Preliminary Results
ITE Group PLC
04 December 2007
4 December 2007
ITE GROUP PLC
RECORD RESULTS DRIVEN BY STRONG ORGANIC GROWTH
PRELIMINARY ANNOUNCEMENT
Highlights
Year ended Year ended
30 September 2007 30 September 2006
Revenue £99.1m £82.4m +20%
Profit before tax £33.7m £24.8m +35%
Headline pre-tax profit * £35.3m £26.0m +35%
Diluted earnings per 9.0p 6.7p +31%
share
Headline diluted 9.4p 7.0p +34%
earnings per share**
Dividend per share 4.5p 3.5p +28%
• Fifth successive year of record profits
• Revenue up 20% to £99.1m
• Headline profits up 35% to £35.3m
• Good organic growth supported by strong economies of Russia and CIS
• Strong balance sheet to support future growth opportunities
• Cash generation £43m - 120% of headline profits
• £27m of cash returned to shareholders during the year
• Dividend up 28% to 4.5p reflecting continued confidence in future
prospects
• 'Like for like' forward sales are up more than 10%
• Board confident of another strong performance in 2008
Commenting on the results, Bill Dye, CEO, said:
'ITE continues to capitalise on the strong growth dynamics of our core markets
and sectors. Demand for our events continues to grow and this underpins another
strong set of results driven by organic growth. Where additional space has
become available we have successfully expanded our events. We have also extended
the business through launches and expansion of the international sales
infrastructure.
'The 2008 financial year has started well; the trading environment remains good
and the overseas economies in which we operate continue to grow strongly. Like
for like sales are more than 10% ahead of the comparable sales position a year
ago. We will continue to benefit from the growth in exhibition space in Russia
and CIS and as at 3 December 2007 advance sales for 2008 were £61m. The Board is
confident of another strong financial performance from ITE in 2008 and we are
well positioned to expand our business.'
Notes:
* 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 Income statement 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:
Bill Dye
Russell Taylor 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 2007
Chairman's statement
Group Performance
ITE has announced an excellent set of results for the year ended 30 September
2007. Reported revenues improved in our stronger biennial year by 20% to £99.1
million and headline profit before tax improved by 35% to £35.3 million (2006:
£26.0 million). Fully diluted headline earnings per share for the year was 9.4p
(2006: 7.0p). Reported profits before tax were £33.7 million (2006: £24.8
million) and fully diluted earnings per share improved by over 30% to 9.0p
(2006: 6.7p).
Strategic Progress
The Group's primary strategy over the last five years has been to maximise the
organic growth opportunities that the Group has earned through strong market
positions in the emerging and developing markets of Russia and Central Asia. Our
success in achieving this aim has come from the single mindedness with which we
have focussed on this objective. As a result ITE has enjoyed five years of
continuous growth in revenues and profits and, reflecting this success, ITE
became a constituent company of the FTSE 250 index in June this year.
Highlights of the year included Mosbuild, the Group's market leading
construction event in Moscow, which this year was the largest commercial
exhibition held in Russia and is today one of the world's leading events of its
kind. The Moscow International Oil and Gas event and the Kazakhstan
International Oil and Gas conference also demonstrated their credentials as
world class events for the international community. Also important this year was
the signing of an agreement extending our venue rights in Almaty, Kazakhstan
through to 2017. This agreement confirms ITE's position in the Kazakhstan
exhibition business at a time of economic health and expansion for the region.
The dedication and loyalty of our hard working staff together with the support
of our venue partners have been important contributors to the overall success of
the Group. Looking forward, I see another year of growth based upon these
relationships and infrastructures we have assiduously built over the last five
years. The balance sheet is strong and the Group is well positioned to take
advantage of any new opportunities that arise in the year.
Board and Management
As previously announced, Ian Tomkins, Chief Executive Officer for the last five
years, stepped down from the Board on 3 September to return to Australia with
his family. He left the Company with a solid foundation and the Group will reap
the benefits of his stewardship. We have been fortunate to recruit Bill Dye, who
succeeds Ian as Chief Executive Officer. Bill's experience encompasses
entrepreneurial business building and corporate management skills of a FTSE 100
company. Bill brings a new dimension to the Company and the Board look forward
to the next stage of ITE's development under his direction.
Sir Jeremy Hanley joined the Board of ITE as a non executive on 12 March 1998
when the Group first listed on the London Stock Exchange. After nearly ten years
of loyal service and hard work Sir Jeremy will, under corporate governance
guidelines, be stepping down from the Board after the Company's next Annual
General Meeting in March. All the Board extend their thanks to Sir Jeremy for
his support and guidance over the years. The search for a new non-executive
director is under way.
Dividend
The Board is recommending to shareholders a final dividend of 3.2 pence per
share (2006: 2.5 pence), making a total dividend for the year of 4.5 pence per
share (2006: 3.5 pence). The total dividend for the year represents an increase
of more than 28% over last year's dividend, which reflects both the strong cash
dynamics of the business and the Board's confidence in its opportunities looking
forward.
Outlook
The markets in which we operate continue to expand and the domestic economies of
the countries in which we trade are still growing strongly. With ITE's strong
brands and expanding international infrastructure, I look forward to another
year of growth for the ITE Group.
Iain Paterson
Chairman
3 December 2007
Chief Executive's Review
Results for 2007 Financial Year
Turnover for the year was £99.1 million, an increase of 20% over last year
(2006: £82.4 million). Growth from our higher margin products, selective price
increases and good cost control all helped to lift gross margins to 50% in the
year (2006: 46.7%). Organic revenue growth was 15%, earned through running 148
events around the world and selling over 450,000 metres of exhibition space
through our 19 offices.
Headline profit before tax of £35.3 million was 35% ahead of last year's £26.0
million comparable result. The 2007 result includes a net £3.8 million biennial
contribution, largely from the Moscow Oil and Gas event and high organic growth
across the rest of the portfolio. On a like for like basis gross profit was 21%
higher than last year, operating profit was 20% higher than last year and
Headline Profit was 21% higher than last year. Overall this represents an
excellent financial and trading result for the year.
Cash generated from the business in the year before tax was £43.1 million
representing more than 120% of headline profit before tax. After accounting for
tax, the business generated £33.0 million of free cash flow, of which a total
£27.1 million was returned to shareholders through share buybacks and dividends.
The strong cash flow resulted in the Group's cash balances rising from £21.2
million at the beginning of the year to £26.7 million at the end of the year.
ITE's strong balance sheet puts it in a good position to take advantage of
current market conditions.
Strategy
ITE has very strong market positions in geographies enjoying good economic
growth and in which the media and marketing businesses are under represented. My
initial impressions of ITE are that it also has unique assets which have enabled
it to participate so well in the growth that these economic and structural
conditions have generated in recent years.
International sales reach - ITE has a culture throughout, such that each office
sells ITE events to its domestic customer base. In addition to the international
sales offices in Germany and the UK, the domestic ITE offices generate
significant cross border sales within Russia, Central Asia and South Eastern
Europe. No other organiser in Russia and CIS is able to replace this 'sales
reach'.
Established market leading positions - ITE has been organising exhibitions in
these territories for over 15 years. The group has extensive knowledge and
experience of the exhibitions, the exhibitors, the venues and the regions in
which ITE run its business.
Local presence - The Group's offices are locally staffed and are accepted and
acknowledged as part of the local Russian - CIS exhibition market. ITE's staff
have for the most part grown up with the business. Many of them have worked
together on the same shows for many years. Some of them have worked in different
offices at different times. Overall this has created a unique 'family' culture
among the staff of ITE that is unusual in such a geographically diverse
business.
Venue relationships - ITE has been working in partnership with its venues since
the beginning of its business. ITE has provided financial support to build and
extend venues and is now a significant customer to each of its main venues.
These assets make ITE a unique business in the exhibition industry. Allied to
this are the strengths of the exhibition business model. The business is
strongly cash generative and has excellent sales visibility forward. The
position of ITE together with the nature of large established brands create
barriers to entry for any potential competitors.
The Group's principal objectives have been the creation of sustainable growth in
headline earnings per share and the creation of leading positions in each of its
markets. The strategy to deliver these targets was to:
• Increase revenues from existing offices, both through expansion of
existing exhibitions and through the launch of new exhibitions.
• Increase volume sales and maintain the rate achieved per unit
('yield') by office.
• Make incremental 'bolt on' acquisitions in support of our
objectives.
• Secure forward venue rights for significant exhibitions.
ITE's 2007 performance against these objectives is set out below:.
• Revenues have increased 15% on a like for like basis.
• Volume sales have increased 12% on a like for like basis from
380,600m2 to 427,700m2. This has been achieved at the same time as
an improvement in comparable yields from £206m2 to £210m2 across the
Group.
• There have been no significant acquisitions made in the year.
• An extension in our venue rights has been signed for our Kazakhstan
business, and discussions are well advanced to extend our
relationship in Uzbekistan.
The Group's priority for cash is to develop ITE's business in line with its
strategy, either through internal investment or by making acquisitions. Surplus
free cash flow is returned to shareholders through dividends and share buybacks.
Trading and Operating Performance in 2007
ITE's growth has been driven by strong performance of its exhibitions that
service the construction and oil and gas sectors. This year saw that trend
continue with revenue growth from the construction exhibitions increasing 25%
and revenue growth from the oil and gas events increasing by 35% (adjusted for
biennial events). There has also been continued growth in the next tier of B2B
events - food, motors and travel notably in the Central Asia regions. These
events have been well established in Moscow and St Petersburg for some time, but
until recently have been less well represented in Central Asia.
Moscow is now much better served in terms of venue facilities than it was a few
years ago and ITE has taken maximum advantage of the opportunity to grow its
business into the new space. However it is still difficult to find suitable
space at the peak times in the calendar and more space will inevitably be built
in response to this underlying demand. St Petersburg remains a static market
with limited options for growth on its site, and a well established ownership of
the main exhibition themes in the region. There are renewed discussions about
new venue projects in St Petersburg which will provide a fresh stimulus to the
industry if and when they are built.
In Central Asia we are recording good growth in the construction and oil and gas
sectors, but also a sustained momentum in the hitherto small travel, food and
auto exhibitions. The largest Central Asian Business is in Kazakhstan where the
venue has expanded steadily over the years, and presently only our construction
event is constrained in its growth. In Azerbaijan the venue is small and not
entirely suitable for our business; ITE is actively searching for a solution to
resolve the situation. In Uzbekistan a new pavilion doubling existing facilities
will pave the way for expansion.
In southern and Eastern Europe, Turkey and Ukraine have both suffered political
unrest in the second half of the year. The weaker Dollar has also had an effect
on revenues in Turkey and the Ukraine and some yield dilution is expected in
both regions in the first half of 2007.
The Group's overall operating metrics for its events business (excluding
publishing) are set out below:
Square Gross Average yield
metres sold Revenue profit £per sqm
000's £m £m
2006 Results from Events 425.6 80.6 37.7
Non annual 2006 -45.0 -2.3 -0.4
2006 'Biennially adjusted' 380.6 78.3 37.3 206
Acquisitions 4.7 0.7 0.2
'Like for like' growth 47.1 12.0 7.4
2007 'Biennially adjusted' 432.4 91.0 44.9 210
Non annual 2007 22.5 6.4 4.2
2007 Results from Events 454.9 97.4 49.1
In 2007 the Group organised 148 events (2006: 146 events) in fifteen countries
(2006: fifteen countries) from its nineteen dedicated offices. There were
seventeen new events in the year contributing a total £2.5 million in revenue
and £0.4 million in gross profits.
The Group sold 454,900m(2) of exhibition space in 2007 (2006: 425,600m(2)).
After adjusting for the effect of biennial events and acquisitions the Group
achieved a 12% increase in volume sales, a 15% increase in revenues and a 21%
improvement in gross profits from its recurring portfolio.
The average yield across the Group achieved on comparable sales was 2% higher
this year at £210 per m(2) (2006 comparable yield: £206 per m(2)).
Outlook
The economies of the regions where ITE operates are enjoying good economic
growth and the exhibition and media businesses that serve them are larger and
still growing. The additional exhibition space constructed in Moscow and the
Ukraine in 2007 will support growth in the exhibition business for the next two
to three years. ITE has the market leading position in several major
international sectors which are all growing their presence in the economy:
construction, oil & gas, travel, food and automotive - transport. There remain
opportunities for ITE to improve its presence in other sectors where the Group
is currently less well represented. ITE with its strong infrastructure and
financial resource is well positioned to take advantage of any opportunities to
expand the scope of its business.
Trading for 2008 has started well and like for like sales are again more than
10% ahead of the comparable sales position a year ago. At 3 December 2007
advance sales for 2008 were £61 million. The Board are confident of another
strong performance from ITE in 2008.
Bill Dye
Chief Executive Officer
3 December 2007
Business review - Divisional Review - 2007
'Like for like' growth in revenue was 15% across ITE's total business. The table
below sets out the actual and 'like for like' growth in revenues across the
regions of ITE's business.
2007 2006 Actual 'Like for like'
£m £m change growth
Russia 63.7 49.9 28% 17%
Central Asia & 17.6 15.4 14% 14%
Caucasus
Eastern & Southern 7.9 8.3 -5% 7%
Europe
UK & Western Europe 7.6 7.8 -3% 3%
Rest of World 2.4 1.0 140% 140%
99.1 82.4 20% 15%
'Like for like' growth excludes the effect of biennial events, acquisitions and
disposals.
Russia
Offices: Moscow, St Petersburg
Staff employed: 2007: 198
2006: 191
Exhibitions organised: 2007: 44
2006: 44
Square metres sold (000's): 2007: 250
2006: 206
The exhibitions business in Russia has continued to show strong growth in the
year to 30 September 2007. Supported by national GDP growth of 7% and increasing
levels of international trade between Russia and the rest of the world, the
exhibition business has performed exceptionally well. Particularly prominent is
the growth in the construction sector and the continued activity in the oil and
gas sector. The construction sector in particular has benefited from increased
government spending in this pre-election year. At the beginning of the financial
year the two main Moscow exhibition centers, Crocus and Expocentr, offered
between them about 180,000m2 of gross exhibition space. By the end of the
financial year Expocentr had opened their new pavilion 8 - an extra 8,000m2
gross and Crocus had opened their new 90,000m2 pavilion 3, bringing the total of
available exhibition space to about 280,000m2. There are still active
discussions concerning the possibility of a third major exhibition centre in
Moscow; though nothing concrete has yet transpired. In St Petersburg there are
also discussions about plans to build a major new exhibition centre.
In Moscow the exhibition business has been vibrant. ITE's Moscow events in the
biennially strong year were 215,000m2 of solid exhibition space; some 25% more
than in the previous year. Average yields in Moscow improved 10% as ITE made
some selective price increases for the first time in a number of years.
Ingredients Russia is the first of our more significant events and it generated
a 15% increase in space sales to 6,400m2. The travel event, Moscow International
Travel and Tourism took place in March. Revenues and profits earned from the
event were both ahead of the 2006 result despite the event being slightly
smaller than the previous year at 18,500m2 (2006: 19,500m2). Mosbuild takes
place in Expocentr and was the first of ITE's events to make use of the newly
constructed pavilion 8. For the first time in several years the Expocentr part
of the show was able to grow and sold 40,000m2, an additional 5,000m2. Mosbuild
Plus held at the Crocus centre grew by more than 30% and achieved sales of
44,600m2 - and in doing so achieved real improvement in the quality and quantity
of the interiors and decorative sections of the building exhibition. In April
the security event, Moscow International and Protection Security, grew to 6,700m
2 using all available space in its existing venue. This event is moving to
Expocentr in 2008 which will facilitate further growth. Moscow International
Boat Show had its first staging in the Crocus venue this year and achieved a
strong result through the combination of a 10% increase in the size of the show
and a reduction costs achieved at the new venue. Trans Russia is another event
which achieved a 10% uplift in volume sales this year, and is also moving to
Expocentr in 2008 to facilitate its growth in future years. In June the biennial
Moscow International Oil and Gas event returned to our calendar and was another
beneficiary of the new pavilion in Expocentr. Using the new pavilion the event
achieved space sales of 22,400m2 - a 40% increase on the 2005 event.
The Moscow International Motor Show which took place for the second time at
Crocus was a similar size event to the previous edition. The last significant
Moscow event in our calendar was Worldfood Moscow which used the new pavilion 8
and, freed from the space constraints of earlier years, grew by 10% to
24,500m2.
Amongst successful new launches in the year was the adventure travel show,
Select Travel, which launched in October 2006. One year later in September 2007
the event sold 2,700m2 . Pharmtech was launched in November 2006, from the niche
of a larger event at Expocentr, and has established itself at Crocus. ITE's
joint venture with Messe Frankfurt to run Automechanika Moscow got off to a
successful start in May and will run again in February 2008. This year also saw
the first time for two events acquired from Maxima in June 2005, Expoclean and
Bytchimexpo which were both successfully integrated into ITE's portfolio.
St Petersburg is relatively settled in the confines of the venue that serves the
city. Overall the volume sales of the St Petersburg office were 10% improved on
the prior year and the office made an enhanced financial contribution to the
Group. The main event of the St Petersburg office is the construction event,
Balticbuild, which uses all the space available in the Lenexpo venue and was the
same size as in the previous year. However, profitability improved on the basis
of better yields and higher gross margins achieved on the event.
Looking forward the drivers of the exhibition and media businesses in Russia
show signs of continuing for the future. Our major construction event in Moscow
has a date clash for one of its sectors with a leading German show in 2008.
However overall demand in construction activity remains a buoyant feature of the
Russian economy and we expect the exhibition to continue its growth pattern
after the 2008 event.
Central Asia & Caucasus
Offices: Kazakhstan (Almaty, Astana, Atyrau) Azerbaijan (Baku), Uzbekistan
(Tashkent), Georgia (Tbilisi), Kyrgyzstan (Bishkek), Tajikistan (Dushanbe)
Staff employed: 2007: 191
2006: 183
Exhibitions organised: 2007: 65
2006: 59
Square metres sold (000's): 2007: 86
2006: 72
Kazakhstan, Azerbaijan and Uzbekistan have all enjoyed 12 months of economic
growth with GDP growth of 10%, 30%, and 7% respectively.
Kazakhstan
ITE's businesses in Kazakhstan sold a total of 60,500m2 across all its offices
(2006: 49,900m2). The largest exhibitions are in the construction and the oil &
gas sectors - fairly reflecting the dominant economic themes of the region.
Kazakhstan International Oil & Gas exhibition increased its space sales by 20%
to 9,600m2 and grew its conference revenues by 12%. The two smaller oil and gas
events in Atyrau and Astana also performed well. Construction events grew
strongly across the locations with Kazbuild Spring (4,900m2) and Kazbuild
(13,400m2) both growing in size by over 20%. In the next tier of events
Worldfood Kazakhstan grew to 3,600m2 (2006: 2,600m2) and Kazakhstan
International Travel Fair grew to 2,900m2 (2006: 1,900m2) - both improving gross
margins with their size.
The strength of our relationship with the principal venue in Almaty was endorsed
with ITE signing a new long term agreement with Atakent covering pricing and
priority for our events through to 2017. Atakent constructed a small new
pavilion in the year and extended the space available at the venue by circa
1,500m2. Venue facilities in Astana, Atyrau and Aktau still impede the growth of
the potential exhibition business.
Azerbaijan
The exhibition industry has thrived in Azerbaijan in selling 15,500m2 in the
year, a like for like increase of over 25% in exhibition space sold. The
principal events are again in oil and gas and construction. The Caspian Oil and
Gas exhibition & conference is venue bound and is a relatively mature product -
it produced a similar result to the 2006 event. The construction event,
Bakubuild, grew strongly to 3,900m2 (2006: 3,000m2). Smaller events in telecoms,
cars and food all grew by more than 40% indicating a spreading of economic
growth to a broader range of sectors.
The venue facilities in Azerbaijan remain an impediment to the exhibition
industry achieving larger scale. The existing venue is circa 6,000m2 gross and
doubles as a sports facility. ITE is active in its support of schemes to build a
bigger and more modern complex.
Uzbekistan
The Uzbekistan office in Tashkent sold 11,900m2 of exhibition space in 2007
representing like for like growth of more than 20%. There was no textile event
this year but strong growth was achieved in the Automotor show, the building
event, Uzbuild, and the local oil and gas event.
The venue facility has recently been increased through the construction of a new
pavilion which was unavailable for this year's events will facilitate growth for
the larger events next year.
Eastern and Southern Europe
Offices: Ukraine (Kyiv), Turkey (Istanbul)
Staff employed: 2007: 99
2006: 97
Exhibitions organised: 2007: 28
2006: 32
Square metres sold (000's): 2007: 78
2006: 104
ITE's offices in these regions are the Kyiv office in Ukraine and two separate
businesses in Istanbul, a wholly owned subsidiary and a 50% share in an
associate business. Both Ukraine and Turkey have had political distractions in
the year but have maintained reasonable economic performance with real GDP
growth in their economies of 7% and 5% respectively.
Ukraine
The Ukraine office has had a mixed year with same events performing
exceptionally and same facing fierce competition. Nevertheless overall growth in
space sales against last year was over 20%. The most impressive performance in
the portfolio was Kyiv Agrithort which, making full use of the new pavilion 3 at
IEC, grew from 9,500m2 to 16,100m2. There are competitive agricultural events in
Ukraine but ITE believe it now holds the premier agricultural exhibition for
international businesses. The events ITE owns in health, travel and food all
enjoyed very good growth in the year. The building event Kyivbuild is facing
strong local competition.
Turkey
ITE's wholly owned subsidiary achieved satisfactory performance in its main
recurring events servicing the optical and stationary industries. The oil and
gas conference performed well and 'like for like' financial contribution was
well ahead of last year. A significant part of the Turkish office activity is in
making outbound sales into the Group's CIS exhibitions, and in this the
performance was exceptional nearly doubling the value of Turkish sales to other
ITE exhibitions.
The contribution of ITF, the Groups 50% associate, was £0.3 million less than
last year. Most of the main events enjoyed an increase in size but the strength
of the Turkish Lira against revenue streams denominated in US Dollars had an
effect on the performance for the year.
Western Europe and UK
Offices: UK (London, Huddersfield), Germany (Hamburg), Holland (Utrecht)
*Staff employed: 2007: 158
2006: 155
*Exhibitions organised: 2007: 6
2006: 7
*Square metres sold (000's): 2007: 36
2006: 36
*of the total staff London and Germany international sales account for 80 staff;
44 staff are London corporate and 34 staff manage the UK fashion magazines and
exhibitions.
The fashion exhibition and publishing business performed well in challenging
market conditions. The mainstream fashion and footwear exhibitions taking place
in Spring and Autumn at Birmingham collectively increased space sales to 34,700m
2 (2006: 33,900m2) which can be regarded as a good performance in an ambiguous
trading environment. As expected the Group cancelled its involvement in the
small London Footwear exhibitions which were sub-scale, and is focusing its
efforts on the market leading fashion events in Birmingham. The publishing
business suffered a small reduction in advertising income fairly evenly across
its four publications. Costs were well controlled and the division's
contribution excluding the London events, was maintained.
Rest of the World
Offices: Algeria (Algiers), China (Beijing, Urumqui)
ITE has run three events this year in Africa. Through its small office in
Algiers ITE enjoyed a successful participation in the SEA 3 National Oil and gas
conference in November 2006. As a result of this ITE are among the preferred
bidders for the next event, due to be held in November 2008.
ITE ran its first owned event in China this year, the West China Build show in
Urumqui in May 2007. The Urumqui office has been established to run exhibitions
in this locality. The ITE Beijing office is primarily sourcing outbound
customers for our Russian and CIS events.
Business review - Finance
Revenue and gross profit
Turnover for the year was £99.1 million (2006: £82.4 million). After making
adjustment for the effect of biennial events this is a 15% improvement over last
year's comparable turnover.
The direct costs of exhibitions were well controlled in 2007 and the gross
margin of 50% was circa 3% higher than the gross margin achieved on last year's
portfolio of events.
Administrative expenses across the Group increased by 14% to £17.6 million. The
increase in overheads stemmed mostly from costs related to the change in Chief
Executive Officer. Additionally the Group's property overhead increased as the
growth in our Moscow office over the last few years necessitated re-location to
bigger and more modern offices. Administrative expenses include an amortisation
charge of £1.6 million (2006: £1.3 million), an 'IFRS 2' charge for expensing
share based payments of £1.6 million (2006: £1.5 million) for expensing share
based payments and net foreign exchange differences of £nil (2006: loss of £0.2
million). Overall, Group administrative expense represented 18% of revenue
(2006: 19%), resulting in net operating margins of 33% (2006: 29%) for the year.
Operating profit was £32.6 million against a prior year profit of £24.0 million.
Headline profit before tax this year of £35.3 million was ahead of last year's
headline profit before tax of £26.0 million and, after adjusting for the effect
of biennial events, represents a 21% increase over the comparable result for
2006.
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 £1.8 million (2006: £1.4 million). Interest from
bank deposits increased to £1.7 million in the year (2006: £0.8 million) as the
Group held higher average cash balances throughout the year of £29.9 million
(2006: £14.8 million) and benefited from higher interest rates in the U.K.
Finance income includes an unwind of fair value provisions of £0.1m against
venue loans in 2007 (2006: £0.4m).
Finance costs
Finance costs of £0.7 million (2006: £0.6 million) represent the interest cost
of the Group's borrowings in Euro and US Dollar and bank charges. The Group
enters into these borrowing arrangements as part of its currency hedging
activity. At 30 September 2007 the Group had borrowings of €16.2 million, and
US$4.0 million.
Tax charge
The tax charge of £10.8 million represents 32% of profit before tax. This
unusually high tax charge for the year reflects extra costs associated with
withdrawing the distributable reserves from our Russian businesses in the year.
Earnings per share
Basic earnings per share increased to 9.1p (2006: 6.9p). Fully diluted earnings
per share increased to 9.0p from 6.7p in the prior year.
The Group achieved headline diluted earnings per share of 9.4p per share
compared with 7.0p for the year to 30 September 2006. 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 3.2p for 2007, to bring the total
dividend for the year to 4.5p (2006: 3.5p).
Return to shareholders
ITE is committed to maximising shareholder return and is a leading performer in
its sector. ITE's progressive dividend policy has resulted in total dividends in
2007 of 4.5 pence per share, up more than 28% over 2006 (3.5p). Since 2003 the
dividend has increased on a compound basis by more than 40%per year.
Cash flow
Cash generated from operations in the year was £41.6 million (2006: £34.2
million). The principal applications of cash were of £17.5 million on purchasing
shares from the open market (2006: £1.1 million), £0.9 million applied to venue
loans and advances (2006: £7.4 million); £10.4 million was paid in tax; (2006:
£9.1 million); £1.6 million was applied to acquisitions in the year (2006: £3.0
million) and £9.6 million was distributed as dividends (2006: £7.1 million). The
net increase in cash balances at 30 September 2007 was £5.5 million.
Net cash at 30 September 2007 was £26.7 million (2006: £21.2 million). Of the
£26.7 million of cash £3.9 million was held in a trust account, which will be
released before the end of 2007.
Acquisitions & disposals
In September 2007 ITE acquired the Harbin International Winter Sports Show in
China for £50,000.
Further deferred consideration payments were made in relation to the acquisition
of ITE Exhibitions BV and the Gift & Decor events, totalling £0.3 million in the
year.
Balance Sheet
The Group's consolidated balance sheet at 30 September 2007 is summarised in the
table below:
Assets Liabilities Net assets
£m £m £m
Goodwill and intangibles 38.7 - 38.7
Property, plant and equipment 1.4 - 1.4
Associates 1.4 - 1.4
Venue advances 3.6 - 3.6
Cash 40.0 (13.3) 26.7
Current assets and liabilities 35.4 (60.1) (24.8)
excluding cash and venue
advances
Provisions - (1.6) (1.6)
Deferred tax 1.7 (1.7) -
Total as at 30 September 2007 122.1 (76.7) 45.4
Total as at 30 September 2006 111.1 (67.4) 43.6
Net assets increased to £45.4 million. The main changes are in intangibles
(decrease of £1.6 million), venue advances (decrease of £3.5 million), net cash
(increase of £5.5 million) and an overall increase through reduced current
liabilities and provisions of £1.8 million.
Investment and capital expenditure
The Group's capital expenditure on plant and equipment for the year was £0.8
million (2006: £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 2007 the Group's Sterling value of the outstanding balances of
advance payments and venue loans was £3.6 million (2006: £7.1 million) as
follows:
30 September New Repayments 30 September
2006 2007
£m £m £m £m
Moscow 2.8 - (2.8) -
Kyiv 1.8 - (0.5) 1.3
Almaty 1.0 1.1 (1.1) 1.0
St Petersburg 1.0 - (0.3) (0.7)
Uzbekistan 0.2 0.3 (0.1) 0.4
Bulgaria 0.3 - (0.1) 0.2
Total 7.1 1.4 (4.9) 3.6
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 2008 and 2011. ITE is not presently
active in Bulgaria and the loan is being repaid in instalments.
Capital
During the year the Company has purchased 10,185,000 shares which were held in
Treasury and then cancelled. The Company has also issued 569,804 ordinary shares
of 1p in the year. Of the total new issues 545,353 were pursuant to the exercise
of options and yielded aggregate consideration of £0.2 million. The remaining
shares were issued as part of Directors' remuneration.
The Employees Share Option Trust ('ESOT') held 1,854,875 (0.7%) of the Company's
issued share capital at the year end (2006: 9,372,100; 3.6%).
Post balance sheet events
There have been no significant post balance sheet events.
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.
Consolidated income statement
For the year ended 30 September 2007
2007 2006
£000 £000
Continuing operations
Revenue 99,134 82,368
Cost of sales (49,397) (43,885)
Gross profit 49,737 38,483
Other operating income 253 278
Administrative expenses before (16,032) (14,112)
amortisation
Amortisation of acquired intangibles (1,603) (1,330)
Total administrative expenses (17,635) (15,442)
Profit on disposal of group - 158
undertakings
Share of results of associate 266 564
Operating profit 32,621 24,041
Finance income 1,778 1,368
Finance costs (663) (621)
Profit on ordinary activities before 33,736 24,788
taxation
Tax on profit on ordinary activities (10,777) (7,351)
Profit for the period 22,959 17,437
Attributable to:
Equity holders of the parent 22,978 17,401
Minority interests (19) 36
22,959 17,437
Earnings per share (p)
Basic 9.1 6.9
Diluted 9.0 6.7
Consolidated balance sheet
30 September 2007
2007 2006
£000 £000
Non-current assets
Goodwill 34,424 34,406
Other intangible assets 4,295 5,869
Property, plant and equipment 1,412 1,269
Investments in associates 1,358 1,438
Venue advances and other loans 1,583 3,015
Deferred tax asset 1,690 2,022
44,762 48,019
Current assets
Trade and other receivables 37,372 31,174
Cash and cash equivalents 39,963 31,883
77,335 63,057
Total assets 122,097 111,076
Current liabilities
Bank overdraft (13,306) (10,717)
Trade and other payables (60,142) (52,291)
Provisions (824) (907)
(74,272) (63,915)
Non-current liabilities
Provisions (754) (1,367)
Deferred tax liabilities (1,671) (2,145)
(2,425) (3,512)
Total liabilities (76,697) (67,427)
Net assets 45,400 43,649
Equity
Share capital 2,503 2,609
Share premium account 871 698
Merger reserve 2,746 2,746
Capital redemption reserve 403 291
ESOT reserve (597) (3,016)
Retained earnings 38,930 40,555
Own shares held - (1,142)
Hedge and translation reserve 544 889
Equity attributable to equity 45,400 43,630
holders of the parent
Minority interests - 19
Total equity 45,400 43,649
Consolidated cash flow statement
For the year ended 30 September 2007
2007 2006
Cash flows from operating activities £000 £000
Operating profit from continuing 32,621 24,041
operations
Adjustments for:
Depreciation and amortisation 2,159 1,895
Share based payments 1,550 1,492
Other non-cash expenses 47 208
(Profit) on sale of fixed asset (39) -
Share of associate profit (266) (564)
Gain on disposal of subsidiary - (158)
Decrease in provisions (1,072) (213)
Operating cash flows before movements in 35,000 26,701
working capital
Increase in receivables (1,230) (233)
Increase in payables 7,748 7,752
Cash generated from operations 41,518 34,220
Tax paid (10,324) (9,064)
Venue advances and loans (929) (7,422)
Net cash from operating activities 30,265 17,734
Investing activities
Interest received 1,752 925
Dividends received from associates 444 422
Acquisition of businesses (359) (2,923)
Exercise of Moda Put Option (1,030) -
Purchase of property, plant and equipment (783) (525)
and computer software
Disposal of property, plant and equipment 142 -
Net cash generated from investing 166 (2,101)
activities
Financing activities
Dividends paid (9,634) (7,143)
Interest paid (663) (621)
Net cash flow in relation to ESOT shares 2,623 541
Purchase of own shares (17,506) (1,142)
Proceeds from issue of share capital 144 634
Net cash flows from financing activities (25,036) (7,731)
Net increase in cash and cash equivalents 5,395 7,902
Net cash and cash equivalents at 21,166 13,019
beginning of period
Effect of foreign exchange rate changes 96 245
Net cash and cash equivalents at end of 26,657 21,166
period
2007 2006
£000 £000
Comprising:
Cash and cash equivalents 39,963 31,883
Bank overdrafts (13,306) (10,717)
26,657 21,166
Consolidated statement of recognised income and expense
For the year ended 30 September 2007
2007 2006
£000 £000
Currency translation difference on net (62) (197)
investment in subsidiary undertakings
Increase in fair value on cash flow hedge 331 356
Tax on items taken directly to equity 1,921 159
Net income recognised directly in equity 2,190 318
Transferred to profit or loss on cash flow (614) (22)
hedges
Implementation of IAS 39 - (500)
Profit for the period attributable to the 22,959 17,437
shareholders
Total recognised income and expense for the 24,535 17,233
period
Attributable to:
Equity holders of the parent 24,554 17,197
Minority interests (19) 36
25,535 17,233
Notes
1 Basis of preparation
ITE Group plc has prepared its audited annual accounts in accordance with
International Financial Reporting Standards (IFRS).
The financial information set out in the preliminary announcement does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985, but is derived from those accounts. While the financial information in
this preliminary announcement has been prepared in accordance with International
Financial Reporting (IFRS), this announcement does not itself contain sufficient
information to comply with IFRS. The IFRS accounting policies applied in respect
of the current and prior years have previously been disclosed. Statutory
accounts for the year ended 30 September 2006 have been delivered to the
Registrar of Companies and those for the year ended 30 September 2007 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 Section 237(2) or (3) of the Companies Act 1985.
2 Dividends
2007 2006
£000 £000
Amounts recognised as distributions to equity holders in
the year:
Final dividend for the year ended 30 September 2006 of 6,331 4,602
2.5p (2005 - 1.85p) per ordinary share
Interim dividend for the year ended 30 September 2007 of 3,303 2,535
1.3p (2006 -1.0p) per ordinary share
9,634 7,137
Proposed final dividend for the year ended 30 September 7,983 6,264
2007 of 3.2p (2006 - 2.5p) 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 1,854,875 (2006: 9,372,100) ordinary shares
representing 1% 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 £23.0 million (2006: £17.4 million) and the following
numbers of shares.
Number of shares 2007 2006
Number of shares Number of shares
('000) ('000)
Weighted average number of shares:
For basic earnings per share 251,276 250,485
Effect of dilutive potential ordinary 4,454 8,727
shares
For diluted earnings per share 255,730 259,212
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 9.4p per share (2006: 7.0p).
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 2007 2006
share
£000 £000
Profit for the financial year attributable 22,978 17,401
to equity holders
Amortisation of acquired intangible assets 1,603 1,330
Tax effect of amortisation of acquired (419) (315)
intangible assets
Profit on disposal of group undertakings - (158)
24,162 18,258
4 Reserves
Share Merger Capital ESOT Retained Treasury Hedge and Put Total
earnings shares Translation option
premium reserve Redemption reserve Reserve reserve
account reserve
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revised 1 October 38 2,746 291 (3,562) 28,538 - 751 (1,044) 27,758
2005
Exercise of options 625 - - 546 117 - - - 1,288
Net profit for the - - - - 17,401 - - - 17,401
year
Dividends paid - - - - (7,137) - - - (7,137)
Loss on foreign - - - - - - (197) - (197)
currency translation
of overseas
operations
Share based payments - - - - 1,492 - - - 1,492
Shares issued for 35 - - - - - - - 35
remuneration
Tax on share options - - - - 159 - - - 159
Increase in fair - - - - - - 356 - 356
value of hedging
derivatives
Transfer to income - - - - - - (22) - (22)
Costs related to - - - - (15) - - - (15)
capital reduction
Exercise of put - - - - - - - 1,044 1,044
option
Own shares held in - - - - - (1,142) - - (1,142)
treasury
30 September 2006 698 2,746 291 (3,016) 40,555 (1,142) 889 - 41,021
Share Merger Capital ESOT Retained Treasury Hedge and Total
earnings shares Translation
premium reserve Redemption reserve Reserve
account reserve
£000 £000 £000 £000 £000 £000 £000 £000
1 October 2006 698 2,746 291 (3,016) 40,555 (1,142) 889 41,021
Exercise of options 138 - - 2,419 208 - - 2,765
Net profit for the year - - - - 22,978 - - 22,978
Dividends paid - - - - (9,634) - - (9,634)
Loss on foreign currency - - - - - - (62) (62)
translation of overseas
operations
Share based payments - - - - 1,550 - - 1,550
Shares issued for 35 - - - - - - 35
remuneration
Tax on share options - - - - 1,921 - - 1,921
Increase in fair value of - - - - - - 331 331
hedging derivatives
Transfer to income (614) (614)
Capital reduction - - 112 - - - - 112
Own shares held in - - - - (18,648) 1,142 - (17,506)
treasury
30 September 2007 871 2,746 403 (597) 38,930 - 544 42,897
The Company purchased 10,185,000 shares at a cost of £17,505,140 to be held in
Treasury during the period. These were all cancelled during the year.
Financial calendar
Final dividend
2007
Ex date 13 February 2008
Record date 15 February 2008
Annual General 6 March 2008
Meeting
Payment date 14 March 2008
Interim dividend
2008
Record date June 2008
Payment date July 2008
Glossary
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.
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.
'Like for like' or 'organic' revenue growth is the % revenue growth generated
from exhibitions, conferences and new launches excluding significant biennial
events and acquisitions in the year.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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