Reach 4 Entertainment triples profits ahead of ‘significant’ coronavirus impact
Theatre marketing firm Reach 4 Entertainment (R4E) tripled its profits in 2019, as the group posted strong annual results ahead of the coronavirus crisis, which it expects will have a “significant impact” on the live entertainment industry.
The results
R4E posted full-year revenues of £135.4m for 2019, up from £76.7m last year.
Adjusted earnings before interest, tax, depreciation and amortisation rose 179 per cent to £1.4m.
Operating profit rose from £0.6m to £1.9m, while profit after tax jumped to £0.9m from £0.3m.
Why it’s interesting
R4E, which runs marketing campaigns for arts events such as the BFI and West End show The Book of Mormon, embarked on an acquisition spree last year, adding new clients such as Frozen, Moulin Rouge, Hairspray and the Tutankhamun exhibition to its roster.
The group also acquired London-based advertising agency Sold Out, in a deal worth up to £10m. R4E nodded towards the purchase of Sold Out, whose portfolio includes high-profile clients AEG presents, Live Nation and Cirque du Soleil, for last year’s success, after the group performed ahead of management’s expectations.
The firm also bought a 50 per cent stake in Buzz 16, a production company founded by former England and Manchester United footballer Gary Neville.
The spate of acquisitions put the firm in a strong position ahead of the pandemic. R4E said it had solid sales growth in line with expectations in January and February this year, but warned that closures of live venues resulted in material reductions in trading from March 2020.
“Inevitably the Covid-19 outbreak — and the consequent closure of live venues on broadway and London’s West End — has resulted in a significant reduction in advertising and marketing spend. No one knows with certainty when live venues will be able to reopen and the impact of social distancing measures.”
R4E said it was still “too early to predict the resumption of normal trading and therefore too early to forecast the extent to which Covid-19 will impact the group’s financial reporting,” but added that that the pandemic would “inevitably result in a material reduction to market expectations” for 2020.
The group was able to slash monthly running costs by 50 per cent in the wake of the outbreak, retaining adjusted net cash of £12m at the end of May.
Shares were broadly flat on the news, up 0.6 per cent to 0.36p at 1pm.
What R4E said
Chairman Lord Michael Grade said: “2019 was a year of great advancement, reflecting the continued success of the turnaround strategy and the diversification of the company into new areas of live entertainment. The group entered 2020 with commercial momentum and an exciting pipeline for the year, which led to strong sales growth in the first two months of 2020.”
“However, with the shutdown of live venues and events in March 2020, Covid-19 has had a significant impact on the entire industry… For consumers and businesses in the live performance and entertainment industry, these are difficult times.”
However, he added that R4E was “exercising the strictest discipline on cost control and reduction.”
“This gives the board confidence in the group’s ability to withstand the current situation and to be ready to capitalise on the re-opening of the live entertainment sector.”
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