New Issues Examined by Ben Jaglom

AIM has seen a number of resource-focused companies join this year, looking to raise money from the junior market. But keen followers are likely to be intrigued by a very different kind of entrant

Looking to join soon is Music Festivals, a company run by the founder of the Mean Fiddler Group and music industry veteran Vince Power. The venture currently runs two festivals: the Benicassim festival in Spain and the Hop Farm Music Festival, a family-oriented occasion that takes place each year in Kent.

I recently met the 63-year-old Power, a self-made man that started his empire with the opening of the Mean Fiddler venue in Harlesden, North-West London, in 1982, before going on to run a group that owned and ran venues including the Jazz Café and The Forum in Kentish Town. He subsequently floated Mean Fiddler on AIM in 2001 before selling it in 2005 in a deal worth £37.9 million, and he is now looking to return to AIM.

He argues that today the festival business is ‘as a whole, very family orientated – people today want to bring their kids’. Power, who has previously run both the Reading and Glastonbury festivals at different stages in his career, seems to have identified a particularly good opportunity with Benicassim. ‘The great thing about Benicassim is that, unlike most festivals, you very rarely have to worry about bad weather,’ he says, adding that in addition to selling tickets for the festival itself, people often stay ‘much longer’ due to the location and good weather.

Battle of the bands
This year he notes that Benicassim will attract a number of big acts including London rapper Tinie Tempah, the man behind club hit Pass Out, hipster favourite Arcade Fire and BRIT award-winning indie rock band Arctic Monkeys. A man who clearly has a passion for music, he insists today ‘you have bands that rise to the top very quickly’, with consumers often being ‘bombarded’ with different artists.

Power is straightforward about what should make the group – which is debt free and last reported profits of £1.39 million on turnover of £12.2 million for the year to 2009 – a success. ‘We have a very good team who know how to run a festival business,’ he says, ‘and we know what is going on in the music business as a whole.’

Set for take-off
Looking forward, he enthuses that Music Festivals, which is VCT qualifying, will ‘not be standing still’, with the strategy being to grow both organically and via acquisitions.

Proposing to raise around £9 million, the analysts at house broker Merchant Securities are forecasting profits of £2.9 million in 2011, growing to £3.1 million in 2012.

An unusual business for AIM, it is a positive sign for a new and dynamic company to join the market, with the festival business not being one traditionally used to AIM. Analysts in Power’s previous AIM project, Mean Fiddler Group, have struggled to come to terms with the challenges of valuing the shares.

At a time in which the music industry as a whole is experiencing a squeeze on profits from downloading and the decline in physical media, the festivals sector has taken on an increasing importance. Consumers’ interest in live music is seemingly on the rise, with live music tours also of greater importance to bands than ever.

The group has a team with a strong background in the festivals business, some excellent brands in the form of Benicassim and Hop Farm and some ambitious plans for growth. The shares in Music Festivals are certainly worth a speculation, with both festival fans and cool-headed City analysts both likely to take an interest in the group’s progress.