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Venue Solutions has grown rapidly since joining AIM at the end of 2005, although it continues to trade at a loss. With the underlying business forecast to be profitable this year, however, the shares could prove an interesting gamble

Venue’s core business is the installation of media, entertainment and IT systems in sporting venues, businesses and homes. Revenue is generated from hardware (screens, etc), consultancy and software sales. More than 90 per cent of sales in the year to last November were in the second half.

Venue’s credentials include the installation of screens, software and systems at Arsenal’s Emirates Stadium and at Middlesbrough’s Riverside Stadium, as well as at Vue Cinemas. Longer-term growth could be supplemented by YourDay, a newly developed system providing theme park visitors with a personalised DVD of their day.

High and low margins

Venue provides customer relationship management and business intelligence software plus Sony screens and other hardware. Sales of high-definition equipment is fuelling growth. The relationship with Sony is more than four years old and Venue is able to use the “powered by Sony” label in its marketing. Hardware is lower margin (normally 15-20 per cent), whereas margins from consultancy and systems integration are far higher – between 30 per cent and 50 per cent.

YourDay is a system where footage of visitors to an attraction can be spliced into other footage, creating a 20-minute DVD. The first installation, at Alton Towers, should be up and running in May and will be available on the eight most popular rides including the Corkscrew and Spinball Whizzer. Visitors are given a wristband with an RFID chip and when they go near a video camera on a ride, footage is recorded which is stored on the park’s system. Come the end of the day, the wristband can be scanned and a personalised DVD produced. A full DVD of the day costs £19.99, but the option of a DVD of a single ride is also on offer. Alton Towers is promoting the new concept by offering two £10 vouchers for a future visit to the theme park.

‘We are looking for six per cent of visitors to purchase a DVD,’ explains Venue’s chief executive Dominic Berger. Analysts estimate Alton Towers alone could generate profits of £300,000 a year. If it proves a success it will help persuade other theme parks to install YourDay. Venue has the sales rights in Europe and the Middle East as well as a 46 per cent stake in the developer, YourDay Inc, which cost £3 million.

Solid sales growth

Last year, turnover at Venue jumped from £95,000 to £2.96 million, although the pre-tax deficit grew from £637,000 to £760,000 because the group consolidated its share of YourDay’s loss.

Paying for the YourDay stake ate up most of the £3.7 million raised in the flotation and subsequent placings, while at the end of November net cash was £106,000, which doesn’t leave much of a comfort margin.

This year, analysts are forecasting losses of around £100,000 on £5.8 million turnover, although the underlying business will be profitable at that level of sales. It is the projected YourDay loss of £600,000 that puts the group in the red. Without it, forecast profits would actually be £500,000 – encouraging for long-term investors. A 2007-08 profit of £3.1 million is forecast, including £1 million of profit from YourDay.

Venue’s core business should grow profits over coming years but installation levels of YourDay systems will affect the overall outcome as will its share of YourDay’s profit or loss.

At 26p, the shares are trading just below the 27p issue price. Investing £3 million of its cash into an early-stage business with an unproven product is a risk, but Venue has certainly made progress on AIM and the shares look to be an interesting gamble.

Venue Solutions Holdings	AIM	£0.36m	0.52p	0.18p
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