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ITE Group PLC (ITE)

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Tuesday 30 November, 2010

ITE Group PLC

Final Results

RNS Number : 0161X
ITE Group PLC
30 November 2010
 



30 November 2010

 

 

ITE GROUP PLC

PRELIMINARY RESULTS ANNOUNCEMENT

 

Financial highlights

 


Year to

30 September

2010

Year to

30 September

2009

Revenue

£113.5m

£116.7m

Profit before tax

£31.3m

£41.5m

Diluted earnings per share

9.8p

12.7p

 

Headline pre-tax profit*

£36.6m

£45.8m

Headline diluted earnings per share**

11.6p

14.2p

 

Dividend per share

5.7p

5.5p

Net cash

£23.0m

£23.1m

 

·      Good financial performance in the Group's lesser biennial year

·      Recovery is now underway in all of the Group's core markets

·      £20m+ invested in development of the business in Ukraine, Turkey and India

·      Strong cash generation from operations: £50m

·      Net cash of £23.0m at year-end to support further expansion

·      Increase in dividend to 5.7p (2009: 5.5p)

·      £74m of revenues booked for 2011: 10%+ ahead of last year on a like-for-like basis

Russell Taylor, CEO of ITE Group plc, commented:

 

"ITE has reported a good financial performance in its lesser biennial year. We have continued to invest by acquiring complementary businesses and further strengthening our market leading events and brands. The benefits of this strategy are coming through as expected.

 

"Having stabilised earlier in the year, market conditions have now improved in all of our markets and this is reflected in both the encouraging fourth quarter performance and the first quarter outlook. While the outlook for the global economy remains uncertain, the actions taken during the last 18 months have strengthened the Group and ITE is well positioned to benefit from growth in its core markets and to capitalise on opportunities in other emerging markets."

 

* Headline pre-tax profit is defined as profit before tax, amortisation of acquired intangibles and impairment of goodwill, profits or losses arising on disposal of group undertakings, revaluation of financial liabilities in relation to minority put options and direct costs on completed and pending acquisitions and disposals - see note 3 for details,

**Headline diluted earnings per share is calculated using profit for the financial year attributable to equity holders of the parent before amortisation of acquired intangibles and impairment of goodwill, profits or losses arising on disposal of group undertakings, revaluation of financial liabilities in relation to minority put options and direct costs on completed and pending acquisitions and disposals - see note 9 for details.

 

Enquiries:

 

Russell Taylor, Chief Executive

Neil Jones, Group Finance Director

 

ITE Group plc

020 7596 5000

Charles Palmer/James Macey-White/Emma Appleton

Financial Dynamics

020 7831 3113

 

Chairman's Review

Group Performance

The Group has delivered a good financial performance in its lesser biennial year that also reflected the effects of the recession although latterly included the beginnings of a recovery. The Group's revenues for the year were £113.5 million (2009: £116.7 million) and headline pre-tax profits were £36.6million (2009: £45.8 million). Reported pre tax profits were £31.3 million (2009: £41.5 million) and fully diluted earnings per share were 9.8p (2009: 12.7p).

 

The balance sheet is strong and the Group finished the year with net cash balances of £23.0million (2009: £23.1million) after making investments in new businesses of over £20m over the last twelve months.

 

Development of ITE's Business

The Group has continued to work on expanding the geographic profile of its business. In November 2009, ITE made initial steps to establish an exhibition business in India through the purchase of a small exhibition organiser. We now have a local office infrastructure in India through our operational centre in Delhi. We have also expanded our presence in Turkey by acquiring a significant portfolio of events from our former 50% owned associate business. In April, the Group acquired three 'Aquatherm' events in Ukraine, Kazakhstan and Azerbaijan which supplement the existing Moscow event of the same brand. These investments are all in line with the Board's strategy of developing international brand strength and expanding its emerging market presence.

 

Board and Management

There have been no changes to the Board this year. The Group have decided to adopt early the new provisions on annual re-election of Directors as recommended by the recently issued 2010 UK Corporate Governance Code, as such all Directors will offer themselves for re-election at the Company's 2011 AGM.

 

The Board and executive management have worked to build a stronger management team and to facilitate the development of talent within our business. This investment is necessary to enable the Group to fulfil its strategy for business expansion. ITE is full of committed individuals, many of whom have demonstrated their loyalty and expertise over a number of years and I would like to thank the 822 staff of ITE throughout the world who have worked so hard for the Group in a year where the economic environment has been challenging.

 

Dividend

The Board has maintained its progressive dividend policy through the recession and is recommending a final dividend of 4.0p per share, which together with the interim dividend of 1.7p per share makes a full year dividend of 5.7p per share (2009: 5.5p). The Board aims to maintain dividend cover of two times over the biennial cycle, and this dividend therefore reflects both the Group's strong cash position and the Board's confidence in the Group's future.

 

Outlook

The Group's markets have all been impacted by the recession over the last two years. Moscow, which is our most significant market, has seen improving trading conditions and next year's results should reflect the financial effect of this strengthening recovery. Our other CIS markets are lagging Moscow's recovery, but are now showing signs of recovery. In our other markets, Turkey, India and the UK, trading conditions are either stable or improving. This positive outlook must be tempered by the risk that the global economy remains uncertain and could cause this recovery to stall.

 

At 26 November forward bookings for 2011 were £74million which, on a 'like-for-like basis', represents growth of more than 10% over last year's bookings at the same time ,and is in line with the Board's expectations.

 

The Group has a strong balance sheet and excellent market positions in places with good growth opportunities and is well positioned to expand both organically and through acquisitions. The Board remains confident of the future prospects for the Group's business.



CEO's Statement

 

The Group has delivered a robust financial performance in a year that saw sentiment in our markets move from recession to recovery. Most of the events that took place reflect the effects of the recession, with only those taking place in the final quarter of the year reporting significant improvement over last year's equivalent events. The effects of last year's recession are evidenced by the expected 11% reduction in 'like-for-like' volume sales.  Average exchange rates of the Euro, our principal invoicing currency, were 5% stronger against Sterling over the year and this helped to mitigate the effect of the sales shortfall on reported revenues.

 

Actual revenues for the year were £113.5 million (2009: £116.7 million), which in 'like-for-like' terms is a reduction of circa 6%. The biennial pattern of the Moscow International Oil & Gas event (which did not take place this year) together with the impact of the recession accounted for a £10 million reduction from last year's revenues. Revenues from newly acquired businesses in the year were circa £8.0 million. Approximately half of this came from new shows in Turkey (previously owned by our former associate company) and comprise relatively low priced large events. The addition of our new Indian exhibition business and a portfolio of 'Aquatherm' events in Ukraine and Central Asia account for the balance of new acquisition revenue.

 

The Group's gross margin has fallen to 49% from last year's high of 52%. This partially reflects ITE's biennial pattern, but is also a consequence of the new low yielding Turkish events in the portfolio which contributed £3.8million of revenue, but at markedly lower yields than the Group's average yield. Administrative expenses (before amortisation) have risen by 11% to £19.9 million, the majority of this increase relates to transaction costs and overhead increase associated with new acquisitions. Excluding these acquisition related costs, administrative expenses before amortisation have increased by circa 6%.

 

Operating profits before amortisation and transaction costs were £36.6million, which represents a net operating margin of 32%.

 

Trading Summary 2010

As last year, the principal factor affecting the performance of individual events was where and when they took place in the year. The Russian economy began to show positive signs in Moscow shortly after the beginning of the calendar year and has gathered momentum since then. In Central Asia the signs of recovery lag Moscow by six months and Ukraine, which suffered the worst of the recessions, has yet to start a recovery. In Turkey, Azerbaijan and Uzbekistan the effects of the global recession were moderate compared to the impact on Russia, Central Asia and Ukraine.

 

Events taking place in the first quarter of this financial year reflected the full impact of the recession and were set against comparative performances from October to December 2008 which enjoyed 'top of the market' conditions for our business. Events taking place from January to April enjoyed a mix of influences as their booking periods included periods of recession and also the beginnings of a recovery, and for events taking place after May the pattern was increasingly one of the recovering economy. By September 2010 the events had almost all of their bookings cycle made in an improving economic background.

 

Sectors have also responded differently to the recession. Construction, represented by the Build brand remains our largest sector accounting for 39% of the Group's revenue and has over the last two years been the most severely affected of ITE's sectors. Since 2008 the sector has fallen in size by 26%. Mosbuild, the dominant Moscow construction exhibition, took place in April but was 16% smaller than the equivalent event in 2009, which itself had been 14% down on the 2008 peak result. Likewise Interstroyexpo, the international construction event in St Petersburg, is now running at about half of its 2008 size, and Balticbuild (St Petersburg) and Kazbuild (Kazakhstan) are reduced to circa 30% of their former peak sizes. Oil & Gas, represented by the 'IOGE' brand is ITE's second biggest sector accounting for circa 12% of revenue and replicated at seven events across our territories. These events are beginning to recover with the recovering oil price. The portfolio was 24% smaller in 2010 than its equivalent peak in 2008. ITE's travel exhibition brand accounts for circa 12% of Group revenue and is dominated by the Moscow, Turkish and Ukrainian events, all taking place in the spring season. A substantial proportion of their customer base comes from government and regional authorities.

 

The 2010 events performed exceptionally well and collectively were only 13% lower than the 2008 peak events. However, looking forward there is now more pressure on many government budgets, particularly in the Southern Mediterranean and Western European holiday destinations and the trading environment for this sector next year is more challenging. 'World Food' is ITE's major food brand and accounts for 10% of Group revenues. Despite a positive result from World Food Moscow in September 2010, the 'World Food' portfolio is still more than 20% smaller than the comparative 2008 portfolio.

 

The revenues and profits of the Group's business for this financial year are comparable to the results from the last pre-recession year, 2008. However in the interceding two years the Group has absorbed a 29% 'like for like' fall in sales volumes from its core portfolio, and replaced the profits and revenues through a combination of new business acquisitions, favourable currency movements and cost reductions. Accordingly as the Group enters 2011, the underlying base of the exhibition business is stronger than in 2008 and there is scope for a cyclical recovery towards previous activity levels, if economic circumstances continue to improve in the next few years.

 

  

ITE's Strategy

ITE's primary business objectives are to:

·      Create sustainable growth in headline earnings per share; and

·      Create and maintain sustainable positions of market leadership in the exhibition business in emerging markets.

ITE's strategic priorities for achieving these objectives are:

(i)            to continue to strengthen and build on its existing market leadership

(ii)           to expand its business model into other sectors and/ or geographies where there is the potential to create strong market positions.

(iii)          to grow and improve its portfolio of international exhibition brands

(iv)          to invest in the development of management talent in ITE.

 

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

 

(i)            To continue to strengthen and build on its existing market leadership:

ITE's existing positions of market leadership are based upon the strength of its international sales network, its market leading brands, established local offices and longstanding relationships with venues.

 

International sales reach 

ITE's International sales reach differentiates it from its local competition in Russian and CIS markets. Through its subsidiary sales offices the Group has built a specialist skill base in promoting sales into ITE's Russian and CIS exhibitions. In 2010 'international sales' accounted for 35% of total metres sold in the year; through its London office 20%; its German office 5%; its Chinese office 3% and its Turkish office 3%. International sales, having performed well in 2009, reflected the recessionary slowdown this year.

 

ITE's market leading brands

 

ITE has established strong brand identity in certain sectors of exhibitions. In particular the Build brand in construction, the Oil & Gas events brand, the ITE Travel exhibition and World Food brands all have strong reputations and identities with customers, earned through more than fifteen years of sustained good performance. The Group is working to establish more recognized brands. ITE now runs Aquatherm events, under licence, in four of its markets and its security portfolio is being expanded and will be represented in three markets next year.

 

Building local presence

 

ITE's brands have built their reputation through sustained delivery of successful exhibitions to customers. The foundation of this are ITE's local offices, which like its exhibitions and brands, have been in place for over 15 years and today employ over 650 people (outside of the UK) who manage local market sales and the details of staging an exhibition. Critically they own and manage the databases of visitors necessary for making an exhibition successful for our customers. ITE's local office skills in Russia and CIS are a differentiating factor from other international organisers and a barrier to entry for new organisers wishing to run events in these markets.   

Maintaining venue relationships

 

ITE has established special relationships with the venues that host its exhibitions. Historically ITE has supported the development of venue facilities which in turn has helped the Group's exhibitions to grow. Through this ITE has established the rights to run its main exhibition themes in its chosen venues at the time of its choice. ITE has continued to work on maintaining its strong relationships over the year and has successfully extended its forward venue bookings for key events. In Turkey the Group has secured the position of its new events with a three year prepayment arrangement.

 

(ii)           To expand the business model into other sectors and geographies where there is the potential to create strong market positions.

 

In existing markets the strategy targets new sectors and regions where businesses can be acquired or developed and 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.

In November 2009 ITE acquired a small business in Delhi, India, running exhibitions that serve the paper industry and the mining, metals and metallurgy industries. India does not yet have a mature exhibition industry and definitive international exhibitions have not yet been established. ITE has entered the Indian market with an aim to establish its brands and give it the best chance of winning a leading market position as the exhibition industry develops. In February 2010 ITE acquired 100% ownership of exhibitions in Turkey which serve the food, engineering, furniture and promotional gift industries. These are all new sectors for ITE in Turkey. There is a real opportunity to bring the Food show into the 'World Food' brand and to leverage relationships with international exhibitors.

 

(iii)          To grow and improve its portfolio of international brands.

The Group has always had a presence in the heating and ventilation markets through its own 'Heat-Vent' brand. Acquiring three shows with the rights to use the Aquatherm brand in three more of its territories in addition to the Moscow event gives ITE the support of a strong well recognized international brand in this sector. The existing construction events taking place in Kazakhstan and Azerbaijan have already benefitted from this association. The Group's management has been actively developing initiatives to improve the strength of its existing brands.

 

(iv)          To invest in the development of management talent in ITE.

ITE has benefitted over the years from the commitment, loyalty and expertise of its employees. The exhibition industry is not an established profession and so training and development is mostly 'on the job' and the responsibility of local offices. As ITE grows it is important to maintain its culture and the Group has now started a process of identifying, training and developing selected individuals to ensure continuity of quality management is generated internally in the future.

 

Key Performance Indicators

 

The key performance indicators that ITE uses to measure progress against its objectives and the performance this year are set out below:

 

To increase revenues from existing exhibition portfolio

Sterling revenues from existing ('like-for-like') products have fallen by 6% in the year under review. This reflects the severity of the recession in our markets, which continued to have an effect on our business through the first three quarters of the year.

To increase the annually recurring volume base of our exhibition business.

The annually recurring volume base of the exhibition business increased by 9% in 2010 from 406,000 square metres to 442,000 square metres. The net increase in volume sales is comprised of a 52,000 m2 fall in portfolio sales offset by an incremental 88,000m2 from new additions to the portfolio in the year. The bulk (73,000m2) of this new volume is from low yielding events in Turkey. Cumulatively over the last two financial years ITE's volumes have fallen by 165,000m2, representing a 29% 'like-for-like reduction', mitigated by the addition of 156,000m2 from acquisitions.

To make incremental bolt on acquisitions in support of our objectives

The Group acquired a small exhibition business in India in November 2009 which gives ITE access to a market with substantial growth potential.

In April the Moscow business acquired two exhibitions to supplement its existing portfolio. 'Citybuild' and 'Meat and Diary' will make their initial contribution in the next financial year.

In April ITE completed the acquisition of three 'Aquatherm' events in Ukraine, Kazakhstan and Azerbaijan. These events supplement our Moscow joint venture of the same brand, and give ITE a strong position from which the Group can build more events in this sector.

Secure forward venue rights for significant exhibitions

Of ITE's top ten exhibitions and conferences eight have secured rights for three years, one for two years and one for one year. The Group's management is engaged in an ongoing process of agreeing venue terms to ensure this objective is met.  These ten exhibitions represent 55% of revenues.

 

Through its international sales expertise, strong brands, local office strength and venue relationships ITE has earned a unique position in Russia and the CIS market place. To run successful international exhibitions, an organiser must have both local presence and international sales strength. ITE's established position in its main sectors in its core markets, its brands and its venue relationships make it hard for new entrants to successfully compete with ITE's events in these markets.  Two of these assets - the brands and the international sales skills are portable and will help ITE to establish itself in new emerging and growth markets.

 

Russell Taylor

Chief Executive Officer

29 November 2010

 

 

Operating performance and Divisional Summary

 

In 2010 the Group ran 167 events (2009: 179). There were a number of cancellations in the year reflecting tough economic circumstances, with acquisitions and new launches compensating for some of these events in the overall total. A detailed analysis of revenues and gross profits from the exhibition and conference activity is set out below:



Sqm sold (000)

Revenue  

£'m

Gross Profit £'m

Yield per Sqm







2009

All events

Non-annual

423

(17)

116

(7)

60

(5)


2009

Annually recurring

Acquisitions

Net reduction

406

88

(52)

109

8

(8)

55

3

(4)

£268

2010

Annually recurring

Non-annual

442

49

109

3

54

1

£247

2010

All events

491

112

55


 

 

The average yield on our portfolio of annually recurring events is now £247 (2009: £268). The change in yield is attributable to product mix in the portfolio with newly acquired events having an average yield of £93 per sqm - principally attributable to the new Turkish events. 

 

Russia

 

In Russia ITE operates through three offices, Moscow, St. Petersburg and Novosibirsk. During the year the Group ran 71 events in Russia, with total volume sales of 205,300m2 (2009: 257,000m2). Actual revenues of £66.1 million were 18% less than last year though 2010 does not include the biennial Moscow International Oil & Gas event. On a like-for-like basis, volume sales were down 14% and revenues 7%.

 

The Russian economy has returned to growth and is expected to expand by around 4%* in 2010, with a similar level of growth expected in 2011*. In general, macro-economic indicators look more favourable for Russia than a year ago, with the price of oil, Russia's key export, holding consistently above $70 a barrel, a stronger Ruble and inflation and interest rates at relatively low levels.  Although the Russian government is now running an annual budget deficit for the first time in a number of years, this is at relatively low and sustainable level of circa 3% pa, with plans for this to be eliminated over the next five years.

 

Across all of our Russian offices the story of 2010 has been one of improving performance quarter by quarter as the effects of a return to growth have started to feed into the Group's sales. The return to growth has also been marked by a difference in the speed of return of local and international exhibitors and by time lags in the recovery between Moscow and the Group's various regional offices. In broad terms, local exhibitors have returned to the market quicker than international exhibitors, which reverses the Group's experience in 2009 when local exhibitors were the first to react to the recession and reduce expenditure.

 

Moscow is Russia's principal international exhibition centre and experienced an increase in local demand from early 2010 (the Group's second quarter), with international exhibitors returning in the fourth quarter events. In general terms, St. Petersburg and Novosibirsk have lagged Moscow by around six months, having seen a return of local exhibitors from the end of the third quarter.

 

In Moscow, where six of the Group's top ten events are held, the autumn events, which were largely untroubled in 2008, all recorded sizeable declines this year as the full impact of the recession was reflected in their results. Second quarter events performed reasonably well with strong growth at the Moscow Aquatherm exhibition (a joint-venture with Reed exhibitions), where the Group is responsible for making local sales and for staging the event. The Moscow international Travel and Tourism event was held in March and despite the economic difficulties of a number of its exhibitors from Southern Europe achieved sales of 19,500m2, a decline of only 3%.

 

This was a resilient performance for an internationally dominated event and owes much to the strong rebound in Russian outbound tourism, which grew by over 40% in the first quarter of 2010. The third quarter holds the largest event in the Group's portfolio including the Moscow construction event Mosbuild, which is held in the first week of April. This year's event sold 62,700m2, a reduction of 16% on last year, reflecting the high level of international participation and a moribund Moscow construction market. The other leading events in Moscow to take place during April have a larger local exhibitor base and fared much better. TransRussia, the transport and logistics exhibition sold 7,500m2, an increase of 3% on the last year (2009: 7,300m2) and the Moscow International Protection and Security exhibition sold 6,600m2, an increase of 3% on last year (2009: 6,400m2).

 

ExpoElectronica, the electrical components exhibition, sold 5,100m2, a decrease of 7% on last year (2009: 5,500m2). The final quarter of the Group's financial year, saw a strong return to growth. Exhibitions held in this period last year fully reflected the effects of the recession, and this year they benefited from a strong return of local exhibitors along with the beginnings of the return of international exhibitors. Worldfood Moscow, the leading International food and drink exhibition, was a significant beneficiary selling 21,000m2, which was 29% more than last year (2009: 16,300m2), and demonstrated the value of not only a leading international position, but also the Group's ability to maintain the strength of its products through the downturn.

 

Trading in St Petersburg, where the trading pattern lagged Moscow by around six months, was difficult this year. The dominance of construction in the St Petersburg portfolio added to the difficulty with the leading construction event, Interstroyexpo, selling 6,400m2 a decline of 37% on last year (2009: 10,100m2). There were signs of a small improvement in the fourth quarter and latterly indications of improved bookings for 2011.

 

Sibfair, the Group's Novosibirsk operation held 37 exhibitions during the year and delivered volume sales of 36,000m2 (2009: 40,500m2). This performance reflected the more general spread of events across sectors and a lesser reliance on international exhibitors.

 

The Group continues to enjoy good relationships with all of its principal venues in Russia. In Moscow there is currently more than sufficient international quality exhibition space for the current level of business activity. St Petersburg's business will benefit from the expected new and larger exhibition and conference facility due to be built by 2013. Novosibirsk's business is currently constrained by the quality and size of the existing facility, which is a converted warehouse. There is however a relatively advanced plan for a new quality exhibition venue and construction has begun. The planned facility is expected to be completed by the end of 2012. ITE is currently involved in a dialogue with the new venue owners to transfer its portfolio and agree terms for the future. 

 

* IMF world statistics book - Oct 2010

 

Central Asia & Caucasus

 

ITE's principal offices in Central Asia are in Kazakhstan, Azerbaijan and Uzbekistan. This year ITE organized a total of 59 events across these territories delivering total volume sales of 60,200m2, which was 1% less than last year. Revenues of £19.6 million represented an increase of 3% over last year.

 

All of the economies within this region are dependent on oil for their overseas earnings and economic well-being and the return to a more stable oil price above $70 a barrel for the majority of 2010 has helped to stabilize the economies. In Azerbaijan and Uzbekistan, which had little exposure to the international banking crisis in 2009, the economies continued to grow well during 2010.

 

Kazakhstan

 

Kazakhstan, which has been exposed to the economic recession since its own property crash of mid 2008, only began to slowly emerge into growth during the early part of 2010. The late cycle nature of the exhibition industry means that this growth is only now beginning to filter through to increased space sales. The relatively flat nature of economic activity during the year meant that 2010 was stable overall in volume sales terms in comparison to 2009, with volume sales of 35,000m2 being only 2% less than last year and revenues at the same level. The region did however show a similar pattern of improvement in performance during the year, with exhibitions taking place in the second half of the year performing more strongly in comparison to the prior year.

 

The region has two principal sectors of operation, Oil and Gas and Construction. The region's largest Oil and Gas event, the Kazakhstan International Oil & Gas Exhibition which took place in the first quarter of the year achieved sales of 7,900m2, 23% less than in the prior year, reflecting difficult trading conditions. The construction sector has begun to show signs of recovery, with the leading construction event Kazbuild, which takes place in September, showing good growth albeit at a much lower level of activity than in its peak years of 2007 and 2008.

 

ITE continues to work closely with Atakent, the principal venue in Almaty, to develop existing venue facilities. At present Atakent offers the Group sufficient space in which to operate its events.

 

Azerbaijan

 

Azerbaijan was relatively unaffected by the economic recession in 2009 and this year the region achieved volume sales of 14,600m2, a similar level to last year. The highlight of the year was the opening of a new 28,000m2 venue located close to Baku international airport. ITE has agreed terms to run its exhibition portfolio there and is established as the anchor tenant. With state of the art facilities this new venue offers the Group an opportunity to grow previously space constrained events, notably the Caspian Oil & Gas Exhibition and the construction event, Bakubuild, as well as launching new events.

 

Uzbekistan

 

ITE's Uzbekistan business showed strong growth in 2010, led by the Oil and Gas event which delivered a strong performance and is now producing revenues in excess of £1million a year. Overall the region sold 10,200m2 in the year an improvement on last year of 3% on an actual basis and 22% on a like for like basis.

 

 

Eastern & Southern Europe

 

The Eastern and Southern European region is represented by the Group's offices in Turkey and Ukraine. Overall the region sold 178,600m2 in 2010 (2009: 73,700m2) which on a like-for-like basis (excluding acquisitions and biennial events) was a decline of 21% in volumes, with a corresponding decrease in revenues. These two offices performed very differently in 2010. Ukraine, continued to feel the effects of political and economic instability well into the year, with little appetite from both local and international customers to increase their participation in exhibitions this year. Turkey, which was relatively unaffected by the economic recession in 2009, performed strongly, grew its overall sales on a 'like-for-like' for basis and added six new  exhibitions from the successful 'split' of the Group's former associate ITF.

 

 

Ukraine

 

In 2009 the Ukrainian economy suffered a 15% reduction in GDP, with only a modest recovery in 2010 and consequently this market was the most severely affected of all ITE's territories during the last financial year. The majority of the Group's Ukrainian business takes place in the first half of the year and this period experienced the full effects of the economic downturn; volume sales fell by nearly 50% in comparison to the relatively strong trading in the same period in the prior year.

 

However, Ukraine remains an attractive market for ITE. The country has a population of over 45 million, its GDP is forecast to grow by 4% to 5% in the near future and it has significant natural resources, notably iron ore and coal. A restructured financial base, following a support package agreement with the IMF, should provide the foundation for good recovery in the general trading environment and this is expected to positively impact the trade exhibition market during 2011 and beyond. This potential led the Group to acquire the market leading Kyiv Aquatherm event (serving the Heating, Ventilation and Air-Conditioning industries) in April 2010. The first event under the Group's ownership was held in May 2010, achieving 14,200m2 and becoming one of the Group's top 10 events by contribution.

 

Turkey

 

The Turkish economy is growing strongly and this is reflected in an expanding exhibition market and in the expansion of both the main venues in Istanbul, who between them are building new additional exhibition space of 50,000m2. When complete, the city will have nearly 200,000m2 of international quality venue space.

  

In December 2009, the Group successfully acquired half the exhibition business of ITF, the Group's former associate company, giving ITE control of six exhibitions in a variety of sectors, including engineering, furniture and food. Full ownership presents ITE with the opportunity to influence better and improve development of these events, particularly their international participation. The newly acquired events together with the biennial construction machinery event, Ankomak realised volume sales this year of 118,100m2. On a like for like basis the growth in the underlying Turkish portfolio was 1%.

 

 

UK and Western Europe

 

Despite the UK's sluggish economic performance over the past year, the Group's UK Fashion business has performed strongly. The business contains MODA the leading mid-market fashion event for Womenswear, Menswear and Footwear, and Bubble a niche high-end Childrenswear event which runs twice a year in London. Overall these events grew revenues and space by 19%, helped by the successful launch of MODA Lingerie alongside the existing events in February and August. This new sector, which was well received by exhibitors and visitors alike, added over 4,000m2 during the year and reinforces the market leading position of ITE's fashion brand among mid-market independent fashion retailers.

 

Rest of the World

 

In India our newly acquired subsidiary made an excellent start with a successful edition of its leading event Paperex (December 2009 - 7,300m2), a biennial event which serves the domestic paper mill industry, and Lighting South Asia in September 2010.  The Group's Indian presence is still small, but India offers an opportunity for significant organic growth as its exhibition industry is currently sub-size for its economy. The Indian economy is projected to show strong growth in the coming years. Presently growth of the exhibition industry is constrained by the lack of suitable large international venue facilities. ITE is focused on the development of its portfolio of events to mirror its existing sector strength in readiness for potential venue expansion. New launches are planned in the Construction, Food and Oil and Gas sectors.

 

Elsewhere, ITE successfully managed the 16th Liquefied Natural Gas Congress in Oran, Algeria, despite the significant obstacles posed by the Icelandic volcanic ash cloud which prevented a number of speakers and delegates attending. The event builds on our strength of running events for third parties in the Oil and Gas sector and the Group is actively pursuing similar opportunities.

 


Finance

 

Revenue and gross profit

Revenue for the year was £113.5 million (2009: £116.7 million) and gross profits for the year were £55.3million (2009 £60.3million).

 

Administrative expenses across the Group increased to £25.8 million from £18.3 million in the previous year. Administrative expenses include significant non-cash items, including an amortisation charge of £5.8 million (2009: £4.3 million) reflecting the impact of the acquisitions made during the year together and a full-year's charge for acquisitions made during 2009, a charge for share-based payments of £1.4 million (2009: £1.1 million) and foreign exchange losses of £0.1 million (2009: gain of £3.9 million) arising on the translation of foreign currency denominated assets held by overseas group companies. Excluding these non-cash items, administrative expenses increased by £2.0 million to £19.9 million (2009: £17.9 million), with £0.4 million being attributable to acquisitions made during the year and £0.9 million to transaction costs relating to completed and pending acquisitions. The charging of transaction costs on  acquisitions to the profit and loss account results from a change in accounting rules with effect from the beginning of this financial year. Overall, Group administrative expenses excluding non-cash items represented 16% of revenue (2009: 15%).

 

Operating profit was £29.9 million against a prior year profit of £42.9 million, resulting in net operating margins of 26% (2009: 37%) for the year. This result is distorted by significant differences in amortization, foreign exchange gains and losses and transaction costs on acquisitions. After adjusting for these items, operating profit for this year is £36.8 million (2009: £43.3 million), yielding an operating margin of 32%.

 

Other operating income     £0.3million (2009: £0.3million)

Other operating income represents rental income earned from subletting surplus office space, principally at ITE's London offices.

 

Investment revenue            £1.1million (2009: £0.6million)

Investment income came from three primary sources during year. Income derived from interest on bank deposits, gains on derivative financial instruments and gains on the revaluation of put options. Interest on bank deposits decreased during the year to £0.3 million (2009: £0.6 million) as the Group held lower average cash balances throughout the year of £20.7 million (2009: £23.1 million) and the Group was exposed to a full year of worldwide interest rates at historically low levels. Gains on derivative financial instruments of £0.2 million (2009:£nil) are derived from forward contracts the Group uses to hedge a portion of its UK based international sales and gains on put options of £0.5 million (2009 :£0.0 million) represent the difference between the original anticipated cost of put options and the actual realised cost upon exercise.

 

Finance costs                         £0.6million (2009: £2.1million)

Finance costs of £0.6 million (2009: £2.1 million) represent the interest cost of the Group's borrowings in Euro and US Dollar, bank charges and the loss on settlement of the Group's derivative financial instruments not in hedging relationships of nil (2009: £1.7 million).  The Group enters into currency borrowing arrangements as part of its currency hedging activity and at 30 September 2010 the Group had currency borrowings of €10.0 million, and US$2.5 million, equivalent to a total of £10.2 million (2009: £9.5 million).

 

Tax charge

The tax charge of £7.3 million represents 23% of profit before tax (2009: 26%). The reduction in the tax rate results from the full year effect of the lowering of underlying corporation tax rates within our main operating economies, a reduction in the tax charged on repatriation of overseas profits and the release of provisions as a result of agreeing prior year tax positions in the UK. The lower levels of underlying corporation tax, if sustained, will continue to benefit the Group's tax rate in the future.

 

Earnings per share

Basic earnings per share were 10.0p (2009: 12.8p). Diluted earnings per share decreased to 9.8p (2009: 12.7p).

The Group achieved headline diluted earnings per share of 11.6p (2009: 14.2p). Headline diluted earnings per share are based upon profit for the financial year attributable to equity holders of the parent, before amortisation of acquired intangible assets, any profits or losses on disposal of Group undertakings, revaluation of financial liabilities in relation to minority put options and transaction costs relating to completed and pending acquisitions and disposals.

 

Dividends

The Group has recommended a final dividend of 4.0p per share for 2010 to bring the total dividend for the year to 5.7p per share (2009: 5.5p).

 

Return to shareholders

ITE is committed to maximising shareholder return and is a leading performer in its sector over recent years.  ITE is committed to a long-term progressive dividend policy, set against a principle of maintaining approximately two times cover across the biennial cycle. Since 2006 the Company has increased the dividend from 3.5p per share to a record level of 5.7p per share in 2010. Set out below is a graph showing total cash returned to shareholders (including the share buybacks in the years ended 30 September 2007, 2008 and 2009) against the post tax profits earned by ITE over the last five years.

 

Cash flow

Cash generated from operations in the year was £49.7 million (2009: £37.4 million).  The principal applications of cash were £20.5 million applied to acquisitions (2009: £8.4 million), £9.2million applied to new venue loans and advances (2009: £5.4 million); £7.4 million was paid in tax (2009: £11.9 million); and £13.3 million was distributed as dividends (2009: £12.6 million). The net decrease in cash balances over the year was £0.1 million, with the Group holding £23.0million in net cash at 30 September 2010 (2009: £23.1 million).

 

Acquisitions

On 27 November 2009, ITE acquired 70% of the issued share capital of Airgate Holdings Limited (Airgate) for an initial cash consideration of €2.2 million (£2.0 million) and deferred consideration of £0.4 million, which was settled during the year. The Group purchased the remaining 30% of Airgate on 23 July 2010 for a consideration of €1.3 million (£1.1 million). Airgate owns the Group's Indian exhibition portfolio.

 

On 31 December 2009, the Group acquired six exhibitions in Turkey which were formally part of its 50% Turkish associate ITF. As a result of the transaction the Group acquired assets with a value of £2.6 million, the consideration for which was the 50% shareholding the Group held in ITF.

 

On 1 April 2010, the Group completed the purchase of the remaining 25% of Primexpo NW, the organiser of Interstroyexpo (the leading St. Petersburg construction event), for €3.4 million in cash.

 

On 9 April 2010, the Group acquired the exhibition assets of Global Expo for an initial consideration of £1.1 million in cash, and contingent consideration of up to £1 million. This Moscow based business operates two exhibitions, one serving the meat and dairy industry and the other servicing infrastructure suppliers to the construction industry.

 

On 29 April 2010, the Group acquired 100% of the issued share capital of Fin-mark srlu, an Italian company based in Bologna, for a net consideration of €14.3 million (£12.5 million) in cash. Fin-mark owns the rights to run the Aquatherm exhibitions in Ukraine, Kazakhstan and Azerbaijan.

 

During the year the Group paid £0.7 million in contingent consideration in relation to acquisitions made in prior years. As at 30 September 2010 the Group has a deferred and contingent consideration liability of £1.7 million, the majority of which it expects to pay during 2011.

 

Balance Sheet

The Group's consolidated balance sheet at 30 September 2010 is summarised in the table below:

 


Assets

Liabilities

Net assets


£m

£m

£m





Goodwill and intangibles

79.4

0.0

79.4

Property, plant and equipment

1.7

0.0

1.7

Venue advances

10.5

0.0

10.5

Cash

33.2

(10.2)

23.0

Current assets and liabilities excluding cash

35.7

(71.0)

(35.3)

Provisions - non current

0.0

(0.8)

(0.8)

Deferred tax

1.7

(6.1)

(4.4)

Other non-current assets and liabilities

0.2

(1.7)

(1.5)





Total as at 30 September 2010

162.4

(89.8)

72.6





Total as at 30 September 2009

135.0

(78.3)

56.7

 

Net assets increased by £15.9 million to £72.6 million.  The main changes are in goodwill and intangibles (an increase of £18.8 million), Venue advances (an increase of £5.6 million) and trade receivables (an increase of £4.9 million) offset by deferred income (an increase of £10.6 million) and an increase in trade and other payables (£1.8 million).

 

Investment and capital expenditure

The Group's capital expenditure on plant and equipment for the year was £1.1 million (2009: £0.4 million) and included exhibition equipment, office fixtures and fittings and computer equipment & associated software.

 

Venue arrangements

The Group has long term arrangements with its principal venues in its main markets setting out ITE's rights over future venue use and pricing.

 

Expocentr is ITE's principal venue in Moscow and hosts some of its largest exhibitions including MosBuild, Moscow International Oil & Gas exhibition, Moscow International Travel & Tourism, World Food Moscow, TransRussia and Moscow International Protection & Security Exhibition.  ITE has an agreement with Expocentr which secures the Group's rights to conduct its exhibitions at the venue on agreed rates until 2013.

 

Crocus Exhibition Centre is located on the outskirts of Moscow city centre and hosts MosBuild+, Expoelectronica, Moscow International Motor Show and the Moscow International Boat Show.  ITE has an agreement with Crocus which secures the Group's rights to conduct its exhibitions at the venue until 2015.

 

Lenexpo is located in St Petersburg and hosts the recently acquired Interstroyexpo and Baltic Building Week events.  ITE has an agreement with Lenexpo, providing rights to hold its exhibitions at the venue on agreed rates to 2012.

 

Atakent Exhibition Centre is the largest venue in Almaty, Kazakhstan and hosts the Kazakhstan International Oil & Gas events and KazBuild exhibitions.  ITE's agreement with Atakent confirms its rights to hold its exhibitions at the venue on agreed rates until 2017.

 

CNR is the principal venue in Istanbul, located close to the City's international airport, and holds all but one of the Group's Turkish exhibitions. ITE has an agreement with CNR which secures its rights to conduct its exhibitions at the venue on agreed rates until 2014.

 

The International Exhibition Centre (IEC) is the principal venue in Kyiv and hosts all of the Groups Ukrainian events, including the newly acquired Aquatherm exhibition. ITE has an agreement with IEC which secures its rights to conduct its exhibitions at the venue until 2012, and is in the process of finalising a new agreement to extend those rights and rates to 2014.

 

The Group funds the development of venues and facilities where improvements will enhance the prospects and profitability of its business.  The funding can take the form of a prepayment of future venue fees ('advance payment'), or a loan which can be repaid by cash or by offset against future venue fees ('venue loan').  Generally the funding brings rights over future venue use and advantageous pricing arrangements through long term agreements.  Venue loans and advance payments are included in the Balance Sheet under non-current and current assets.

 

At 30 September 2010, the Group's Sterling value of the outstanding balances of advance payments and venue loans was £10.5million (2009: £4.9million) as follows:

 


30-Sep-09

New

Repayments

Forex

30-Sep-10


£m

£m

£m

£m

£m







Kyiv

1.0

-

(0.1)

-

0.9

Almaty

1.4

1.0

(1.8)

0.1

0.7

St Petersburg

0.3

-

-

0.1

0.4

Uzbekistan

0.4

-

(0.1)

-

0.3

Crocus (Moscow)

1.3

-

(0.1)

-

1.2

CNR (Istanbul)

0.5

8.1

(1.8)

0.2

7.0







Total

4.9

9.1

(3.9)

0.4

10.5

 






Capital

During the year the Company issued 204,500 ordinary shares of 1p in the year. All of the total new issues were pursuant to the exercise of options and yielded aggregate consideration of £174,110. During the year the Company made no additional purchases of shares for the Employees Share Option Trust ("ESOT"). As at 30 September 2010 ESOT held 9,997,386 (4.0%) of the Company's issued share capital (2009: 10,602,886 4.3%).

 

Treasury

During the year, the Group experienced a net foreign exchange gain of £0.1 million (2009: gain of £2.2 million). The exchange rate for the Euro at 30 September 2010 was €1.16:£1 (30 September 2009: €1.09:£1); the exchange rate for the US Dollar at 30 September 2010 was $1.58:£1 (30 September 2009: $1.59:£1).

 

During the year, 72% of the Group's sales were priced in Euros, 11% in GBP and 4% in US Dollars, the balance being in various local currencies.  Overall 65% of the Group's cash receipts for the period were collected in "hard" currency (Sterling, Dollars or Euros) and 35% was collected in various local currencies, the majority being Rubles.

 

The Group uses derivative instruments and currency borrowings to protect itself against the effect of currency fluctuations on a proportion of its sales and its balance sheet. The Group's policy on derivative instruments is that: it will hedge no more than 75% of the value of anticipated hard currency collated sales; and it will only enter into derivative transactions up to 36 months ahead.

 

At 30 September 2009, the Group had entered into forward contracts to sell Euros for Sterling between October 2010 and September 2013.  The value of the contracts is €99.7 million at an average rate of €1.15:£1.  These instruments are designated as hedging instruments.

 

Over the year, the Group has entered into currency borrowing arrangements to minimise its exposure to foreign exchange risk on trade receivables. At 30 September 2010 the Group had borrowings of €10.0 million, and US$2.5 million. The cash balance of £23.0 million at 30 September 2010 is net of these borrowings.

 

The Group finances its operations through cash holdings.  The objective of the Group is to maximise investment income and minimise interest costs, bearing in mind its liquidity requirements.

 

For short-term debt, such as overdraft facilities or debt with a term of less than six months, fixed or floating rates of interest are used.  For debt with a term of greater than six months, it is policy that at least 50% must have fixed rates of interest so as to minimise the Group's exposure to interest rate movements. As at 30 September 2010, all of the Group's borrowing requirements were in the form of overdraft facilities.


It is Group policy that its cash balances are not invested in instruments that would put the capital value at risk.  All invested funds have a determinable rate of interest.

 

Liquidity risk

The Group policy is to ensure continuity of funding for operational needs through cash deposits and debt facilities as appropriate.  The key requirement for the business is to maintain flexibility to allow the Group to take advantage of opportunities that could arise over the short term. The needs of the business are determined on a rolling cash flow forecast basis, covering weekly, monthly and twelve monthly requirements.  Short-term flexibility is maintained by holding cash in current accounts and high liquidity money market funds.  The Group has overdraft facilities in place both to permit currency borrowing as part of its foreign exchange management and to allow flexibility in where it holds its cash balances.

 

Recent events in the world financial markets have highlighted the risks associated with holding deposits in foreign domiciled banks.  The territories in which ITE operates do not all have internationally recognised banks and the Group has relationships with a number of domestic banks. The Group seeks to use the territories leading banks and to minimise the level of cash held in such banks. Of the Group's total cash balance of £33.2 million as at 30 September 2010, 74% was held in institutions with a rating of grade A or above and 19% in B to BBB+.

 

Going concern

The Group and Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the CEO's Statement and Operating Performance and Divisional Summary on pages 9 to 13. The financial position of the Group and Company, its significant cash balance, its cash flow, liquidity position and absence of long term borrowings are described in the finance review on pages 14 to 20. In addition, in the general information section and note 20 of the notes to the financial statements the Group and Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk are referred to.    

 

After making enquires, reviewing the Group and Company's forecasts and projections and taking account of reasonably possible changes in trading performance, the Directors have a reasonable expectation that the Group has adequate resources to continue its operations for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the Annual Report and Financial Statements.

 

Risks & Uncertainties

The Group identifies and monitors the key risks and uncertainties affecting the Group and runs the business in a way that minimises the impact of such risks where possible.

 

Operational risks

Potential impact

Mitigation

Political uncertainty and regulatory risk

 

The Group's business is principally carried out in Russia and the CIS.  Changes in law or the regulatory environment could have an effect on some or all of the exhibitions of the Group. 

ITE has reduced the risk by establishing its business as independent Russian and CIS companies fully contributing to the local economy, and the diversity of businesses across sectors and geography provides protection for the longer-term prospects of the Group.

Economic instability reduces demand for exhibition space

 

 

Reduced demand for exhibition space would reduce the profits of exhibitions.

ITE operates across a wide range of sectors and countries to minimise the exposure to any single market. ITE, through its relationships with venues and staff has a relatively flexible cost structure, allowing it to manage its event margins in the short and medium term.

Commercial relationships

 

The Group has key commercial relationships with venues which secure the Group's rights to run its exhibitions in the future.

These key relationships are regularly reviewed and the Group seeks to maintain its exhibition rights for at least three years forward for significant exhibitions.

Venue availability

 

Damage to or unavailability of a particular venue could impact the Group's short-term trading position. 

The Group carries business interruption insurance policies which protect profits on our largest 20 events against such an event in the short-term. In the longer-term the Group seeks to maintain good relationships with its principal venues to ensure the continuance of availability.

Competitor risk

 

Competition has existed in ITE's markets for some years. ITE faces competitive pressures on a market-by-market basis.

In all of its overseas markets, ITE has a strong position as an international organiser, achieved through effective use of its international sales network and its established brands for major events.  A single exhibition or sector in a market could have its prospects curtailed by a strong competitor launch; however, the breadth of ITE's portfolio of events, with its geographic and sector diversity, reduce the risk of a competitive threat to the Group's overall business.

People

 

ITE's employees have long-standing relationships with customers and a unique knowledge of the exhibitions business. Loss of key staff could impact the short-term prospects of a specific event or sector.

 

ITE has sought to build loyalty in its staff by ensuring remuneration is competitive and through a wide distribution of the Group's long-term incentive plans. ITE has a good record of retaining its key staff through both growth and recessionary times.

Financial risk - foreign currency risk  

 

The Group is exposed to movements in foreign exchange rates against Sterling for both trading transactions and for the translation of overseas operations. The principal exposure is to the Euro, which forms the basis of invoicing and to the Ruble which forms the base books of the Group's Russian operations.

 

The Group seeks to minimise exposure by:

 

·   Protecting a certain amount of Euro denominated sales with forward contracts. 

·   Utilising currency overdraft facilities to hedge foreign currency balance sheet assets.

 

 

 


 

 

Consolidated Income Statement

For the year ended 30 September 2010

 






2010

2009






Notes

£000

£000

Continuing operations




Revenue

4

113,547

116,730

Cost of sales

 

(58,211)

(56,432)

Gross profit

 

55,336

60,298

Other operating income

 

288

283

     Administrative expenses before amortisation

 

(19,858)

(17,914)

     Amortisation of acquired intangibles

3

(5,820)

(4,311)

     Foreign exchange (loss)/gain on operating activities

 

(141)

3,922

Total administrative expenses

 

(25,819)

(18,303)

Share of results of associate

 

126

663

Operating profit

 

29,931

42,941


 



Gain on disposal of associate

 

834

-

Investment revenue

5

1,098

619

Finance costs

6

(585)

(2,108)

Profit on ordinary activities before taxation

 

31,278

41,452

Tax on profit on ordinary activities

7

(7,313)

(10,790)

Profit for the period

 

23,965

30,662

Attributable to:

 



      Equity holders of the parent

 

23,873

30,435

      Non-controlling interests

 

92

227


 

23,965

30,662


 



Earnings per share (p)

 



Basic

9

10.0

12.8

Diluted

9

9.8

12.7

 


 

Statement of Comprehensive Income

For the year ended 30 September 2010




 



2010

2009

 





 


Notes

£000

£000

 

Profit for the period attributable to shareholders

 

23,965

30,662

 

Cash flow hedges:

 



 

     Gains/losses during the period

 

3,180

(1,745)

 

Exchange differences on translation of foreign operations

 

2,150

(1,254)

 

Put option at fair value

 

(2,065)

(1,351)

 


 

27,230

26,312

 


 



 

Tax relating to components of comprehensive income

7

(414)

-

 

Total comprehensive income for the period

 

26,816

26,312

 

Attributable to:

 



 

     Owners of the company

 

26,724

26,085

 

     Non-controlling interests

 

92

227

 


 

26,816

26,312


 

 


Consolidated statement of changes in equity

For the year ended 30 September 2010

 














Share

capital

Share

premium account

Merger

reserve

Capital Redemption

reserve

 

 

 

ESOT

reserve

 

 

 

Retained Earnings

Put Option reserve

Translation reserve

Hedge
reserve

 

 

 

 

Total

 

 

Non

Controlling interests

Total Equity


£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000














Balance as at  1 October 2009

2,481

2,678

2,746

457

(10,241)

60,519

(4,620)

2,160

(1,745)

54,435

2,272

56,707

Net profit for the year

-

-

-

-

-

23,873


-

-

23,873

92

23,965

Currency translation difference on net investment in subsidiary undertakings

-

-

-

-

-

-

-

2,150

-

2,150

-

2,150

Increase in fair value of hedging derivatives

-

-

-

-

-

-

-

-

3,180

3,180

-

3,180

Tax relating to components of comprehensive income

-

-

-

-

-

(414)

-

-

-

(414)

-

(414)

Put option on acquisition of subsidiary

-

-

-

-

-

-

(2,065)

-

-

(2,065)

-

(2,065)

Total comprehensive income for the period

-

-

-

-

-

23,459

(2,065)

2,150

3,180

26,724

92

26,816

Issue of share capital

2

-

-

-

-

-

-

-

-

2

-

2

Dividends paid

-

-

-

-

-

(13,335)

-

-

-

(13,335)

-

(13,335)

Exercise of share options

-

-

-

-

603

(273)

-

-

-

330

-

330

Share-based payments

-

20

-

-

-

1,369

-

-

-

1,389

-

1,389

Tax charged to equity

-

-

-

-

-

341

-

-

-

341

-

341

Exercise of put option on acquisition of subsidiary 

-

-

-

-

-

(3,762)

5,334

-

-

1,572

(1,241)

331


 

 

 

 

 

 

 

 

 

 

 

 

30 September 2010

2,483

2,698

2,746

457

(9,638)

68,318

(1,351)

4,310

1,435

71,458

1,123

72,581


 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of changes in equity

For the year ended 30 September 2010

 













Share

capital

Share

premium account

Merger

reserve

Capital Redemption

reserve

 

 

 

ESOT

reserve

 

 

 

Retained Earnings

Put Option reserve

Translation reserve

Hedge
reserve

 

 

 

 

Total

 

 

Non

Controlling interests

Total Equity


£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

£000














Balance as at  1 October 2008

2,479

2,669

2,746

457

(8,390)

42,776

(3,269)

3,414

-

42,882

1,194

44,076

Effect of change in accounting policy

-

-

-

-

-

(90)

-

-

-

(90)

-

(90)

As restated

2,479

2,669

2,746

457

(8,390)

42,686

(3,269)

3,414

-

42,792

1,194

43,986

Net profit for the year

-

-

-

-

-

30,435

-

-

-

30,435

227

30,662

Currency translation difference on net investment in subsidiary undertakings

-

-

-

-

-

-

-

(1,254)

-

(1,254)

-

(1,254)

Increase in fair value of hedging derivatives

-

-

-

-

-

-

-

-

(563)

(563)

-

(563)

Put option on acquisition of subsidiary

-

-

-

-

-

-

(1,351)

-

-

(1,351)

-

(1,351)

Tax charged to equity

-

-

-

-

-

13

-

-

-

13

-

13

Recognition and transfer of cashflow hedges

-

-

-

-

-

-

-

-

(1,182)

(1,182)

-

(1,182)

Total comprehensive income for the period

-

-

-

-

-

30,448

(1,351)

(1,254)

(1,745)

26,098

227

26,325

Issue of share capital

2

-

-

-

-

-

-

-

-

2

-

2

Dividends paid

-

-

-

-

-

(12,600)

-

-

-

(12,600)

-

(12,600)

Exercise of options

-

-

-

-

1,318

(1,115)

-

-

-

203

-

203

Share-based payments

-

9

-

-

-

1,100

-

-

-

1,109

-

1,109

Shares issued for remuneration

-

-

-

-

24

-

-

-

-

24

-

24

Purchase of shares

-

-

-

-

(3,193)

-

-

-

-

(3,193)

-

(3,193)

Non controlling interest on acquisition of subsidiary

-

-

-

-

-

-

-

-

-

-

851

851


 

 

 

 

 

 

 

 

 

 

 

 

30 September 2009

2,481

2,678

2,746

457

(10,241)

60,519

(4,620)

2,160

(1,745)

54,435

2,272

56,707


 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidated balance sheet

30 September 2010

 






2010

2009







£000

£000

Non-current assets

 



Goodwill

 

50,584

44,619

Other intangible assets

 

28,829

16,007

Property, plant and equipment

 

1,741

1,449

Investments in associates

 

-

1,840

Venue advances and other loans

 

6,178

1,994

Deferred tax asset

 

1,652

1,268

Derivative financial instruments

 

178

68


 

89,162

67,245

Current assets

 



Trade and other receivables

 

38,488

33,859

Tax prepayment

 

608

1,056

Cash and cash equivalents

 

33,163

32,587

Derivative financial instruments

 

951

226


 

73,210

67,728


 



Total assets

 

162,372

134,973


 



Current liabilities

 



Bank overdraft

 

(10,183)

(9,480)

Trade and other payables

 

(15,163)

(13,395)

Deferred income

 

(55,211)

(44,567)

Derivative financial instruments

 

(161)

(5,020)

Provisions

 

(452)

(203)


 

(81,170)

(72,665)

Non-current liabilities

 



Provisions

 

(807)

(610)

Deferred tax liabilities

 

(6,089)

(4,134)

Derivative financial instruments

 

(1,725)

(857)


 

(8,621)

(5,601)


 



Total liabilities

 

(89,791)

(78,266)

Net assets

 

72,581

56,707


Consolidated balance sheet

30 September 2010

 






2010

2009






Notes

£000

£000

Equity

 



Share capital

 

2,483

2,481

Share premium account

 

2,698

2,678

Merger reserve

 

2,746

2,746

Capital redemption reserve

 

457

457

ESOT reserve

 

(9,638)

(10,241)

Retained earnings

 

68,318

60,519

Translation reserve

 

4,310

2,160

Hedge reserve

 

1,435

(1,745)

Put option reserve

 

(1,351)

(4,620)


 



Equity attributable to equity holders of the parent

 

71,458

54,435


 



Non controlling interests

 

1,123

2,272


 



Total equity

 

72,581

56,707

 

 

The financial statements of ITE Group plc, registered company number 1927339, were approved by the Board of Directors and authorised for issue on 29 November 2010.  They were signed on their behalf by:

 

Russell Taylor                                      Neil Jones

Chief Executive Officer                     Finance Director

 


Consolidated cash flow statement

For the year ended 30 September 2010

 






2010

2009







£000

£000

Cash flows from operating activities




Operating profit from continuing operations


29,931

42,941

Adjustments for:




Depreciation and amortisation


6,682

5,062

Share-based payments


1,369

1,100

Other non-cash expenses


-

121

Share of associate profit


(126)

(663)

(Decrease)/increase in provisions


446

(105)





Operating cash flows before movements in working capital


38,302

48,456

Decrease/(increase) in receivables


(2,171)

7,956

(Decrease)/ increase in deferred income


10,644

(19,835)

Increase in payables


2,905

775





Cash generated from operations


49, 680

37,352

Tax paid


(7,427)

(11,887)

Venue advances and loans


(9,248)

(5,352)





Net cash from operating activities


33,005

20,113





Investing activities




Interest received


342

619

Gain/(loss) on derivative financial instruments


214

(1,696)

Dividends received from associates


637

204

Acquisition of businesses - cash paid


(20,498)

(8,400)

Acquisition of business - cash acquired


1,915

388

Purchase of property, plant and equipment and computer software


(1106)

(449)





Net cash (utilised) from investing activities


(18,496)

(9,334)





Financing activities




Dividends paid


(13,335)

(12,600)

Interest paid


(576)

(412)

Net cash flow in relation to ESOT shares


-

(3,193)

Proceeds from issue of share capital


22

11





Net cash flows from financing activities


(13,889)

(16,194)





Net (decrease)/increase in cash and cash equivalents


620

(5,415)





Net cash and cash equivalents at beginning of period net of overdrafts


23,107

29,141

Effect of foreign exchange rate changes


(747)

(619)





Net cash and cash equivalents at end of period net of overdrafts


22,980

23,107

 


Consolidated cash flow statement

For the year ended 30 September 2010

 






2010

2009







£000

£000

Comprising:




Cash and cash equivalents

 

33,163

32,587

Bank overdrafts

 

(10,183)

(9,480)


 




 

22,980

23,107


 



Cash generated from the business:




Cash generated from operations


49,548

37,352

Interest received


342

619

Interest paid


(576)

(412)

Dividends earned from associates


637

204







49,951

37,763





Free cash flow from the business:




Cash generated from the business


49,951

37,763

Tax paid


(7,427)

(11,887)







42,524

25,876

 


Notes

30 September 2010

 

 

1 Basis of preparation

 

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), this announcement does not contain sufficient information to comply with IFRS's.

The Company expects to publish full financial statements that comply with IFRS in December 2010. These will be available at www.ite-exhibitions.com.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2010 or 2009, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

    

2 Impact of new accounting standards

 

IFRS 8, Operating Segments

IFRS 8 sets out disclosure requirements concerning an entity's reportable segments, products, services, geographical areas in which it operates and its major customers. IFRS 8 replaces IAS 14, Segmental Reporting. The Group has not been significantly impacted by the adoption of this standard.

Amendment to IFRS 3, Business Combinations (revised 2008) and IAS 27 Consolidated and Separate Financial Statements (revised 2008)

The most significant changes to the Group's previous accounting policies for business combinations are as follows:

-       Acquisition related costs which previously would have been included in the cost of a business combination are included in administrative expenses as they are incurred;

-       Any pre-existing equity interest in the entity acquired is remeasured to the fair value at the date of obtaining control, with any resulting gain or loss recognised in income statement;

-       Any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

-       Any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in income statement.  Previously, such changes resulted in an adjustment to goodwill.

The revised standards have been applied to the acquisitions made in the year.

Any adjustments to contingent consideration for acquisitions made prior to 1 October 2009 which result in an adjustment to goodwill continue to be accounted for under IFRS 3(2004) and IAS 27(2005).

£860,000 of transaction costs relating to completed and pending acquisitions made in the period have been expensed that would previously have been capitalised on the balance sheet .     

Amendment to IAS 1, Presentation of Financial Statements

This amendment introduces changes to the way in which movements in equity must be disclosed and requires an entity to disclose each component of other comprehensive income not recognised in profit and loss. The amendment also requires disclosure of the amount of income and deferred tax relating to each component of other comprehensive income as well as other minor disclosure amendments.

The following new standards, amendments to standards and interpretations are mandatory for the year ending 30 September 2010, and these have been adopted but have had no impact on the 2010 Group financial statements:

·      IFRIC 17  'Distribution of Non Cash Assets to Owners'

·      IFRIC 18 'Transfers of Assets to Customers'

The following interpretations have been issued which are not applicable to the Group since they are only effective for the Group's accounting periods beginning on or after 1 October 2010.  These are also not expected to have a material impact on the Group financial statements:

·      IFRIC 14 'Prepayments of a minimum funding requirement'

·      IFRIC 19 'Extinguishing liabilities with equity instruments'

 

3 Reconciliation of headline pre-tax profit to profit on ordinary activities before taxation

 


2010

2009

 


£000

£000




Profit on ordinary activities before taxation

31,278

41,452

Amortisation of acquired intangibles

5,820

4,311

Gain on exercise of Primexpo North West LLC put option

(533)

-

Gain on disposal of associate

(834)

-

Transaction costs (completed and pending)

860

-




Headline pre-tax profit

36,591

45,763




Profit on ordinary activities before taxation

Profit on ordinary activities before taxation is stated after charging/(crediting):


2010

2009


£000

£000




Staff costs

22,971

21,374

Depreciation of property, plant and equipment

661

507

Amortisation of computer software

201

244

Amortisation of purchased intangible assets

5,820

4,311

Operating lease rentals - other

3,036

3,224

Loss on derivative financial instruments

9

1,696

Foreign exchange loss/(gain) on operating activities

141

(3,922)

 4 Segmental information

 

IFRS 8 introduces the term Chief Operating Decision Maker (CODM). The Executive Board comprising the Executive Directors  (Russell Taylor (Chief Executive Officer), Neil Jones (Financial Director), Edward Strachan (Executive Director), Stephen Keen, Alexander Shtalenkov, Michael Johannes, Colette Tebbutt and Suzanne King is considered to be the CODM.

ITE's reportable segments are strategic business units that are based in different geographic locations, predominantly in the developing and emerging markets.  Each business unit is managed separately and has a different marketing strategy as determined by the local management. The products and services offered by each business unit are identical across the group.  

ITE Group evaluates performance on the basis of profit or loss from operations before tax expense not including non-recurring gains and losses and foreign exchange gains and losses.

The revenue and profit before taxation are attributable to the Group's one principal activity, the organisation of trade exhibitions, conferences and related activities and can be analysed by geographic segment as follows.

Year ended 30 September 2010

UK & Western Europe

Central Asia & Caucasus

Russia

Eastern & Southern Europe

Rest of World

Total Group


£000

£000

£000

£000

£000

£000

By geographical location of events/ activities







Revenue

8,188

19,622

66,130

15,271

4,336

113,547

Result (excluding share of results of associates)

(13,185)

8,074

30,046

3,978

892

29,805








By origin of sale







Revenue

48,796

9,179

40,108

13,208

2,256

113,547

Result (excluding share of results of associates)

12,319

2,599

13,768

1,320

(201)

29,805








Share of results of associates






126

Operating profit






29,931

Gain on disposal of associate






834

Investment revenue






1,098

Finance costs






(585)








Profit before tax






31,278

Tax






(7,313)








Profit after tax






23,965








Capital expenditure

438

308

188

92

80

1,106

Depreciation and amortisation

1,251

187

3,172

1,797

275

6,682








Balance Sheet







Assets*

55,611

10,700

57,043

33,314

3,444

160,112








Liabilities*

(41,635)

(4,483)

(25,731)

(6,967)

(901)

(79,717)

 

* Segment assets and segment liabilities exclude current and deferred tax assets and liabilities.

The revenue in the year of £113.5 million includes £0.3 million (2009: £0.5 million) of barter sales.



4 Segmental information (continued)

Year ended 30 September 2009

UK & Western Europe

Central Asia & Caucasus

Russia

Eastern & Southern Europe

Rest of World

Total Group


£000

£000

£000

£000

£000

£000

By geographical location of events/activities







Revenue  

7,016

19,031

80,863

9,585

235

116,730

Result  (excluding share of results of associates)

(6,188)

6,451

39,731

3,473

(1,189)

42,278








By origin of sale







Revenue

57,002

9,092

44,833

5,803

-

116,730

Result (excluding share of results of associates)

16,752

2,570

22,445

669

(158)

42,278








Share of results of associates






663








Operating profit






42,941

Investment revenue






619

Finance costs






(2,108)








Profit before tax






41,452

Tax






(10,790)








Profit after tax






30,662








Capital expenditure

223

28

163

35

-

449

Depreciation and amortisation

 

1,868

 

6

 

2,432

 

756

 

-

 

5,062








Balance Sheet







Assets*

74,081

7,941

46,912

1,875

-

130,809








Interest in associates






1,840

Consolidated total assets






132,649








Liabilities*

46,116

3,914

19,490

1,939

196

71,655








* Segment assets and segment liabilities exclude current and deferred tax assets and liabilities.

 

5 Investment revenue


2010

2009


£000

£000




Interest receivable from bank deposits

271

619

Interest receivable from Inland Revenue repayments

71

-

Gain on derivative financial instruments

223

-

Gain on exercise of Primexpo North West LLC put option

533

-





1,098

619



6 Finance costs


2010

2009


£000

£000




Interest on overdrafts

208

148

Bank charges

336

264

Interest payable to Inland Revenue

32

-

Loss on derivative financial instruments

9

1,696





585

2,108

 

 

7 Tax on profit on ordinary activities

Analysis of tax charge for the year:


2010

2009

 


£000

£000

Group taxation on current year profit



UK corporation tax on profit for the year

4,021

5,049

Adjustment to UK tax in respect of previous years

(460)

(131)





3,561

4,918




Overseas taxation - current year

5,830

5,891

Overseas taxation - previous years

76

(70)





5,906

5,821




Current tax

9,467

10,739




Deferred tax



Origination and reversal of timing differences:






Current year

(1,525)

315

Prior year

(629)

(264)





7,313

10,790



7 Tax on profit on ordinary activities

 

The tax charge for the year can be reconciled to the profit per the income statement as follows:

 


2010

2009

 


£000

£000




Profit on ordinary activities before tax

31,278

41,452




Profit on ordinary activities multiplied by standard rate of corporation tax

in the UK of 28% (2009: 28%)

 

8,758

 

11,607




Effects of:



Expenses not deductible for tax purposes

152

165

Deferred tax assets not recognised

29

290

Withholding tax and other irrecoverable taxes

776

194

Adjustments to tax charge in respect of previous years

(1,013)

(467)

Deferred tax provision in respect of proposed dividends from overseas subsidiaries

103

1,130

Effect of different tax rates of subsidiaries operating in other jurisdictions

(1,457)

(1,943)

Associate tax

(35)

(186)





7,313

10,790

 

Tax relating to components of comprehensive income

2010

2009





£000

£000




Cash flow gains/losses 

(414)

-

Exchange differences on translation of foreign operations

-

-

Put option at fair value

-

-





(414)

-




8 Dividends


2010

2009


£000

£000

Amounts recognised as distributions to equity holders in the year:



Final dividend for the year ended 30 September 2009 of 3.9p (2008 - 3.7p) per ordinary share

9,283

8,809

Interim dividend for the year ended 30 September 2010 of 1.7p (2009 -1.6p) per ordinary share

4,052

3,791





13,335

12,600




Proposed final dividend for the year ended 30 September 2010  of 4p (2009 - 3.9p) per ordinary share

 

9,533

 

9,262




The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

 

Under the terms of the trust deed dated 20 October 1998, the ITE Group Employees Share Trust, which holds 9,978,386 (2009: 10,602,886) ordinary shares representing 4% of the Company's called up ordinary share capital, has agreed to waive all dividends due to it each year.

 

 

9 Earnings per share

The calculation of basic, diluted and headline diluted earnings per share is based on the following earnings and the numbers of shares:


2010

2009


No.of shares

(000)

No.of shares

(000)

Weighted average number of shares:



For basic earnings per share

238,679

238,030

Effect of dilutive potential ordinary shares

4,213

1,352




For diluted and headline diluted earnings per share

242,892

239,382




Basic and diluted earnings per share
The calculations of basic and diluted earnings per share are based on the profit for the financial year attributable to equity holders of the parent of £23.9 million (2009: £30.4 million). Basic and diluted earnings per share were 10.0p and 9.8p respectively (2009: 12.8p and 12.7p respectively).

 

Headline diluted earnings per share
Headline diluted earnings per share is intended to provide a consistent measure of Group earnings on a year-on-year basis and is 11.6p per share (2009: 14.2p).  Headline basic earnings per share is 11.8p per share (2009: 14.2p).

 


2010

2009


£000

£000




Profit for the financial year attributable to equity holders of the parent

23,873

30,435

Amortisation of acquired intangible assets

5,820

4,311

Tax effect of amortisation of acquired intangible assets

(1,144)

(848)

Transaction costs

860

-

Gain on exercise of Primexpo North West LLC put option

(533)

-

Gain on disposal of associate

(834)

-




Headline earnings for the financial year after taxation

28,042

33,898

 

Responsibility statement

 

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 30 September 2010. Certain parts thereof are not included within this announcement.

 

We confirm that to the best of our knowledge:

 

the accounts prepared in accordance with International Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and the management report, which is incorporated in the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face

 

The responsibility statement was approved by the board of directors on 30 November 2010 and is signed on its behalf by:

 

 

Russell Taylor                                                                             

Group Chief Executive

 

 

 

Neil Jones

Chief Financial Officer

 

 

 

 

Final dividend 2010

Ex date                                                  5 January 2011

Record date                                          7 January 2011

Annual General Meeting                  27 January 2011

Payment date                                      14 February 2011

 

Interim dividend 2011

Ex date                                                  6 July 2011

Record date                                          8 July 2011

Payment date                                      11 August 2011

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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