Interim Results
ITE Group PLC
21 May 2007
21 May 2007
ITE GROUP PLC
INTERIM RESULTS ANNOUNCEMENT
Highlights
Six months ended Six months ended % Change
31 March 2007 31 March 2006
Revenue £31.3m £26.2m 19%
Headline pre-tax profit* £5.5m £3.7m 48%
Reported Profit before tax 4.8m 3.0m 60%
Headline diluted earnings per share* 1.5p 1.0p 50%
Diluted earnings per share 1.3p 0.8p 64%
Dividend per share 1.3p 1.0p 30%
• Impressive growth in sales and headline profits reflects strong demand in
core markets
• Like for like Revenue up 14%
• Like for like Headline profit before tax up 30%
• New ten year venue agreement in Kazakhstan to 2017
• Rolling on-market share buyback programme from free cashflow
• Interim dividend up 30% to 1.3p reflecting prospects and surplus cash
• Board are confident of prospects for the full year
• Forward sales for full year 2007 up 15%+ on a like for like basis
Commenting on the results, Iain Paterson, Chairman, said:
'The Group has delivered a strong financial and operating performance. The
results reflect our ability to leverage our market leading positions in Russia
and the CIS where our exhibitions have enjoyed significant growth. We have built
a strong presence in our core markets. We expect to continue to grow our
business against a background of robust domestic economies, expanding venue
space and strong demand for exhibitions. The second half year has commenced
ahead of expectations and the Board remains positive and confident of the
prospects for the 2007 financial year.'
* Headline pre-tax profit is defined as profit before tax, amortisation of
intangible assets arising on business combinations and impairment of goodwill
and intangible assets and profits or losses arising on disposal of group
undertakings - see the Income Statement for details
Headline diluted earnings per share is calculated using profit before
amortisation of intangible assets arising on business combinations and
impairment of goodwill and intangible assets 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
Interim Statement for six months ended 31 March 2007
Overview
ITE's results for the first six months of the financial year reflect strong
trading conditions in the Group's core markets of Russia and the CIS. Revenue
of £31.3m is 19% ahead of the same period last year and headline pre-tax profit
of £5.5m is 48% ahead of last year's headline pre-tax profit of £3.7m. This
year's first half results have been skewed by the Ukraine International Travel &
Tourism event taking place in March instead of April. After adjusting for this
and for acquisitions, the Group reported like for like revenue growth of 14% and
a like for like 30% improvement in headline pre-tax profit for the first half.
Reported pre-tax profit for the six months was £4.7m (2006: £3.0m).
The trading environment in Russia and the CIS continues to be resoundingly
buoyant and most of ITE's major exhibitions have enjoyed strong growth. The
business in Central Asia and Caucasus has performed particularly well in the
first six months of the year and the Moscow exhibition business, which is second
half weighted, has now completed its busy April calendar with results that
suggest the full year result for Moscow will exceed our original expectations.
The Group has continued to focus efforts on the organic growth and development
of ITE's business in its core markets. ITE has recently announced that it has
signed a new 10 year agreement with Atakent (Almaty, Kazakhstan) extending its
venue exclusivity rights and agreeing tenancy rates until the end of 2017.
Additionally, ITE has financially assisted further expansion of the exhibition
facilities at Atakent, by making an additional prepayment of US$1.5m to support
the construction of a new pavilion at the venue.
The Group's strategy includes the acquisition of appropriate bolt-on events to
supplement the strong organic growth of the existing business. However if
appropriate opportunities are not available then the Board remains committed to
returning surplus cash to shareholders via dividends and the buyback of shares.
As at 31 March 2007 the Group's balance sheet recorded net assets of £40.3m
(2006: £30.1m) and net cash balances of £37.4m (2006: £14.9m). Given the
continued strength of the Group's balance sheet it is the Board's intention, to
pursue a rolling share buyback programme financed by the free cash flow of the
business after dividends, and within the limits already approved by
shareholders. ITE acquired 1.5m shares at £1.60 each on 30 March, which have
since been cancelled.
Board and Management
Further to the announcement that Ian Tomkins wishes to step down by the end of
2007, the Nomination Committee has been working closely with a recruitment
consultant. The process of selecting a new Chief Executive for the Group is well
advanced.
Dividend
The Board has approved an interim dividend of 1.3p per share (2006: 1.0p per
share). The increase in the interim dividend reflects both the Board's
confidence in ITE's trading prospects and the high level of cash balances held
by the Group at 31 March 2007.
Financial Performance
Revenue for the first half increased 14% on a like for like basis compared to
last year.
Gross profit margins achieved over the first six months of 38% are consistent
with last year's gross profit margins for the same period.
Operating profits of £4.2m (2006: £2.6m) are stated after administrative costs
of £8.0m (2006: £7.4m) which include a £0.8m charge for amortisation of
intangible assets (2006: £0.7m). Costs associated with the re-location of the
Moscow office to larger premises had a small impact on the administrative costs
for the first six months. Net administrative costs for the first six months
include £0.3m of foreign exchange gains (2006: £0.1m foreign exchange gain).
Finance income of £0.9m reflects higher average cash balances and rising
interest rates. Last year's comparable figure of £0.6m included £0.2m of fair
value adjustments.
Headline pre-tax profits for the first half were up 48% to £5.5m (2006: £3.7m),
which on a like for like basis represents a 30% improvement in headline pre-tax
profit.
Trading Highlights and Review of Operations
In the six months to 31 March 2007 ITE organised 62 events (2006: 52 events)
including six new launch events. Total square metres sold were 163,100m(2)
(2006: 123,100m(2)). A summary analysis of the Group's sales and margins from
its exhibitions business is set out below:
Square Gross
Metres Revenue Profit
'000 £m £m
First half 2006 123.1 25.3 9.6
Timing differences 9.9 1.3 0.6
Acquisitions 2.3 0.4 0.1
Net organic growth 27.8 3.4 1.4
_____ ____ ____
First half 2007 163.1 30.4 11.7
_____ ____ ____
The Group's overall yield for the six month period is £186 per m(2) (£206 per m
(2) for the same period last year). This change is largely attributable to the
impact of growth in the low yielding AgriHort event in Ukraine, though the
decline in the $US also had an impact on both revenue and direct costs in
Central Asia. In the full year the impact of the weaker $US will be less, given
the predominance of Euro priced business in the second half.
Russia
ITE's Russian business continues to experience strong demand, particularly in
Moscow. For the first half of the year space sales were 9% ahead of last year's
performance and yields 1% higher. The principal events taking place in Russia
over the first six months of the year all performed in line with expectations.
Ingredients Russia and TransRussia both delivered space sales growth of circa
10% over last year's events. The Moscow International Travel and Tourism event
performed well despite competition and delivered an improvement in yield of 5%
which covered a reduction in space sales of 4%. Other notable successes were
the integration of Expoclean which was acquired in June 2006, and the successful
re-location of Pharmtech to an alternative venue.
Central Asia & the Caucasus
Over the first six months space sales in Central Asia and the Caucasus were 33%
higher than for the same period last year. Yields were a net 4% lower
reflecting the effect of a weaker $US in which prices for this region are
normally based.
The Kazakhstan Oil and Gas exhibition was released from space constraints and
grew into the new pavilion 10, the construction of which was funded by ITE. It
increased its space sales by 20% to 9,600m(2) (2005: 7,900m(2)) and the
conference also enjoyed a 10%+ increase in revenues. The portfolio of events in
Central Asia and the Caucasus reported good growth across all sectors.
Specifically, Kazbuild Spring consolidated its strong launch and grew by 20%,
reflecting the continuing strength of the construction industry in Central Asia.
World Food Kazakhstan grew by over 40% but notably more than doubled its profit,
reflecting the incremental profitability of events once they achieve critical
mass. Other strong performances were BakuBuild and BakuTel in Azerbaijan and
Uzbuild in Uzbekistan which from a modest base all delivered growth in excess of
30% over last year's comparable events.
Southern and Eastern Europe
The Kyiv business reported space sales 70% higher than for the same period last
year. The two main influences were the significant growth of its AgriHort event
and a change in dates of the travel event, Ukraine International Travel and
Tourism, which brought it into the first half of the year. Ukraine International
Travel and Tourism performed well and delivered growth of 10% over last year.
AgriHort grew into the new 3rd pavilion at IEC with space sales of over 16,000m
(2) (2006: 9,500m2). Public Health which was acquired in 2004 delivered space
sales 23% up on the prior year performance. On a like for like basis space sales
for the Ukraine business were 39% improved over last year, but the low yields of
the AgriHort event led to a reduction on a comparable basis of 24% in average
yields.
The wholly owned business in Istanbul, Turkey recorded satisfying growth in
volumes and yields from a low base. However the performance of our associate
company in Turkey, ITF, has been disappointing. The result for the first half
is a small improvement on last year's result but this is not expected to be
maintained over the full year.
UK and Rest of the World
The Spring MODA Fashion and Footwear exhibition held in February 2007 grew in
space terms over last year's equivalent event by 3% though revenues were
unchanged. The growth was mostly in the Footwear sector which is benefiting
from its inclusion in the MODA portfolio. The Publishing business delivered
results marginally behind last year, which was in line with our expectations and
realistically reflects the difficult market conditions.
ITE's partnership with Sonatrach in Algeria delivered a successful Oil and Gas
exhibition and conference in Oran. Further initiatives in Algeria are in
progress.
Outlook
Since 31 March 2007 the Group has organised several of its most important
exhibitions for the full financial year. In April ITE's flagship events
Mosbuild and Mosbuild+ sold 85,000m(2) (2006: 68,300m(2)) representing overall
growth of circa 25%. Most of the growth was in the Mosbuild+ event at Crocus
which also improved its yield. At Expocentr a newly constructed pavilion was
completed earlier than originally scheduled and released space constraints on
the Mosbuild event. The Moscow International Boat Show successfully re-located
to another venue and grew to 8,700m2 (2006: 7,900m2). Moscow International
Protection and Security grew by 10% to 6,700m2 and having reached capacity at
its venue is re-locating next year. Expoelectronica consolidated last year's
re-location and improved its yield and profitability.
Looking ahead the availability of extra space at Expocentr has improved the
prospects for sales of Moscow International Oil and Gas (June 2007) and World
Food Moscow which is due to take place in September this year.
Russia, Central Asia and the Caucasus and Ukraine are enjoying robust growth in
all sectors of their economies. The exhibition industry in the Group's key
markets is set for further growth based upon continuing good prospects for the
domestic economies, expanding venue space and strong demand for exhibitions.
At 11 May 2007 ITE has booked revenue of £85.8m for the full year. This
represents a 15%+ increase on a like for like basis over the same period last
year. The second half has started well with the Moscow events held since 31
March performing ahead of expectations and the Board remains positive and
confident of the prospects for the 2007 financial year.
Iain Paterson Ian Tomkins
Chairman Chief Executive
Consolidated Income Statement
Six months to Six months to Year ended 30
31 March 2007 31 March 2006 September 2006
Unaudited Unaudited Audited
Notes £000 £000 £000
Continuing operations
Revenue 31,277 26,175 82,368
Cost of sales (19,243) (16,236) (43,885)
__________ __________ __________
Gross profit 12,034 9,939 38,483
Other operating income 123 145 278
Administrative expenses before amortisation (7,159) (6,669) (14,112)
Amortisation of acquired intangibles 1 (794) (733) (1,330)
Total administrative expenses (7,953) (7,402) (15,442)
Profit on disposal of group undertakings - - 158
Share of results of associate (23) (71) 564
__________ __________ __________
Operating profit 4,181 2,611 24,041
Finance income 3 872 641 1,368
Finance costs (312) (285) (621)
__________ __________ __________
Profit on ordinary activities before taxation 4,741 2,967 24,788
Tax 5 (1,433) (928) (7,351)
__________ __________ __________
Profit for the period from continuing operations 3,308 2,039 17,437
__________ __________ __________
Attributable to:
Equity holders of the parent 3,327 2,022 17,401
Minority interests (19) 17 36
__________ __________ __________
3,308 2,039 17,437
__________ __________ __________
Earnings per share (p)
Basic 6 1.3 0.8 6.9
Diluted 6 1.3 0.8 6.7
__________ __________ __________
The results stated above relate to continuing activities of the Group.
Consolidated Balance Sheet 30 September
31 March 2007 31 March 2006 2006
Notes Unaudited Unaudited Audited
£000 £000 £000
Non-current assets
Goodwill 34,391 32,705 34,406
Other intangible assets 5,021 5,689 5,869
Property, plant & equipment 1,415 1,234 1,269
Investments in associates 1,446 1,033 1,438
Venue advances and other loans 2,588 3,180 3,015
Deferred tax asset 2,323 1,797 2,022
___________ ___________ ___________
47,184 45,638 48,019
Current assets
Trade and other receivables 7 26,994 29,345 29,594
Cash and cash equivalents 43,656 22,601 31,883
___________ ___________ ___________
70,650 51,946 61,477
Total assets 117,834 97,584 109,496
Current liabilities
Bank overdraft (6,237) (7,749) (10,717)
Trade and other payables 7 (66,739) (55,718) (50,711)
Provisions (1,025) (535) (907)
___________ ___________ ___________
(74,001) (64,002) (62,335)
Non-current liabilities
Provisions (1,284) (1,902) (1,367)
Deferred tax liabilities (2,215) (1,549) (2,145)
___________ ___________ ___________
(3,499) (3,451) (3,512)
Total liabilities (77,500) (67,453) (65,847)
___________ ___________ ___________
Net assets 40,334 30,131 43,649
___________ ___________ ___________
Capital and reserves
Called-up share capital 2,609 2,607 2,609
Share premium account 727 558 698
Merger reserve 2,746 2,746 2,746
Capital redemption reserve 291 291 291
ESOT reserve (1,658) (3,021) (3,016)
Retained earnings 38,795 25,861 40,555
Own shares held (3,566) - (1,142)
Hedge and translation reserve 390 878 889
___________ ___________ ___________
Equity attributable to equity holders of the parent 40,334 29,920 43,630
___________ ___________ ___________
Minority interests - 211 19
___________ ___________ ___________
Total equity 40,334 30,131 43,649
___________ ___________ ___________
Consolidated Cash Flow Statement
Six months to Six months Year ended 30
31 March to 31 March September
2007 2006 2006
Notes Unaudited Unaudited Audited
£000 £000 £000
Cash flows from operating activities
Operating profit from continuing operations 4,181 2,611 24,041
Adjustments for:
Depreciation and amortisation 1,065 987 1,895
Other non-cash expenses 791 102 208
Share of associate (profit)/loss 23 71 (564)
Gain on disposal of subsidiary - - (158)
Increase/(decrease) in provisions 202 (22) (213)
__________ __________ __________
Operating cash flows before movements in working 6,262 3,749 25,209
capital
Decrease/(increase) in receivables 2,819 (961) (233)
Increase in payables 15,274 14,767 9,244
__________ __________ __________
Cash generated from operations 24,355 17,555 34,220
Tax paid (3,294) (4,352) (9,064)
Venue advances and loans (728) (6,773) (7,422)
__________ __________ __________
Net cash from operating activities 20,333 6,430 17,734
Investing activities
Interest received 872 409 925
Dividends received from associates - 322 422
Acquisition of Intangibles (133) (1,061) (3,026)
Purchase of property, plant & equipment (293) (226) (422)
__________ __________ __________
Net cash used in investing activities 446 (556) (2,101)
Financing activities
Dividends paid (6,316) (4,623) (7,143)
Interest paid (312) (285) (621)
Net cash flow in relation to ESOT shares 1,811 541 541
Purchase of own shares - - (1,142)
Proceeds from issue of share capital 11 510 634
__________ __________ __________
Net cash flows from financing activities (4,806) (3,857) (7,731)
Net increase in cash and cash equivalents 15,973 2,017 7,902
Net cash and cash equivalents at beginning of 21,166 13,019 13,019
period
Effect of foreign exchange rates 280 (184) 245
__________ __________ __________
Net cash and cash equivalents at end of period 8 37,419 14,852 21,166
__________ __________ __________
31 March 2007 31 March 2006 30 September 2007
£000 £000 £000
Comprised of:
Cash and cash equivalents 43,656 22,601 31,833
Bank overdrafts (6,237) (7,749) (10,717)
__________ __________ __________
37,419 14,852 21,166
__________ __________ __________
Consolidated Statement of Recognised Income and Expense
Six months to 31 Six months to Year ended 30
March 2007 31 March 2006 September 2006
Unaudited Unaudited Audited
£000 £000 £000
Currency translation on net investment in subsidiary (276) 78 (197)
undertakings
(Loss)/gain on cash flow hedge (18) - 356
Tax on items taken directly to equity - - 159
__________ __________ __________
Net (expense)/income recognised directly in equity (294) 78 318
Transferred to profit or loss on cash flow hedges (202) - (22)
Implementation of IAS 39 - - (500)
Profit for the period attributable to the 3,308 2,039 17,437
shareholders
__________ __________ __________
Total recognised income and expense for the period 2,812 2,117 17,233
__________ __________ __________
Attributable to:
Equity holders of the parent 2,831 2,100 17,197
Minority interests (19) 17 36
__________ __________ __________
2,812 2,117 17,233
__________ __________ __________
Notes
1. The interim results have been prepared in accordance with IFRS that
the directors expect to be applicable as at 30 September 2007. IFRS are subject
to amendment or interpretation by the International Accounting Standards Board
and there is an ongoing process of review and endorsement by the European
Commission.
The financial information for the period ended 31 March 2007 is unaudited and
does not constitute statutory accounts as defined by Section 240 of the
Companies Act 1985. The interim results are prepared on the basis of accounting
policies set out in the annual financial statements of the Group for the year
ended 30 September 2006. These interim results were approved by the Board on 18
May 2007 and copies of this document are being sent to shareholders. Further
copies are available from the Company's registered office.
2. The results for the year ended 30 September 2006 have been extracted
from the statutory accounts, which have been reported on by the Group's auditors
and have been delivered to the Registrar of Companies. The auditors' report was
unqualified and did not contain any statement under section 237 (2) or (3) of
the Companies Act 1985.
3. Finance income
Six months to Six months to Year ended 30
31 March 2007 31 March 2006 September 2006
Unaudited Unaudited Audited
£000 £000 £000
Interest receivable from bank deposits 830 386 787
Interest receivable from Inland revenue repayments 28 - 115
Interest receivable on advances to venues 11 18 17
Interest receivable on loan to Incheba Praha - 5 5
Unwind of fair value discount on venue advances 3 232 444
__________ __________ __________
872 641 1,368
__________ __________ __________
4. Reconciliation of headline profit before taxation to profit on ordinary
activities before taxation
Six months to Six months to Year ended 30
31 March 2007 31 March 2006 September 2006
Unaudited Unaudited Audited
£000 £000 £000
Profit on ordinary activities before taxation 4,741 2,967 24,788
Amortisation of acquired intangibles 794 733 1,330
(Profit) on disposal of subsidiary undertakings - - (158)
__________ __________ __________
Headline profit before taxation 5,535 3,700 25,960
__________ __________ __________
5. Taxation
Six months to Six months to Year ended 30
31 March 2007 31 March 2006 September 2006
Unaudited Unaudited Audited
£000 £000 £000
Current tax
UK corporation tax 1,002 644 3,959
Foreign tax 646 552 3,388
__________ __________ __________
1,648 1,196 7,347
Deferred tax (215) (268) 4
__________ __________ __________
Tax on profit on ordinary activities 1,433 928 7,351
__________ __________ __________
Tax at the interim is charged at 30% (2006: 31%) representing the best
estimate of the weighted average annual corporation tax expected for the
financial year.
6. The calculations of earnings per share are based on the following results
and numbers of shares.
Headline diluted Basic and diluted
2007 2006 2007 2006
£000 £000 £000 £000
Profit for the financial period 3,327 2,022 3,327 2,022
Amortisation of acquired intangibles 794 733 - -
Tax effect of amortisation (157) (158) - -
________ ________ ________ ________
3,964 2,597 3,327 2,022
________ ________ ________ ________
2007 2006
Number of shares ('000) Number of shares ('000)
Weighted average number of shares:
For basic earnings per share 253,505 250,710
Dilutive effect of exercise of share options 7,382 10,406
___________ ___________
For diluted earnings per share 260,887 261,116
___________ ___________
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.
7. Trade and other receivables include trade debtors of £14.9m (31 March
2006: £13.5m; 30 September 2006: £22.0m) and venue advances and other loans of
£2.6m (31 March 2006: £6.4m; 30 September 2006: £4.1m).
Trade and other payables include deferred income of £55.8m (31 March 2006:
£47.4m; 30 September 2006: £39.7m).
8. As a result of the capital reduction in July 2005, £4.1m is held in a
trust account, which will be released as certain creditors are paid in full. At
31 March 2007, £0.5m of the cash in trust was expected to be released within one
year.
Financial Calendar
Interim dividend
Record date 1 June 2007
Payment date 22 June 2007
Final dividend
Record date January 2008
Payment date March 2008
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