6th Dec 2005 07:02
ITE Group PLC06 December 2005 6 December 2005 For Immediate Release ITE GROUP PLC PRELIMINARY RESULTS ANNOUNCEMENT RECORD RESULTS Highlights Year ended Year ended % change 30 September 2005 30 September 2004 Turnover £78.5m £60.8m 29% Profit before tax £23.0m £15.7m 46% Headline pre-tax profit* £26.0m £18.1m 44% Diluted earnings per share 5.5p 3.8p 45% Headline diluted earnings per share** 6.6p 4.7p 40% Dividend per share 2.75p 2.2p 25% • Strong growth in core markets • Headline pre-tax profits up 44% to £26m • Good contribution from biennial Moscow Oil and Gas exhibition and the one-off World Petroleum Congress • Headline diluted earnings per share up 40% to 6.6p • Total dividend increased by 25% to 2.75p per share • Recent acquisitions successfully integrated and benefiting from ITE ownership • 37m of cash returned to shareholders through share buy back and dividends Commenting on the results, Iain Paterson, Chairman, said: "ITE's performance during the year confirms the strength of our business and thegrowth potential in our markets. During the year the core business grewstrongly. In addition we benefited from one-off and biennial exhibitions. Wecontinue to demonstrate our ability to grow our leading events, launch newexhibitions and integrate bolt-on acquisitions. "The Group's focus on emerging and developing markets provides manyopportunities and ITE, with its strong and established presence in its keymarkets, is well placed to continue to capitalise on them. The momentum we haveseen in 2005 has continued into the current financial year and the business isperforming in line with our expectations. We are confident of the prospects of2006." * Headline pre-tax profit is defined as profit before tax, amortisation andimpairment of goodwill (including associates) and profits or losses arising ondisposal of group undertakings - see the Profit and Loss Account for details ** Headline diluted earnings per share is calculated using profit beforeamortisation and impairment of goodwill (including associates) and profits orlosses arising on disposal of group undertakings. 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 2005 Chairman's Statement Group Performance All sectors of our business have had an excellent year yielding strong financialresults. Turnover grew 29% to £78.5m (2004: £60.8m) and headline profit beforetax rose 44% to £26.0m (2004: £18.1m). Headline diluted earnings per shareimproved by 40% to 6.6p per share and diluted earnings per share improved to5.5p (2004: 3.8p). Profit before tax was £23.0m (2004: £15.7m). A strongperformance from annually recurring business was augmented by contributions fromthe biennial Moscow International Oil & Gas exhibition, and from the once-offorganisation of the World Petroleum Congress held in Johannesburg in September.Excluding the effect of these two events turnover from the annually recurringbusiness increased by 14% and gross profits by 15%. The Group returned £30m to shareholders via a tender to buy back its own sharesin July. Due to the cash generative nature of the business, we finished theyear with a net £13.0m of cash and a strong balance sheet capable of supportinginvestment and selective acquisition opportunities that are in line with ourstrategic plans. Strategic Process During the year we have continued to implement our strategy of enhancing ourcore business, principally through a combination of organic growth and 'bolt on'acquisitions where the strategic fit is attractive. Consistent with thisstrategy we acquired Caspian Events Limited (Caspian Oil & Gas in Azerbaijan) atthe beginning of the financial year, BTO AgriHort (Agriculture in Kyiv) inAugust and Footwear UK (Fashion in Birmingham and London) in September and thesehave all been successfully integrated into our existing infrastructure. We tendered for, purchased and cancelled £30m of our own share capital in Julydemonstrating our desire to improve the efficiency of the Group's balance sheetin light of the Group's strong positive operational cash flow. A further significant event was the recent conclusion of a long termco-operation agreement with Crocus (the new Moscow exhibition venue). Thisagreement is supplementary to ITE's main long-term agreement for the Expocentrvenue in central Moscow. Given the potential for growth in the Moscowexhibition market fuelled by the new space at Crocus, it is important for ITE tomaintain substantive contractual relationships with both of the main venues inMoscow. Board and Management Following the reduction in the shareholding of Veronis Suhler Stevenson,Christopher Russell stepped down from the Board. In addition, Ross Stobie,Director General of the Moscow office, resigned from the Board following theconclusion of three years of service in Moscow. The Board extends its thanks toboth Ross and Christopher who have both played important roles in our successover recent years. The success of our business largely depends on the relationships that our staffbuild and maintain with our customers. I should like, therefore, to express theBoard's appreciation for the continued efforts which all our staff have made inachieving such a strong set of results. Dividend The Board increased the interim dividend to 0.9p per share (2004: 0.55p) andrecommends a final dividend of 1.85p per share making a total dividend for theyear of 2.75p per share, a 25% increase on last year's total dividend of 2.2pper share. Taken together with the share buy back in the summer the Companywill have returned £37m of cash to shareholders this year. Outlook The momentum seen in 2005 has continued into the current financial year andthere are good indications that the underlying growth is set to continue.Overall the Board is confident that ITE is well positioned to benefit from boththe changing exhibitions environment in Moscow, and from the ongoing economicgrowth apparent across the regions in which we operate. Iain PatersonChairman6 December 2005 Chief Executive's Review Financial performance Turnover for the year ended 30 September 2005 was £78.5m (2004: £60.8m). Overallgross profit for 2005 was £36.0m, (2004: £27.2m) earned at a gross margin of45.8% (2004: 44.8%). This year's result was buoyed by the biennial effect of the Moscow InternationalOil & Gas exhibition ('MIOGE'), and the once-off contract to organise the WorldPetroleum Congress ('WPC') in Johannesburg, South Africa. Excluding the effectof these two events, the result from annually recurring business was a turnoverof £69.4m, representing a 14% improvement on 2004's comparable figure, and agross profit of £31.3m, a 15% improvement on 2004's comparable figure. Operating profit of £20.6m for the financial year (2004: £13.8m) was aftercharging operating expenses of £15.4m (2004: £13.4m). The increase of £2.0m inoperating expenses reflects higher levels of staff employed in line with risingactivity levels throughout the Group and higher inflation rates in the regionsin which ITE operates, together with an increasing cost of expensing the ITEPerformance Share Plan (£0.6m in 2005; £0.3m in 2004). The associate company contribution of £0.5m (2004: £0.5m) is from the Group's50% owned associate business in Turkey, which reported good sales. Howeverlower yields and higher operating costs culminated in a similar financialcontribution to last year. Trading highlights In 2005 ITE organised 152 exhibitions in 16 countries (2004: 137 events in 15countries). There were 27 new launches in the year. Total square metres sold in2005 were 341,000 (2004: 276,000) at an average yield of £227 per square metre(2004: £220 per metre). An analysis of the key changes in the Group's overall revenue, gross profit andvolume sales is set out below: Square metres Revenue Gross profit (000's) £'million £'million2004 Sales & gross profits 276 60.8 27.2Biennial & WPC 21 9.1 4.7 297 69.9 31.9Non recurring and timing (11) (3.0) (0.3)differencesNew launches 11 2.4 0.1Acquisitions 11 2.1 1.0Growth on recurring events 33 5.8 2.9Publishing 1.2 0.42005 Sales & gross profits 341 78.5 36.0 The increase in net square metre sold of 65,000 metres was spread throughoutRussia and the CIS countries in which ITE operates. The exhibition business inMoscow, helped by the biennial recurrence of the Moscow International Oil andGas event and the growth of its Mosbuild construction event contributed a 12%increase in its square metre sales. All ITE's offices in the CIS countriesenjoyed strong levels of growth with Ukraine's volume of square metre salesgrowing by 18%, Kazakhstan's and Azerbaijan's sales volumes increasing by 12%,Uzbekistan's by 35%, and St Petersburg's by 10%. The top ten events ranked by gross profit sold a total 181,700m(2) with theannually recurring events in the top ten showing an overall expansion of 13% involume sales over their 2004 equivalent events. The benefit of having more spaceto sell, notably at the Mosbuild construction event in Moscow and the KazakhstanOil & Gas Exhibition in Almaty underpinned the growth in ITE's biggest events. Gross profit of £36.0 million (2004: £27.2 million) analysed by industry sectoris set out below: 2005 2004 Construction 32% 40%Oil & Gas 22% 9%Travel 10% 13%Food 10% 12%Motor / Transport 8% 8%Fashion 5% 5%IT 4% 5%Other 9% 8% Total gross profit has increased by 32% with much of the activity being drivenby the oil and gas and construction sectors. This year the oil and gas sectorincludes significant contributions from the Kazakhstan International Oil and Gasevent, the biennial Moscow International Oil & Gas event, the World PetroleumCongress and the newly acquired Caspian Oil & Gas event. The continuingstrength of construction events throughout Russia and the CIS reflects theincreasing investment being made year on year into private and publicinfrastructure projects. Review of Operations Gross profit analysed by the main geographical regions in which ITE operates isset out below, followed by a review of the most significant events for 2005 ineach of the regions. 2005 2004 Russia 70% 76%Central Asia & Caucasus 14% 13%Southern & Eastern Europe 4% 3%Western Europe 6% 8%Rest of World 6% 0.2% Russia Offices: Moscow, St Petersburg 2005 2004 Staff 188 161Exhibitions 40 44Square metres 194,000 173,000 ITE Group's Moscow office has seen changes in the exhibition market environmentover the year and has implemented a series of initiatives. Expocentr, with whom ITE has a long and established trading relationship,continues to host the Group's most important events. A shortage of qualityvenue space in Moscow has however restricted the growth of some of ITE'sexhibitions until recent times. Crocus, a new purpose built exhibition facilityin Moscow opened with Phase I of its project in late 2004. In April 2005 ITEheld 'Mosbuild+' at Crocus, being a re-location of the Windows & Doors eventtogether with 'Interiors' and was a resounding success. The combined meterageof Mosbuild and Mosbuild+ was 54,400m(2), an increase of over 20% on the 2004equivalent combined meterages. ITE has also initiated further re-locations toCrocus for 2006, including Expoelectronica (April 2006), Mining World Russia(April 2006), Moscow International Motor Show (Sept 2006) and Ingredients Russia(Nov 2006). On 28 September 2005, ITE formalised the basis of a long-termco-operation agreement with Crocus until 2015 with respect to certain keyexhibitions, and in October ITE made an advance payment of $10m against specificvenue tenancy contracts for the future. Our major Moscow exhibitions all enjoyed attractive increases in size withmaintained or improved yields. Ingredients Russia in November 2004 continuedits expansion, improving space sales by 16% to 5,500m(2). Moscow InternationalTravel exhibition in March grew 13% to 19,200m(2) (2004 : 17,000m(2)); and thebiennial Moscow International Oil & Gas exhibition in June sold 15,600m(2) anincrease of 9% over its 2003 equivalent. The Motor event held in August was theMoscow International Motor Show, primarily focussed on the spare parts,accessories and repairs and maintenance sectors. Following a series of changesthat have taken place over the course of the past year with respect to the Motorsector in Russia, ITE will now pursue its Moscow International Motor Show atCrocus commencing in September 2006. The Moscow Autumn event season finishedwith a good result from WorldFood Moscow selling 20,300m(2), but it remainsrestricted in its growth given current space availability issues at Expocentr. In May, Alexander Shtalenkov joined ITE as Director General, Moscow withresponsibility for further developing the Group's leading Moscow business.Alexander has an established background of managing international businesses inRussia. The dynamics of supply and demand have changed substantially in Moscow. Withthe second phase of the new Crocus exhibition facility opening in September2005, an additional 90,000 gross m(2) has been supplied to the Moscow exhibitionindustry over the last two years, effectively doubling the availability ofinternational quality exhibition space in the city. Whilst this assists growthby releasing various constraints on some of ITE's key events, it also invitesincreasing competition. ITE with its recognised international brands,established venue relationships, and unparalleled office infrastructure is in astrong position from which to benefit from the expected growth in the Moscowexhibitions market. Exhibitions in St Petersburg represented 22,800m(2) of ITE's sales in Russia andenjoyed 9% growth in volume. The largest event, Baltic Building Week realisedsales of 10,200m(2) a small increase on the 2004 result. Lenexpo, the StPetersburg venue, has now finished construction of its new pavilion. Afterde-commissioning some older halls the venue now offers an additional 4,000m(2)of gross space into which ITE plans to grow its events. Central Asia & Caucasus Offices: Kazakhstan (Almaty, Astana, Atyrau), Azerbaijan (Baku), Uzbekistan(Tashkent) and Georgia (Tbilisi) 2005 2004 Staff 134 116Exhibitions 63 56Square metres 59,200 47,000 The Central Asia and Caucasus regions have continued their strong growth thisyear - driven by new launches, new regional opportunities and strong exhibitordemand. This year also included a first time contribution from the Caspian Oiland Gas exhibition which was acquired in October 2004. The combination oforganic growth and the aforementioned acquisition delivered an increase from theregion of more than 25% in space sold and gross profit over the comparativeperformance in 2004. As announced in the interim statement the Kazakhstan Oil and Gas Exhibition,which runs simultaneously with the conference, grew by 20% to over 7,400m(2).Kazbuild, organised in September also achieved growth of 20% in selling over8,200m(2). Both of these exhibitions are now currently space constrained at theAtakent venue facility in Almaty. However the construction team are launching anew Kazbuild Spring in 2006 to satisfy demand. The Azerbaijan office successfully integrated the Caspian Oil and Gas exhibitionacquired in October 2004. ITE substantially improved the profitability of theevent in its first edition using its extensive sales network and local officeresources. In addition there were several new launches in Baku coveringconsumer electronics, cleaning and a once-off customs event. Howeverdifficulties with availability of the venue which also operates as a sportsfacility necessarily caused the postponement of BakuBuild from September untilOctober 2005. ITE Group's exhibition business in Tashkent, Uzbekistan contributed very stronggrowth more than doubling its sales and profits over the last year. A highlightamong ITE's emerging markets, the office initiated eight new launches in theyear. TextileExpo achieved a very significant performance in its second editionwith space sales more than doubling. Expansion into new Central Asian regions included the launching of a number ofsmall initial events in Mongolia, Tajikistan and Kyrgyzstan in 2005. ITECentral Asia has now established small offices in Beijing and Urumqi in WesternChina. Eastern & Southern EuropeOffices: Turkey (Istanbul), Ukraine (Kyiv) 2005 2004 Staff 98 102Exhibitions 35 28Square metres 49,000 36,000 The Kyiv office produced a 50% increase in revenue and operating profit for theyear ending 30 September 2005. This included excellent first time contributionsfrom the two acquired exhibitions Public Health and Informatica, which togetheradded 6,500m(2) of sales. WorldFood Ukraine organised in November 2004 wasaffected by the political unrest at the time and was 15% smaller than in theprevious November. However the ordinary course of business was soonre-established in early 2005 and Kievbuild in February 2005 recorded stronggrowth in achieving sales of over 5,250m(2). ITE made two further acquisitions in the year in Kyiv, Photofair Kyiv, a smallspecialist event focused on digital photography and production, and, moresignificantly the acquisition of BTO's Kyiv AgriHort. The latter event isconducted in February and is the leading agricultural machinery and productsevent in the Ukraine. In February 2006 it is scheduled to expand into the newlycompleted phase II of the IEC exhibition halls, where ITE has been a contributorto the financing arrangements. ITE's 100% owned Turkish office has continued developing its important andgrowing role in selling outbound Turkish exhibitors into the Group's Russian andCentral Asian exhibitions. It also organises a series of local events and 'Caspian regional conferences'. Yields are still disappointingly low in Turkeyand the 19,200m(2) sold in 2005 only yield marginal profits for ITE. Associate Company - ITF ITF, a 50% owned associate business in Istanbul, had a successful trading yearwith volume sales and revenues both showing strong growth. The 2005 eventcalendar included Autoshow (cars) and Otomotive (spare parts / accessories) andenjoyed spectacular growth with the Furniture Show, IMOB. The growth howeverwas again at lower yields. The higher yielding clothing fabric and textile eventwas reduced in size as a consequence of re-positioning it's target exhibitionmarket. The Turkish economy has now enjoyed a period of greater stability andthe continuance of such a stable economic environment will be welcome. Western Europe and UK Offices: London, Northern England, Hamburg 2005 2004 Staff 158 155Exhibitions 4 4Square metres 25,000 21,000 MODA UK is ITE's seventh highest contributing exhibition to Group gross profitsthis year. The Womenswear, Menswear and Accessories exhibitions added a catwalkto the shows and invested in a series of new initiatives, which helped supportthe growth in sales to from 21,000m(2) to 24,000m(2) this year. On 28 September ITE announced that it had acquired a series of complementaryFootwear exhibitions in the UK, two of which have historically been co-locatedand share visitor audiences with our MODA Fashion events at the NEC inBirmingham. ITE is currently re-branding the events and will expand themarketing of the events using ITE's UK infrastructure. RAS Publishing, ITE's business to business fashion publications business, hasenjoyed a successful first full year under ITE's stewardship. Circulations ofthe Womenswear and Menswear Buyer publications were stable, whilst advertisingrevenue improved by circa 13%. RAS Publishing made a minor acquisition of anaccessories magazine during the year, which has been integrated into thebusiness, re-branded and re-launched as Fashion Extras. Of the total staff number employed in the UK and Western Europe, 27 are based inGermany and are focussed on contributing outbound sales into our Russian and CISexhibitions; 99 staff are currently based in London, of which more than half aresales orientated with the balance consisting of corporate, finance andadministrative roles. Rest of World Offices: Johannesburg The highlight of the year's 'rest of the world' activity was the organisation ofthe World Petroleum Congress ('WPC) in Johannesburg, South Africa. The eventattracted over 3,200 delegates (80% International), had over 500 speakers andwas co-located with a new launch exhibition of 400 exhibitors utilising 9,000square meters of net space. The event was a resounding success and the level ofsponsorship raised for the events, as well as the number of paying foreigndelegates attending the event, was the highest ever achieved in the WPC's 72year history. Furthermore, the exhibition held alongside the congress was thelargest oil and gas exhibition ever organised in Africa. ITE developed anunprecedented network of media partners to ensure maximum exposure globally andcoupled with the sales, marketing and logistical achievements, the eventevidenced ITE's maturity as a leading world class professional event organiser.The culmination of three years work from a dedicated ITE team yielded overallrevenues of £5.5m and a pre-tax profit in the year of £2.0m. Outlook ITE's strategy is to focus on organic growth opportunities in our core markets,whilst making complementary 'bolt-on' acquisitions. The recent increase in supply of available Moscow exhibition venue space createsopportunities. ITE will continue to focus on its existing business, increasingits competitiveness and building on its expertise and infrastructure advantages,to ensure the Group will be the major beneficiary of the increase in capacity ofthe Moscow exhibitions market. Consistent with this ITE has concluded a new 10year co-operation agreement with the Crocus venue in Moscow, that will relievespace constraints on Mosbuild, Expoelectronica and several other events.;Increased space could create opportunities for competitors. Nonetheless webelieve that ITE is in a very strong position to benefit from the availableopportunities and meet the challenges as they arise. ITE Group's Central Asia business continues to enjoy significant growthopportunities and resides in a region blessed with substantial naturalresources. ITE remains the dominant force in conducting international tradeexhibitions in the region. The Ukraine business is also contributing excellentgrowth and will benefit this year from having more available venue space. ITE Group's emerging and developing markets focus provides many opportunitiesand challenges. ITE Group's stable senior management team, well establishednetwork of local offices, together with its strong reputation and brand identityare key assets which will provide the platform for continued growth. As of 2December 2005 advance sales for the 2006 event calendar were £43m (2004: £42m),an increase of 10% on a comparable basis with the forward sales position at thistime last year. After another successful year and with the Group performinginline with expectations, the Board remains positive and confident with respectto the development and growth prospects ahead for the business. Ian TomkinsChief Executive6 December 2005 Group Financial review Earnings per share The diluted earnings per share increased to 5.5p from 3.8p in the prior year.The Group achieved headline diluted earnings per share of 6.6p per sharecompared with 4.7p for the year to 30 September 2004. Headline diluted earningsper share is based upon profit for the financial year before amortisation andimpairment of goodwill, (including associates) and profits or losses on disposalof Group undertakings. Acquisitions & disposals As reported in last year's financial statements ITE acquired 100% of the issuedshare capital of Caspian Events Limited on 6 October 2004 for £2.2m in cash. On 2 August 2005 ITE completed the acquisition of 100% of BTO Beurs-enTentoonstelling - Organisatie B.V. ("BTO") for consideration of €2.0m of which€0.6m is payable in three instalments on the 30 April 2006, 2007 and 2008. BTOowns the AgriHort exhibition held in Kyiv every February, and on which ITE hasbeen the local partner for the last five years. On 28 September 2005 ITE acquired 100% of DEW Events Limited which owns fourFootwear exhibitions for an initial consideration of £3.4m in cash. £2.6m ofthe consideration was paid on completion with a further £0.8m paid in November2005. There are put and call options existing over management's retained 25% inITE Footwear Limited (which owns the two London exhibitions) based on a multipleof profits and not normally exercisable before 1 November 2008. Deferred receipts of $0.24m from the sale of ITE's interests in ACG have beenreceived in the year, and a further $0.15m has been received since 30 September2005. The balance remaining still due is $0.05m. Post balance sheet event Events since 30 September 2005 In October 2005 ITE Group made advance payments of $10m to Crocus, a Moscowexhibition venue. The payments are made against specific exhibition venuelicence agreements. Tax charge The tax charge of £7.4m represents 28.5% of headline pre-tax profits. The Groupanticipates that for the next year the tax rate will remain below the UKCorporation tax rate of 30% due to the lower tax rate experienced in some of ourmajor overseas markets. However anticipated changes to Dutch tax legislationhas restricted the availability of future tax losses to the Group in Holland. Capital The Company cancelled its share premium account of £29,944,011 on 8 July 2005.It subsequently used the distributable reserves so created to buy back andcancel 29,126,208 of its own shares for a cost of £30.2m. The net effect ofthese transactions was to reduce the issued share capital by 10% and to reducethe Group's net assets by £ 30.2m. The Company has also issued 3,847,401ordinary shares of 1p in the year. This represents 1.3% of the issued sharecapital at 1 October 2004. Of the total new issues 3,802,537 were pursuant tothe exercise of options and yielded aggregate consideration of £0.96m. Theremaining shares were issued as part of Directors' remuneration. The Employees Share Option Trust ("ESOT") held 11,127,000 (4.3%) of theCompany's issued share capital at the year end (2004: 10,427,000; 3.6%). TheESOT has acquired further shares in the market over the course of the year. Cash flow Net cash at 30 September 2005 was £13.0m (2004: £33.5m). Cash inflow fromoperating activities in the year to 30 September 2005 was £28.6m (2004: £21.8m).Cash outflow on acquisitions was £6.1m. A net £30.0m was applied in buyingback the Company's own shares (including ESOT purchases) and after takingaccount of consideration from new issues. A further £8.4 was applied in taxationpayments and £7.1m was paid to shareholders as dividends. Of the £13.0m of cash £6.5m was held in a trust account, which will be releasedas certain creditors are paid in full. At 30 September 2005 £2.2m of the cashin trust was expected to be released within one year and £4.3m was expected tobe released after 30 September 2006. Interest Net interest earned in the year was £1.65m (2004: £1.1m). The Group held averagecash balances of £32.9m through the year (2004: £27.4m). Investment and capital expenditure The Group's capital expenditure on plant and equipment for the year was £0.4m(2004: £0.7 million) and included exhibition equipment, computer equipment andassociated 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 debtors in the balance sheet and are treated asfinancial investments in the Cash flow statement. At 30 September 2005 the Group's Sterling value of the outstanding balances ofadvance payments and venue loans was £3.9m (2004: £4.6m) as follows: 30 September Repayments New Advances 30 September 2004 2005 £m £m £m £m Kyiv* 1.6 (0.3) - 1.3 Almaty + 0.8 (0.5) 0.5 0.8St. Petersburg* 2.0 (0.6) - 1.4Uzbekistan* - (0.1) 0.3 0.2 Bulgaria+ 0.2 (0.1) - 0.1 4.6 (1.6) 0.8 3.8 * advance payments+ venue loans 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 will be repaid in instalments. This table does not include an advance payment to the Crocus venue in Moscow ofUS$10m (£5.7m) made in October 2005. 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 £0.7m (2004:£0.4m). The exchange rate for the Euro at 30September 2005 was €1.46:£1 (30 September 2004: €1.46: £1); the exchange ratefor the US dollar started the year at $1.80:£1, and finished the year $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 2005 52%of the Group's sales were priced in Euros and 41% in US dollars. Overall 70% ofthe Group's cash receipts in financial year ending 30 September 2005 were inhard currency and 30% 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. At 30 September 2005 theweighted average exchange rate for forward sales against Sterling used forconverting US dollar sales was $1.82 (2005 financial year: $1.84) and for Eurosales was €1.47 (2005 financial year: €1.47). 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. 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. The net cashbalances of £13.0m at 30 September 2005 are shown in the balance sheet. 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. Adoption of International Financial Reporting Standards ('IFRS') The Company's adoption of IFRS for the year ending 30 September 2006 will firstimpact on the interim statement for the six months to 31 March 2006. The mainareas that are expected to have an effect on the Group's consolidated pre-taxprofits are the treatment of share based payments and the amortisation ofgoodwill and intangible assets. The Company will issue a restatement of itsresults for the year ended 30 September 2005 and its consolidated balance sheetat 30 September 2005 presented in accordance with IFRS, prior to making theinterim announcement. Russell TaylorFinance Director6 December 2005 Consolidated Profit and Loss AccountFor the year ended 30 September 2005 2005 2004 £000 £000Turnover 78,547 60,750Cost of sales (42,552) (33,542) __________ __________Gross profit 35,995 27,208 Net operating expenses before goodwill amortisation (12,232) (10,883) Goodwill amortisation (3,142) (2,528) Total net operating expenses (15,374) (13,411) __________ __________Operating profit 20,621 13,797 Share of associates' operating profit before goodwill 612 676amortisation Goodwill amortisation (153) (221) Share of associates' operating profit 459 455Profit on disposal of group undertakings 221 323 __________ __________Profit on ordinary activities before interest 21,301 14,575Interest receivable 2,085 1,148Interest payable and similar charges (427) (16) __________ __________Profit on ordinary activities before taxation 22,959 15,707Tax on profit on ordinary activities (7,429) (4,955) __________ __________Profit on ordinary activities after taxation 15,530 10,752Minority interests 33 (31) __________ __________Profit for the financial year 15,563 10,721Dividends paid and proposed (7,146) (5,984) __________ __________Retained profit for the year 8,417 4,737 __________ __________Earnings per shareBasic 5.7p 3.9pDiluted 5.5p 3.8pHeadline diluted 6.6p 4.7p _________ _______ Consolidated Balance Sheet30 September 2005 2005 2004 £000 £000 Fixed assets Goodwill 33,698 29,348 Tangible assets 1,741 1,862 Associates 1,257 1,377 Other investments 109 74 ___________ ___________ 36,805 32,661 Current assets Debtors due within one year 22,810 23,426 Debtors due after one year 2,216 4,060 Cash at bank and in hand (Note 6) 13,019 33,546 ___________ ___________ 38,045 61,032 Creditors: amounts falling due within one year (48,335) (47,773) ___________ ___________ Net current (liabilities)/assets (10,290) 13,259 ___________ ___________ Total assets less current liabilities 26,515 45,920 Provisions for liabilities and charges (2,316) (1,498) ___________ ___________ Net assets 24,199 44,422 ___________ ___________ Capital and reserves Called up share capital 2,599 2,852 Share premium account 38 29,036 Capital redemption reserve 291 - Merger reserve 2,746 2,746 Option reserve - 23 ESOT reserve (3,562) (2,792) Profit and loss account 21,893 12,329 ___________ ___________ Equity shareholders' funds 24,005 44,194 ___________ ___________ Minority interests 194 228 ___________ ___________ Total capital employed 24,199 44,422 ___________ ___________ Consolidated Cash Flow StatementFor the year ended 30 September 2005 2005 2004 £000 £000Net cash inflow from operating activities 28,598 21,754Dividends received from associates 437 172Returns on investments and servicing of finance 1,658 1,132Taxation (8,378) (3,363)Capital expenditure and financial investment 13 (2,858)Acquisitions and disposals (5,785) (1,345)Equity dividends paid (7,088) (4,545) __________ __________Cash inflow before management of liquid resources and financing 9,455 10,947Management of liquid resources 17,974 (19,336)Financing (29,982) 495 __________ __________Decrease in cash in the year (2,553) (7,894) __________ __________ Consolidated Statement of Total Recognised Gains and Losses For the year ended 30 September 2005 2005 2004 £000 £000 Profit for the financial year Group 15,325 10,534 Associates 238 187 ___________ ___________ 15,563 10,721Gain on foreign currency translation 750 96 ___________ ___________Total recognised gains and losses relating to the year 16,313 10,817 ___________ __________ Notes 1 Basis of preparation This Preliminary Announcement is for the year ended 30 September 2005 and wasapproved by the Board on 6 December 2005. The financial information set out herein does not constitute the Company'sstatutory accounts for the years ended 30 September 2005 or 2004, but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theRegistrar of Companies and those for 2005 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under s237(2) or(3) Companies Act 1985. The accounts have been prepared on the historical cost basis and do notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985. 2 Net operating expenses Net operating expenses includes total administrative expenses of £15.7 million(2004: £13.7 million) and other operating income of £316,000 (2004: £303,000). 3 Earnings per share The calculations of earnings per share are based on the following results andnumbers of shares. Headline diluted Basic and diluted 2005 2004 2005 2004 £000 £000 £000 £000 Profit for the financial year 15,563 10,721 15,563 10,721Amortisation of goodwill (including associates) 3,295 2,749 - -Profit on disposal of group undertakings (221) (323) - - ________ ________ ________ ________ 18,637 13,147 15,563 10,721 ________ ________ ________ ________ 2005 2004 Number of shares ('000) Number of shares ('000)Weighted average number of shares:For basic earnings per share 273,134 274,435Exercise of share options 9,197 7,203 ___________ ___________For diluted earnings per share 282,331 281,638 ___________ ___________ Headline diluted earnings per share is intended to provide a consistent measureof group earnings on a year on year basis. Headline diluted earnings per share is calculated using profit for the financialyear before amortisation of goodwill and profits or losses arising on disposalof group undertakings. 4 Reserves Share Merger Capital Option ESOT Profit and Total premium reserve Redemption reserve reserve loss account account reserveGroup £000 £000 £000 £000 £000 £000 1 October 2004 29,036 2,746 - 23 (2,792) 12,329 41,342Exercise of options 912 - - (23) 99 - 988Retained profit for the year - - - - - 8,417 8,417Gain on foreign currency - - - - - 750 750translationGain on exercise of ESOT options - - - - - 48 48Options issued in the year at a - - - - - 592 592discount to market valueShares issued for remuneration 35 - - - - - 35Capital reduction (29,945) - - - - 29,945 -Purchase and cancellation of - - 291 - - (30,188) (29,897)sharesPurchase of shares by ESOT - - - - (869) - (869) _________ ________ ________ ______ ______ _________ ________30 September 2005 38 2,746 291 - (3,562) 21,893 21,406 _________ ________ ________ ______ ______ __________ ________ 5 Reconciliation of operating profit to operating cash flows 2005 2004 £000 £000 Operating profit 20,621 13,797Depreciation charges 448 471Amortisation 3,142 2,528Loss on sale or write down of fixed assets 79 103Decrease/(increase) in debtors 1,969 (2,638)Increase in creditors 1,365 6,546Increase in provisions 974 947 __________ __________Net cash inflow from operating activities 28,598 21,754 __________ __________ 6 Analysis of net funds 30 September 30 September 2004 Cash flow 2005 £000 £000 £000 Cash at bank and in hand 9,046 (2,553) 6,493 __________ __________ __________Net funds 9,046 (2,553) (6,493) Cash held on deposit 24,500 (24,500) -Cash held on Trust - 6,526 6,526 __________ __________ __________Cash shown on balance sheet 33,546 (20,527) 13,019 __________ __________ __________ As a result of the capital reduction, £6.5m is held in a trust account, whichwill be released as certain creditors are paid in full. At 30 September 2005£2.2m of the cash in trust was expected to be released within one year and £4.3mwas expected to be released after 30 September 2006. Subsequent to year end, ITE Group made advance payments of $10m to Crocus, aMoscow exhibition venue. The payments are made against specific exhibitionvenue licence agreements. 7 Reconciliation of net cash flow to movement in net funds 2005 2004 £000 £000Decrease in cash in the year (2,553) (7,894) __________ __________Movement in net funds in year (2,553) (7,894) Net funds at 1 October 9,046 16,940 __________ __________Net funds at 30 September 6,493 9,046 __________ __________ 8 Dividend payment dates Final dividend 2005 Ex date 25 January 2006 Record date 27 January 2006 Annual General Meeting 23 February 2006 Payment date 3 March 2006 Interim dividend 2006 Record date June 2006 Payment date July 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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