Facilities By ADF £ADF
Hi,
I have just bought a starter position in this company and was flabbergasted to see that 94% of our community have already bought shares.
TBH Facilities By Adf (LON:ADF) operates in a sector that I know very well - because I also work in that sector (I am a Lighting Gaffer for HETV production).
Every day of television and film production involves working at a real location or a studio 'build'. And every day we have the facility of what we call a unit base. This is where Facilities By Adf (LON:ADF) does their stuff. They provide office space, costume changing and washing space, dining space, makeup space, toilets etc. Every night (depending on schedules) this unit base miraculously moves to a new location ready for tomorrows work.
What I can say is that Facilities By Adf (LON:ADF) is the smartest best presented outfit operating in this industry. I wish them the best of luck, and I can think of several possible acquisitions that they will likely target as they grow.
To date since IPO they have a near 60% uplift from 50P to 80P, which is good going in my book. Let's see what transpires.
If anybody has any queries, I'm quite happy to pass on anything I know about how this company works (seeing it from my perspective). And I hope that the 94% percent of us (if accurate) the best of luck with this stock!
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32 comments
Reading the Times today an article regarding the proposed expansion of Warner Bros studios in Herts caught my eye. The article included figures attributed to the British Film Institute (BFI) stating that the combined spend on film and high quality television production in Britain last year was £5.6 billion, a £1.3 billion increase on 2019. The article went on to cite Ben Roberts, Chief Exec of the BFI who is attributed with saying that the country now has more studio space than Hollywood.
Irrespective of the fact that Facilities By Adf (LON:ADF) principally operates on location shoots as opposed to studio and notwithstanding Netflix's fall from grace this level of investment should surely bode well for the company. What can go wrong...famous last words!
Perhaps Wayneski can provide an insight into how busy Film and high end television production currently is.
All the best
Interesting to read in his column in the weekend FT, that Lord Lee has taken an opening position in £ADF. I hold and despite the present turmoil there is some solace in knowing that I am in good company.
Hi Abtan
Like you, I like the business overall and have taken a small opening position and have re-read the admission document in light of your post.
Leasing of its fleet appears to have been the case thus far. The admission document states that the Group has historically used hire purchase and lease agreements to finance its fleet. The finance period being 4 to 7 years with ownership transferring to Facilities By Adf (LON:ADF) thereafter. It goes on to say that units have an average operational life of 10 years, with older trailers being refurbished and vehicles being maintained in-house. So some of older units will be owned outright.
The admission documents states that purchase plans have already been agreed for 2022 and 2023 with UK-based DAF and General Coach, based in Canada to meet existing demand. This infers that the company is moving towards the purchase of units as opposed to leasing as its preferred option, although it very much depends on ones interpretation of 'purchase'. The extract from the trading update below, if taken at face value also suggest this view,
"The Company raised £15m of gross proceeds on admission to trading on AIM and has already started to invest by expanding orders for additional vehicles and trailers to meet demand"
If this is the case and outright purchase is now preferred to leasing it should over time financially de-risk the company. I would welcome your thoughts on this view as you appear to have a good handle on Facilities By Adf (LON:ADF) and its modus operandi.
In the meantime I will email the company to seek clarification
All the best
Facilities By Adf (LON:ADF)
Hi Jonno
I think you're correct that the leases might not be an issue and that the assets are presumably bought by ADF at the end of their respective leases. Perhaps this isn't as big an issue as I originally thought?
Given low interest rates and the seemingly high usage rates, I guess I would have simply expected them to own them outright.
I'm afraid I can't offer any more thoughts, though I look forward to seeing more detailed updated, which will hopefully make the picture a little clearer.
Cheers
A
Facilities By Adf (LON:ADF)
Overall I liked this business and remain intrigued enough to keep an eye on it.
Having said that I remain wary of quite a few things:
The #1 customer of the group contributed 22%, 17%, 42% and 20% in 2018, 2019, 2020 and 2021-H1 respectively.
That 42% alone scares me a little. What happens if that specific Production Company tries to bring some of ADF's services in-house?
I'm not sure why they decided to lease everything, but it seems like quite a risk. There are no assets to sell if something goes wrong.
Putting aside that I find it strange given the relative size of the company (i.e. I expect it needs a lot of micro management), I'm surprised that no-one realised that he should have been paying taxes in both countries.
This is basic stuff for finance/HR teams and highlights poor administrative controls.
The company disclosed in the IPO that there will be penalties from the French tax authorities, which will be paid by the company, not the CEO.
These will be minor in the whole scheme of things, but I still don't like seeing this.
I'm sure there's some logical reason, but all they mention in the IPO is the 10% uplift, which doesn't really make sense when I look at the numbers alone.
"orderbook has been completely filled for 2022 and currently stands at approximately £20 million."
So the maximum annual revenue is currently £20m then. Or is it?
I was surprised when the 1st trading update came out to show that Revenue for 2021 will be no less than £27.8m.
I see now that the difference primarily comes from labour + fuel, which presumably are pass-through revenues + uplifts for the company.
It would have been interesting to see gross profits split by each of these revenue sources to understand what those presumed uplifts are. It makes it quite tricky to know where the company is making its money from.
For such a lease-heavy company, EBITDA is completely meaningless as it ignores one of the biggest costs - the leases being paid for all the trailers and vehicles that generate all of the company's revenues.
To highlight my concern see how £4.17m EBITDA in H1 2021 actually translated into a £2.2m profit.
I appreciate that this is only for a 6 month period, but crudely assuming profit of £4.4m for the full year, this doesn't seem overly cheap for a company worth c£60m, with some big players who could possibly insource the services ADF offers and with what looks to be at least one other big competitor based in the UK (would similar US companies try and set up base over here?)
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There's a lot of negatives in there - or perhaps I'm just trying too hard to find some - so I'm wary.
I have no position for now, but at the very least it seems like a profitable new listing so it's probably worth keeping an eye on
Cheers
A
I think there’s a high risk that this year’s boom on the catch-up of content production sets ‘23 up with tough comps. And not only is customer concentration significant but there will be a shakeout in the streaming market that brings a drop in demand at some point.
However I do not share your concern that film production companies might take ADF’s services in-house. They run very asset-light and stick to their knitting, which is creativity.
Facilities By Adf (LON:ADF)
Hi BnB
The IPO document stated that a number of studios have signed long term contracts in the UK:
"Some of the world’s largest production companies have in recent times begun setting up significant long term operations in the UK.
For example, the world’s largest spender on content, The Walt Disney Company, in 2019 secured a long term lease at London’s Pinewood Studios.
Furthermore, in 2019 Netflix signed a 10 year lease at Shepperton Studios in West London which guarantees Netflix exclusive access to the majority of the facilities. Following this, in September 2021, Netflix signed an additional long term lease at Longcross Film Studios which gives it additional physical production footprint to produce content.
The UK is Netflix’s third biggest production base outside of the USA and Canada and it plans to produce $1 billion worth of film and TV in the territory in 2021."
I don't understand the industry well enough to know whether the studios - especially Netflix, which seems to be ADF's largest customer - having signed these long term contracts, would prefer to take ADF's services in-house. Surely it would make sense for them to do so if they're hanging around?
Cheers
A
Yes there is a boom in studio development at the moment. But, as I understand it, the trailers are primarily to support on-location productions, not in-studio.
Hi BnB
Yes, I understand the distinction between on location and in-studio and where ADF's services are used.
I am simply assuming that if a production company is investing more in the former, then surely they might choose to invest more in the latter too?
Like I said, I have no idea how the industry works. It would certainly be interesting to hear from someone with insider experience.
A
It would certainly be interesting to hear from someone with insider experience.
My daughter is a film director and currently works for Sky. My weekly hiking partner is a jobbing director for BBC, C4 and RTE.
They lead me to believe that productions are largely freelance operations assembled by a production team commissioned by the broadcaster to create a film/series. The broadcast organisations are asset light relative to the volume of output. This is evidenced by the fact that hardly anyone that I know in media actually has a full-time job!
I believe if studios wanted to take more in-house, they would start with talent rather than trailers - that’s how the industry thinks.
Facilities By Adf (LON:ADF)
Hi Wayneskie
Many thanks for starting this thread. I actually 'enjoyed' reading through the IPO document just now - it seems quite fascinating.
Given your involvement in the industry I hope you don't mind me asking about the competition out there. The IPO document notes 3 other big players; Translux, Movie-Makers Ltd and On-Set Location.
I've checked out Companies House and the first of these looks very good indeed, with European operations alongside their UK ones. I'm surprised that Translux don't have a bigger market share than Facilities By Adf (LON:ADF) given their international presence and therefore implied larger size (unless of course the IPO document is being misleading somehow?)
However, Movie-Makers looks to have been dissolved now and both Movie-Makers and On-Set don't have full accounts on Companies House (only balance sheets), implying that they're quite small. I'm quite surprised by this given the the On-Set is indicated in the IPO document as having 29% market share within HETV.
For reference to any reading the above who have not looked at the IPO document, Facilities By Adf (LON:ADF) claim to have 20-25% of the total market share.
I have a few other points to mention, but to detach from this more direct comment, I will post those separately.
Cheers again
A
Stockopedia say that "Watchlists portfolios are not included in the calculation." Presumably this means that subscribers have to enter a buy transaction in their folio to be counted as buyers. This is as opposed to just adding the share to a portfolio without entering a buy transaction, which is an option which is open to subscribers . However, the reality is that, even if people do enter a buy transaction in their folio, it is still quite possible that the whole folio could be a test folio which could be used to try out an investment approach without actually investing any real hard cash. The only possible way that I could imagine that Stockopedia could have a better handle on whether or not the trades entered into the folio are real or not would be to ask a question such as "Does this transaction correspond to a real trade that you have carried out?" But I can't see them doing that because some subscribers would probably object to it on privacy grounds.
So I don't believe that 94% of Stockopedia subscribers do actually own the shares. However, that doesn't mean that the numbers are meaningless. They do give some idea of the interest that subscribers have in a share. I usually calculate the ratio of buyers to sellers from this data before buying for myself. Also I think it would be very interesting to be able to screen for this ratio. For example I might want to see a list of all shares with a ratio of subscribers buys to sells which is greater than 2:1. But this function is not currently available in the screener.
If we click on the blue question mark by the shareholder activity on the stock report it says for the Community "This bar shows the percentage of our community that are buying, holding or selling the share" I suspect that this is incorrect / misleading. I think what it may actually be referring to is not the percentage of all subscribers, but rather the much smaller subset, of the subscribers who have bought / held / sold the share during the last 3m. I will raise this question with Stockopedia via the green button.
Yes it’s confusing and buying is just adding amounts to a watchlist, most of my folios are full of stocks that I don’t actually hold. Some tinpot mining stock, had very high community buy at one time, I can’t believe around 65% of members, would be buying a penny share miner. I think this feature shoukdvscrapped as seems very misleading to me.
My watchlist do have amounts for each stock, so I can see the gains and losses for each and the folio performance.
I have have discussed this with Stockopedia before but did not get anywhere.
I was attracted to the story behind Facilities By Adf (LON:ADF) and was impressed to see a long convoy of their vehicles on the motorway recently, but I think there are several bear points which are not being mentioned:
1. The company has few assets, the real estate is owned by the founder who presumably receives rent (a related party arrangement given that he controls a hefty chunk of the company). The trailers and vehicles are subject to sale and leaseback.
2. The valuation multiple is very punchy for a company that rents out trailers (albeit specialised) and does have significant competitors. I don't think the barriers to entry are as high as the IPO prospectus makes out.
3. Insiders cashed out around £3 million at the IPO. I don't see a compelling reason for the IPO (other than owners cashing out) as further financing could easily be raised at low rates secured on the vehicle assets being acquired
4. Netflix, Amazon etc investing in UK studios would seem positive on the face of it but heavy investment in studio estates may reduce the need to carry out expensive on-location shoots - which would be negative for companies like ADF.
5. 2022 is likely to see flattering growth numbers for ADF as the streaming companies scramble to produce content having been constrained by the pandemic 2020-21. I think it unlikely that recent growth rates will be sustained and think the IPO was opportunistically timed to take advantage of this.
Re ADF. Page 17 of today's Times (19th February 2022) says it all. Could not have given the company a better boost if it tried.
I’m generally pretty wary of glowing newspaper stock tips, they often seem to be in cahoots with professional investors looking to exit positions that have had a recent good run
A very positive trading update this morning from Facilities By Adf (LON:ADF), completely unexpected. What good fortune to have bought an opening position yesterday, prompted by Wayneskie's post. It is only a small position but nevertheless provides a foothold to add to. It just goes to show it pays to read the admission document, albeit it can be numbingly boring. From small acorns as they say.
The stocko figures don't mean that 94% of the community have bought shares. They mean that over a period, of the shares held (in folios) and traded 94% of them were buys. The period is the last quarter. As this is a recent IPO there were no shares held throughout the period, so stocko just shows buys and sells in the period adding up to 100%.
Ah yes, there is so much info on the stockopedia page, that I had not appreciated this fully. Thanks for pointing this out. Ninety-five percent seemed a bit bonkers really and I should have looked closer before raising the point. Although I hope that by raising the point, that a few others have a better appreciation of this aspect as well.
Facilities By Adf (LON:ADF) was on Naked Trader this week as a buy - I think it might have come out earlier in the week. It also featured in SCSW at the weekend which would account for Mondays rise.
It does sound like a good opportunity, but as it is now up 17% this week alone and 66% since its float in January I feel like I may have missed the boat for the moment. If there is a correction, some short term selling or some numbers come out I might take a look further.
I've jumped in on too many "great" things just after they have nailed a new high to find that they either ease back or just sit still for the next few months.
"You don't have to take a hit at everything" is the old saying (or something like this). There are a few others sat in my watch list awaiting a further event to revisit.
It looks a good business but it's impossible to calculate the valuation without understanding remuneration for the board which will likely shift from dividend-focused to a significantly enhanced salary - with material consequences for earnings. PER might be anywhere from 10x to 20x. We just don't know so I have resisted what is otherwise a tempting IPO. Less tempting today than a few weeks ago I might say so be careful.
I see someone else was listening to Naked Money podcast today haha.
Think is highly unlikely that such a large percentage of the Stocko community bought this share. Would be amazed if it was 5% . Not suggesting it’s not a fine investment , but just so rare for a community as large as ours to be heavily invested in one stock
Having done some research and having anecdotal evidence of how busy the large film/tv production facilities close to mine home are, which have recently expanded, I have bought a opening position in £ADF. Given the growth of media production in the UK, I think it will do well, but will, like most investments no doubt require patience.
According to the admission documents Facilities By Adf (LON:ADF) currently has 20% -25% of the UK market with three other operators having around 45% to 50%. The remaining 25% are smaller concerns and presumably potential acquisitions. There is also off course the potential for expansion in western Europe. We shall see. Fingers crossed!
I don't think the community buys are very accurate. It does not mean they have bought the shares either, just means they are on a watchlist. I don't have any shares even on a watchlist, cant believe 95% of members have either.
Did they organize the Amazon film, The Power, that was filmed last year in Suffolk,
do you know?
It's a strong possibility. To be clear, they don't organise the film per se. They are hired by a specific production (which itself is usually a separate limited company set up solely to make one production). It is usually the individual line producer of said production who would have the choice of a particular facility company (such as Facilities By Adf (LON:ADF)). Facilities By Adf (LON:ADF) would then provide the facilities as described earlier (or some of them - lighting and cameras are very much a separate hire for instance).
While it is true that a company such as Facilities By Adf (LON:ADF) might have a strong relationship with 'Netflix productions', it would be a stretch to say that they would do all Netflix or Amazon productions in the UK for example. So, I don't think they could claim to have the exclusive right to all said work.
These types of companies also tend to have relationships with individual Line Producers as well. Being a freelance world, virtually all film and television crews move from company to company as the jobs present themselves.
Thanks for the information. It does look quite an interesting company but I do have reservations about the industry, the amounts of money that is spent and wasted, environmental impact and impact on locals.
Hi Wayneskie
I briefly looked at Facilities By Adf (LON:ADF) a few weeks ago when it was around 64p. It looks an interesting company and I am aware that film and television production is a growing industry in the UK. I live a mile or so from a major film production studios/sets and they are always busy. We often receive mailshots providing advance information about night shooting or explosive effects etc. The company's communication with the local residents is excellent. On the same topic I consider that the current share price of Itv (LON:ITV) woefully undervalues its assets, mainly ITV studios and its back catalogue. The advertising part of the Itv (LON:ITV) which is currently about 50% of revenue is in the price for free, in my view.
Anyway back to Facilities By Adf (LON:ADF), I didn't buy because it is a recent IPO and I tend to steer clear of such, as usually the sellers of IPO's know a deal more than the buyers and in fairness I didn't have the head space at the time to wade through the prospectus. Having said that I missed Fidelity European Trust (LON:FEV) when it floated at 134p!.
I am also amazed at the number of Stockopedia members who hold the shares.
Do you know whether the founders of Facilities By Adf (LON:ADF) are still invested and if so to what degree? I seem to recollect that the reason for the IPO was to raise money to invest in more equipment/mobile units. From what you say there are several potential acquisitions and presumably the potential to expand into Europe, as I assume that Facilities By Adf (LON:ADF) is mainly a UK operator Any other information you have to hand would be appreciated. I shall now go and do some research.
All the best
Jonno
Andy Dixon for who the company is named is still a shareholder at around 14% I believe.
Also Marsden Proctor who started as a facility driver (truck driver to be fair) has worked his way through to CFO by way of two other companies in the sphere - BTFS and Screen Facilities. Both good companies but not anywhere near as 'shiny' as Facilities By Adf (LON:ADF)
Thanks Wayneskie
I am currently wading through the the admission document. It all appears very positive. The main drawback as I see it, is the absence of any market numbers, as it is a new IPO, but the fact that the four founding shareholders will retain 46.8% of the shares on admission is reassuring, with Andrew Dixon and Stephen Haines each holding 14%.