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2015 > December > 2015 Preliminary Results Announcement
01/12/2015
2015 Preliminary Results Announcement

 
Results in line with expectations
 
Financial highlights

 
Year to
30 September
2015
 Year to
30 September
2014
Revenue £135.8m £174.8m
Headline pre-tax profit * £47.2m £60.3m
Headline diluted earnings per share ** 15.3p 20.2p
Profit before tax £31.5m £41.5m
Diluted earnings per share 10.4p 13.8p
Dividend per share 7.4p 7.4p
Net (debt) £(52.3)m £(14.8)m
 
  • Results in line with Board’s expectations despite difficult market conditions
  • Further diversification achieved: Breakbulk, Eurasia Rail & Africa Oil Week acquisitions
  • Good performance from Asia, Turkey and India
  • Net debt of £52.3 million after investing £56 million on acquisitions & deferred consideration
  • Post period end, acquired majority stake in leading Indian organiser ABEC for £14 million
  • Maintained full year dividend at 7.4p, reflecting confidence in future
  • £77 million of revenues booked for 2016
 
Russell Taylor, CEO of ITE Group plc, commented:
 
“ITE has delivered a solid performance despite a challenging trading environment in Russia and more recently in the central Asian states due to the weakness of the oil price and domestic currency, which has impacted the Group’s results. The Group’s other regions, which now account for over 40% of ITE’s business, are trading well.  
 
“ITE has continued to diversify its portfolio and strengthen its industry verticals by acquiring leading events, establishing a better geographic balance between its historical Russian-CIS businesses and other leading emerging markets. ITE has established cornerstone businesses in three of the largest emerging markets of the future – China, India and Africa. The Group operates a resilient business model, a flexible cost base and our strong market positions mean the Group is well placed to benefit from any future improvement in the Russian economy.”

*     Headline pre-tax profit is defined as profit on ordinary activities before taxation, amortisation of acquired intangible assets, impairment of goodwill, profits or losses arising on disposal of Group undertakings, transaction costs on completed and pending acquisitions & disposals, tax on income from associates & joint ventures, gains or losses on the revaluation of contingent consideration, gains or losses on the revaluation  of put option liabilities over non-controlling interests, and imputed interest charges on discounted put option liabilities – see note 3 for details.
**   Headline diluted earnings per share is calculated using profit attributable to equity holders of the parent before amortisation of acquired intangible assets, impairment of goodwill, profits or losses arising on disposal of Group undertakings, transaction costs on completed and pending acquisitions & disposals, gains or losses on the revaluation of contingent consideration, gains or losses on the revaluation  of put option liabilities over non-controlling interests, and imputed interest charges on discounted put option liabilities – see note 9 for details.
 
Enquiries:
Russell Taylor, Chief Executive
Neil Jones, Chief Financial Officer
Des McEwan, Group Financial Controller		 ITE Group plc 020 7596 5000
Charles Palmer/ Emma Appleton FTI Consulting 020 3727 1000

Chairman's Statement


Group Performance

ITE Group plc has reported revenues of £136 million and headline profits before tax of £47 million. The two major themes running through this year have been the impact of the fall in the oil price on the oil dependant economies where we operate, and the Group's ongoing diversification of its business. The lower oil price has caused a significant slowdown in economic activity in some of the key countries in which we operate and has also led to a devaluation of their currencies against Sterling. At the same time, the Group has continued to diversify both organically and through acquisition into other geographies. During 2015, three substantial acquisitions have been completed and, as a result, the Group has stronger businesses in Asia and Turkey and has established a first time presence in Africa, a new geography for ITE. These proactive changes have given the Group a better geographic balance between its historic Russian-CIS businesses, and other leading emerging markets. Looking forward, Russia now accounts for circa 40% of ITE's business (2014: 51%).

The Group has made significant progress during the year in developing its business by adding to its portfolio of market-leading events in target industry sectors. Over the course of the year the transport and logistics portfolio has been enhanced by the additions of Eurasia Rail in Turkey and the international Breakbulk series of events. In the oil and gas portfolio the Group acquired Africa Oil Week which serves the upstream industry and is the leading event for exploration of future oil and gas reserves in Africa. Post-year end the Group has announced the exercise of its call option in its Indian associate, ABEC, taking its holding to 60%, making ITE the leading private organiser in the Indian exhibition industry as well as enhancing its construction portfolio.

Overall, these results demonstrate the resilience of the Group's business model to challenging trading circumstances in some of its most important geographies and its continued focus on the execution of its strategy.

In this stronger biennial year, headline diluted earnings per share was 15.3p (2014: 20.2p). Reported pre-tax profit was £31.5 million (2014: £41.5 million) and fully diluted earnings per share was 10.4p (2014: 13.8p). The Group finished the year with net debt of £52 million (2014: £15 million), after investing £56 million on acquisitions during the year.

Board and Management

There were no changes to the Board during the financial year. However on 14 October 2015, Neil Jones, our Chief Financial Officer for the last seven years announced that he will be leaving the Group.  Neil will remain at ITE until 31 January 2016 in order to close the current financial year end, and to ensure a smooth handover. The Board has commenced a search for his successor and a further announcement in relation to a new Chief Financial Officer will be made in due course.  On behalf of the Board, I would like to thank Neil for his contribution over the last few years; his knowledge, drive and positive attitude have made him an excellent member of the executive management team and we wish him well in his future endeavours.

ITE is a people business and its success is based upon the hard work and loyalty of its staff worldwide. The Group has over 1,000 employees conducting its business in 32 offices in 20 different countries. We have an increasingly diverse mix of cultures with an additional 250 staff in Asia employed via associate business structures. Almost 50% of our staff have been employees of ITE for more than five years and 63% are participants in one of our equity schemes. As Chairman and on behalf of the Board, I would like to thank and acknowledge the contribution of all of ITE's employees to this year's result and especially those staff in Ukraine and Russia who have worked extremely hard under difficult circumstances.


ITE's Board recognises that good corporate governance is in the long-term interests of the Group and we are conscious of our responsibilities for setting values that underpin the Group culture. As Chairman, I am mindful of my personal responsibility for leading the Board and ensuring it operates diligently and effectively.

Dividend

This year the interim dividend was held at 2.5p and the proposed final dividend remains at 4.9p, making a full dividend for the year of 7.4p (2014: 7.4p). This reflects the Board's confidence in the quality and potential of the business. The final dividend is proposed for payment on 8 February 2016 to shareholders on the register on 8 January 2016.

Outlook

Trading conditions in Russia and more recently the central Asian states, continue to be challenging. Whilst the Group has seen a stabilisation in Russian trading conditions, the impact of lower oil prices and domestic currency weakness is reflected in our forward bookings. As anticipated, the H1 bookings for 2016 will be more impacted than H2, as last year's comparatives for H1 only partially reflect the current trading conditions in Russia and Central Asia. The Group's other regions, which now account for over 40% of ITE's business are trading well. At 27 November 2015, Group revenues already booked for FY 2016 were £77 million representing circa 57% of market expectations for the full year. On a like-for-like basis these revenues are circa 10% behind this time last year.

Although ITE's ongoing geographical diversification is reducing its dependency on Russia, the Group's results remain sensitive to its economic climate and to the oil price. However, its strong market positions mean the Group is well positioned to benefit from any future improvement in the Russian economy. Elsewhere, ITE has good growth prospects in its other markets and its portfolio of leading events continue to perform well. Management will continue to monitor and review the Group's cost base to ensure that it has the most efficient structure and will further diversify the Group's business as well as strengthen its industry verticals. The Group has a robust balance sheet, good operating cash flow and the Board has confidence in the Group's future prospects.

 
Marco Sodi
Chairman

Where used, like-for-like measures are stated on a constant currency basis adjusted to exclude acquisitions impacting for the first time, event timing differences and biennial events.

Chief Executive's Statement


The Group's performance this year

ITE's performance this year largely reflects the difficult trading conditions in its main market, Russia and the decline in the value of the Russian Ruble (against Sterling) in which 40% of the Group's revenues are denominated.

The main factors affecting Group profitability this year are summarised in the profit bridge below.

  £'m
2014 headline PBT 60.3
Net biennial & timing 1.4
Net 'once off' forex 1.9
FX impact FY15 (6.5)
Acquisitions (net of overheads and financing) 2.6
Core business (12.5)
2015 headline PBT 47.2

The fall by circa 50% of the Russian Ruble against Sterling accounted for most of the £6.5 million foreign exchange loss suffered in the year, and a reduction in core business through adverse economic conditions accounted for a further £12.5 million of shortfall against last year. Offsetting this was a positive biennial contribution of £1.4 million, and the benefit of newly acquired businesses, which had an incremental effect of £2.6 million in the year after additional financing costs.

The currency impact and the core business decline have a common cause; the fall in the oil price having a negative effect on the oil dependant economies of Russia, Azerbaijan and Kazakhstan and leading to a proportionate devaluation of currencies to protect their national finances. The currencies of Russia, Azerbaijan and Kazakhstan are now trading at circa half of their previous values against Sterling. The effect on ITE's business in these countries was further aggravated by the high proportion of ITE's exhibitors who import and distribute overseas goods, for these customers the currency devaluation has made their business less competitive.

The Group's Russian and Ukrainian businesses were the most severely impacted in the year. The ongoing political instability in Eastern Ukraine and consequent sanctions imposed by the West on Russia was already dragging on the Russian business before the sudden fall in oil prices in December 2014. Overall, like-for-like trading volumes across Russia declined by 20% in the year, which accounts for the majority of the £12.5 million decline in core business highlighted above. The Ukrainian office had already suffered a 50% decline in business activity last year, and this year reported a further 25% reduction in like-for-like volumes, as the first half of the year reported 'catch up' results reflecting the political turmoil that had already impacted the second half of the previous financial year. The Central Asian business had traded positively last year, and started this year in positive mode with the early events showing good growth, but by the end of the year these economies were also reflecting the impact of a much lower oil price, and had devalued their currencies.

The associate businesses in India and China made a positive contribution to the core business, with the 50% owned Sinostar business in China, and the 28% owned ABEC business in India both reporting 'best ever' results (though revenues of those businesses are not consolidated). The positive contribution of £2.6 million from newly acquired businesses came from the additions of Eurasia Rail, and the Breakbulk portfolio, both of which are set out in more detail below.

Development of the business

The main objectives for the Group this year were continuing to expand and diversify the Group's business and managing the effects of the difficult economic conditions in Russia.

The Group made three substantial acquisitions in the year. In December 2014 the Group acquired the Breakbulk portfolio of events for £27 million. In January this year, the Group acquired Eurasia Rail for £7.3 million.  In March this year, the Group acquired 50% of Africa Oil Week for £16 million, which was largely funded by a share placing raising approximately £12 million. These events will further diversify our business away from its historical Russia-CIS platform and their contributions will be fully reflected in next year's results.

The Breakbulk portfolio of exhibitions and publications serves the transportation and logistics market for large scale project equipment, and are held annually in Houston, Antwerp, Shanghai, and Johannesburg. The Shanghai, Antwerp and Johannesburg events ran in this financial year. The Houston event and a newly launched Middle East event took place in October 2015 and will be included in the Group's 2016 results. The portfolio provides exciting opportunities for the Group and is performing in line with expectations.

Eurasia Rail is the leading railway infrastructure show in Turkey and extends our Transport & Logistics industry sector into Rail transportation and geographically into Turkey. It ran for the first time under ITE ownership in March 2015 and performed in line with our expectations.

Africa Oil Week is the annual Oil & Gas confex held in Cape Town. It is the longest-running and most prominent event held in Africa for the continent's growing oil, gas and energy industry. Delegate attendance and financial performance held up well and the event remains resilient. We expect it to recover and exceed its previous levels when oil prices return to more normal levels.

The Group's management has invested heavily in managing its exposure to the Russian economy, by reviewing and controlling its cost base. Over the year the total headcount in Russia has been reduced by circa 11% from 444 to 393, as we have sought to keep costs in line with reducing volumes of business. Venue costs are the biggest part of our cost base, and these have been reduced in line with business volumes. There have been positive developments in the Krasnodar business, where a new venue has been completed which will help ITE's business to grow in future years. Krasnodar is the prime agricultural region in Russia and is benefitting from the current focus for Russia to become less dependent on imports for its food production. We have also continued to build our joint venture relationship with Messe Frankfurt to develop a world class exhibition in the Russian auto sector. This joint venture already runs the MIMS - Automechanika event and we have jointly invested a further £3.2 million to acquire Comtrans, the commercial vehicle exhibition taking place in Moscow.

The Asian business has had a year of building structure and consolidation, following the acquisition activity of earlier years. We now have a well-established management structure with a clear focus on how to build a coherent exhibition portfolio in the future. A good proportion of time this year has been spent preparing ourselves for the exercise of the call option over ABEC in India, and establishing how to properly combine the activities of our two business units. ABEC itself has had a very strong year growing its profits by 40%, and we are pleased Manish and Sumit Gandhi will continue to work for ITE and ABEC in the future.

The Group continues to develop its digital capacity, with the creation of a team spread across the regions allowing the Group to utilise its best resources in this area and access maximum synergies. The team focuses on the use of existing data, in particular on enhanced data governance, collection and collation as well as best practice in digital engagement with our customers. Central to this is our ability to monitor our customers' feedback and measurement of their satisfaction and experience at the Group's events. The team is also challenged to deliver complimentary revenues streams and the Group's first digital product: WorldBuild365, was launched in July. This creates an online extension of the exhibition for the construction industry by bringing buyers and sellers of the industry together throughout the year on a digital platform where they can share product information and industry knowledge.

Venue expansion is critical to the development of our business. As noted before, the new purpose-built venue in Krasnodar offering 28,000 m2 of international standard space is an improvement on the old facility, which has restricted the growth of some of our biggest events. A new 50,000 m2 venue in Jakarta, Indonesia, which is opening in early 2016 will facilitate growth of our market-leading construction event, Indobuildtech. In Malaysia construction is underway on a new venue of circa 20,000 m2 due to open in 2017 that will create opportunities for the Group to grow its events. The Group is increasingly well positioned to participate in the growth that the investments in local exhibition facilities will generate.

ITE's diversification strategy is continuing to work well and it remains a priority to create more geographical balance in our business. ITE has now established 'cornerstone' businesses in three of the largest emerging markets of the future - China, India and Africa. Having established a base business in these geographies much of the Group's future activity will focus on developing additional scale through organic development and bolt-on acquisitions in our core industries. The historic development of our business has left us with strong industry positions in Construction, Oil and Gas, Travel & Tourism and Food, with multiple shows in each sector. We have this year created a stronger position in the Transport and Logistics sector, which we expect to be a good opportunity in our new emerging market geographies in the future. We are increasingly seeing more synergy across the industry portfolios, and the expected contribution from acquisitions made in this financial year will fall half into the Oil and Gas portfolio, with the remaining half into the Transport and Logistics sector.

ITE's objectives and strategy

ITE's principal objective is to create a business with sustainable growth in headline earnings per share. Its strategy is to develop positions of market leadership in the exhibition business substantially in emerging and developing markets with good growth prospects.

ITE has been evolving its strategic objectives. We have to date been successful in establishing positions in new markets, but in the future our activity will be orientated towards development of brands and industry verticals to support our aim for industry leadership in certain sectors. This 'strength in depth' logic is increasingly driving the development of our future business as it both reduces risk and increases synergy to develop the business within sectors where there is expertise and a common customer base. We will continue to add geographic balance to our business through expansion in our industry verticals in focussing on emerging and developing markets.

Four priorities underpin ITE's strategy:

1.  Improving its existing positions of market leadership
2.  Expansion into new sectors and geographies with potential for strong market positions
3.  Improving our exhibition brands
4.  Developing our people


ITE's performance against its strategic priorities is set out below:

(i)            Improving existing positions of market leadership:

ITE's existing positions of market leadership are founded on its ability to generate international sales, its recognised brands, its local office infrastructure and its longstanding relationships with venues.

International sales strength

ITE's ability to generate international sales has differentiated it from its local competition in Russia and the related CIS markets. The same pattern is also true of China and South East Asia, with international participation and content being key differentiators for pricing and position. The Group has established a loyal customer base and a geographic reach, which is increasingly valuable as it seeks to leverage its sales into new markets. This year the Group has focussed on growing its sales from Asia, and now operates 'outbound' offices in India, and Malaysia in addition to its Beijing office. In 2015 the Group's international sales offices sold 105,000m2 which represents circa 25% of the Group's 2015 revenues. Approximately 14% of revenues were sold by the Group's London office, 3% by the German office, 4% by the Turkish office and 6% by the sales offices in Asia.

ITE's international brands

ITE has established strong brand identities in certain exhibition sectors. In particular, the WorldBuild brand in construction, the Global Oil & Gas brand, the ITE Travel portfolio and the WorldFood brands all have strong reputations with customers as leading events in the Russian and CIS markets earned through more than fifteen years of sustained good performance. We have this year developed these 'brands' in an online environment, and developed a clear new brand in the 'Translogistica' space.

Local office infrastructure

ITE's brands have built their reputation through sustained delivery of successful exhibitions to customers.  The foundation of this is in ITE's local offices which now employ over 900 staff. Local offices generate the local sales, reputation and visitor participation of the event as well as managing technical staging of the exhibitions. Critically they own and develop the database of local visitors who make the exhibition successful for the exhibitors. In its core markets, ITE's local offices have always been a competitive advantage over other international exhibition organisers and a barrier to entry for new organisers wishing to run events. ITE will continue to develop strong local offices as part of its exhibition business in new markets. The Group has an integration programme for new offices acquired into the ITE network and is increasing its investment in the infrastructure that underpins these offices and in staff training. The Group has high rates of employee retention in its offices, and supports this by its commitment to having widespread equity ownership - currently 63% of staff participate in some form of equity scheme. 

Venue relationships

ITE has always enjoyed long-standing relationships with the venues that host its exhibitions. In its historic core markets ITE has supported the development of venue facilities which in turn has helped the Group's exhibitions to grow. The Group has always sought to establish rights to run its main exhibition themes in its partner venues at the time of its choice and ITE has continued to work on maintaining and improving the venue relationships that underpin its business. Most of ITE's major events have agreements which provide for venue facilities for two to three years ahead. 


(ii)          Expansion into new sectors and geographies with potential for strong market positions:

In existing markets this strategy means targeting new sectors in which to acquire or develop exhibitions where there is potential for the participation of international exhibitors. In new markets, ITE is targeting the development of exhibition businesses where there is clear opportunity for strong future growth.
 
This year the Group has continued to expand its business presence into Turkey, South East Asia, China and Africa. In so doing it has acquired expertise in new sectors - some of which have the potential to be replicated in ITE's core markets. It has also made it possible for the Group to run its existing brands in the new markets. The acquisition of Africa Oil Week, which serves the oil industry throughout Africa, provides ITE with a platform to run other events in select African countries. We have already announced the launch of a construction event in Nigeria in tandem with a partner, and we plan to expand the oil and gas franchise further where practical. In India, the step up to ABEC becoming a subsidiary is significant for the future development of our business in India.

As the Group's acquisition activity over the last few years has opened up access to new markets, there are now increasing synergies and benefits to be gained from strengthening its industry portfolio where it has sector presence. The Group aims to increasingly focus its acquisition activity on building portfolio strength and leadership in exhibition sectors - creating stronger, more defensible business positioning for its exhibitions.

(iii)        Improving our exhibition brands:

The Group's management has been working to strengthen ITE's existing international brands. We are doing this by introducing product improvements to enhance customer experience and ensuring consistency in the presentation and promotion of similar events in ITE's vertical industry sectors. The Group's brand development projects have covered all aspects of product quality, naming, character, tone-of-voice and graphic designs associated with events in the Group's largest portfolios. The improvements will deliver numerous benefits, including increasing the global recognition of ITE's brands and enabling the Group to launch events into new territories. 

(iv)          Developing our people:

The Group has continued its programme of developing the strength and depth of the leadership and management teams in the year as well as improving communications between offices. Current initiatives include a continuing commitment to our leadership development programme focusing on the Group's most promising employees. We also continue to invest in a rolling programme of cross-Group development conferences. Communications have continued to improve, with a high level of employee engagement via the intranet, the newsletter and through cooperation in cross border industry groups. 

ITE has continued to evolve the strategic priorities by which it seeks to achieve its overall objectives. The Group has been successful in establishing positions in new markets and in the year ahead will continue to focus on strengthening its brands and industry verticals. 
 
Russell Taylor
Chief Executive Officer

Divisional trading summary 2015


Overall in 2015 the Group ran 240 events (2014: 246). The decrease in the number of events is attributable to a combination of acquisition activity, launches and timing differences. A detailed analysis of volumes, revenues and gross profits from the Group's exhibition and conference activities is detailed below:

    Square Metres Sold
(000)		 Revenue
£'m		 Gross Profit
£'m		 Average yield
per m2
2014  All events 733 175 81  
  Non-annual (70) (11) (3)  
  Timing (15) (3) (1)  
2014  Annually recurring 648 161 77 248
  Acquisitions 20 6 4  
  FX Translation   (22) (10)  
  Net Growth (96) (20) (14)  
2015  Annually recurring 572 125 57 219
  Non-annual 20 7 4  
  Timing 21 4 1  
2015  All events 613 136 62  

Overall, the Group saw volume sales fall by 16% to 613,400m2 and revenues decrease by 22% to £135.8 million, despite a stronger biennial year and the impact of acquisitions. On a like-for-like basis, volume sales fell by 14% and revenues fell by 12%.

Revenue
  2015
£'m		 2014
£'m		 %
change		 %
change
like-for-like#
Russia 72,138 102,851 -30% -17%
Asia 3,877 5,665 -32% -7%
ROW 14,719 11,677 +26% 0%
Central Asia 27,201 33,509 -19% -8%
Eastern & Southern Europe 17,859 21,125 -15% -3%
Total 135,794 174,827 -22% -12%


# Where used, like-for-like measures are stated on a constant currency basis adjusted to exclude acquisitions impacting for the first time, event timing differences and biennial events.


Russia
(Moscow, St. Petersburg, Novosibirsk, Krasnodar, Ekaterinburg)

During the year ITE held 116 events in Russia (2014: 118), with total volume sales this year of 312,600m2 (2014: 380,200m2). Revenue of £72.1 million was 30% lower than the previous year, reflecting the significant weakening of the Russian Ruble and an increasingly more difficult trading environment as the year progressed. On a like-for-like basis volume sales in Russia decreased by 20% and revenues decreased by 17% from the prior year.

The Russian economy has been in a recessionary environment through all of last year with the effects on trading volumes increasing as the year progressed. The first half of the year was relatively unaffected as this benefited from more benign booking conditions in spring/summer 2014. The second half of the year was increasingly impacted from a deepening economic recession exacerbated by the rapid fall in oil prices. The Group saw a contraction in all sectors across the Russian business with construction and energy most impacted.

Moscow is ITE's largest office in Russia accounting for around 85% of the region's revenues.  The office operates the Group's largest events a number of which are the 'number one, must attend' events which partially help insulate the Group in the event of economic weakness. Moscow's volume sales for the year were 202,400m2 (2014: 243,700m2); a fall of 18% on a like-for-like basis.

The leading events in Moscow produced a mixed performance this year. The portfolio of industrial events held in the first quarter performed relatively strongly with some events showing good levels of growth, however, performance declined from the second quarter onwards with all major events showing a fall in prior year volumes. The Moscow International Travel and Tourism exhibition which is held annually in March delivered sales of 16,300m2 (2014: 20,000m2) as the devaluing Ruble impacted Russian international tourism. The Group's largest event Mosbuild, which in common with other construction businesses in Russia was impacted by the economic conditions and local competition, saw volumes fall by 38% to 40,300m2 (2014: 65,400m2). The logistics event TransRussia saw volumes decline by 21% to 7,900m2 (2014: 10,000m2), whilst the security event, Moscow International Security & Protection performed a little better with volumes of 11,100m2 (2014: 11,700m2). The biennial Moscow International Oil and Gas Event returned in June and reflected the decline in oil prices delivering 18,500m2 (2013: 24,000m2). The key event for the Group in September is WorldFood Moscow which proved relatively resilient, growing its visitor numbers over the prior year and suffering only a 12% fall in volumes to 22,600m2, as supplier substitution offset a decline in the traditional European supplier base.

The Group operated 18 events from the St Petersburg office during the year, with overall volume sales of 23,400m2 (2014: 27,200m2). Performance was in line with Moscow with most shows showing a decline in volumes from the prior year with those events in industries reliant on capital expenditure, such as construction and mining most impacted. The exception was ExpoElectronica, the international radio-electronics event, which grew by 1% as it took market share.

In Novosibirsk, Siberia, ITE is the anchor tenant in the city's main venue. The international quality space it offers has provided a platform for good growth in the Group's business in this region in recent years. However, this trend reversed during 2014 as the region moved into a recessionary environment and this continued further in 2015. During the year the region held 36 events (2014: 34), with overall volume sales declining to 30,200m2 (2014: 41,500m2) with all sectors affected.

The Krasnodar region in southwest Russia is one of the most prosperous outside Moscow. The exhibition portfolio covers a broad range of sectors, the largest events being in the agriculture and construction sectors. The region fared better than others, buoyed by the relative resilience of its agricultural exhibitions. In total this office contributed volume sales of over 52,500m2 (2014: 60,000m2). Despite the decline in sales volumes this year, the Group's two largest events in Krasnodar continues to be restricted by the size of the venue.

The Group has now become the anchor tenant at a new 28,000m2 venue in the city, which opened ahead of schedule in November 2015, and in time to house ITE's agricultural event, YugAgro, which grew by nearly 20% over the prior edition. This new facility will allow ITE's largest events to grow and the business to expand into new industry sectors as the economy recovers.
 
Central Asia

ITE's principal offices in Central Asia are in Kazakhstan, Azerbaijan and Uzbekistan.

All of the economies in this region are heavily dependent on Oil and Gas for their overseas earnings and economic wealth and in the case of Kazakhstan a significant level of trade with Russia as well. The fall in the oil price and the Russian economic recession have had an increasingly significant impact on trading conditions within the region as the year progressed.

This year ITE organised a total of 79 events (2014: 79) across these territories delivering total volume sales of 83,000m2 (2014: 103,100m2) and revenues of £27.2 million (2014: £33.5 million). Overall, on a like-for-like basis volumes decreased by 9% over the previous year with revenues being impacted by the negative effects of foreign exchange movements, particularly in Azerbaijan which saw a 33% devaluation of the Manat in January 2015 and in Kazakhstan where the Tenge has devalued by over 60% in the last 18 months.

Kazakhstan is the Group's largest office in the region selling 45,200m2 (2014: 47,100m2). Trading in the first half of the year includes the largest event in the region, Kazakhstan Oil & Gas Exhibition (KIOGE), which took place in Almaty in October 2014 and was slightly smaller than the prior edition at 6,800m2 (2014: 8,000m2). Aside from this event the first half was relatively strong with good growth at a number of events, led by food and packaging. The second half of the year saw a more mixed performance as the effects of a falling oil price began to feed through to the trading results, with construction most impacted.

Volumes in Azerbaijan contracted for the first time since the financial recession of 2008/09, as a lesser biennial pattern, the oil price fall and the subsequent Manat devaluation impacted the business. This year the region achieved volume sales of 25,600m2 (2014: 42,000m2) a decrease of 22% on the prior year on a like-for-like basis. Although certain sectors such as Food, Logistics and Health performed ahead of the prior year the impact of a decrease in oil and telecoms dragged down the overall revenue performance, with like for like revenues down 18% on the prior year.

ITE's Uzbekistan business performed well in 2015 selling 11,500m2 (2014:13,100m2) in their weaker biennial year due to resilient local exhibitions and some new launches. Revenues increased by 1% on a like-for-like basis.
 
Eastern & Southern Europe

The Eastern and Southern Europe region is represented by the Group's offices in Turkey and Ukraine. Overall the region sold 147,000m2 in 2015 (2014: 174,300m2), reflecting the continued impact of the political crisis in Ukraine. On a like-for-like basis this represented a decrease of 9% in volumes.

Trading in Ukraine continues to be severely impacted by on-going geopolitical issues. ITE runs all of its Ukrainian events in Kiev, and its business there now represents 2% of Group profits for this financial year (3% in 2014). During the year it has continued to operate the majority of its events, albeit with fewer exhibitors, although visitor numbers have held up very well. Overall volume sales for the year were 26,500m2 (2014: 35,400m2) a 25% decrease in comparison to the prior year, with revenues lower by 48% as the Ukrainian Hryvnia devalued further during the year. Despite these significant falls in volumes the business remains profitable and has recently been active in launching new events. With a population of over 45 million people and the potential for economic recovery, ITE remains committed to operating its business in Ukraine and believes it offers attractive returns in the longer-term.
Overall total volumes in Turkey were 120,400m2 (2014: 138,900m2), reflecting good growth in the majority of events and the absence of the biennial Ankomak event. On a like-for-like basis volume sales were 4% lower than last year. During the year the region has focused on consolidating its operations under one roof and integrating Eurasia Rail, which held its first event under ITE ownership, selling circa 10,000m2 and performing in line with initial expectations. The travel event EMITT again performed well and ahead of the prior edition. Turkeybuild, the pre-eminent construction event in Turkey, took place in late April and delivered its largest ever event at 40,000m2 (2014: 36,300m2), taking advantage of recently completed additional venue space. In September the Group saw further strong growth at the WorldFood Istanbul and the successful launch of the Istanbul Water Exhibition.
 
Asia

The Group's operations in this region are based in India, China and South East Asia. These regions represent relatively new markets for ITE in which to grow our existing products and develop new sectors. These markets are characterised by faster growing economies, underpinned by a rapidly expanding aspirational middle class population which is expected to drive consumer demand. In addition, they have relatively immature exhibition industries for the size of their economies and these two factors combine to offer excellent growth opportunities for ITE over the medium-term. The Group's operations in this region are largely through a series of joint venture arrangements and the Group's income statement reflects only those revenues over which it has majority ownership, which totalled £3.9 million during this weaker biennial year (2014: £5.5 million). In comparison revenues generated by 100% of the joint venture and associate businesses totalled around £27 million during the year.

The Indian exhibition industry offers significant potential but is currently restricted by the lack of international quality venue space in the country. The Group operates two business in India: one through a small wholly-owned subsidiary, ITE India, and the other through ABEC, India's largest private exhibition organiser in which ITE increased its stake from 28.3% to 60% in October 2015. ABEC's portfolio of over 20 exhibitions across different industry sectors includes Acetech - India's leading construction event. Both businesses performed well this year, ITE India had its biennially quieter year but added some small new launches, whilst ABEC delivered record profits with a strong performance at the Acetech events.

In China the Group operates through its Hong Kong headquartered 50% joint venture partner Sinostar which runs the Chinacoat/Surface Finishing China event. The November 2014 event was a record size selling over 36,000m2, with further strong growth expected at the November 2015 event which will be reflected in next years' financial results. The Group is now expanding its portfolio of events in the coatings sector with launches in Kuala Lumpur (May '16), Thailand (March '17), and the addition of the complementary Fastener Expo acquired in November 2015 will further enhance the offering in this fast growing sector.

In South East Asia the Group operates through three organisations based in Malaysia and Indonesia. In Kuala Lumpur, Malaysia the Group now owns 100% of Tradelink (having acquired the minority's 25% stake in November 2015) which runs the Metaltech event, serving the machine tool technology and metal fabrication industries. The event, which sells over 12,000m2, takes place each May in Kuala Lumpur and performed ahead of the previous edition, although it is likely to remain at its present size until construction of a new venue is completed in two years' time. Also based in Kuala Lumpur is the Group's 50% joint venture, ECMI, a pan-ASEAN organiser operating in Malaysia, Indonesia, Vietnam and Myanmar, and traditionally operating in the professional beauty, life-sciences, and oil & gas sectors.

In Jakarta, Indonesia, the Group owns 50% of PT Debindo which runs the Indobuildtech series of construction exhibitions, the largest of which takes place annually in Jakarta and is over 14,000m2 in size. The Group has already begun to leverage its international sales expertise in this sector securing international participation at the 2015 event, and now has an opportunity to significantly increase this participation with the move of the event to the brand new International Convention and Exhibition Centre. This new venue of 50,000m2 will offer much needed expansion space in an international class facility.
 
RoW

The Group's RoW results in 2015 are focused on the UK fashion industry. In MODA the Group owns the leading midmarket fashion event for Womenswear, Menswear, Footwear and Lingerie which runs twice a year in Birmingham. In London the Group operates Bubble, a niche high-end Childrenswear event; Jacket Required, a designer-led menswear event; and Scoop, a designer-led Womenswear event. Overall the portfolio achieved volumes sales of 41,800 m2, a 2% decline on the prior year with continued growth in the London-based events, especially at Jacket Required and Scoop, partially offsetting declines at MODA which continues to see the effects of a changing market place for midmarket independent fashion retailers. The Group is now taking its expertise in the fashion sector outside the UK and is increasing its stake to a 51% controlling interest in "The Hub" a contemporary menswear event which is now located in Shanghai.

Lentewenc, based in Warsaw, in which the Group has a 40% stake, continued to build its business and now runs events in 4 sectors (Construction, Food, Healthcare and Transport), with food being the largest and fastest growing. In total Lentewenc sold 4,900m2 this year an increase of over 50% on the previous year.


> View full statement (PDF)

> View 2015 year end Preliminary Results Presentation (PDF) 

> View Financial Calendar 

 


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