DEAG Off To A Successful Start To Financial Year 2020
Thanks to event cancellation insurance that also covers pandemics, Deutsche Entertainment AG (DEAG) emerges as the only major promoter in Europe able to report a “stable and profitable” Q1, which ended on March 31.
Group sales of €26.2 million ($28.8 million) were 3% above the previous year’s result (€25.5 million). Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at €1.2 million ($1.3 million), compared to €1 million in the previous year’s reporting period, which marks a 20% increase.
Thanks to its event cancellation insurance, DEAG, which operates in Germany, Switzerland and the UK, is in the unique position to be able to say, “both sales and EBITDA were thus in line with the original planning for financial year 2020, which was prepared prior to the Covid-19 outbreak.”
DEAG founder and CEO Prof. Peter Schwenkow gave Pollstar and estimation of 3,000 to 4,000 events, which his team would have handled this year and which are affected by government-imposed bans on public life. Some 1,300 events are being postponed, rather than cancelled.
This causes “a significant amount of work in terms of rescheduling events and servicing customers, but it doesn’t hit us financially,” he explained, adding, “It is, of course, an extraordinary privilege to be in this situation. It mostly means that a part of the profits we would have made this year will only be made next year.”
DEAG now expects to see a material decline in sales and earnings in the current financial year due to event restrictions. While it is the company’s goal is to remain EBITDA positive for 2020, achieving such will depend on the duration and future course of the restrictions.
Another factor that helps DEAG in this crisis is one event format in particular, which will most likely go ahead as usual: the annual Christmas Gardens in various cities across Europe.
Michael Clemens – Scene from the Christmas Garden 2019 in Berlin
The event can be executed in its usual format, while adhering to all distance regulations.
The concept of the Christmas Gardens is to only let in a limited amount of visitors during certain time slots, even in normal times. Distances can be easily maintained, and it’s an open-air event, another health advantage.
“We welcomed around one million visitors at our Christmas Gardens in 2019. The event format is compatible with Covid-19 restrictions, which means we have a product that can be executed in its full scope, even with restrictions in place in November in December,” Schwenkow explained.
“We decided to promote at least eleven instead of the usual six Christmas Gardens in November and December this year, raising the total visitor count from 950,000 to 1.5 million in an enormous effort,” he continued.
Both the insurance policy as well as a product that will probably go ahead in its usual format in Q4, have led to what Schwenkow describes as a “combative spirit of optimism, rather than despair.”
DEAG has reduced its monthly fixed costs by applying strict cost management, including the implementation of short-time work in Germany, the UK and Switzerland.
DEAG, by its own admission, has “access to financial resources of more than €60 million [$66 million], consisting of available liquidity, credit lines with banks, grants from aid programmes and insurance payments,” and thus considers itself to be in a strong position to weather the crisis, even beyond 2020.
Till Brönner – Prof. Peter Schwenkow
Founder and CEO of DEAG.
DEAG owns ticketing platforms MyTicket, which is operational in Germany, Austria and the UK, as well as Gigantic.com. The Q1 earning report states, that “sales and earnings from ticket sales tripled in the first quarter in Germany alone.”
While distancing regulations are in place, DEAG is banking on drive-in concerts, which have emerged as the industry’s go-to, yet short-term, solution for maintaining a modicum of business under the government-imposed restrictions on public life.
These include the “Stage Drive Kulturbühne” open air events to be held on the parking lot of the Jahrhunderthalle in Frankfurt/Main, as well as the “Kulturwasen” in Stuttgart and other formats in the UK.
Schwenkow is fully aware that these alternative event concepts can only be a short-term solution. “Live requires closeness. And we’ll only have closeness again, once the virus is under control or we have vaccines. I’m convinced there will be vaccines, but I’m even more convinced that there’ll also be meds. We as an industry need to return to situation, in which people aren’t afraid of visiting events anymore,” he explained.
Our full interview with Prof. Peter Schwenkow will go online on Monday, June 1, on pollstar.com.