Questor: everyone wants to see live bands – and this firm has a tight grip on the market

This gives it a lot of protection from competition. Think of London: apart from the O2 and Wembley there are very few sites up to standard for big live acts. Ownership or control over access to sites of that kind of stature is a key asset.”

He added: “More and more people want to go to festivals and concerts. This gives Live Nation pricing power on behalf of its artist customers.”

Last year the concert division made “adjusted” operating margins of 14.8pc. “It is strongly profitable in an industry that’s growing,” Weldon said. “It is well positioned to benefit from that growth as it essentially makes money on a ‘per fan’ basis.”

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This arm accounts for three quarters of the group’s sales, although it makes just 21pc of operating profits.

Another division, sponsorship and advertising, contributes 32pc of operating profits from just 4pc of revenue, thanks to adjusted margins of 63pc. This side of the business sells advertising and promotional campaigns at venues. It has managed campaigns for 7UP, Absolute Vodka and New Look, among others.

The third part of the business is a household name: Ticketmaster, the ticketing agency that recently announced the closure of two ticket resale websites.

Ticketmaster, which makes 47pc of group profits on 21pc of sales at margins of about 20pc, attributed its decision to the actions of ticket touts, who make big profits by snapping up tickets at face value when they go on sale and then selling them at huge markups via the reselling service.

This could prove a shrewd move, according to Weldon. “While artists do want to run profitable tours, they don’t want to be seen as gouging fans,” he said “If Live Nation can squeeze touts out of the process the artists may be able to charge a little more without the bad taste that fans get when they pay high prices to touts.”

Sales growth over the past couple of years has been between 8pc and 9pc a year in the concerts division and Ticketmaster, with profits growing at about the same rate, Weldon added. The group is good at turning profits into cash, although some needs to be spent on capital expenditure on its venues.

Weldon said its structure made the traditional price-to-earnings ratio inappropriate as a valuation measure. Instead, he said the “enterprise value” – market value plus debt – was 12 times earnings on an “ebitda” basis. This is reasonable for such a solid business with steady growth prospects.

Questor says: buy

Ticker: NYSE: LYV

Share price at close: $49.48

Arena Events Group

Arena operates in a similar field: it is a global leader in the provision of temporary infrastructure for “tier 1” sporting events such as Wimbledon, The Open golf championship and the US PGA tour.

Its flotation last year provided an exit from private equity ownership and an opportunity to recapitalise the business to support a “buy and build” strategy of service enhancement and geographical expansion.

“It has high-quality earnings thanks to multiyear contracts, supporting strong profit and cash flow growth and a well covered, growing dividend,” said Ken Wotton, whose Livingbridge UK Micro Cap fund owns 5.5pc of the firm.

“Excellence in operational execution provides high barriers to entry in a market where clients have a high cost of failure because of the profile of the events,” he added.

Questor says: buy

Ticker: ARE

Share price at close: 68.5p

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