An Introduction to ITE Group plc June 2014
Introduction 2014 01
Introduction About ITE Founded in 1991; listed on LSE in March 1998 B2B exhibition organiser; over 90% of revenues from emerging markets Exhibitions market leader in Russian and CIS Leading market positions in Turkey and India Growing presence in China and Southeast Asia Annual revenues of circa 200m; headline PBT circa 60m; market cap > 600m 3
Introduction ITE World UK NORWAY POLAND GERMANY UKRAINE RUSSIA KAZAKHSTAN GEORGIA UZBEKISTAN TURKEY AZERBAIJAN KYRGYZSTAN TURKMENISTAN CHINA UAE INDIA MYANMAR THAILAND VIETNAM MALAYSIA SINGAPORE INDONESIA 4
Introduction Revenue by Sector and Region 2013 2012 Russia 62% 61% Central Asia 15% 16% & Caucasus Eastern & 15% 16% Southern Europe UK & Western 6% 6% Europe Asia 2% 1% 2013 2012 Construction 37% 42% Oil & Gas 13% 7% Food 10% 10% Travel 8% 9% Motor 5% 5% Fashion 6% 6% IT& Medical 5% 5% Other 16% 16% 5
Introduction Sector Strength ITE s leading events in 2013 (by profit) categorised by region and sector Construction Fashion Food Industrial Motor & Pharmaceutical Technology Travel & & Interiors & Textiles & Drink Technology Transport Oil & Gas & Healthcare & Telecoms Leisure Other Total Moscow 17 St. Petersburg 5 Novosibirsk 1 Krasnodar 4 Kazakhstan 7 Azerbaijan 2 Uzbekistan 2 Ukraine 5 Turkey 4 Malaysia 1 UK 2 Total 13 5 5 4 3 6 3 2 4 5 50 6
Introduction Divisional Analysis Year to 30 September 2013 2014 2013 Revenue Contribution Revenue Contribution Russia 121m 48.4m Central Asia 29m 10.4m S/E Europe Turkey 11m 4.4m Ukraine 18m 4.2m UK + W Europe 10m 3.0m Asia 3m 0.5m 105m 41.3m 27m 9.3m 10m 4.1m 18m 4.9m 10m 2.6m 2m 0.5m 7
Introduction Key Attributes Geographic Location: growing & developing markets Sector: big international business Brands: international and local recognition Venue: long established venue relationships Infrastructure: network of local offices and international sales capability Sales Visibility: forward contracted revenue Flexibility: of cost structure Balance Sheet: strong cash flow minimal gearing 8
Emerging Markets & Exhibitions 2014 02
Emerging Markets & Exhibitions Exhibition Facts The World s exhibition business $27.1bn 40%+ is in the USA $11.7bn 25%+ is in Western Europe $6.3bn 12%+ is in BRICs $3.5bn Developed West: 38% of World GDP 66% of exhibitions BRICs: 20% of World GDP 13% of exhibitions Source: AMR Globex Report 2013 10
Emerging Markets & Exhibitions Exhibition Facts 0.06% of GDP Size of exhibition industry in developed markets 11
Emerging Markets & Exhibitions Key Factors Behind the Growth of the Exhibition Industry GDP growth in country Sufficient venue capacity Population size Sub size industry structural growth 12
Emerging Markets & Exhibitions GDP Projections 10% 8% 7.3 GDP Growth 2013 2017 Source: IMF 6.7 6% 4% 6.0 5.5 5.2 4.9 4.7 4.7 4.5 4.2 4.0 3.9 3.8 3.5 3.5 3.1 Established presence Targeted presence 3.0 2% 2.3 1.9 1.2 1.2 1.2 1.2 0% 13
Emerging Markets & Exhibitions Structural Growth Potential GDP $tn 2014 Per capita $k GDP growth 2013 2017 Exhibition v GDP China 9.7 6.6 7.3% 0.02 India 1.7 1.4 6.7% 0.01 Russia 2.2 15.0 3.5% 0.04 Brazil 2.2 11.0 3.5% 0.03 S Korea 1.3 23.8 4.0% 0.02 Indonesia 0.9 3.5 6.0% 0.01 Mexico 1.4 11.2 3.8% 0.01 Turkey 0.9 10.7 4.5% 0.05 Singapore/Malaysia/Thailand 1.0 7.9 5.4% 0.04 GCC (inc Saudi Arabia) 1.2 29.2 4.2% 0.03 Benchmark 12.0 0.06% Source: AMR Globex Report 2013 14
Emerging Markets & Exhibitions Exhibition Size and Growth Expectations 11 16.7 USA Established presence Exhibitions Market Size $bn 10 2 1 2.5 UK 3.6 Germany S.E. Asia 2.4 0.8 8.9 China 2.2 Russia 2.2 Brazil Turkey 1.8 India Targeted presence Others # GDP in $trn* * 2013 estimates IMF 5 10 % Expected Exhibitions Industry CAGR (2012 2017) 15
Strategy 2014 03
Strategy Objective & Strategy Objective Create sustainable growth in headline earnings per share Strategy By building sustainable positions of market leadership in exhibitions in emerging markets 17
Strategy Strategic Priorities Improve existing positions Build brands Strategy Expand to new geographies & sectors Invest in staff 18
Strategy Regional Business Split by Profits* 2008 (A) 18% 4% 2014 (F) 20% 2018 (illustrative) 35% 50% 78% 20% 60% 15% Russia CIS Increasing geographical diversification RoW * Divisional profits before central overheads 19
Strategy Implementation of Strategy 2008 2013 Building stronger existing business Regional Russia Sector in Russia Bulking up Turkey Bulking up Ukraine 2013 2018 Diversification to new geographies India Southeast Asia China RoW to come 20
Strategy Expanding the Business Existing business New business Launches Pre 2012 Build & Interiors Oil & Gas Travel & Tourism Food & Drink Fashion & Clothing Trans & Logistics Metalworking Beauty Paper Coatings Russia Turkey Ukraine Kazakhstan Azerbaijan UK India SE Asia China RoW Post 2012 21
Strategy Sustainable Growth 2003 2013 70 34m excluding acquisitions + 3m 35 60 37m ex biennial ( 5m) & ex foreign exchange ( 4m) 59.4m 30 Headline profit before tax ( m) 50 40 30 20 19.3p 25 20 15 10 Headline diluted EPS (pence) 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 22
Appendices Appendix 1: ITE fundamentals i. Shareholder Structure @ 27 April 2014 ii. Management Team iii. Balance sheet iv. Key exhibitions v. Currency and hedging vi. Ukraine vii. GDP Growth in ITE s Markets viii. Revenue growth 2009 2013 ix. Acquisitions and Return on Investment 2009 2013 Appendix 2: Exhibition fundamentals i. Cash generation (i) ii. Cash generation (ii) iii. Growth iv. Venue relationships v. Flexibility of costs 2014 04
Appendix 1: ITE Fundamentals Shareholder Structure as at 27 April 2014 Schroders Blackrock Threadneedle Investments Standard Life Legal and General Scottish Widows NBIM Denver Investment Directors ESOT Other Institutions and individuals % 14.1 13.5 5.9 4.4 4.2 3.7 3.1 3.0 0.9 1.5 45.7 No. of Shares (millions) 35.5 32.5 14.8 11.0 10.4 9.1 7.8 7.5 2.3 3.8 115.2 Total Shares in issue 100 249.7 Options in the money: 0.2 0.4 Management including options in the money 1.1 2.7 Free float (Excluding Directors & ESOT) 97.6 Average daily trading volume (6 months) 0.8 24
Appendix 1: ITE Fundamentals Management Team Marco Sodi Chairman John Price Russell Taylor Company Secretary CEO Neil Jones Suzanne King Alexander Shtalenkov Edward Strachan Stephen Keen Colette Tebbutt Nik Rudge Baris Onay Finance Director Corporate Development Director Regional Director Russia Regional Director Azerbaijan / Uzbekistan Construction Sector Fashion Sector Regional Director Europe / Asia / Kazakhstan Digital / Data 25
Appendix 1: ITE Fundamentals Consolidated Balance Sheet Mar 14 (un audited m) Mar 13 (un audited m) Non Current Assets Goodwill & intangibles 118.4 137.5 Other non current assets 58.0 23.9 176.4 161.4 Current Assets Trade debtors 29.3 33.0 Prepayments 27.2 28.5 Net (debt)/cash (1.8) 21.7 54.7 83.2 Creditors Deferred revenue 91.4 106.5 Trade & other payables 22.1 30.3 Deferred consideration 10.3 0.8 Deferred tax 10.9 13.0 Provisions 0.6 1.3 135.3 151.9 Net Assets 95.8 92.7 26
Appendix 1: ITE Fundamentals Key Exhibitions (in 2014 Gross Profit order) Rank Event Location 2014 m² sold 2013 m² sold 1 MosBuild Moscow 65,300 68,700 2 Moscow International Travel & Tourism (MITT) Moscow 20,300 19,500 3 World Food Moscow Moscow Sept 14 24,900 4 Turkeybuild (YAPI) Istanbul 36,300 36,200 5 MODA UK Birmingham 16,500* 35,400 * Spring event only 45% 31% 13% 11% 27
Appendix 1: ITE Fundamentals Currency of Invoice Currency of invoice 2014 (F) % Average Translation Rate FY 14 (YTD) % change FY 13 EUR 40 1.20 1% RUB 35 58.9 20% 75% TRY 5 3.6 24% UAH 2 18.3 45% KZT 3 29.5 27% USD 4 1.64 5% 25% GBP 7 1 n/a Other 4 n/a n/a 28
Appendix 1: ITE Fundamentals Currency Hedging EM Currencies Local currency pricing to local customers Local revenue = local costs = high level of natural hedge EM currency profits < 10% of group HPBT International pricing to local customers Hard currency pricing/local currency invoicing > 50% of group HPBT Short term exposure to currency movements 11 Rouble = 0.5m Long term EM currency movements passed to customers International pricing to International customers Hard currency pricing / hard currency invoicing circa 40% of group HPBT Exposure to / movements 11 Cent = 0.3m Forward cover on / 85m @ 1.19 (2014 2017) 29
Strategy Ukraine All ITE events are in Kyiv All events running Financial impact in FY14 = 2.5m FY15 assume status quo Lviv Kyiv Slavyansk Donetsk Odessa 30
Appendix 1: ITE Fundamentals GDP Growth in ITE s Markets 2014 GDP growth forecast % 2015 GDP growth forecast % Russia 0.2 1.0 Kazakhstan 5.7 6.1 Azerbaijan 5.0 4.6 Uzbekistan 7.0 6.5 Ukraine N/A N/A Turkey 2.3 3.1 UK 2.9 2.5 India 5.4 6.4 China 7.5 7.3 Source: IMF World Economic Outlook Database, April 2014 31
Appendix 1: ITE Fundamentals Revenue Growth 2009 2013 2013 110 13 69 192 2012 105 3 65 172 2011 104 12 39 155 Revenues 2010 2009 90 98 3 20 8 11 113 117 Financial Recession Organic Biennial Acquisitions 20 40 60 80 100 120 140 160 180 200 220 m Revenue 32
Appendix 1: ITE Fundamentals Acquisitions and Return on Investment 2000 2013 2013 7m 18% 2012 15m 13% 2011 63m 16% 2013 Profits Capital invested = ROI % 2010 17m 21% 2009 6m 13% 10 20 30 40 50 60 70 Acquisition spend in year including deferred consideration ( m) 33
Appendix 2: Exhibition Fundamentals Cash Generation in Exhibition Business Cash positive model generates negative working capital Cash flow from operations headline PBT in a growing business Forward sales contracting = excellent sales visibility 34
Appendix 2: Exhibition Fundamentals Cash Generation in Exhibition Business 1200 1000 Cumulative Cashflow Exhibition 5000m² 1.2m revenue First stage collections Second stage collections & venue payments Circa 50% margin 000s 800 600 400 Deposits collected Visitor promotion On site stand construction 200 12 11 10 9 8 7 6 5 4 3 2 1 0 Months to opening of exhibition Currency & Sales 2013 Sales % of Revenue International Sales Euro based 77m 40% 45m Rouble based 58m 30% 1m Other 58m 30% 3m 35
Appendix 2: Exhibition Fundamentals Growth Pattern of an Exhibition Revenue / m² / profit gross margin gross margin Rapid development phase (due to market dynamics) gross margin 15% 45% 60% + Established Establishment phase 0 2,000m² 2,000 7,000m² 7,000m²+ 36
Appendix 1: ITE Fundamentals Venue Relationships Theme Rates Loans/Prepayments FY15+ Venue Location Protection Agreed 31 March 2014 Expocentre Moscow 2017 2015 Crocus Moscow 2015 2016 3.9m ExpoForum St Petersburg 2017 2017 Expocentre Novosibirsk 2021 2021 2.1m Expo City Yug Krasnodar 2016 2016 0.3m Atakent Almaty 2017 2017 0.0m IEC Kiev 2017 2017 0.3m Tuyap Istanbul 2016 2016 CNR Istanbul 2016 2016 2.0m Uzexpocentre Tashkent 2019 2019 0.2m Expocentre Baku 2015 2015 0.2m TOTAL 9.6m 37
Appendix 2: Exhibition Fundamentals Flexible Cost Structure of an Event Budget Actual Variance Sales 200 140 (60) (30%) Venue (50) (35) 15 (30%) Staff (25) (20) 5 (20%) Marketing (12.5) (12.5) 0 On site consumables (12.5) (9.5) 3 (24%) Gross Profit 100 63 (37) Margin 50% 45% (5%) 38