ITE Group today publishes its Interim Results for HY19, with the Transformation and Growth Programme (TAG) continuing to drive strong growth.
Financial highlights
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Six months to
31 March 2019 |
Six months to
31 March 2018 |
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Volume sales |
354,300 m2 |
353,300 m2 |
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Revenue |
£107.8m |
£75.4m |
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Headline profit before tax1 |
£24.5m |
£16.0m |
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Profit before tax |
£1.9m |
£1.3m |
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Headline diluted earnings per share2,3 |
2.3p |
2.3p |
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Diluted earnings per share3 |
(0.1)p |
(0.4p) |
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Interim dividend per share3 |
0.9p |
0.9p |
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Net debt4 |
£108.9m |
£51.2m |
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Revenue of £107.8m; growth of 6% on a like-for-like basis5, driven by Transformation and Growth (TAG) initiatives and focus on Core6 events. Excluding Acetech Delhi like-for-like revenue growth was 8%
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The five largest recurring shows in the period which have had TAG investment, collectively delivered 14% like-for-like revenue growth
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Headline profit before tax of £24.5m, growth of 7% on a like-for-like basis, with increased margins
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Statutory profit before tax of £1.9m after increased M&A-related costs, including amortisation on acquired intangible assets, the loss on disposal of non-core events, transaction costs and integration costs
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Cash conversion7 over 100%
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Net debt increased as expected from £51.2m to £108.9m following the Ascential Events and Mining Indaba acquisitions
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Interim dividend maintained at 0.9p3, in line with policy
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Forward bookings8 of £200m already contracted for FY19; FY20 forward bookings up 11% on a like-for-like basis
Read full interim results report (PDF)
View Interim Results Presentation (PDF)
Watch Interim Results Webcast
Strategy update
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TAG programme now in its final year, with a focus on execution
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The Ascential Events and Mining Indaba integrations are on track
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Portfolio was further strengthened with the sale of non-core events in Russia and closure of a further 24 less-profitable events
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Secured multi-year deal with Crocus Expo for Russian events
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Expect to reach most TAG targets earlier than planned and all targets within planned timeframe
Mark Shashoua, CEO of ITE Group plc, commented:
“2019 is all about execution and embedding the people and processes that we have put into place since the inception of our Transformation and Growth programme.
The benefits of the programme are clear, with like-for-like revenue growth of 6% (8% excluding Acetech Delhi), and overall revenues including acquisitions up 43%. Our top five recurring events that received TAG investment during the period, collectively achieved 14% like-for-like revenue growth. Headline profit before tax grew 7% on a like-for-like basis (11% excluding Acetech Delhi). As the quality of our events improve and TAG investment levels out, we have improved our headline operating profit margin, which has increased from 23% to 25%.
The outlook for the remainder of the year is strong, owing to our continued focus on forward bookings. Contracted revenues already stand at 94% of full year consensus and are 6% ahead of this time last year on a like-for-like basis. We have also contracted £58m of revenues for FY20, representing a like-for-like increase of 11% giving us good visibility into next year.
We continue to trade in line with Board expectations for FY19 and looking further ahead, we expect to see the full benefits of the investments we have made into our acquired events from FY20 onwards, and we have a much-improved portfolio of events that is well positioned to deliver further sustainable growth in the years to come.”
1. Headline profit before tax is defined as profit before tax and adjusting items, which include amortisation of acquired intangibles, impairment of goodwill, intangible assets and investments, profits or losses arising on disposal of Group undertakings, restructuring costs, transaction and integration costs on completed and pending acquisitions and disposals, tax on income from associates and joint ventures, gains or losses on the revaluation of deferred/contingent consideration and on equity option liabilities over non-controlling interests, and imputed interest charges on discounted equity option liabilities – see note 3 to the condensed consolidated financial statements for details.
2. Headline diluted earnings per share is calculated using profit attributable to shareholders before adjusting items – see notes 3 and 6 to the condensed consolidated financial statements for details.
3. Headline diluted earnings per share, diluted earnings per share and interim dividend per share have all been restated to account for the bonus element of the rights issue that took place in July 2018.
4. Net debt is defined as cash and cash equivalents after deducting bank loans.
5. Like-for-like results are stated on a constant currency basis, after excluding events which took place in the current period but did not take place under our ownership in the comparative period and after excluding events which took place in the comparative period but did not take place under our ownership in the current period. For clarity, this excludes all
- Biennial events;
- Timing differences (i.e. events that ran in only one of the current or comparative periods, due to changes in the event dates);
- Launches;
- Cancelled or disposed of events that did not take place under our ownership in the current year;
- Acquired events in the current period; and
- Acquired events in the comparative period that didn’t take place under our ownership in the comparative period (i.e. they took place pre-acquisition).
See ‘Trading highlights and review of operations’ for further detail.
6. Core events are those of strategic importance to our future and include the Group’s largest events, those with the greatest potential for growth and a number of smaller but strategically important events. Following the strategic review, the Group deliberately segmented its business into Core and Non-Core, enabling management to increase its focus on events that present the greatest opportunities whilst reducing distraction from smaller events.
7. Cash conversion is defined as cash generated from operations before net venue utilisation and the cash impact of the adjusting items included in the definition of headline profit before tax, expressed as a percentage of headline profit before tax adjusted for net finance costs and non-cash profits, including foreign exchange gains/losses, depreciation and amortisation.
8. Forward bookings are contracted revenues for the years ending 30 September 2019 and 30 September 2020. These are the bookings as at 10 May 2019, unless otherwise stated.
Enquiries:
Mark Shashoua, Chief Executive Officer
Andrew Beach, Chief Financial Officer
Melissa McVeigh, Director of Communications |
ITE Group plc |
020 3545 9000 |
Charles Palmer / Harry Staight |
FTI Consulting |
020 3727 1000 |
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Nick Westlake / Matt Lewis |
Numis |
020 7260 1000 |
About ITE Group plc
ITE Group plc was founded in 1991 and is now one of the world’s leading organisers of international exhibitions and conferences.
ITE Group’s strategic vision is to create the world’s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. In May 2017 the Group launched its Transformation & Growth (TAG) programme, which is designed to transform the Company from a geographic market-share led business to a product-led business that focuses on market-leading events through a centralised operating model, wherever they are in the world. ITE strives to run the best shows and offer the best service to its customers regardless of location. By putting exhibitors and visitors at the heart of everything we do, we plan to drive sustainable growth for our shareholders.
ITE Group is a
public limited company and has been listed on the main market of the London Stock Exchange since 1998.
Executive summary
ITE has delivered a strong trading performance as the benefits of the TAG programme initiatives are being realised, resulting in good like-for-like revenue and headline profit before tax growth. Headline operating profit margins have increased to 25% (2018: 23%), as the scalable platform introduced through the TAG programme is supporting the revenue growth. The acquisitions of Ascential Events Limited (“Ascential Events”) and Mining Indaba and the divestment and closure of a number of smaller non-core events in the last 12 months gives us a significantly stronger and more diversified portfolio of events.
Revenues of £107.8m (2018: £75.4m) for the first six months are 6% higher than the same period last year on a like-for-like basis. Excluding Acetech Delhi, one of our larger events that was space constrained due to ongoing venue construction work this year, like-for-like revenue growth was 8%. This was due to improved like-for-like trading (£3.4m), driven by strong performances across several divisions, in particular Russia and Global Brands.
The Group reported a statutory profit of £1.9m for the period (2018: £1.3m), after increased costs associated with the acquisitions and disposals completed in the last 12 months. The reported profit is after including amortisation on acquired intangible assets of £12.0m (2018: £5.8m), the loss on disposal of non-core events of £2.4m (2018: £nil), M&A transaction costs of £1.4m (2018: £0.7m) and integration costs of £3.4m (2018: £nil).
The Group is benefiting from the TAG investment, most noticeably at the larger Core events where investment has been focused. During the period, the Group’s largest recurring events took place in Russia and in the Global Brands division, with both divisions delivering strong performances, achieving like-for-like revenue growth of 10% and 23% respectively, both comfortably ahead of the GDP growth in their respective markets. This was the second year of TAG improvements in Russia and the second consecutive period of like-for-like double-digit revenue growth from the retained Russian business. In Russia, we have also secured an excellent multi-year contract with Crocus Expo, the newest, purpose-built venue in Moscow, for almost the entire portfolio of Moscow events. This ensures the future of our key events in terms of space, dates and price. We are extremely pleased to have been able to achieve this with no large upfront payment which was customary in the past.
This TAG investment has largely benefitted our core shows in Moscow, Istanbul and the Africa Oil Week and Breakbulk events within our Global Brands portfolio. Exhibitor NPS scores at these events are up significantly, on average by 10 points. Core buying groups and revisits, which are key indicators of quality audiences returning throughout the event and staying longer, grew double-digit leading to collective double-digit revenue growth in our top five events that received TAG investment, for the second year in a row.
This has also led to increased levels of rebooking for FY20, contributing to the 11% increase in forward bookings for FY20 compared to this time last year, on a like-for-like basis, of £58m.
We achieved like-for-like revenue growth in the period across all regions, with the exception of the UK and Asia divisions. The three events in the UK division that ran in the current and comparative periods were Moda fashion events. The largest of the three, Moda, is a mid-market event that runs twice a year in Birmingham and has been challenged for some time. It has now been integrated into the fashion portfolio, post the acquisition of Pure from Ascential plc. The integration is progressing well and as a larger fashion portfolio is in a better position to deliver growth in FY20. As expected, there wasn’t enough time to change the trajectory of decline at Spring Fair for 2019, but a restructured management team, plus considerable investment into the event and a complete re-edit is leading to growth in new business. In Asia the decline is attributable to the aforementioned space constraints at the Acetech Delhi event while a new venue is being built, without which the region delivered like-for-like revenue growth.
Like-for-like revenue growth across almost all markets in the period has been achieved despite facing a number of trading headwinds including macro-economic challenges in Turkey, tensions between Ukraine and Russia and Brexit. The macro-economic challenges in Turkey are also having a knock-on effect in some of our other markets that attract overseas exhibitors from Turkey, and as a result we saw a number of cancellations at some of our Russian events, most notably at MITT, our international travel and tourism event.
Our Chinese joint venture Sinostar performed well again, contributing £6.9m to profits (2018: £6.7m).
We have largely completed the integration of the Ascential Events portfolio into the Group and we have merged the teams into the Paddington office. We expect to realise the top end of the forecast annualised synergies and have focused on implementing the investment cases that will drive growth in the acquired events in FY20.
Strategic Update - Delivering transformation and growth
As we enter the final phase of our TAG programme, there is a clear focus on execution, now that we have put the necessary building blocks in place.
Since we announced the TAG programme in May 2017, we have hired a new management team, centralised our operating model and instilled operational rigour at a local level. We have achieved this by recruiting heads of best practice across all our activities, rolling out best practice blueprints, investing in our key shows and making them more content-rich, upskilling and incentivising our sales and marketing teams, as well as investing in new systems to serve our customers better and operate the business more efficiently. We have now created a scalable platform from which we can grow.
Meanwhile, we have managed our portfolio to focus on those events which are, or have the potential to be, market-leading and that we own 100%. Since the start of TAG, we have more than halved the size of our portfolio, whilst improving the overall quality of events with revenue per event up 220% and still delivering like-for-like revenue and profit growth.
In the first six months of FY19, we have continued to make progress against each of our three pillars of TAG:
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Create a scalable platform;
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Actively manage our portfolio; and
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Make selective product-led acquisitions.
Create a scalable platform
We are now able to take advantage of the significant work completed in the first years of TAG, with regards to creating a scalable platform. Having put in place those building blocks, such as best practice processes, improved systems and highly-motivated event teams, we are now able to execute and realise the benefits of our transformation.
Investing in new systems is an essential part of creating a scalable platform. This year we are building new integrated finance systems, which will give us better transparency and control over global accounting.
Only by continuing to improve customer service and event quality, will we drive customer retention. Last year we introduced a customer success team, whose role it is to help exhibitors market themselves and ensure they meet the right people at our events, thereby increasing their return on investment. So far this year the team has made over 10,000 proactive contacts with our customers.
We continue to place a huge focus on event content, which attracts the highest quality audience when produced and delivered correctly. The number of key visitors attending those of our shows which have benefitted from TAG investment, has grown 8% year on year.
Finally, our new lead generation process, which has moved us on from individuals sourcing their own leads to a more systematic approach by analysing market sectors, is allowing us to take a more targeted approach for each event. This is having a positive impact on new business for events which have benefitted from TAG investment during the first half of this year.
Actively manage the portfolio
We continue to proactively manage our portfolio, in order to increase focus and investment on the shows which offer the best opportunities for growth.
At the start of the financial year we sold 56 small, regional events in Russia. These events had been yield-driven for many years and the cost to improve and bring them up to an international standard would have diminished profitability. We also closed a further 24 less profitable events, most of which operated in Siberia, and in March we disposed of an additional five events in Azerbaijan.
As disclosed in note 32 of the last Annual Report, during FY18 a supplier of the Group threatened to make a claim for additional rent of £28.8m in respect of the use of a venue by the Group in 2016 and 2017. The venue is in Novosibirsk, Siberia, which is a non-core market for the Group. The Group closed its business in Siberia during the period. Since the date of the Annual Report, court proceedings have been started and the Group is engaged in litigation with the landlord of the venue. The landlord’s claim is additional rent of £20m (as set out in the claim), whilst the Group is seeking a declaration from the Court that the rent claimed is unreasonable and therefore unenforceable under Russian law. The Group’s lawyers’ advice is that they consider the Group likely to succeed in the litigation. Accordingly, no provision has been made as at 31 March 2019 as management does not expect any economic outflow will arise as a result of the litigation.
Our portfolio of events has been materially enhanced following the start of the TAG programme. Overall, we have more than halved our portfolio through closing and disposing of underperforming events, but continue to deliver revenue and profit growth. Since May 2017, average revenues per show have more than trebled, from £0.5m to £1.6m, a key illustration of the success of the TAG programme, together with the impact of recent acquisitions (see Product led acquisitions below).
We will continue to manage our portfolio on an ongoing basis in order to maximise growth.
Product-led acquisitions
The integration of the Ascential business, which we acquired in July 2018, is making good progress. We have put in place an entirely new management structure and organisation design, aligned our reporting periods and accounting policies, as well as HR policies, and moved to be co-located in the same building in Paddington. The final stage is systems integration, which is planned to take place throughout this summer.
In October we announced the completion of a further market-leading event into our Global Brands division – that of Mining Indaba. As the world’s largest mining investment conference, dedicated to the capitalisation and development of mining in Africa, this event met all our criteria for selecting product-led acquisitions. It is the must-attend event in the African mining industry, attracting nearly 6,000 industry leaders, investors and government officials from around the world to Cape Town each year.
With the focus and investment Mining Indaba will receive as part of our TAG programme, we believe we can accelerate its growth. There are some clear synergies with Africa Oil Week, including sharing some of the same ministries and customers, streamlining their operations, achieving greater purchasing power and offering a more consistent product for both sets of customers. We have merged the two teams and are investing in new content, onsite sales and lead generation at Mining Indaba to drive growth from FY20 onwards.
We now have a robust operating platform from which to accelerate growth through selective acquisitions in the future, that can both leverage our platform and further strengthen our portfolio.
Outlook
We are now in the final year of the TAG programme and we expect to meet most of our TAG targets earlier than planned and are on track to deliver on all of our targets within the expected timeframe.
The Group enters the second half of the year with excellent visibility of revenues having contracted £200m of revenue for the current financial year as at 10 May 2019, representing circa 94% of market expectations for the full year. As a result of our focus on forward bookings, the Group has also already contracted £58m of forward bookings for FY20, representing 26% of consensus revenue. The FY20 forward bookings are up 11% on a like-for-like basis and the improved level of bookings partly reflects the Group’s focused sales initiatives on Core events, in line with its strategy.
The results show a second year of strong growth in the core events that have received TAG investment, as well as margin improvement as investment levels off. This too will follow with the newly-acquired acquisitions, which are receiving investments that will drive growth for FY20 onwards.
We continue to trade in line with Board expectations for FY19 with a strengthened portfolio of events, which will drive sustainable growth in the future. We firmly believe that in our final year of TAG we have a higher quality, better balanced portfolio that will offer stronger and more sustainable growth.
We believe that this model gives us a distinctive competitive edge in our industry, and is allowing us to deliver on our vision to create the world’s leading portfolio of content-driven, must-attend events delivering an outstanding experience and return on investment for our customers.
Mark Shashoua
Chief Executive Officer
Read full interim results report (PDF)