Final Results

ITE Group PLC 06 December 2005 6 December 2005 For Immediate Release ITE GROUP PLC PRELIMINARY RESULTS ANNOUNCEMENT RECORD RESULTS Highlights Year ended Year ended % change 30 September 2005 30 September 2004 Turnover £78.5m £60.8m 29% Profit before tax £23.0m £15.7m 46% Headline pre-tax profit* £26.0m £18.1m 44% Diluted earnings per share 5.5p 3.8p 45% Headline diluted earnings per share** 6.6p 4.7p 40% Dividend per share 2.75p 2.2p 25% • Strong growth in core markets • Headline pre-tax profits up 44% to £26m • Good contribution from biennial Moscow Oil and Gas exhibition and the one-off World Petroleum Congress • Headline diluted earnings per share up 40% to 6.6p • Total dividend increased by 25% to 2.75p per share • Recent acquisitions successfully integrated and benefiting from ITE ownership • 37m of cash returned to shareholders through share buy back and dividends Commenting on the results, Iain Paterson, Chairman, said: 'ITE's performance during the year confirms the strength of our business and the growth potential in our markets. During the year the core business grew strongly. In addition we benefited from one-off and biennial exhibitions. We continue to demonstrate our ability to grow our leading events, launch new exhibitions and integrate bolt-on acquisitions. 'The Group's focus on emerging and developing markets provides many opportunities and ITE, with its strong and established presence in its key markets, is well placed to continue to capitalise on them. The momentum we have seen in 2005 has continued into the current financial year and the business is performing in line with our expectations. We are confident of the prospects of 2006.' * Headline pre-tax profit is defined as profit before tax, amortisation and impairment of goodwill (including associates) and profits or losses arising on disposal of group undertakings - see the Profit and Loss Account for details ** Headline diluted earnings per share is calculated using profit before amortisation and impairment of goodwill (including associates) and profits or losses arising on disposal of group undertakings. 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 2005 Chairman's Statement Group Performance All sectors of our business have had an excellent year yielding strong financial results. Turnover grew 29% to £78.5m (2004: £60.8m) and headline profit before tax rose 44% to £26.0m (2004: £18.1m). Headline diluted earnings per share improved by 40% to 6.6p per share and diluted earnings per share improved to 5.5p (2004: 3.8p). Profit before tax was £23.0m (2004: £15.7m). A strong performance from annually recurring business was augmented by contributions from the biennial Moscow International Oil & Gas exhibition, and from the once-off organisation of the World Petroleum Congress held in Johannesburg in September. Excluding the effect of these two events turnover from the annually recurring business increased by 14% and gross profits by 15%. The Group returned £30m to shareholders via a tender to buy back its own shares in July. Due to the cash generative nature of the business, we finished the year with a net £13.0m of cash and a strong balance sheet capable of supporting investment and selective acquisition opportunities that are in line with our strategic plans. Strategic Process During the year we have continued to implement our strategy of enhancing our core business, principally through a combination of organic growth and 'bolt on' acquisitions where the strategic fit is attractive. Consistent with this strategy we acquired Caspian Events Limited (Caspian Oil & Gas in Azerbaijan) at the beginning of the financial year, BTO AgriHort (Agriculture in Kyiv) in August and Footwear UK (Fashion in Birmingham and London) in September and these have all been successfully integrated into our existing infrastructure. We tendered for, purchased and cancelled £30m of our own share capital in July demonstrating our desire to improve the efficiency of the Group's balance sheet in light of the Group's strong positive operational cash flow. A further significant event was the recent conclusion of a long term co-operation agreement with Crocus (the new Moscow exhibition venue). This agreement is supplementary to ITE's main long-term agreement for the Expocentr venue in central Moscow. Given the potential for growth in the Moscow exhibition market fuelled by the new space at Crocus, it is important for ITE to maintain substantive contractual relationships with both of the main venues in Moscow. Board and Management Following the reduction in the shareholding of Veronis Suhler Stevenson, Christopher Russell stepped down from the Board. In addition, Ross Stobie, Director General of the Moscow office, resigned from the Board following the conclusion of three years of service in Moscow. The Board extends its thanks to both Ross and Christopher who have both played important roles in our success over recent years. The success of our business largely depends on the relationships that our staff build and maintain with our customers. I should like, therefore, to express the Board's appreciation for the continued efforts which all our staff have made in achieving such a strong set of results. Dividend The Board increased the interim dividend to 0.9p per share (2004: 0.55p) and recommends a final dividend of 1.85p per share making a total dividend for the year of 2.75p per share, a 25% increase on last year's total dividend of 2.2p per share. Taken together with the share buy back in the summer the Company will have returned £37m of cash to shareholders this year. Outlook The momentum seen in 2005 has continued into the current financial year and there are good indications that the underlying growth is set to continue. Overall the Board is confident that ITE is well positioned to benefit from both the changing exhibitions environment in Moscow, and from the ongoing economic growth apparent across the regions in which we operate. Iain Paterson Chairman 6 December 2005 Chief Executive's Review Financial performance Turnover for the year ended 30 September 2005 was £78.5m (2004: £60.8m). Overall gross profit for 2005 was £36.0m, (2004: £27.2m) earned at a gross margin of 45.8% (2004: 44.8%). This year's result was buoyed by the biennial effect of the Moscow International Oil & Gas exhibition ('MIOGE'), and the once-off contract to organise the World Petroleum Congress ('WPC') in Johannesburg, South Africa. Excluding the effect of these two events, the result from annually recurring business was a turnover of £69.4m, representing a 14% improvement on 2004's comparable figure, and a gross profit of £31.3m, a 15% improvement on 2004's comparable figure. Operating profit of £20.6m for the financial year (2004: £13.8m) was after charging operating expenses of £15.4m (2004: £13.4m). The increase of £2.0m in operating expenses reflects higher levels of staff employed in line with rising activity levels throughout the Group and higher inflation rates in the regions in which ITE operates, together with an increasing cost of expensing the ITE Performance Share Plan (£0.6m in 2005; £0.3m in 2004). The associate company contribution of £0.5m (2004: £0.5m) is from the Group's 50% owned associate business in Turkey, which reported good sales. However lower yields and higher operating costs culminated in a similar financial contribution to last year. Trading highlights In 2005 ITE organised 152 exhibitions in 16 countries (2004: 137 events in 15 countries). There were 27 new launches in the year. Total square metres sold in 2005 were 341,000 (2004: 276,000) at an average yield of £227 per square metre (2004: £220 per metre). An analysis of the key changes in the Group's overall revenue, gross profit and volume sales is set out below: Square metres Revenue Gross profit (000's) £'million £'million 2004 Sales & gross profits 276 60.8 27.2 Biennial & WPC 21 9.1 4.7 297 69.9 31.9 Non recurring and timing (11) (3.0) (0.3) differences New launches 11 2.4 0.1 Acquisitions 11 2.1 1.0 Growth on recurring events 33 5.8 2.9 Publishing 1.2 0.4 2005 Sales & gross profits 341 78.5 36.0 The increase in net square metre sold of 65,000 metres was spread throughout Russia and the CIS countries in which ITE operates. The exhibition business in Moscow, helped by the biennial recurrence of the Moscow International Oil and Gas event and the growth of its Mosbuild construction event contributed a 12% increase in its square metre sales. All ITE's offices in the CIS countries enjoyed strong levels of growth with Ukraine's volume of square metre sales growing by 18%, Kazakhstan's and Azerbaijan's sales volumes increasing by 12%, Uzbekistan's by 35%, and St Petersburg's by 10%. The top ten events ranked by gross profit sold a total 181,700m(2) with the annually recurring events in the top ten showing an overall expansion of 13% in volume sales over their 2004 equivalent events. The benefit of having more space to sell, notably at the Mosbuild construction event in Moscow and the Kazakhstan Oil & Gas Exhibition in Almaty underpinned the growth in ITE's biggest events. Gross profit of £36.0 million (2004: £27.2 million) analysed by industry sector is set out below: 2005 2004 Construction 32% 40% Oil & Gas 22% 9% Travel 10% 13% Food 10% 12% Motor / Transport 8% 8% Fashion 5% 5% IT 4% 5% Other 9% 8% Total gross profit has increased by 32% with much of the activity being driven by the oil and gas and construction sectors. This year the oil and gas sector includes significant contributions from the Kazakhstan International Oil and Gas event, the biennial Moscow International Oil & Gas event, the World Petroleum Congress and the newly acquired Caspian Oil & Gas event. The continuing strength of construction events throughout Russia and the CIS reflects the increasing investment being made year on year into private and public infrastructure projects. Review of Operations Gross profit analysed by the main geographical regions in which ITE operates is set out below, followed by a review of the most significant events for 2005 in each of the regions. 2005 2004 Russia 70% 76% Central Asia & Caucasus 14% 13% Southern & Eastern Europe 4% 3% Western Europe 6% 8% Rest of World 6% 0.2% Russia Offices: Moscow, St Petersburg 2005 2004 Staff 188 161 Exhibitions 40 44 Square metres 194,000 173,000 ITE Group's Moscow office has seen changes in the exhibition market environment over the year and has implemented a series of initiatives. Expocentr, with whom ITE has a long and established trading relationship, continues to host the Group's most important events. A shortage of quality venue space in Moscow has however restricted the growth of some of ITE's exhibitions until recent times. Crocus, a new purpose built exhibition facility in Moscow opened with Phase I of its project in late 2004. In April 2005 ITE held 'Mosbuild+' at Crocus, being a re-location of the Windows & Doors event together with 'Interiors' and was a resounding success. The combined meterage of Mosbuild and Mosbuild+ was 54,400m(2), an increase of over 20% on the 2004 equivalent combined meterages. ITE has also initiated further re-locations to Crocus for 2006, including Expoelectronica (April 2006), Mining World Russia (April 2006), Moscow International Motor Show (Sept 2006) and Ingredients Russia (Nov 2006). On 28 September 2005, ITE formalised the basis of a long-term co-operation agreement with Crocus until 2015 with respect to certain key exhibitions, and in October ITE made an advance payment of $10m against specific venue tenancy contracts for the future. Our major Moscow exhibitions all enjoyed attractive increases in size with maintained or improved yields. Ingredients Russia in November 2004 continued its expansion, improving space sales by 16% to 5,500m(2). Moscow International Travel exhibition in March grew 13% to 19,200m(2) (2004 : 17,000m(2)); and the biennial Moscow International Oil & Gas exhibition in June sold 15,600m(2) an increase of 9% over its 2003 equivalent. The Motor event held in August was the Moscow International Motor Show, primarily focussed on the spare parts, accessories and repairs and maintenance sectors. Following a series of changes that have taken place over the course of the past year with respect to the Motor sector in Russia, ITE will now pursue its Moscow International Motor Show at Crocus commencing in September 2006. The Moscow Autumn event season finished with a good result from WorldFood Moscow selling 20,300m(2), but it remains restricted in its growth given current space availability issues at Expocentr. In May, Alexander Shtalenkov joined ITE as Director General, Moscow with responsibility for further developing the Group's leading Moscow business. Alexander has an established background of managing international businesses in Russia. The dynamics of supply and demand have changed substantially in Moscow. With the second phase of the new Crocus exhibition facility opening in September 2005, an additional 90,000 gross m(2) has been supplied to the Moscow exhibition industry over the last two years, effectively doubling the availability of international quality exhibition space in the city. Whilst this assists growth by releasing various constraints on some of ITE's key events, it also invites increasing competition. ITE with its recognised international brands, established venue relationships, and unparalleled office infrastructure is in a strong position from which to benefit from the expected growth in the Moscow exhibitions market. Exhibitions in St Petersburg represented 22,800m(2) of ITE's sales in Russia and enjoyed 9% growth in volume. The largest event, Baltic Building Week realised sales of 10,200m(2) a small increase on the 2004 result. Lenexpo, the St Petersburg venue, has now finished construction of its new pavilion. After de-commissioning some older halls the venue now offers an additional 4,000m(2) of gross space into which ITE plans to grow its events. Central Asia & Caucasus Offices: Kazakhstan (Almaty, Astana, Atyrau), Azerbaijan (Baku), Uzbekistan (Tashkent) and Georgia (Tbilisi) 2005 2004 Staff 134 116 Exhibitions 63 56 Square metres 59,200 47,000 The Central Asia and Caucasus regions have continued their strong growth this year - driven by new launches, new regional opportunities and strong exhibitor demand. This year also included a first time contribution from the Caspian Oil and Gas exhibition which was acquired in October 2004. The combination of organic growth and the aforementioned acquisition delivered an increase from the region of more than 25% in space sold and gross profit over the comparative performance in 2004. As announced in the interim statement the Kazakhstan Oil and Gas Exhibition, which runs simultaneously with the conference, grew by 20% to over 7,400m(2). Kazbuild, organised in September also achieved growth of 20% in selling over 8,200m(2). Both of these exhibitions are now currently space constrained at the Atakent venue facility in Almaty. However the construction team are launching a new Kazbuild Spring in 2006 to satisfy demand. The Azerbaijan office successfully integrated the Caspian Oil and Gas exhibition acquired in October 2004. ITE substantially improved the profitability of the event in its first edition using its extensive sales network and local office resources. In addition there were several new launches in Baku covering consumer electronics, cleaning and a once-off customs event. However difficulties with availability of the venue which also operates as a sports facility necessarily caused the postponement of BakuBuild from September until October 2005. ITE Group's exhibition business in Tashkent, Uzbekistan contributed very strong growth more than doubling its sales and profits over the last year. A highlight among ITE's emerging markets, the office initiated eight new launches in the year. TextileExpo achieved a very significant performance in its second edition with space sales more than doubling. Expansion into new Central Asian regions included the launching of a number of small initial events in Mongolia, Tajikistan and Kyrgyzstan in 2005. ITE Central Asia has now established small offices in Beijing and Urumqi in Western China. Eastern & Southern Europe Offices: Turkey (Istanbul), Ukraine (Kyiv) 2005 2004 Staff 98 102 Exhibitions 35 28 Square metres 49,000 36,000 The Kyiv office produced a 50% increase in revenue and operating profit for the year ending 30 September 2005. This included excellent first time contributions from the two acquired exhibitions Public Health and Informatica, which together added 6,500m(2) of sales. WorldFood Ukraine organised in November 2004 was affected by the political unrest at the time and was 15% smaller than in the previous November. However the ordinary course of business was soon re-established in early 2005 and Kievbuild in February 2005 recorded strong growth in achieving sales of over 5,250m(2). ITE made two further acquisitions in the year in Kyiv, Photofair Kyiv, a small specialist event focused on digital photography and production, and, more significantly the acquisition of BTO's Kyiv AgriHort. The latter event is conducted in February and is the leading agricultural machinery and products event in the Ukraine. In February 2006 it is scheduled to expand into the newly completed phase II of the IEC exhibition halls, where ITE has been a contributor to the financing arrangements. ITE's 100% owned Turkish office has continued developing its important and growing role in selling outbound Turkish exhibitors into the Group's Russian and Central Asian exhibitions. It also organises a series of local events and ' Caspian regional conferences'. Yields are still disappointingly low in Turkey and the 19,200m(2) sold in 2005 only yield marginal profits for ITE. Associate Company - ITF ITF, a 50% owned associate business in Istanbul, had a successful trading year with volume sales and revenues both showing strong growth. The 2005 event calendar included Autoshow (cars) and Otomotive (spare parts / accessories) and enjoyed spectacular growth with the Furniture Show, IMOB. The growth however was again at lower yields. The higher yielding clothing fabric and textile event was reduced in size as a consequence of re-positioning it's target exhibition market. The Turkish economy has now enjoyed a period of greater stability and the continuance of such a stable economic environment will be welcome. Western Europe and UK Offices: London, Northern England, Hamburg 2005 2004 Staff 158 155 Exhibitions 4 4 Square metres 25,000 21,000 MODA UK is ITE's seventh highest contributing exhibition to Group gross profits this year. The Womenswear, Menswear and Accessories exhibitions added a catwalk to the shows and invested in a series of new initiatives, which helped support the growth in sales to from 21,000m(2) to 24,000m(2) this year. On 28 September ITE announced that it had acquired a series of complementary Footwear exhibitions in the UK, two of which have historically been co-located and share visitor audiences with our MODA Fashion events at the NEC in Birmingham. ITE is currently re-branding the events and will expand the marketing of the events using ITE's UK infrastructure. RAS Publishing, ITE's business to business fashion publications business, has enjoyed a successful first full year under ITE's stewardship. Circulations of the Womenswear and Menswear Buyer publications were stable, whilst advertising revenue improved by circa 13%. RAS Publishing made a minor acquisition of an accessories magazine during the year, which has been integrated into the business, re-branded and re-launched as Fashion Extras. Of the total staff number employed in the UK and Western Europe, 27 are based in Germany and are focussed on contributing outbound sales into our Russian and CIS exhibitions; 99 staff are currently based in London, of which more than half are sales orientated with the balance consisting of corporate, finance and administrative roles. Rest of World Offices: Johannesburg The highlight of the year's 'rest of the world' activity was the organisation of the World Petroleum Congress ('WPC) in Johannesburg, South Africa. The event attracted over 3,200 delegates (80% International), had over 500 speakers and was co-located with a new launch exhibition of 400 exhibitors utilising 9,000 square meters of net space. The event was a resounding success and the level of sponsorship raised for the events, as well as the number of paying foreign delegates attending the event, was the highest ever achieved in the WPC's 72 year history. Furthermore, the exhibition held alongside the congress was the largest oil and gas exhibition ever organised in Africa. ITE developed an unprecedented network of media partners to ensure maximum exposure globally and coupled with the sales, marketing and logistical achievements, the event evidenced ITE's maturity as a leading world class professional event organiser. The culmination of three years work from a dedicated ITE team yielded overall revenues of £5.5m and a pre-tax profit in the year of £2.0m. Outlook ITE's strategy is to focus on organic growth opportunities in our core markets, whilst making complementary 'bolt-on' acquisitions. The recent increase in supply of available Moscow exhibition venue space creates opportunities. ITE will continue to focus on its existing business, increasing its competitiveness and building on its expertise and infrastructure advantages, to ensure the Group will be the major beneficiary of the increase in capacity of the Moscow exhibitions market. Consistent with this ITE has concluded a new 10 year co-operation agreement with the Crocus venue in Moscow, that will relieve space constraints on Mosbuild, Expoelectronica and several other events.; Increased space could create opportunities for competitors. Nonetheless we believe that ITE is in a very strong position to benefit from the available opportunities and meet the challenges as they arise. ITE Group's Central Asia business continues to enjoy significant growth opportunities and resides in a region blessed with substantial natural resources. ITE remains the dominant force in conducting international trade exhibitions in the region. The Ukraine business is also contributing excellent growth and will benefit this year from having more available venue space. ITE Group's emerging and developing markets focus provides many opportunities and challenges. ITE Group's stable senior management team, well established network of local offices, together with its strong reputation and brand identity are key assets which will provide the platform for continued growth. As of 2 December 2005 advance sales for the 2006 event calendar were £43m (2004: £42m), an increase of 10% on a comparable basis with the forward sales position at this time last year. After another successful year and with the Group performing inline with expectations, the Board remains positive and confident with respect to the development and growth prospects ahead for the business. Ian Tomkins Chief Executive 6 December 2005 Group Financial review Earnings per share The diluted earnings per share increased to 5.5p from 3.8p in the prior year. The Group achieved headline diluted earnings per share of 6.6p per share compared with 4.7p for the year to 30 September 2004. Headline diluted earnings per share is based upon profit for the financial year before amortisation and impairment of goodwill, (including associates) and profits or losses on disposal of Group undertakings. Acquisitions & disposals As reported in last year's financial statements ITE acquired 100% of the issued share capital of Caspian Events Limited on 6 October 2004 for £2.2m in cash. On 2 August 2005 ITE completed the acquisition of 100% of BTO Beurs-en Tentoonstelling - Organisatie B.V. ('BTO') for consideration of €2.0m of which €0.6m is payable in three instalments on the 30 April 2006, 2007 and 2008. BTO owns the AgriHort exhibition held in Kyiv every February, and on which ITE has been the local partner for the last five years. On 28 September 2005 ITE acquired 100% of DEW Events Limited which owns four Footwear exhibitions for an initial consideration of £3.4m in cash. £2.6m of the consideration was paid on completion with a further £0.8m paid in November 2005. There are put and call options existing over management's retained 25% in ITE Footwear Limited (which owns the two London exhibitions) based on a multiple of profits and not normally exercisable before 1 November 2008. Deferred receipts of $0.24m from the sale of ITE's interests in ACG have been received in the year, and a further $0.15m has been received since 30 September 2005. The balance remaining still due is $0.05m. Post balance sheet event Events since 30 September 2005 In October 2005 ITE Group made advance payments of $10m to Crocus, a Moscow exhibition venue. The payments are made against specific exhibition venue licence agreements. Tax charge The tax charge of £7.4m represents 28.5% of headline pre-tax profits. The Group anticipates that for the next year the tax rate will remain below the UK Corporation tax rate of 30% due to the lower tax rate experienced in some of our major overseas markets. However anticipated changes to Dutch tax legislation has restricted the availability of future tax losses to the Group in Holland. Capital The Company cancelled its share premium account of £29,944,011 on 8 July 2005. It subsequently used the distributable reserves so created to buy back and cancel 29,126,208 of its own shares for a cost of £30.2m. The net effect of these transactions was to reduce the issued share capital by 10% and to reduce the Group's net assets by £ 30.2m. The Company has also issued 3,847,401 ordinary shares of 1p in the year. This represents 1.3% of the issued share capital at 1 October 2004. Of the total new issues 3,802,537 were pursuant to the exercise of options and yielded aggregate consideration of £0.96m. The remaining shares were issued as part of Directors' remuneration. The Employees Share Option Trust ('ESOT') held 11,127,000 (4.3%) of the Company's issued share capital at the year end (2004: 10,427,000; 3.6%). The ESOT has acquired further shares in the market over the course of the year. Cash flow Net cash at 30 September 2005 was £13.0m (2004: £33.5m). Cash inflow from operating activities in the year to 30 September 2005 was £28.6m (2004: £21.8m). Cash outflow on acquisitions was £6.1m. A net £30.0m was applied in buying back the Company's own shares (including ESOT purchases) and after taking account of consideration from new issues. A further £8.4 was applied in taxation payments and £7.1m was paid to shareholders as dividends. Of the £13.0m of cash £6.5m was held in a trust account, which will be released as certain creditors are paid in full. At 30 September 2005 £2.2m of the cash in trust was expected to be released within one year and £4.3m was expected to be released after 30 September 2006. Interest Net interest earned in the year was £1.65m (2004: £1.1m). The Group held average cash balances of £32.9m through the year (2004: £27.4m). Investment and capital expenditure The Group's capital expenditure on plant and equipment for the year was £0.4m (2004: £0.7 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 debtors in the balance sheet and are treated as financial investments in the Cash flow statement. At 30 September 2005 the Group's Sterling value of the outstanding balances of advance payments and venue loans was £3.9m (2004: £4.6m) as follows: 30 September Repayments New Advances 30 September 2004 2005 £m £m £m £m Kyiv* 1.6 (0.3) - 1.3 Almaty + 0.8 (0.5) 0.5 0.8 St. Petersburg* 2.0 (0.6) - 1.4 Uzbekistan* - (0.1) 0.3 0.2 Bulgaria+ 0.2 (0.1) - 0.1 4.6 (1.6) 0.8 3.8 * advance payments + venue loans 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 will be repaid in instalments. This table does not include an advance payment to the Crocus venue in Moscow of US$10m (£5.7m) made in October 2005. 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 £0.7m (2004:£0.4m). The exchange rate for the Euro at 30 September 2005 was €1.46:£1 (30 September 2004: €1.46: £1); the exchange rate for the US dollar started the year at $1.80:£1, and finished the year $1.76:£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 2005 52% of the Group's sales were priced in Euros and 41% in US dollars. Overall 70% of the Group's cash receipts in financial year ending 30 September 2005 were in hard currency and 30% 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. At 30 September 2005 the weighted average exchange rate for forward sales against Sterling used for converting US dollar sales was $1.82 (2005 financial year: $1.84) and for Euro sales was €1.47 (2005 financial year: €1.47). 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. 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. The net cash balances of £13.0m at 30 September 2005 are shown in the balance sheet. 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. Adoption of International Financial Reporting Standards ('IFRS') The Company's adoption of IFRS for the year ending 30 September 2006 will first impact on the interim statement for the six months to 31 March 2006. The main areas that are expected to have an effect on the Group's consolidated pre-tax profits are the treatment of share based payments and the amortisation of goodwill and intangible assets. The Company will issue a restatement of its results for the year ended 30 September 2005 and its consolidated balance sheet at 30 September 2005 presented in accordance with IFRS, prior to making the interim announcement. Russell Taylor Finance Director 6 December 2005 Consolidated Profit and Loss Account For the year ended 30 September 2005 2005 2004 £000 £000 Turnover 78,547 60,750 Cost of sales (42,552) (33,542) __________ __________ Gross profit 35,995 27,208 Net operating expenses before goodwill amortisation (12,232) (10,883) Goodwill amortisation (3,142) (2,528) Total net operating expenses (15,374) (13,411) __________ __________ Operating profit 20,621 13,797 Share of associates' operating profit before goodwill 612 676 amortisation Goodwill amortisation (153) (221) Share of associates' operating profit 459 455 Profit on disposal of group undertakings 221 323 __________ __________ Profit on ordinary activities before interest 21,301 14,575 Interest receivable 2,085 1,148 Interest payable and similar charges (427) (16) __________ __________ Profit on ordinary activities before taxation 22,959 15,707 Tax on profit on ordinary activities (7,429) (4,955) __________ __________ Profit on ordinary activities after taxation 15,530 10,752 Minority interests 33 (31) __________ __________ Profit for the financial year 15,563 10,721 Dividends paid and proposed (7,146) (5,984) __________ __________ Retained profit for the year 8,417 4,737 __________ __________ Earnings per share Basic 5.7p 3.9p Diluted 5.5p 3.8p Headline diluted 6.6p 4.7p _________ _______ Consolidated Balance Sheet 30 September 2005 2005 2004 £000 £000 Fixed assets Goodwill 33,698 29,348 Tangible assets 1,741 1,862 Associates 1,257 1,377 Other investments 109 74 ___________ ___________ 36,805 32,661 Current assets Debtors due within one year 22,810 23,426 Debtors due after one year 2,216 4,060 Cash at bank and in hand (Note 6) 13,019 33,546 ___________ ___________ 38,045 61,032 Creditors: amounts falling due within one year (48,335) (47,773) ___________ ___________ Net current (liabilities)/assets (10,290) 13,259 ___________ ___________ Total assets less current liabilities 26,515 45,920 Provisions for liabilities and charges (2,316) (1,498) ___________ ___________ Net assets 24,199 44,422 ___________ ___________ Capital and reserves Called up share capital 2,599 2,852 Share premium account 38 29,036 Capital redemption reserve 291 - Merger reserve 2,746 2,746 Option reserve - 23 ESOT reserve (3,562) (2,792) Profit and loss account 21,893 12,329 ___________ ___________ Equity shareholders' funds 24,005 44,194 ___________ ___________ Minority interests 194 228 ___________ ___________ Total capital employed 24,199 44,422 ___________ ___________ Consolidated Cash Flow Statement For the year ended 30 September 2005 2005 2004 £000 £000 Net cash inflow from operating activities 28,598 21,754 Dividends received from associates 437 172 Returns on investments and servicing of finance 1,658 1,132 Taxation (8,378) (3,363) Capital expenditure and financial investment 13 (2,858) Acquisitions and disposals (5,785) (1,345) Equity dividends paid (7,088) (4,545) __________ __________ Cash inflow before management of liquid resources and financing 9,455 10,947 Management of liquid resources 17,974 (19,336) Financing (29,982) 495 __________ __________ Decrease in cash in the year (2,553) (7,894) __________ __________ Consolidated Statement of Total Recognised Gains and Losses For the year ended 30 September 2005 2005 2004 £000 £000 Profit for the financial year Group 15,325 10,534 Associates 238 187 ___________ ___________ 15,563 10,721 Gain on foreign currency translation 750 96 ___________ ___________ Total recognised gains and losses relating to the year 16,313 10,817 ___________ __________ Notes 1 Basis of preparation This Preliminary Announcement is for the year ended 30 September 2005 and was approved by the Board on 6 December 2005. The financial information set out herein does not constitute the Company's statutory accounts for the years ended 30 September 2005 or 2004, but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies and those for 2005 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 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 £15.7 million (2004: £13.7 million) and other operating income of £316,000 (2004: £303,000). 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 2005 2004 2005 2004 £000 £000 £000 £000 Profit for the financial year 15,563 10,721 15,563 10,721 Amortisation of goodwill (including associates) 3,295 2,749 - - Profit on disposal of group undertakings (221) (323) - - ________ ________ ________ ________ 18,637 13,147 15,563 10,721 ________ ________ ________ ________ 2005 2004 Number of shares ('000) Number of shares ('000) Weighted average number of shares: For basic earnings per share 273,134 274,435 Exercise of share options 9,197 7,203 ___________ ___________ For diluted earnings per share 282,331 281,638 ___________ ___________ 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 of goodwill and profits or losses arising on disposal of group undertakings. 4 Reserves Share Merger Capital Option ESOT Profit and Total premium reserve Redemption reserve reserve loss account account reserve Group £000 £000 £000 £000 £000 £000 1 October 2004 29,036 2,746 - 23 (2,792) 12,329 41,342 Exercise of options 912 - - (23) 99 - 988 Retained profit for the year - - - - - 8,417 8,417 Gain on foreign currency - - - - - 750 750 translation Gain on exercise of ESOT options - - - - - 48 48 Options issued in the year at a - - - - - 592 592 discount to market value Shares issued for remuneration 35 - - - - - 35 Capital reduction (29,945) - - - - 29,945 - Purchase and cancellation of - - 291 - - (30,188) (29,897) shares Purchase of shares by ESOT - - - - (869) - (869) _________ ________ ________ ______ ______ _________ ________ 30 September 2005 38 2,746 291 - (3,562) 21,893 21,406 _________ ________ ________ ______ ______ __________ ________ 5 Reconciliation of operating profit to operating cash flows 2005 2004 £000 £000 Operating profit 20,621 13,797 Depreciation charges 448 471 Amortisation 3,142 2,528 Loss on sale or write down of fixed assets 79 103 Decrease/(increase) in debtors 1,969 (2,638) Increase in creditors 1,365 6,546 Increase in provisions 974 947 __________ __________ Net cash inflow from operating activities 28,598 21,754 __________ __________ 6 Analysis of net funds 30 September 30 September 2004 Cash flow 2005 £000 £000 £000 Cash at bank and in hand 9,046 (2,553) 6,493 __________ __________ __________ Net funds 9,046 (2,553) (6,493) Cash held on deposit 24,500 (24,500) - Cash held on Trust - 6,526 6,526 __________ __________ __________ Cash shown on balance sheet 33,546 (20,527) 13,019 __________ __________ __________ As a result of the capital reduction, £6.5m is held in a trust account, which will be released as certain creditors are paid in full. At 30 September 2005 £2.2m of the cash in trust was expected to be released within one year and £4.3m was expected to be released after 30 September 2006. Subsequent to year end, ITE Group made advance payments of $10m to Crocus, a Moscow exhibition venue. The payments are made against specific exhibition venue licence agreements. 7 Reconciliation of net cash flow to movement in net funds 2005 2004 £000 £000 Decrease in cash in the year (2,553) (7,894) __________ __________ Movement in net funds in year (2,553) (7,894) Net funds at 1 October 9,046 16,940 __________ __________ Net funds at 30 September 6,493 9,046 __________ __________ 8 Dividend payment dates Final dividend 2005 Ex date 25 January 2006 Record date 27 January 2006 Annual General Meeting 23 February 2006 Payment date 3 March 2006 Interim dividend 2006 Record date June 2006 Payment date July 2006 This information is provided by RNS The company news service from the London Stock Exchange U

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