Preliminary Results

RNS Number : 6398S

ITE Group PLC

04 December 2012

 



4 December 2012

ITE GROUP PLC

PRELIMINARY RESULTS ANNOUNCEMENT

GOOD TRADING IN CORE MARKETS

Financial highlights

	Year to 30 September 2012	Year to 30 September 2011
Revenue	£172.3m	£155.5m
Headline pre-tax profit	£53.0m	£51.4m
Headline diluted earnings per share	16.9p	16.6p
Profit before tax	£40.5m	£39.1m
Diluted earnings per share	12.8p	12.6p
Dividend per share	6.5p	6.1p
Net cash	£13.0m	£5.5m

·      Record results in lesser biennial year

·      Revenues up 11% to £172m ; Headline profits up 3% to £53m

·      Acquisition of 28% stake in leading Indian exhibition business announced today

·      Strong cash generation: - net cash of £20.0m at 30th November 2012

·      Good trading conditions continue into 2013

·      £95m of revenues booked for 2013, in-line with the Board's expectations

Russell Taylor, CEO of ITE Group plc, commented:

"ITE has delivered record results in its lesser biennial year. This reflects the strength and breadth of our market leading events portfolio and a first time contribution from acquisitions. The relocation of Mosbuild this year was successful and its performance underlines the resilience of this event. We have benefitted from good trading conditions in our core markets, which are continuing into 2013.

ITE is well positioned in growth markets and the Board remains confident in ITE's growth prospects. As we enter the new financial year, trading is in line with our expectations and we are well placed to continue our growth, both organically and through selective acquisitions."

*     Headline pre-tax profit is defined as profit before tax, amortisation of acquired intangibles and impairment of goodwill, profits or losses arising on disposal of group undertakings, revaluation of financial liabilities in relation to put options over non controlling interests, settlement of contingent consideration and direct costs on completed and pending acquisitions and disposals - see note 3  for details.

**   Headline diluted earnings per share is calculated using profit before amortisation of acquired intangibles and impairment of goodwill, profits or losses arising on disposal of group undertakings, revaluation of financial liabilities in relation to put options over non controlling interests, settlement of contingent consideration and direct costs on completed and pending acquisitions and disposals - see note 9 for details.

Enquiries:

Russell Taylor, Chief Executive Neil Jones, Group Finance Director	ITE Group plc	020 7596 5000
Charles Palmer/ Emma Appleton	FTI Consulting	020 7831 3113

Chairman's Statement

Group Performance

ITE has again delivered record financial results, despite 2012 being the lesser year in its biennial pattern. Revenues of £172.3million (2011: £155.5 million) have yielded headline profits before tax of £53.0 million (2011: £51.4 million) and headline diluted earnings per share of 16.9p (2011: 16.6p).  Reported pre-tax profit was £40.5 million (2011: £39.1 million) and fully diluted earnings per share were 12.8p (2011: 12.6p). The Group finished the year with positive net cash of £13.0 million (2011: £5.5 million), after spending £19.5 million in the year on acquisitions and deferred consideration.

This year has largely been one of internal consolidation following the large acquisitions made in 2011 as well as laying the groundwork for the expansion of its business into the Asian market.  The Group has rebuilt its cash position and focused on integrating the new businesses into ITE's structure. This process is already reflected in the cost base although most of the revenue benefits will only be realised in the future. The Group has made some small bolt-on acquisitions in the year. Two event portfolios have enhanced the business in Ukraine and two smaller regional acquisitions have added scope to our business in India. The Group has announced today the acquisition of a minority stake in Asian Business Exhibition and Conferences (ABEC), the leading independent organiser in India.

Board and Management

On 1^st February I joined the ITE Board, having already been a non-executive director of ITE from 2004 - 2006. On 23^rd March Iain Paterson stepped down from the Board after 10 years as Chairman, during which time he oversaw a period of substantial growth in the size of the Group's business, its revenues and its profits. On behalf of the Board, I would like to acknowledge the significant contribution Iain made to the development of ITE during his tenure as Chairman. There have been no other changes to the composition of the Board during the year.

The Board has taken positive steps this year to strengthen further the executive and senior management team in line with the growth of its business. ITE continues to prosper because of the efforts of its staff worldwide and I would again, on behalf of the Board like to express our thanks and appreciation to all the employees of ITE throughout our 28 offices for their significant contribution to another successful year.

ITE's Board recognises that good corporate governance is in the long term interests of the Group and we are conscious of our responsibilities for setting values which underpin the Group culture. As Chairman, I am mindful of my personal responsibility for leading the Board and ensuring it operates effectively. The Board effectiveness review carried out during the year confirmed the Board and its committees continue to work to achieve the desired results, and the insights gained from this process have been built into a clear action plan for the year ahead.

Dividend

The Board has a good record of maintaining a progressive dividend policy and this year the interim dividend was increased from 1.9p to 2.1p. The proposed final dividend is 4.4p, making a full dividend for the year of 6.5p (2011: 6.1p), an increase of 7%. The final dividend is proposed to be paid on 11^th February 2013.

Outlook

This year, the Group has benefited from good trading conditions most of its markets. These good results were offset by increased competitive activity in our largest market, Moscow. The effects of this new competition have now been absorbed into our results and the trading conditions in our principal markets continue to be buoyant. At 30^th November revenues booked for the 2013 financial year are £95 million, in line with the Board's expectations and representing circa 53% of market expectations for 2013 revenues.  On a like-for-like basis revenues are circa 4% ahead of last year, despite movements in exchange rates (principally in Euro to Sterling) which have reduced average Sterling yields by circa 4% against this time last year.

The Group's portfolio of events are performing well and operating in markets where growth prospects are good. Strong cash flow and an ungeared balance sheet places the Group in an excellent position to continue with its strategy of growing its business both organically and through selective acquisitions. The Board is focused on the execution of this strategy, and remains confident in ITE's future prospects.

Marco Sodi

Non Executive Chairman

Chief Executive's Statement

Chief Executive's Statement

The Group's performance this year

ITE has delivered a good financial performance in its lesser biennial year which reflects a good trading performance in most of its markets together with a first time contribution from acquisitions, but offset by an increase in the cost base of Mosbuild which re-located to a new venue and faced a new competitive threat.  ITE has made a number of smaller bolt-on acquisitions in the year in Ukraine and India, but the main focus of management has been to integrate properly and consolidate the large acquisitions which the Group made during 2011.

Revenues for the year of £172 million represent an 11% increase over last year, and volume sales of 799,000m2 represent growth of 24% over last year. These results reflect growth in the core portfolio and recent acquisitions. On a like-for-like basis revenue growth of 3% was earned on volume sales growth of 2%. Trading conditions in most of our markets were consistently strong and most of our markets delivered revenue growth figures of more than 10%, although Moscow and the UK were exceptions to this.

The major impact on our results this year came from ITE's premiere construction event Mosbuild which represents one third of our exhibition business in Moscow. Following a decision by its host venue to launch its own competitive event in the construction sector, ITE had in 2011 made the decision to re-locate Mosbuild to another venue which offered more secure terms for its future. The results this year reflect the financial impact of this upheaval but also underpin the strength and resilience of this event. Mosbuild in underlying terms stayed broadly the same size - despite facing the dual challenges of re-location and new competition. Exhibition sales achieved were 66,000m2 compared to 77,600m2 in 2011, the change mostly reflecting a biennial pattern within one of its sectors. However the cost base of the show increased by circa £3 million in the new venue, which in addition to the biennial effect on the revenues negatively affected ITE's 2012 profits by circa £4.5 million.  This one-off step up in costs has now been absorbed and sales for the 2013 event are, to date, progressing in line with expectations. 

Excluding Mosbuild, the like-for-like revenues from the Russian exhibition business grew by 4% this year. Trading conditions in the Central Asia markets were strong and supported a 21% improvement in like-for-like revenues. In Southern and Eastern Europe, good trading conditions helped the region to deliver 6% like-for-like revenue growth, which together with a strong first time contribution from Turkeybuild and the new Ukrainian acquisitions helped the region to its best ever result. Our UK business MODA also had a good year with growth from its minority stakes in niche fashion businesses and a solid performance from its mainstream fashion event.

The main factors affecting Group profitability this year are summarized in the profit bridge below.

	£'m
2011 Headline PBT	51.4
Net Biennial	(4.9)
Mosbuild	(4.5)
Currency	(0.5)
Acquisitions	7.6
Organic growth	3.9
2012 Headline PBT	53.0

Development of the business

ITE has focused this year on properly integrating the new businesses it acquired last year, as well as laying the groundwork for developing a business platform in Asia. Two of the larger acquisitions in 2011 were in Russia (MVK and Krasnodar). The Krasnodar business made a full year contribution with revenues of £8.4 million and a profit contribution of £2.4 million, both better than our expectations at time of acquisition. The MVK business in Moscow performed well in delivering revenues this year of £14.8 million and a contribution of £5.2 million, despite the competitive environment and the re-location of some of its events. Turkeybuild, also acquired last year, made its first contribution to ITE's results and delivered its best ever result with revenues of £7.3 million and a contribution of £3.2million.

The Russian management team has been consolidated into a regional management structure. The financial and operating systems of the four businesses are now managed on a common platform and the various show identities and brands are being combined. We have identified a number of good opportunities to cross launch events from one region to another and to cross sell between events. Likewise in Turkey there has been a change in management structure to absorb the newly acquired Turkeybuild.

We made some small complementary acquisitions this year which have helped to build the profile of ITE's business in Ukraine, India and the UK. In December 2011 ITE completed the acquisition of the Autoexpo portfolio of events in Ukraine, which brought a number of complementary events (winter tourism, logistics) into the portfolio, but whose principal asset is the dominant motor show taking place in Ukraine. Later in the year we acquired two events in the beauty sector (Beautex), which is a new sector for ITE, but of considerable growth potential in other regions where ITE operates. In India we made two small acquisitions in the year - one a portfolio of engineering events based in Mumbai and one of construction related events in Chennai. India's exhibition business is currently regional with no single large exhibition facility, and the route to expansion is through regional cloning. Having a regional capability now provides the Group with a platform for running events in Mumbai and Chennai. In the UK, MODA increased the scope of its London based fashion business through the acquisition of 'Jacket Required', a fast growing niche menswear event.

ITE's priority in Russia and CIS over the next year is to continue the organic growth initiatives started this year. The Group will also continue to look for opportunities to expand the business model, both in-market and by building a coherent exhibition business in Asia. Having done much of the groundwork this year we are well positioned to make good progress next year.

Announced today was the acquisition of a 28.3% minority stake in ABEC, the largest independent organiser in India. ITE plans to co-operate with this new partner and become a majority owner within the next three years. One of the exciting aspects of this partnership is that ITE now has ownership of the premier construction events in Russia, Turkey and India, three of the fastest growing emerging markets.

The international exhibition business

The global exhibition market was estimated to be worth circa $25 billion in 2011. The following table sets out the distribution of the world's exhibition business and shows that almost half by value is in the USA, and circa three-quarters is in developed markets. There is a broad correlation between the amount of exhibition space in a country and the size of a country's exhibition industry.

The Global exhibition organising market by country (2011)  $bn

US	10.93
Germany	1.92
France	1.63
UK	1.58
China	1.45
Italy	1.02
Russia	0.78
Brazil	0.64
GCC	0.49
Spain	0.44
Hong Kong	0.38
Turkey	0.33
India	0.23

The emerging and developing market exhibition business is small when compared to the developed world, but faster growing. Russia, Turkey and the CIS countries together account for circa $1 billion (4%) of the world's exhibition business and the Asian markets (China, India and South East Asia) account for circa 10%.

Projected future growth rates for the exhibition industry are set out below:

Future exhibition organising market growth by country and revenue type (CAGR 2011-16)

	Net space sold	Price per sqm	Other	Total
Brazil	5.1%	4.3%	0.2%	9.6%
Russia	4.6%	3.8%	0.6%	9.0%
GCC	5.6%	3.2%	0.2%	9.0%
India	3.7%	4.2%	0.2%	8.1%
China	5.2%	2.4%	0.3%	7.9%
Turkey	3.9%	3.4%	0.3%	7.6%
Hong Kong	2.0%	2.8%	0.2%	5.0%
USA	3.4%	1.0%	0.5%	4.9%
Germany	2.6%	1.8%	0.1%	4.5%
France	1.7%	2.0%	0.7%	4.4%
Spain	1.0%	0.6%	0.1%	1.7%
UK	0.8%	0.8%	0.1%	1.7%
Italy	0.5%	0.7%	0.1%	1.3%

ITE is the eighth largest organiser in the world by revenue, and the third largest in emerging markets. ITE is the largest exhibition organiser in Russia with an estimated market share of over 20%. ITE is in a stronger position in most of its Central Asian businesses with a leading market position and status as the dominant international exhibition organizer.  In Turkey ITE has a strong market position (8% of the market) though its business is more locally based and there are a number of other international organizers competing in different sectors.  All of these markets are expected to grow in the future at above average rates for the industry and a large part of ITE's strategy is based around ensuring we continue to be market leaders in these markets.

ITE aims to apply its free cash flow from its exhibition businesses in expanding its business model to new markets, where there is good potential for growth in the future. The current focus is on developing a business infrastructure in India, South East Asia and China to ensure our exhibition portfolio can participate in the expected growth in these regions.

ITE's objectives and strategy

 ITE's business objectives are to:

·      Create sustainable growth in headline earnings per share

·      Create and maintain sustainable positions of market leadership in the exhibition business in emerging and developing markets.

ITE's strategic priorities for achieving these objectives are:

(i)            to strengthen and develop existing positions of market leadership

(ii)           to expand the business model into new sectors and geographies where there is potential to develop strong market positions

(iii)         to grow and improve its portfolio of international exhibition brands

(iv)         to invest in the development of management talent in ITE.

ITE's performance against its strategic objectives is set out below:

(i)            To strengthen and develop its existing positions of market leadership:

ITE's positions of market leadership are founded on its ability to generate international sales, its recognised brands, its local office infrastructure and its longstanding relationships with venues.

International sales strength 

ITE's ability to generate international sales differentiates it from most of its local competition in Russia and the related CIS markets. Through its subsidiary sales offices the Group has established a loyal customer base and a specialisation in promoting sales into ITE's Russian and CIS exhibitions. In 2012 the total net metres sold by the Group's international sales offices increased by 18% to 115,500m2. This represents circa 23% of the Group's 2012 revenues, the same proportion as achieved in 2011 reflecting the acquisition of new businesses which are mostly weighted towards local sales. The Group has invested in building-up its international sales presence this year, opening a new office in Malaysia to target potential customers from South East Asia.  Approximately 9% of revenues were sold by the Group's London office, 4% by its German office , 3% by its Chinese office and 3% by its Turkish office.

ITE's international brands

ITE has established strong brand identity in certain exhibition sectors. In particular, the Build brand in construction, the Oil & Gas events brand, the ITE Travel exhibition and World Food brands all have strong reputations as leading events in the Russian and CIS markets earned through more than fifteen years of sustained good performance. The Group is working to increase recognition for these brands in other emerging markets. There are also a number of new and developing local brands in security, transport, packaging, printing and mining events. The Group is working to consolidate and establish these brands more visibly in the international exhibition world.

Building ITE's local office infrastructure

ITE's brands have built their reputation through sustained delivery of successful exhibitions to customers. The foundation of this is in ITE's local offices which, like its exhibitions and brands, have been in place for nearly 20 years and today employ over 800 staff who organise the details of staging an exhibition. Critically they own and manage the database of visitors necessary for making an exhibition successful for ITE's customers. ITE's local offices are a competitive advantage over other international organisers and a barrier to entry for new organisers wishing to run events in these markets.  ITE continues to strengthen its local office presence through investment in infrastructure and training its staff. There is a high level of equity ownership in the Group with more than 51% of staff participating in equity schemes of some description. 

Maintaining venue relationships

ITE has established long-standing relationships with the venues that host its exhibitions. Historically ITE has supported the development of venue facilities which in turn has helped the Group's exhibitions to prosper. Through this, ITE has established rights to run its main exhibition themes in its chosen venues at the time of its choice. ITE has continued to work on maintaining and improving the venue relationships that underpin its business. Most of ITE's major events have agreements which provide for venue facilities for at least three years ahead. This year ITE has agreed outline terms for holding its shows in the new St Petersburg venue, which is due to be completed by 2014.

 (ii)          To expand the business model into new sectors and geographies where there is potential to develop strong market positions.

In existing markets this strategy means targeting new sectors or regions in which to acquire or develop businesses where there is potential for the participation of international exhibitors. In new markets, ITE is targeting the development of exhibition businesses where there is clear opportunity for strong future growth.

This year the Group has expanded the industry sectors in its Ukrainian business. Through its acquisitions of Autoexpo and Beautex the Ukrainian business has gained exposure to the automotive and beauty/cosmetics sectors. The beauty sector is new to ITE, and one we hope to be able to replicate into other markets in the near future. The Group aims to increase its involvement in a broader range of sectors in India, and made two small acquisitions this year, one in the industrial machinery sector and one in the construction sector.

(iii)         To grow and improve its portfolio of international brands.

The Group's management has been working to improve the strength of ITE's existing international brands and to improve international recognition of its local brands. As part of this, some industry vertical groupings have been established to ensure consistency of presentation and message across the Group. Developing the international recognition and strength of its brands improves the Group's ability to successfully 'clone' its events into new geographies.

(iv)          To invest in the development of management talent in ITE.

We have made some good progress in developing the strength and depth of the management team in the year as well as improving the communication between the different offices. We have further developed our Group intranet as well as opening up communication by functional management i.e. connecting staff lines across the different offices such as construction / marketing / IT. We have started on a rolling programme of internal senior management and functional conferences, and launched a series of leadership training courses to further develop our internal management resource.

Russell Taylor

Chief Executive Officer

Trading summary 2012

Revenue

				2012		2011		%		%
				£000		£000		change		change Like-for-like#
	Russia			105,163		105,650		0%		-2%
	Central Asia & Caucasus			27,030		21,853		+24%		+21%
	Eastern & Southern Europe			28,417		17,940		+58%		+6%
	UK & Western Europe			9,562		8,950		+7%		+6%
	Rest of World			2,140		1,063		+101%		-32%
	Total			172,312		155,456		+11%		+3%

# measures the change over the previous year after excluding biennial events and acquired events impacting the results for the first time.

ITE's results this year reflect good economic growth in the Group's markets and a first time contribution from newly acquired businesses, partially offset by the effects of the Group's weaker biennial pattern and the effects of increased costs and competition on the Group's leading event. In total the Group saw volume sales increase by 24% to 799,000m2 and revenues by 11% to £172.3 million. On a like-for-like basis, volume sales grew by 2% and revenues grew by 3%.

In 2012 the Group ran 251 events (2011: 211). The increase in the number of events is a mix of acquisitions and new launches, together with the cancellation of some marginal events. A detailed analysis of volumes, revenues and gross profits from the Group's exhibition and conference activities is set out below. Average yields per m2 have reduced to £224 per m2 primarily due to lower yielding events included for the first time; excluding those events the average yield would be £243 per m2.

			Square Metres Sold			Revenue		Gross Profit		Average yield
			(000)			£m		£m		Per m2
2011	All events*		644			154		75
	Non-annual		(57)			(12)		(6)
2011	Annually recurring		587			142		69		242
	Acquisitions		150			22		9
	Net Growth		14			4		(1)
2012	Annually recurring		751			168		77		224
	Non-annual		48			4		1
2012	All events *		799			172		78

* Excluding publishing

Russia

In Russia ITE operates through four principal offices, Moscow, St. Petersburg, Novosibirsk and Krasnodar together with a small office in Ekaterinburg established in 2012. During the year ITE held 118 events in Russia (2011: 104), with total volume sales of 391,800m2 (2011: 344,500m2). Revenues of £105 million were fractionally lower than the previous year, reflecting the weaker biennial year, a small decline in the Moscow business, good organic growth from in the regional portfolios (which grew by an average of 15%) and acquisitions impacting for the first time this year. On a like-for like basis volume sales and revenues in Russia were down 2% on the prior year.

The Russian economy continues to grow at a good pace, with GDP growth of around 4% in 2012 and similar levels forecast for 2013. This backdrop of economic growth underpinned by relatively stable commodity prices, most notably oil, is providing the environment for continued good growth in ITE's exhibitions.

Moscowis ITE's largest office accounting for around 48% of Group revenue. The results this year reflect the weaker biennial pattern in Moscow and the effect of competitive launches against two of our leading Moscow events, Mosbuild and Euroexpomebel which together offset the good growth in the office's other events.  Overall volume sales for the year were 251,200m2 (2011: 248,800m2) with new events from last year's MVK acquisition helping to offset the absence of the biennial Moscow International Oil & Gas Exhibition (MIOGE).

The Moscow business had a strong first half with 14% like-for-like growth, led by Aquatherm Moscow which again delivered double digit growth. There was a small decline in volumes at the Moscow International Travel and Tourism exhibition with volume sales of 20,000m2 (2011: 21,000m2) as exhibitors from Southern European travel destinations continue to suffer austerity cutbacks. The second half of the year again saw some excellent results and strong growth from a number of ITE's leading events although overall profitability was affected by Mosbuild. The logistics event TransRussia lifted volume sales by 16% to 10,100m2, Moscow International Security & Protection also grew volume sales by 16% to 10,000m2, and World Food Moscow also continued to grow well with a 7% increase in volume sales to 24,400m2. All three of these events are constituents of the Group's top 15 events by gross profit and reached record sizes this year. As expected Mosbuild proved very resilient to competition, delivering record visitor numbers, and volume sales of 66,100m2 representing a decline of just over 3,000m2 (after adjusting for the biennial pattern in the Windows sector).

In St. Petersburg, ITE made further good progress, building on the improved trading conditions experienced in 2011. During the year ITE operated 17 events from this office selling 35,000m2 (2011: 30,500m2) a 15% increase which was matched by a similar increase in revenues. Growth was good across all sectors, but most importantly for this construction-dominated portfolio, Interstroyexpo, the region's leading event, improved its volume sales by 14% to 9,800m2. The St Petersburg business has not yet recovered its full 2008 market size, but further recovery is expected albeit at a slower pace than this year. Construction has now begun on a new venue for the city with completion due by 2014 and the Group has recently signed a protocol agreement covering its current events in the new venue.

In Novosibirsk it was an important year for Sibfair, ITE's operation in Siberia, with the opening of a new 14,000m2 state of the art exhibition centre located close to the airport. ITE is the anchor tenant for this venue and the international quality space it offers is already providing a platform for growth in the Group's business in this region, although due to the increased cost base there is a lag on profitability. During 2012 the region held 30 events (2011: 34), removing a number of smaller less profitable events which were not suited to the new venue. Overall volume sales were 42,700m2 (2011: 37,800m2), an improvement of 13% over the previous year as exhibitors responded to the improved facilities and local revenues improved by 14% to nearly £7 million.

In Krasnodar this was the first full year of ownership for ITE's Krasnodar business which had been acquired in March 2011. Krasnodar is in the south west of Russia, it will be one of the host cities for the 2018 FIFA World Cup and is located just two hours from Sochi where the 2014 Winter Olympics will take place. The region, which is the centre of the Russian agricultural industry, is one of the most prosperous outside Moscow and continues to attract increasing numbers of international manufacturers. The exhibition portfolio covers a broad range of sectors, the largest events being in the agriculture and construction sectors. In total the region contributed volume sales of over 68,000m2 and generated over £8 million in revenues this year, a growth of 15% on the equivalent prior period.

Central Asia and the Caucasus

ITE's principal offices in Central Asia are in Kazakhstan, Azerbaijan and Uzbekistan. This year ITE organized a total of 93 events across these territories delivering volume sales of 80,000m2, an increase of 19% over the previous year. Revenues of £27million represented an increase of 28% over the previous year.

All of the economies in this region are dependent on Oil and Gas for their overseas earnings and economic wealth. The consistent $100+ barrel price of oil has helped support economic confidence within these economies feeding through to good levels of economic growth, which has been reflected in the growth of ITE's business in the region this year.

Kazakhstan

Kazakhstan continued to grow strongly in 2012, delivering like-for-like volume growth of 13% and revenue growth of 9%. The capital Astana has recently been chosen to hold the World Expo in 2017 which will be a significant international event and an opportunity to showcase the country and bring significant new exhibition facilities to the city.

The region is dominated by the Oil & Gas sector, which accounts for over 40% of regional revenue. The largest event in the region is the Oil & Gas Exhibition (KIOGE) which took place in Almaty in October 2011. The event has been expanded this year to include the Kazenergy conference in Astana and this has allowed the Group to co-ordinate the development of a broader Kazakhstan Oil and Gas week. The combined event produced sales of 8,500m2 an increase of 9% on the previous year and combined conference revenues were increased by over 30%.

Other important sectors are construction which has remained relatively subdued since the property crash of 2008, but grew revenues by 5% in 2012, and the fast growing Food and Health & Pharmaceutical sectors which both grew revenues by around 30%.

Azerbaijan

The region has continued to build on the opportunity afforded by the development of a new venue in 2010 and the country's continued economic expansion, and this year the region achieved volume sales of over 22,400m2 (2011: 18,600m2) a 20% increase on the prior year. ITE is benefiting from being the recognized industry leader in the country and has organized a number of 3^rd party conferences resulting in an overall revenue increase of over 40% during the year.

Uzbekistan

ITE's Uzbekistan business showed strong growth in 2012 selling over 13,600m2 (2011:10,100m2) in the year aided in part by a number of small events moving date lines. Excluding these timing differences regional revenue grew by 15%, led by events in the Fashion textiles and Mining sectors.

Eastern & Southern Europe

The Eastern and Southern Europe region is represented by the Group's offices in Turkey and Ukraine. Overall the region sold 268,300m2 in 2012 (2011: 185,900m2). On a like-for-like basis sales grew by 5% in volumes and 6% in revenues. In Ukraine, which is now experiencing better economic conditions, the Group invested over £10 million in two separate acquisitions reflecting the Group's on-going confidence in the future of the region. The two acquisitions bring new sectors for ITE in the region, adding over 30,000m2 in volume sales and over £3 million in annual revenues to the Group.

Both acquisitions illustrate how ITE's market-leading position and in-depth knowledge of the industry in each of the territories we operate in affords us good opportunities to expand our portfolio at good prices.

Ukraine

Despite the well documented economic and political difficulties, Ukraine remains an attractive market for ITE and one in which we will continue to expand both organically and by acquisition. The successful co-hosting of the UEFA European football championships this summer was great exposure for a country with a population in excess of 45 million and forecast GDP growth of 4% per annum in the short to medium term. It has significant natural resources, notably iron ore and coal, plus recent findings of shale gas reserves which provide opportunities for sustained growth that will impact positively on ITE's operations in this country.

In November 2011 the Group announced the acquisition of the Autoexpo portfolio of events, the largest of which is the principal automotive event in the Ukrainian market taking place each May. In April 2012, the Group announced the acquisition of Beautex which runs two events in the Beauty sector. Volume sales in Ukraine nearly doubled to 61,400m2 (2011: 33,600m2), helped by the Autoexpo and Beautex acquisitions.

Turkey

The Turkish economy is continuing to grow and the country is now established in the second tier of emerging market economies. These economies are seen as offering potential for above average economic growth, and are characterized by a growing aspirational middle class population which is expected to drive consumer demand. The market continues to be characterised by two types of exhibitions, those that are dominated by local trade associations which tend to be low cost/low margin events, and those that attract international exhibitors which tend to be higher yielding/higher margin events. ITE's portfolio of events has until recently been biased toward the domestic market. The acquisition of EMITT (East Mediterranean International Travel & Tourism event) in 2009 and of Turkeybuild in 2011 has changed the composition of the Turkish business. In the medium term the Group aims to raise the margins in its more domestic events by increasing the level of international participation. This process has begun with the development of the biennial Ankomak (construction machinery) event, which this year produced significantly increased margins and profits.

During 2012, the portfolio continued to perform well with volume sales of 206,700m2 (2011: 152,400m2) which includes a first time contribution from Turkeybuild together with a change in the mix of biennial events. Turkeybuild, the pre-eminent construction event in Turkey, took place in early May for the first time under the Group's ownership and delivered its largest ever event with volume sales of 36,100m2. The event enjoys strong demand for additional space from its exhibitors, which at present can't be satisfied by current venue arrangements. The Group is working on initiatives to satisfy this demand through the development and expansion of the Turkeybuild offering. The Group's leading regional travel event EMITT achieved record volumes for a 4^th successive year, illustrating the continued growth available in this sector in the region.

UK & Western Europe

Despite continued static economic conditions in the UK, the Group's fashion business continued to perform well and continues to execute its strategy of broadening its sector offering whilst maintaining a lead in the mid-market sector. The Group now contains a number of brands that serve several sectors of the UK fashion industry. MODA, which is the leading midmarket fashion event for Womenswear, Menswear, Footwear and Lingerie, runs twice a year in Birmingham generating volumes sales in excess of 35,000m2 annually. In London the Group operates Bubble, a niche high-end Childrenswear event and it also owns a 40% stake in Scoop, a designer lead Womenswear event. In July 2012 the Group expanded into the designer-led menswear sector with the purchase of 100% of the London based event Jacket Required. Overall these events grew by 3% in volumes and 8% in revenues as the business continued to gain market share.

Rest of the World

The Group's operations in this Division are in India, which has potential for significant organic growth as its exhibition industry is currently sub-size for its economy. The Group continued to expand its presence in this market with two small regional acquisitions in May 2012. In Mumbai the Group purchased a portfolio of engineering events and in Chennai the Group purchased two construction events. These new offices complement its existing Delhi operation.   This year saw the return of the Group's leading event Paperex, which serves the domestic paper mill industry. The event grew by nearly 30% in comparison to its 2010 edition demonstrating the potential for growth in the region. These new businesses allied with the existing base provide the Group with opportunities to expand its regional events offering whilst adding additional operational capacity.

Finance Director's statement

Revenue and gross profit

Revenue for the year was £172.3 million (2011: £155.5 million) and gross profit for the year was £77.7 million (2011: £74.9 million); a reduction in gross margin by 3% to 45.1% (2011: 48.1%).  The main factors affecting gross margin are summarised in the gross margin bridge below.

	£'m
2011 Gross Margin	48.1%
Mosbuild	(1.6)%
Biennial	(0.6)%
Acquisitions & timing difference	(0.8%)
2012 Gross Margin	45.1%

Administrative expenses across the Group increased to £39.8 million from £35.2 million in the previous year. Administrative expenses include significant non-cash items, including an amortisation charge of £13.5 million on acquired intangibles (2011: £10.7 million) reflecting the impact of acquisitions made during the year together with a full-year's charge for acquisitions made during 2011, a charge for share-based payments of £2.1 million (2011: £1.7 million) and a foreign exchange gain of £0.3 million arising on the translation of foreign currency assets (2011: a loss of £0.2 million).

Excluding these non-cash items, administrative expenses increased by £2.1 million to £24.5 million (2011: £22.4 million), with £1.7 million being overheads relating to the full year impact of acquisitions made in the prior year and acquisitions made in 2012. Overall, Group administrative expenses excluding non-cash items and transaction related costs represented 14% of revenue (2011: 14%).

Operating profit was £39.0 million against a prior year profit of £40.0 million, resulting in net operating margins of 23% (2011: 26%) for the year. The result in both years is impacted by the significant increase in amortisation charges. After adjusting for amortisation on acquired intangibles operating profit for this year is £52.5 million (2011: £50.7 million), yielding an operating margin of 30.5% (2011: 32.6%)

Headline pre-tax profit for the year was £53.0 million (2011: £51.4 million).

Reconciliation of headline pre-tax profit to profit on ordinary activities before taxation

	2012	2011
	£000	£000
Profit on ordinary activities before taxation	40,474	39,094
Amortisation of acquired intangibles	13,508	10,717
Loss on exercise of Ekin Fuar put option	93	269
Gain on revaluation of put option liabilities	(1,641)	-
Unwind of discount on put option liabilities	460	-
Profit on sale of investments	(78)	-
Gain on settlement of contingent consideration	(453)	(119)
Loss on settlement of contingent consideration	-	104
Transaction costs (completed and pending)	640	1,180
Impairment of goodwill	-	130
Headline pre-tax profit	53,003	51,375

Other operating income

£0.4 million  (2011: £0.3 million)

Other operating income represents rental income earned from subletting surplus office space, principally at ITE's London office.

Investment revenue

£3.2 million  (2011: £0.6 million)

Investment revenue came from interest on bank deposits which increased to £1.0 million this year (2011: £0.4 million), gains on the revaluation of put options on acquisitions made during 2011 of £1.6 million (2011: nil) and gains on the settlement of contingent consideration of £0.5 million (2011: £0.1 million).

Finance costs

£1.7 million  (2011: £1.5 million)

Finance costs represent the interest cost of the Group's borrowings in Sterling, Euro and US Dollar (£0.7 million), bank charges (£0.4 million) together with an imputed interest charge arising on the discounting of the Group's put option liabilities of £0.5 million.

The Group enters into currency borrowing arrangements as part of its currency hedging activity and at 30 September 2012 the Group had currency borrowings in the form of overdrafts of £13.3 million, and US$3.3 million, equivalent to a total of £15.4 million (2011: £13.9 million). In addition the Group had term loans drawn in Euros totalling £13.3 million (2011: £14.5 million).

Tax charge

The tax charge of £7.9 million represents 20% of profit before tax (2011: 21%). The Group continues to focus on tax efficiency across the Group, with the reduction in the tax rate this year resulting from further effects of the lowering of underlying corporation tax rates within the main operating economies of the Group, together with efficiencies within the Group structure. The lower levels of underlying corporation tax, if sustained, will continue to benefit the Group's tax rate in the future.

Earnings per share

Basic earnings per share increased by 2% to 13.0p (2011: 12.8p). Diluted earnings per share also increased by 2% to 12.8p (2011: 12.6p).

The Group achieved headline diluted earnings per share of 16.9p (2011: 16.6p). Headline diluted earnings per share are based upon profit for the financial year attributable to equity holders of the parent, before amortisation and impairment of acquired intangible assets and goodwill, any profits or losses on disposal of Group undertakings, revaluation of financial liabilities in relation to put options over non-controlling interests, imputed interest charges on discounted put option liabilities and transaction costs relating to completed and pending acquisitions and disposals.

Dividends

The Group has recommended a final dividend of 4.4p per share for 2012, to bring the total dividend for the year to 6.5p per share (2011: 6.1p).

Return to shareholders

ITE is committed to maximising shareholder value through a long-term progressive dividend policy, set against a principle of maintaining at least two times cover across the biennial cycle, together with the re-investment of profits into expanding the business. Since 2007 the company has increased the dividend by 44% from 4.5p per share to a record level of 6.5p.

Cash flow

Cash generated from operations in the year was £62.1 million, representing 117% of headline profits (2011: £65.3 million, 127%). The principal applications of cash were £19.6 million applied to acquisitions (2011: £44.5 million); £6.2 million applied to new venue loans and advances (2011: £6.9 million); £11.6 million was paid in tax (2011: £11.6 million); and £15.2 million was distributed as dividends to the Group's shareholders (2011: £14.1 million). The increase in net cash balances over the year was £7.5 million, with the Group holding £13.0 million in net cash at 30 September 2012 (2011: £5.5 million).

 Acquisitions

On 2 December 2011, ITE acquired the assets of LLC Autoexpo ('Autoexpo') for £4.5 million in cash. During the financial year this portfolio of Ukrainian exhibitions contributed revenue of £1.0 million and £0.2 million of profit before interest charges to the Group's headline results.

On 3 April 2012, ITE acquired 100% of the issued share capital of Beautex Co LLC (Beautex') for £7.1 million of which £5.0 million was satisfied in cash on completion and a deferred consideration payment of £1.3 million was paid in June. Further deferred consideration of £0.3 million is payable in equal tranches, in June 2013 and June 2014. During the financial year this group of exhibitions contributed revenue of £2.0 million and £0.9 million of profit before interest charges to the Group's headline results.

The Group also completed four smaller acquisitions (two in India, one in Kazakhstan and one in the UK) for total consideration of £4.1 million, of which £0.6 million is contingent and deferred, with £0.3 million expected to be paid in July 2013 and £0.3 million expected to be paid in July 2014.

During the financial year this group of exhibitions contributed revenue of £1.8 million and £0.3 million of profit before interest charges to the Group's headline results.

Balance Sheet

The Group's consolidated balance sheet at 30 September 2012 is summarised in the table below:

	Assets £m	Liabilities £m	Net assets £m
Goodwill and intangibles	131.0	0.0	131.0
Property, plant and equipment	2.3	0.0	2.3
Venue advances	8.9	0.0	8.9
Cash	41.7	(15.4)	26.3
Bank Loan	0.0	(13.3)	(13.3)
Current assets and liabilities excluding cash	49.0	(89.4)	(40.4)
Provisions - non-current	0.0	(0.6)	(0.6)
Deferred tax	1.8	(14.4)	(12.6)
Other non-current assets and liabilities	2.7	(4.5)	(1.8)
Total as at 30 September 2012	237.4	(137.6)	99.8
Total as at 30 September 2011	225.1	(144.2)	80.9

Net assets increased by £18.9 million to £99.8 million. The main changes are in cash (an increase of £7.5 million), goodwill and intangibles (an increase of £1.4 million) and the movement in derivative financial instruments on cash flow hedges and put option liabilities (an increase in net assets of £8.6 million).

Investment and capital expenditure

The Group's capital expenditure on plant and equipment for the year was £1.3 million (2011: £1.2 million) and included exhibition equipment, office fixtures and fittings. Capital expenditure on computer software in the year was £0.6 million (2011: £0.4 million). The increase seen this year reflects increased investment in computer software to enhance our exhibition visitor experiences and support our sales, marketing and accounting functions.

Venue arrangements

The Group has long-term arrangements with its principal venues in its main markets setting out ITE's rights over future venue use and pricing.

In Moscow the Group utilises three venues:-

Expocentr is ITE's principal venue in Moscow and hosts seven of its largest exhibitions including MosBuild, Moscow International Oil & Gas exhibition, Moscow International Travel & Tourism, World Food Moscow, TransRussia and Moscow International Protection & Security Exhibition. ITE has an agreement with Expocentr which secures the Group's rights to hold its exhibitions at the venue on agreed rates until 2015.

VVC is located in Central Moscow and hosts a number of events acquired with the MVK portfolio in December 2010. ITE has an agreement with VVC, providing rights to hold its exhibitions at the venue on agreed rates to 2015.

Crocus is located on the outskirts of Moscow city centre and hosts a number of events including Expoelectronica and Rosupack. ITE has an agreement with Crocus on an event by event basis, providing rights to hold its exhibitions at the venue on agreed rates between 2013 and 2015.

Lenexpo is located in St Petersburg. ITE has an agreement with Lenexpo, providing rights to hold its exhibitions at the venue on agreed rates until 2013. Construction has now begun on a new venue for the city with completion due by 2014 and ITE has signed a protocol agreement covering its current events in the new venue.

Atakent Exhibition Centre is the largest venue in Almaty, Kazakhstan and hosts the Kazakhstan International Oil & Gas events and KazBuild exhibitions. ITE's agreement with Atakent confirms its rights to hold its exhibitions at the venue on agreed rates until 2017.

CNR is the principal venue in Istanbul, located close to the city's international airport, and holds the majority of the Group's Turkish exhibitions. ITE has an agreement with CNR which secures its rights to conduct its exhibitions at the venue on agreed rates until 2014.

The International Exhibition Centre ('IEC') is the principal venue in Kyiv and hosts all of the Group's Ukrainian events, including the Aquatherm exhibition and all events within the recently acquired Beautex and SIA portfolios. ITE has an agreement with IEC which secures its rights to conduct its exhibitions at the venue until 2014.

Expocentre Novosibirsk was opened in February 2012. ITE is the anchor tenant for the venue with exclusive occupancy rights for over 6 months of the year. The Group operates all of its Siberian exhibitions from this venue and has contracted rights to operate on these terms until 2021.

Azexpo is the principal venue in Baku and hosts all of the Group's exhibitions in Azerbaijan. ITE has an agreement with Azexpo which secures its rights to conduct its exhibitions at the venue on agreed rates until 2015.

The Group funds the development of venues and facilities where improvements will enhance the prospects and profitability of its business. The funding can take the form of a prepayment of future venue fees ('advance payment'), 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 through long-term agreements. Venue loans and advance payments are included in the Balance Sheet under non-current and current assets.

At 30 September 2012, the Group's Sterling value of the outstanding balances of advance payments and venue loans was £8.9 million (2011: £10.1 million) as follows:

	30 September 2011 £m	New £m	Repayments £m	Forex £m	30 September 2012 £m
Kyiv	1.8	0.0	(0.4)	0.0	1.4
Almaty	1.8	1.6	(2.6)	0.0	0.8
St Petersburg	0.3	0.0	(0.3)	0.0	0.0
Uzbekistan	0.2	0.0	0.0	0.0	0.2
Azerbaijan	0.6	0.0	(0.1)	0.0	0.5
Crocus (Moscow)	0.3	0.0	(0.2)	0.1	0.2
CNR (Istanbul)	5.1	0.0	(2.7)	0.4	2.8
Novosibirsk (Siberia)	0.0	4.6	(1.6)	0.0	3.0
Total	10.1	6.2	(7.9)	0.5	8.9

Capital

During the year the Company issued 294,658 ordinary shares of 1p in the year. All of the total new issues were pursuant to the exercise of options and yielded aggregate consideration of £72,097. During the year the Company made no additional purchases of shares for the Employees Share Option Trust ('ESOT'). As at 30 September 2012 ESOT held 5,366,722 (2.2%) of the Company's issued share capital (2011: 8,102,687 (3.3%).

Treasury

During the year, the Group experienced a net foreign exchange gain of £0.3 million (2011: loss of £0.2 million). The exchange rate for the Euro at 30 September 2012 was €1.25:£1 (30 September 2011: €1.15:£1); the exchange rate for the US Dollar at 30 September 2012 was $1.61:£1 (30 September 2011: $1.56:£1).

During the year, 54% of the Group's sales were priced in Euros, 21% in Rubles, 7% in GBP, 1% in US Dollars, the balance being in various local currencies. Overall 62% of the Group's cash receipts for the period were collected in 'hard' currency (Sterling, Dollars or Euros) and 38% was collected in various local currencies, the majority being Rubles.

The Group uses derivative instruments and currency borrowings to protect itself against the effect of currency fluctuations on a proportion of its sales and its balance sheet. The Group's policy on derivative instruments is that:

>   it will hedge no more than 75% of the value of anticipated Euro denominated sales derived from outside Russia and the CIS; and

>   it will only enter into derivative transactions up to 36 months ahead.

At 30 September 2012, the Group had entered into forward contracts to sell Euros for Sterling between October 2012 and September 2015. The value of the contracts is €102.2 million at an average rate of €1.18:£1. These instruments are designated as hedging instruments.

The Group finances its operations through cash holdings and banking facilities. The objective of the Group is to maximise investment income and minimise interest costs, bearing in mind its liquidity requirements.

During the year the Group entered into currency borrowing arrangements to minimise its exposure to foreign exchange risk on trade receivables. At 30 September 2012 the Group had borrowings of £13.3 million and US$3.3 million through an overdraft facility and €16.7 million through a term facility with Barclays Bank.

Group borrowing facilities

The Group has long-term borrowing facilities provided by Barclays Bank. The arrangements, which were extended after the year end, extend until 30th June 2015 and consist of term and overdraft facilities totalling £30 million.

For short-term debt, such as overdraft facilities or debt with a term of less than 12 months, fixed or floating rates of interest are used. For debt with a term of greater than 12 months, when the borrowing is not covered by existing cash holdings, it is policy that at least 50% must have fixed rates of interest so as to minimise the Group's exposure to interest rate movements. It is Group policy that its cash balances are 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.

The Group is conscious of the risks associated with holding deposits in foreign domiciled banks. The territories in which ITE operates do not all have internationally recognised banks and the Group has relationships with a number of domestic banks. The Group seeks to use the territories' leading banks and to minimise the level of cash held in such banks. Of the Group's total cash balance of £41.7 million as at 30 September 2012, 61% was held in institutions with a rating of grade A or above and 29% in B to BBB+.

Going concern

The Group and Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the CEO's Review and Divisional Trading Summary. The financial position of the Group and Company, its significant cash balance, its cash flow, liquidity position and absence of long-term borrowings are described within this Finance Director's statement. In addition, in the general information section and note 21 of the notes to the financial statements the Group and Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk are referred to. 

After making enquiries, reviewing the Group and Company's forecasts and projections and taking account of reasonably possible changes in trading performance, the Directors have a reasonable expectation that the Group has adequate resources to continue its operations for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the Annual Report and Financial Statements.

Risks & Uncertainties

The Group identifies and monitors the key risks and uncertainties affecting the Group and runs the business in a way that minimises the impact of such risks where possible.

Operational risks	Potential impact	Mitigation
Political uncertainty and regulatory risk	The Group's business is principally carried out in Russia, the CIS and Turkey.  Changes in law or the regulatory environment could have an effect on some or all of the exhibitions of the Group.	ITE has reduced the risk by establishing its business as independent Russian, CIS and Turkish companies fully contributing to the local economy, and the diversity of businesses across sectors and geography provides protection for the longer-term prospects of the Group.
Economic instability reduces demand for exhibition space	Reduced demand for exhibition space would reduce the profits of exhibitions.	ITE operates across a wide range of sectors and countries to minimise the exposure to any single market. ITE, through its relationships with venues and staff has a relatively flexible cost structure, allowing it to manage its event margins in the short and medium term. This was clearly evidenced during the company's performance during the recent recession.
Commercial relationships	The Group has key commercial relationships with venues which secure the Group's rights to run its exhibitions in the future.	These key relationships are regularly reviewed and the Group seeks to maintain its exhibition rights for up to least three years forward for significant exhibitions where possible.
Venue availability	Damage to or unavailability of a particular venue could impact the Group's short-term trading position.	The Group carries business interruption insurance policies which protect profits on its largest events covering annual revenue of circa £120 million against such an event in the short term. In the longer-term the Group seeks to maintain good relationships with its principal venues to ensure the continuance of availability.
Competitor risk	Competition has existed in ITE's markets for some years. ITE faces competitive pressures on a market-by-market basis.	In all of its overseas markets, ITE has a strong position as an international organiser, achieved through effective use of its international sales network and its established brands for major events.  A single exhibition or sector in a market could have its prospects curtailed by a strong competitor launch; however, the breadth of ITE's portfolio of events, with its geographic and sector diversity, reduce the risk of a competitive threat to the Group's overall business.
People	ITE's employees have long-standing relationships with customers and a unique knowledge of the exhibitions business.   Loss of key staff could impact the short-term prospects of a specific event or sector.	ITE has sought to build loyalty in its staff by ensuring remuneration is competitive and through a wide distribution of the Group's long-term incentive plans. ITE has a good record of retaining its key staff through both growth and recessionary times.
Financial risk - foreign currency risk	The Group is exposed to movements in foreign exchange rates against Sterling for both trading transactions and for the translation of overseas operations. The principal exposure is to the Euro and the Ruble which form the basis of the Group's invoicing and to the Ruble which forms the base books of the Group's Russian operations.	The Group seeks to minimise exposure by: ·   Protecting a certain amount of euro denominated sales with forward contracts.  ·   Seeking to maximise the matching of costs and revenues in the same currency.

 

Consolidated Income Statement

For the year ended 30 September 2012

		2012	2011
	Notes	£000	£000
Continuing operations
Revenue	4	172,312	155,456
Cost of sales		(94,617)	(80,595)
Gross profit		77,695	74,861
Other operating income		371	292
Administrative expenses before amortisation		(26,550)	(24,099)
Amortisation of acquired intangibles		(13,508)	(10,717)
Impairment loss		-	(130)
Foreign exchange (loss) on operating activities		259	(208)
Total administrative expenses		(39,799)	(35,154)
Income from investments & associates		701	-
Operating profit		38,968	39,999
Investment revenue	5	3,193	582
Finance costs	6	(1,687)	(1,487)
Profit on ordinary activities before taxation	3	40,474	39,094
Tax on profit on ordinary activities	7	(7,943)	(8,292)
Profit for the period		32,531	30,802
Attributable to:
Equity holders of the parent		31,486	30,724
Non controlling interests		1,045	78
		32,531	30,802
Earnings per share (p)
Basic	9	13.0	12.8
Diluted	9	12.8	12.6

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2012

		2012	2011
	Notes	£000	£000
Profit for the period attributable to shareholders		32,531	30,802
Cash flow hedges:
Movement in fair value of cash flow hedges		4,892	(662)
Fair value of cash flow hedges released to the income statement		923	(1,367)
Currency translation movement on net investment in subsidiary undertakings		(5,214)	(4,162)
		33,132	24,611
Tax relating to components of comprehensive income	7	(1,368)	551
Total comprehensive income for the period		31,764	25,162
Attributable to:
Owners of the company		30,719	25,084
Non-controlling interests		1,045	78
		31,764	25,162

Consolidated Statement of Changes in Equity

For the year ended 30 September 2012

	Share capital	Share premium account	Merger reserve	Capital Redemp-tion reserve	ESOT reserve	Retained Earnings	Put Option reserve	Translation reserve	Hedge reserve	Total	Non Controlling interests	Total Equity
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance as at  1 October 2011	2,486	2,724	2,746	457	(7,826)	87,057	(13,345)	148	(594)	73,853	7,059	80,912
Net profit for the year	-	-	-	-	-	31,486	-	-	-	31,486	1,045	32,531
Currency translation movement on net investment in subsidiary undertakings	-	-	-	-	-	-	-	(5,214)	-	(5,214)	-	(5,214)
Movement  in fair value of cash flow hedges	-	-	-	-	-	-	-	-	4,892	4,892	-	4,892
Fair value of cash flow hedges released to the income statement	-	-	-	-	-	-	-	-	923	923	-	923
Tax relating to components of comprehensive income	-	-	-	-	-	(1,368)	-	-	-	(1,368)	-	(1,368)
Total comprehensive income for the period	-	-	-	-	-	30,118	-	(5,214)	5,815	30,719	1,045	31,764
Dividends paid	-	-	-	-	-	(15,220)	-	-	-	(15,220)	(936)	(16,156)
Exercise of share options	3	69	-	-	2,643	(1,937)	-	-	-	778	-	778
Share-based payments	-	-	-	-	-	2,147	-	-	-	2,147	-	2,147
Tax credited to equity	-	-	-	-	-	(1,075)	-	-	-	(1,075)	-	(1,075)
Exercise of put option on acquisition of subsidiary	-	-	-	-	-	93	1,835	-	-	1,928	(472)	1,456
Balance as at 30 September 2012	2,489	2,793	2,746	457	(5,183)	101,183	(11,510)	(5,066)	5,221	93,130	6,696	99,826

	Share capital	Share premium account	Merger reserve	Capital Redemp-tion reserve	ESOT reserve	Retained Earnings	Put Option reserve	Translation reserve	Hedge reserve	Total	Non Controlling interests	Total Equity
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance as at  1 October 2010	2,483	2,698	2,746	457	(9,638)	68,318	(1,351)	4,310	1,435	71,458	1,123	72,581
Net profit for the year	-	-	-	-	-	30,724	-	-	-	30,724	78	30,802
Currency translation movement on net investment in subsidiary undertakings	-	-	-	-	-	-	-	(4,162)	-	(4,162)	-	(4,162)
Movement  in fair value of cash flow hedges	-	-	-	-	-	-	-	-	(662)	(662)	-	(662)
Fair value of cash flow hedges released to the income statement	-	-	-	-	-	-	-	-	(1,367)	(1,367)	-	(1,367)
Tax relating to components of comprehensive income	-	-	-	-	-	551	-	-	-	551	-	551
Total comprehensive income for the period	-	-	-	-	-	31,275	-	(4,162)	(2,029)	25,084	78	25,162
Put option on acquisitions	-	-	-	-	-	-	(12,856)	-	-	(12,856)	6,554	(6,302)
Dividends paid	-	-	-	-	-	(14,105)	-	-	-	(14,105)	-	(14,105)
Exercise of share options	3	26	-	-	1,812	(106)	-	-	-	1,735	-	1,735
Share-based payments	-	-	-	-	-	1,696	-	-	-	1,696	-	1,696
Tax credited to equity	-	-	-	-	-	132	-	-	-	132	-	132
Exercise of put option on acquisition of subsidiary	-	-	-	-	-	(153)	862	-	-	709	(696)	13
Balance as at 30 September 2011	2,486	2,724	2,746	457	(7,826)	87,057	(13,345)	148	(594)	73,853	7,059	80,912

Consolidated Statement of Financial Position

30 September 2012

	2012	2011
	£000	£000
Non-current assets
Goodwill	76,309	70,684
Other intangible assets	54,707	58,867
Investments	-	400
Property, plant and equipment	2,346	2,080
Interests in associates	596	100
Venue advances and other loans	4,011	4,043
Derivative financial instruments	2,139	79
Deferred tax asset	1,763	2,112
	141,871	138,365
Current assets
Trade and other receivables	50,320	51,623
Tax prepayment	1,377	923
Derivative financial instruments	2,128	221
Cash and cash equivalents	41,734	33,961
	95,559	86,728
Total assets	237,430	225,093
Current liabilities
Bank overdraft	(15,418)	(13,948)
Bank loan	(13,306)	-
Trade and other payables	(14,686)	(19,766)
Deferred income	(69,612)	(67,867)
Derivative financial instruments	(4,516)	(906)
Provisions	(589)	(565)
	(118,127)	(103,052)
Non-current liabilities
Bank loan	-	(14,483)
Provisions	(597)	(866)
Deferred tax liabilities	(14,414)	(13,067)
Derivative financial instruments	(4,466)	(12,713)
	(19,477)	(41,129)
Total liabilities	(137,604)	(144,181)
Net assets	99,826	80,912
Equity
Share capital	2,489	2,486
Share premium account	2,793	2,724
Merger reserve	2,746	2,746
Capital redemption reserve	457	457
ESOT reserve	(5,183)	(7,826)
Retained earnings	101,183	87,057
Translation reserve	(5,066)	148
Hedge reserve	5,221	(594)
Put option reserve	(11,510)	(13,345)
Equity attributable to equity holders of the parent	93,130	73,853
Non controlling interests	6,696	7,059
Total equity	99,826	80,912

The financial statements of ITE Group plc, registered company number 01927339, were approved by the Board of Directors and authorised for issue on 3 December 2012.  They were signed on their behalf by:

Russell Taylor                                   Neil Jones           
Chief Executive Officer                   Finance Director

Cash Flow Statement

For the year ended 30 September 2012

	2012	2011
	£000	£000
Cash flows from operating activities
Operating profit from continuing operations	38,968	39,999
Adjustments for non cash items:
Depreciation and amortisation	14,621	11,647
Impairment of goodwill	-	130
Share-based payments	2,147	1,696
Share of associate profit	(701)	-
(Decrease) / Increase in provisions	(245)	172
(Profit) / loss on disposal of plant, property and equipment	(23)	35
Foreign exchange (gain) / loss on operating activities	(259)	208
Barter sales	-	(501)
Fair value of cash flow hedges released to the income statement from reserves	923	(1,367)
Movement on cash flow hedges recognised directly in the income statement	107	528
Operating cash flows before movements in working capital	55,538	52,547
Increase in receivables	(1,013)	(10,589)
Utilisation of venue loans	7,353	7,330
Increase in deferred income	2,578	12,656
Increase/(decrease) in payables	(2,374)	3,364
Cash generated from operations	62,082	65,308
Tax paid	(11,593)	(11,589)
Venue advances and loans	(6,215)	(6,923)
Net cash from operating activities	44,274	46,796
Investing activities
Interest received	951	449
Income from associates	655	-
Investment in associates	(50)	-
Acquisition of businesses - cash paid	(18,384)	(47,565)
Asset retained by vendor on acquisition of businesses	(434)	(2,010)
Cash acquired through acquisitions	131	3,032
Purchase of plant, property & equipment and computer software	(1,883)	(1,523)
Cash paid to acquire non controlling interests	(739)	(763)
Net cash utilised from investing activities	(19,753)	(48,380)
Financing activities
Equity dividends paid	(15,205)	(14,105)
Minority dividends paid	(936)	-
Interest paid	(1,092)	(1,082)
Proceeds from the issue of share capital	778	3
Drawdown of borrowings	293	18,248
Net cash flows from financing activities	(16,162)	3,064

	2012	2011
	£000	£000
Net (decrease)/ increase in cash and cash equivalents	8,359	1,480
Cash and cash equivalents at beginning of period	33,961	33,163
Effect of foreign exhange rates	(586)	(682)
Cash and cash equivalents at end of period	41,734	33,961

Cash generated from the business
Cash generated from operations	62,082	65,308
Interest received	951	449
Interest paid	(1,092)	(1,082)
	61,941	64,675
Free cash flow from the business
Cash generated from the business	61,941	64,693
Tax paid	(11,593)	(11,589)
	50,348	53,104

Net cash reconciliation

	At 1 October 2011	Cashflow	Foreign exchange	Reclassification to current	At 30 September 2012
	£'000	£'000	£'000	£'000	£'000
Cash	33,961	8,359	(586)	-	41,734
Debt due within one year	(13,948)	(1,470)	-	(13,306)	(28,724)
Debt due after one year	(14,483)	1,177	-	13,306	-
Net cash	5,530	8,066	(586)	-	13,010

Related Notes

For the year ended 30 September 2012

1 Basis of preparation

 Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), this announcement does not contain sufficient information to comply with IFRS's.

The Company expects to publish full financial statements that comply with IFRS in December 2012. These will be available at www.ite-exhibitions.com.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

2 Impact of new accounting standards

New, revised or changes to existing standards which have been adopted by the Group in the year ending 30 September 2012

The following new standards and interpretations have been adopted in the current year but have not impacted the reported results or the financial position:

·      Amendment to IFRS 1 'Limited Exemption from Comparative IFRS 7 Disclosures for First Time Adopters'

·      Amendments to IFRS 7 'Financial Instruments: Disclosures'

·      Amendments to IAS 1 'Presentation of Financial Statements'; and

·      Amendments to IAS 24 'Related Party Disclosures'

·      The adoption of these new standards and interpretation has not changed any previously reported figures.

New standards and interpretations not yet adopted

At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

·      Amendments to  IAS 12, IAS 19, IAS 27, IAS 28 and IFRIC 20

·      IFRS 9 'Financial Instruments - Classification and Measurement'

·      IFRS 10 'Consolidated Financial Statements'

·      IFRS 11 'Joint Arrangements'

·      IFRS 12 'Disclosure of Interests in Other Entities'; and

·      IFRS 13 'Fair Value Measurement'

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group, except for:

§ IFRS 9 "Financial Instruments" - This will introduce a number of changes in the presentation of financial instruments.

§ IFRS 10 - 13 were issued by the IASB on 12 May 2011 and which are effective for annual periods beginning on or after 1 January 2013. These pronouncements have not yet been endorsed for use in the EU. The Group has not completed its assessment of the impact of pronouncements on the consolidated results, financial position or cash flows of the Group.

3 Reconciliation of headline pre-tax profit to profit on ordinary activities before taxation

	2012	2011
	£000	£000
Profit on ordinary activities before taxation	40,474	39,094
Amortisation of acquired intangibles	13,508	10,717
Loss on exercise of Ekin Fuar put option	93	269
Gain on revaluation of put option liabilities	(1,641)	-
Unwind of discount of put option liabilities	460	-
(Profit) on sale of investments	(78)	-
(Gain) on settlement of contingent consideration	(453)	(119)
Loss on settlement of contingent consideration	-	104
Transaction costs (completed and pending)	640	1,180
Impairment of goodwill	-	130
Headline pre-tax profit	53,003	51,375

Profit on ordinary activities before taxation is stated after charging/(crediting):	2012	2011
	£000	£000
Staff costs	31,764	29,115
Depreciation of property, plant and equipment	1,113	633
Amortisation of intangible assets	13,508	11,014
Impairment of goodwill	-	130
(Profit) / loss on sale of property, plant and equipment	(23)	35
Operating lease rentals - other	2,304	3,623
(Gain) / loss on derivative financial instruments - cash flow hedges (notes 5 and 6)	(106)	18
(Gain) / loss on derivative financial instruments - put options (notes 5 and 6)	(1,641)	269
Foreign exchange (gain) / loss on operating activities	(259)	208

4 Segmental information

IFRS 8 introduces the term Chief Operating Decision Maker (CODM). The Senior Management Board comprising the Executive Directors  (Russell Taylor (Chief Executive Officer), Neil Jones (Financial Director), Edward Strachan (Executive Director)), Stephen Keen, Alexander Shtalenkov, Andy Braid, Colette Tebbutt and Suzanne King is considered to be the CODM. ITE's reportable segments are strategic business units that are based in different geographic locations, predominantly in the developing and emerging markets.  Each business unit is managed separately and has a different marketing strategy as determined by the local management. The products and services offered by each business unit are identical across the group.  ITE Group evaluates performance on the basis of profit or loss from operations before tax expense not including non-recurring gains and losses. The revenue and profit before taxation are attributable to the Group's one principal activity, the organisation of trade exhibitions, conferences and related activities and can be analysed by geographic segment as follows.

Year ended 30 September 2012	UK & Western Europe	Central Asia & Caucasus	Russia	Eastern & Southern Europe	Rest of World	Total Group
	£000	£000	£000	£000	£000	£000
By geographical location of events/ activities
Revenue	9,562	27,030	105,163	28,417	2,140	172,312
Headline pre-tax profit	(7,412)	8,908	42,240	9,086	181	53,003
Operating profit	(20,525)	8,969	42,172	8,325	27	38,968
By origin of sale
Revenue	53,331	15,168	76,227	25,017	2,569	172,312
Headline pre-tax profit	9,141	3,612	30,840	8,440	970	53,003
Operating profit	9,481	3,524	22,918	2,519	526	38,968
Operating profit						38,968
Investment revenue						3,193
Finance costs						(1,687)
Profit before tax						40,474
Tax						(7,943)
Profit after tax						32,531
Capital expenditure	330	374	1,098	153	127	2,082
Depreciation and amortisation	514	384	8,203	5,198	322	14,621
Balance Sheet
Assets*	60,470	11,685	92,515	63,095	6,525	234,290
Liabilities*	(49,404)	(5,639)	(45,208)	(20,533)	(845)	(121,629)
Non Current Assets**	12,492	4,913	57,140	53,513	5,901	133,959

* Segment assets and segment liabilities exclude current and deferred tax assets and liabilities.

**Included in non current assets are all non current assets other than venue advances and other loans, deferred tax assets and financial instruments.

The revenue in the year of £172.3 million includes £0.5 million (2011: £0.5 million) of barter sales.

Year ended 30 September 2011	UK & Western Europe	Central Asia & Caucasus	Russia	Eastern & Southern Europe	Rest of World	Total Group
	£000	£000	£000	£000	£000	£000
By geographical location of events/ activities
Revenue	8,950	21,853	105,650	17,940	1,063	155,456
Headline pre-tax profit	(6,933)	7,805	47,424	4,360	(1,281)	51,375
Operating profit	(17,975)	7,852	47,320	4,042	(1,240)	39,999
By origin of sale
Revenue	56,841	10,998	71,594	15,981	42	155,456
Headline pre-tax profit	13,407	3,524	32,346	2,863	(765)	51,375
Operating profit	12,919	3,562	25,831	(1,324)	(989)	39,999
Operating profit						39,999
Investment revenue						582
Finance costs						(1,487)
Profit before tax						39,094
Tax						(8,292)
Profit after tax						30,802
Capital expenditure	456	117	680	21	-	1,274
Depreciation and amortisation	586	176	6,612	4,002	271	11,647
Balance Sheet
Assets*	66,006	13,061	99,078	41,138	2,774	222,057
Liabilities*	(48,360)	(5,718)	(51,786)	(20,804)	(1,603)	(128,271)
Non Current Assets**	20,715	8,022	65,630	35,635	2,129	132,131

* Segment assets and segment liabilities exclude current and deferred tax assets and liabilities.

**Included in non current assets are all non current assets other than venue advances and other loans, deferred tax assets and financial instruments.

5 Investment revenue
	2012	2011
	£000	£000
Interest receivable from bank deposits	951	437
Interest receivable from Inland Revenue repayments	-	12
Gain on revaluation of put option liabilities	1,641	-
Gain on cashflow hedges	148	14
Gain on settlement of contingent consideration	453	119
	3,193	582

6 Finance costs
	2012	2011
	£000	£000
Interest on overdrafts	660	741
Bank charges	426	341
Loss on exercise of Ekin Fuar put option	93	269
Loss on settlement of contingent consideration	-	104
Interest payable to Inland Revenue	6	-
Loss on cashflow hedges	42	32
Imputed interest charge on discounted put option liabilities	460	-
	1,687	1,487

7 Tax on profit on ordinary activities

Analysis of tax charge for the year:

	2012	2011
	£000	£000
Group taxation on current year profit
UK corporation tax on profit for the year	923	3,294
Adjustment to UK tax in respect of previous years	(603)	(768)
	320	2,526
Overseas taxation - current year	9,335	8,569
Overseas taxation - previous years	422	(442)
	9,757	8,127
Current tax	10,077	10,653
Deferred tax
Origination and reversal of timing differences:
Current year	(2,134)	(2,362)
Prior year	-	1
	7,943	8,292

The tax charge for the year can be reconciled to the profit per the income statement as follows:
		2012	2011
		£000	£000
Profit on ordinary activities before tax		40,474	39,094
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2010: 27%)		10,119	10,555
Effects of:
Expenses not deductible for tax purposes		1,388	963
Deferred tax assets (recognised) / not recognised		(76)	39
Withholding tax and other irrecoverable taxes		526	333
Adjustments to tax charge in respect of previous years		(131)	(1,210)
Deferred tax provision in respect of proposed dividends from overseas subsidiaries		200	13
Effect of different tax rates of subsidiaries operating in other jurisdictions		(4,047)	(2,401)
Associate tax		(36)	-
		7,943	8,292
	2012	2011
	£000	£000
Tax relating to components of comprehensive income;
Cash flow gains/(losses)  - Current	(230)	225
Cash flow gains/(losses)  - Deferred	(1,138)	326
	(1,368)	551
Tax relating to amounts credited / (charged) to equity;
Share options - Current	364	127
Share options - Deferred	(49)	5
Goodwill on historic acquisition - Deferred	(1,390)	-
	(1,075)	132
	(2,443)	683

During the year the Group recognised directly in equity a deferred tax liability relating to the goodwill arising on an historic acquisition.  This deferred tax liability had not been recognised on transition to IFRS in 2005.

8 Dividends

	2012	2011
	£000	£000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2011 of 4.2p (2010 - 4.0p) per ordinary share	10,109	9,537
Interim dividend for the year ended 30 September 2012 of 2.1p (2011 -1.9p) per ordinary share	5,111	4,568
	15,220	14,105
Proposed final dividend for the year ended 30 September 2012 of 4.4p (2011 - 4.2p) per ordinary share	10,714	10,100

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 5,366,722 (2011: 8,102,687) ordinary shares representing 2.2% of the Company's called up ordinary share capital, has agreed to waive all dividends due to it each year.

9 Earnings per share

The calculation of basic, diluted and headline diluted earnings per share is based on the following earnings and the numbers of shares:

	2012	2011
	No.of shares (000)	No.of shares (000)
Weighted average number of shares:
For basic earnings per share	242,124	239,635
Effect of dilutive potential ordinary shares	3,040	5,132
For diluted and headline diluted earnings per share	245,164	244,767

Basic and diluted earnings per share

The calculations of basic and diluted earnings per share are based on the profit for the financial year attributable to equity holders of the parent of £31.5 million (2010: £30.7 million). Basic and diluted earnings per share were 13.0p and 12.8p respectively (2011: 12.8p and 12.6p respectively).

Headline diluted 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 16.9p per share (2011: 16.6p).  Headline basic earnings per share is 17.1 per share (2011: 17.0p).

	2012	2011
	£000	£000
Profit for the financial year attributable to equity holders of the parent	31,486	30,724
Amortisation of acquired intangible assets	13,508	10,717
Tax effect of amortisation of acquired intangible assets	(2,651)	(2,358)
Gain on revaluation of put option liabilities	(1,641)	-
Unwind of discount of put option liabilities	460	-
Profit & loss on sale of investments	(78)	-
Transaction costs	640	1,180
Loss on exercise of Ekin Fuar put option	93	269
Loss on settlement of contingent consideration	-	104
Gain on settlement of contingent consideration	(453)	(119)
Impairment of goodwill	-	130
Tax effect of other adjustments	15	(27)
Headline earnings for the financial year after taxation	41,379	40,620

Responsibility statement

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 30 September 2012. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

The accounts prepared in accordance with International Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and the management report, which is incorporated in the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face

The responsibility statement was approved by the board of directors on 3 December 2012 and is signed on its behalf by:

Russell Taylor 

Group Chief Executive

Neil Jones

Chief Financial Officer

Financial Calendar

Final dividend 2012

Ex dividend date                            2 January 2013

Record date                                      4 January 2013

Annual General Meeting             31 January 2013

Payment date                                   11 February 2013

Interim dividend 2013

Ex dividend date                             3 July 2013

Record date                                       5 July 2013

Payment date                                    8 August 2013

 

END

 

 

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