Final Results

ITE Group PLC 05 December 2006 5 December 2006 For Immediate Release ITE GROUP PLC PRELIMINARY RESULTS ANNOUNCEMENT STRONG DEMAND DRIVES GROWTH Highlights Year ended Year ended 30 September 2006 30 September 2005 Turnover Â£82.4m Â£78.5m Profit before tax Â£24.8m Â£25.2m Headline pre-tax profit* Â£26.0m Â£25.3m Diluted earnings per share 6.7p 6.6p Headline diluted earnings per share** 7.0p 6.6p Dividend per share 3.5p 2.75p â€¢ Strong growth in demand for exhibitions in core markets â€¢ Biennially adjusted turnover up 16% # â€¢ Biennially adjusted headline profits up 25% # â€¢ New launches and contributions from acquisitions delivering as planned â€¢ 'Like for like' forward sales at 1 December 2006 up more than 10% â€¢ Dividend for year of 3.5p up 27% Commenting on the results, Iain Paterson, Chairman, said: 'Our successful strategy of leveraging the market leading positions we have developed in our core markets has delivered another strong set of results. The growth in both turnover and underlying profitability has been largely driven by organic development of our exhibitions, supplemented by the initial contribution from the Footwear and AgriHort acquisitions made in the last financial year.' 'The growing strength and stability of the Russian and CIS economies has stimulated demand from both local and international businesses to exhibit their goods and services at our events. This, coupled with the opportunities presented by increases in venue space in our core markets, will support growth in our exhibition portfolio into 2007 and beyond. The new financial year has commenced well, in line with our expectations, and the Board remains confident of the prospects for the year.' * Headline pre-tax profit is defined as profit before tax, amortisation of acquired intangibles and profits or losses arising on disposal of group undertakings - see Note 3 for details. ** Headline diluted earnings per share is calculated as profit attributable to equity holders adjusted for amortisation of acquired intangibles and profits or losses arising on disposal of Group undertaking, - see Note 3 for details. # Biennially adjusted figures exclude the effect of significant non-annual events. Enquiries: Ian Tomkins ITE Group plc 020 7596 5000 Charles Palmer/Tim Spratt Financial Dynamics 020 7831 3113 ITE Group plc Preliminary statement for the year ended 30 September 2006 Chairman's Statement Group Performance The Group has produced another impressive trading and financial performance for the 2006 financial year. Turnover of Â£82.4 million was a 5% improvement on last year's reported turnover of Â£78.5 million, and headline profit before tax of Â£26.0 million was ahead of the re-stated result for last year (Â£25.3 million). This result was achieved despite lower interest income following last year's share buyback and the Â£4.9 million contribution in 2005 from non-annual events. Reported profit before tax was Â£24.8 million (2005: Â£25.2 million) and fully diluted earnings per share improved to 6.7p per share (2005: 6.6p). Strategic Progress During the year the Group has continued to implement its strategy of pursuing organic growth and strengthening ITE's market leadership in key industry sectors supplemented through selective earning enhancing acquisitions. In addition, the excellent long-term relationships with our venues continue to be of significance to our business. In Moscow the construction event, Mosbuild, grew into the newly constructed exhibition space at Crocus, and in Almaty, Kazakhstan, the Kazbuild construction event was able to expand into the newly completed, ITE supported, pavilion. In Kyiv the larger events, KievBuild and AgriHort, were both able to grow into the second phase development at the IEC venue which was completed in January 2006. It is through the proven and established success of our sales and organising teams that ITE is now the independent exhibition organiser of choice for venues in our markets. Looking forward, I see another year of continued growth built upon the relationships and contracts we have established. Board and Management There have been a number of changes to the Board during the year. Marco Sodi stepped down in January following the sale by Veronis Suhler Stevenson of its remaining shareholding in the Company. Malcolm Wall joined the Board as a non-executive Director on 4 May 2006, and is a member of the Audit and Remuneration Committees. Malcolm brings extensive experience in the international B2B media and exhibitions business. Since the year-end Ceyda Erem has tendered her resignation as an ITE Board Director, although she will remain Managing Director of our associate business in Turkey. Ian Tomkins has informed the Board that he wishes to relinquish his role as Chief Executive at the end of 2007 for personal reasons. The Nomination Committee will shortly be starting a process to find his successor and will be meeting both internal and external candidates. During his tenure Ian has made an immense contribution to the remarkable success of the Group. I would like to express my thanks to the management and staff throughout the territories who have worked so hard to make this result achievable. We employ 650 people of whom over 75% are local nationals, employed and working in Russia, the CIS and Turkey. Dividend The Board has proposed a final dividend of 2.5p per share, making a total dividend for the year of 3.5p. This reflects an increase of more than 25% over last year's total dividend and is in line with the Board's policy of increasing dividends in line with the underlying earnings growth. Outlook The continued expansion of the exhibition industry in Russia and the CIS which has fuelled ITE's growth over the last few years is set to continue. Strong economic conditions, ITE's recognised international brands, our market leading position and our dedicated and conscientious staff all place us in a very strong position to drive our business forward. Iain Paterson Chairman 4 December 2006 Chief Executive's review Results for 2006 Financial Year Turnover for the year was Â£82.4 million (2005: Â£78.5 million). After making adjustment for the effect of biennial events this is a 16% improvement over last year's comparable turnover. This year's turnover includes an initial Â£2.7 million contribution of revenue from the Footwear and Kiev AgriHort acquisitions made in the last financial year. These events contributed Â£1.2 million to gross profits. The 'like for like' revenue growth (excluding the effect of biennial events and acquisitions in the year) achieved this year on our portfolio of events was 13%. The direct costs of exhibitions were well controlled in 2006 and as a result the gross margin of 46.7% was circa 1% higher than the gross margin achieved on last year's portfolio of events. Operating costs before amortisation charges of Â£14.1 million were 10% higher than the comparative charge for last year (2005: Â£12.8 million). Operating costs this year include the higher costs of expensing Performance Share Plans and Option Plans of Â£1.6 million (2005: Â£1.1 million), but this is partially offset by the release of a Â£0.3 million provision, originally made in 2003 against a venue loan. The associate business in Turkey delivered a result of Â£0.6 million (2005: Â£0.4 million) despite a reduced contribution from its textile exhibitions. Income from interest and finance was reduced following the Â£30 million share buyback executed in August 2005. Interest income was consequently reduced by approximately Â£1.3 million. Finance income includes the release of Â£0.4 million of 'notional imputed interest receipts' relating to certain venue loans under IFRS fair value accounting standards. Headline profit before tax this year of Â£26.0 million was ahead of last year's headline profit before tax of Â£25.3 million and, after adjusting for the effect of biennial events, represents a 25% increase over the comparable result for 2005. The Group's overall operating metrics for its events business (excluding publishing) are set out below: Square Gross Average yield metres sold Revenue profit Â£ 000's Â£m Â£m 2005 Results from Events 340.9 77.3 35.6 Non annual 2005 -23.9 -10.0 -4.9 2005 'Biennially adjusted' 317.0 67.3 30.7 212 Acquisitions 20.9 2.7 1.2 'Like for like' growth 42.7 8.3 5.4 2006 'Biennially adjusted' 380.6 78.3 37.3 206 Non annual 2006 45.0 2.3 0.4 2006 Results from Events 425.6 80.6 37.7 In 2006 the Group organised 146 events (2005: 152 events) in fifteen countries (2005: sixteen countries) from its nineteen dedicated offices. There were sixteen new launches in the year contributing a total Â£2.0 million in revenue and Â£0.5 million in gross profits. The Group sold 425,600m(2) of exhibition space in 2006 (2005: 340,900m(2)). After adjusting for the effect of biennial events the Group achieved a 20% increase in volume sales, a 16% increase in revenues and a 21% improvement in gross profits from the events it organised in 2006. The average yield across the Group achieved on comparable sales was 3% lower this year at Â£206 per m(2) (2005 comparable yield: Â£212 per m(2)). This was expected as half of the dilution in yield was attributable to the average yields of the new acquisitions; a quarter of the dilution in yield related to the re-pricing of the Moscow International Motor Show, and the remaining quarter was caused by strong volume growth from regions outside Moscow, where in general, average yields are lower. Divisional Review 'Like for like' growth (excluding the effect of biennial events and acquisitions) in revenue was 13% across ITE's total business. The strongest growth was in Central Asia where both profits and revenue increased by over 25%. Russia and Eastern & Southern Europe also performed above expectations. The table below sets out the biennially adjusted and 'like for like' growth in revenues across the regions of ITE's business. 2006 2005 Actual Biennially 'Like for like' Â£m Â£m change adjusted growth Russia 49.9 48.4 3% 11% 11% Central Asia & Caucasus 15.4 12.1 27% 27% 27% Eastern & Southern Europe 8.3 5.0 66% 42% 32% UK & Western Europe 7.8 6.0 30% 30% -3% Rest of World 1.0 7.0 -86% -23% -23% 82.4 78.5 5% 16% 13% 'Biennially adjusted' excludes the effect of biennial events 'Like for like' growth excludes the effect of biennial events and acquisitions in the year Russia Offices: Moscow, St Petersburg Staff employed: 2006: 191 2005: 188 Exhibitions organised: 2006: 44 2005: 40 Square metres sold (000's): 2006: 206 2005: 194 The market conditions in Moscow and St Petersburg were strong with most exhibitions reflecting higher demand. In Moscow the second pavilion at Crocus, which was completed in 2005, added an extra 60,000m(2) of available gross space to the market's international quality exhibition space. Accordingly there was resultant change in the Moscow market with new launches and venue changes across the industry, as organisers responded to the increase in space and increased choice of venue. In St Petersburg there has been relative stability and little change in established trading patterns. However the draw of Moscow's large events for the major international exhibitors is causing St Petersburg to evolve into a more regional exhibition business. In ITE's Moscow business the highlight of the year was the further expansion of the market leading construction event, Mosbuild. At 68,300m(2) (2005: 54,400m (2)) across the two leading exhibition venues this event is now Moscow's, and Russia's, largest trade exhibition. Of our other major international events in Moscow the Moscow International Travel and Tourism exhibition held in Expocentr was solid in response to competition this year from a new event launch at Crocus. It recorded marginal growth to 19,600m(2) (2005: 19,300m(2)) at a slightly reduced overall yield. The Moscow International Motor Show, focused on the B2B motor accessories, service and parts industries, took place for the first time in the new Crocus venue alongside the OICA consumer motor show, Autosalon. As part of this re-positioning the Moscow International Motor Show agreed a common pricing policy with the Autosalon event together with a lower venue cost to ITE. The event was bigger at 17,700m(2) (2005: 16,900m(2)) but yields were lower than the 2005 comparatives. However the new format was well received by visitors and exhibitors alike. Following the move to Crocus, pricing for the Moscow International Motor Show is likely to stabilise. Worldfood Moscow, held in Expocentr, continues to perform well and has become the leading specialist event in the trade food sector now occupying 22,200m(2) of space (2005: 20,300m(2)). Expoelectronica, the leading electrical components event, moved to the Crocus venue to secure more and better quality space. The event grew by over 20% to 9,000m(2) (2005: 7,400m(2)) and is now one of ITE's top five contributing events in Moscow. There have been a number of successful new launches in Moscow this year. Babytime is a consumer focused event; MIBS Autumn an 'on the water' summer boat event supplementing our Spring Boat Show. Since the year end a new launch of an Autumn travel event, Select Travel, and the transfer of our pharmaceuticals event to Crocus have both proved successful initiatives. Additionally ITE acquired two new events in June this year. Expoclean Moscow has a focus on the industrial cleaning industry and Bytchemexpo focuses on household chemicals. Expoclean took place in November and performed ahead of expectations; Bytchemexpo will take place in March next year. In St Petersburg most of the exhibitions reported steady growth. The major event in the calendar is Balticbuild which was unchanged in size at 10,200m(2) (the event is space constrained), but improved its revenues and profits. There was one small new launch, Subcontracting, supported by the City Government. Looking forward there is a new pavilion being built at Expocentr which will provide much needed space for our Expocentr based events to expand. This will add a further 8,000m(2) gross space and is due for completion in early 2007. Crocus has also commenced construction of a third pavilion, designed to provide at least 60,000m(2) gross. With more new space available the Moscow exhibition business is well positioned to deliver further growth. Central Asia & Caucasus Offices: Kazakhstan (Almaty, Astana, Atyrau) Azerbaijan (Baku), Uzbekistan (Tashkent), Georgia (Tbilisi), Kyrgyzstan (Bishkek), Tajikistan (Dushanbe) Staff employed: 2006: 183 2005: 134 Exhibitions organised: 2006: 59 2005: 63 Square metres sold (000's): 2006: 72 2005: 59 All offices in Central Asia experienced strong demand and excellent year on year revenue growth of more than 25% was achieved across the whole region. There have been no marked changes in the competitive environment. In Almaty, Atakent, the venue owner, successfully completed a new pavilion ready for our use in September 2006, but there have been no other significant changes in venue facilities elsewhere in Central Asia. A new office was opened in Kyrgyzstan in the year. One highlight of the year was the new launch of Kazbuild Spring in Almaty which delivered 4,100m(2). Our regular Kazbuild (Autumn) event was able to utilise the newly constructed pavilion and grow to 10,800m(2) (2005: 8,300m(2)). Total sales to the construction sector in Almaty have almost doubled in this financial year, testimony to the underlying strong demand. The strength of the construction sector was in evidence throughout the region with revenue growth at Atyraubuild (10%), Astanabuild (21%), Bakubuild (30%) and Uzbuild (14%) all recording positive year on year growth. In October 2005, the Kazakhstan International Oil and Gas exhibition and conference grew by 7% to 7,900m(2) (2005: 7,400m(2)). Since the year-end the October 2006 edition has been held and grew by 20% into the newly constructed pavilion. Oil and Gas events have again been strong performers throughout the region with the North Caspian event in Atyrau, Kazakhstan, Oil and Gas Uzbekistan and the Caspian Oil and Gas exhibition in Azerbaijan all recording good year on year revenue growth. New launch activity continued its momentum. The eight small start up events and conferences across the regions will assist to secure ITE's future presence in these markets as the economic infrastructure evolves. Events were launched in construction, banking and financial services and the power industry (Kazakhstan); and telecoms and travel (Uzbekistan). The current pattern of business growth in line with economic growth and assisted by venue development looks set to continue for the foreseeable future. Eastern and Southern Europe Offices: Ukraine (Kyiv), Turkey (Istanbul) Staff employed: 2006: 97 2005: 98 Exhibitions organised: 2006: 32 2005: 35 Square metres sold (000's): 2006: 104 2005: 49 In the Ukraine the second phase development of ITE's preferred venue, IEC, was completed in January 2006 allowing the newly acquired AgriHort event to expand into the new space. The 2006 edition of the event was 9,500m(2), significantly larger than the 2005 pre-acquisition edition. The construction event, Kievbuild, also benefited from the new space and reported strong growth of 47% over last year's show to 7,750m(2). The Ukraine International Travel and Tourism event reported growth of 20% in revenue and profit in selling 5,100m(2) (2005: 4,200m (2)). A strong overall result from the Ukrainian business was achieved in delivering 20% 'like for like' growth in revenues over the year. In Turkey our wholly owned business delivered its best contribution to date. The construction plant and machinery exhibition, Ankomak was held, for the first time since 2003; this event is over 40,000m(2) but at relatively low yields. The Turkish business saw good growth in its other exhibitions and in its outbound sales activity into ITE events across the regions. Our 50% owned associate business reported total sales of 200,000m(2) and made a contribution to ITE Group's profits after tax of Â£0.6 million. The furniture, house textiles and machinery tools events all grew well but the decline in the textile fabric exhibition, as previously advised, held back the overall result. Western Europe and UK Offices: UK (London, Huddersfield), Germany (Hamburg), Holland (Utrecht) Staff employed: 2006: 155 2005: 158 Exhibitions organised: 2006: 6 2005: 4 Square metres sold (000's): 2006: 36 2005: 25 The principal businesses carried out in the UK are the Spring and Autumn Fashion events, MODA, held at the NEC Birmingham and the related magazine publishing business. During the year the recently acquired Footwear UK events were integrated into the MODA UK business and operational structures. The core UK fashion events having enjoyed a successful February show, recorded a decline in demand in the Menswear section of its August event, reflecting seasonal patterns as well as circumstances in the UK retail market. The shortfall was more than compensated for by strong growth in the Footwear event over its pre-acquisition size. Magazine publishing also recorded a good result with revenues up 7% over the prior year on its portfolio of titles. This ITE business unit has established a successful model of complementing magazine advertising and exhibition participation. The business has been quick to adapt to industry trends and to grow and consolidate exhibition and magazine revenue. 36 staff are employed in the North England office running the exhibition and magazine business. Of the total staff employed in Western Europe and the UK, 28 are based in Germany contributing specialist sales onto Russia and the CIS. The London office of ITE employs 91 staff split evenly between sales teams and corporate ' head office'. Rest of the World Offices: Algeria (Algiers), China (Beijing) The principal event running in Africa this year was in Algeria where we continued our relationship with U.N.C.T.A.D. Following on from our initial success we opened a small office in Algiers and entered into a joint venture with Sonatrach to organise the national oil and gas exhibition and conference in Oran in November 2007. ITE has recently opened a small sales office in Beijing with a view to developing a greater participation from Chinese exhibitors into ITE's Russian and CIS events. Initial successes have been encouraging. Future Outlook ITE's strategy of focussing on achieving maximum organic revenue growth by leveraging its market leading position in markets where we have expertise advantage has yielded another strong set of results. The growing strength and stability of the Russian and the CIS economies, underpin the growth of domestic and international trade business conducted within these regions. International and local businesses are increasingly looking to exhibit their goods and services at the exhibitions which ITE owns. Growth in the exhibition business has been constrained until recently, by the lack of suitable international quality exhibition space. In 2006 the completion of 75,000m(2) of new venue space across Moscow, Kazakhstan and Ukraine will help support growth of our exhibition portfolio into 2007 and beyond. We anticipate further additional space will become available for use in 2007 in Moscow and Ukraine. ITE has, in its markets, a series of recognised market leading brands across a number of international exhibition sectors. The Group's well established office and infrastructure network throughout the region means that it is well placed to fully participate in the anticipated growth of the exhibition business. The new financial year has started well with trading in line with the Board's expectations. As of 1 December 2006 advance sales for the 2007 financial year were Â£54 million (2005: Â£43 million) an increase in excess of 10% on the comparable forward sales position this time last year. The Board remains confident of the prospect for the current financial year. Group Financial Review International Financial Reporting Standards ('IFRS') The 2006 Financial Statements are reported under IFRS. The comparative figures for 2005 have been re-stated onto a consistent basis as required. A full statement reconciling the reported 2005 Financial Statements to the re-stated 2005 Financial Statements is available on the Company's website: www.ite-exhibitions.com. Revenue and gross profit A detailed analysis of the main changes in revenues and gross profits of the business is set out in the Chief Executive's review of the business. Other operating income Other operating income represents rental income earned from subletting surplus office space, principally at ITE's London offices. Finance income Finance income for the year was Â£1.4 million (2005: Â£2.1 million). This includes Â£0.4 million of 'notional interest' imputed in applying IFRS fair value principles to certain venue loans. A further amount of Â£0.05 million of ' notional interest' remains to be credited to the income statement in the next financial year. The interest from bank deposits reduced to Â£0.8 million in the year (2005: Â£2.0 million) following ITE's Â£30 million buyback of its own shares in August 2005. The Group held average net cash balances of Â£14.8 million through the year (2005: Â£32.9 million). Finance costs Finance costs of Â£0.6 million (2005: Â£0.6 million) represent the interest cost of the Group's borrowings in Euro and US Dollar. The Group enters into these borrowing arrangements as part of its currency hedging activity. At 30 September 2006 the Group had borrowings of â‚¬13.0 million, and US$3.7 million. Tax charge The tax charge of Â£7.4 million represents 30% of profit before tax. In this financial year tax losses of â‚¬7 million which the Group had previously treated as being available to offset against future tax charges, were disallowed by the Dutch tax authority, leading to an increase in the deferred tax liability in the period. There has been a reduction in the Group's overall level of tax provisions. The Group anticipates that for the next year the tax rate will be in line with the UK Corporation tax rate of 30%, whereby the lower tax rates typically experienced in our major overseas markets are offset by withholding tax charges on dividends back to the UK. Earnings per share Basic earnings per share increased to 6.9p (2005: 6.7p). Fully diluted earnings per share increased to 6.7p from 6.6p in the prior year. The Group achieved Headline diluted earnings per share of 7.0p per share compared with 6.6p for the year to 30 September 2005. Headline diluted earnings per share is based upon profit for the financial year before amortisation of acquired intangible assets and any profits or losses on disposal of Group undertakings. Dividends The Group has recommended a final dividend of 2.5p for 2006, to bring the total dividend for the year to 3.5p (2005: 2.75p). Cash flow Cash generated from operations in the year was Â£34.2 million (2005: Â£29.4 million). The principal applications of cash were of Â£7.4 million applied to venue loans and advances (2005: net receipt Â£0.4 million) ; Â£9.1 million was paid in tax; (2005 : Â£8.4 million) ; Â£3.0 million was applied to acquisitions in the year (2005:Â£5.8 million) and Â£7.1 million was distributed as dividends (2005: Â£7.1 million). The result was a net increase in cash balances at the 30 September of Â£8.1 million. Net cash at 30 September 2006 was Â£21.2 million (2005: Â£13.0 million). Of the Â£21.2 million of cash Â£4.5 million was held in a trust account, which will be released as certain creditors are paid in full. At 30 September 2006 Â£0.5 million of the cash in trust was expected to be released within one year. Acquisitions & disposals On 1 March 2006 ITE acquired the Kiev Decor & Gift Exhibition from Expo UA for consideration of Â£0.4 million. The event is held in the Spring and Autumn each year. On 29 June 2006 ITE acquired the ExpoClean and BytChemExpo exhibitions in Moscow from PIK Maxima for a consideration of Â£1.8 million. Both events will be held by ITE for the first time in the year ending 30 September 2007. On 20 September 2006, ITE bought the remaining 10% minority shareholding in ITE Moda Limited for consideration of Â£1.0 million. ITE now owns 100% of the Moda fashion and publishing business. On 29 September 2006 ITE disposed of a subsidiary in Azerbaijan, Caspian Freight Services LLC, for Â£0.2 million to Meritex International Freight Services Limited. The company provided freight services to the Group's exhibitions in Azerbaijan. The consideration will be received over the 12 months ending 30 September 2007. The final deferred receipts of Â£0.1 million from the sale of ITE's interests in ACG have been received in the year. No further amounts remain outstanding Balance Sheet The Group's consolidated balance sheet at 30 September 2006 is summarised in the table below: Assets Liabilities Net assets Â£m Â£m Â£m Goodwill and intangibles 40.3 - 40.3 Property, plant and equipment 1.3 - 1.3 Associates 1.4 - 1.4 Venue advances 7.1 - 7.1 Cash 31.9 (10.7) 21.2 Current assets and liabilities excluding 25.5 (50.7) (25.2) cash and venue advances Provisions - (2.3) (2.3) Deferred tax 2.0 (2.1) (0.1) Total as at 30 September 2006 109.5 (65.8) 43.6 Total as at 30 September 2005 91.3 (59.2) 32.1 Net assets increased to Â£43.6 million. The main changes are in goodwill (increase of Â£1.6 million), venue advances (increase of Â£3.3 million) and net cash (increase of Â£8.1 million). Investment and capital expenditure The Group's capital expenditure on plant and equipment for the year was Â£0.4 million (2005: Â£0.4 million) and included exhibition equipment, computer equipment and associated software. The Group funds the development of venues and facilities where improved facilities will enhance the prospects and profitability of our organising business. The funding can take the form of a prepayment of future venue fees (' advance payments'), 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. Venue loans and advance payments are included under non-current and current assets in the balance sheet. At 30 September 2006 the Group's Sterling value of the outstanding balances of advance payments and venue loans was Â£7.1 million (2005: Â£3.8 million) as follows: 30 September 2005 New Repayments 30 September 2006 Â£m Â£m Â£m Â£m Moscow - 5.8 (3.0) 2.8 Kyiv 1.3 1.1 (0.6) 1.8 Almaty 0.8 1.1 (0.9) 1.0 St Petersburg 1.4 - (0.4) 1.0 Uzbekistan 0.2 0.3 (0.3) 0.2 Bulgaria 0.1 0.3* (0.1) 0.3 Total 3.8 8.6 (5.3) 7.1 *Release of provision These balances will be recovered from future venue use within three years except in Bulgaria and St Petersburg. In St Petersburg part of the advance repayments relate to future events taking place between 2007 and 2011. ITE is not presently active in Bulgaria and the loan is being repaid in instalments. Capital Following the cancellation of the share premium account and buy back and cancellation of its own shares last year, the Company has a Share Premium account of Â£698,000 as at 30 September 2006. During the year the Company has purchased 975,833 shares to be held in Treasury. The Company has also issued 1,013,194 ordinary shares of 1p in the year. Of the total new issues 983,000 were pursuant to the exercise of options and yielded aggregate consideration of Â£0.6m. The remaining shares were issued as part of Directors' remuneration. The Employees Share Option Trust ('ESOT') held 9,372,100 (3.6%) of the Company's issued share capital at the year end (2005: 11,127,000; 4.3%). Post balance sheet events There have been no significant post balance sheet events. Financial risk The main financial risk facing the Group is foreign currency risk. The Board has reviewed and agreed policies to manage financial risk as follows: Foreign currency risk The Group is exposed to movements in foreign exchange rates against Sterling for both trading transactions and for the translation of net assets and the profits and loss accounts of overseas operations. The principal exposure is to the Euro and Dollar exchange rates which form the basis of invoicing for our international customers. During the year the Group experienced net foreign exchange losses of Â£0.2 million (2005: Â£0.7 million). The exchange rate for the Euro at 30 September 2006 was â‚¬1.48:Â£1 (30 September 2005: â‚¬1.46::Â£1); the exchange rate for the US Dollar at the year end was $1.88:Â£1, (30 September 2005: $1.76::Â£1). The bulk of the Group's business is in emerging markets and to minimise the currency risk, the Group prices predominantly in Euros and US Dollars. A proportion of total invoicing amount is settled in local currency equivalent, translated at prevailing rates of at the date of settling invoices. In 2006 64% of the Group's sales were priced in Euros and 22% in US Dollars. Overall 61% of the Group's cash receipts in financial year ending 30 September 2006 were in hard currency and 39% was in various local currencies. The Group has a large proportion of its revenues and costs denominated in non-Sterling currencies. Sterling costs exceed Sterling revenues due to the level of UK based costs - in particular London sales and head office costs. The Group uses derivative instruments and currency borrowings to protect itself against the effect of currency fluctuations on its balance sheet. The Group's policy on derivative instruments is that: - it will only hedge up to 80% of the value of anticipated cash flows; and - it will not enter into derivative transactions more than 18 months ahead. At 30 September 2006 the Group had options to sell â‚¬15 million spread over the 12 months to 30 September 2007 at a rate of â‚¬1.43:Â£1 (the ''Option Rate'). Were the exchange rate for the Euro to fall below â‚¬1.38:Â£1 then the Group would be obliged to sell Euros at the Option Rate. Over the course of the year the Group has entered into currency borrowing arrangements to minimise it's exposure to foreign exchange risk. The currency borrowings can be offset against the matching Sterling deposits. At 30 September 2006 the Group had borrowings of â‚¬13.0 million, and US$3.7 million. The cash balance of Â£21.2 million at 30 September 2006 is presented net of these borrowings. Interest rate risk The Group finances its operations through cash holdings and debt facilities. 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 75% must have fixed rates of interest so as to minimise the Group exposure to interest rate movements. It is Group policy that surplus cash is 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. Going concern After considering the current financial projections for the Group, the Directors have a reasonable expectation that the Company has adequate resources to continue its operations for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts. Russell Taylor Finance Director 4 December 2006 Consolidated income statement For the year ended 30 September 2006 2006 2005 Â£000 Â£000 Continuing operations Revenue 82,368 78,547 Cost of sales (43,885) (42,552) __________ __________ Gross profit 38,483 35,995 Other operating income 278 316 Administrative expenses before amortisation (14,112) (12,848) Amortisation of acquired intangibles (1,330) (378) Total administrative expenses (15,442) (13,226) Profit on disposal of group undertakings 158 221 Share of results of associate 564 393 __________ __________ Operating profit 24,041 23,699 Finance income 1,368 2,068 Finance costs (621) (596) __________ __________ Profit on ordinary activities before taxation 24,788 25,171 Tax (7,351) (6,781) __________ __________ Profit for the period from continuing operations 17,437 18,390 __________ __________ Attributable to: Equity holders of the parent 17,401 18,423 Minority interests 36 (33) __________ __________ 17,437 18,390 __________ __________ Earnings per share (p) Basic 6.9 6.7 Diluted 6.7 6.6 __________ __________ Consolidated balance sheet 30 September 2006 2006 2005 Â£000 Â£000 Non-current assets Goodwill 34,406 32,771 Other intangible assets 5,869 5,989 Property, plant and equipment 1,269 1,126 Investments in associates 1,438 1,410 Venue advances and other loans 3,015 2,216 Deferred tax asset 2,022 1,395 ___________ ___________ 48,019 44,907 Current assets Trade and other receivables 29,594 22,722 Cash and cash equivalents 31,883 23,705 ___________ ___________ 61,477 46,427 Total assets 109,496 91,334 Current liabilities Bank overdraft (10,717) (10,686) Trade and other payables (50,711) (43,844) Provisions (907) (1,064) ___________ ___________ (62,335) (55,594) Non-current liabilities Provisions (1,367) (1,974) Deferred tax liabilities (2,145) (1,671) ___________ ___________ (3,512) (3,645) Total liabilities (65,847) (59,239) ___________ ___________ Net assets 43,649 32,095 ___________ ___________ Capital and reserves Share capital 2,609 2,599 Share premium account 698 38 Merger reserve 2,746 2,746 Capital redemption reserve 291 291 ESOT reserve (3,016) (3,562) Retained earnings 40,555 29,038 Own shares held (1,142) - Hedge and translation reserve 889 751 ___________ ___________ Equity attributable to equity holders of the 43,630 31,901 parent Minority interests 19 194 ___________ ___________ Total equity 43,649 32,095 ___________ ___________ Consolidated cash flow statement For the year ended 30 September 2006 2006 2005 Â£000 Â£000 Cash flows from operating activities Operating profit 24,041 23,699 Adjustments for: Depreciation and amortisation 1,895 826 Other non-cash expenses 208 926 Share of associate profit (564) (393) Gain on disposal of subsidiary (158) (221) (Decrease)/increase in provisions (213) 1,531 __________ __________ Operating cash flows before movements in 25,209 26,368 working capital (Increase)/decrease in receivables (233) 1,666 Increase in payables 9,244 1,355 __________ __________ Cash generated from operations 34,220 29,389 Tax paid (9,064) (8,378) Venue advances and loans (7,422) 436 __________ __________ Net cash from operating activities 17,734 21,447 Investing activities Interest received 925 2,085 Dividends received from associates 422 437 Acquisition of businesses (3,026) (5,785) Purchase of property, plant and equipment (422) (430) __________ __________ Net cash used in investing activities (2,101) (3,693) Financing activities Dividends paid (7,143) (7,088) Interest paid (621) (596) Share cancellation - (30,185) Net cash flow in relation to ESOT shares 541 (724) Purchase of own shares (1,142) - Proceeds from issue of share capital 634 927 __________ __________ Net cash flows from financing activities (7,731) (37,666) Net increase/(decrease) in cash and cash 7,902 (19,912) equivalents Net cash and cash equivalents at beginning of 13,019 33,546 period Effect of foreign exchange rate changes 245 (615) __________ __________ Net cash and cash equivalents at end of period 21,166 13,019 __________ __________ 2006 2005 Â£000 Â£000 Comprised of: Cash and cash equivalents 31,883 23,705 Bank overdrafts (10,717) (10,686) __________ __________ 21,166 13,019 __________ __________ Consolidated statement of recognised income and expense For the year ended 30 September 2006 2006 2005 Â£000 Â£000 Currency translation difference on net investment in subsidiary undertakings (197) 750 Gain on cash flow hedge 356 - Tax on items taken directly to equity 159 151 __________ __________ Net income recognised directly in equity 318 901 Transferred to profit or loss on cash flow hedges (22) - Implementation of IAS 39 (500) - Profit for the period attributable to the shareholders 17,437 18,390 __________ __________ Total recognised income and expense for the period 17,233 19,291 __________ __________ Attributable to: Equity holders of the parent 17,197 19,324 Minority interests 36 (33) __________ __________ 17,233 19,291 __________ __________ Notes 1 Basis of preparation ITE Group plc has historically prepared its audited annual accounts in accordance with UK generally accepted accounting practice (UK GAAP). Following European regulation issued in 2002, the Group now presents its Annual Report and consolidated accounts in accordance with International Financial Reporting Standards (IFRS). The information contained in this preliminary announcement for the year ended 30 September 2006 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 but has been extracted from those accounts. The IFRS information for the year ended 30 September 2005 is a restatement of information extracted from the statutory financial statements prepared under UK GAAP on the historical cost basis. The statutory financial statements for the year ended 30 September 2005 have been filed with the Registrar of Companies and those for the year ended 30 September 2006 will be filed following the Group's Annual General Meeting. The auditors' report on those accounts was unqualified and did not contain statements under section 237 (2) or 237(3) of the Companies Act 1985. Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Group expects to publish its full IFRS financial statements for the year ended 30 September 2006 in January 2007. IFRS 1 First-time Adoption of International Financial Reporting Standards permits companies adopting IFRS for the first time to take some exemptions from the full requirements of IFRS and also certain elections in the transition period. The exemptions and elections adopted by the Group are shown in the Group's Annual Report and Accounts for the year ended 30 September 2005 and are available on the Group's website www.ite-exhibitions.com together with full details of the Group's IFRS accounting policies. 2 Dividends 2006 2005 Â£000 Â£000 Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 30 September 2005 of 1.85p (2004 - 1.65p) per 4,602 4,533 ordinary share Interim dividend for the year ended 30 September 2006 of 1.0p (2005 - 0.9p) per 2,535 2,544 ordinary share __________ __________ 7,137 7,077 __________ __________ Proposed final dividend for the year ended 30 September 2006 of 2.5p (2005 - 6,264 4,602 1.85p) per ordinary share __________ __________ 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 9,372,100 (2005: 11,127,000) ordinary shares representing 4% of the Company's called-up ordinary share capital, has agreed to waive all dividends due to it. Further, no dividends will be paid in respect of own shares held in treasury. 3 Earnings per share The calculations of basic and diluted earnings per share are based on the Profit for the financial year of Â£17.4 million (2005: Â£18.4 million) and the following numbers of shares. Number of shares 2006 2005 Number of shares ('000) Number of shares ('000) Weighted average number of shares: For basic earnings per share 250,485 273,134 Effect of dilutive potential ordinary shares 8,727 6,788 ___________ ___________ For diluted earnings per share 259,212 279,922 ___________ ___________ Headline 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 7.0p per share (2005: 6.6p). The headline diluted earnings per share is based on the following earnings and the diluted number of shares in the table above. Earnings for headline diluted earnings per share 2006 2005 Â£000 Â£000 Profit for the financial year attributable to equity holders 17,401 18,423 Amortisation of acquired intangible assets 1,330 378 Tax effect of amortisation of acquired intangible assets (315) (83) Profit on disposal of group undertakings (158) (221) ________ ________ 18,258 18,497 ________ ________ 4 Reserves Share Merger Capital ESOT Retained premium reserve redemption reserve earnings account reserve Â£000 Â£000 Â£000 Â£000 Â£000 1 October 2004 29,036 2,746 - (2,792) 16,637 Exercise of options 912 - - 99 (23) Net profit for the year - - - - 18,953 Dividends paid - - - - (7,077) Gain on foreign currency translation of overseas - - - - - operations Share based payments - - - - 592 Shares issued for remuneration 35 - - - - Deferred tax reserve - - - - 151 Purchase of shares by ESOT - - - (869) - Gain on exercise of ESOT options - - - - 48 Capital reduction (29,945) - - - 29,945 Purchase and cancellation of shares - - 291 - (30,188) _________ _______ _________ _______ _________ 1 October 2005 38 2,746 291 (3,562) 29,038 Adoption of IAS 39 - - - - (500) _________ _______ _________ _______ _________ Revised 1 October 2005 38 2,746 291 (3,562) 28,538 Treasury Hedge and Put option Total shares translation reserve reserve Â£000 Â£000 Â£000 Â£000 1 October 2004 - - - 45,627 Exercise of options - - - 988 Net profit for the year - - - 18,953 Dividends paid - - - (7,077) Gain on foreign currency translation of overseas - 751 - 751 operations Share based payments - - - 592 Shares issued for remuneration - - - 35 Deferred tax reserve - - - 151 Purchase of shares by ESOT - - - (869) Gain on exercise of ESOT options - - - 48 Capital reduction - - - - Purchase and cancellation of shares - - - (29,897) _______ _________ _________ _______ 1 October 2005 - 751 - 29,302 Adoption of IAS 39 - - (1,044) (1,544) _______ _________ _________ _______ Revised 1 October 2005 - 751 (1,044) 27,758 Share Merger Capital ESOT premium reserve redemption reserve account reserve Â£000 Â£000 Â£000 Â£000 Revised 1 October 2005 38 2,746 291 (3,562) Exercise of options 625 - - 546 Net profit for the year - - - - Dividends paid - - - - Loss on foreign currency translation of overseas - - - - operations Share based payments - - - - Shares issued for remuneration 35 - - - Deferred tax reserve - - - - Increase in fair value of hedging derivatives - - - - Transfer to income - - - - Costs related to capital reduction - - - - Exercise of put option - - - - Own shares held in treasury - - - - _________ _______ _________ _______ 30 September 2006 698 2,746 291 (3,016) _________ _______ _________ _______ Retained Treasury Hedge and Put option Total earnings shares translation reserve reserve Â£000 Â£000 Â£000 Â£000 Â£000 Revised 1 October 2005 28,538 - 751 (1,044) 27,758 Exercise of options 117 - - - 1,288 Net profit for the year 17,401 - - - 17,401 Dividends paid (7,137) - - - (7,137) Loss on foreign currency translation of overseas - - (197) - (197) operations Share based payments 1,492 - - - 1,492 Shares issued for remuneration - - - - 35 Deferred tax reserve 159 - - - 159 Increase in fair value of hedging derivatives - - 356 - 356 Transfer to income - - (22) - (22) Costs related to capital reduction (15) - - - (15) Exercise of put option - - - 1,044 1,044 Own shares held in treasury - (1,142) - - (1,142) _________ _______ _________ _________ _______ 30 September 2006 40,555 (1,142) 889 - 41,021 _________ _______ _________ _________ _______ The Company adopted IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' prospectively from 1 October 2005. As a consequence of adopting IAS 32 and IAS 39, the Company recognised a loss of Â£0.5 million in equity at that date. Additionally certain put options have been reclassified as financial liabilities resulting in a Â£1.0 million reduction in reserves. 5 Dividend payment dates Final dividend 2006 Ex date 31 January 2007 Record date 2 February 2007 Annual General Meeting 22 February 2007 Payment date 2 March 2007 Interim dividend 2007 Record date June 2007 Payment date July 2007 This information is provided by RNS The company news service from the London Stock Exchange

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