Final Results

ITE Group PLC 09 December 2003 9 December 2003 For Immediate Release ITE GROUP PLC PRELIMINARY RESULTS ANNOUNCEMENT ITE Group plc, the leading exhibition organiser in emerging markets, is pleased to announce its preliminary results for the year ended 30 September 2003. Key points: - Reported turnover of Â£58.9 million (2002: Â£52.4 million), up 12.4% - Profit before tax of Â£12.3 million (2002: loss of Â£0.4 million) - Headline pre-tax profit* of Â£15.5 million (2002: Â£8.4 million), up 84.5% - Net cash of Â£22.1 million (2002: Â£17.7 million), up 24.9% - Basic earnings per share of 3.1p (2002: 1.0p loss per share) - Headline diluted earnings per share of 4.2p (2002: 2.4p), up 75% - Net assets of Â£41.0 million (2002: Â£36.4 million), up 12.6% - Business focus on strongest, most profitable brands - Strong growth in key Moscow market - Disposal of non-core investments Commenting on the results, Iain Paterson, Chairman, said: 'I am pleased to report record results for ITE Group plc which demonstrate the underlying strength of our business. Turnover at Â£58.9 million was up 12% on last year and Headline profit before tax of Â£15.5 million was up 85% on last year. The Group has a strong balance sheet and ended the year with net cash of Â£22.1 million. The Group enjoys a leading position in the Moscow, St Petersburg and Central Asian exhibition markets. We believe that these areas will continue to experience economic growth thereby underpinning the expansion of our business. We are opening opportunities for organic growth by taking our existing brands and core products into new emerging markets. With these strong foundations, we are confident that we can continue the good financial performance of this year.' * Headline pre-tax profit is defined as profit before tax, amortisation and impairment of goodwill and profits or losses arising on disposal of group undertakings. In the financial highlights of the annual reports for previous years, Headline profit before tax included profits and losses on disposal of group undertakings. These have been restated above to more accurately reflect the group's underlying performance. Enquiries: Iain Paterson / Ian Tomkins ITE Group plc 020 7596 5000 Philip Ranger / Kirsty Black Merlin Financial 020 7606 1244 ITE Group plc Preliminary statement for the year ended 30 September 2003 Chairman's Statement Group Performance I am pleased to report record results for ITE Group plc which demonstrate the underlying strength of our business. Turnover and Headline Profit before tax for the year were Â£58.9 million and Â£15.5 million respectively. Headline diluted earnings per share grew by 75% to 4.2p per share and diluted earnings per share improved to 3.0p per share on Profit before tax of Â£12.3m compared to a loss of 1.0p per share on a Loss before tax of Â£0.4m in 2002. The Group has a strong balance sheet and ended the year with net cash of Â£22.1 million. Strategic Progress We pursued a number of organic growth opportunities during the year, expanding our portfolio of events in sixteen countries and enhancing our major brands. Recently ITE has agreed terms with Expocentr, its principal Moscow venue, to extend the terms of its co-operation agreement covering our key events for a further five years. We have continued to focus our business on its most profitable areas of activity. Since the year-end we have sold all of our interests in the Czech Republic and Slovakia to Incheba a.s., the owner of the other 50% interest. The effect of the floods in Prague in August 2002 had shifted the focus of the Czech business towards investment in and refurbishment of exhibition halls. Board and Management There have a number of changes to your Board during the year. Russell Taylor was appointed Group Finance Director and Company Secretary in March. Russell is a Chartered Accountant whose previous experience included eight years in the exhibitions industry. In July, Edward Strachan, Managing Director of our St Petersburg and Central Asia businesses was appointed to the Board. Edward has been with the Group for over ten years and now brings his breadth of experience of our industry to the Board. Alex Bernstein resigned from the Board in June. Alex had significantly contributed to building our business in Moscow. Sir Hugh Bidwell, Deputy Chairman, stepped down from the Board in September after seven years with ITE and Alexander Rozin resigned from the Board in November following the sale of our Czech and Slovakian interests. The Board would like to thank these Directors for their contributions to the development of the Group over the years. In July, Marco Sodi replaced Jeffrey Stevenson as one of the Non-Executive Directors nominated by Veronis Suhler Stevenson. Marco is actively involved in the European media sector. Michael Hartley was appointed a Non-executive Director in October. Michael is currently Chairman of Dawson International plc and brings extensive experience of managing and growing internationally diversified groups of businesses. In addition to the Board changes, we have streamlined and strengthened our management team. I should like, on behalf of the Board, to thank all our staff for the very considerable effort that they have made during the year. We are particularly appreciative of their support during a period of organisational and structural change. Dividend The Board has recommended a final dividend of 1.1p per share bringing the total dividend for the year to 1.6p per share. This represents a real increase of 6.7% in the annual dividend in line with the Board's progressive dividend policy. Outlook The Group enjoys a leading position in the Moscow, St Petersburg and Central Asian exhibition markets. We believe that these areas will continue to experience economic growth thereby underpinning the expansion of our business. We are opening opportunities for organic growth by taking our existing brands and core products into new emerging markets. With these strong foundations, we are confident that we can add value and continue the good financial performance of this year. Iain Paterson Chairman Chief Executive's Review Financial performance Turnover for the year of Â£58.9m (2002: Â£52.4m) and Gross Profits of Â£26.7m (2002: Â£21.4m) reflect both the strength of the markets in which we operate and the benefits of re-focusing our business on its most profitable areas. Control of overheads assisted Operating Profits of Â£11.7m (2002: Â£6.9m excluding impairment charges) and an increase in Headline Profit before Tax to Â£15.5m from Â£8.4m last year. This is the stronger year in our biennial trading pattern and Â£2.4m of the increase in profits is attributable to events that only take place every two years. Revenues are 12% higher than last year, despite the effect of a weakening dollar on our revenue streams. Circa Â£4.4m of the increase in revenue is attributable to our biennial events, Moscow International Oil and Gas and Autosalon. Events which took place last year and did not recur in 2003 (or were discontinued) and other timing differences reduced turnover by Â£4.3m. New launches and growth in our existing portfolio lifted turnover by Â£6.4m and profits by Â£3.6m. The gross margin achieved of 45% is an improvement on last year's margin of 41%. The improvement is partly attributable to the margins we earn on the two biennial events, and partly to the steps we have taken to reduce our cost of sales and to eliminate less profitable business. We carried out a review of our operating structure over the summer and the resulting changes yielded annualised savings of over Â£1m. The costs of the restructuring exercise were Â£0.4m. The cost of severing our relationship with the Czech and Slovakian exhibition businesses was Â£0.8m. This included expensing Â£0.5m of prepayments in respect of unused tenancies and a loss on disposal of Â£0.2m. Our associated company contribution in the year primarily relates to our 50% owned business in Istanbul, Turkey. The core business sold 150,000 square metres, but yields are low and profits are depressed by the Turkish Lira, which is only one third of its February 2001 value against the dollar. The Group has performed well this year and the results represent a highly creditable performance. This set of results confirms that our period of rationalisation and consolidation has been successfully completed and that the Group is making substantial progress. We have contracted Â£35m of business for the 2004 year which is an increase on a like for like basis of 11%. Trading highlights In 2003 we organised 114 events in 16 countries (2002: 117 events in 19 countries) and sold a total of 292,000 square metres of space (2002: 255,800 square metres). We launched 19 new events over the course of the year across a range of industries concentrating on the markets of Kazakhstan, Ukraine and Turkey. Like for like growth in space sales of our annually recurring events was in excess of 14%, led by exceptionally strong results in our key core events. The top ten events ordered by contribution to gross profit in 2003 and their change in size over the previous year were: Rank Event 2003 2002 Growth net Sq.m. net Sq.m. 1 Russia Building Week 34,600 26,900 28% 2 Moscow International Travel & Tourism 17,500 15,000 16% (MITT) 3 Moscow International Oil & Gas/ 14,300 3,400 * Neftegas 4 World Food Moscow 17,500 14,600 20% 5 Autosalon / MIMS 22,800 15,600 * 6 MODA UK (bi-annual) 20,900 10,800 93% 7 Kazakhstan International Oil & Gas 5,600 4,500 24% (including conference) 8 Windows & Doors 8,600 7,400 15% 9 Moscow International Sports & Boat 7,400 5,800 28% Show 10 Ingredients Russia 4,500 2,600 69% * 2002 Events not comparable due to biennial pattern We enjoyed considerable growth in our key market, Moscow, which accounts for up to 70% of our gross profit. The main influences were the good performance of our two biennial events and the opening of a new 7,000 net square metre pavilion at the principal exhibition venue, Expocentr. Russia Our Russian exhibition business is very well established and enjoyed growth of 25% in both space and revenues. Russia Building Week expanded to fill the newly built exhibition hall at Expocentr and has further potential to grow, but is constrained for the time being by the availability of good quality exhibition space in Moscow. Moscow International Travel and Tourism show and the World Food Moscow event both enjoyed growth in space sales of more than 15%. Our Oil and Gas event and Autosalon only take place every two years, but nevertheless both enjoyed growth of 20% + over their previous editions. Moscow has become an increasingly competitive environment in recent years and presently continues to be under-resourced in available exhibition space. However, new space will be available soon to provide the opportunity to enhance ITE's growth. The recently signed co-operation agreement with Expocentr is of real significance to the Group, as it secures our key Moscow events at the leading Moscow venue of Expocentr for the foreseeable future. Currently ITE is in new discussions to again further extend the term of our co-operation with Lenexpo, our principal venue in St. Petersburg, following on from an agreement made late last year. Our premier events in St Petersburg remain the Baltic Building Week (8,000 Sq.m.) and Interfood St Petersburg (4,000 Sq.m.). We have recently developed a new theme in St. Petersburg with the agreement of a joint venture in the food production technology area. Central Asia ITE is the leading international operator established in these regions. The economies in these markets are buoyant, with growth underpinned by strong world oil and gas prices. In 2003 ITE launched 6 new events in the region, mainly in Kazakhstan. The launches were in a range of industries including Building, Fashion, Packaging, Cleaning and Chemicals. In Kazakhstan, strong growth was developed in the city of Atyrau, where last year's Infrastructure launch was split into three separate exhibitions, all of which filled the existing venue capacity. In Almaty we entered into a funding arrangement to assist our venue partner to build a new exhibition hall, so as to facilitate growth in our construction and oil and gas events (which both grew by circa 30%). Our events in Azerbaijan are showing strong growth from a modest base - in particular in the medical and construction sectors. Eastern & Southern Europe We have strengthened our teams in Ukraine and Turkey and have increased the number of events held by making a series of new launches. The reduction in space sales reflects the sale of our stand alone Czech business last year and the decision to withdraw from our Belgrade events. In Kyiv space sales increased by over 30%, though the new launch activity meant that this did not feed through proportionately to profits. In Turkey our wholly owned business further extended its 'Caspian' brand, with successful launches in the Transport, Banking and Finance and Ecology sectors. Caspian Telecoms, launched last year exhibited further good growth. Overall space sales in Istanbul were affected by a reduction in size of the low yielding construction event, Ankomak, but profits were still higher than in 2002. Western Europe and UK One of our strongest performing brands for the year was MODA UK fashion, which takes place in Spring and Autumn at the NEC in Birmingham. In particular Womanswear outperformed all expectations and almost doubled the prior year contribution. In September, ITE acquired a further 15% in ITE Moda Limited bringing our interest up to 90%. International Sales Offices & Rest of World We have international sales offices based in London and Hamburg which focus on selling international exhibitors into our emerging market events (sales are shown in the regions where the events are held). We recently reviewed the structure of our London office with a view to reducing overheads. Together with other cost control measures we have successfully reduced our cost base in London by circa Â£1m on an annualised basis, without impacting our sales capacity. The Group has an increased focus in Africa, although this is not yet significant in revenue terms. Our industry brands are proving to be very strong - particularly in Oil and Gas where our brand has helped us win the tender for the 2005 World Petroleum Congress in Johannesburg. This in turn has provided a platform for ITE to increase the spread of our oil and gas events throughout the African market. If we consider a market to have significant potential, we look to follow with the introduction of other selected events from our portfolio of sector brands. Associates During the year ITE held 50% interests in exhibition organising businesses in the Czech Republic, in Turkey and in Egypt. As noted earlier, subsequent to 30 September we have disposed of our Czech Republic interests. ITF in Istanbul has had an encouraging year, organising 16 events including the re-launch of important Auto events which had been postponed following the economic crisis in 2001. This business is however still the lowest yielding market in which we operate. Although the increase in space sales was of real significance, the challenge for the future is to improve the yields and profitability of the key events. Outlook ITE has made very significant steps in consolidating and securing its key business interests throughout the course of the past year. We have considerable assets in our brands, international sales networks and local office infrastructures and these will underpin future growth. The markets in which we specialise continue to offer excellent prospects for us to develop and grow our business further. We are also pursuing new market opportunities to leverage our brand strengths. I look forward to and am excited by the prospects ahead. Ian Tomkins Chief Executive Consolidated Profit & Loss Account For the year ended 30 September 2003 2003 2002 Â£000 Â£000 Turnover 58,934 52,431 Cost of sales (32,213) (31,012) ------ ------ Gross profit 26,721 21,419 ------ ------ Net operating expenses before impairment and (12,720) (12,581) goodwill amortisation Impairment charge - (6,220) Goodwill amortisation (2,331) (1,905) ------ ------ Total net operating expenses (15,051) (20,706) ------ ------ Operating profit 11,670 713 ------ ------ Share of associates' operating profit/(loss) before goodwill amortisation 836 (1,211) Goodwill amortisation (132) (160) ------ ------ Share of associates' operating profit/(loss) 704 (1,371) Provision or loss on disposal of group undertakings (779) (476) ------ ------ Profit/(loss) on ordinary activities before 11,595 (1,134) interest Interest receivable 760 824 Interest payable and similar charges (68) (95) ------ ------ Profit/(loss) on ordinary activities before 12,287 (405) taxation Tax on profit/(loss) on ordinary activities (4,030) (2,350) ------ ------ Profit/(loss) on ordinary activities after 8,257 (2,755) taxation Minority interests 6 152 ------ ------ Profit/(loss) for the financial year 8,263 (2,603) Dividends (4,359) (6,548) ------ ------ Retained profit/(loss) for the year 3,904 (9,151) ------ ------ Earnings/(loss) per share Basic 3.1p (1.0p) Diluted 3.0p (1.0p) Headline diluted 4.2p 2.4p ------ ------ ------ ------ Consolidated Balance Sheet 30 September 2003 2003 2002 (as restated) Â£000 Â£000 Fixed assets Goodwill 30,016 30,826 Tangible assets 1,920 2,041 Associates 1,057 612 Other investments 2,412 2,492 ------- ------- 35,405 35,971 Current assets Debtors due within one year 19,557 18,225 Debtors due after one year 3,914 4,148 Cash at bank and in hand 22,104 17,693 ------- ------- 45,575 40,066 Creditors: amounts falling due within one year (39,035) (38,426) ------- ------- Net current assets 6,540 1,640 ------- ------- Total assets less current liabilities 41,945 37,611 Provisions for liabilities and charges (984) (1,241) ------- ------- Net assets 40,961 36,370 ------- ------- ------- ------- Capital and reserves Called-up share capital 2,813 2,778 Share premium account 27,996 27,495 Merger reserve 2,746 2,478 Option reserve 132 239 Profit and loss account 7,277 3,377 ------- ------- Equity shareholders' funds 40,964 36,367 ------- ------- Minority interests (3) 3 ------- ------- Total capital employed 40,961 36,370 ------- ------- ------- ------- Consolidated Cash Flow Statement For the year ended 30 September 2003 2003 2002 Â£000 Â£000 Net cash inflow from operating activities 14,439 10,393 Returns on investments and servicing of finance 692 1,080 Taxation (3,677) (2,300) Capital expenditure and financial investment 145 (643) Acquisitions and disposals (3,595) (5,624) Equity dividends paid (4,026) (1,623) -------- -------- Cash inflow before management of liquid resources and financing 3,978 1,283 Management of liquid resources (5,164) 2,300 Financing 433 155 -------- -------- (Decrease)/increase in cash in the year (753) 3,738 -------- -------- -------- -------- Consolidated Statement of Total Recognised Gains and Losses For the year ended 30 September 2003 2003 2002 Â£000 Â£000 Profit/(loss) for the financial year Group 7,762 (1,281) Associates 501 (1,322) --------- -------- 8,263 (2,603) (Loss)/gain on foreign currency translation (46) 22 Adjustment to option reserve for lapsed options 42 115 --------- -------- Total recognised gains and losses relating to the year 8,259 (2,466) --------- -------- Notes 1. Basis of preparation This report is for the year ended 30 September 2003 and was approved by the Board on 8 December 2003. The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2003 or 2002, but is derived from those accounts. Statutory accounts for 2002 have been delivered to the Registrar of Companies and those for 2003 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 September 2003 have been prepared following accounting policies consistent with those for the year ended 30 September 2002 except that the reserves for the year ended 30 September 2002 have been restated in order to follow the merger relief provisions of the Companies Act 1985 where shares are issued at a premium for acquisition as set out in note 5. The accounts have been prepared on the historical cost basis and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. 2. Net operating expenses Net operating expenses includes total administrative expenses of Â£15.3 million (2002: Â£21.3 million) and rental income of Â£287,000 (2002: Â£150,000). The balance for the prior year related to income in relation to profit rights in an externally run exhibition of Â£442,000. Administrative expenses include Â£0.4 million of redundancy costs and, in connection with the Group's activities in the Czech Republic and Slovakia, Â£0.8 million of operating charges and Â£0.6 million of goodwill amortisation. In the prior year, administrative expenses included non-recurring items of Â£1.4 million, being Â£0.6 million of redundancy and restructuring costs, Â£0.3 million of provision against loans and Â£0.5 million of provision against rent and repairs. 3. Earnings per share The calculations of earnings per share are based on the following results and numbers of shares. Headline diluted Basic and diluted 2003 2002 2003 2002 Restated Â£000 Â£000 Â£000 Â£000 Profit/(loss) for the financial year 8,263 (2,603) 8,263 (2,603) Amortisation of goodwill 2,463 2,065 - - Exceptional amounts written off goodwill and investments - 6,220 - - Loss on disposal of group undertakings 779 476 - - ------ ------- ------ ------ 11,505 6,158 8,263 (2,603) ------ ------- ------ ------ 2003 2002 Number of shares Number of shares ('000) ('000) Weighted average number of shares: For basic earnings per share 270,527 258,372 Exercise of share options 3,643 2,837 ---------- ---------- ---------- ---------- For diluted earnings per share 274,170 261,209 ---------- ---------- ---------- ---------- Headline diluted earnings per share is intended to provide a consistent measure of group earnings on a year on year basis. Headline diluted earnings per share is calculated using profit for the financial year before amortisation and impairment of goodwill and profits or losses arising on disposal of group undertakings. In the prior year, Headline diluted earnings per share included profits and losses on disposal of group undertakings. 4. Cash flow notes Reconciliation of operating profit to operating cash flows 2003 2002 Â£000 Â£000 Operating profit 11,670 713 Depreciation charges 454 449 Amortisation 2,331 1,905 Impairment - 6,220 Profit/(loss) on sale or write down of fixed assets 267 (69) Increase in debtors (1,234) (2,776) Increase in creditors 649 3,951 Increase in provisions 302 - -------- ------- Net cash inflow from operating activities 14,439 10,393 -------- ------- Analysis of net funds 30 September 30 September 2002 Cash flow 2003 Â£000 Â£000 Â£000 Cash at bank and in hand 17,693 (753) 16,940 --------- --------- --------- Net funds 17,693 (753) 16,940 Cash held on deposit - 5,164 5,164 --------- --------- --------- Cash shown on balance sheet 17,693 4,411 22,104 --------- --------- --------- --------- --------- --------- Reconciliation of net cash flow to movement in net funds 2003 2002 Â£000 Â£000 (Decrease)increase in cash in the year (753) 3,738 --------- --------- Movement in net funds in year (753) 3,738 Net funds at 1 October 17,693 13,955 --------- --------- Net funds at 30 September 16,940 17,693 --------- --------- 5. Reserves Share Merger Option Profit and Total premium account reserve reserve loss account Â£000 Â£000 Â£000 Â£000 Â£000 1 October 2002 (as previously reported) 31,010 - 239 2,340 33,589 Transfer to merger reserve (3,515) 2,478 - 1,037 - ------- ------ ------ ------- ------ 1 October 2002 (as restated) 27,495 2,478 239 3,377 33,589 Exercise of options 475 - (65) - 410 Retained profit for the year - - - 3,904 3,904 Gain on foreign currency translation - - - (46) (46) Adjustment to option reserve for lapsed options - - (42) 42 - Purchase consideration - 268 - - 268 Shares issued for remuneration 26 - - - 26 ------- ------ ------ ------- ------ 30 September 2003 27,996 2,746 132 7,277 38,151 ------- ------ ------ ------- ------ ------- ------ ------ ------- ------ The prior year adjustment relates to the correction required to follow the merger relief provisions of the Companies Act 1985 to account for acquisitions involving the issue of shares at a premium. A net total of Â£2,478,000 has been transferred to the merger reserve which consists of Â£3,515,000 from the share premium account to reflect the premium on shares issued for acquisitions made in prior years and against this Â£1,037,000 in respect of goodwill amortisation and impairments previously charged in the Group consolidated accounts. 6. Post balance sheet event On 7 November 2003 an agreement was signed between Incheba Praha, Incheba a.s. and ITE whereby ITE disposed of its interest in Incheba Praha and Incheba a.s. and any rights in the Coneco exhibition. The loan between ITE and Incheba Praha was reduced by CZK 23,160,000 in November 2003 with the remaining balance being repaid in equal tranches in December 2004 and 2005. A provision has been made for the difference between the consideration due and the net book value of the assets of Â£779,000. This information is provided by RNS The company news service from the London Stock Exchange

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