,000 in H1 twenty twenty five. And finally, to point out that the group currently has seasonal pattern that is more heavily weighted to H2. So h two twenty five alone delivered 23,900,000 of revenue and 7,000,000 of adjusted EBITDA materially stronger than h one, and we do also expect an h two weighting this year. Next slide, please. So moving on to cash flow now.

11:09 Net cash from operating activities was 1,200,000 against 4,800,000 in H1 twenty five, but that prior year figure was flattered by a large positive working capital movement of $2,700,000 which didn't repeat this year. Working capital was broadly neutral. So stripping that out, cash generated was $1,300,000 against $2,100,000 a year ago, which by and large tracks the reduction in EBITDA. It's worth also putting that in the seasonal context to 75% of pre working capital operating cash last year was generated in H2 and we expect a similar weighting again this year. On investing activities, capital expenditure was $500,000 sharply down from $2,300,000 in H1 twenty twenty five, with the largest single item being investment in our new executive single artist trailer.

12:01 We also paid $800,000 of deferred consideration in respect of the AutoTrac acquisition, and there are two further annual earn out payments still to come. Financing cash flows, think we'll cover when we talk about the RCF on the balance sheet slide. So taken together, closing cash was 1,900,000. We go into the second half with a clear, understood seasonal cash profile and a disciplined approach to both capital expenditure and financing. Next slide, please. So finally, moving on to the balance sheet. And I think the key story behind the balance sheet and the one that matters the most for returns is the continued unwind of the fleet, which splits between right of use assets when financed and PPE when owned outright.

12:47 Right of use assets reduced from to 28,000,000 from 29,900,000 and lease and higher purchase liabilities reduced to 15,800,000 from 16,900,000. Much of this fleet was built up during the post pandemic growth phase and is now largely in place. Its continued amortization is a direct contributor to the improvements in ROCE, which stood at 4.5% at the half year, up from 3% a year earlier. Elsewhere on the balance sheet, borrowings were $3,600,000 compared with nil at the December year end. That comprises a $3,000,000 drawdown of the group's RCF and $600,000 of asset refinancing. The drawdown was both to fund contingent consideration, payables, auto track, as well as working capital requirements. As mentioned previously, we are a group with a largely fixed cost base with seasonal revenue patterns typically generating a working capital requirement in h one and an unwind in h two.

13:43 Net debt was $14,500,000 up from $12,300,000 at the December 31. That's made up of $12,700,000 of higher purchase liabilities that sit within lease liabilities, the 3,000,000 RCF drawdown and 600,000 of asset refinancing, less 1,000,000 of cash. So in summary, the fleet unwind remains a key driver of capital efficiency with Rocky up a 150 basis points to 4.5% year on year. The rise in net debt reflects our normal seasonal working capital pattern and the auto track earn out payments, and we expect the usual H2 unwind. And capital discipline and continued deleveraging remain central priorities as the fleet matures. And I think that links directly to the group's broader strategic priorities, which Nick will take you through now.

14:32 Thank you, Will. Okay. So moving on to strategic priorities. We're really pleased to have matched our medium term strategic plan for growth. Our strategic pillars are built around four priorities. We have operational efficiencies, national to regional operating model, diversification, and customer retention. Regarding operational efficiencies, we are already activating savings through restructuring and more active fleet management, and we've identified further efficiencies across the group pointing to material cost savings that we touched on a moment ago for the second half of the year and the future. Our commercial team is increasingly driving group sales and marketing as an integrated proposition, which is already having a positive effect.

15:23 Regarding national to regional, since introducing this strategy, we have instigated efficiencies in combining pops between our companies where where we were historically more siloed, and we're further optimizing regionality to satisfy market needs. In addition to this, we are building out auto track specifically, investing in capacity ahead of peak demand, and extending our regional coverage because it's already delivering strong returns, and we want to build on that. Diversification is a real opportunity for us. Film and events remain a major growth area for our company in particular as we have previously highlighted, and we're well placed to extend our business here. And group cross selling, as previously mentioned, is already having a positive impact.

16:13 And finally, at our core is customer retention. We focus on sustainability and accessibility today. However, at our core is our excellence in customer satisfaction, and that is something we must uphold to maintain our partnerships. Sustainability and accessibility continue to really matter both for us and our clients. We have an industry leading reputation for saying sustainable innovation. Our operations increasingly make significant carbon reduction a standard part of how productions work with us, and we've materially reduced our carbon footprint in recent years. We're also increasing accessibility across our fleet to make sure we're meeting the needs of all cast and crew.

16:59 Together, these four pillars give you a top line indication of our medium term plan for growth. With our strategic priorities set out, let me turn to outlook. Next slide. Our first half performance was lower than anticipated. The current shape of the q four pipeline means full year results are expected to be below market expectations. However, we are optimistic about FY '27. Our order book and weighted pipeline as the as of the September 7 are over four and a half percent year on year. Something else that's worth noting is that The UK theatrical box office is also up 11% in the first half of the year.

17:47 We believe that will really help create renewed positive sentiment in the market for feature film production. We've already commenced further cost saving efficiencies in the second half, which we anticipate will have further material impact. Our enhanced group commercial team continues to drive cross selling and will improve our combined pipeline. And with our medium term strategic plan now mapped out, our four pillars are expected to drive increased utilization, leading to stronger ROCE and free cash flow generation across the group. In conclusion, I'm confident that FACILITIES BY ADF is very well positioned with a resilient first half behind us, a clear strategic plan in place, and a business that continues to be trusted by the very best in The UK and film television industry.

18:39 Thank you for your time. At this point, we will pause to take any questions. That's great. 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. While the company take a few moments to review those questions 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 our investor dashboard. I'm Nicola William. If I may, I'll move us straight onto the q and a session. And the first question here reads as follows. Can you comment on the current competitive pricing environment, and how is this affecting margins? Yes. Of course. Yes. The market is price competitive. There's no doubt about that.

19:25 And, certainly, it becomes weighted in a contracted market as we have experienced. I think with that in mind, the the positive open pipeline and improved order book and and weighted pipeline for next year suggests that the market will be busier, which then should have an impact. But we should also be mindful that budgets have absolutely been squeezed. There's always requests and questions for, you know, how everyone can be more efficient in in the geopolitical climate in which we're operating. And, therefore, we have to be considerate of that and just work out how to best manage that alongside everyone else operating in in the industry. Thank you, Nicola. And the next question is on debt. Can you provide an update on net debt and your expectations for debt reduction over the medium term as free cash flows normalize?

20:20 Yes. I think that's probably one for me. Yes. So as covered in the presentation, we are a seasonal business, with a largely fixed cost base. So based on current seasonality, we usually see, an increase in net debt in the first half of the year, and a decrease in h two as operating cash flows increase. So we're currently forecasting a decrease in net debt to $13,900,000 at the end of the year from the 14,500,000 at the end of H1. Looking more forward in 2027, we're forecasting higher levels of operating cash flow as a result of our strategic priorities, none of which are particularly capital intensive. And therefore, net debt forecast dropped further at the end of next year to 11,900,000.

21:12 I think probably the final comment here is that the board takes a disciplined approach to leverage and bringing that debt down further remains a priority for us over the medium term. Yeah. Thank you, William. Moving on. What is management's current appetite for targeting overseas expansion or capturing a higher share of internationally mobile productions? Good question. We're very aware that productions can be international in scope. I've worked on many of those myself. We already work with production companies whose films will be set in multiple territories. And as part of that, we would offer our services to those productions as applicable when we're currently on a production right now in a in another territory, for example.

22:00 Productions may, of course, often to elect to use a local player if it is more efficient to do so, or we will partner with them to provide those services required, which we are certainly keen to do. So it it's something that's on our radar. Thank you. Another investor asks here, following the integration of AutoTrac and LocationOne, what does the m and a pipeline look like, and what is the acquisition criteria? Can you spell that? Yeah. Yeah. I think, well. Think, firstly, we'll always keep an eye out for value accretive opportunities. But I think we're mindful of how we finance them, and we don't want to put the balance sheets, under any pressure to chase acquisitions. I think near term, our priority is really the strategic pillars that Nick talked about, and strengthening the core group.

22:53 And as that starts to bear fruit, we're generating higher levels of free cash flow. I think that's what gives us more scope to look at bigger, more material add ons down the line. Thank you. The next question we've got here is, you previously talked about optimizing the fleet. If assets are underutilized, are you looking to dispose of more? Yeah. Ahead. Cover that? Yeah. I can do. So when the wider market contracts like we saw in h one, demand for disposals naturally softens. People just aren't buying, as much. I think we'd expect that to turn around as we move into '27, and we're already seeing the early signs of a stronger market next year.

23:39 But that said, we did sell a number of assets in the first half, and we made a small profit on those disposals as I covered. I think going forward, there's there's a balance to strike between rightsizing for an optimal fleet and also making sure what we've, you know, we've got what we need to actually deliver on the business over the next few years. Yeah. Thank you, William. Someone here has asked, you've said the business is well positioned and that the actions being taken are already bearing fruit. What measurable KPIs should shareholders use to judge the next twelve months? Yes. We have said the business is well positioned.

24:25 I think I set out in the presentation already. You know, our revenue utilization, adjusted EBITDA, ROCE, and cash flow generation will act as our core KPIs, to judge, you know, over that period of the next twelve months. These, of course, will be impacted by our behaviors within the business, which we now you know, we know now that all will or will be defined by our medium term strategic plan and the strategic pillars that sit within that. Thank you. Following from this, can you talk about the current market backdrop and the strength of the pipeline? What are the biggest factors supporting investment in film production? What challenges remain for the industry, and how are these affecting pipeline activity? Couple of questions there.

25:13 Yeah. Okay. Let's break that down slightly then. So in terms of the current market backdrop, obviously, we've talked about, you know, what's happened in the market at the first start of the year. Yes. There has been decline in, in production spend across film and television. I think that's something that I've touched upon in the presentation to really worth highlighting here, which is the box office as well. The box office being up 11% in the period is a really strong message for the industry. This will give, in my opinion, studio streamers and independent producers alike, a real boost in perceived value of of feature film production. And I can say that with a, you know, a level of comfort, especially given, obviously, Will, I mean, he when his historical role and and with mine prior also, that gives great impetus.

26:03 You know, of course, box office levels can be skewed by tentpole titles, those event films. But fundamentally, what this has demonstrated is that audiences are keen to go to the cinemas. That's a massive factor when you're considering where you're going to invest your your your priority spend for production. And so to have hit those numbers in The UK is is really, really valuable. Yeah. Production spend's down disappointingly. However, when we look, as we mentioned, at our pipeline, that continues to improve. And I think also, you know, that that visibility that we have of productions for next year across both film and television is far stronger year on year.

26:49 You know, we mentioned that the order book and pipeline is up four and a half percent. Again, just looking back at the detail of that question, what challenges remain? Let me just quickly touch upon, I think, tax credits. We we probably touched upon that briefly last time as well when questioned. Improved tax credits in other territories will have certain you know, certainly have an impact. So we have a responsibility as a country to stay on top of that. Thankfully, we have a really strong group of bodies in The UK and leading figureheads who are constantly building on that message. It's really important for any leaders of any entities within the in industry to be driving that as well, whether it's the studios, the infrastructure studios, the studio studios, streamers, ourselves. You know, it's it's reiterating and double downing on on that.

27:41 Look. Our talent and crews are are second to none. The infrastructure is incredible in The UK amongst many of the factors that that makes The UK shine. Thank you very much. Do you expect The US tax incentives to negatively impact The UK The UK film and TV market? I thought that might come up. I think per, you know, per what I've just mentioned, you know, any tax credit change will create noise. It it could and can sway production, so there's no denying. There's always a desire to benefit from tax incentives if that's what's going to help get a production financed.

28:27 Thankfully, we have strong incentives in The UK already coupled with the desire for for people to work here, be based here, let alone the backdrop of the, you know, of the country itself because there's a certain look and feel that are required for certain productions as well. So I think it's, you know, as I mentioned, continuing to build on our story and making sure that we are we remain as attractive as possible. I think also let's you know, looking back at the what I mentioned in terms of infrastructure studios. So the the likes of your, you know, Longcross, Fire and Shecton, all of those, the types of the types of studios Warner Brothers, Lisa, you know, with with these studios in place, you know, streamers have invested and, you know, private investment big profile investment have been put into these these studios.

29:20 And the amount that has gone into the mix, when a a large chunk of that is streamers, that gives weight that there's no suggestion that there's any turnaround on that and that they're walking away from it. So that gives us that, you know, again, that momentum and that positivity around the fact that we fully expect those studios to be optimized to drive drive the return on investment. Thank you, Nicola. And switching gears, one here on dividends. Are you looking to reinstate a dividend? Shall I go with that? Yeah, please. So I think at the moment, the board thinks it's more value accretive to shareholders to deploy capital in growing the core business, as, hopefully, we've outlined in today's presentation.

30:09 However, it's always something that we'll keep under regular review, and we'll, of course, update shareholders, should the policy change. Thank you. And perhaps one last question here to wrap up the q and a session. What are the most significant changes you have made since joining, and how have they improved the business? Well, we're certainly a few months more down the line now. We will. So, hopefully, today's presentation will have given you a clear indication of, you know, what we have already implemented, you know, the improved integrated commercial team, our strategic pillars that are being sent out as part of our medium term plan. So I think perhaps I should reiterate what's important to me, you know, as a CEO in terms of what kind of culture I want our teams to operate in and how that will also really help the business growth.

31:02 From my perspective, building and trusting a strong team from management all the way through to the business will only help steer these combined businesses into the future. That's just really, really, really key. And, you know, in this role, it's it's really important for me that, you know, we have as much transparency and we are authentic as a business. You know, we are confident in what we're delivering, and we're fully compliant. I believe in an open door policy. I promote feedback, and that for me is what will help improve our business. So, you know, constantly improving employee engagement is key. That open door policy will lead to faster problem escalation in my mind and, therefore, faster problem solving, not to not to forget ideation.

31:51 And it's all those things, you know, actually, ideation from our employees is is is there at the forefront of everything we do. That's what's going to help take us to the next level. That's great, Nicola. William, thank you for addressing those questions for investors today. But, Nicola, before I direct investors to provide you with a feedback, which I know is particularly important to yourself and the company, could I please just ask you for a few closing comments? Oh, yes. Thank you. Thank you for joining fundamentally. You know, it's it's valuable for us to to be able to get our our message across, you know, conscious that the first half of the year is in terms of that production spend, you know, hasn't been what we would have loved it to be, but, you know, the company's worked incredibly hard and has proven its its discipline and resilience in that, which gives us real confidence as we, you know, built out those strategic pillars and and our plan moving forward to to step ahead.

32:47 I we look forward to to updating you at the next set of results. Thanks for your time. Fantastic. Thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide you feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to you all.