Today, we announce our interim results for the six months to 31 March 2017, delivering a good performance in challenging conditions and launching a 3 year Transformation & Growth Programme (TAG).


Good performance in challenging trading conditions
3 Year Transformation & Growth Programme (TAG) initiated
  Six months to
31 March 2017
Six months to
31 March 2016
Volume sales 325,200 m2 340,100 m2
Revenue £69.6m £63.6m
Pre-tax profit £3.1m £10.6m
Headline pre-tax profit1 £15.4m £19.0m
Diluted earnings per share 0.6p 2.8p
Headline diluted earnings per share2 3.9p 5.2p
Interim dividend per share 1.5p 1.5p
Net debt £55.2m £69.6m
Financial highlights
  • Results in line with management expectations
  • The first period of like-for-like3 growth after three years of difficult trading
  • Statutory revenue up to £69.6 million; statutory profit before tax down to £3.1 million due to event timings, foreign exchange and restructuring costs
  • Ongoing stabilisation in Moscow is encouraging but trading remains challenging in a number of regions
  • Continued strong cash generation; reduced net debt from £59.1 million at 30 September 2016 to £55.2 million at 31 March 2017
  • Interim dividend maintained
  • Improved level of bookings partly reflects new management sales initiatives
  • Confidence in full year outcome with over 98% of revenues for FY 2017 contracted

Strategy update
  • Comprehensive review of the strategy and business completed
  • 3 year Transformation & Growth Programme (“TAG”) to create a scalable platform and drive organic growth
  • Investment of up to £20 million to be funded by existing cash generation; anticipated strong ROI by 2020
  • Dividend cover maintained at 2x throughout investment period
Mark Shashoua, CEO of ITE Group plc, commented:
“I’m pleased to report that the Group has arrested its recent decline and posted like-for-like growth after three years of difficult trading. The first half performance reflects a more stable market in Moscow which is encouraging, but mixed market conditions remain in some of our other regions. We have completed a thorough review of the entire business and have concluded that there are significant organic opportunities in ITE’s existing core portfolio that have yet to be realised.

Therefore, I am delighted to announce today the evolution of our strategy and a £20 million Transformation and Growth Programme that will deliver a stronger, more scalable platform to drive organic growth with an emphasis on retention, content and customer service. By putting our exhibitors and visitors at the heart of everything we do, we plan to drive sustainable growth and shareholder value.”

1  Headline pre-tax profit 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  Where used, like-for-like or underlying measures are stated on a constant currency basis adjusted to exclude acquisitions impacting results for the first time, event timing differences, biennial events and net finance costs

Mark Shashoua, Chief Executive Officer
Andrew Beach, Chief Financial Officer
ITE Group plc 020 7596 5000
Charles Palmer/Emma Appleton FTI Consulting 020 3727 1021
Nick Westlake/Toby Adcock Numis 020 7260 1000

Executive summary

ITE has delivered a set of interim results which are assisted by the ongoing stabilisation of Moscow but reflect continued challenging trading conditions in some of the Group’s other markets.  Revenues of £69.6 million for the first six months are 9% higher than last year as a result of improved underlying trading (£1.4 million), foreign exchange (£5.8 million) and acquired events (£3.3 million), offset by the adverse impact from net biennial events (£2.3 million) and changes in event timings (£2.2 million). The improvement in underlying trading (£1.4 million) represents an increase of 2%.

Headline pre-tax profits of £15.4 million are 19% lower than the same period last year, yet up 2% on a like-for-like basis. The reduction is due in part to the non-recurrence of a £1.5 million foreign currency exchange gain in the comparative period, which has been replaced by a loss of £0.2 million in the current period. Underlying trading (£0.3 million), which includes the share of profits from associates and previously announced additional investment in overheads, foreign exchange (£0.2 million) and acquisitions (£0.5 million) have increased headline pre-tax profits, but are offset by the net impact from biennials (£0.8 million), timing changes (£1.8 million) and increased net finance costs (£0.3 million).

Reported profits before tax were £3.1 million (2016: £10.6 million). This is after including one-off restructuring costs of £2.3 million incurred in the first phase of the TAG Programme, announced today.

In December 2016 the Group completed the acquisition of the Gehua portfolio of events in China, with the first event post-ownership running in March contributing revenues of £0.9 million. Other events relating to recent acquisitions running for the first time under ITE ownership contributed revenues of £2.4 million, the majority of which relate to ABEC events in India.

The ongoing stabilisation of the trading environment in Moscow has enhanced performance in this significant part of our business, but this stabilisation has not yet spread to the remaining regions of Russia, nor to Kazakhstan or Azerbaijan, which continue to be impacted by the difficult trading environment we have experienced since the fall in oil prices.  In Moscow like-for-like volumes over the first half were 5% higher than this time last year, although for Russia overall growth was just 1% and in Kazakhstan volumes were 25% lower and in Azerbaijan 42% lower.

In other regions, the Group has seen demonetisation in India, which has created uncertainty for many in the country, resulting in cancellations and postponements of a number of our smaller events. The continued uncertainty in Turkey has resulted in a number of cancellations by international exhibitors, although the improvement in relations with Russia resulted in the return of some Turkish exhibitors to our Russian exhibitions.

Strategic Review

A detailed diagnostic of the current portfolio and its growth potential has been undertaken as part of the Group’s strategy review. Alongside this, a comprehensive review of key business areas was conducted including sales and marketing, content, show operations and support functions.

In recent years the Group pursued an acquisition-led strategy in order to diversify away from Russia and Central Asia which worked well when market conditions were buoyant, but as has been well documented, trading performance has deteriorated as macro-economic conditions have become more challenging. To execute its diversification strategy and in order to protect margins, investment was held back across the portfolio.

During the review process, management time has been spent on understanding where ITE’s strengths lie and how the business needs to evolve. The events industry has changed and continues to evolve faster than ever and that change is largely driven by the different demands of our customers (exhibitors and visitors). More than ever, there is a constant need for Return on Investment and Return on Time which are critical key metrics for our customers and also a need for new and engaging customer experience. Therefore running market leading events is absolutely paramount.

Following a thorough strategy and business review, the Group believes the future is to move decisively from being a decentralised, geographically structured business to one that is product-led with strong regional platforms.

Our vision is “to create the world’s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers.” By putting exhibitors and visitors at the heart of everything we do, we plan to drive sustainable growth for our shareholders.

The Group’s focus on a product-led strategy will see ITE focus on events that are market leading or have a clear path to become number one in their sector. To create a best in class events business, the Group will invest in its people, systems and products in order to build a high quality portfolio and sustainable model for the long-term.

The Transformation & Growth Programme (“TAG”)

In order to drive the transition, ITE has initiated the TAG Programme which will see it invest up to £20 million over the next three years, creating a stronger, more scalable platform. The TAG Programme comprises of three pillars of strategic activity to drive revenue and accelerate growth as follows:

1) Create a Scalable Platform 

The TAG Programme will introduce transformational levers and investment will be spread across five areas to:
  • Implement best practice across the business
  • Build and maintain ‘fit for purpose’ IT infrastructure and systems
  • Invest in show operations
  • Drive a performance culture
  • Build capability and talent

As part of creating a scalable platform, the Group will change its operating model and transition from a model organised and managed by geography to a more centralised one that supports a product-led business. As part of TAG the Group will develop an ‘ITE way’ creating a blueprint to run events that is consistent globally.

2) Manage the Portfolio

The Group is implementing a more rigorous approach to allocation of capital. ITE currently runs 269 events and moving forward the Group will focus its capital resource on events that are market leading, or have the potential to be, delivering greater return on the Group’s investment and time. 

Following the review, the Group has deliberately segmented its business into Core and Non-Core, enabling management to increase its focus on products that present the greatest opportunities whilst reducing distraction from smaller shows.

The Core shows are of strategic importance to our future and include the Group’s largest shows, those with the greatest potential for growth and a number of smaller but strategically important shows. The Core shows currently represent 85% of revenue and 85% of profit. The Non-Core shows consist of smaller shows with less potential for growth.

As part of the Group’s strategy, its top priority will be to apply a full suite of transformational levers to its Core events which present the best long-term growth opportunities and to realise their full potential. This will include investing in content to drive great customer experience, retention and pricing.

The Group will continue to pro-actively review its portfolio on an ongoing basis.

3) Product-led Acquisitions

The Group will look to make selective product-led acquisitions to accelerate growth in line with strict M&A criteria. Each opportunity will be carefully reviewed but will not be limited to any particular geography or vertical as the Group aims to run the best shows in the best industries anywhere in the world.

TAG returns and funding

The Group has committed to investing up to £20 million over a three year period on the TAG Programme. This one-off cost will be split approximately one third in the current financial year, 2017, approximately 40% to 50% in 2018, and the remainder in 2019. This investment will cover both capital and operating expenditure. It is the intention to report one-off expenditure directly associated with the TAG Programme as an adjusting item, which will not affect headline results.

We anticipate a positive return on investment within three years and cash payback within four years.

Whilst we expect to continue to grow revenues, both headline PBT and EPS will be impacted in the current financial year – followed by anticipated flat or low growth in 2018 and anticipated double digit growth into 2019. This is due to the ongoing costs of running the new processes introduced across the programme, which will be reported within headline results.

The programme is designed to deliver mid-term sustainable high single digit revenue growth and high 20’s operating margins. 

We plan to fund the programme from cash generated by our operations. Throughout the duration of the programme, the Group expects to maintain its net debt to EBITDA within a target range of 1.5 to 2 times.

2017-2020 Dividend

ITE intends to maintain its dividend cover of two times earnings throughout its planned investment period. The Board has announced an interim dividend this year of 1.5p (2016: 1.5p).

More detail will be provided at the Group’s analyst presentation today and a recording of the event will be published in the investor relations section of ITE’s website.


Whilst we have seen a recent recovery in Moscow, market forecasts predict a much lower rate of growth than in the past. Trading conditions in other regions in which the Group operates continue to be challenging. Group revenues booked for 2017 are £136 million (at current exchange rates) representing circa 98% of market expectations for the full year. On a like-for-like basis these revenues are circa 5% ahead of this time last year, with trading volumes circa 2% lower. This improvement partly reflects earlier bookings following investment in the new initiatives introduced by management.  With this good visibility on current year bookings the Board remains confident in the full year outcome and in the Group’s future prospects as it embarks on the next stage of its development.

Financial performance
Statutory results

Revenues for the first six months of the year were £69.6 million (2016: £63.6 million). The uplift in revenue includes the ABEC Acetech Bangalore and the Gehua Shanghai Hosiery events running for the first time under ITE’s ownership, a favourable foreign exchange impact partly offset by the negative timing and biennial pattern affecting the first six months. In addition, underlying trading (excluding currency benefit) is up £1.4m representing like-for-like growth of 2%. This is the first period of growth after three years of difficult trading.

The impact of foreign exchange rates (both on overseas costs incurred in the period and overseas costs recognised in this period relating to events in future periods) almost entirely offsets the favourable impact of foreign exchange rates on revenues meaning there is no favourable impact on profits from the movement in exchange rates since last year.  

The average exchange rates over the first six months of the year are:
  Six months ended 31 March 2017 Six months ended 31 March 2016 Movement
Russian ruble 75.6 103.2 +27%
Turkish lira 4.3 4.3
Indian rupee 83.3 98.2 +15%
Reported pre-tax profits were £3.1 million (2016: £10.6 million). This is after including one-off restructuring costs of £2.3 million incurred in the first phase of the TAG programme, announced today. It also includes a net charge of £0.8 million (2016: net credit of £1.3 million) on the revaluation of our liabilities relating to completed acquisitions, which in the current period principally relates to the unwinding of the discounting applied to our equity option liabilities (£1.6 million), offset by the net revaluation of equity option liabilities and deferred and contingent consideration payable (£0.8 million). The movements primarily relate to the options to acquire the 40% shareholding of ABEC we do not currently own and earn out obligations on the ABEC and Fasteners acquisitions completed in the prior year.
Reported diluted earnings per share for the first six months were 0.6p (2016: 2.8p). The decrease in earnings per share is due to the reduction in profits in the period and also an increase in the Group’s effective tax rate, which has increased due to an anticipated increase in withholding taxes on dividends from overseas entities as profits increase.

Headline results

In addition to the statutory results, headline results are presented, which are the statutory results after excluding a number of adjusting items, as the Board consider this to be the most appropriate way to measure the Group’s underlying performance. We also report a like-for-like measure, on a constant currency basis adjusted to exclude acquisitions impacting results for the first time, event timing differences, biennial events and net finance costs. In addition to providing a more comparable set of results year-on-year, this is also in line with similar adjusted measures used by our peer companies and therefore facilitates comparisons across the industry.

Headline pre-tax profits for the first six months of the year were £15.4 million (2016: £19.0 million), in part as a result of the movement from a foreign exchange gain of £1.5 million in 2016 to a loss of £0.2 million in the current period. Underlying trading increased (£0.3 million) and foreign exchange (£0.2 million) and the first time impact of acquisitions (£0.5 million) both contributed to an increase, but these were offset by net biennials (£0.8 million), timing changes (£1.8 million) and increased net finance costs (£0.3 million). On a like-for-like basis, headline pre-tax profits are up 2%.

Headline diluted earnings per share for the first six months were 3.9p (2016: 5.2p), reflecting the reduced headline earnings in the period and the increase in the Group’s effective tax rate, as detailed above.

The headline results are presented after excluding adjusting items consistent with those excluded in the year end annual report, but after also excluding restructuring costs. These are principally costs associated with designing and implementing the Group’s TAG Programme, announced with the interim results today. The costs incurred to date relate to the design and diagnostic phase of the transformation programme, and further costs are expected during the remainder of the current financial year and across the subsequent two years as we move into the implementation and deployment phase.

The restructuring costs have been presented separately in order to report what the Board consider to be the most appropriate measure of underlying performance of the Group and to provide additional information to users of the interim report on the scale and progress of the Group’s transformation programme.

The following table reconciles statutory profit/(loss) before tax to headline pre-tax profit:
  Six months to 31 March 2017 Six months to 31 March 2016 Year ended
30 September 2016
  £000 £000 £000
Profit/(loss) on ordinary activities before taxation 3,130 10,616 (4,095)
Operating items      
Amortisation of acquired intangible assets 7,832 7,603 15,468
Impairment of goodwill - 1,236 24,650
Impairment of investments in associates and joint ventures - - 1,859
Restructuring costs 2,347 - -
Transaction costs on completed and pending acquisitions 184 285 330
Profit on disposal of investments - (1,497) (1,498)
Tax on income from associates and joint ventures 1,140 1,029 1,078
Financing items      
Revaluation of liabilities on completed acquisitions 793 (316) (1,288)
  __________ __________ __________
Headline pre-tax profit 15,426 18,956 36,504
Amortisation of acquired intangible assets relates to the amortisation charge in respect of intangible assets acquired through business combinations. Restructuring costs are the costs incurred in designing and implementing the Group’s new strategy. Transaction costs on completed and pending acquisitions relates principally to costs incurred on the Gehua acquisition completed in December 2016. Tax on income from associates and joint ventures is an adjustment to ensure consistency with pre-tax operating profits.

Revaluation of liabilities on completed acquisitions include the losses from the revaluation of our equity options over non-controlling interests in our subsidiaries (charge of £0.5 million), principally in relation to ABEC, revaluations of deferred and contingent consideration (credit of £1.3 million), principally in relation to Fasteners, and the imputed interest charge on the unwinding of the discounting on the Group’s equity option liabilities (charge of £1.6 million).

Cash flows

The Group’s cash flow generated from operations over the first six months has improved to £21.8 million (2016: £18.0 million), and during the period £5.9 million has been applied to fund acquisitions and £5.4 million to dividends, resulting in the Group’s net debt standing at £55.2 million at 31 March 2017 (2016: £69.6 million). Consistent with the comparative period, cash conversion for the first half was over 100%. During the period the Group negotiated a relaxation of our leverage covenant with our banks for the final three quarters of the current financial year, ending 30 September 2017.

Trading highlights and review of operations
During the period the Group organised 122 events (2016: 134 events) which generated actual revenue growth of 9%. Like-for-like revenues were 2% higher than for the same period last year.

Actual volume sales for the period were 325,200 sqm (2016: 340,100 sqm), reflecting the weaker biennial pattern, timing changes and weaker trading in Central Asia, Turkey and India, partially offset by the stabilisation of trading conditions in Moscow. Volume sales were 5% lower on a like-for-like basis in comparison to the same period last year.

A summary of the Group’s revenue and gross profits for the period is set out below.
  Volume Sales
Gross Profit
First half 2016 340 63.6 27.6
Non-annual 2016 (19) (2.9) (1.0)
Annually recurring 2016 321 60.7 26.6
Acquisitions 26 3.3 0.9
FX Translation - 5.8 1.5
Like-for-like change (16) 1.4 0.1
Annually recurring 2017 331 71.2 29.1
Timing differences (7) (2.2) (1.8)
Non-annual 2017 1 0.6 0.3
First half 2017 325 69.6 27.6
The economic situation in Moscow has continued to stabilise although the regional offices continue to experience tough trading conditions. Like-for-like volume sales in Moscow were 5% higher than the comparative period and across Russia were 1% higher than the comparative period.

Moscow’s largest event in the first half was the Moscow International Travel & Tourism (MITT) event, which increased volume sales to 13,700 sqm (2016: 11,700 sqm) reflecting the return of Turkish exhibitors and an increase in other international and domestic stands. 

Central Asia
Trading in Central Asia remains challenging with like-for-like volume sales for the first six months 22% lower than for the comparative period.

The largest part of the Group’s business in the region is Kazakhstan, which reported a 25% decrease in like-for-like volume sales. The largest event in the region is the Kazakhstan International Oil & Gas Exhibition (KIOGE), held in October 2016, which was smaller than this time last year at 3,700 sqm (2016: 5,800 sqm), reflecting the continued impact of the oil price and local currency devaluation on the region.
Eastern & Southern Europe
In Turkey, the Group has seen a reduction of 18% in like-for-like volumes due to the impact of regional unrest on the local economy resulting in a reduction in international interest in the region. The largest event taking place in the first half was the travel event EMITT, which achieved volumes of 23,300 sqm (2016: 26,700 sqm) against a worsening backdrop facing the Turkish tourist industry.

Ukraine grew like-for-like volumes by 37% but still represents less than 5% of Group profits.
Like-for-like volume sales for the first six months in Asia were 6% lower than for the comparative period.

The Group’s large construction events in India were held before demonetisation occurred in November, but some of our smaller Indian events have subsequently been affected, with a small number of cancellations and postponements. Acetech Mumbai is the largest construction event in India and remained wall-bound in its venue, although Acetech Delhi saw volumes decrease by 7% to 19,000 sqm from 20,400 sqm.
Rest of the World
Africa Oil Week ran in October 2016 and, as expected, was adversely affected by the difficult trading conditions affecting the oil industry. There was still excellent representation from all usual participating companies, although many companies sent fewer delegates with a resulting impact on revenues of over 20%. The Breakbulk Americas event ran in September 2016 (and will run again in October 2017) and so does not - and will not - feature in the 2017 results. Trading has held firm for the mid-market focused fashion event, MODA, held at the NEC in Birmingham and volumes were slightly down on prior year, selling 14,400 sqm (2016: 15,000 sqm).

April trading

April is the largest trading month for the Group. Mosbuild (which will be renamed WorldBuild Moscow next year) has benefitted from the stabilisation of the Moscow economy and the increased sales focus on this event, resulting in volume improvement from 31,200 sqm last year to 34,300 sqm this year. In India, as anticipated, the Security Safety show has seen withdrawals as the impact of de-monetisation affects our events. In Turkey, also as anticipated, the Beauty Eurasia event was significantly smaller due to the uncertainty created by the constitutional referendum particularly impacting our April events.

Set out below are the results for the Group’s principal events taking place in April 2017:
  2017 (sqm) 2016 (sqm) Variance (%)
Mosbuild (Russia) 34,300 31,200 +10%
TransRussia (Russia) 7,400 7,100 +4%
ExpoElectronica (Russia) 8,200 7,600 +8%
Breakbulk Europe (Belgium) 7,000 6,600 +6%
Beauty Eurasia (Turkey) 6,000 8,500 -29%
Secutech (India) 6,200 7,200 -14%

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