As if Covid was not impactive enough, last year this company was hit for six by a bout of strikes within the industry of its main clients.
This Friday morning will see the business reveal just how badly it fared – but it could also declare just how it will be fighting back this year, as it looks to strongly recover its earnings.
The Business
The Bridgend, Wales-based Facilities by ADF (LON:ADF) provides premium-quality serviced vehicle hire for TV and Film productions.
It specialises in support for high-end TV and major feature films for the highly competitive video-on-demand market led by the major streaming giants, such as Netflix, Apple, Disney +, HBO Max, Marvel, NBC Universal, and Amazon.
The £40m capitalised group’s expert team has many years of experience throughout the UK and Europe, enabling it to offer a reliable and professional service, from artiste trailers to departmental vehicles.
The business is a 24-hour, 7-days-a-week operation with a fleet of over 600 super quality location vehicles, capable of servicing 25 large productions at any one time.
The company’s fleet is made up of mobile make-up, costume and artiste trailers, production offices, mobile bathrooms, diners, school rooms, and technical vehicles.
It also supplies mobile and key location facilities for television and film productions.
With operational bases in London, Glasgow, Cardiff, Manchester, Birmingham and at Pinewood Studios in Slough, which are organised into dedicated departments including account management, logistics, transport, factory, workshops, HR and accounts.
The Strikes And ADF Mitigating Actions
After a record first half of 2023, the group was hit hard by the onset of the USA Writers (Writers Guild of America) and Actors (Screen Actors Guild – American Federation of Television and Radio Artists) strikes, with several large productions that ADF was working on stopped filming immediately, impacting revenue levels in the second half of the year.
In response the group took several mitigating actions to maximise profitability in the second half year, including securing shorter duration domestic productions, and cutting the use of more expensive agency drivers, thereby enabling the group to price its services more competitively and win a larger share of available business.
Overall, ADF supported 84 high-profile productions in FY23 with an average revenue per production of £302,000 (£381,000).
Notable productions included The Crown season 6, Slow Horses, Star Wars Andor, The Gentlemen, Rivals and The Diplomat.
At the end of February, the company issued a statement noting that following the end of the Strikes in November 2023, and the continued growth in demand for ADF’s services as evidenced by the current order book, the company expects the financial performance of H1-FY24 to be significantly ahead of the H2-FY23.
The group will provide further guidance when it announces its full year FY23 results later this week.
CEO Marsden Proctor stated that:
“Our performance in FY23 demonstrates the Group’s resilience with a strong first half countered by the first joint strike of Hollywood actors and writers in over 60 years.
The effects of the strikes will continue to be felt through the first half of the current year, but we will carefully manage our cost base during the period.
The long-term market dynamics remain very much in ADF’s favour with continued high levels of investment in the UK HETV industry and the Board is confident that we will return to pre-strike order levels and beyond as conditions normalise.”
Analyst View
Andrew Renton at Cavendish Capital Markets has estimates out for the year to end December 2023 for higher revenues of £34.8m (£31.4m), but with adjusted pre-tax profits collapsing to £1.1m (£4.8m), slashing earnings down to 1.3p (5.8p) – but an air of confidence of recovery this year is indicated by expectations of a maintained but uncovered 1.4p (1.4p) dividend per share.
For the current year Renton is going for a leap in sales to £47.0m, taking profits up to £5.0m, with 5.8p earnings and a healthy 1.9p dividend per share.
He has a 76p per share Target Price.
My View
Those strikes were like a body blow to ADF, but it appears that the company is standing a lot straighter now after the wincing agony.
Looking forward this group could well show an excellent recovery this year, leading into even more positive results in 2025.
Its shares, which were up to 81p two years ago, have subsequently been down to 37.26p in response to the strikes.
Ahead of Friday’s results announcement, they are looking stronger at 49p, at which level investors taking a positive view of the group’s recovery potential could well see an early advance in price towards the broker’s objective.
