19/05/2014
Interim results announcement

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ITE GROUP PLC
INTERIM RESULTS ANNOUNCEMENT
Strong H1 profits

  Six months to 
31 March 2014
Six months to 
31 March 2013
Volume sales 320,100 m2 352,500 m2
Revenue £71.2m £69.4m
Pre-tax profit £12.2m £2.6m
Headline pre-tax profit* £18.2m £11.1m
Diluted earnings per share 4.3p 0.9p
Headline diluted earnings per share** 6.0p 3.7p
Interim dividend per share 2.5p 2.3p
Net (debt)/cash (£1.8)m £21.7m

 

  • Headline pre-tax profits up 64% to £18.2 million
  • Underlying business reports volume growth of 2%
  • Continuing strong cash generation; net debt as at 31 March of £1.8 million after £38 million investment
  • Acquisitions in China and in Turkey are trading well
  • Booked revenues for the current financial year of £158 million as at 16 May 2014
  • Confidence in full year outcome


Russell Taylor, CEO of ITE Group plc, commented:
“ITE has delivered a strong performance over the first half of the year with revenue growth in the Group’s main markets allied to a stronger biennial pattern in the first half of the year. Our recent acquisition of Beauty Eurasia in Turkey and a 50% investment stake in the Chinese Chinacoat/Surface Finishing exhibition represents more progress in achieving the Group’s strategic objectives.

“Looking forward, we continue to seek opportunities to expand the business with investments that are consistent with our strategy of building market leading positions in higher growth markets. The Group is in a strong financial position and operates a resilient business model. With good visibility on current year bookings, the Board has confidence in the full year outcome.”

* Headline pre-tax profit is defined as profit before tax, excluding amortisation of acquired intangibles, impairment of goodwill, profits or losses on disposal of Group undertakings, revaluation of financial liabilities in relation to minority put options, imputed interest charges on put option liabilities, direct costs on completed and pending acquisitions & disposals and tax on income from associates – see note 5 to the consolidated financial statements for details.

** Headline diluted earnings per share is calculated using profit before amortisation of acquired intangibles, impairment of goodwill, profits or losses on disposal of Group undertakings, revaluation of financial liabilities in relation to minority put options, imputed interest charges on put option liabilities and direct costs on completed and pending acquisitions & disposals – see note 8 to the consolidated financial statements for details.

Where used, like-for-like growth is on an actual currency basis adjusted to exclude acquisitions impacting results for the first time, event timing differences and biennial events.



Enquiries:

Russell Taylor, Chief Executive, ITE Group plc   020 7596 5000
Neil Jones, Group Finance Director, ITE Group plc    
     
Charles Palmer/Emma Appleton, FTI Consulting   020 3727 1021
James Serjeant, Numis   020 7260 1309



ITE has delivered a good set of results for the first six months despite the turbulent political backdrop surrounding Ukraine and Russia since the turn of the year. Revenues are 2.5% ahead of the same time last year and Headline profits before tax of £18.2 million are a substantial increase over last year’s equivalent result of £11.1 million. In addition to developing the portfolio of events organically, the Group continues to seek opportunities to expand its business with investments which are consistent with its overall strategy of building market leading positions in higher growth markets.

During the first six months of this financial year, the Group made further progress in expanding its business in Turkey, Asia and the UK. On 15 October 2013, the Group purchased the Beauty Eurasia event for £8.4 million in cash, £2.7 million of which is deferred. Beauty Eurasia is an annual event that takes place in Istanbul which serves the beauty, personal care and cosmetics industries in Turkey and the surrounding region. On 18 November 2013, the Group purchased a 50% investment in Sinostar which runs the ChinaCoat /SF China exhibitions for £34 million in cash, £30 million of which was paid on completion with the balance due for payment in June 2014. The exhibition serves the growing industries of paints, coatings and surface finishing in China and SE Asia. The 2013 edition took place in Shanghai on 20 November selling 34,500 sqm net and was attended by over 36,000 professional visitors, in line with our expectations at the time of the acquisition. In the UK the Group acquired the remaining 60%, which it did not already own, of Scoop a high-end London fashion event for the womenswear sector.

Financial performance
Revenues for the first six months of the year were £71.2 million (2013: £69.4 million) reflecting good revenue growth in ITE’s main markets allied to a stronger biennial pattern in the first half of this year. These positive factors were offset by the effects of weaker exchange rates across most emerging market currencies and the decision to discontinue the large but low margin events IMOB and TATEF in Turkey.

Headline profit before tax for the first six months of the year was £18.2 million (2013: £11.1 million). The principal factors affecting the change in profits were net organic growth of £2.1 million, a contribution of £2.6 million from the newly acquired investment in Sinostar and changes in the biennial pattern and timing of events, which accounted for £2.4 million of first half profits.

Reported profits before tax were £12.2 million (2013: £2.6 million). Fully diluted earnings per share for the first six months were 4.3p (2013: 0.9p) and headline diluted earnings per share for the first six months were 6.0p (2013: 3.7p). The Group has a strong balance sheet and continues to generate positive cash flow; cash generated from operations over the first six months was £29.4 million (2013: £39.7 million) and during the period £38 million has been applied to acquisitions and £11.6 million to dividends. The Group had net debt of £1.8 million (2013: £21.7 million cash) at 31 March 2014.

Board and management
On 25 March 2014 the Board announced the appointment of Sharon Baylay as a non-executive Director with effect from 1 April 2014. Sharon is a member of ITE’s Audit and Remuneration Committees. She brings a wealth of international marketing, branding and communications experience together with a strong understanding of digital marketing from her background with Microsoft and as Marketing Director at the BBC. On 25 March 2014, the Board also announced Edward Strachan had stepped down as a Director with effect from 31 March 2014. He will continue in his existing management role as Regional Director for ITE's Central Asian offices.

Dividend
The Board has approved and increased the interim dividend by 9% to 2.5p per share (2013: 2.3p per share), maintaining the Group’s progressive dividend policy.

Trading highlights and review of operations
Over the first half of the financial year, the Group experienced mixed trading conditions with growth in Moscow and the Central Asian markets but with more challenging conditions being experienced in regional Russia, Ukraine and the UK. During the period the Group organized 136 events (2013: 109 events) which generated like-for-like revenues (after making a £7.1m adjustment for discontinued events) 1% higher than for the same period last year despite the negative impact of circa £8 million from lower foreign exchange translation rates (+12% on a constant currency basis). Actual volume sales for the period of 320,100 sqm (2013: 352,500 sqm) were 9% lower than last year’s equivalent, mostly reflecting the discontinued Turkish events but partially offset by a stronger biennial pattern and positive timing differences. The underlying business (like-for-like excluding the discontinued events) reported volume sales growth of 2%. A summary of the Group’s exhibition business sales and profits for the first six months of the year is set out below.

  Square meters sold
000’s
Revenue
£’m
Gross Profit
£’m
First half 2013 353 69.4 25.4
Non-annual 2013 (2) (0.3) (0.1)
Annually recurring 351 69.1 25.3
Acquisitions 2 1.0 0.4
Timing differences 12 2.5 1.1
Discontinued events (79) (7.1) (0.4)
FX Translation - (7.8) (2.2)
Organic increase 6 8.2 2.7
Non-annual 2014 28 5.3 1.7
First half 2014 320 71.2 28.6



Russia
Volume sales in Russia over the first six months of the year were 9% higher as a result of the return of two biennial events; the printing exhibition, Polygraphinter, and the woodworking machinery event, Woodex. On a like-for-like basis volume sales were 1% ahead reflecting a mix of good performance in Moscow offsetting weaker performances in Novosibirsk and Krasnodar.

Moscow performed well over the first half of the financial year, with like-for-like volume sales up 5% led by a return to growth of the Moscow International Travel & Tourism event, which delivered sales of 20,300sqm (2013: 19,400sqm) and strong growth in the Pharma portfolio. Both Krasnodar and Novosibirsk saw volumes fall by around 10% largely in their construction events where overall marketing spend was affected by construction activity on the Sochi Winter Olympic project. St. Petersburg benefited from some small new launches in the period but the majority of its events take place in the second half of the year.

Central Asia & the Caucasus
Volume sales for the first six months in Central Asia and the Caucasus were 23% higher than for the comparative period, partly due to timing differences on a number of events mainly in Uzbekistan. Volume sales were ahead by 13% on a like-for-like basis.

The largest part of the Group’s business in the region is Kazakhstan, which reported a small decline in like-for-like volumes sales. The largest event in the region is the Kazakhstan International Oil & Gas Exhibition (KIOGE), was slightly smaller than the previous edition with volume sales of 8,000sqm. The strongest growth in the region has again been in Azerbaijan which enjoys a good trading environment and the Group’s business here continues to grow into the new larger venue facilities realising good volume and revenue growth across the portfolio.

Eastern & Southern Europe
Consistent with the comments made at the time of the pre-close statement, business performance in Ukraine has been affected by the on-going political troubles. The business which will represent less than 5% of Group profits this year has run its normal exhibition programme to date, all of which take place in Kiev, – albeit with fewer exhibitors and visitors as in previous years. The Group expects the profits from the Ukrainian business for the full year to be circa £2.5 million less than would have normal, mostly affecting exhibitions to be reported in the second half of the year. Overall volumes sales were 19% below the comparative period with the smaller part of the portfolio in Autumn 2013 performing well, but events taking place this year increasingly reflecting the political tensions in the area.

In Turkey, as part of ITE’s on-going review of its event portfolio the Group discontinued two high volume, low margin events IMOB (furniture) and TATEF (industrial machinery) which led to a reduction in volume sales over the period of circa 50%. The remaining events performed well and the region reported an increase in profits over the comparative period. Turkeybuild, the pre-eminent construction event in Turkey (which remains capacity constrained until the 2015 event) took place in early May and delivered its largest ever event at 36,300sqm.

Asia
In Asia, the Group’s activities are largely conducted through joint venture arrangements, ABEC in India and Sinostar in China both of which are accounted for through the associate and joint venture line in the profit and loss account. ABEC has performed well delivering an increase in profits from its Indian construction portfolio and completing the successful launch of the India International Travel and Tourism event. The Group’s 100% owned subsidiary in India reported a good result from its biennial Paperex event which grew volumes by over 15%.

UK
Following the exercise of its call option the UK fashion portfolio now owns 100% of Scoop, its London based designer lead womenswear event. The event grew strongly which helped the Group to offset a decline of 9% in volumes in its largest event, MODA, which in common with many European fashion events experienced a difficult Spring season.

April/May trading
April is the largest trading month for the Group. Mosbuild delivered a solid performance, but in common with other construction businesses in Russia reported lower volumes than for last year’s comparable event. Other leading events in April reported a mix of performances with the Moscow International Protection & Security growing but TransRussia impacted by a slowdown in one sector.

Set out below are the results for the Group’s principal events taking place in April and early May 2014:

  2014 sqm. 2013 sqm.
Mosbuild 65,300 68,500
Turkeybuild 36,300 36,200
Moscow International Protection & Security 11,700 11,400
TransRussia 10,000 11,300



Outlook
As at 16 May 2014, the Group had booked revenues for the current financial year of £158 million (2013: £174 million). On a like-for-like basis this represents a decrease of 8% over the comparable figure for last year, although on a constant currency basis this would have been 5% ahead.

The Group enters the second half of the year in a strong financial position and continues to generate high levels of cash. It operates a resilient business model and is well placed to continue to diversify its business into new market leading positions and geographies. There remains much political uncertainty surrounding Russia-Ukraine and Russian economic indicators now suggest lower levels of growth for the remainder of 2014. The Board is monitoring carefully any developments and their implications for ITE’s business but with good visibility on current year bookings the Board remain confident in the full year outcome and in the Group’s future prospects.

Going Concern
As stated in note 20 to the condensed financial statements, the directors are satisfied that the Group has sufficient resources to continue to operate for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

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