Preliminary Results

RNS Number : 3635Q

ITE Group PLC

29 November 2016

 

29 November 2016

ITE GROUP PLC

PRELIMINARY RESULTS ANNOUNCEMENT

Results reflect challenging market conditions, in line with market expectations

Financial highlights

	Year to 30 September 2016	Year to 30 September 2015
Revenue	£134.4m	£135.8m
Headline profit before tax*	£36.5m	£47.2m
Headline diluted earnings per share **	10.7p	15.3p
(Loss)/Profit before tax***	£(4.1)m	£31.5m
Diluted earnings per share***	(3.6)p	10.4p
Dividend per share	4.5p	7.4p
Net debt	£(59.1)m	£(52.3)m

·      Headline results in line with market expectations with challenging market conditions partially offset by acquisitions

·      Continued diversification of the geographic spread of ITE's portfolio

·      Loss before tax reflecting a non-cash impairment of goodwill on certain acquired assets

·      Net debt of £59.1 million after investing £18.3 million on acquisitions & deferred consideration

·      Full year dividend of 4.5p - headline earning cover of more than two times

·      59% of consensus revenues booked for 2017 (2016: 57% of actual revenue)

·      New CEO and CFO now in place

·      Full review of business and strategy underway - the outcome will be presented at the interims in May

Mark Shashoua, CEO of ITE Group plc, commented:

"I am very excited by the opportunity at ITE to work again in a business whose heritage is familiar to me. Since joining as CEO on 1 September, I have been spending time getting to know our employees and customers and have also visited a number of ITE's offices in different regions. I have been impressed by the people I have met, their knowledge of local markets and their enthusiasm for ITE's diverse portfolio of events. I am leading a full review of the business and strategy and will present the results of this review at the Group's interim results in May 2017.

ITE has continued to face challenging end markets in the last year due to the impact of the oil price, weakness in local economies and geo-political events. The Group's recent acquisitions which ran for the first time under ITE ownership have helped to partially mitigate the impact on our results. Trading conditions in Russia, Central Asia and Turkey remain challenging but prospects appear to be improving in Moscow which in time should spread through the rest of the region. The Group's other regions, which now account for over 40% of ITE's business, are trading satisfactorily."

Enquiries:

Mark Shashoua, Chief Executive Officer Andrew Beach, Chief Financial Officer	ITE Group plc	020 7596 5000
Charles Palmer / Emma Appleton	FTI Consulting	020 3727 1000

*     Headline profit before tax is a non-statutory measure of performance used by the Group as it better reflects underlying trading performance. Headline profit before tax is defined as profit before tax and adjusting items which include amortisation of acquired intangible assets, impairment of goodwill and intangible, profits or losses arising on disposal of Group undertakings, transaction and integration costs on completed and pending acquisitions & disposals, tax on income from associates & joint ventures, gains or losses on the revaluation of contingent consideration, gains or losses on the revaluation  of put option liabilities over non-controlling interests, and imputed interest charges on discounted put option liabilities - see note 3 for details.

**    Headline diluted earnings per share is calculated using profit before adjusting items - see note 9 for details.

***  The differences between headline and statutory results and EPS are primarily due to non-cash, non-trading items such as amortisation of intangible assets and the impairment of goodwill - see note 3 for details. 

Where used, like-for-like measures are stated on a constant currency basis adjusted to exclude acquisitions impacting for the first time, event timing differences and biennial events. 

Chairman's Statement

Group Performance

ITE Group plc has reported revenues of £134.4 million and headline profits before tax of £36.5 million. As expected at the start of the year, there have been three factors affecting the results in 2016 - the impact of difficult trading conditions in the oil-dependent economies of Russia and Central Asia, the negative impact of exchange rates for much of the year and the beneficial impact of the recent acquisitions.

The impact of the fall in the oil price on the oil dependant economies where we operate was always going to take time to cycle through our results and this year has suffered the full effect as all bookings for this year's events were made in the period since the oil price fell in early 2015. In addition to this, there was an adverse impact from translating operating results at less favourable exchange rates. Furthermore, the Group benefited in the previous year from a significant one-off foreign exchange gain which was not repeated this year.

In mitigation of these factors, the Group's diversification of its business in 2015 meant that the results of Africa Oil Week and Breakbulk Americas feature in the 2016 results for the first time and the step up to a controlling stake in ABEC, the largest private exhibition organiser in India, means we have the benefit of consolidating the results of this business. These proactive changes have given the Group a better geographic balance between its historic Russian-CIS businesses, and other leading emerging markets.

In this weaker biennial year, headline diluted earnings per share was 10.7p (2015: 15.3p). As a result of a number of items that are not related to the underlying trading of the business (primarily amortisation of intangible assets and impairment of goodwill), we are reporting a loss before tax of £4.1 million (2015: £31.5 million profit) and fully diluted earnings per share of (3.6p) (2015: 10.4p). The Group finished the year with net debt of £59.1 million (2015: £52.3 million), after investing £18.3 million on acquisitions during the year.

Board and Management

We have seen a significant change in the leadership team of the business during 2016. As previously disclosed, Neil Jones resigned as CFO early in the financial year and Russell Taylor stood down as CEO on 1 September 2016. Russell joined ITE as Finance Director in 2003 and was appointed CEO in May 2008. During his tenure, the business enjoyed substantial revenue, profit and EPS growth. Russell was instrumental in developing ITE's diversification strategy, establishing cornerstone businesses in three of the largest emerging markets of the future - China, India and Africa. On behalf of the Board I express our gratitude to Russell for his tremendous contribution to ITE over the years both as CEO and Finance Director and we wish him well in the future.

Our search process to find a new CEO and CFO was driven by the desire to appoint a strong executive team with a mix of industry experience, knowledge of our operating model and geographies, together with the skills to develop and grow the Group and maximize its potential.

The Board believes it has achieved this aim with these two key appointments and believe that Mark Shashoua (appointed as CEO on 1 September 2016) and Andrew Beach (appointed as CFO on 17 October 2016) offer the necessary qualities and right combination of skills to actively develop the business moving forward.

Mark's experience and success as CEO at i2i Events Ltd, an international high-growth B2B events and trade exhibitions company, part of Ascential Plc, and previously with Advent International, Expomedia Group, and as one of the original founders of ITE in the early 1990's, means he brings huge strategic and operational experience to this role.

Andrew was previously CFO of Ebiquity plc, the marketing analytics specialist, having taken up the position in 2008, where he oversaw the rapid expansion of the business, leading and integrating over 15 acquisitions across new verticals and global geographies and restructuring the global finance systems and team.

Mark is now leading a review of the business and strategy. The outcome of this review will be presented alongside the Group's interim results in May 2017.

We look forward to working closely with Mark and Andrew, and the senior leadership team, in the future.

ITE is a people business and its success is based upon the hard work and loyalty of its staff worldwide. The Group has over 1,400 employees conducting its business in 32 offices in 20 different countries. As Chairman and on behalf of the Board, I would like to thank and recognise the involvement of all of ITE's employees to this year's result and especially those staff in Turkey who have worked extremely hard under difficult circumstances. 

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 that underpin the Group culture. As Chairman, I am mindful of my personal responsibility for leading the Board and ensuring it operates diligently and effectively. 

Dividend

In order to rebuild dividend cover to historical levels of more than two times earnings the Board took the decision to reduce the interim dividend to 1.5p. In line with this objective the final dividend has been reduced from 4.9p to 3.0p making a full year dividend of 4.5p.  With the current lower levels of trading in Russia, Central Asia and Turkey, the Board believes this to be in the best long term interests of shareholders.  The final dividend is proposed for payment on 6 February 2017 to shareholders on the register on 30 December 2016.

Outlook

Trading conditions in a number of the regions in which we operate continue to be challenging. Whilst commentators expect a moderate economic recovery in Moscow to spread to the rest of the country and region, given the high visibility of our business model with events booked a year in advance there will be a lag before this feeds into our trading results. The benefit of exchange rate movements since June will, if maintained, also benefit the Group in the medium term.  At 27 November 2016, Group revenues already booked for FY 2017 were £81 million (FY 2016: £77 million) representing circa 59% (FY 2016: 57%) of market expectations for the full year. On a like-for-like basis these revenues are circa 4% ahead of this time last year. 

Although ITE's acquisition activity has reduced its dependency on Russia, the Group's results remain sensitive to its economic climate and to the oil price. Management will continue to monitor and review the Group's cost base to ensure that it has the most efficient structure and the operational capability to benefit from any recovery in its core markets.

Since its creation in 1991 ITE has successfully navigated emerging market challenges and evolved to meet the needs of the markets it serves. The Group has weathered the conditions of the past two years and has an established position in promising markets. We enter 2017 with a new management team who have the necessary qualities to take the business to the next phase of its development. A solid leadership team combined with the Group's sound balance sheet and good operating cash flow provides the Board with confidence in the Group's future prospects.

Marco Sodi

Chairman

Chief Executive's Statement

I was delighted to take over as CEO of ITE on 1 September. I am very excited by the opportunity at ITE to work again in a business whose heritage is familiar to me and apply my experience from a career in the global exhibitions industry to drive the business forward.

I have spent the time since my appointment travelling to meet the Group's operations and customers and so far have visited Russia, China, Indonesia, India, South Africa and as well as our UK offices outside of London.  I have been very impressed by the people I have met, their knowledge of local markets and their enthusiasm for the events they run. It is clear that a number of our customers have strong connections to our events and recognise their essential market leading positions.

My first impressions are that ITE has some great people and events and I believe that there are significant opportunities through enhanced sales and marketing activities, greater use of technology and focussed management reporting to drive operational efficiencies and improved performance in order to better service our customers.

With a new executive management team now in place, I am in the process of conducting a comprehensive review of the business and strategy. I look forward to presenting the results of this review at the time of the Group's interim results in May 2017.

The Group's performance in 2016

ITE's performance in 2016 largely reflects the challenging trading conditions in Russia and Central Asia,  the decline in the value of the Russian Ruble (against Sterling) in which 20% of the Group's revenues are denominated, compensated by the Group's acquisition activity in line with its diversification strategy.

The Group's acquisitions this year were mainly aimed at consolidating our ownership position in existing investments. In October 2015 the Group acquired an additional 31.7% stake in ABEC taking the Group's ownership in this business to 60% and in May 2016 the Group acquired a further 24.9% of Africa Oil Week following the exercise of a put option by the non-controlling interest, which was settled by a small issue of equity, taking the Group's stake in this business to 75%.

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

	£'m
2015 headline PBT	47.2
Net biennial & timing	(1.9)
Acquisitions (net of overheads and financing)	5.7
FX impact	(6.6)
Core business	(7.9)
2016 headline PBT	36.5

The positive contribution of £5.7 million from newly acquired businesses is attributable to the consolidation of ABEC, the Africa Oil Week and Breakbulk Americas October 2015 events and the acquisition in January 2016 of ITE Ebseek's Fasteners event which ran for the first time under ITE's ownership in June.

The devaluation of the Russian Ruble against Sterling (by 10% on an annual average basis, but by 20% in key trading months) accounted for most of the £2.6 million adverse impact from translating our results at less favourable rates and this, combined with a £4.0 million reduction in foreign exchange gains from the retranslation of foreign currency denominated monetary assets and liabilities, results in £6.6m total adverse impact attributable to foreign exchange rates movements.

A reduction in core business through adverse economic and trading conditions accounted for a further £7.9 million of shortfall against last year.

The currency impact and the core business decline have a common cause; the fall in the oil price in early 2015 had a negative effect on the oil dependant economies of Russia, Azerbaijan and Kazakhstan leading to a proportionate devaluation of currencies to protect their national finances. The effect on ITE's business in these countries was further aggravated by the high proportion of ITE's exhibitors who import and distribute overseas goods. For these customers the currency devaluation has made their business less competitive.

Divisional trading summary 2016

In 2016 the Group ran 252 events (2015: 240). The increase in the number of events is primarily attributable to acquisitions. A detailed analysis of volumes, revenues and gross profits from the Group's exhibition and conference activities is detailed below:

			Square Metres Sold		Revenue		Gross Profit		Average yield
			(000)		£'m		£'m		£ per m2
2015	All events		613		136		62
	Non-annual		(20)		(7)		(4)
2015	Annually recurring		593		129		58		216
	Acquisitions		91		18		10
	Timing		0		1		1
	FX Translation		-		(9)		(4)
	Net Growth		(44)		(10)		(7)
2016	Annually recurring		640		129		58		200
	Non-annual		45		5		1
2016	All events		685		134		59

Overall, the Group saw volume sales grow by 12% to 684,700m² and revenues decrease by 1% to £134.4 million. On a like-for-like basis, volume sales fell by 7% and revenues fell by 8%.

Revenue

					2016	2015			%		%
					£m	£m			change		change Like-for-like#
		Russia			50.8	72.1			-30%		-16%
		Central Asia			22.0	27.2			-19%		-8%
		Eastern & Southern Europe			19.3	17.9			+8%		+7%
		Asia			18.1	3.9			+364%		+33%
		ROW			24.2	14.7			+65%		+6%
		Total			134.4	135.8			-1%		-8%

# Where used, like-for-like measures are stated on a constant currency basis adjusted to exclude acquisitions impacting for the first time, event timing differences and biennial events.

Russia

(Moscow, St. Petersburg, Novosibirsk, Krasnodar, Ekaterinburg)

During the year ITE held 110 events in Russia (2015: 116), with total volume sales of 256,000m² (2015: 312,600m²). Revenue of £50.9 million was 30% lower than the previous year, reflecting the difficult trading environment and the weakening of the Russian Ruble. On a like-for-like basis volume sales in Russia decreased by 14% and revenues decreased by 16% from the prior year.

Moscow is ITE's largest office in Russia accounting for around 75% of the region's revenues. Moscow's volume sales for the year were 151,200m² (2015: 202,400m²); a fall of 18% on a like-for-like basis.

The leading events in Moscow performed as expected this year demonstrating resilience in tough conditions. The Moscow International Travel and Tourism exhibition which is held annually in March delivered sales of 11,700m² (2015: 16,300m²) as the impact on Russian international tourism from the devaluation of the Ruble was exacerbated by the deterioration in relations between Turkey and Russia at that time. Mosbuild saw volumes fall by 21% to 31,800m² (2015: 40,300m²) in line with the Board's expectations due to the impact of the economic conditions on the construction industry and local competition. The logistics event TransRussia saw volumes decline to 7,200m² (2015: 7,900m²), whilst the security event, Moscow International Security & Protection performed a little better with volumes of 10,600 m² (2015: 11,100m²). WorldFood Moscow in September proved relatively resilient, increasing its visitor numbers over the prior year and suffering only a 10% fall in volumes to 20,200m² (from 22,600m²), as supplier substitution offset a decline in the traditional European supplier base.

The Group operated 16 events from the St Petersburg office during the year, with overall volume sales of 23,100m² (2015: 27,600m²). Performance was in line with Moscow with most shows showing declines in volumes from the prior year. Those events in industries reliant on capital expenditure, such as construction and mining were the most impacted. The exception was ExpoElectronica, the international radio-electronics event, which grew by 4% as it took further market share.

In Novosibirsk, Siberia, ITE is the anchor tenant in the city's main venue. During the year the region held 34 events (2015: 36), with overall volume sales declining to 23,500m² (2015: 30,200m²) with all sectors affected. An impairment charge of £1.2m was taken in the interim results writing off the remaining goodwill and intangible assets associated with this business due to the sustained downturn in the region. 

The Krasnodar region in southwest Russia is one of the most prosperous outside Moscow. The exhibition portfolio covers a broad range of sectors, the largest events being in agriculture and construction. The Group has now become the anchor tenant at a new 28,000m² venue in the city, which opened ahead of schedule in November 2015, and in time to house ITE's agricultural event, YugAgro, which grew by nearly 20% over the prior edition. In total this office contributed volume sales of over 57,800m² (2015: 52,500m²) an increase of 13% on a like-for-like basis.

Central Asia

ITE's principal offices in Central Asia are in Kazakhstan, Azerbaijan and Uzbekistan. All of the economies in this region are heavily dependent on oil and gas for their overseas earnings and economic wealth and in the case of Kazakhstan a significant level of trade with Russia as well. The fall in the oil price and the Russian economic recession have had a significant impact on trading conditions within the region.

This year ITE organised a total of 74 events (2015: 79) across these territories delivering total volume sales of 70,400m² (2015: 83,000m²) and revenues of £22.0 million (2015: £27.2 million). Overall, on a like-for-like basis volumes decreased by 17% over the previous year with revenues falling by 8% on the same basis. This region was later to suffer a decline in trading compared with Russia and so is currently lagging Russian performance.

Kazakhstan is the Group's largest office in the region selling 34,400m² (2015: 45,200m²). The largest event in the region, Kazakhstan Oil & Gas Exhibition (KIOGE), which took place in Almaty in October 2015, was smaller than the prior edition at 5,800m² (2015: 6,800m²).

Azerbaijan achieved volume sales of 19,300m² (2015: 25,600m²) a decrease of 24% on the prior year on a like-for-like basis with all sectors suffering reduced volumes and like for like revenues down 12% on the prior year.

ITE's Uzbekistan business is slightly more insulated from the oil price due to the nature of the local economy and it performed well in 2016 selling 16,100m² (2015:11,500m²) due to the benefit of some timing changes and the biennial pattern. On a like-for-like basis volumes have increased by 5% and revenues by 16%.

Eastern & Southern Europe

The Eastern and Southern Europe region is represented by the Group's offices in Turkey and Ukraine. Overall the region sold 172,200m² in 2016 (2015: 147,000m²), reflecting the stronger biennial pattern in Turkey and growth in Ukraine. On a like-for-like basis this represents an increase of 4% in volumes.

Trading in Ukraine has recovered strongly. Overall volume sales for the year were 37,000m² (2015: 26,500m²) a 40% increase on a like-for-like basis in comparison to the prior year and revenues increased by 35% on the same basis. With a population of over 45 million people and the potential for further economic recovery, Ukraine now offers attractive returns in the longer-term.

Overall total volumes in Turkey were 135,200m² (2015: 120,400m²) reflecting the biennial Ankomak event which mitigated the challenging local environment. On a like-for-like basis volume sales were 3% lower than last year. The travel event EMITT was challenged due to the deterioration in relations between Turkey and its local trading partners and the backdrop facing the tourist industry and fell by 7% to 26,700 m². Turkeybuild, the pre-eminent construction event in Turkey, took place in late April and delivered 38,400m² (2015: 40,000m²). In September, following the attempted coup in July, the Group's WorldFood Istanbul exhibition fell from 13,900m² to 12,000m². All of these events were protected to some extent due to the existing bookings for the event but it looks likely that this region will face a challenging 2017.

Asia

The Group's operations in this region are based in India, China and South East Asia. These regions represent relatively new markets for ITE in which to grow our existing products and potentially develop new sectors. Although these markets have experienced flat or slowing economic growth they are still attractive markets as they are underpinned by a rapidly expanding aspirational middle class population which is expected to drive consumer demand. In addition, they have relatively immature exhibition industries for the size of their economies and these two factors combine to offer good potential growth opportunities over the medium-term. In October 2015, the Group exercised its call option to take a majority stake in ABEC. This increased revenues in the region to £18.1 million (2015: £3.9 million). The Group's other operations in this region are largely through a series of joint venture arrangements and the Group's income statement reflects only those revenues over which it has majority ownership.

The Indian exhibition industry offers significant potential but is currently restricted by the lack of international quality venue space in the country. The Group operates two business in India: one through a small wholly-owned subsidiary, ITE India, and the other through ABEC, India's largest private exhibition organiser in which ITE increased its stake from 28.3% to 60% in October 2015. ABEC's portfolio of over 20 exhibitions across different industry sectors includes Acetech - India's leading construction event. Both businesses performed in line with management expectations this year. ITE India had its biennially stronger year, whilst ABEC's Acetech events once again performed strongly.

Although the underlying businesses remain strong, the growth of the Indian business has been slower than management's initial expectations and the delay in the construction of a new venue means that the value in use, as calculated under accounting standard IAS 36, falls short of the current carrying value and therefore an impairment has been recognised to write down the goodwill and intangible assets attributable to the business to £32.1 million.

In China the Group has offices in Beijing, Shanghai, Guangzhou and operates (through its Hong Kong headquartered 50% joint venture partner Sinostar) the Chinacoat/Surface Finishing China event. The November 2015 Chinacoat/Surface Finishing China event saw record sales of over 39,800m², with another strong performance expected at the November 2016 event. A 70% stake in the complementary ITE Ebseek's Fastener Expo was acquired in November 2015 and had a successful debut under ITE's ownership. It is currently being integrated in to ITE's Chinese operation.

In South East Asia the Group operates through three organisations based in Malaysia and Indonesia. In Kuala Lumpur, Malaysia the Group now owns 100% of Tradelink (having acquired the minority's 25% stake in November 2015) which runs the Metaltech event, serving the machine tool technology and metal fabrication industries. The event, which sells over 12,000m², takes place each May in Kuala Lumpur and performed marginally ahead of the previous edition, although it is likely to remain at its present size until construction of a new venue is completed, which is expected in two years' time. Also based in Kuala Lumpur is the Group's 50% joint venture, ECMI, a pan-ASEAN organiser operating in Malaysia, Indonesia, Vietnam and Myanmar, and traditionally operating in the professional beauty, life-sciences, and oil & gas sectors. Similarly to India, these businesses remain strong but the delay in construction of a new venue in Malaysia has reduced their growth below expectations at the time of these acquisitions resulting in impairments under IAS 36 of £4.1m for goodwill associated with South East Asia and of £1.9m relating to the carrying value of our joint ventures in the region. In Jakarta, Indonesia, the Group owns 50% of PT Debindo which runs the Indobuildtech series of construction exhibitions, the largest of which takes place annually in Jakarta. This year the event moved to the new International Convention and Exhibition Centre and has grown to over 22,000m² (2015: 14,000m²).

RoW

The Group's RoW business contains the results of our UK fashion events and the Africa Oil Week, Breakbulk Americas and Europe events.

In MODA the Group owns the leading midmarket fashion event for Womenswear, Menswear, Footwear and Lingerie which runs twice a year in Birmingham. In London the Group operates Bubble, a niche high-end childrenswear event; Jacket Required, a designer-led menswear event; and Scoop, a designer-led womenswear event. Overall the portfolio achieved volume sales of 39,600m², a 5% like-for-like decline on the prior year with MODA continuing to see the effects of a changing market place for midmarket independent fashion retailers.

A 50.1% stake in Africa Oil Week was acquired in March 2015 and the event ran for the first time in ITE's ownership in November 2015. Revenues were a little lower than had been anticipated at the time of making the acquisition but this does not undermine the future potential of this event. A further 24.9% stake was acquired in May 2016 following the exercise of the put option granted to the previous owners. The remaining 25% non-controlling interest is also subject to a put option, exercisable after 1 February 2017.

Breakbulk Americas ran for the first time in ITE ownership in October 2015 and achieved sales of 5,200m2 compared with 4,700m2 for its previous event. Due to a timing change associated with venue availability, the event ran again in September 2016 and sold 4,900m2 as the global transportation sector slowed slightly.

Chief Financial Officer's statement

Revenue and gross profit

Revenue for the year was £134.4 million (2015: £135.8 million) and gross profit for the year was £58.6 million (2015: £62.2 million), with a gross margin of 44%, slightly lower than the previous year (2015: 46%).

Administrative expenses across the Group increased to £65.1 million from £34.1 million in the previous year when taking into account the non-cash items, including impairments of £26.5 million (2015: £nil), an amortisation charge of £15.5 million on acquired intangibles (2015: £13.1 million), a charge for share-based payments of £0.4 million (2015: £0.1 million) and a lower foreign exchange gain of £2.0 million arising on the revaluation of foreign currency monetary assets (2015: £5.9 million gain).

Excluding these items, administrative expenses decreased by £2.1 million to £24.7 million (2015: £26.8 million) as a result of cost-saving initiatives within the Group, together with the impact of weaker emerging market currencies, notably the Ruble, in which a significant portion of overhead costs are incurred. Overall, Group administrative expenses excluding non-cash items and transaction related costs represented 18% of revenue (2015: 17%).

The Group's operating loss was £2.3 million against a prior year profit of £32.1 million, reflecting the largely non-cash items referred to above, see also the table below.

Headline profit before tax is a non-statutory measure of performance used by the Group as it better reflects underlying trading performance. Headline profit before tax for the year was £36.5 million (2015: £47.2 million).

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

	2016	2015
	£000	£000
(Loss)/profit on ordinary activities before taxation	(4,095)	31,546
Operating items
Amortisation of acquired intangible assets	15,468	13,134
Impairment of goodwill	24,650	-
Impairment of investments in associates and joint ventures	1,859	-
Transaction costs on completed and pending acquisitions	330	2,534
Profit on disposal of investments	(1,498)	-
Tax on income from associates & joint ventures	1,078	1,208
Financing items
Revaluation of equity option liabilities	(6,940)	929
Revaluation of deferred and contingent consideration	3,094	(2,192)
Imputed interest charge on discounted equity option liabilities	2,558	-
Headline profit before tax	36,504	47,159

Amortisation of acquired intangible assets relates to the amortisation charge in respect of intangible assets acquired through business combinations. Impairment of goodwill relates to the Indian, South East Asian and Siberian cash generating units. Impairment of investments in associates and joint ventures relates to our Malaysian joint venture. Transaction costs on completed and pending acquisitions relates principally to costs incurred on the acquisition of the controlling interests in ABEC and ITE Ebseek, with the prior year costs relating to the acquisitions of Breakbulk and Africa Oil Week.  Profit on disposal of investments results from the deemed disposals on minority positions as we move to controlling interests in ABEC and The Hub. Tax on income from associates & joint ventures is an adjustment to ensure consistency with pre-tax operating profits.

Revaluations of equity option liabilities reflects the gains/losses from the revaluation of our equity options over non-controlling interests in our subsidiaries, principally in relation to ABEC, Fasteners and Africa Oil Week. Revaluations of deferred and contingent consideration reflects outstanding consideration payments on Fasteners, Debindo and ABEC. Imputed interest charge on discounted equity option liabilities is the charge due to the unwinding of the discounting on the equity option liabilities.

Other operating income

£0.6 million (2015: £0.4 million)

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

Share of results of associates and joint ventures

£3.6 million (2015: £3.7 million)

Profits after taxation for the financial year arising from investments in joint ventures and associates decreased by £0.1 million to £3.6 million (2015: £3.7 million). The growth of Sinostar and our other associates and joint ventures offset the reduction caused by ABEC moving from associate status to a fully consolidated subsidiary.

Investment revenue

£7.5 million (2015: £2.9 million)

Investment revenue consists of interest on bank deposits of £0.4 million (2015: £0.3 million), a gain on cash flow hedges of £0.2 million (2015: £0.4 million) and a gain on the revaluation of put options of £6.9 million arising from the reduction in estimated future liability (2015: nil). In the prior year, there was a gain on the revaluation of contingent consideration of £2.2 million.

Finance costs

£9.3 million (2015: £3.4 million)

Finance costs represent the interest cost of the Group's borrowings of £2.4 million (2015: £1.6 million), bank charges of £1.2 million (2015: £0.9 million), a loss on the revaluation of contingent consideration of £3.1 million (2015: nil) and an imputed interest charge arising on the discounting of the Group's put option liabilities of £2.6 million (2015: nil). In the prior year, there was also a loss on the revaluation of put options of £0.9 million.

Tax charge

A tax charge of £3.1 million has been recognised in the period. Tax on associate profits, which is presented within the share of profit from associates, was £1.1 million (2015: £1.2 million). The total tax charge was £4.2 million (2015: £6.2 million).

Earnings per share

The Group achieved headline diluted earnings per share of 10.7p (2015: 15.3p). Headline diluted earnings per share is based upon profit for the financial year attributable to equity holders of the parent, before adjusting items.

Basic earnings per share decreased to (3.6)p (2015: 10.5p). Diluted earnings per share decreased to (3.6)p (2015: 10.4p).

Return to shareholders

The Group has recommended a final dividend of 3.0p per share for 2016, to bring the total dividend for the year to 4.5p per share (2015: 7.4p), which is covered 2.3 times by headline earnings.

Cash flow

Cash generated from operations in the year was £41.0 million (2015: £37.0 million), which after adjusting for the non-cash foreign exchange gain of £2.0 million (2015: £5.9 million) and venue utilisation of £1.0 million (2015: £0.8 million) represents 112% of headline profits (2015: 88%). The increase in operating cash conversion reflects a working capital improvement of £2.3 million partly attributable to the full consolidation of the ABEC business during the financial year. The principal applications of cash were £18.3 million applied to acquisitions (2015: £55.6 million); £6.7 million paid in tax (2015: £6.6 million); and £15.6 million was distributed as dividends to the Group's shareholders (2015: £18.7 million). The increase in net debt balances over the year was £6.8 million, with the Group being £59.1 million in net debt at 30 September 2016 (2015: £52.3 million).

Acquisitions

On 28 October 2015, the Group acquired an additional 31.7% holding in Asian Business Exhibition & Conferences Limited ("ABEC"), a company incorporated in Mumbai, for consideration of £15.0 million, including deferred consideration of £1.1 million. This takes the Group's holding in ABEC to 60% and the Group has written put and call options over the remaining 40% stake. The acquired business has contributed £9.6 million to Group revenue and a headline profit of £2.9 million since acquisition.

On 11 January 2016, the Group acquired 70% of the shares of Shanghai ITE Ebseek Exhibitions Co Ltd, the organiser of industrial fasteners exhibitions in Shanghai and Guangzhou, for consideration of £2.9m, of which £0.9m is deferred and contingent on the results of the 2016 and 2017 events. The business has contributed £1.6 million to Group revenue and a profit of £0.5 million since acquisition.

Consolidated Statement of Financial Position

The Group's Consolidated Statement of Financial Position at 30 September 2016 is summarised in the table below:

	30 September 2016			30 September 2015
	Assets £m	Liabilities £m	Net assets £m	Net assets £m
Goodwill and other intangible assets	168.7	-	168.7	137.8
Interests in associates and joint ventures	45.7	-	45.7	56.8
Property, plant and equipment	2.5	-	2.5	1.7
Venue advances	6.3	-	6.3	6.4
Cash	15.5	-	15.5	17.3
Bank loan	-	(74.6)	(74.6)	(69.6)
Other current assets and liabilities	49.3	(88.9)	(39.6)	(35.0)
Provisions - non-current	-	(0.2)	(0.2)	(0.2)
Deferred tax	3.1	(12.7)	(9.6)	(8.6)
Other non-current assets and liabilities	-	(18.3)	(18.3)	(7.3)
Total	291.1	(194.7)	96.4	99.3

Goodwill and intangible assets

Goodwill and intangible assets have increased during the year due to acquisitions made in the period and from the retranslation of overseas balances to Sterling at year end exchange rates. This has more than offset the decrease resulting from the amortisation charge in the year and impairments. The intangible assets balance represents acquired customer relationships, trademarks and licences, visitor databases and computer software.

Investment and capital expenditure

The Group's capital expenditure on plant and equipment increased during the year to £1.3 million (2015: £0.5 million) and included exhibition equipment, office fixtures and fittings. Capital expenditure on computer software in the year was £1.2 million (2015: £1.3 million). This reflects continued investment in computer software to enhance our exhibition visitor experiences, develop our office network 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.

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 be 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 advances and prepayments are included in the Consolidated Statement of Financial Position under non-current and current assets.

At 30 September 2016, the Group's Sterling value of the outstanding balances of advance payments and venue loans was £6.3 million (2015: £6.4 million) as follows:

	30 September 2015 £m	New  £m	Repayments £m	Forex £m	30 September 2016 £m
Russia	4.3	2.5	(3.0)	0.8	4.6
Central Asia	0.3	1.6	(1.2)	0.1	0.8
Eastern & Southern Europe	1.8	-	(1.1)	0.2	0.9
Total	6.4	4.1	(5.3)	1.1	6.3

Other non-current assets and liabilities

This net liability balance has increased in the year primarily due to the recognition of the put option liability relating to the 40% non-controlling interest of our ABEC Indian business.

Share capital

During the year the Company issued 5,166,043 (2015: 7,253,107) ordinary shares of 1p.  512,527 of the total new issues were to shareholders who elected to receive their dividend in the form of new ordinary shares as part of the scrip dividend alternative that was made available at the interim. The remaining shares issued were consideration for the exercise of options to acquire an additional stake in Africa Oil Week. As at 30 September 2016 the Employees Share Option Trust (ESOT) held 2,869,603 (1.1%) of the Company's issued share capital (2015: 3,168,153 (1.2%)).

Reserves

The movement in the translation reserve from a debit balance of £59.7 million to £42.3 million represents the gain on the year end retranslation of the Group's overseas assets denominated in foreign currencies. This is driven primarily by movements in Sterling/Ruble exchange rates. The increase in the put option reserve and non-controlling interest is primarily the result of the acquisitions of the ABEC and Fasteners businesses. The increases in the put option reserve more than offset the decreases due to the exercises of the Africa Oil Week and Trade Link put options. The Group's ability to pay dividends is secure, with distributable reserves in the parent Company accounts of £46.6m, comfortably in excess of the proposed final dividend.

Treasury

During the year, the Group recognised a net foreign exchange gain of £2.0 million (2015: £5.9 million). The exchange rate for the Euro at 30 September 2016 was €1.16:£1 (30 September 2015: €1.35:£1); the exchange rate for the Ruble at 30 September 2016 was R82.1:£1 (30 September 2015: R99.3:£1); the exchange rate for the US Dollar at 30 September 2016 was $1.30:£1 (30 September 2015: $1.52:£1).

During the year, 33% of the Group's sales were priced in Euros, 22% in Rubles, 13% in Sterling, 12% in US Dollars, with the balance being in various local currencies.

The average exchange rates used to translate sales into Sterling were: R96.5:£1 (2015: R85.0), €1.28:£1 (2015: €1.30:£1).

The Group uses derivative instruments and currency borrowings to protect itself against the effect of currency fluctuations on a proportion of its net cash inflows. The Group's policy on derivative instruments is that it will seek to hedge 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 2016, the Group had entered into forward contracts to sell Euros for Sterling between October 2016 and September 2019. The value of the contracts is €52.9 million at an average rate of €1.23:£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.

Group borrowing facilities

The Group has long-term borrowing facilities provided by Barclays Bank and HSBC. The arrangements extend until 31 March 2019 and consist of a revolving credit facility totaling £93 million. The facility amortises by £7 million in each of June 2017 and June 2018.

At 30 September 2016, the Group had borrowings under this facility of £74.6 million (2015: £69.6 million) of which £73.0 million (2015: £65.0 million) was denominated in Sterling and £1.6 million (2015: £4.6 million) was denominated in US Dollars.

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, management will review the Group's exposure to interest rate movements and fix interest rates to the extent deemed appropriate.

With effect from 30 April 2016, the Group entered into two interest rate swap agreements to exchange the floating rate of interest paid on its bank borrowings for fixed rates on the first £40.0 million of the Group's GBP debt, calculated on agreed notional principal amounts of £20.0 million each. Under the agreements, one month GBP LIBOR is exchanged for fixed rates of 0.66% with a maturity date of 31 March 2018 and 0.71% with a maturity date of 31 March 2019.

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, annual and three-years' 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 £15.5 million as at 30 September 2016, 56% was held in institutions with a rating of grade A or above and 28% in B.

Going concern and viability statement

In accordance with provision C.2.2 of the 2014 revision of the Corporate Governance Code, the Directors have assessed the prospect of the Group over both a one and a three-year period. The one-year period has a greater level of certainty and is, therefore, used to set detailed budgetary targets at all levels across the Group. The three-year period offers less certainty but is aligned with the Board's periodic strategic review, as well as the long-term incentives offered to management.

The Directors' assessment considered a range of factors, including the Group's expected trading performance based on approved budgets, risk adjusted where appropriate, and the resulting cash flows, covenant compliance and other key ratios over the period. These metrics are subject to sensitivity analysis which evaluates the potential impact of the Group's principal risks, as disclosed in the Risk Committee Report. The Group operates in territories that can be unpredictable and unexpected geopolitical and economic events such as attempted coups, acts of terrorism, sanctions, currency controls and exchange rate movements can have an impact on the Group's reported trading performance. A significant deterioration in trading from the major markets (notably Russia and Turkey) could impact on certain banking covenants. However, the Directors have a range of mitigating actions available and within their control. Furthermore, as part of the review of the business and strategy, the appropriate funding arrangements for the Group will be considered. On the basis of this and other matters considered and reviewed by the Board during the year, the Board has reasonable expectations that the Company will be able to continue in operation and meet its liabilities as they fall due over the periods used for the assessment. For this reason, they continue to adopt the going concern basis in preparing the financial statements. In doing so, it is recognised that such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty.

Andrew Beach

Chief Financial Officer

Consolidated Income Statement

For the year ended 30 September 2016

		Year ended 30 September 2016							Year ended 30 September 2015
		Headline		Adjusting items (Note 3)		Statutory			Headline		Adjusting items (Note 3)		Statutory
		£000		£000		£000			£000		£000		£000
Revenue		134,422		-		134,422			135,794		-		135,794
Cost of sales		(75,862)		-		(75,862)			(73,617)		-		(73,617)
		_________		_________		_________			_________		_________		_________
Gross profit		58,560		-		58,560			62,177		-		62,177
Other operating income		615		-		615			372		-		372
Administrative expenses		(26,203)		(40,809)		(67,012)			(24,398)		(15,668)		(40,066)
Foreign exchange gain on operating activities		1,956		-		1,956			5,932		-		5,932
Share of results of associates and joint ventures		4,628		(1,078)		3,550			4,891		(1,208)		3,683
		_________		_________		_________			_________		_________		_________
Operating profit/(loss)		39,556		(41,887)		(2,331)			48,974		(16,876)		32,098
Investment revenue		554		6,940		7,494			691		2,192		2,883
Finance costs		(3,606)		(5,652)		(9,258)			(2,506)		(929)		(3,435)
		_________		_________		_________			_________		_________		_________
Profit/(loss) before tax		36,504		(40,599)		(4,095)			47,159		(15,613)		31,546
Tax (charge)/credit		(7,059)		3,983		(3,076)			(8,430)		3,454		(4,976)
		_________		_________		_________			_________		_________		_________
Profit/(loss) for the year		29,445		(36,616)		(7,171)			38,729		(12,159)		26,570
		_________		_________		_________			_________		_________		_________
Attributable to:
Owners of the Company		27,289		(36,616)		(9,327)			38,338		(12,159)		26,179
Non-controlling interests		2,156		-		2,156			391		-		391
		_________		_________		_________			_________		_________		_________
		29,445		(36,616)		(7,171)			38,729		(12,159)		26,570
		_________		_________		_________			_________		_________		_________
Earnings per share (p)
Basic		10.7				(3.6)			15.3				10.5
Diluted		10.7				(3.6)			15.3				10.4
		_________		_________		_________			_________		_________		_________

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2016

		2016	2015
		£000	£000
(Loss)/profit for the year attributable to shareholders		(7,171)	26,570
Cash flow hedges:
Movement in fair value of cash flow hedges		(7,042)	79
Fair value of cash flow hedges released to the income statement		(1,293)	640
Currency translation movement on net investment in subsidiary undertakings		17,414	(26,434)
		1,908	855
Tax relating to components of comprehensive income		1,669	(149)
Total comprehensive income for the year		3,577	706
Attributable to:
Owners of the company		1,421	315
Non-controlling interests		2,156	391
		3,577	706

Consolidated Statement of Changes in Equity
For the year ended 30 September 2016

	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 2015	2,570	14,875	2,746	457	(4,825)	140,031	(16,843)	(59,703)	3,674	82,982	16,361	99,343
Net (loss)/profit for the year	-	-	-	-	-	(9,327)	-	-	-	(9,327)	2,156	(7,171)
Currency translation movement on net investment in subsidiary undertakings	-	-	-	-	-	-	-	17,414	-	17,414	-	17,414
Movement in fair value of cash flow hedges	-	-	-	-	-	-	-	-	(7,042)	(7,042)	-	(7,042)
Fair value of cash flow hedges released to the income statement	-	-	-	-	-	-	-	-	(1,293)	(1,293)	-	(1,293)
Tax relating to components of comprehensive income	-	-	-	-	-	-	-	-	1,669	1,669	-	1,669
Total comprehensive income for the year	-	-	-	-	-	(9,327)	-	17,414	(6,666)	1,421	2,156	3,577
Dividends	5	(5)	-	-	-	(15,594)	-	-	-	(15,594)	(1,520)	(17,114)
Exercise of share options	-	-	-	-	455	(452)	-	-	-	3	-	3
Share-based payments	-	-	-	-	-	390	-	-	-	390	-	390
Issue of shares	46	5,759	-	-	-	449	-	-	-	6,254	-	6,254
Tax debited to equity	-	-	-	-	-	(16)	-	-	-	(16)	-	(16)
Acquisition of subsidiary	-	-	-	-	-	-	(13,159)	-	-	(13,159)	17,084	3,925
Exercise put option on acquisition of subsidiary	-	-	-	-	-	(31)	8,685	-	-	8,654	(8,654)	-
Balance as at 30 September 2016	2,621	20,629	2,746	457	(4,370)	115,450	(21,317)	(42,289)	(2,992)	70,935	25,427	96,362

The accompanying notes 1 to 9 form an integral part of the consolidated financial statements.

 

Consolidated Statement of Changes in Equity
For the year ended 30 September 2016

	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 2014	2,497	2,947	2,746	457	(5,641)	133,126	(1,498)	(33,269)	3,104	104,469	942	105,411
Net profit for the year	-	-	-	-	-	26,179	-	-	-	26,179	391	26,570
Currency translation movement on net investment in subsidiary undertakings	-	-	-	-	-	-	-	(26,434)	-	(26,434)	-	(26,434)
Movement  in fair value of cash flow hedges	-	-	-	-	-	-	-	-	79	79	-	79
Fair value of cash flow hedges released to the income statement	-	-	-	-	-	-	-	-	640	640	-	640
Tax relating to components of comprehensive income	-	-	-	-	-	-	-	-	(149)	(149)	-	(149)
Total comprehensive income for the period	-	-	-	-	-	26,179	-	(26,434)	570	315	391	706
Dividends paid	-	-	-	-	-	(18,398)	-	-	-	(18,398)	(317)	(18,715)
Exercise of share options	1	-	-	-	816	(810)	-	-	-	7	-	7
Share-based payments	-	-	-	-	-	148	-	-	-	148	-	148
Issue of shares	72	11,928	-	-	-	-	-	-	-	12,000	-	12,000
Tax debited to equity	-	-	-	-	-	(214)	-	-	-	(214)	-	(214)
Acquisition of subsidiary	-	-	-	-	-	-	(15,345)	-	-	(15,345)	15,345	-
Balance as at 30 September 2015	2,570	14,875	2,746	457	(4,825)	140,031	(16,843)	(59,703)	3,674	82,982	16,361	99,343

The accompanying notes 1 to 9 form an integral part of the consolidated financial statements.

Consolidated Statement of Financial Position 30 September 2016
		2016	2015
		£000	£000
Non-current assets
Goodwill		97,855	72,490
Other intangible assets		70,816	65,313
Property, plant and equipment		2,469	1,708
Interests in associates & joint ventures		45,677	56,782
Venue advances and prepayments		2,945	2,131
Derivative financial instruments		-	1,528
Deferred tax asset		3,070	1,652
		222,832	201,604
Current assets
Trade and other receivables		50,610	41,225
Tax prepayment		2,115	945
Derivative financial instruments		-	1,951
Cash and cash equivalents		15,508	17,269
		68,233	61,390
Total assets		291,065	262,994
Current liabilities
Trade and other payables		(20,844)	(15,944)
Deferred income		(61,918)	(49,831)
Derivative financial instruments		(5,904)	(9,054)
Provisions		(240)	(137)
		(88,906)	(74,966)
Non-current liabilities
Bank loan		(74,604)	(69,616)
Provisions		(189)	(190)
Deferred tax liabilities		(12,675)	(10,045)
Derivative financial instruments		(18,329)	(8,834)
		(105,797)	(88,685)
Total liabilities		(194,703)	(163,651)
Net assets		96,362	99,343
Equity
Share capital		2,621	2,570
Share premium account		20,629	14,875
Merger reserve		2,746	2,746
Capital redemption reserve		457	457
ESOT reserve		(4,370)	(4,825)
Retained earnings		115,450	140,031
Put option reserve		(21,317)	(16,843)
Translation reserve		(42,289)	(59,703)
Hedge reserve		(2,992)	3,674
Equity attributable to equity holders of the parent		70,935	82,982
Non-controlling interests		25,427	16,361
Total equity		96,362	99,343

The accompanying notes 1 to 9 form an integral part of the consolidated financial statements.

The financial statements of ITE Group plc, registered company number 01927339, were approved by the Board of Directors and authorised for issue on 29 November 2016.  They were signed on their behalf by:

Mark Shashoua                                 Andrew Beach  
Chief Executive Officer                   Chief Financial Officer

Consolidated Cash Flow Statement 30 September 2016
		2016	2015
		£000	£000
Operating activities
Operating (loss)/profit from continuing operations		(2,331)	32,098
Adjustments for non cash items:
Depreciation and amortisation		17,191	14,574
Impairment of goodwill		24,650	-
Impairment of investments in associates and joint ventures		1,859	-
Share-based payments		390	148
Share of profit from associates & joint ventures		(3,550)	(3,683)
Decrease in provisions		(69)	(74)
Profit on disposal of plant, property and equipment		(1)	(6)
Foreign exchange gain on operating activities		(1,956)	(5,932)
Profit on disposal of investments		(1,498)	-
Fair value of cash flow hedges recognised in the income statement		(1,187)	1,073
Dividends received from associates & joint ventures		5,373	2,632
Operating cash flows before movements in working capital		38,871	40,830
(Increase)/decrease in receivables		(4,254)	10,744
Venue advances and loans		(2,867)	(3,574)
Utilisation & repayment of venue loans		3,901	4,411
Increase/(decrease) in deferred income		12,087	(12,908)
Decrease in payables		(6,735)	(2,541)
Cash generated from operations		41,003	36,962
Tax paid		(6,668)	(6,635)
Net cash from operating activities		34,335	30,327
Investing activities
Interest received		385	258
Investment in associates & joint ventures		(2,397)	(7,046)
Acquisition of businesses - cash paid		(17,185)	(48,787)
Cash acquired through acquisitions		3,404	280
Purchase of plant, property & equipment and computer software		(2,419)	(1,740)
Disposal of plant, property & equipment and computer software		112	25
Cash paid to acquire non-controlling interests		(2,087)	-
Net cash utilised on investing activities		(20,187)	(57,010)
Financing activities
Equity dividends paid		(15,589)	(18,681)
Dividends paid to non-controlling interests		(1,520)	(317)
Interest paid and bank charges		(3,544)	(2,506)
Proceeds from the issue of share capital & exercise of share options		3	12,007
Drawdown of borrowings		4,988	26,716
Net cash inflow from financing activities		(15,662)	17,219

		2016	2015
		£000	£000
Net decrease in cash and cash equivalents		(1,514)	(9,464)
Cash and cash equivalents at beginning of year		17,269	28,145
Effect of foreign exchange rates		(247)	(1,412)
Cash and cash equivalents at end of year		15,508	17,269

Net debt reconciliation

	At 1 October 2015	Cash flow	Foreign exchange	At 30 September 2016
	£000	£000	£000	£000
Cash	17,269	(1,514)	(247)	15,508
Debt due after one year	(69,616)	(4,988)	-	(74,604)
Net debt	(52,347)	(6,502)	(247)	(59,096)

The accompanying notes 1 to 9 form an integral part of the consolidated financial statements.

Notes to the Consolidated Financial Statements
30 September 2016

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 November 2016. 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 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 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

The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for accounting periods beginning on or after 1 October 2016. A list of these can be found below:

New, amended and revised Standards	Effective date
Amendments to IAS 16 Property, plant and equipment	1 January 2016
Amendments to IAS 38 Intangible assets	1 January 2016
Amendments to IFRS 11 Joint arrangements	1 January 2016
IFRS 14 Regulatory deferral accounts	1 January 2016
Annual improvements:	1 January 2016
IFRS 5 Non-current assets held for sale and discontinued operations
IFRS 7 Financial instruments: disclosures
IAS 19 Employee benefits
IAS 34 Interim financial reporting
Amendments to IFRS 10 Consolidated financial statements	1 January 2016
Amendments to IFRS 12 Disclosure of interests in other companies	1 January 2016
Amendments to IAS 28 Investments in associates and joint ventures	1 January 2016
Amendments to IAS 1 Presentation of financial statements	1 January 2016
Amendments to IAS 27 Consolidated and separate financial statements	1 January 2016
Amendments to IAS 7 Statement of cash flows	1 January 2017
Amendments to IFRS 2 Share-based payments	1 January 2018
Clarifications to IFRS 15 Revenue from contracts with customers	1 January 2018
IFRS 9 Financial instruments	1 January 2018
IFRS 15 Revenue from contracts with customers	1 January 2018
Amendments to IAS 12 Income taxes	1 January 2019
IFRS 16 Leases	1 January 2019

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 with the exception of the adoption of IFRS 16 Leases, which will replace the current leasing standard, IAS 17 Leases.

IFRS 16 requires all leases to be treated in a consistent way to the current rules on finance leases. This will result in all leases being disclosed in the Statement of Financial Position, with the exception of short-term leases, where, for lease terms of less than 12 months, an election can be made to account for the expense in line with the payment terms.

This is expected to have a significant impact on both the Group's Statement of Financial Position, as there will be an increase in lease assets and financial liabilities recognised, and the Group's Income Statement, through a changing of the expense profile and the financial statement lines in which the expenses are recognised. The adoption of IFRS 16 will increase the expense charged at the beginning of our lease contracts, due to the straight-line operating lease expense charge being replaced by the finance cost approach, which, by its nature is front-loaded. This is expected to reduce profit before tax in the first year of adoption. Currently, our operating lease rentals are recognised within administrative expenses, but under IFRS 16, these will be classified as finance costs and therefore operating profit is expected to increase on adoption. The financial impact of the changes have yet to be quantified by management.

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

Operating profit is stated after charging/(crediting):

	2016	2015
	£000	£000
Staff costs	31,728	30,358
Depreciation of property, plant and equipment	816	696
Amortisation of intangible assets included within administrative expenses	16,375	13,878
Impairment of goodwill	24,650	-
Impairment of investments in associates and joint ventures	1,859	-
Operating lease rentals - land and buildings	2,180	2,352
Net gain on derivative financial instruments - cash flow hedges	(107)	(433)
(Gain)/loss on derivative financial instruments - equity options	(6,940)	929
Foreign exchange gain on operating activities	(1,956)	(5,932)

Adjusting items

	2016	2015
	£000	£000
Operating items
Amortisation of acquired intangible assets	15,468	13,134
Impairment of goodwill	24,650	-
Impairment of investments in associates and joint ventures	1,859	-
Transaction costs on completed and pending acquisitions	330	2,534
Profit on disposal of investments	(1,498)	-
Tax on income from associates & joint ventures	1,078	1,208
Total operating items	41,887	16,876
Financing items
Revaluation of equity option liabilities	(6,940)	929
Revaluation of deferred and contingent consideration	3,094	(2,192)
Imputed interest charge on discounted equity option liabilities	2,558	-
Total financing items	(1,288)	(1,263)
Total adjusting items	40,599	15,613

The adjustments to operating items are in respect of:

·    Amortisation of acquired intangible assets: the amortisation charge in respect of intangible assets acquired through business combinations;

·    Impairment of goodwill: in relation to the Indian, South East Asian and Siberian cash generating units;

·    Impairment of investments in associates and joint ventures: in relation to the Malaysian joint venture;

·    Transaction costs on completed and pending acquisitions: principally costs incurred on the acquisition of controlling interests in ABEC and ITE Ebseek. The prior year costs relate to the acquisitions of Breakbulk and Africa Oil Week.

·    Profit on disposal of investments: the deemed disposals on the acquisition of controlling interests in ABEC and The Hub; and

·    Tax on income from associates & joint ventures: since post-tax profits from associates and joint ventures are presented within the pre-tax operating profits of the business, this adjustment ensures consistency of presentation.

The adjustments to financing items are in respect of:

·      Revaluations of equity option liabilities: the gains/losses from the revaluation of the Group's equity options over non-controlling interests in our subsidiaries, principally in relation to ABEC, Fasteners and Africa Oil Week;

·      Revaluations of deferred and contingent consideration: the revaluation of deferred and contingent consideration on the Group's outstanding payments following the acquisitions of subsidiaries, joint ventures and associates, principally in relation to Fasteners, Debindo and ABEC; and

·      Imputed interest charge on discounted equity option liabilities: the charge due to the unwinding of the discounting on the equity option liabilities.

4  Segmental information

IFRS 8 introduced the term Chief Operating Decision Maker (CODM). The Senior Management Board is considered to be the CODM and consists of the regional and functional heads of the business.

ITE's reportable segments are strategic business units that are based in different geographic locations, predominantly in 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.

The Group evaluates the performance of its segments on the basis of headline pre-tax profit and operating profit.  See note 3 for more details.

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.  No individual customer amounts to more than 10% of Group revenues. 

Year ended 30 September 2016	Russia	Central Asia	Eastern & Southern Europe	Asia	Rest of the World	Total Group
	£000	£000	£000	£000	£000	£000
By geographical location of events / activities
Revenue	50,851	21,980	19,294	18,075	24,222	134,422
Headline pre-tax profit	20,316	7,309	5,855	4,888	(1,864)	36,504
Operating profit/(loss)	17,074	6,841	1,217	(23,545)	(3,918)	(2,331)
By origin of sale
Revenue	33,647	11,946	20,185	23,619	45,025	134,422
Headline pre-tax profit	9,883	3,402	6,532	11,729	4,958	36,504
Operating profit/(loss)	6,641	2,933	1,895	(16,703)	2,903	(2,331)
Operating loss						(2,331)
Investment revenue						7,494
Finance costs						(9,258)
Loss before tax						(4,095)
Tax						(3,076)
Loss after tax						(7,171)
Capital expenditure	722	58	100	253	1,286	2,419
Depreciation and amortisation	2,458	611	4,674	3,309	6,139	17,191
Balance Sheet
Assets*	46,054	12,110	41,013	102,479	84,361	286,017
Liabilities*	(26,208)	(4,194)	(25,951)	(17,459)	(106,210)	(180,022)
Non-current Assets*	30,250	5,025	29,684	85,149	69,654	219,762

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

The revenue in the year of £134.4 million includes £0.4 million (2015: £0.6 million) of barter sales.

Included within the headline pre-tax profit and operating profit of Rest of the World is £13.1 million and £10.6 million respectively of corporate costs.

Year ended 30 September 2015	Russia	Central Asia	Eastern & Southern Europe	Asia	Rest of the World	Total Group
	£000	£000	£000	£000	£000	£000
By geographical location of events / activities
Revenue	72,138	27,201	17,859	3,877	14,719	135,794
Headline pre-tax profit	37,260	8,606	6,758	4,288	(9,753)	47,159
Operating profit	33,621	8,090	1,347	1,383	(12,343)	32,098
By origin of sale
Revenue	44,933	14,272	21,013	11,411	44,165	135,794
Headline pre-tax profit	23,180	2,313	10,352	10,703	611	47,159
Operating profit	19,540	1,797	4,942	7,798	(1,979)	32,098
Operating profit						32,098
Investment revenue						2,883
Finance costs						(3,435)
Profit before tax						31,546
Tax						(4,976)
Profit after tax						26,570
Capital expenditure	93	155	99	56	1,337	1,740
Depreciation and amortisation	3,054	780	5,024	1,382	4,313	14,553
Balance Sheet
Assets*	44,539	13,127	41,747	69,827	91,157	260,397
Liabilities*	19,037	5,049	10,086	7,094	110,803	152,069
Non Current Assets*	27,693	6,437	30,322	65,099	70,401	199,952

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

Included within the headline pre-tax profit and operating profit of Rest of the World is £11.3 million and £8.9 million respectively of corporate costs.

5  Investment revenue

	2016	2015
	£000	£000
Interest receivable from bank deposits	385	258
Gain on revaluation of equity options	6,940	-
Gain on cash flow hedges	169	433
Gain on revaluation of deferred and contingent consideration	-	2,192
	7,494	2,883

6  Finance costs

	2016	2015
	£000	£000
Interest on bank loans	2,403	1,624
Bank charges	1,141	882
Loss on revaluation of deferred and contingent consideration	3,094	-
Loss on revaluation of equity options	-	929
Loss on cash flow hedges	62	-
Imputed interest charge on discounted equity option liabilities	2,558	-
	9,258	3,435

7  Tax on profit on ordinary activities

Analysis of tax charge for the year:

	2016	2015
	£000	£000
Group taxation on current year profit:
UK corporation tax on profit for the year	820	(184)
Adjustment to UK tax in respect of previous years	(8)	(18)
	812	(202)
Overseas tax - current year	5,721	7,362
Overseas tax - previous years	(39)	213
	5,682	7,575
Current tax	6,494	7,373
Deferred tax
Origination and reversal of timing differences:
Current year	(3,218)	(1,993)
Prior year	(200)	(404)
	3,076	4,976

The tax charge for the year can be reconciled to the profit per the income statement as follows:

	2016	2015
	£000	£000
(Loss)/profit on ordinary activities before tax	(4,095)	31,546
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2015: 20.5%)	(819)	6,467
Effects of:
Expenses not deductible for tax purposes	289	249
Increase in uncertain contingencies	303	-
Tax effect of put options/deferred consideration	(491)	190
Impairment of goodwill	5,302	-
Foreign exchange	(59)	(90)
Tax effect of amortisation of intangibles	(755)	(328)
Deferred tax asset not recognised	674	688
Witholding tax and other irrecoverable tax	533	678
Deferred tax provision on repatriation of overseas profits	49	90
Tax charge in respect of previous period	(248)	(125)
Effect of different tax rates of subsidiaries in other jurisdictions	(1,006)	(2,088)
Associate tax	(696)	(755)
	3,076	4,976

The Group operates and derives profits from a range of international markets, and as such it is subject to tax in a number of territories. The Group actively monitors developments in international and domestic tax rules to which it is subject and is currently assessing the potential impact of measures announced as part of the OECD's 'Base Erosion and Profit Shifting'. It is possible that changes in tax rules will have an impact of the Group's effective tax rate in future periods.

Tax relating to components of comprehensive income:
Cash flow gains/(losses) - Current	262	(134)
Cash flow gains/(losses) - Deferred	1,407	(15)
	1,669	(149)
Tax relating to amounts (charged) / credited to equity:
Share options - Current	(84)	(43)
Share options - Deferred	68	(171)
	(16)	(214)
	1,653	(363)

8  Dividends

		2016			2015
	Per share p	Settled in cash £000	Settled in scrip £000	Per share p	Settled in cash £000	Settled in scrip £000
Amounts recognised as distributions to equity holders in the year:
Final dividend in respect of the prior year	4.9	12,436	-	4.9	12,053	-
Interim dividend in respect of the current year	1.5	3,158	720	2.5	6,345	-
	6.4	15,594	720	7.4	18,398	-

The Directors declared a final dividend for the year ended 30 September 2016 of 3p per ordinary share, a distribution of approximately £7.8 million. A scrip dividend alternative is available, allowing shareholders to elect to receive their dividend in the form of new ordinary shares. 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 2,869,603 (2015: 3,168,153) ordinary shares representing 1.1% 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:

	2016	2015
	No. of shares (000)	No. of shares (000)
Weighted average number of shares:
For basic earnings per share	255,598	250,321
Effect of dilutive potential ordinary shares	79	333
For diluted and headline diluted earnings per share	255,677	250,654

Basic and diluted earnings per share

The calculations of basic and diluted earnings per share are based on the loss for the financial year attributable to equity holders of the parent of £9.3 million (2015: profit of £26.2 million). Basic and diluted earnings per share were -3.6p (2015: 10.5p and 10.4p 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 10.7p per share (2015: 15.3p).  Headline basic earnings per share is also 10.7p per share (2015: 15.3p).

	2016	2015
	£000	£000
(Loss)/profit for the financial year attributable to equity holders of the parent	(9,327)	26,179
Amortisation of acquired intangible assets	15,468	13,134
Tax effect of amortisation of acquired intangible assets	(2,905)	(2,246)
Impairment of goodwill	24,650	-
Impairment of investments in associates and joint ventures	1,859	-
Transaction costs on completed & pending acquisitions	330	2,534
Profit on disposal of investments	(1,498)	-
(Gain)/loss on revaluation of equity option liabilities	(6,940)	929
Gain/(loss) on revaluation of deferred and contingent consideration	3,094	(2,192)
Imputed interest charge on discounted equity option liabilities	2,558	-
Headline earnings for the financial year after taxation	27,289	38,338

Responsibility statement

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 30 September 2016. 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 28 November 2016 and is signed on its behalf by:

Mark Shashoua

Chief Executive Officer

Andrew Beach

Chief Financial Officer

Dividend calendar

Final dividend 2016
Ex-dividend date	29 December 2016
Record date	30 December 2016
Payment date	6 February 2017

Interim dividend 2017
Ex-dividend date	8 June 2017
Record date	9 June 2017
Payment date	3 August 2017

 

END

 

 

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