15/05/2018
Interim Results 2018 & Acquisition Update

Financial highlights

	Six months to 31 March 2018	Six months to 31 March 2017
Volume sales	353,300 m2	325,200 m2
Revenue	£75.4m	£69.6m
Headline profit before tax1	£16.0m	£15.4m
Profit before tax	£1.3m	£3.1m
Headline diluted earnings per share2	3.7p	3.9p
Diluted earnings per share	(0.7p)	0.6p
Interim dividend per share	1.5p	1.5p
Net debt3	£51.2m	£55.2m

• First year of like-for-like⁴ growth in volume and yields since 2014
• Revenue of £75.4m; growth of 8% on a like-for-like basis, driven by early TAG initiatives, focus on Core events and the majority of markets returning to like-for-like revenue growth
• Four top 10 events ran in the period and together delivered double digit like-for-like revenue growth
• Headline profit before tax (“Headline PBT”) of £16.0m; statutory profit before tax of £1.3m
• Growth of 2% on a like-for-like basis in headline PBT reflects reinvestment into future events
• Continued strong cash generation from sales initiatives and reduced net debt by 7% to £51.2m
• Maintained interim dividend of 1.5p, in line with policy
• Forward bookings⁵ of £144 million already contracted for FY18; 2019 forward bookings up 31% on a like-for-like basis

Strategy update

• Early TAG initiatives and focus on Core⁶ events is driving performance
• Most markets have now returned to growth – continued good progress in Moscow
• Completed negotiations to move Mosbuild to Russia’s largest exhibition venue on a long term basis
• TAG investment is on track, expenditure within budget
• Continued progress in managing the portfolio, including the disposal of TradeLink ITE Sdn. Bhd (“TradeLink”) for £4.2m

Proposed acquisition of Ascential Events Limited

• Proposed acquisition of seven market leading and scalable event brands
• Expected to be earnings enhancing in first full year of ownership
• Cost synergies achievable net of investment
• Strong scope for growth under ITE management as part of Core portfolio
• Diversifies ITE’s revenue by geography and product
• Addition of market leading brands supports and accelerates the delivery of ITE’s vision
• Standby underwriting entered into with Investec Bank plc in respect of the proposed rights issue to fund the acquisition

Mark Shashoua, CEO of ITE Group plc, commented:
“We are seeing the benefits from a number of our early initiatives in the TAG programme which has driven a return to revenue growth in most of our markets. Overall, revenues were up 8% on a like-for-like basis and, encouragingly, the focus on operational rigour on our Core events delivered the first like-for-like volume and yield growth since 2014. Consistent with this, the four top 10 shows that took place during the first half collectively delivered double digit revenue growth.

Today we have also announced the proposed acquisition of seven highly complementary market leading events from Ascential plc. These events are well known to us, the acquisition is in line with our product-led acquisition strategy and gives us the benefit of a more balanced portfolio by geography and product. It also adds two more global brands in BETT and CWIEME and is expected to be earnings enhancing in 2019, our first full financial year of ownership.

As a result of our focus on forward bookings we have good visibility into this year and next with revenues booked for 2018 at 89% of consensus for the full year and, on a like-for-like basis, bookings for 2019 are up 31% at £31.0m. The combination of good progress on TAG and the proposed acquisition of Ascential Events Limited represent significant steps for ITE in realising its vision of creating the world’s leading portfolio of content-driven, must-attend events that deliver an outstanding experience and ROI for our customers.

The acquisition is conditional, inter alia, on obtaining shareholder approval and the completion of a proposed rights issue which will be launched in due course. Further details can be found in the separate announcement on the acquisition also issued today.”

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1. Headline profit before tax is defined as profit before tax and adjusting items which include amortisation of acquired intangibles, impairment of goodwill, intangible assets and investments, profits or losses arising on disposal of Group undertakings, restructuring costs, transaction and integration costs on completed and pending acquisitions and disposals, tax on income from associates and joint ventures, gains or losses on the revaluation of deferred/contingent consideration and on equity option liabilities over non-controlling interests, and imputed interest charges on discounted equity option liabilities – see note 3 to the condensed consolidated financial statements for details.
2. Headline diluted earnings per share is calculated using profit attributable to shareholders before adjusting items – see notes 3 and 6 to the condensed consolidated financial statements for details.
3. Net debt is defined as cash and cash equivalents after deducting bank loans.
4. Like-for-like results are stated on a constant currency basis, after excluding events which took place in the current period but did not take place under our ownership in the comparative period and after excluding events which took place in the comparative period but did not take place under our ownership in the current period. For clarity, this excludes all:

See ‘Trading highlights and review of operations’ for further detail.
5. Forward bookings are contracted revenues for the years ending 30 September 2018 and 30 September 2019. These are the bookings as at 11 May 2018, unless otherwise stated.
6. Core events are those of strategic importance to our future and include the Group’s largest events, those with the greatest potential for growth and a number of smaller but strategically important events. Following the strategic review, the Group deliberately segmented its business into Core and Non-Core, enabling management to increase its focus on events that present the greatest opportunities whilst reducing distraction from smaller events.

Enquiries:

Mark Shashoua, Chief Executive Officer Andrew Beach, Chief Financial Officer Melissa McVeigh, Director of Communications	ITE Group plc	020 7596 5000
Charles Palmer / Emma Hall / Harry Staight	FTI Consulting	020 3727 1000
Nick Westlake / Toby Adcock	Numis	020 7260 1000

 

About ITE Group plc
ITE Group plc was founded in 1991 and is now one of the world’s leading organisers of international exhibitions and conferences.

ITE Group’s strategic vision is to create the world’s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. In May 2017 the Group launched its Transformation & Growth (TAG) programme, which is designed to transform the Company from a geographic-led business to a product-led business that focuses on market-leading events, wherever they are in the world. ITE strives to run the best shows and offer the best service to its customers throughout the world regardless of location. By putting exhibitors and visitors at the heart of everything we do, we plan to drive sustainable growth for our shareholders.

ITE Group is a public limited company and has been listed on the main market of the London Stock Exchange since 1998.

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Executive summary
ITE has delivered a strong overall trading performance as we start to see the benefits of our early TAG programme initiatives coming through. This was the first period of like-for-like growth in both yield and volume since 2014 and these results reflect revenue growth in the majority of our markets as a result of our early TAG initiatives and focus on our Core events.

Revenues of £75.4m (2017: £69.6m) for the first six months are 8% higher than the same period last year on a like-for-like basis. This was as a result of improved like-for-like trading (£6.2m), driven by strong performances across several markets with volume growth achieved in Russia, Asia, Central Asia and Eastern & Southern Europe. Revenue growth was also supported by the benefit of biennials and event timing differences (£4.3m) and a small positive impact from the acquisition of the Gehua portfolio of events in China, which completed during the previous year (£0.5m, net of other event disposals). This was offset by the adverse impact from foreign exchange (£3.5m) and the cancellation of 22 of our less profitable events in line with our strategy (£1.6m, net of launches).

Despite the revenue impact of the net cancellations and costs associated with the TAG programme, headline profits before tax of £16.0m are 4% higher than the same period last year. The increase is due to the positive impact of biennial events and timing differences (£2.4m), net acquisitions (£0.4m) and foreign exchange (£0.2m). This was offset by the impact of ongoing investment in the TAG programme (£2.7m). Because of the positive top line performance and continued growth at Sinostar (our Chinese joint venture), we have been able to make additional investments into future events, spending £1.5m more than at this stage in the comparative period. Despite these reinvestments, headline profit before tax grew by 2% on a like-for-like basis.

Reported profits before tax were £1.3m (2017: £3.1m). This is after including £2.3m of one-off costs relating to the TAG Programme (2017: £nil). This takes our total spend, recognised in the income statement, on one-off TAG costs to £6.9m since the launch of the programme, which is slightly less than previously indicated, due to timing.

Russia, a significant part of our business, has delivered a strong performance, ahead of market growth following the decision to allocate the largest proportion of TAG investment into the region. Like-for-like volumes were 6% higher than this time last year, following a strong performance across the Core Moscow portfolio and at the Core agriculture event in Krasnodar, Yugagro.

Whilst there has been an increase in political tensions between Russia and the West, there has been a negligible effect on both results to date and forward bookings. It is important to note that the effects of the sanctions in 2014 have meant that exposure to US/UK companies attending our Russian events is very small, accounting for just £0.4m (0.3%) of Group revenues in 2017. Through our strong sales operations in certain international markets we are experiencing growth in particular from Chinese and Turkish exhibitors.

In other regions, we delivered like-for-like revenue growth across all regions in Asia and our Chinese joint venture Sinostar performed well, contributing £6.7m to profitability. On a like-for-like revenue basis both Turkey and Ukraine experienced double-digit growth. In Turkey this represents just one event – the EMITT travel show – which returned to growth this year, following management attention and operational improvements delivered as part of the TAG programme.

We have recently rolled out improved content at our Core shows in Moscow, Istanbul and across the Brands portfolio, and exhibitor NPS scores are on average up by 10 points. Core buying groups and revisits (which is a key indicator of quality audiences returning throughout the show and staying longer) are both up.

This has led to increased levels of rebooking for 2019 where we are 31% ahead of this time last year on a like-for-like volume basis, with bookings at £31m (2017: £27m).

As at 11 May 2018, the Group has contracted £144m of revenue for the current financial year which is 13% ahead of last year on a like-for-like basis. This is partly due to bookings being made earlier as a result of a focused sales effort on Core events, and gives the Group much improved visibility, which represents 89% of consensus.

Strategic Update - TAG programme
Our vision is “To create the world’s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers”.

By putting exhibitors and visitors at the heart of everything we do, we plan to drive sustainable growth for our shareholders. ITE strives to run the best shows and offer the best service to its customers throughout the world, regardless of location. The Group’s focus on a product-led strategy will see ITE focus on events that are market leading or have a clear path to become number one in their sector.

Following the announcement of our TAG programme a year ago, our early TAG initiatives are progressing according to plan, within budget and already driving strong organic revenue growth. 2018 is about rigorous attention to detail and execution of our plan.

The TAG Programme comprises of three pillars of strategic activity to drive revenue and accelerate growth.

• Create a scalable platform to generate real organic growth;
• Actively manage our portfolio; and
• Make selective product-led acquisitions.

Create a scalable platform
Organic revenue growth is being delivered by directing TAG investment towards five transformational levers by creating best practice functions and teams, investing in show operations, building capability and talent, driving a performance culture and building and maintaining a fit for purpose IT infrastructure and systems. 

Creating a strong operational Head Quarters in order to instil best practice across each area of our business is imperative to our transformation.  Having recruited the Heads of Best Practice we now have the team in place to deliver our transformation.  To ensure that our shows are consistently run at the same level of excellence anywhere in the world we have implemented the ‘ITE way’ and rolled out multiple best practice initiatives following the launch of our ‘Events Best Practice’ blueprints. We are committed to rolling out blue prints for every activity associated with running a successful events business.

Our main focus for TAG in 2018 is on content, lead generation and customer service. During the period, ITE has started to deliver events with much richer content in order to attract new visitors and drive retention. Initiatives have had an immediate impact. For example, EMITT, the East Mediterranean International Tourism and Travel Exhibition show grew double digit revenues on like-for-like basis and rebooked 45% of 2018 revenues for the 2019 event onsite. This is a significant achievement as many of the customers are national tourist boards whose budgets are typically only set later in the calendar year. Our focus on onsite rebooking at a number of Core events continues to strengthen our sales visibility.

To ensure the Group becomes more efficient, work is underway to put in place common systems to deliver a better service across the world to ITE’s customers. A new CRM and HR system is set to be launched this year with a new marketing system to be rolled out over the next 18 months, while we are in the early stages of designing our new global finance system. 

Clear progress has been made during the first half of the year across the five levers and the Group is on track with its 2018 milestones:

Transformational Lever	Benefit	2018 Milestones
Create best practice functions and teams	Deliver best-in-class processes implemented globally across the Group, greater efficiency via standardised processes, a more structured and accountable leadership, and a globally consistent ‘ITE way’ driving efficiency and greater attendee experience	Completed the design of the ‘ITE way’ Implementation has begun of the ‘ITE way’
Invest in show operations	Enhance customer retention and exhibitor reach, obtain enriched data insights and improve operational efficiency	Regional customer success teams have been started Dedicated regional content teams have been formed Implementation of value-based pricing methods has been started Show ‘blueprints’ have been rolled out New show content has begun to be deployed in Core shows e.g. MITT, MosBuild
Build capability and talent	Attract and retain talent, develop internal capabilities, and establish the right capabilities to drive business and adapt to market changes	Dedicated specific training programmes have been rolled out for Sales teams All key Regional Directors have been recruited
Drive a performance culture	Create a values-driven organisation that encourages high performance and rewards success and talent, building a winning team with an aspirational culture	Standardisation of performance management is ongoing
Build and maintain fit for purpose IT infrastructure and systems	Create a global IT function and infrastructure that can support the requirements of a flexible, mobile and highly effective workforce that operates globally, but delivers locally, and supports and enables the ‘ITE way’ of working	Integrated sales and marketing systems have been launched Systems design and development has been completed for Marketing and HR and in the early stages of design for Finance Systems to be deployed in phased waves

Actively manage the portfolio
The Group continues to manage its portfolio by implementing a more rigorous approach to the allocation of capital. Under current management, since October 2016, in line with the aims of the TAG programme, we have discontinued 59 less profitable events as we continue to focus on our Core events. Despite these closures, revenues have grown.

Post period end, the Group recognised a profit on disposal, having sold TradeLink, the owner of Metaltech, the metalworking exhibition in Malaysia, to UBMMG Holdings Sdn. Bhd., a subsidiary of UBM plc for a total cash consideration of MYR 23m (£4.2m). This transaction marks a further step towards this second element of TAG to manage our portfolio of events and the proceeds will be reinvested into the Group. 

Having deliberately segmented our business into Core and Non-Core, management is able to increase its focus on events that present the greatest opportunities whilst reducing distraction from smaller events. The Group continues to apply the transformational levers to its Core events to realise their full potential and each segment of the portfolio requires a different degree of focus and different transformational levers to maximise its growth.

In line with its product-led strategy, the Group will continue to pro-actively review its portfolio on an ongoing basis and will review its options if too much time or investment is involved to deliver expected target growth.

Product-led acquisitions
The third TAG pillar is for the Group to make selective product-led acquisitions to accelerate growth in line with its strict M&A criteria. Each opportunity will be carefully reviewed, but will not be limited to any particular geography as the Group aims to run the best shows in the best industries anywhere in the world. These product led acquisitions would also benefit from the best practice teams that are now in place so that standardisation of processes would drive further organic growth post acquisition.

A pipeline of product-led opportunities is building, but the Group will only proceed if such opportunities meet most of the following criteria:

• Scalability – in sectors with high growth potential
• A distinct customer value proposition – serving a clear part of an industry sector
• Position in attractive markets for events – serving a high growth underlying market
• Evidence of strong organic revenue growth and profit margins
• Potential to roll out internationally – dependent on the product
• Earnings accretive – offering a good return on invested capital

The Directors believe that the Ascential Exhibitions Business is an attractive, high-quality portfolio of ‘must-attend’ exhibitions. The Acquisition aligns with ITE’s continuing TAG Programme and specifically its strategy of making product-led acquisitions of scalable events brands which are seen as offering strong growth potential under ITE’s ownership.

The proposed acquisition will diversify ITE’s exposure to some end-market verticals such as education technology and coil winding, electric motor and transformer manufacturing technologies that the Directors believe are attractive and supported by structural growth drivers, creating a more balanced portfolio of events.

The proposed acquisition will also diversify ITE’s geographic footprint, giving rise to further opportunities for growth. In particular, the Directors believe that following the proposed acquisition, Bett and CWIEME will benefit from the leveraging of ITE’s wider geographic footprint and existing infrastructure, providing geo-cloning opportunities.

Outlook
The TAG programme is delivering early benefits with improved financial performance from our Core events delivering like-for-like volume, revenue and headline PBT growth for the first time in four years.

Cash conversion remains strong and the Group enters the second half with high visibility of revenues having contracted £144m of revenue for the current financial year as at 11 May 2018, representing circa 89% of market expectations for the full year.  As a result of our focus on forward bookings, the Group has also already contracted £31m of forward bookings for FY2019, representing 19% of consensus revenue. This is up 31% on a like-for-like basis and the improved level of bookings partly reflects the Group’s focused sales initiatives on Core events, in line with its strategy.

The like-for-like growth and cash conversion have allowed management to invest £1.5m more in future period events than at this stage last year.

The combination of good progress on TAG and the proposed acquisition of Ascential Events Limited - a portfolio of market leading products that the management of ITE have known for a long time and that fit well with our strategy means that ITE is taking significant steps towards realising its vision of creating the world’s leading portfolio of content-driven, must-attend events that deliver an outstanding experience and ROI for our customers.



Mark Shashoua
Chief Executive Officer

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