RNS Number:0186T
ITE Group PLC
09 December 2003
9 December 2003
For Immediate Release
ITE GROUP PLC
PRELIMINARY RESULTS ANNOUNCEMENT
ITE Group plc, the leading exhibition organiser in emerging markets, is pleased
to announce its preliminary results for the year ended 30 September 2003.
Key points:
- Reported turnover of #58.9 million (2002: #52.4 million), up 12.4%
- Profit before tax of #12.3 million (2002: loss of #0.4 million)
- Headline pre-tax profit* of #15.5 million (2002: #8.4 million), up
84.5%
- Net cash of #22.1 million (2002: #17.7 million), up 24.9%
- Basic earnings per share of 3.1p (2002: 1.0p loss per share)
- Headline diluted earnings per share of 4.2p (2002: 2.4p), up 75%
- Net assets of #41.0 million (2002: #36.4 million), up 12.6%
- Business focus on strongest, most profitable brands
- Strong growth in key Moscow market
- Disposal of non-core investments
Commenting on the results, Iain Paterson, Chairman, said:
"I am pleased to report record results for ITE Group plc which demonstrate the
underlying strength of our business. Turnover at #58.9 million was up 12% on
last year and Headline profit before tax of #15.5 million was up 85% on last
year. The Group has a strong balance sheet and ended the year with net cash of
#22.1 million.
The Group enjoys a leading position in the Moscow, St Petersburg and Central
Asian exhibition markets. We believe that these areas will continue to
experience economic growth thereby underpinning the expansion of our business.
We are opening opportunities for organic growth by taking our existing brands
and core products into new emerging markets. With these strong foundations, we
are confident that we can continue the good financial performance of this year."
* Headline pre-tax profit is defined as profit before tax, amortisation and
impairment of goodwill and profits or losses arising on disposal of group
undertakings. In the financial highlights of the annual reports for previous
years, Headline profit before tax included profits and losses on disposal of
group undertakings. These have been restated above to more accurately reflect
the group's underlying performance.
Enquiries:
Iain Paterson / Ian Tomkins ITE Group plc 020 7596 5000
Philip Ranger / Kirsty Black Merlin Financial 020 7606 1244
ITE Group plc
Preliminary statement for the year ended 30 September 2003
Chairman's Statement
Group Performance
I am pleased to report record results for ITE Group plc which demonstrate the
underlying strength of our business. Turnover and Headline Profit before tax for
the year were #58.9 million and #15.5 million respectively. Headline diluted
earnings per share grew by 75% to 4.2p per share and diluted earnings per share
improved to 3.0p per share on Profit before tax of #12.3m compared to a loss of
1.0p per share on a Loss before tax of #0.4m in 2002. The Group has a strong
balance sheet and ended the year with net cash of #22.1 million.
Strategic Progress
We pursued a number of organic growth opportunities during the year, expanding
our portfolio of events in sixteen countries and enhancing our major brands.
Recently ITE has agreed terms with Expocentr, its principal Moscow venue, to
extend the terms of its co-operation agreement covering our key events for a
further five years.
We have continued to focus our business on its most profitable areas of
activity. Since the year-end we have sold all of our interests in the Czech
Republic and Slovakia to Incheba a.s., the owner of the other 50% interest. The
effect of the floods in Prague in August 2002 had shifted the focus of the Czech
business towards investment in and refurbishment of exhibition halls.
Board and Management
There have a number of changes to your Board during the year. Russell Taylor was
appointed Group Finance Director and Company Secretary in March. Russell is a
Chartered Accountant whose previous experience included eight years in the
exhibitions industry. In July, Edward Strachan, Managing Director of our St
Petersburg and Central Asia businesses was appointed to the Board. Edward has
been with the Group for over ten years and now brings his breadth of experience
of our industry to the Board.
Alex Bernstein resigned from the Board in June. Alex had significantly
contributed to building our business in Moscow. Sir Hugh Bidwell, Deputy
Chairman, stepped down from the Board in September after seven years with ITE
and Alexander Rozin resigned from the Board in November following the sale of
our Czech and Slovakian interests. The Board would like to thank these Directors
for their contributions to the development of the Group over the years.
In July, Marco Sodi replaced Jeffrey Stevenson as one of the Non-Executive
Directors nominated by Veronis Suhler Stevenson. Marco is actively involved in
the European media sector. Michael Hartley was appointed a Non-executive
Director in October. Michael is currently Chairman of Dawson International plc
and brings extensive experience of managing and growing internationally
diversified groups of businesses.
In addition to the Board changes, we have streamlined and strengthened our
management team. I should like, on behalf of the Board, to thank all our staff
for the very considerable effort that they have made during the year. We are
particularly appreciative of their support during a period of organisational and
structural change.
Dividend
The Board has recommended a final dividend of 1.1p per share bringing the total
dividend for the year to 1.6p per share. This represents a real increase of 6.7%
in the annual dividend in line with the Board's progressive dividend policy.
Outlook
The Group enjoys a leading position in the Moscow, St Petersburg and Central
Asian exhibition markets. We believe that these areas will continue to
experience economic growth thereby underpinning the expansion of our business.
We are opening opportunities for organic growth by taking our existing brands
and core products into new emerging markets. With these strong foundations, we
are confident that we can add value and continue the good financial performance
of this year.
Iain Paterson
Chairman
Chief Executive's Review
Financial performance
Turnover for the year of #58.9m (2002: #52.4m) and Gross Profits of #26.7m
(2002: #21.4m) reflect both the strength of the markets in which we operate and
the benefits of re-focusing our business on its most profitable areas. Control
of overheads assisted Operating Profits of #11.7m (2002: #6.9m excluding
impairment charges) and an increase in Headline Profit before Tax to #15.5m from
#8.4m last year. This is the stronger year in our biennial trading pattern and
#2.4m of the increase in profits is attributable to events that only take place
every two years.
Revenues are 12% higher than last year, despite the effect of a weakening dollar
on our revenue streams. Circa #4.4m of the increase in revenue is attributable
to our biennial events, Moscow International Oil and Gas and Autosalon. Events
which took place last year and did not recur in 2003 (or were discontinued) and
other timing differences reduced turnover by #4.3m. New launches and growth in
our existing portfolio lifted turnover by #6.4m and profits by #3.6m.
The gross margin achieved of 45% is an improvement on last year's margin of 41%.
The improvement is partly attributable to the margins we earn on the two
biennial events, and partly to the steps we have taken to reduce our cost of
sales and to eliminate less profitable business.
We carried out a review of our operating structure over the summer and the
resulting changes yielded annualised savings of over #1m. The costs of the
restructuring exercise were #0.4m. The cost of severing our relationship with
the Czech and Slovakian exhibition businesses was #0.8m. This included expensing
#0.5m of prepayments in respect of unused tenancies and a loss on disposal of
#0.2m.
Our associated company contribution in the year primarily relates to our 50%
owned business in Istanbul, Turkey. The core business sold 150,000 square
metres, but yields are low and profits are depressed by the Turkish Lira, which
is only one third of its February 2001 value against the dollar.
The Group has performed well this year and the results represent a highly
creditable performance. This set of results confirms that our period of
rationalisation and consolidation has been successfully completed and that the
Group is making substantial progress. We have contracted #35m of business for
the 2004 year which is an increase on a like for like basis of 11%.
Trading highlights
In 2003 we organised 114 events in 16 countries (2002: 117 events in 19
countries) and sold a total of 292,000 square metres of space (2002: 255,800
square metres). We launched 19 new events over the course of the year across a
range of industries concentrating on the markets of Kazakhstan, Ukraine and
Turkey.
Like for like growth in space sales of our annually recurring events was in
excess of 14%, led by exceptionally strong results in our key core events. The
top ten events ordered by contribution to gross profit in 2003 and their change
in size over the previous year were:
Rank Event 2003 2002 Growth
net Sq.m. net Sq.m.
1 Russia Building Week 34,600 26,900 28%
2 Moscow International Travel & Tourism 17,500 15,000 16%
(MITT)
3 Moscow International Oil & Gas/ 14,300 3,400 *
Neftegas
4 World Food Moscow 17,500 14,600 20%
5 Autosalon / MIMS 22,800 15,600 *
6 MODA UK (bi-annual) 20,900 10,800 93%
7 Kazakhstan International Oil & Gas 5,600 4,500 24%
(including conference)
8 Windows & Doors 8,600 7,400 15%
9 Moscow International Sports & Boat 7,400 5,800 28%
Show
10 Ingredients Russia 4,500 2,600 69%
* 2002 Events not comparable due to biennial pattern
We enjoyed considerable growth in our key market, Moscow, which accounts for up
to 70% of our gross profit. The main influences were the good performance of our
two biennial events and the opening of a new 7,000 net square metre pavilion at
the principal exhibition venue, Expocentr.
Russia
Our Russian exhibition business is very well established and enjoyed growth of
25% in both space and revenues. Russia Building Week expanded to fill the newly
built exhibition hall at Expocentr and has further potential to grow, but is
constrained for the time being by the availability of good quality exhibition
space in Moscow. Moscow International Travel and Tourism show and the World Food
Moscow event both enjoyed growth in space sales of more than 15%. Our Oil and
Gas event and Autosalon only take place every two years, but nevertheless both
enjoyed growth of 20% + over their previous editions. Moscow has become an
increasingly competitive environment in recent years and presently continues to
be under-resourced in available exhibition space. However, new space will be
available soon to provide the opportunity to enhance ITE's growth.
The recently signed co-operation agreement with Expocentr is of real
significance to the Group, as it secures our key Moscow events at the leading
Moscow venue of Expocentr for the foreseeable future.
Currently ITE is in new discussions to again further extend the term of our
co-operation with Lenexpo, our principal venue in St. Petersburg, following on
from an agreement made late last year. Our premier events in St Petersburg
remain the Baltic Building Week (8,000 Sq.m.) and Interfood St Petersburg (4,000
Sq.m.). We have recently developed a new theme in St. Petersburg with the
agreement of a joint venture in the food production technology area.
Central Asia
ITE is the leading international operator established in these regions. The
economies in these markets are buoyant, with growth underpinned by strong world
oil and gas prices. In 2003 ITE launched 6 new events in the region, mainly in
Kazakhstan. The launches were in a range of industries including Building,
Fashion, Packaging, Cleaning and Chemicals.
In Kazakhstan, strong growth was developed in the city of Atyrau, where last
year's Infrastructure launch was split into three separate exhibitions, all of
which filled the existing venue capacity. In Almaty we entered into a funding
arrangement to assist our venue partner to build a new exhibition hall, so as to
facilitate growth in our construction and oil and gas events (which both grew by
circa 30%).
Our events in Azerbaijan are showing strong growth from a modest base - in
particular in the medical and construction sectors.
Eastern & Southern Europe
We have strengthened our teams in Ukraine and Turkey and have increased the
number of events held by making a series of new launches. The reduction in space
sales reflects the sale of our stand alone Czech business last year and the
decision to withdraw from our Belgrade events.
In Kyiv space sales increased by over 30%, though the new launch activity meant
that this did not feed through proportionately to profits.
In Turkey our wholly owned business further extended its 'Caspian' brand, with
successful launches in the Transport, Banking and Finance and Ecology sectors.
Caspian Telecoms, launched last year exhibited further good growth. Overall
space sales in Istanbul were affected by a reduction in size of the low yielding
construction event, Ankomak, but profits were still higher than in 2002.
Western Europe and UK
One of our strongest performing brands for the year was MODA UK fashion, which
takes place in Spring and Autumn at the NEC in Birmingham. In particular
Womanswear outperformed all expectations and almost doubled the prior year
contribution. In September, ITE acquired a further 15% in ITE Moda Limited
bringing our interest up to 90%.
International Sales Offices & Rest of World
We have international sales offices based in London and Hamburg which focus on
selling international exhibitors into our emerging market events (sales are
shown in the regions where the events are held). We recently reviewed the
structure of our London office with a view to reducing overheads. Together with
other cost control measures we have successfully reduced our cost base in London
by circa #1m on an annualised basis, without impacting our sales capacity.
The Group has an increased focus in Africa, although this is not yet significant
in revenue terms. Our industry brands are proving to be very strong -
particularly in Oil and Gas where our brand has helped us win the tender for the
2005 World Petroleum Congress in Johannesburg. This in turn has provided a
platform for ITE to increase the spread of our oil and gas events throughout the
African market. If we consider a market to have significant potential, we look
to follow with the introduction of other selected events from our portfolio of
sector brands.
Associates
During the year ITE held 50% interests in exhibition organising businesses in
the Czech Republic, in Turkey and in Egypt. As noted earlier, subsequent to 30
September we have disposed of our Czech Republic interests.
ITF in Istanbul has had an encouraging year, organising 16 events including the
re-launch of important Auto events which had been postponed following the
economic crisis in 2001. This business is however still the lowest yielding
market in which we operate. Although the increase in space sales was of real
significance, the challenge for the future is to improve the yields and
profitability of the key events.
Outlook
ITE has made very significant steps in consolidating and securing its key
business interests throughout the course of the past year. We have considerable
assets in our brands, international sales networks and local office
infrastructures and these will underpin future growth. The markets in which we
specialise continue to offer excellent prospects for us to develop and grow our
business further. We are also pursuing new market opportunities to leverage our
brand strengths. I look forward to and am excited by the prospects ahead.
Ian Tomkins
Chief Executive
Consolidated Profit & Loss Account
For the year ended 30 September 2003
2003 2002
#000 #000
Turnover 58,934 52,431
Cost of sales (32,213) (31,012)
------ ------
Gross profit 26,721 21,419
------ ------
Net operating expenses before impairment and (12,720) (12,581)
goodwill amortisation
Impairment charge - (6,220)
Goodwill amortisation (2,331) (1,905)
------ ------
Total net operating expenses (15,051) (20,706)
------ ------
Operating profit 11,670 713
------ ------
Share of associates' operating profit/(loss)
before goodwill amortisation 836 (1,211)
Goodwill amortisation (132) (160)
------ ------
Share of associates' operating profit/(loss) 704 (1,371)
Provision or loss on disposal of group undertakings (779) (476)
------ ------
Profit/(loss) on ordinary activities before 11,595 (1,134)
interest
Interest receivable 760 824
Interest payable and similar charges (68) (95)
------ ------
Profit/(loss) on ordinary activities before 12,287 (405)
taxation
Tax on profit/(loss) on ordinary activities (4,030) (2,350)
------ ------
Profit/(loss) on ordinary activities after 8,257 (2,755)
taxation
Minority interests 6 152
------ ------
Profit/(loss) for the financial year 8,263 (2,603)
Dividends (4,359) (6,548)
------ ------
Retained profit/(loss) for the year 3,904 (9,151)
------ ------
Earnings/(loss) per share
Basic 3.1p (1.0p)
Diluted 3.0p (1.0p)
Headline diluted 4.2p 2.4p
------ ------
------ ------
Consolidated Balance Sheet
30 September 2003
2003 2002
(as restated)
#000 #000
Fixed assets
Goodwill 30,016 30,826
Tangible assets 1,920 2,041
Associates 1,057 612
Other investments 2,412 2,492
------- -------
35,405 35,971
Current assets
Debtors due within one year 19,557 18,225
Debtors due after one year 3,914 4,148
Cash at bank and in hand 22,104 17,693
------- -------
45,575 40,066
Creditors: amounts falling due within one year (39,035) (38,426)
------- -------
Net current assets 6,540 1,640
------- -------
Total assets less current liabilities 41,945 37,611
Provisions for liabilities and charges (984) (1,241)
------- -------
Net assets 40,961 36,370
------- -------
------- -------
Capital and reserves
Called-up share capital 2,813 2,778
Share premium account 27,996 27,495
Merger reserve 2,746 2,478
Option reserve 132 239
Profit and loss account 7,277 3,377
------- -------
Equity shareholders' funds 40,964 36,367
------- -------
Minority interests (3) 3
------- -------
Total capital employed 40,961 36,370
------- -------
------- -------
Consolidated Cash Flow Statement
For the year ended 30 September 2003
2003 2002
#000 #000
Net cash inflow from operating activities 14,439 10,393
Returns on investments and servicing of finance 692 1,080
Taxation (3,677) (2,300)
Capital expenditure and financial investment 145 (643)
Acquisitions and disposals (3,595) (5,624)
Equity dividends paid (4,026) (1,623)
-------- --------
Cash inflow before management of liquid resources and
financing 3,978 1,283
Management of liquid resources (5,164) 2,300
Financing 433 155
-------- --------
(Decrease)/increase in cash in the year (753) 3,738
-------- --------
-------- --------
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 30 September 2003
2003 2002
#000 #000
Profit/(loss) for the financial year
Group 7,762 (1,281)
Associates 501 (1,322)
--------- --------
8,263 (2,603)
(Loss)/gain on foreign currency translation (46) 22
Adjustment to option reserve for lapsed options 42 115
--------- --------
Total recognised gains and losses relating to the year 8,259 (2,466)
--------- --------
Notes
1. Basis of preparation
This report is for the year ended 30 September 2003 and was approved by the
Board on 8 December 2003.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2003 or 2002, but is derived
from those accounts. Statutory accounts for 2002 have been delivered to the
Registrar of Companies and those for 2003 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s237(2) or
(3) Companies Act 1985.
The statutory accounts for the year ended 30 September 2003 have been prepared
following accounting policies consistent with those for the year ended 30
September 2002 except that the reserves for the year ended 30 September 2002
have been restated in order to follow the merger relief provisions of the
Companies Act 1985 where shares are issued at a premium for acquisition as set
out in note 5.
The accounts have been prepared on the historical cost basis and do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985.
2. Net operating expenses
Net operating expenses includes total administrative expenses of #15.3 million
(2002: #21.3 million) and rental income of #287,000 (2002: #150,000). The
balance for the prior year related to income in relation to profit rights in an
externally run exhibition of #442,000.
Administrative expenses include #0.4 million of redundancy costs and, in
connection with the Group's activities in the Czech Republic and Slovakia, #0.8
million of operating charges and #0.6 million of goodwill amortisation. In the
prior year, administrative expenses included non-recurring items of #1.4
million, being #0.6 million of redundancy and restructuring costs, #0.3 million
of provision against loans and #0.5 million of provision against rent and
repairs.
3. Earnings per share
The calculations of earnings per share are based on the following results and
numbers of shares.
Headline diluted Basic and diluted
2003 2002 2003 2002
Restated
#000 #000 #000 #000
Profit/(loss) for
the financial year 8,263 (2,603) 8,263 (2,603)
Amortisation of
goodwill 2,463 2,065 - -
Exceptional amounts
written off goodwill
and investments - 6,220 - -
Loss on disposal of
group undertakings 779 476 - -
------ ------- ------ ------
11,505 6,158 8,263 (2,603)
------ ------- ------ ------
2003 2002
Number of shares Number of shares
('000) ('000)
Weighted average number
of shares:
For basic earnings
per share 270,527 258,372
Exercise of share
options 3,643 2,837
---------- ----------
---------- ----------
For diluted earnings
per share 274,170 261,209
---------- ----------
---------- ----------
Headline diluted earnings per share is intended to provide a consistent measure
of group earnings on a year on year basis.
Headline diluted earnings per share is calculated using profit for the financial
year before amortisation and impairment of goodwill and profits or losses
arising on disposal of group undertakings. In the prior year, Headline diluted
earnings per share included profits and losses on disposal of group
undertakings.
4. Cash flow notes
Reconciliation of operating profit to operating cash flows
2003 2002
#000 #000
Operating profit 11,670 713
Depreciation charges 454 449
Amortisation 2,331 1,905
Impairment - 6,220
Profit/(loss) on sale or write down of fixed assets 267 (69)
Increase in debtors (1,234) (2,776)
Increase in creditors 649 3,951
Increase in provisions 302 -
-------- -------
Net cash inflow from operating activities 14,439 10,393
-------- -------
Analysis of net funds
30 September 30 September
2002 Cash flow 2003
#000 #000 #000
Cash at bank and in hand 17,693 (753) 16,940
--------- --------- ---------
Net funds 17,693 (753) 16,940
Cash held on deposit - 5,164 5,164
--------- --------- ---------
Cash shown on balance sheet 17,693 4,411 22,104
--------- --------- ---------
--------- --------- ---------
Reconciliation of net cash flow to movement in net funds
2003 2002
#000 #000
(Decrease)increase in cash in the year (753) 3,738
--------- ---------
Movement in net funds in year (753) 3,738
Net funds at 1 October 17,693 13,955
--------- ---------
Net funds at 30 September 16,940 17,693
--------- ---------
5. Reserves
Share Merger Option Profit and Total
premium account reserve reserve loss account #000
#000 #000 #000 #000
1 October 2002 (as
previously
reported) 31,010 - 239 2,340 33,589
Transfer to merger
reserve (3,515) 2,478 - 1,037 -
------- ------ ------ ------- ------
1 October 2002 (as
restated) 27,495 2,478 239 3,377 33,589
Exercise of
options 475 - (65) - 410
Retained profit
for the year - - - 3,904 3,904
Gain on foreign
currency
translation - - - (46) (46)
Adjustment to
option reserve for
lapsed options - - (42) 42 -
Purchase
consideration - 268 - - 268
Shares issued for
remuneration 26 - - - 26
------- ------ ------ ------- ------
30 September 2003 27,996 2,746 132 7,277 38,151
------- ------ ------ ------- ------
------- ------ ------ ------- ------
The prior year adjustment relates to the correction required to follow the
merger relief provisions of the Companies Act 1985 to account for acquisitions
involving the issue of shares at a premium. A net total of #2,478,000 has been
transferred to the merger reserve which consists of #3,515,000 from the share
premium account to reflect the premium on shares issued for acquisitions made in
prior years and against this #1,037,000 in respect of goodwill amortisation and
impairments previously charged in the Group consolidated accounts.
6. Post balance sheet event
On 7 November 2003 an agreement was signed between Incheba Praha, Incheba a.s.
and ITE whereby ITE disposed of its interest in Incheba Praha and Incheba a.s.
and any rights in the Coneco exhibition. The loan between ITE and Incheba Praha
was reduced by CZK 23,160,000 in November 2003 with the remaining balance being
repaid in equal tranches in December 2004 and 2005. A provision has been made
for the difference between the consideration due and the net book value of the
assets of #779,000.
This information is provided by RNS
The company news service from the London Stock Exchange
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