Long gone are First Artist’s days of lumpy earnings based on football agency revenues. Since 2005, the company has transformed itself into a profitable media, events and entertainment consolidator offering investors visible and resilient earnings through a diverse batch of businesses with attractive ‘cross-referral’ potential. Trading on extremely low multiples, however, the market continues to overlook the company.

Floated on AIM in 2002 by renowned football agent Jon Smith, First Artist has evolved into a rounded group boasting high-quality brands in fragmented markets. As Smith explains, ‘Our business doesn’t depend on any one sector, and football represents less than 20 per cent of our turnover.’ Keen to talk up First Artist’s broader appeal, he remains fiercely proud of the football agency which, although highly seasonal, remains a big earner. ‘We believe it is one of the biggest football agencies in the world, if not the biggest,’ Smith enthuses.

Today, First Artist’s media operations span advertising, marketing and signage for West End, Broadway and Las Vegas shows. This is through Newman Displays and the highly cash-generative Dewynters business, acquired for £16 million in late 2006.

First Artist also conducts sponsorship consulting (through its First Rights and Sponsorship Consulting businesses) and operates in the management arena, representing a diverse array of media personalities and footballers through First Artist Sport and First Artist Entertainment. Clients include football manager Harry Redknapp, Dutch football legend Ruud Gullit (now coach of David Beckham’s LA Galaxy side) and even dietician Gillian McKeith.

There are compelling cross-selling opportunities between these operations and Optimal, the group’s wealth management arm. In the events sector, through Finishing Touch, First Artist turns its hand to conferences and company activity days for both public and private sector clients.

Interim results to February, posted back in April, illustrated First Artist’s increased resilience. Pre-tax losses of £280,000 were no surprise, merely reflecting the second-half weighting of the sports division, which makes it money during the summer transfer window.

Growth at the top line was strong, with sales increasing by 48 per cent to £27.4 million, buoyed in part by a full six months of trading from star performer Dewynters. In a tough trading climate, all group companies performed well, generating good levels of new business and strong organic growth from existing clients.

First Artist remains keen to do further deals, but acquisitions are being hindered by the lowly valuation placed on its paper – Smith is reluctant to take on more debt (£11.9 million at the interim). For the time being, ‘what we will do is look to extrapolate more value from what we have already got’, he says.

This year and next, forecasts from house broker Daniel Stewart point to strong profits progression to £3.6 million and then £4 million, giving earnings of 17.1p and 18.6p and placing the shares on budget multiples of 4.2 and 3.9. The lowly rating reflects a lack of understanding among investors regarding the transformation that has taken place.

Somewhat clouding the investment picture is a recent preliminary approach for Dewynters, which could lead to a break-up of the group if a disposal comes to pass. However, this might just be the only way for management to unlock value and a sale wouldn’t be a disaster, bringing bumper proceeds into the business.

Moreover, with First Artist’s market cap having dropped to just £9.96 million, the enterprise value of the entire group (less than £22 million) is only £6 million more than was paid for Dewynters. Decidedly undervalued, with the house broker suggesting a 194p target, now is the time to buy First Artist, which frankly looks a no-brainer.

First Artist Corporation	AIM	£2.98m	21.50p	0.00p
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