Mediazest (LSE:MDZ) — Half Year Results

0:01 Good afternoon, and welcome to the MEDIAZEST PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. 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 all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 And I would now like to hand you over to CEO, Jeff Jeff Robinson. Good morning to you. Good morning. Thank you very much. Thank you for joining us, everybody. So as I said, my name is Jeff and I'm the CEO of MEDIAZEST. To this morning, I'm just gonna give a a very quick overview of the company for those of you who may not be familiar with us and also talk about our interim results for the six months ended 03/31/2024, which we recently announced a couple of weeks ago. Disclaimer there, this presentation will be online after the after the the call, so if anyone wants to read that. First of all, board of directors, we're a relatively small team. So it's myself, Lance O'Neill, who's non exec chairman, James Hamter, who's our non exec director. We've all been with the team for for quite some time. Lots of experience around the markets and also around audio visual digital signage.

1:27 The business proposition for the company is that we deliver a turnkey audio visual solutions for our clients. We generate revenue in a couple of ways. So the first is from project fees, so that will be finding hardware and software for our clients and installing them on their premises and all the professional fees around that commissioning, project management, etcetera. Second way is we generate ongoing recurring revenue streams from service and maintenance contracts. That include things like content management or content hosting, but also repair and maintenance if there's a problem with a solution that we've installed.

2:00 Sort of overview of of more of what we do and who we do it for. We think of Hostiles as a creative audio visual solutions provider. So a lot of our business comes from the sort of more standard day to day rollout. But, actually, what we've got in the locker that I think differentiates us from our our competition a little bit is that we will go the extra mile and come with creative solutions that people haven't seen before. So we often talk about bringing the wow factor that particularly sets us aside when it comes to designing new stores, new propositions, new ways of doing business. So one of the appealing things about working with us for our agency partners and our end clients is that we'll go the extra mile and design for them a unique solution that maybe they've not seen before. We'll take that on, and that's proved very successful in winning new business for us. We provide our clients with an end to end integrated service. So a lot of what we do is quite complex. It will touch very different parts of a business. So to give you an example with that, with a retailer, we may well be talking to the store format design team.

2:58 We may be talking to marketing. We'll almost certainly be talking to IT. Certainly, what we do will go across the desk of finance. So lots of different stakeholders that all need information around what solution we're providing, need to understand how we're doing it. Health and safety comes into it, obviously, very important. So one of the things that we do because we can then offer that end to end integrated services again, we can stand out from the crowd and differentiate ourselves to to potential customers and clients. We primarily deliver digital signage. So innovation in digital signage is what we're really known for, but also audio visual systems around that. So audio in particular is an area we've worked in for nearly fifty years now. And, again, we've got, you know, huge reputation in that. In terms of the markets that we target, so our three core areas, and we do work a little bit outside them, but the three core are retail, automotive, particularly automotive showrooms, and corporate office spaces.

3:53 In terms of experience, so MEDIAZEST was founded in 2004, floated to 2005. One of the first things that the directors did was they acquired an audio visual installation business. So to be able to really credibly deliver the solutions that we talk about, which was originally called TouchVision, and that company has been going for forty nine years. So we've got a real core competency in what we do. You know, there's a lot of stuff that we've seen over the years, a lot of things we've worked out, what does, doesn't work. Again, that gives potential clients and our existing clients a lot of comfort that we can really deliver for them.

4:27 In terms of our strategy, so one of our the pillars of our ongoing strategy is to improve the visibility performance and the value of the business by focusing on long term contractual revenues and on clients that generate repeat business. So that could be clients with long term opportunities where they might need us again and again in the same area or to deploy solutions across multiple sites. So, obviously, retail and automotive retail, it really fits that bracket well. We've got a very diversified client base in different sectors. So one of the things that, again, we set ourself aside over some of our competitors is that we have a real spread of of clients. No one's there's no one big client we're dependent on. We've lots of different clients and lots of different markets. So that means if it wants up and wants down, that's fine. Yeah. We can balance that out. Innovation in audio visual is a common thread throughout it all, and that that core competence in delivery.

5:17 Another area that we sort of differentiate from our competitors a little bit is sort of thought leadership around data and around collecting data from what we do and understanding how it's working for our clients and trying to help them make it better. So that could be in a retail store, something as simple as measuring when a touch screen's being used. It could be sensors that can tell when someone's attracted to come over to display. It could be looking at the audience we bring into a certain store depending on what content we show. So lots of different ways we do that. We use lots of different technologies from the sort of Internet of things, big data area spaces to bring to our systems. So, again, it's very unusual. Not a lot of people do it. It's kind of a an evolving art, if you like. Again, great way to differentiate ourselves. And, also, it means that when we're pitching to our clients, we're not just pitching to sell them the solution. We're also gonna tell them why they should have it, whether it works or not, and how we can improve it moving forward.

6:11 And we work all across the world. We're based primarily in The UK, and we work mostly around UK and Europe. But we do work further afield for some of our clients. Recent work including Spain, Netherlands, Ireland, Germany, Slovakia, and The US. We established a Dutch subsidiary in late December twenty twenty two, and the idea with that was post Brexit to enable us to deliver better for our European clients, and that's been a great success so far. So we've already built, you know, considerable amount of business and projects through that subsidiary. And we expect more to come.

6:44 In terms of the market opportunity, what sort of size of market we're talking about, we believe there's a significant opportunity here to build a leading digital signage business with international reach. There isn't really a a competitor that does that. There's several people trying to do it like ourselves, but we think there's an opportunity there to really lead that. There's a huge addressable market here in terms of the overall audio visual market, so that would be all the sectors that we work in. That's expected to increase by a 113,000,000,000 over the next five years. And the global digital signage market where we really do specialize and we really are at the cutting edge, that's estimated at about $227,000,000,000 in 2023, and that's expected to almost double to 46,000,000,000 by 2032. So the markets that we work in are, you know, growing at a huge rate. There's a big opportunity to to take advantage of that.

7:34 In terms of the makeup of the market and our competitors, there's lots of relatively small skilled companies, but without sufficient access to capital or scale to meet that demand. So that gives us a a big opportunity. It means as we believe to become a consolidator in the market and really use that public listing to the best of our ability.

7:54 A couple of things about some of the clients that we work with. There's a couple of examples. So projects and partners of ours. On the retail side, pets at home has been a a client for over five years now. We're working over a 100 of their stores. Lululemon, we started within The UK nearly ten years ago, and we've supplemented that with new stores in several European locations. So in the last financial year, that's carried on into this financial year. The picture there is Arcterix in Covent Garden, if some of you may have been to that. And that's their new flagship store there. It's a beautiful store and large LED wall behind real premium Samsung product, and that's the first project we've delivered for them. And subsequent to that, in the second half of the year, we've delivered more sites for them in Berlin, Paris, and Munich. On the automotive side, Hyundai has been a a great client of ours last ten years. We work across all of their dealer network.

8:44 We work with Kia now in three European territories, and we're looking to grow that. We have a Porsche, very high end dealership in Milan at a place called City Life, which is an absolutely beautiful store. As you'd imagine with Porsche, you know, superbly designed, a real premium look and feel. It's a it's a different approach to the car market. So, again, it sort of shows a different element where the wow factor in our techno technological expertise can come in. We also see opportunities of for the dealer groups. So some of the bigger dealer groups, you know, they're ambitious as well, they don't wanna just wait to be told by the manufacturers what they what they would like them to do. So they're taking the lead as well, which is an interesting trend we're seeing. So we work a lot with Jardines, particularly in the Jaguar Land Rover dealerships and in companies like Norton Way. And finally, one of our our bigger sort of projects in our longer term longest term relationships is Rockar, and we work with them first at Hyundai actually in Bluewater. We currently support them at the Jaguar Land Rover dealership in Canary Wharf, which again, has a beautiful store, you know, real premium, slightly different approach to to sort of the market than than maybe Hyundai have or maybe some of our other clients.

9:54 In the corporate office space, we're really delivering things like meeting room deployments and booking systems. So, yeah, post COVID, obviously, you know, we've all evolved to a slightly different way of working, you know, whether we're in the office three days a week, some people working from home, some people in the building, clients, you know, maybe traveling less than they used to. I think, you know, there's there's a huge amount of change happened there. Using audio visual systems to help manage that has become absolutely crucial to any business. Lots of businesses looking to downside physical downsize physical office space and obviously save money. But to do that, you need the technology to be able to then manage multiple meetings and evolve those systems. And, again, that's where our technical expertise really comes in. We're Microsoft Teams accredited company, and that's super important at the moment. So that's really grown in the last few years.

10:44 Obviously, Office three six five is getting take up more and more and more, and that include teams. It includes teams. So a lot of companies going that route. Again, that deep expertise and credibility helps us to really win business in those areas.

10:59 So a little bit about the interims. As we said, you know, it's a much more positive first half performance compared to the prior year. Some of the long term project rollouts that were delayed last year, they came through, and we continue to work with key customers, including Hyundai and Pets at Home during the period. So really pleasing to see a return to year on year growth, which we expected an improvement in numbers across the board. We've completed work on more Lululemon stores, as we mentioned, and we continue to work with them across Europe. And I mentioned as well the Arcterix LED and the Covent Garden flagship, and, again, working with them across Europe. So we see, yeah, big opportunity there. The fact that we can deliver in The UK for our clients, but also then keep that consistency and deliver the same look and feel and the same quality for them. And that trust credibility overseas, particularly across Europe, is is hugely important.

11:51 Having the subsidiary and being able to manage the logistics of that, again, is a is a real big selling point for us, and that's been been terrific in the last twelve months. Post period end, so new business wins we mentioned in recent announcements in in The Netherlands, in Germany, in France, to be delivered in the second half of this financial year. We talked about some of the the the automotive clients who work with one of those, the follow on contract already, which is it's a roundabout. It's multi years. It's nearly three years in another EU country, and we announced that in May 2024. And the real significance of that is it's growing again on the initial install we've done. So that's gone well, and then we're moving on. But, also, it's helping us grow the recurring revenue streams over multiple years. So it gives us much better visibility moving out over the coming years as we start to really build up that part of the business.

12:43 And again, you know, again shows the benefit of the EU subsidiary and where that's really worked well for us. Second half of the year, very much aiming to build on the progress in the first half of the year and generate positive growth organically. And, obviously, we're still targeting a return to profitability for the full for the full financial year. The second half of the year started well, as we said in the interims, which is which is really encouraging. Typically, as well, if you look back into our results, first half of the year is generally not as good as the second half of the year, and the reason for that is that, obviously, we work considerably in retail and December because of Christmas and January because of sales, two months that generally people don't want us in their in their stores. So they tend to be very, very quiet months for us. So naturally, the second half of the year as they're gearing up to the next sort of golden quarter phase from the retail side in particular, yeah, naturally becomes, you know, a much better a much better time for us.

13:37 So the moving on to the the unaudited interim results for the six months ended March 31. So financially, revenue was up 11%, gross profit up 17%. So really pleasing to see the increase in the numbers and coming back to a better level. Gross margin improved slightly as well. So our focus on professional services, that credibility I talked about, and that ability to deliver for our clients. It's not just about hardware, the 10. It's really about how you put that stuff together and how you deliver it and how you improve on it, how you get the content to work better. That all helps us drive those margins. The EBITDA improved significantly. So much smaller loss. Obviously, we would like to get that to be positive and a much smaller loss after tax, obviously, accordingly.

14:23 And that's obviously reflected in the the loss per share. Cash position was very similar to to last year. Naturally, obviously, as as we see second half of the year, we expect improvements in that as well. So just finishing on sort of outlook. In terms of the the the target, you know, very much targeting year on year growth from return to profitability for FY '24 and beyond that. As I mentioned, we're AIM listed. We are creative audio visual provider to lots of top brands, and that spread of the different brands we work with, as I said, gives us a lot of comfort over the fact if one or two of them aren't doing much at a certain time, we will we'll be working with the others. Lots of long term blue chip clients. The recurring revenue, pretty stable around 700,000 again at the moment. We're looking to grow that in the second half of the year.

15:13 Strong long term demand in all three core sectors, and I think that's the real difference in f y twenty four. I think, obviously, y twenty three had some some challenges in the market and in the, you know, the global marketplace, the macroeconomic side of it. But what we are seeing in '24 is people really pushing on an adoption of what we what we do, what we deliver, all the sectors in which we work. So, you know, as recently as sort of three or four years ago, we'd be having conversations about what is digital signage and why would I use it in my business, and those conversations are gone. We're now talking about how best can we deliver that for our customers. And that's reflected in the market opportunity we talked about already. I've mentioned before, so new business wins, including Netherlands, Germany, and France. We're really pleased with the way that the European subsidiary has started, and we see lots of big potential there.

16:01 And the fact that we've got that combined with our UK business is is a really big selling point to our clients. We talked a bit about the potential for a buy and build acquisition. We've been refocusing on organic growth because it's been so busy the last few months, but we still are looking at opportunities in that area. We think that's got a real long term goal, but we are very, very focused on only doing the right deal at the right time. So last year's results reflect the fact we looked at we looked at one opportunity in particular. When we came to due diligence, we realized that it wasn't gonna be a deal. We can make work for both parties. We very much believe don't do a deal for deal sake. So, you know, we need to maintain, you know, the investment proposition. So we pulled away from that. We took some pain last year on the numbers because of that, but we believe that was the right thing to do.

16:46 However, the strategy is sound, and there will be more opportunities coming with shore in that, and we continue to look at that that area. Finally, we have a confident in our ability to deliver year on year growth alongside targeting that return to profitability. So, yeah, that's it for me. Thank you very much for your time. Thank you for listening and your interest in MEDIAZEST, and I look forward to your questions. Perfect, Geoff. 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, would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Jeff, as you can see, we have received a number of pre submitted and live questions throughout today's presentation.

17:36 If I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Yeah. Sure. Absolutely. Thank you. Yes. So thank you for the questions. That's great. So let's start at the top. How much does it cost to list on the AI market every year? I think always it's hard work for such a tiny company to do this like MEDIAZEST. Yeah. That's a that's a really good point. Really good question. In terms of cost, it will depend on what we're doing in the year. So one of the the costs obviously will be legal fees. So last year, due diligence and legal fees for the aborted transaction, that that had an impact. I would say sort of core costs is probably around about $35,400,000 a year, which is, you know, significant for a company of our size, and it's hard work for for a small company to do that. On the flip side of it, what it does give us is the opportunity to go out and to build,

18:26 to do that buy and build strategy. I think the visibility we're getting from more recurring revenue streams is gonna help us hopefully deliver more consistent numbers, which I think will help us, and and, obviously, that was difficult to do last year. Also, with the AIM costs, they're very they're pretty consistent. So even at, you know, $23,000,000, it's still a reasonably large amount of, you know, it's a large percentage of turnover. But, actually, if we get to $510,000,000 pretty quickly, then I don't think those costs will go up very much, and it become obviously a a significant in terms of our cost base. So we think that it is hard work. We're committed to it. You know, we think it gives us an opportunity to for the buy and build, and we think that that's really gonna be very exciting in the next sort of two, three years.

19:12 So thank you for that. Second question. Where do you see the balance between turnover in the EU setup and The UK being in the next year or two? Another question, I think we've been really pleased with how the first the first year of the EU subsidiary, you know, started. And I think we're building momentum there as well. So I think, you know, that's definitely very exciting. In terms of the balance, I would say at the moment, you know, probably, yeah, at least three quarters business is still in The UK. But I think that will change quite rapidly. And I can certainly see a situation where we're sort of fifty fifty UK and and EU rest of the world coming up pretty soon. But, yeah, there there's a lot of opportunity out there. I think I mentioned in the presentation. I think one of the things that our clients really like is that they can come to us and we can deliver for them across Europe. So we can, you know, irrespective of, you know, post Brexit, we've got the systems and the solutions in place that we can consistently give them in their shops, whether it's in London or Berlin, the same experience for their customers, and that's, you know, super important.

20:15 Next question. When do you see the group becoming cash generative? So the group wasn't cash generative last year, but it was the year before. And the year before that, I think we're EBITDA positive as well. So, yeah, we're looking to get back to that, obviously, as soon as possible, but we we have already been that. Just last year was a difficult year. I think we we talked about on previous presentations. Yeah. Please please do feel free to have a look in more detail there, but, you know, really delays to projects and, obviously, additional costs coming from the acquisition we looked at is the story of last year. Flip side of that, of course, is those projects are now starting, and we're really starting to see that growth in FY '24 and beyond. What are the most likely takeover targets? Is it difficult to name names? I don't think that'd be appropriate on this sort of presentation.

21:02 But, again, a good question. I think we're looking at companies that are a little bit smaller than us, maybe where they've got three or four, maybe even less sometimes. A lot of these companies that have got one big client where they may look after them to, you know, really deep level, you know, really, really have great relationships there, but maybe haven't got the ability to grow and they're focused very much on that. We can give them that platform at MEDIAZEST where they can come join us and we can build together on that. So I think it's it's looking at targets, you know, where where that sort of there's a fit there. So like minded people, like minded clients. Also, those sort of small companies maybe where the EU is a good opportunity where maybe they haven't got that reach that we have. And actually by coming on board with us, there's an attraction there to take their business to the next level together.

21:48 So I think that's that's the sort of area we're looking at. We're thinking very much in the still in the AV sphere, refocusing on what we do. We know that market. We know it's right for growth. We know there's lots of fragmented small companies, and we're one of the very few with the access to capital to be able to do that buy and build strategy.

22:08 So next question, with a target of return to profitability by the end of the year, what milestones or benchmarks need to be achieved to meet this? So it's a very good question. And one of the challenges that that we have as directors in particular is that a lot of the work we do is in new builds or refurbishments or new stores that have been taken over with new leases. And if any of you have worked in any of those phase, you'll know that when you get building works involved and leases and times can time scales can shift very quickly on you. So for example, if we have a a big project in the end of September and it shifts two weeks into October, that can have a big difference to the year. So really for us, that target in return to profitability is really getting back on the the with the flow of the deals coming through with the the investment we made last year in marketing, and we've continued with that. And new salespeople, it's really trying to grow on that and grow on the opportunity that we see now as, you know, the markets and all the spheres in which we work are, you know, really taking off.

23:08 How are you leveraging new innovations to stay ahead in what seems a competitive market? So, again, a a really good question. And, actually, a question that we could quite often get from our our customers is how do we future proof it? And the honest answer to that is that, actually, even in the technology that we use, it doesn't change that much year on year. So, you know, a lot of times, we'll be looking at clients with a project that maybe is to put a solution in that will last in a store between three and five years. And, actually, the the difference between the start and end of that project in terms of new technologies won't generally be that much. What we are seeing is LED. So big LED walls, you've probably seen these in terms of in retail stores, a couple of photos I've showed today, but also out of home. So, you know, the roadside advertising, the super super high bright pixel based screen, they're getting cheaper and cheaper and better and better quality. So we're seeing that come through.

24:04 In terms of how we actually keep on top of it ourselves, so one of the things that we do is have really good relationships with the manufacturers. So that'll be your Samsungs, your Philips, your NEC's, your LG's in this world. And we work very closely with them, and they always want to come to us with new innovations, with anything new they're coming for coming out within the market. And that generally give us, you know, quite a runway on that so that they might release a product next year that we've seen this year with them, and it's on their road map. So what that means is that we can help our clients plan for that, help them understand how the market might shift, and make sure the solutions that we put in, you know, really do, you know, are fit for purpose and really do sort of last the lifetime they expect. I think one of the one of the things that I've been taken by surprise even my side, some of the stuff we've put in, we've got clients with Kit we put in ten years ago that still works perfectly.

24:56 That is, you know, that still looks stunning. That's just taken yeah. It's just worked brilliantly. They've invested in the right kit. We've put the solution together really well. And, actually, it's still there because the market hasn't moved on that much that it needs to change. And if it did it again today, it would probably be slightly different, but it's not that big a difference that there's a problem. But it's a really good question, and I think that future proofing, you know, it's quite often something we talk about in a sort of pitch to a new client. Next question. Sorry. What are the current sector EBITDA multiples you're seeing for m and a? It's a bit tricky to see because a lot of these are small companies and private held companies, so information isn't always available. When we hear people talk about it, they sort of talk about five to 10. Sometimes that's when they're talking to us, so I'm sure they're gonna talk that up.

25:49 I think probably yeah. That's a that's a difficult question to answer without public sector information. And because we are pretty much the only one of our competitors who are listed, there's there's no one else with that information out there. What we are doing is seeing in the market, there is consolidation going on, and we have seen that over recent years where, you know, businesses such as ours have been targeted by bigger marketing companies. So, obviously, if we can build a bigger business and an exciting business, then I don't see any reason why MEDIAZEST won't be a target in in the future.

26:23 One more question, I think. Are you looking at any new technologies? How much cross selling is it once you're in a client to some different tech once you sold them one project? I guess that ties in to the question we just had. Yes. So in terms of new technologies, we're we're always looking around. I think in terms of the market, the LED innovation is probably the biggest change we've seen in the last three to five years, and it's been coming for three to five years. So I don't see anything hugely different, that will come come through the next sort of year or two. I think a lot of what clients are doing is understanding. They can use digital signage and the power of it and how it can really help their businesses, and that's what they're looking at. So they're looking less, I guess, at new tech, but more at how they use tech that is existing and how they really make it work for them. And we've also gone through a phase where I think people have maybe sort of done things a little bit, you know, not really given it too much thought and just put something on the wall.

27:15 Let's see what happens. And now they're understanding there's a real skill to what we do here, understanding how it combines with content, how it combines with other things going on in the store or the dealership, you know, how it all has to link in.

27:29 So I think that side of it rather than new technologies is where clients are looking at the minute. The second part of the question was about cross selling. So I think once we're in, you know, talking to a client that we generally quite quickly establish a, you know, good rapport. As I mentioned, there's lots of different stakeholders. So getting to know the client, understanding how they work, and understanding what they want from you and where you can really help them deliver their strategy is really, really important. And that gives us opportunities to cross sell. Absolutely. We've got quite a few examples where we might work with a client on the retail side of it. And then they'll say, actually, our offices need a bit of an upgrade because the meeting rooms don't work. And can you come in and sort those? So that definitely can happen. But, also, we're we're obviously looking for opportunities as we go. I think the investment we've made in the last twelve months, again, I touched on it a little bit earlier, but in the sales and marketing side of it, and particularly in the sales side, means that we're able to talk to our clients on a more regular basis to give them a better service, but also to look for more of those opportunities. And, obviously, the great thing about existing clients is they know they know we can deliver for them.

28:31 They understand the credibility. They've got that trust and and confidence in us. So it makes that selling process a little bit easier. Perfect. That's great, Jeff. I believe you have addressed all those questions on the q and a tab. And, of course, the company can review all questions submitted today, and we'll polish those responses on the investor meet company platform. But, Jeff, before redirecting investors to provide you with their feedback, which I know is particularly important to the company, could I please ask you for a few closing comments? Just thank you very much for your time, really. You know, we're very excited about, you know, the improvement we're seeing in FY '24. As I said, first six months, you know, big improvement, more to come. Second second half of the year started well. We got lots of great clients. We're very lucky. The clients that we get to work with, they've got ambition, and they've got some great projects going on.

29:19 And we're looking forward to working for them, serving them and also, you know, growing the business in in the coming years. Perfect, Jeff. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of management team of MEDIAZEST PLC, we'd like to thank you for attending today's presentation, and good morning to you all.