ITE Group plc Preliminary statement for the six months ended 31 March 2009 Financial performance The Group has reported good results for the first six months of the year. Revenues of £43.2m are 33% higher than last year (2008: £32.6m), a 10% increase on a like-for-like basis*. Like-for-like revenue growth has benefited from the strength of the Euro against Sterling which offset a 19% decline in like-for-like volume sales from events held in the period. The total volume of metres sold in the period increased by 17% to 188,600m2 reflecting the contribution of newly acquired businesses, notably the Siberian Fairs portfolio and the Turkish travel event, EMITT.  The new acquisitions contributed an incremental £7.1m of revenue and £2.9m of headline pre-tax profit.   Gross margin is unchanged on last year at 42% and demonstrates the Group’s ability to manage its operational cost base in line with sales performance.  Finance income of £0.4m is less than last year (2008: £1.1m), reflecting lower interest rates earned on lower average cash balances. Finance costs of £1.4m this year (2008: £3.9m) include £1.2m of charges relating to derivative instruments not in a hedging relationship (2008: £3.5m), which were in place at 1 October 2008 and were fully closed out by 31 March 2009.   Headline pre-tax profit of £13.3m (2008: £4.7m) includes foreign exchange gains of £3.9m (2008: loss of £2.8m) and a contribution from new acquisitions of £2.9m.  Reported profit before tax increased from £3.9m to £11.1m for the first six months and fully diluted earnings per share has improved from 1.1p to 3.4p. The Group remains highly cash generative and generated £20.4m from operations during the period. Of this, £6.9m was applied to acquisitions, £8.8m was distributed as dividends and a further £3.8m of advances were made to the Employees’ Share Option Trust to finance the purchase of ITE shares.  The Group’s net cash balance at 31 March 2009 was £25.3m.   Overview Trading conditions in the Group’s principal markets have changed substantially over the period since 1 October 2008. October trading was relatively buoyant with bookings running in line with management expectations.  The impact of the global financial crisis began to affect Russia and the CIS from the beginning of November - although Kazakhstan had already experienced the onset of this in the final quarter’s trading of the last financial year.  From November to March the outflow of foreign capital from Russia contributed to the Ruble devaluation of 30% against the world’s major currencies, which together with the economic slowdown led to a liquidity crisis for many smaller Russian and CIS businesses.  The events held over this period benefited from varying levels of ‘pre-crisis ‘ bookings offset by the more difficult trading climate from November onwards. The impact of the economic crisis was greater in local markets and, as a result, the more international events have tended to perform better.  The Group has been active in managing its cost base throughout this period, reducing venue commitments in line with demand and staff remuneration in line with sales. * ‘Like-for-like’ figures exclude the effect of significant non-annual events, acquisitions and disposals. Despite the downturn, the events that have taken place have enjoyed similar or improved visitor attendance and ‘better than expected’ results for exhibitors.  This has supported some positive re-booking statistics for next year. The Group has continued to implement its strategy of strengthening its international sales presence to build on its position in its core markets.  The major addition to ITE’s product portfolio since 1 October 2008 has been the East Mediterranean International Travel and Tourism event (EMITT), which is held in Istanbul every year.  The exhibition was held in February and recorded its biggest ever event at 21,400m2.  ITE is now marketing EMITT through its various international sales offices and aims to attract a broader international participation in the event for 2010.  The Group continues to look for investments that will broaden its sector spread in its existing markets or offer an opportunity to take its existing sectors into new emerging and developing markets.  ITE’s strategy is to invest where suitable opportunities present themselves and to return surplus cash to shareholders via dividends and share buybacks.   In the current environment, there are likely to be more opportunities arising to make bolt-on investments and so the Group has no plans to make further share buybacks in the second half of the year.  Dividend The Board has approved an interim dividend of 1.6p per share (2008: 1.6p per share), reflecting a prudent view of the current economic situation. The Board remains committed to a progressive dividend policy over time.  Trading highlights and review of operations In the six months to 31 March 2009, ITE organised 91 events (2008: 67 events), including 26 acquired events.  Total square metres sold in the first half was 188,600m2, up from 161,100m2 in the first six months of 2008. The result stated before the effect of acquisitions is a like-for-like volume decline of 19%.  A summary of the Group’s sales and margins from its exhibitions business is set out below:   Square metres sold 000s Revenue £m Gross profit £m First half 2008 161.1 31.8 13.4   Acquisitions   57.8   7.2   3.6   Timing differences   (7.2)   -   (0.2)   Net organic change   (23.1)   3.5   1.0         First half 2009 188.6 42.5 17.8 The Group’s average yield for events held in the first six months was £225 per m2 (2008: £197 per m2) a net increase of 14% mostly reflecting the effect of the stronger Euro together with price increases offset by dilution from newly acquired events.   Russia In April 2008, the Group added a third Russian office with the acquisition of Siberian Fairs in Novosibirsk. This office is now fully integrated into the Group and held 23 events during the period, with space sales totalling 31,200m2 and contributing £3.9m of additional revenue. Most of the principal events of this business take place in the first half of the year. In Moscow, the events which took place in the autumn season were relatively untroubled by the changed trading environment and the Group reported good results from its Ingredients Russia and Pharmtech events. The Moscow International Travel & Tourism event took place in March and, despite the economic backdrop, reported space sales of 20,200m2 – a minor reduction in size from last year’s event, which was 20,800m2. The strong performance of this event reflects its clear market leadership in this sector and its high proportion of international exhibitors. St Petersburg’s calendar is weighted to the second half of the year and its largest event in the first six months was the newly acquired St Petersburg security event, SFITEX. This took place in October and performed strongly in its first year under the Group’s management, improving space sales to 4,400m2 from circa 3,000m2. Central Asia & the Caucasus The Central Asia & Caucasus market has seen mixed performances, as the global slowdown has impacted different territories at different times. Azerbaijan and Uzbekistan have only recently begun to feel the effects of the slowdown and traded broadly in line with prior year.  Kazakhstan, which was affected in the last quarter of the 2008 financial year, has reported a 19% drop in like-for-like space sales for events taking place in the first half of the year. The Kazakhstan Oil & Gas event reported an 8% decline in metres sold to 10,300m2. However reported revenues from both the exhibition and the conference were improved over last year, reflecting price increases and a weaker Sterling.  The construction sector continues to reflect the worst effects of the economic crisis and KazBuild Spring experienced more than a 50% reduction in space sales from 5,600m2 last year to this year’s 2,400m2. Costs have been well controlled, helped by the long-term venue relationship, which allows late reductions in space commitments. Resulting gross margins for this event were comparable with those achieved last year. In Azerbaijan, the largest event, BakuBuild, took place in October before the economic slowdown and recorded a 46% increase in space sales over the prior year.  This event is space constrained in its existing venue and relies on outside space for some of its sales. Construction of the new venue in Baku is continuing and ITE plans to re-locate its main events there when it is completed.   Southern & Eastern Europe The market in Ukraine has been the most severely affected region for ITE during the economic slowdown. Nonetheless, the office reported a strong first quarter, notably influenced by the Healthcare event, which took place in October and reported sales volume growth of 11%. The second quarter was marked by a severe downturn in the local economic environment and overall, on a like-for-like basis, volume sales fell by 40% over the first half of the financial year.  The most difficult market sectors were agriculture and construction, which impacted the sales for the AgriHort event and the building and construction event, KievBuild.  ITE’s travel event in Kyiv, UITT, was also affected by the difficult trading environment and reported sales of 5,100m2 (2008: 7,100m2). However, the Group has managed its cost base well with venue commitments controlled tightly to avoid paying for unused space and, combined with the improved yield, the overall profit for Ukraine was broadly comparable to last year’s result. In Turkey, the recently acquired travel event, EMITT, was held for the first time in February and was the largest staged in its history at 21,400m2.  The event is the leading travel event in Turkey and ITE expects to consolidate its position by increasing the sales to internationals through its network of offices and agents.  The ITF business, owned 50% by ITE, reported an increase in its profits to £0.6m for the first half of 2009, benefiting this year from the biennial Autoshow event.   UK and Rest of the World The MODA fashion and footwear business continues to trade in difficult market conditions.  The spring event reported sales of 14,900m2, a reduction of 13% in space sales from the prior year. Despite the economic backdrop the event was favourably received by exhibitors and visitors alike.  The acquisition of Bubble, the childrenswear event, takes the MODA business into a new sector with future growth potential and the first event under MODA’s ownership was a notable success. Outlook April is the most important month in the Group’s financial calendar with four of the Group’s top ten contributing events taking place.  All of the major April events benefited to differing degrees from ‘pre-crisis’ bookings as well as experiencing the more difficult trading environment prevalent from November to April.  MosBuild, which was affected more in its local than in its international sales, was 74,900m2 (2008: 87,200m2). Other shows taking place in April reported a broadly similar trend  - the Moscow International Protection & Security event sold 6,300m2 (2008: 7,600m2), TransRussia finished with space sales of 7,300m2 (2008: 8,200m2) and Expoelectronica sold 5,500m2 (2008: 9,000m2). Interstroyexpo, the newly acquired spring construction event took place in St Petersburg and staged a very successful event of 9,500m2. Consistent with this trend, volume bookings for the remainder of the 2009 events are lagging behind the comparative sales position of this time a year ago. The financial effect of this will be partially mitigated by the relative strength of the Euro against Sterling, the Group’s flexible cost structure and the ongoing focus on cost management. At 14 May 2009, ITE had booked revenue of £103.3m (2008: £93.4m) for this financial year, of which £10.6m relates to acquisitions not represented in last year’s figures.  On a like-for-like basis, volume sales for the full financial year are currently circa 20% below last year’s sales contracted at the same time.  The trading environment in our core markets appears to have stabilised in recent weeks and ITE has, at the end of April, completed events representing over 70% of the Group’s expected revenue for the full year.  Looking beyond the effects of the current global downturn, ITE’s markets have significant long-term growth potential. Events remain the primary route to market for our exhibitors and ITE has a strong portfolio of leading events which position it well to benefit from a recovery. The Board remains confident that ITE is managing the effects of the current economic crisis effectively and will emerge a stronger business. By order of the Board Chief Executive Officer Russell Taylor 15 May 2009     Disclaimer The interim management report has been prepared solely to provide additional information to shareholders as a body to assess the Company’s strategies and the potential for those strategies to succeed. The interim management report should not be relied on by any other party or for any other purpose. The interim management report includes forward-looking statements made by the directors in good faith based on the information available to us up to the time of approving the interim report. These statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.