How things have turned. At the start of this year, Greg Lawless, a former corporate financier with Davy Stockbrokers, was predicting the best year yet for Arena Group, the AIM-listed business that he leads. Months later, the company is facing one of the biggest existential crises in its 250-year history.
The company is a supplier of temporary seats and hospitality structures to some of the world’s most prestigious sporting events. Business should have been brisk this year. It was set to supply stadium-style seating with a capacity for 30,000 spectators for four venues at the Tokyo Olympics, on top of its usual list of marquee tournaments such as the US PGA, US Open and the Open in golf; the Wimbledon tennis tournament; and numerous Formula One Grand Prix.
Backed by new investors, it was exploring delisting from the London AIM market, while staff numbers had increased to 1,250 across its two main regions, the USA and EMEA.
However, COVID-19 has decimated the live sports business, and this has impacted Arena heavily. One by one, each event was cancelled. It became apparent to Lawless and his team that Arena was facing an existential crisis outside of its control.
By early March it was apparent that 2020 sales were likely to fall short of expectations by at least 50 per cent. As the days passed, even this began to look optimistic. In June 2020, normally a very busy period, revenues were a small fraction of what was expected in Q1.
Lawless, who also worked with Allegro, and his team remained calm. They made several decisions aimed at shoring up the business. These included:
However, even with these immediate actions, the business faced a future cash flow crisis and fundraising was completed which introduced £10 million in funds from shareholders (including senior management) and on the back of this a new banking facility of £5m was negotiated. This defers the cash pinch point well into 2021.
The team has continued to adjust the cost base of the business, delayering (what was already a shallow structure) and consolidating senior management teams/overheads.
Customer relationships in the industry are long-term, and major projects have lengthy lead-in and build times. Consequently, the business development/marketing/sales function continues to operate. However, restrictions and limitations on international travel mean the traditional way of working with customers is no longer possible.
The business has been stabilised and put in a position where, with support of the financiers, it can survive a drought for the remainder of 2020, while maintaining as much of its core competencies and expertise as possible.
It is also seeking out new markets and has had some success in securing some new business in the fixed location hospitality (pubs and restaurants) and education sectors.
Meanwhile, customer and client-facing staff have not been able to conduct face to face meetings, which until now were regarded as essential. These staff are working effectively remotely from their homes.
As of now, with its key markets locked down, it is impossible to predict with any confidence what the future for Arena looks like. The company knows success for the moment, is to ensure survival until there is some clarity.
The attitude of the public, across the world, who attend mass sporting, cultural, and other public gatherings - frequently requiring international travel to attend - will determine the extent of the market for the services Arena currently provides.
Until there is a COVID-19 vaccine, or successful treatments, and there is a consensus established in respect of the risk to public health and the economic benefits events confer to society / and the societal and personal needs they address, the future for such gatherings is uncertain.
If and when the market Arena serves re-opens, it seems certain there will be increased costs directly related to requirements for social distancing. Also, Arena will be subject to the restrictions which now apply to the construction industry, which will inevitably impact the ongoing cost to serve.