ITE Group plc. Preliminary Results. Year ended 30 September December 2018

Transcription

1 ITE Group plc Preliminary Results Year ended 30 September December 2018

2 Preliminary results: year ended 30 September 2018 Agenda FY18 - a year of transformation and growth Mark Shashoua Preliminary results Andrew Beach TAG programme update Mark Shashoua Q&A Mark Shashoua & Andrew Beach 1 /

3 Preliminary results: year ended 30 September 2018 FY18 - a year of transformation and growth TAG programme is delivering LFL revenues up 11.4% 1 Profit growth ahead of revenue growth Expect to reach most TAG targets earlier than planned Improved quality of portfolio Closed 28 less profitable events, taking total closures to 65 Disposed of MetalTech and ECMI in Malaysia Announced sale of 56 regional events in Russia Acquired 7 market-leading brands from Ascential during the year Announced acquisition of Mining Indaba after year-end Further strengthened our portfolio and accelerated our strategy 2 / 1 Like-for-like results are stated on a constant currency basis, after excluding events which took place in the current period but did not take place under our ownership in the comparative period and after excluding events which took place in the comparative period but did not take place under our ownership in the current period. For clarity, this excludes all: Biennial events; Timing differences (i.e. events that ran in only one of the current or comparative periods, due to changes in the event dates); Launches; Cancelled or disposed of events that did not take place under our ownership in the current year; Acquired events in the current period; and Acquired events in the comparative period that didn t take place under our ownership in the comparative period (i.e. they took place pre-acquisition).

4 Preliminary results: year ended 30 September 2018 Preliminary results Andrew Beach 3 /

5 Preliminary results: year ended 30 September 2018 Financial highlights FY18 FY17 Revenue 175.7m 152.6m LFL growth 11.4% Headline PBT 35.4m 31.6m LFL growth 20.4% TAG costs one-off 7.0m 5.0m ongoing 7.3m 2.8m Within guidance Net debt 82.7m 49.7m 113% cash conversion; 1.4x EBITDA 2 Headline diluted EPS 4.9p 5.0p 1 Dividend 2.5p 2.5p 1 Maintained at 2x EPS cover 4 / 1 Restated for rights issue. 2 Pro forma basis, adjusted as if Ascential Events acquisition completed on 1 October 2017.

6 Preliminary results: year ended 30 September 2018 Revenue bridge ( 2.8m) 15.6m ( 11.8m) 16.3m 5.8m 152.6m m Ascential 17.1 TradeLink (2.0) Net Other 0.5 m RUB (5.8) TRY (1.9) UZS (1.8) Other (2.3) m Russia 5.9 Turkey 1.8 Breakbulk 1.2 Other m FY17 Net Biennial & Timing Acquisitions & Disposals Launches & Cancellations FX Impact Underlying Trading FY18 5 /

7 Preliminary results: year ended 30 September 2018 Our Top 10 shows 1 in FY18 drove higher rates of revenue growth Top 10 35% Rest of portfolio LFL growth TOP 10 14% LFL growth TOTAL 11% Average yield TOP /sqm Average yield TOTAL 254/sqm 6 / 1 Excluding acquisitions.

8 Preliminary results: year ended 30 September 2018 Headline PBT bridge 0.1m 2.8m ( 1.8m) 1.5m m ( 4.4m) 5.6m Revenue translational (11.8) Cost translational m 31.6m m Ascential 3.5 Trading impact (4.0) B/S transactional FY TradeLink (1.2) B/S transactional FY Net other 0.5 Movement 2.2 FY17 Net Biennial & Timing Acquisitions & Disposals Launches & Cancellations FX Impact TAG Costs Underlying Trading FY18 7 / 1 B/S transactional for FY18 excludes 0.3m of FX relating to the Ascential Events acquisition which is included in the Acquisitions & Disposals bar.

9 Preliminary results: year ended 30 September 2018 TAG cost update One-off (Not included in Headline results) FY18 Ongoing (Included in Headline results) 8m- 10m 7m 14m- 17m 12m 8m- 9m 7.3m Guidance FY18 Actual FY18 Guidance to date Actual to date Guidance FY18 Actual FY18 > Total TAG one-offs will be within 20m 8 /

10 Preliminary results: year ended 30 September 2018 Create a scalable platform targets ahead of plan In-year net operating profit after tax ( NOPAT ) Positive ROI in FY Positive ROI Plan Update Within 3 years (FY20) Within 2 years (FY19) 2 ROI > WACC 1 Plan Within 4 years (FY21) Update Within 3 years (FY20) FY17 FY18 FY19 FY20 FY21 FY22 TAG plan Update 3 Cash Payback Plan Update Within 4 years (FY21) Within 3.5 years (FY21) 9 / 1 Based on May 2017 WACC.

11 Preliminary results: year ended 30 September 2018 Ascential events costs in line with guidance 2.5 months of trading Revenue 17.1m PBT 3.5m Exceptional costs FY18 actual Total forecast Total guidance (July 2018) Acquisition costs rights issue 9.0m 9.0m other 6.0m 6.0m 15.0m Integration costs 1.9m 8.5m 9.0m Synergy release costs 0.8m 2.0m 2.0m 17.7m 25.5m 26.0m 10 /

12 Preliminary results: year ended 30 September 2018 Ascential events integration on track Integration Synergies ( 4m- 5m annualised) Investment plans to drive FY20 growth ( 2m- 2.5m annualised cost) On track On track On track 11 /

13 Preliminary results: year ended 30 September 2018 Driving sustainable revenue growth and operating profit margins 4 Like-for-like revenue growth % LFL revenue growth 11% Entry Velocity 2017 Low single digit 5% Exit Velocity 2022 High single digit -10% -12% -8% 5 Operating profit margin % Entry Velocity 2017 Low twenties 35% 36% Operating profit margin 29% City consensus 23% 22% 25% 26% Exit Velocity 2022 High twenties 12 /

14 Preliminary results: year ended 30 September 2018 Ahead of plan on most TAG targets Target Original plan Status 1 Positive ROI Within 3 years Ahead 2 ROI>WACC Within 4 years Ahead 3 Cash payback Within 4 years Ahead 4 LFL revenue growth High single digit from FY22 Ahead 5 Operating profit margins High twenties from FY22 On track 13 /

15 Preliminary results: year ended 30 September 2018 FY19 contracted revenue LFL increase of 11% 89m 1,2 (of 147.0m 2 ) = 61% of total pro forma revenue 147m 3 (of 217.5m) = 68% of consensus FY18 FY19 14 / 1 Booked at 30 November 2017 at actual event FX rates. Expressed as a % of actual revenue. 2 Excludes Ascential acquired events and Russian non-core divested events. 3 Booked at 30 November 2018 at actual event rates for past events and at FX rates at 29 November 2018 for future events.

16 Preliminary results: year ended 30 September 2018 Financial takeaways Revenue growth ahead of FY22 TAG target Profit growth above revenue growth Operational cash flows remain strong Ascential events integration progressing well Excellent FY19 revenue visibility Early delivery expected on most TAG targets 15 /

17 TAG programme update Mark Shashoua 16 /

18 TAG programme update Setting the context May 2017 Limited organic growth % CAGR +9% TAG 153 CAGR 176 Decentralised model Large, unfocused portfolio Underinvested Revenue ( m) FY13 FY14 FY15 FY16 FY17 FY18 17 / 1 Excluding Ascential Events.

19 TAG programme update Our vision To create the world s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. 18 /

20 TAG programme update TAG - the Transformation and Growth programme TAG Programme Create a Scalable Platform Manage the Portfolio Product-led Acquisitions Underpinned by a performance-led culture 19 /

21 TAG programme update Create a scalable platform TAG programme Create a Scalable Platform best practice approach Create best practice functions & teams Change Operating Model Build a fit for purpose IT infrastructure & systems Invest in show operations Drive a performance culture Build capability & talent 20 /

22 TAG programme update Create a scalable platform Investing in show operations Ongoing review process for all core events established Core Russia grew new business by average of 15% over last 2 years Customer success over 5,000 contacts made to support Exhibitors Investing in high quality content to attract key visitors Core retention rates grew: 70% to 79% by volume 72% to 81% by value 21 /

23 TAG programme update Create a scalable platform Breakbulk Europe 2018 Sold 23% more space Overall attendance increased 45% with key visitors increasing 26% YoY Exhibitor Net Promoter Score improved 15% to % rebooked for next year s event on site 22 /

24 TAG programme update Create a scalable platform MosBuild 2018 Key visitors increased 14% Visitor Net Promoter Score improved 70% to % growth in total revenue rebooked on site MosBuild moves to Crocus Expo, Russia s largest venue, in /

25 TAG milestones ahead of plan 30 September September 2018 TAG programme update Create a scalable platform FY 2017 FY 2018 FY 2019 Create best practice functions & teams Invest in show operations Build a fit for purpose IT infrastructure & systems New onsite rebooking strategy launched Design of the ITE way Setup of Customer Success team Setup of dedicated Content team 1 st new hardware roll out Systems design & development Implementation of the ITE way Implementation of value-based pricing methods Roll out of show blueprint New show content deployed Launch of one view back office systems Launch of integrated sales and marketing systems Systems deployed in phased waves Drive a performance culture New sales incentive scheme launched Review of performance structure Development of Sales leadership Standardisation of Performance Management Build capability & talent Governance framework in place Recruitment of key organisational roles Roll out of dedicated specific training programmes 24 /

26 Scale TAG programme update - Manage the portfolio TAG programme Managing the portfolio Higher Event Quality & Potential Lower Growth Market tailwind Mature Stable, mature market Challenged Facing market or competitive threat 65 less profitable shows discontinued since start of TAG Large > 1.0m revenue Use full suite of transformational levers Enable sales & marketing to drive volume growth Pricing, show value and content to drive yield and retention Core Manage pro-actively, solve issues across commercial, content and operations Top priority Medium priority Successful disposal of TradeLink, ECMI and ITE Expo (Russian non-core) Medium 0.5m- 1.0m revenue Small < 0.5m revenue Invest in content and shows to drive great customer experience Non-Core Onsite re-booking, sales commissions Low priority Continue to review all options for less profitable shows 25 /

27 TAG programme update - Product-led acquisitions Ascential events integration update 100-day plan completed Organisational design completed Aligned reporting periods and accounting policies All HR policies aligned Office move to Paddington at beneficial rates Synergy savings on track 26 /

28 TAG programme update - Product-led acquisitions Applying TAG best practice to acquired events Product Reinvesting half of the synergies to drive 2020 growth Re-edit events to improve customer experience Focus on key accounts Grow international events to scale and investigate new markets Sector expansion in Germany Regional expansion in the US and China Investigate new markets over the longer term Re-edit events and add new sectors Visitor acquisition teams to target online and major chains 1 Focus on customer proposition 27 / 1 Moda was an existing ITE event.

29 TAG programme update - Product-led acquisitions Driving growth for FY20 Investment Phase Growth Phase FY19 FY20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 28 /

30 TAG programme update - Product-led acquisitions TAG programme Product-led acquisition: Mining Indaba Meets all of our TAG programme acquisition criteria Strong strategic rationale and complementary to Africa Oil Week Acquisition of Investing in African Mining Indaba for 30m Feb 2018 revenue of 7.2m; EBITDA of 3.7m Leading event in its industry Cash consideration funded through debt 29 /

31 TAG programme update Portfolio Evolution since May Revenue per event 1 0.5m Revenue per event 2 1.4m May 2017 Closed Divested Acquired Dec / 1 Based on FY16 reported revenue of 134.4m. 2 Based on FY19 market consensus of 217.5m.

32 TAG programme update A more balanced portfolio for the combined group Portfolio Top 10 Jun 2018 Portfolio Top 10 Dec 2018 Previous portfolio 1 MosBuild Russia 1 Spring Fair UK Top 10 as a % of our portfolio Current portfolio 1 2 Breakbulk Brands 3 WorldFood Moscow Russia 2 Bett Brands 3 MosBuild Russia 35% 48% 4 MITT Russia 5 6 AquaTherm Moscow Acetech Mumbai Russia Asia 7 Moda UK 8 RosUpack Russia 9 TurkeyBuild E/S Europe 10 YugAgro Russia 4 Autumn Fair UK 5 CWIEME Brands 6 Pure UK 7 Breakbulk Brands 8 9 WorldFood Moscow Mining Indaba Russia Brands 10 MITT Russia 11% 47% 14% 16% Top 10 Other 6% 6% Revenue by division2 23% 21% 27% 11% 7% 11% Russia Asia Central Asia E/S Europe Brands UK 31 / Note: Brands ranked by revenue. 1 Pro forma based on revenue, uncalendarised. 2 Bett, CWIEME and Mining Indaba classified under Brands; other acquired revenue under UK. Moda moved from Brands to UK.

33 TAG programme update Summary 11.4% LFL revenue growth, profit growth ahead of revenue growth Created smaller and stronger portfolio whilst delivering growth Made acquisitions to leverage our scalable platform Expect to be ahead on 4 out of 5 TAG targets 2019 trading in line with Board expectations 32 /

34 Q&A 33 /

35 Preliminary results: Financial analysis Year ended 30 September /

36 Divisional structure and acquired events Preliminary results: Financial analysis year ended 30 September 2018 Events Acquired from UK Brands Ascential Ascential Ascential Ascential Ascential Ascential Ascential Euromoney 35 /

37 Preliminary results: Financial analysis year ended 30 September 2018 Consolidated Income Statement Headline Results FY18 FY17 m m Revenue Gross Profit Gross Profit Margin 39% 39% Admin Expenses/Operating Income (39.1) (31.5) FX Profit from Associates Operating Profit Net Finance Costs (3.3) (3.1) PBT EPS 4.9p 5.0p 1 Statutory Reconciliation FY18 FY17 m m Headline PBT Adjusting Items (39.1) (34.8) Statutory PBT (3.7) (3.2) 36 / 1 Restated from YE17 EPS of 8.1p due to rights issue.

38 Preliminary results: Financial analysis year ended 30 September 2018 Divisional analysis FY18 FY17 Revenue HPBT Revenue HPBT m m m m Russia Asia Central Asia East/South Europe Brands UK > Strong performance of Core events, offset by currency impact > Largest allocation of TAG investment > Impact of biennial and acquisition > Profit supported by strong growth from Sinostar joint venture > Timing differences > Some recovery from oil prices > Biennial and fx impact > LFL growth in revenue and profits > Timing differences > Large TAG investment > Ascential Events acquisition (3 events post-acquisition) > Moda decline Other Income > Rental income on property subleases Central Costs (19.5) (16.1) > Planned TAG cost increases FX Gain > Balance sheet retranslation of monetary assets and liabilities Net Finance Costs (3.3) (3.1) > Interest on bank loans and bank charges, offset by deposit income Total /

39 Preliminary results: Financial analysis year ended 30 September 2018 Revenue by division FY18 Pro forma 1 FY17 Actual FY18 Actual UK 23% 27% Russia Central Asia 14% UK 14% Central Asia 11% 7% E/S Europe Brands 12% 47% Russia Central Asia 14% 42% Russia Brands 21% 11% Asia Asia 16% Brands 6% 10% Non-core 11% Asia 15% 9% E/S Europe E/S Europe Core 90% 38 / 1 After divestment of 56 Russian non core events and acquisition of Mining Indaba.

40 Preliminary results: Financial analysis year ended 30 September 2018 Volume & revenue by division Metres Revenue 000s 000s m m FY18 FY17 FY18 FY17 Russia LFL volumes up 4% Asia LFL volumes up 2% Central Asia LFL volumes up 7% East/South Europe LFL volumes up 3% Brands LFL volumes up 12% UK LFL volumes down 13% Total /

41 Performance analysis Preliminary results: Financial analysis year ended 30 September 2018 Metres Revenue Gross Profit 000s m m Results from events Biennial (10) (2.0) (0.9) FY17 Timing (3) (1.1) (0.8) Non-recurring (26) (4.2) (0.5) Disposals (12) (2.7) (1.3) Recurring events b Acquisitions Launches FY18 FX translation - (11.8) (5.5) TAG costs - - (1.3) LFL change a Recurring events Timing FY18 Biennial Results from events LFL growth (a/b) 3% 11% 13% 40 /

42 Preliminary results: Financial analysis year ended 30 September 2018 Revenue by sector FY18 (FY17 figures in brackets) Build & Interiors (28%) 6% 5% 3% 23% Food & Packaging (16%) Fashion (7%) 7% Oil, Gas & Energy (10%) 7% Manufacturing & Industrial Tech (9%) Transport & Logistics (7%) 8% 16% Travel & Tourism (8%) 8% 8% 9% Retail Advanced Technologies (6%) Beauty & Healthcare (6%) Connect (3%) 41 /

43 Preliminary results: Financial analysis year ended 30 September 2018 Adjusting items FY18 FY17 m m Amortisation of acquired intangible assets Non-cash (13.6) (14.1) Impairment of assets Non-cash (7.5) (14.3) Derecognition of goodwill on cessation of trade Non-cash (2.2) - Operating items Gain/(loss) on disposal Cash 2.9 (3.7) Transaction costs Cash (8.0) (0.4) Integration costs Cash (2.7) - Restructuring costs Cash (7.6) (5.0) Tax on income from associates and joint ventures Non-cash (1.6) (1.5) Financing items Revaluation of liabilities on completed acquisitions Non-cash Total (39.1) (34.8) 42 /

44 Preliminary results: Financial analysis year ended 30 September 2018 Headline diluted EPS bridge (0.8p) 1.5p 0.1p (0.1p) (0.8p) 5.0p 1 4.9p FY17 TAG costs Increase in underlying profits Decrease in NCI profits Change in effective tax rate Change in no. of shares in issue FY18 43 / 1 Restated for rights issue.

45 Preliminary results: Financial analysis year ended 30 September 2018 Consolidated balance sheet FY18 FY17 m m Goodwill and intangible assets Non-current assets Other non-current assets Trade debtors Current assets Prepayments Other current assets (76.9) (54.2) Net debt (82.7) (49.7) Deferred revenue (100.6) (82.6) Trade and other payables (46.5) (26.5) Creditors Deferred consideration and equity option liabilities (15.2) (13.5) Net deferred tax liabilities (36.2) (7.1) Provisions (3.1) (0.8) (284.3) (180.2) Net assets /

46 Preliminary results: Financial analysis year ended 30 September 2018 Future consideration Deferred Consideration Cash Settle m Financial Year Payable ABEC Ascential Events Other Puts & Calls - Cash Settle m Financial Years 1 Fasteners Indobuild Scoop (for 5% MI) Puts & Calls - Equity Settle m Financial Years 1 ABEC / 1 Earliest financial year Puts & Calls are exercisable.

47 Preliminary results: Financial analysis year ended 30 September 2018 Banking facility Net debt m 1.4x headline EBITDA At 30 September 2018 Available Facility 170m (and 30m accordion) Drawn Facility 134m 1 Term loan 75m amortising at 10m / 17.5m / 17.5m / 30m; balance RCF Undrawn 36m Interest Rate LIBOR % % 134m Drawn 2.5x net debt:ebitda covenant Note: Post year-end 20m drawn for Mining Indaba acquisition Pro forma net debt:ebitda post this acquisition and Russian non-core divestment 1.7x Term November / 1 Shown on Balance Sheet as 132m, net of capitalised refinance fees.

48 Preliminary results: Financial analysis year ended 30 September 2018 Net debt bridge September 2017 Cash Flow from Operations (excl. TAG) Dividends & Tax TAG Acquisition net of rights issue FX Cash & cash equivalents held for sale September 2018 ( 49.7m) 41.4m ( 20.2m) m ( 14.7m) ( 82.7m) Dividends (10.6) Tax (9.6) m Ongoing (7.5) ( 37.2m) One-off (5.6) Capex (1.6) ( 0.1m) ( 2.2m) 47 /

49 Preliminary results: Financial analysis year ended 30 September 2018 Venue relationships Venue Loans / Prepayments FY18 FY17 m m Russia Central Asia Eastern & Southern Europe Total ( 2.8m < 1 Yr, 2.1m > 1 Yr) /

50 Preliminary results: Financial analysis year ended 30 September 2018 Cash generated from operations FY18 FY17 m m Statutory operating loss (1.6) (4.2) Adjustments Operating cash flows before movements in working capital Working capital movements Cash generated from operations FY18 FY17 m m Cash generated from operations Interest received Interest paid (3.9) (3.8) Tax paid (9.6) (6.8) Free cash flow from the business /

51 Preliminary results: Financial analysis year ended 30 September 2018 Shareholder structure as at 31 October 2018 Country of Shareholder % of Total Shares No. of Shares (millions) Brandes Investment Partners USA RWC Partners UK Fidelity Management & Research UK, USA Invesco Canada Amiral Gestion France Bestinver Asset Management Spain Mawer Investment Management Canada Legal & General Investment Management UK BlackRock UK, USA Neptune Investment Management UK Directors Other institutions and individuals Total Shares in Issue /

52 TAG programme - Product-led acquisitions Example Screening Criteria Size Distinct Customer Value Proposition Structurally Attractive Market for Exhibitions High Growth Underlying Market Organic Revenue Growth and Profit Margin International Roll Out Potential ROIC EPS Accretion M&A funnel Phase 1 Quick screening Phase 2 Thorough analysis Phase 3 Due diligence Phase 4 Transaction Objective be effective identify pearls don t miss risk fair deal Activity Screen maximum # of shows employing set of clear criteria Assessment of concrete potential for ITE Strategic / market DD Financial DD Synergy estimate Integration planning Final price negotiation Deal structuring (e.g. earnout) 51 /