5th Dec 2006 07:02
ITE Group PLC05 December 2006 5 December 2006For Immediate Release ITE GROUP PLC PRELIMINARY RESULTS ANNOUNCEMENT STRONG DEMAND DRIVES GROWTH Highlights Year ended Year ended 30 September 2006 30 September 2005 Turnover £82.4m £78.5m Profit before tax £24.8m £25.2m Headline pre-tax profit* £26.0m £25.3m Diluted earnings per share 6.7p 6.6p Headline diluted earnings per share** 7.0p 6.6p Dividend per share 3.5p 2.75p • Strong growth in demand for exhibitions in core markets• Biennially adjusted turnover up 16% #• Biennially adjusted headline profits up 25% #• New launches and contributions from acquisitions delivering as planned• 'Like for like' forward sales at 1 December 2006 up more than 10%• Dividend for year of 3.5p up 27% Commenting on the results, Iain Paterson, Chairman, said: "Our successful strategy of leveraging the market leading positions we havedeveloped in our core markets has delivered another strong set of results. Thegrowth in both turnover and underlying profitability has been largely driven byorganic development of our exhibitions, supplemented by the initial contributionfrom the Footwear and AgriHort acquisitions made in the last financial year." "The growing strength and stability of the Russian and CIS economies hasstimulated demand from both local and international businesses to exhibit theirgoods and services at our events. This, coupled with the opportunities presentedby increases in venue space in our core markets, will support growth in ourexhibition portfolio into 2007 and beyond. The new financial year has commencedwell, in line with our expectations, and the Board remains confident of theprospects for the year." * Headline pre-tax profit is defined as profit before tax, amortisation ofacquired intangibles and profits or losses arising on disposal of groupundertakings - see Note 3 for details. ** Headline diluted earnings per share is calculated as profit attributable toequity holders adjusted for amortisation of acquired intangibles and profits orlosses arising on disposal of Group undertaking, - see Note 3 for details. # Biennially adjusted figures exclude the effect of significant non-annualevents. Enquiries:Ian Tomkins ITE Group plc 020 7596 5000Charles Palmer/Tim Spratt Financial Dynamics 020 7831 3113 ITE Group plc Preliminary statement for the year ended 30 September 2006 Chairman's Statement Group Performance The Group has produced another impressive trading and financial performance forthe 2006 financial year. Turnover of £82.4 million was a 5% improvement on last year's reported turnoverof £78.5 million, and headline profit before tax of £26.0 million was ahead ofthe re-stated result for last year (£25.3 million). This result was achieveddespite lower interest income following last year's share buyback and the £4.9million contribution in 2005 from non-annual events. Reported profit before taxwas £24.8 million (2005: £25.2 million) and fully diluted earnings per shareimproved to 6.7p per share (2005: 6.6p). Strategic Progress During the year the Group has continued to implement its strategy of pursuingorganic growth and strengthening ITE's market leadership in key industry sectorssupplemented through selective earning enhancing acquisitions. In addition, theexcellent long-term relationships with our venues continue to be of significanceto our business. In Moscow the construction event, Mosbuild, grew into thenewly constructed exhibition space at Crocus, and in Almaty, Kazakhstan, theKazbuild construction event was able to expand into the newly completed, ITEsupported, pavilion. In Kyiv the larger events, KievBuild and AgriHort, wereboth able to grow into the second phase development at the IEC venue which wascompleted in January 2006. It is through the proven and established success of our sales and organisingteams that ITE is now the independent exhibition organiser of choice for venuesin our markets. Looking forward, I see another year of continued growth builtupon the relationships and contracts we have established. Board and Management There have been a number of changes to the Board during the year. Marco Sodistepped down in January following the sale by Veronis Suhler Stevenson of itsremaining shareholding in the Company. Malcolm Wall joined the Board as anon-executive Director on 4 May 2006, and is a member of the Audit andRemuneration Committees. Malcolm brings extensive experience in theinternational B2B media and exhibitions business. Since the year-end Ceyda Eremhas tendered her resignation as an ITE Board Director, although she will remainManaging Director of our associate business in Turkey. Ian Tomkins has informed the Board that he wishes to relinquish his role asChief Executive at the end of 2007 for personal reasons. The NominationCommittee will shortly be starting a process to find his successor and will bemeeting both internal and external candidates. During his tenure Ian has madean immense contribution to the remarkable success of the Group. I would like to express my thanks to the management and staff throughout theterritories who have worked so hard to make this result achievable. We employ650 people of whom over 75% are local nationals, employed and working in Russia,the CIS and Turkey. Dividend The Board has proposed a final dividend of 2.5p per share, making a totaldividend for the year of 3.5p. This reflects an increase of more than 25% overlast year's total dividend and is in line with the Board's policy of increasingdividends in line with the underlying earnings growth. Outlook The continued expansion of the exhibition industry in Russia and the CIS whichhas fuelled ITE's growth over the last few years is set to continue. Strongeconomic conditions, ITE's recognised international brands, our market leadingposition and our dedicated and conscientious staff all place us in a very strongposition to drive our business forward. Iain PatersonChairman4 December 2006 Chief Executive's review Results for 2006 Financial Year Turnover for the year was £82.4 million (2005: £78.5 million). After makingadjustment for the effect of biennial events this is a 16% improvement over lastyear's comparable turnover. This year's turnover includes an initial £2.7million contribution of revenue from the Footwear and Kiev AgriHort acquisitionsmade in the last financial year. These events contributed £1.2 million to grossprofits. The 'like for like' revenue growth (excluding the effect of biennialevents and acquisitions in the year) achieved this year on our portfolio ofevents was 13%. The direct costs of exhibitions were well controlled in 2006 and as a result thegross margin of 46.7% was circa 1% higher than the gross margin achieved on lastyear's portfolio of events. Operating costs before amortisation charges of £14.1 million were 10% higherthan the comparative charge for last year (2005: £12.8 million). Operatingcosts this year include the higher costs of expensing Performance Share Plansand Option Plans of £1.6 million (2005: £1.1 million), but this is partiallyoffset by the release of a £0.3 million provision, originally made in 2003against a venue loan. The associate business in Turkey delivered a result of £0.6 million (2005: £0.4million) despite a reduced contribution from its textile exhibitions. Income from interest and finance was reduced following the £30 million sharebuyback executed in August 2005. Interest income was consequently reduced byapproximately £1.3 million. Finance income includes the release of £0.4 millionof 'notional imputed interest receipts' relating to certain venue loans underIFRS fair value accounting standards. Headline profit before tax this year of £26.0 million was ahead of last year'sheadline profit before tax of £25.3 million and, after adjusting for the effectof biennial events, represents a 25% increase over the comparable result for2005. The Group's overall operating metrics for its events business (excludingpublishing) are set out below: Square Gross Average yield metres sold Revenue profit £ 000's £m £m 2005 Results from Events 340.9 77.3 35.6 Non annual 2005 -23.9 -10.0 -4.92005 'Biennially adjusted' 317.0 67.3 30.7 212 Acquisitions 20.9 2.7 1.2 'Like for like' growth 42.7 8.3 5.42006 'Biennially adjusted' 380.6 78.3 37.3 206 Non annual 2006 45.0 2.3 0.42006 Results from Events 425.6 80.6 37.7 In 2006 the Group organised 146 events (2005: 152 events) in fifteen countries(2005: sixteen countries) from its nineteen dedicated offices. There weresixteen new launches in the year contributing a total £2.0 million in revenueand £0.5 million in gross profits. The Group sold 425,600m(2) of exhibition space in 2006 (2005: 340,900m(2)).After adjusting for the effect of biennial events the Group achieved a 20%increase in volume sales, a 16% increase in revenues and a 21% improvement ingross profits from the events it organised in 2006. The average yield across the Group achieved on comparable sales was 3% lowerthis year at £206 per m(2) (2005 comparable yield: £212 per m(2)). This wasexpected as half of the dilution in yield was attributable to the average yieldsof the new acquisitions; a quarter of the dilution in yield related to there-pricing of the Moscow International Motor Show, and the remaining quarter wascaused by strong volume growth from regions outside Moscow, where in general,average yields are lower. Divisional Review 'Like for like' growth (excluding the effect of biennial events andacquisitions) in revenue was 13% across ITE's total business. The strongestgrowth was in Central Asia where both profits and revenue increased by over 25%.Russia and Eastern & Southern Europe also performed above expectations. Thetable below sets out the biennially adjusted and 'like for like' growth inrevenues across the regions of ITE's business. 2006 2005 Actual Biennially 'Like for like' £m £m change adjusted growth Russia 49.9 48.4 3% 11% 11%Central Asia & Caucasus 15.4 12.1 27% 27% 27%Eastern & Southern Europe 8.3 5.0 66% 42% 32%UK & Western Europe 7.8 6.0 30% 30% -3%Rest of World 1.0 7.0 -86% -23% -23% 82.4 78.5 5% 16% 13% 'Biennially adjusted' excludes the effect of biennial events 'Like for like' growth excludes the effect of biennial events and acquisitionsin the year Russia Offices: Moscow, St Petersburg Staff employed: 2006: 191 2005: 188 Exhibitions organised: 2006: 44 2005: 40 Square metres sold (000's): 2006: 206 2005: 194 The market conditions in Moscow and St Petersburg were strong with mostexhibitions reflecting higher demand. In Moscow the second pavilion at Crocus,which was completed in 2005, added an extra 60,000m(2) of available gross spaceto the market's international quality exhibition space. Accordingly there wasresultant change in the Moscow market with new launches and venue changes acrossthe industry, as organisers responded to the increase in space and increasedchoice of venue. In St Petersburg there has been relative stability and littlechange in established trading patterns. However the draw of Moscow's largeevents for the major international exhibitors is causing St Petersburg to evolveinto a more regional exhibition business. In ITE's Moscow business the highlight of the year was the further expansion ofthe market leading construction event, Mosbuild. At 68,300m(2) (2005: 54,400m(2)) across the two leading exhibition venues this event is now Moscow's, andRussia's, largest trade exhibition. Of our other major international events in Moscow the Moscow InternationalTravel and Tourism exhibition held in Expocentr was solid in response tocompetition this year from a new event launch at Crocus. It recorded marginalgrowth to 19,600m(2) (2005: 19,300m(2)) at a slightly reduced overall yield. TheMoscow International Motor Show, focused on the B2B motor accessories, serviceand parts industries, took place for the first time in the new Crocus venuealongside the OICA consumer motor show, Autosalon. As part of thisre-positioning the Moscow International Motor Show agreed a common pricingpolicy with the Autosalon event together with a lower venue cost to ITE. Theevent was bigger at 17,700m(2) (2005: 16,900m(2)) but yields were lower than the2005 comparatives. However the new format was well received by visitors andexhibitors alike. Following the move to Crocus, pricing for the MoscowInternational Motor Show is likely to stabilise. Worldfood Moscow, held inExpocentr, continues to perform well and has become the leading specialist eventin the trade food sector now occupying 22,200m(2) of space (2005: 20,300m(2)).Expoelectronica, the leading electrical components event, moved to the Crocusvenue to secure more and better quality space. The event grew by over 20% to9,000m(2) (2005: 7,400m(2)) and is now one of ITE's top five contributing eventsin Moscow. There have been a number of successful new launches in Moscow this year.Babytime is a consumer focused event; MIBS Autumn an 'on the water' summer boatevent supplementing our Spring Boat Show. Since the year end a new launch of anAutumn travel event, Select Travel, and the transfer of our pharmaceuticalsevent to Crocus have both proved successful initiatives. Additionally ITEacquired two new events in June this year. Expoclean Moscow has a focus on theindustrial cleaning industry and Bytchemexpo focuses on household chemicals.Expoclean took place in November and performed ahead of expectations;Bytchemexpo will take place in March next year. In St Petersburg most of the exhibitions reported steady growth. The majorevent in the calendar is Balticbuild which was unchanged in size at 10,200m(2)(the event is space constrained), but improved its revenues and profits. Therewas one small new launch, Subcontracting, supported by the City Government. Looking forward there is a new pavilion being built at Expocentr which willprovide much needed space for our Expocentr based events to expand. This willadd a further 8,000m(2) gross space and is due for completion in early 2007.Crocus has also commenced construction of a third pavilion, designed to provideat least 60,000m(2) gross. With more new space available the Moscow exhibitionbusiness is well positioned to deliver further growth. Central Asia & Caucasus Offices: Kazakhstan (Almaty, Astana, Atyrau) Azerbaijan (Baku), Uzbekistan (Tashkent), Georgia (Tbilisi), Kyrgyzstan (Bishkek), Tajikistan (Dushanbe) Staff employed: 2006: 183 2005: 134 Exhibitions organised: 2006: 59 2005: 63 Square metres sold (000's): 2006: 72 2005: 59 All offices in Central Asia experienced strong demand and excellent year on yearrevenue growth of more than 25% was achieved across the whole region. Therehave been no marked changes in the competitive environment. In Almaty, Atakent,the venue owner, successfully completed a new pavilion ready for our use inSeptember 2006, but there have been no other significant changes in venuefacilities elsewhere in Central Asia. A new office was opened in Kyrgyzstan inthe year. One highlight of the year was the new launch of Kazbuild Spring in Almaty whichdelivered 4,100m(2). Our regular Kazbuild (Autumn) event was able to utilisethe newly constructed pavilion and grow to 10,800m(2) (2005: 8,300m(2)). Totalsales to the construction sector in Almaty have almost doubled in this financialyear, testimony to the underlying strong demand. The strength of theconstruction sector was in evidence throughout the region with revenue growth atAtyraubuild (10%), Astanabuild (21%), Bakubuild (30%) and Uzbuild (14%) allrecording positive year on year growth. In October 2005, the Kazakhstan International Oil and Gas exhibition andconference grew by 7% to 7,900m(2) (2005: 7,400m(2)). Since the year-end theOctober 2006 edition has been held and grew by 20% into the newly constructedpavilion. Oil and Gas events have again been strong performers throughout theregion with the North Caspian event in Atyrau, Kazakhstan, Oil and GasUzbekistan and the Caspian Oil and Gas exhibition in Azerbaijan all recordinggood year on year revenue growth. New launch activity continued its momentum. The eight small start up events andconferences across the regions will assist to secure ITE's future presence inthese markets as the economic infrastructure evolves. Events were launched inconstruction, banking and financial services and the power industry(Kazakhstan); and telecoms and travel (Uzbekistan). The current pattern of business growth in line with economic growth and assistedby venue development looks set to continue for the foreseeable future. Eastern and Southern Europe Offices: Ukraine (Kyiv), Turkey (Istanbul) Staff employed: 2006: 97 2005: 98 Exhibitions organised: 2006: 32 2005: 35 Square metres sold (000's): 2006: 104 2005: 49 In the Ukraine the second phase development of ITE's preferred venue, IEC, wascompleted in January 2006 allowing the newly acquired AgriHort event to expandinto the new space. The 2006 edition of the event was 9,500m(2), significantlylarger than the 2005 pre-acquisition edition. The construction event, Kievbuild,also benefited from the new space and reported strong growth of 47% over lastyear's show to 7,750m(2). The Ukraine International Travel and Tourism eventreported growth of 20% in revenue and profit in selling 5,100m(2) (2005: 4,200m(2)). A strong overall result from the Ukrainian business was achieved indelivering 20% 'like for like' growth in revenues over the year. In Turkey our wholly owned business delivered its best contribution to date.The construction plant and machinery exhibition, Ankomak was held, for the firsttime since 2003; this event is over 40,000m(2) but at relatively low yields.The Turkish business saw good growth in its other exhibitions and in itsoutbound sales activity into ITE events across the regions. Our 50% owned associate business reported total sales of 200,000m(2) and made acontribution to ITE Group's profits after tax of £0.6 million. The furniture,house textiles and machinery tools events all grew well but the decline in thetextile fabric exhibition, as previously advised, held back the overall result. Western Europe and UK Offices: UK (London, Huddersfield), Germany (Hamburg), Holland (Utrecht) Staff employed: 2006: 155 2005: 158 Exhibitions organised: 2006: 6 2005: 4 Square metres sold (000's): 2006: 36 2005: 25 The principal businesses carried out in the UK are the Spring and Autumn Fashionevents, MODA, held at the NEC Birmingham and the related magazine publishingbusiness. During the year the recently acquired Footwear UK events wereintegrated into the MODA UK business and operational structures. The core UKfashion events having enjoyed a successful February show, recorded a decline indemand in the Menswear section of its August event, reflecting seasonal patternsas well as circumstances in the UK retail market. The shortfall was more thancompensated for by strong growth in the Footwear event over its pre-acquisitionsize. Magazine publishing also recorded a good result with revenues up 7% overthe prior year on its portfolio of titles. This ITE business unit has established a successful model of complementingmagazine advertising and exhibition participation. The business has been quickto adapt to industry trends and to grow and consolidate exhibition and magazinerevenue. 36 staff are employed in the North England office running theexhibition and magazine business. Of the total staff employed in Western Europe and the UK, 28 are based inGermany contributing specialist sales onto Russia and the CIS. The Londonoffice of ITE employs 91 staff split evenly between sales teams and corporate 'head office'. Rest of the World Offices: Algeria (Algiers), China (Beijing) The principal event running in Africa this year was in Algeria where wecontinued our relationship with U.N.C.T.A.D. Following on from our initialsuccess we opened a small office in Algiers and entered into a joint venturewith Sonatrach to organise the national oil and gas exhibition and conference inOran in November 2007. ITE has recently opened a small sales office in Beijing with a view todeveloping a greater participation from Chinese exhibitors into ITE's Russianand CIS events. Initial successes have been encouraging. Future Outlook ITE's strategy of focussing on achieving maximum organic revenue growth byleveraging its market leading position in markets where we have expertiseadvantage has yielded another strong set of results. The growing strength and stability of the Russian and the CIS economies,underpin the growth of domestic and international trade business conductedwithin these regions. International and local businesses are increasinglylooking to exhibit their goods and services at the exhibitions which ITE owns.Growth in the exhibition business has been constrained until recently, by thelack of suitable international quality exhibition space. In 2006 the completionof 75,000m(2) of new venue space across Moscow, Kazakhstan and Ukraine will helpsupport growth of our exhibition portfolio into 2007 and beyond. We anticipatefurther additional space will become available for use in 2007 in Moscow andUkraine. ITE has, in its markets, a series of recognised market leading brandsacross a number of international exhibition sectors. The Group's wellestablished office and infrastructure network throughout the region means thatit is well placed to fully participate in the anticipated growth of theexhibition business. The new financial year has started well with trading in line with the Board'sexpectations. As of 1 December 2006 advance sales for the 2007 financial yearwere £54 million (2005: £43 million) an increase in excess of 10% on thecomparable forward sales position this time last year. The Board remainsconfident of the prospect for the current financial year. Group Financial Review International Financial Reporting Standards ('IFRS') The 2006 Financial Statements are reported under IFRS. The comparative figuresfor 2005 have been re-stated onto a consistent basis as required. A fullstatement reconciling the reported 2005 Financial Statements to the re-stated2005 Financial Statements is available on the Company's website:www.ite-exhibitions.com. Revenue and gross profit A detailed analysis of the main changes in revenues and gross profits of thebusiness is set out in the Chief Executive's review of the business. Other operating income Other operating income represents rental income earned from subletting surplusoffice space, principally at ITE's London offices. Finance income Finance income for the year was £1.4 million (2005: £2.1 million). Thisincludes £0.4 million of 'notional interest' imputed in applying IFRS fair valueprinciples to certain venue loans. A further amount of £0.05 million of 'notional interest' remains to be credited to the income statement in the nextfinancial year. The interest from bank deposits reduced to £0.8 million in theyear (2005: £2.0 million) following ITE's £30 million buyback of its own sharesin August 2005. The Group held average net cash balances of £14.8 millionthrough the year (2005: £32.9 million). Finance costs Finance costs of £0.6 million (2005: £0.6 million) represent the interest costof the Group's borrowings in Euro and US Dollar. The Group enters into theseborrowing arrangements as part of its currency hedging activity. At 30 September2006 the Group had borrowings of €13.0 million, and US$3.7 million. Tax charge The tax charge of £7.4 million represents 30% of profit before tax. In thisfinancial year tax losses of €7 million which the Group had previously treatedas being available to offset against future tax charges, were disallowed by theDutch tax authority, leading to an increase in the deferred tax liability in theperiod. There has been a reduction in the Group's overall level of taxprovisions. The Group anticipates that for the next year the tax rate will be inline with the UK Corporation tax rate of 30%, whereby the lower tax ratestypically experienced in our major overseas markets are offset by withholdingtax charges on dividends back to the UK. Earnings per share Basic earnings per share increased to 6.9p (2005: 6.7p). Fully diluted earningsper share increased to 6.7p from 6.6p in the prior year. The Group achieved Headline diluted earnings per share of 7.0p per sharecompared with 6.6p for the year to 30 September 2005. Headline diluted earningsper share is based upon profit for the financial year before amortisation ofacquired intangible assets and any profits or losses on disposal of Groupundertakings. Dividends The Group has recommended a final dividend of 2.5p for 2006, to bring the totaldividend for the year to 3.5p (2005: 2.75p). Cash flow Cash generated from operations in the year was £34.2 million (2005: £29.4million). The principal applications of cash were of £7.4 million applied tovenue loans and advances (2005: net receipt £0.4 million) ; £9.1 million waspaid in tax; (2005 : £8.4 million) ; £3.0 million was applied to acquisitions inthe year (2005:£5.8 million) and £7.1 million was distributed as dividends(2005: £7.1 million). The result was a net increase in cash balances at the 30September of £8.1 million. Net cash at 30 September 2006 was £21.2 million (2005: £13.0 million). Of the£21.2 million of cash £4.5 million was held in a trust account, which will bereleased as certain creditors are paid in full. At 30 September 2006 £0.5million of the cash in trust was expected to be released within one year. Acquisitions & disposals On 1 March 2006 ITE acquired the Kiev Decor & Gift Exhibition from Expo UA forconsideration of £0.4 million. The event is held in the Spring and Autumn eachyear. On 29 June 2006 ITE acquired the ExpoClean and BytChemExpo exhibitions in Moscowfrom PIK Maxima for a consideration of £1.8 million. Both events will be heldby ITE for the first time in the year ending 30 September 2007. On 20 September 2006, ITE bought the remaining 10% minority shareholding in ITEModa Limited for consideration of £1.0 million. ITE now owns 100% of the Modafashion and publishing business. On 29 September 2006 ITE disposed of a subsidiary in Azerbaijan, Caspian FreightServices LLC, for £0.2 million to Meritex International Freight ServicesLimited. The company provided freight services to the Group's exhibitions inAzerbaijan. The consideration will be received over the 12 months ending 30September 2007. The final deferred receipts of £0.1 million from the sale of ITE's interests inACG have been received in the year. No further amounts remain outstanding Balance Sheet The Group's consolidated balance sheet at 30 September 2006 is summarised in thetable below: Assets Liabilities Net assets £m £m £m Goodwill and intangibles 40.3 - 40.3Property, plant and equipment 1.3 - 1.3Associates 1.4 - 1.4Venue advances 7.1 - 7.1Cash 31.9 (10.7) 21.2Current assets and liabilities excluding 25.5 (50.7) (25.2)cash and venue advancesProvisions - (2.3) (2.3)Deferred tax 2.0 (2.1) (0.1) Total as at 30 September 2006 109.5 (65.8) 43.6 Total as at 30 September 2005 91.3 (59.2) 32.1 Net assets increased to £43.6 million. The main changes are in goodwill(increase of £1.6 million), venue advances (increase of £3.3 million) and netcash (increase of £8.1 million). Investment and capital expenditure The Group's capital expenditure on plant and equipment for the year was £0.4million (2005: £0.4 million) and included exhibition equipment, computerequipment and associated software. The Group funds the development of venues and facilities where improvedfacilities will enhance the prospects and profitability of our organisingbusiness. The funding can take the form of a prepayment of future venue fees ('advance payments'), or a loan which can be repaid by cash or by offset againstfuture venue fees ('venue loan'). Generally the funding brings rights overfuture venue use and advantageous pricing arrangements. Venue loans and advancepayments are included under non-current and current assets in the balance sheet. At 30 September 2006 the Group's Sterling value of the outstanding balances ofadvance payments and venue loans was £7.1 million (2005: £3.8 million) asfollows: 30 September 2005 New Repayments 30 September 2006 £m £m £m £m Moscow - 5.8 (3.0) 2.8Kyiv 1.3 1.1 (0.6) 1.8Almaty 0.8 1.1 (0.9) 1.0St Petersburg 1.4 - (0.4) 1.0Uzbekistan 0.2 0.3 (0.3) 0.2Bulgaria 0.1 0.3* (0.1) 0.3 Total 3.8 8.6 (5.3) 7.1 *Release of provision These balances will be recovered from future venue use within three years exceptin Bulgaria and St Petersburg. In St Petersburg part of the advance repaymentsrelate to future events taking place between 2007 and 2011. ITE is not presentlyactive in Bulgaria and the loan is being repaid in instalments. Capital Following the cancellation of the share premium account and buy back andcancellation of its own shares last year, the Company has a Share Premiumaccount of £698,000 as at 30 September 2006. During the year the Company haspurchased 975,833 shares to be held in Treasury. The Company has also issued1,013,194 ordinary shares of 1p in the year. Of the total new issues 983,000were pursuant to the exercise of options and yielded aggregate consideration of£0.6m. The remaining shares were issued as part of Directors' remuneration. The Employees Share Option Trust ("ESOT") held 9,372,100 (3.6%) of the Company'sissued share capital at the year end (2005: 11,127,000; 4.3%). Post balance sheet events There have been no significant post balance sheet events. Financial risk The main financial risk facing the Group is foreign currency risk. The Boardhas reviewed and agreed policies to manage financial risk as follows: Foreign currency risk The Group is exposed to movements in foreign exchange rates against Sterling forboth trading transactions and for the translation of net assets and the profitsand loss accounts of overseas operations. The principal exposure is to the Euroand Dollar exchange rates which form the basis of invoicing for ourinternational customers. During the year the Group experienced net foreignexchange losses of £0.2 million (2005: £0.7 million). The exchange rate for theEuro at 30 September 2006 was €1.48:£1 (30 September 2005: €1.46::£1); theexchange rate for the US Dollar at the year end was $1.88:£1, (30 September2005: $1.76::£1). The bulk of the Group's business is in emerging markets and to minimise thecurrency risk, the Group prices predominantly in Euros and US Dollars. Aproportion of total invoicing amount is settled in local currency equivalent,translated at prevailing rates of at the date of settling invoices. In 2006 64%of the Group's sales were priced in Euros and 22% in US Dollars. Overall 61% ofthe Group's cash receipts in financial year ending 30 September 2006 were inhard currency and 39% was in various local currencies. The Group has a largeproportion of its revenues and costs denominated in non-Sterling currencies.Sterling costs exceed Sterling revenues due to the level of UK based costs - inparticular London sales and head office costs. The Group uses derivative instruments and currency borrowings to protect itselfagainst the effect of currency fluctuations on its balance sheet. The Group'spolicy on derivative instruments is that: - it will only hedge up to 80% of the value of anticipated cash flows; and- it will not enter into derivative transactions more than 18 months ahead. At 30 September 2006 the Group had options to sell €15 million spread over the12 months to 30 September 2007 at a rate of €1.43:£1 (the ''Option Rate'). Werethe exchange rate for the Euro to fall below €1.38:£1 then the Group would beobliged to sell Euros at the Option Rate. Over the course of the year the Group has entered into currency borrowingarrangements to minimise it's exposure to foreign exchange risk. The currencyborrowings can be offset against the matching Sterling deposits. At 30 September2006 the Group had borrowings of €13.0 million, and US$3.7 million. The cashbalance of £21.2 million at 30 September 2006 is presented net of theseborrowings. Interest rate risk The Group finances its operations through cash holdings and debt facilities.The objective of the Group is to maximise investment income and minimiseinterest costs bearing in mind its liquidity requirements. For short term debt, such as overdraft facilities or debt with a term of lessthan six months, fixed or floating rates of interest are used. For debt with aterm of greater than six months, it is policy that at least 75% must have fixedrates of interest so as to minimise the Group exposure to interest ratemovements. It is Group policy that surplus cash is not invested in instruments that wouldput the capital value at risk. All invested funds have a determinable rate ofinterest. Liquidity risk The Group policy is to ensure continuity of funding for operational needsthrough cash deposits and debt facilities as appropriate. The key requirementfor the business is to maintain flexibility to allow the Group to take advantageof opportunities that could arise over the short term. The needs of the businessare determined on a rolling cash flow forecast basis, covering weekly, monthlyand twelve monthly requirements. Short term flexibility is maintained byholding cash in current accounts and high liquidity money market funds. TheGroup has overdraft facilities in place both to permit currency borrowing aspart of its foreign exchange management and to allow flexibility in where itholds its cash balances. Going concern After considering the current financial projections for the Group, the Directorshave a reasonable expectation that the Company has adequate resources tocontinue its operations for the foreseeable future. For this reason theycontinue to adopt the going concern basis in preparing the accounts. Russell TaylorFinance Director4 December 2006 Consolidated income statementFor the year ended 30 September 2006 2006 2005 £000 £000Continuing operationsRevenue 82,368 78,547Cost of sales (43,885) (42,552) __________ __________Gross profit 38,483 35,995Other operating income 278 316 Administrative expenses before amortisation (14,112) (12,848) Amortisation of acquired intangibles (1,330) (378)Total administrative expenses (15,442) (13,226)Profit on disposal of group undertakings 158 221Share of results of associate 564 393 __________ __________Operating profit 24,041 23,699Finance income 1,368 2,068Finance costs (621) (596) __________ __________Profit on ordinary activities before taxation 24,788 25,171Tax (7,351) (6,781) __________ __________Profit for the period from continuing operations 17,437 18,390 __________ __________Attributable to: Equity holders of the parent 17,401 18,423 Minority interests 36 (33) __________ __________ 17,437 18,390 __________ __________Earnings per share (p)Basic 6.9 6.7Diluted 6.7 6.6 __________ __________ Consolidated balance sheet30 September 2006 2006 2005 £000 £000Non-current assetsGoodwill 34,406 32,771Other intangible assets 5,869 5,989Property, plant and equipment 1,269 1,126Investments in associates 1,438 1,410Venue advances and other loans 3,015 2,216Deferred tax asset 2,022 1,395 ___________ ___________ 48,019 44,907Current assetsTrade and other receivables 29,594 22,722Cash and cash equivalents 31,883 23,705 ___________ ___________ 61,477 46,427 Total assets 109,496 91,334 Current liabilitiesBank overdraft (10,717) (10,686)Trade and other payables (50,711) (43,844)Provisions (907) (1,064) ___________ ___________ (62,335) (55,594)Non-current liabilitiesProvisions (1,367) (1,974)Deferred tax liabilities (2,145) (1,671) ___________ ___________ (3,512) (3,645) Total liabilities (65,847) (59,239) ___________ ___________Net assets 43,649 32,095 ___________ ___________Capital and reservesShare capital 2,609 2,599Share premium account 698 38Merger reserve 2,746 2,746Capital redemption reserve 291 291ESOT reserve (3,016) (3,562)Retained earnings 40,555 29,038Own shares held (1,142) -Hedge and translation reserve 889 751 ___________ ___________Equity attributable to equity holders of the 43,630 31,901parent Minority interests 19 194 ___________ ___________Total equity 43,649 32,095 ___________ ___________Consolidated cash flow statementFor the year ended 30 September 2006 2006 2005 £000 £000Cash flows from operating activitiesOperating profit 24,041 23,699 Adjustments for:Depreciation and amortisation 1,895 826Other non-cash expenses 208 926Share of associate profit (564) (393)Gain on disposal of subsidiary (158) (221)(Decrease)/increase in provisions (213) 1,531 __________ __________Operating cash flows before movements in 25,209 26,368working capital(Increase)/decrease in receivables (233) 1,666Increase in payables 9,244 1,355 __________ __________Cash generated from operations 34,220 29,389Tax paid (9,064) (8,378)Venue advances and loans (7,422) 436 __________ __________Net cash from operating activities 17,734 21,447 Investing activitiesInterest received 925 2,085Dividends received from associates 422 437Acquisition of businesses (3,026) (5,785)Purchase of property, plant and equipment (422) (430) __________ __________Net cash used in investing activities (2,101) (3,693) Financing activitiesDividends paid (7,143) (7,088)Interest paid (621) (596)Share cancellation - (30,185)Net cash flow in relation to ESOT shares 541 (724)Purchase of own shares (1,142) -Proceeds from issue of share capital 634 927 __________ __________Net cash flows from financing activities (7,731) (37,666) Net increase/(decrease) in cash and cash 7,902 (19,912)equivalents Net cash and cash equivalents at beginning of 13,019 33,546periodEffect of foreign exchange rate changes 245 (615) __________ __________Net cash and cash equivalents at end of period 21,166 13,019 __________ __________ 2006 2005 £000 £000Comprised of:Cash and cash equivalents 31,883 23,705Bank overdrafts (10,717) (10,686) __________ __________ 21,166 13,019 __________ __________ Consolidated statement of recognised income and expenseFor the year ended 30 September 2006 2006 2005 £000 £000 Currency translation difference on net investment in subsidiary undertakings (197) 750Gain on cash flow hedge 356 -Tax on items taken directly to equity 159 151 __________ __________Net income recognised directly in equity 318 901 Transferred to profit or loss on cash flow hedges (22) -Implementation of IAS 39 (500) - Profit for the period attributable to the shareholders 17,437 18,390 __________ __________Total recognised income and expense for the period 17,233 19,291 __________ __________ Attributable to: Equity holders of the parent 17,197 19,324 Minority interests 36 (33) __________ __________ 17,233 19,291 __________ __________ Notes 1 Basis of preparation ITE Group plc has historically prepared its audited annual accounts inaccordance with UK generally accepted accounting practice (UK GAAP). FollowingEuropean regulation issued in 2002, the Group now presents its Annual Report andconsolidated accounts in accordance with International Financial ReportingStandards (IFRS). The information contained in this preliminary announcement for the year ended 30September 2006 does not constitute statutory accounts within the meaning ofsection 240 of the Companies Act 1985 but has been extracted from thoseaccounts. The IFRS information for the year ended 30 September 2005 is arestatement of information extracted from the statutory financial statementsprepared under UK GAAP on the historical cost basis. The statutory financialstatements for the year ended 30 September 2005 have been filed with theRegistrar of Companies and those for the year ended 30 September 2006 will befiled following the Group's Annual General Meeting. The auditors' report onthose accounts was unqualified and did not contain statements under section 237(2) or 237(3) of the Companies Act 1985. Whilst the financial informationincluded in this preliminary announcement has been computed in accordance withIFRS, this announcement does not itself contain sufficient information to complywith IFRS. The Group expects to publish its full IFRS financial statements forthe year ended 30 September 2006 in January 2007. IFRS 1 First-time Adoption of International Financial Reporting Standardspermits companies adopting IFRS for the first time to take some exemptions fromthe full requirements of IFRS and also certain elections in the transitionperiod. The exemptions and elections adopted by the Group are shown in theGroup's Annual Report and Accounts for the year ended 30 September 2005 and areavailable on the Group's website www.ite-exhibitions.com together with fulldetails of the Group's IFRS accounting policies. 2 Dividends 2006 2005 £000 £000Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 30 September 2005 of 1.85p (2004 - 1.65p) per 4,602 4,533ordinary shareInterim dividend for the year ended 30 September 2006 of 1.0p (2005 - 0.9p) per 2,535 2,544ordinary share __________ __________ 7,137 7,077 __________ __________Proposed final dividend for the year ended 30 September 2006 of 2.5p (2005 - 6,264 4,6021.85p) per ordinary share __________ __________ The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. Under the terms of the trust deed dated 20 October 1998, the ITE Group EmployeesShare Trust, which holds 9,372,100 (2005: 11,127,000) ordinary sharesrepresenting 4% of the Company's called-up ordinary share capital, has agreed towaive all dividends due to it. Further, no dividends will be paid in respect ofown shares held in treasury. 3 Earnings per share The calculations of basic and diluted earnings per share are based on the Profitfor the financial year of £17.4 million (2005: £18.4 million) and the followingnumbers of shares. Number of shares 2006 2005 Number of shares ('000) Number of shares ('000)Weighted average number of shares:For basic earnings per share 250,485 273,134Effect of dilutive potential ordinary shares 8,727 6,788 ___________ ___________For diluted earnings per share 259,212 279,922 ___________ ___________ Headline earnings per share Headline diluted earnings per share is intended to provide a consistent measureof Group earnings on a year on year basis and is 7.0p per share (2005: 6.6p).The headline diluted earnings per share is based on the following earnings andthe diluted number of shares in the table above.Earnings for headline diluted earnings per share 2006 2005 £000 £000 Profit for the financial year attributable to equity holders 17,401 18,423Amortisation of acquired intangible assets 1,330 378Tax effect of amortisation of acquired intangible assets (315) (83)Profit on disposal of group undertakings (158) (221) ________ ________ 18,258 18,497 ________ ________ 4 Reserves Share Merger Capital ESOT Retained premium reserve redemption reserve earnings account reserve £000 £000 £000 £000 £000 1 October 2004 29,036 2,746 - (2,792) 16,637Exercise of options 912 - - 99 (23)Net profit for the year - - - - 18,953Dividends paid - - - - (7,077)Gain on foreign currency translation of overseas - - - - -operationsShare based payments - - - - 592Shares issued for remuneration 35 - - - -Deferred tax reserve - - - - 151Purchase of shares by ESOT - - - (869) -Gain on exercise of ESOT options - - - - 48Capital reduction (29,945) - - - 29,945Purchase and cancellation of shares - - 291 - (30,188) _________ _______ _________ _______ _________1 October 2005 38 2,746 291 (3,562) 29,038Adoption of IAS 39 - - - - (500) _________ _______ _________ _______ _________Revised 1 October 2005 38 2,746 291 (3,562) 28,538 Treasury Hedge and Put option Total shares translation reserve reserve £000 £000 £000 £0001 October 2004 - - - 45,627Exercise of options - - - 988Net profit for the year - - - 18,953Dividends paid - - - (7,077)Gain on foreign currency translation of overseas - 751 - 751operationsShare based payments - - - 592Shares issued for remuneration - - - 35Deferred tax reserve - - - 151Purchase of shares by ESOT - - - (869)Gain on exercise of ESOT options - - - 48Capital reduction - - - -Purchase and cancellation of shares - - - (29,897) _______ _________ _________ _______1 October 2005 - 751 - 29,302Adoption of IAS 39 - - (1,044) (1,544) _______ _________ _________ _______Revised 1 October 2005 - 751 (1,044) 27,758 Share Merger Capital ESOT premium reserve redemption reserve account reserve £000 £000 £000 £000 Revised 1 October 2005 38 2,746 291 (3,562)Exercise of options 625 - - 546Net profit for the year - - - -Dividends paid - - - -Loss on foreign currency translation of overseas - - - -operationsShare based payments - - - -Shares issued for remuneration 35 - - -Deferred tax reserve - - - -Increase in fair value of hedging derivatives - - - -Transfer to income - - - -Costs related to capital reduction - - - -Exercise of put option - - - -Own shares held in treasury - - - - _________ _______ _________ _______30 September 2006 698 2,746 291 (3,016) _________ _______ _________ _______ Retained Treasury Hedge and Put option Total earnings shares translation reserve reserve £000 £000 £000 £000 £000 Revised 1 October 2005 28,538 - 751 (1,044) 27,758Exercise of options 117 - - - 1,288Net profit for the year 17,401 - - - 17,401Dividends paid (7,137) - - - (7,137)Loss on foreign currency translation of overseas - - (197) - (197)operationsShare based payments 1,492 - - - 1,492Shares issued for remuneration - - - - 35Deferred tax reserve 159 - - - 159Increase in fair value of hedging derivatives - - 356 - 356Transfer to income - - (22) - (22)Costs related to capital reduction (15) - - - (15)Exercise of put option - - - 1,044 1,044Own shares held in treasury - (1,142) - - (1,142) _________ _______ _________ _________ _______30 September 2006 40,555 (1,142) 889 - 41,021 _________ _______ _________ _________ _______ The Company adopted IAS 32 "Financial Instruments: Disclosure and Presentation"and IAS 39 "Financial Instruments: Recognition and Measurement" prospectivelyfrom 1 October 2005. As a consequence of adopting IAS 32 and IAS 39, the Companyrecognised a loss of £0.5 million in equity at that date. Additionally certainput options have been reclassified as financial liabilities resulting in a £1.0million reduction in reserves. 5 Dividend payment dates Final dividend 2006 Ex date 31 January 2007 Record date 2 February 2007 Annual General Meeting 22 February 2007 Payment date 2 March 2007 Interim dividend 2007 Record date June 2007 Payment date July 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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