Chairman’s Statement

Group performance
The Group has delivered a record financial performance, reporting revenues of £116.7 million and Headline pre-tax profits of £45.8 million. Reported pre-tax profits were £41.5 million, a 21% increase from last year and diluted earnings per share increased by 37% from 9.3p to 12.7p. There were several factors influencing these results, notably the downturn in the world economy which had a growing impact on trading conditions throughout our markets as the year progressed, the benefit of our stronger biennial pattern of events, newly acquired events and beneficial currency movements. The economic downturn reduced the Group’s like-for-like* volume sales by more than 20%, the effect of which was largely offset by changes in the Sterling-Euro exchange rate. The Group’s balance sheet at the beginning of the year was well positioned to deal with the effects of the economic downturn with £29.1 million of net cash and, after investing £8.0 million in expanding the business, the Group’s net cash position at 30 September 2009 was £23.1 million.

Strategic Progress
ITE’s primary strengths are its strong exhibition brands in the markets of Russia and the CIS allied to the reputation and breadth of its international sales network. Together these assets have given the Group a unique opportunity to capitalise on the strong growth experienced by the Russian and CIS economies over the last five years. More recently the strategy has been to leverage those strengths by both expanding the portfolio of events in other emerging markets and by enhancing the reach and effectiveness of our international sales network. This year saw a continuation of this strategy with the addition of the Eastern Mediterranean International Travel and Tourism exhibition based in Istanbul which has enhanced the Group’s portfolio of travel events.

Board and Management
Neil Jones joined the Board as Group Finance Director last November. He has been able to make an immediate contribution with his existing knowledge of the industry. There were no further changes to the Board during the year. The success of the business largely depends on the relationships that our staff build and maintain with our customers, and I should like to extend my thanks to all the staff who have worked so hard to make this year’s result achievable.

Dividend 
The Board has a progressive dividend policy and is recommending a final dividend of 3.9p per share which, together with the interim dividend of 1.6p, makes a total dividend of 5.5p (2008: 5.3p) for the year. The increase reflects the Group’s strong cash position and its confidence in the future prospects of the business.  The payment date of the proposed final dividend is being brought forward to February 2010 to achieve a better spread of returns to shareholders during the year.

Outlook
The current trading conditions in our core markets are now stable, albeit at a lower level than this time a year ago, although the Group has yet to experience an upturn in booking patterns. The economic prospects in the Group’s core markets are for a return to economic growth over the course of calendar year 2010, with stronger growth expected thereafter. The nature of the exhibition business is such that this economic recovery is not expected to feed into the Group’s financial results until the middle of next year. As anticipated, this ‘late-cycle’ characteristic means that like-for-like volume sales for 2010 could be up to 10% lower than 2009. At 27 November forward bookings for 2010 stand at £56 million.

The Group has reported strong financial results for the year, has a strong balance sheet, and is well positioned to benefit from a recovery and capitalise on new opportunities to expand the business. Accordingly the Board remains confident of ITE’s future prospects.  

Iain Paterson
Chairman
30 November 2009

* Like-for-like excludes the effect of significant non-annual events, acquisitions and disposals. 

Chief Executive’s Statement

Results for the 2009 Financial Year
Reported revenues for the year of £116.7 million are a 6% improvement over last year’s £109.8 million and were earned from volume sales of 423,000m2 (2008: 500,000m2). The volume sales pattern gives a better indication of the trading conditions experienced during the year. The Group’s like-for-like volume sales on 1 October 2008 were circa 10% ahead of the previous year’s figures. By the end of December the onset of the financial crisis had caused like-for-like volume sales to fall marginally behind the previous year’s, and over the full year were more than 20% below the comparable 2008 figure.   The mitigating factors that helped reported revenues increase despite the deterioration in underlying trading were a first time contribution from acquisitions of £9.4 million, a net biennial revenue contribution of £3.7 million and an estimated £10.5 million of benefit from the reporting of Dollar and Euro revenues in Sterling. Average exchanges rates for the year reflected Sterling being circa 12% weaker against our principal currency revenues compared to the previous year.

Against this backdrop of reducing volume sales, costs were reduced in line with the size of exhibitions. Reducing venue commitments and staffing costs were the main focus, resulting in a gross margin for the year of 52%, consistent with the margins we normally report in our biennially stronger year. Overheads were also reduced and are maintained this year at 15% of revenue producing an operating margin of 37% for the year. Headline profits before tax of £45.8 million are comfortably ahead of last year’s £37.0 million, helped by, acquisitions, the biennial pattern and net foreign exchange gains made in the year.

The Group reduced its ongoing tax rate to 26% from 32% last year, reflecting improved tax management and falling tax rates in the Group’s principal trading regions, notably Russia.

The improved financial position, lower tax rate and lower average number of shares in issue resulted in diluted headline earnings per share rising 41% to 14.2p (2008: 10.1p). This is a strong financial result in a year where actual trading activity was more than 15% down on the previous year. The integration of new acquisitions, the reduction and control of costs and the successful management of its events leave the Group on an excellent footing from which to progress next year.

Trading and operating performance in 2009
The principal factors affecting individual shows and sector performance this year were the proportion of international exhibitors in an event and when the event took place in the calendar. International customers reacted less severely than smaller local market customers and different regions reflected the economic downturn at different times and with varying levels of severity.  The strongest performing events all took place in the first quarter of the year where bookings were mostly made in pre-crisis conditions, contrasting with events taking place in the final quarter where bookings were all made into a post-crisis environment. The revenues earned in the Group are largely denominated in Euros and the relative strength of this currency against local currencies and against Sterling meant that all regions reported better revenue results than volume results.

The construction sector has been the biggest contributor to ITE’s growth over the last five years, and unsurprisingly was particularly exposed to a tightening of credit facilities and international investment. However, the biggest event in our portfolio, Mosbuild, benefited from high levels of early bookings from international customers. Across the Group, the sector experienced a reduction of 25% in volume sales representing a balance between the Spring events which had some pre-crisis bookings in their figures and the Autumn events which reported larger reductions in volume sales. The oil and gas sales portfolio of events reported sales volumes circa 20% lower than last year on a like-for-like basis. The low oil price detrimentally affected sentiment in the sector for the Spring events, and for the important biennial Moscow International Oil and Gas Exhibition. Latterly a recovery in oil prices to circa $70 per barrel has improved the mood of the sector and helped support the performance of the Kazakhstan International Oil and Gas Exhibition which took place in the first part of the 2010 financial year.  The Group’s travel exhibitions were a relative out-performer with sales volumes reducing by only 15%, reflecting both their Spring season timing and high proportion of international customers.

In 2009 the Group ran 179 events (2008: 159), the increase largely being attributable to the acquired portfolio of smaller events in our Novosibirsk office. New launch activity was mostly stalled in this year though there will now be opportunities to step into gaps where competitors have failed. A detailed analysis of revenues and gross profits from our exhibition and conference business is set out below. 

The Group’s annually recurring exhibition business (on a volume basis) is 10% less than last year, but through the beneficial movement in currency rates together with good cost control, the Group has been able to report higher revenues and gross profits from this lower annually recurring volume base. The Group’s average sales rate in Sterling terms of £268 per m2 is a 15% increase on last year’s average sales rate reflecting changes in currency and mix of events. The average sales rates for the year were €1.21: £1 and $1.57: £1 reflecting the fact that a large proportion of our business was booked relatively early in the year before Sterling reached its lowest point. 

ITE’s Strategy

ITE’s primary business objectives are to:

• Create sustainable growth in headline earnings per share; and
• Create and maintain sustainable positions of market leadership.

ITE’s strategy for achieving these objectives is to continue to strengthen its existing positions of market leadership by investing in the quality of it’s events, and to expand the business model into other market areas or geographies where there is the potential to create strong market positions. In the Group’s existing markets this means searching out new sectors and regions in which to acquire or develop businesses. ITE’s strengths lie in its proven ability to deliver international sales and its search is focused around those businesses where there is potential for the participation of international exhibitors, and also look to develop new complementary geographies.

The key performance indicators that ITE uses to measure progress against its objectives and performance this year are set out below:

ITE has sought to develop and build upon its main business strengths:

International sales reach
ITE’s discerning quality in its business is its reputation with its international exhibiter base. ITE is unique in owning several sales offices which exist solely to make ‘outbound sales’ to its exhibitions and events in Russia and the CIS.  The Group focuses its staff on selling its own exhibitions, which has created a specialist skill base in promoting sales into the Russian and CIS economies. In 2009 international sales accounted for 43% of total square metres sold in the year (2008: 43%); through its London office (17%), its German office (4%), its Chinese office (3%) and its Turkish office (3%). This international sales reach differentiates us from locally based competitors. ITE’s ability to add value to acquired businesses relies on it being able to promote the sale of new exhibitions to its existing international customer base. ITE has recently invested in the development of its international sales network by launching new offices in Spain, USA, Poland and Dubai.

Established market leading brands
ITE has established strong brand identity in certain sectors of exhibitions. In particular the ‘build’ brand in construction, the ‘International Oil and Gas Events’(‘IOGE’) brand, the ’International Travel and Tourism’ (‘ITT’) and World Food brands have a strong reputation and identity with customers, earned through more than fifteen years of sustained good performance. These brands and their attached reputation are not restricted to the Russian and CIS markets and the Group can, and aspires to, expand the use of these brands into new markets.

Local presence
ITE’s brands have built their reputation through sustained delivery of successful exhibitions to customers. The foundation of this is our local office presence, with 8 principal offices running more than 170 events per year. ITE’s offices, like its exhibitions and brands, have been in place for over 15 years and today employ over 800 people. The local offices both organise all details of staging an exhibition, but critically own and manage the databases of visitors necessary for making an exhibition successful for our customers. ITE’s local office skills in Russia and the CIS are a differentiating factor from other international organisers – and building a local office remains a barrier to entry for new organisers wishing to establish themselves in these markets.   

Venue relationships
ITE has established special relationships with the venues that host its exhibitions. Historically, ITE has supported the development of venue facilities – which in turn has helped the Group’s exhibitions to grow. This ‘partnership’ relationship has established for ITE the rights to run its main exhibition themes in its chosen venues at the time of its choice. The Group’s track record in developing good quality exhibitions also makes it the ‘organiser of choice’ for venues.

ITE’s international sales expertise, brand identity, local office strength and venue relationships give it a unique position in Russia and the CIS market place. To run successful international exhibitions, which are generally the ‘must do’ events in a country, an organiser needs both local presence and international sales strength. ITE has established this position in its main sectors in its core markets, and its brands and venue relationships make it hard for new entrants to successfully compete with ITE’s events in these markets.  Two of these assets – the brand and the international sales skills are portable and can help ITE to establish itself in other emerging markets.