ITE Group plc. Preliminary Results. Year ended 30 September November 2017

Transcription

1 ITE Group plc Preliminary Results Year ended 30 September November 2017

2 Agenda Introduction Financial Update Transformation and Growth Programme Update Q&A Mark Shashoua Andrew Beach Mark Shashoua Mark Shashoua / Andrew Beach 1 /

3 Introduction > Strong overall trading performance > First year of LFL revenue growth in four years > Success of early TAG initiatives > Top 10 events grew 15%; forward visibility of FY18 revenues is high 2 /

4 Preliminary results: Year ended 30 September /

5 Preliminary Results: Year Ended 30 September 2017 Highlights of FY17 > Strong trading performance Revenue 152.6m; HPBT 31.6m; HDEPS 8.1p > LFL growth for the first time since 2013 LFL revenue growth of 5%; LFL profit growth of 2% > Moscow stabilised; challenges elsewhere Moscow LFL volumes up 9%; Rest of Russia / Central Asia challenged > Very strong cash generation Net debt of 49.7m (<1.5x EBITDA), a 16% reduction YOY > TAG investment on track Expenditure within budget > Final dividend of 2.5p Total dividend of 4p in line with policy 4 /

6 Preliminary Results: Year Ended 30 September 2017 Revenue bridge 6.7m 134.4m ( 3.9m) 5.4m ABEC (prior year) Gehua (current year) ( 1.7m) 11.6m m RUB 10.3 INR 2.2 UZS (1.0) Other 0.1 m Russia 7.1 Other (0.4) 152.6m FY 2016 Net Biennial & Timing Acquisitions & Disposals Launches & Cancellations FX Impact Underlying Trading FY /

7 Preliminary Results: Year Ended 30 September 2017 Headline PBT bridge ( 2.5m) 1.2m ( 0.6m) 0.7m ( 2.8m) 36.5m m Revenue translational 11.6 ( 1.4m) 0.7m Cost translational (9.2) Trading benefit 2.4 B/S transactional FY m B/S transactional FY16 (2.0) Movement (1.7) FY 2016 Net Biennial & Timing Acquisitions & Disposals Launches & Cancellations FX Impact TAG Costs Central Costs Adjustment Underlying Trading FY /

8 Preliminary Results: Year Ended 30 September 2017 Divisional analysis FY17 FY16 Revenue ( m) HPBT ( m) Revenue ( m) HPBT ( m) Russia > Stabilisation of Moscow offsetting some challenges regionally Asia > Impact of acquisitions and fx gains, offset by underlying trading Central Asia > Declines in two of the three countries in the region East/South Europe > Turkey decline, offset by strong growth in Ukraine Brands > Timing (BB Americas) plus AOW and Moda declines Other Income > Rental income on property subleases Central Costs (16.2) (11.9) > TAG costs impact and YOY central cost increases to deliver strategy FX Gain > Balance sheet retranslation of monetary assets and liabilities Net Finance Costs (3.1) (3.1) > Interest on bank loans and bank charges, offset by deposit income Total /

9 Preliminary Results: Year Ended 30 September 2017 Our Top 10 shows are driving higher rates of revenue growth Top 10 35% Rest of portfolio LFL growth Top 10 15% LFL growth TOTAL 5% Average yield Top /sqm Average yield TOTAL 224/sqm 8 /

10 Preliminary Results: Year Ended 30 September 2017 TAG financial update FY17 One-off (Not included in Headline results) FY17 Ongoing (Included in Headline results) 5m 6m- 7m 2.8m 3.0m Actual Guidance Actual Guidance > FY18 / FY19 planned one off at c 10m and c 5m In line with guidance (FY18: 8-10m; FY19: 4-6m) > Total one off will be within 20m In line with guidance ( 20m) 9 /

11 Preliminary Results: Year Ended 30 September 2017 Net debt bridge September 2016 Cash Flow from Operations Dividends & Tax Acquisitions & Deferred Consideration TAG Other September 2017 m Gehua 7.9 ( 16.2m) Fasteners 0.8 ABEC 0.7 ( 59.1m) 48.9m* m Dividends 9.4 Tax 6.8 Other 0.6 ( 10.0m) m One off 4.5 Ongoing 2.2 ( 6.7m) m Interest 3.1 Capex* 2.5 FX changes 1.0 ( 49.7m) ( 6.6m) * Excluding TAG 10 /

12 Preliminary Results: Year Ended 30 September 2017 Debt refinance: new 100m facility Additional headroom for future Broader banking syndicate for future growth Covers full period of TAG programme More favourable covenants More favourable pricing Greater flexibility on acquisitions and disposals 11 / 100m facility (+ 20m accordion) over 4 year term; net debt leverage at <2.5x (previously gross debt leverage at <2x); lower interest rates/ commitment fees/arrangement fees); 4 banks: HSBC, Barclays, Citi, Commerz; increase in acquisition baskets and flexibility on use of disposal proceeds

13 Preliminary Results: Year Ended 30 September 2017 Contracted revenue LFL increase of 20% 81m* (of 152.6m) = 53% of consensus 98m** (of 159m) = 62% of consensus *% booked at 24 November 2016 at actual event FX rates. Expressed as a % of actual revenue. **% booked at 24 November 2017 at actual event rates for past events and at FX rates at 23 November 2017 for future events. 12 /

14 Preliminary Results: Year Ended 30 September 2017 Financial takeaways Strong like-for-like revenue growth first time in four years TAG expenditure on track Cash conversion strong due to onsite rebook Improved FY18 revenue visibility, up 20% LFL Comfortable level of leverage and successful refinance Dividends maintained at >2x cover 13 /

15 Transformation & Growth programme update 14 /

16 Our vision To create the world s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. 15 /

17 TAG - the Transformation & Growth programme TAG Programme Create a Scalable Platform Manage the Portfolio Product-led Acquisitions Underpinned by a performance-led culture 16 /

18 TAG programme Create a Scalable Platform best practice approach Create best practice functions & teams Invest in show operations Change Operating Model Build a fit for purpose IT infrastructure & systems Drive a performance culture Build capability & talent 17 /

19 TAG milestones high level representation on track 30 September 2017 FY18 FY19 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 18 /

20 Creating a Scalable Platform Best practice functions & teams Transitioning to a more centralised model underway Event Event Event Event > Moving from decentralised to a centralised model that supports a Product-led business Region Group Region > First steps made to create strong operational Head Quarters and instil best practice Event Event Event Event Event Event Region Event Event 19 /

21 Creating a Scalable Platform Best practice functions & teams Senior management & heads of best practice now in place CEO Regional Directors & Chairmen CFO COO Strategy Director HR Director Finance Legal Best Practice Business Support Product Strategy M&A 20 /

22 Strategy Marketing (Content) Sales Performance Finance IT HR Operations / Technical Strategy Marketing (Content) Sales Performance Finance IT HR Operations / Technical Introduced matrix management structure Best Practice Functions Creating a Scalable Platform Best practice functions & teams HQ defines the ITE Way for delivering functional services Regional Director Regions apply the ITE Way when delivering functional services Event Directors Local & International Sales Portfolio Director Event Directors Local & International Sales Event teams receive best practice functional services Regional Functions Event Teams 21 /

23 Creating a Scalable Platform Best practice functions & teams Creation of the Blueprint underway - the ITE way Event Cycle New Business Lead Generation Yield Management Launches/NPD Account Management Customer Success Visitor Acquisition Rebook Product Strategy Content Product Labs Event Operations (On-site) Systems Commercial Finance (Reporting/budgeting) Rolled Out In Design Phase 22 /

24 Creating a Scalable Platform Invest in Show Operations Focus on drivers of event performance Sales Marketing Content Customer Success Event Operations Targets & Incentives Rebooking blueprint launched Lead generation blueprint launched Heads of Content appointed in London, Russia and Turkey New customer service team put in place for Exhibitors New Events operations team to ensure high quality customer experience Increased Sales Increased New Business An engaged audience Improved Retention Improved Customer Experience 23 /

25 Creating a Scalable Platform Invest in Show Operations Product strategy launched to help drive our product-led vision Product Strategy Implementation Show Date Product Update Report Define Product Strategy for next 2 shows including: Customer proposition Pricing Floorplan Onsite rebooking plan 8-10 weeks pre show Product Development Lifecycle 8 weeks post show Product Development Review Review previous Show performance Define changes that need to be made to Product Strategy Links to budgeting process Product Strategy Implementation 24 /

26 Creating a scalable platform Build a fit for purpose IT infrastructure system Our vision for global IT across the Group Manageable Simple Global Visible Mobile Manageable Infrastructure Technically Simple Globally Consistent Deliver Visibility Enable Mobility > CRM and HR systems now contracted > Implementation of CRM and HR systems underway > Benefit: centralised IT will support a global One ITE, real-time view 25 /

27 Creating a Scalable Platform Drive Performance Culture Invigorating and energising our people > Introduction of monthly sales targets > KPIs established and new commission schemes rolled-out > Sales training launched across each region > Reward & recognition (Club Elite) rolled out beyond sales to reward success across ITE > Similar approach now extended to marketing, content and support services 26 /

28 Creating a Scalable Platform Build capability & talent Embedding a culture of engagement > Opened new communication channels - CEO breakfasts > Town Halls showcasing event successes globally > Launching a new, more interactive intranet > Engagement surveys > Working towards one ITE 27 /

29 Scale TAG programme manage the portfolio Higher Event Quality & Potential Lower Growth Market tailwind Mature Stable, mature market Challenged Facing market or competitive threat 37 less profitable shows discontinued in FY17 Large > 1m revenue Medium m revenue Small < 0.5m revenue Use full suite of transformational levers Enable sales & marketing to drive volume growth Invest in content and shows to drive great customer experience Pricing, show value and content to drive yield and retention Manage pro-actively, solve issues across commercial, content and operations Non-Core Top priority Medium priority Low priority 28 /

30 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) 29 /

31 2018 Priorities 2017 = getting to the starting line 2018 = out of the blocks Investing up to 10m of one-off costs in TAG this year Develop systematic lead generation to drive new business Strengthen content to attract new visitors Complete roll-out of customer service to improve retention Ongoing portfolio management with focus on marketleading events 30 /

32 Summary TAG set to deliver high single digit revenue growth and margins in high 20s from 2022 First like-for-like growth since 2013 despite challenging markets Early success from instilling sales-led performance culture Strong team now in place to implement TAG Refinancing gives us greater flexibility to deliver our plans TAG delivers increased sustainable shareholder returns 31 /

33 Q&A 32 /

34 Financial analysis Year ended 30 September /

35 Financial Analysis: Year Ended 30 September 2017 Consolidated income statement Headline Results YE17 YE16 m m Revenue Gross Profit Gross Profit Margin 39% 44% Admin Expenses/Operating Income (31.5) (25.6) FX Profit from Associates Operating Profit Net Finance Costs (3.1) (3.1) PBT EPS 8.1p 10.7p Statutory Reconciliation YE17 YE16 m m Headline PBT Adjusting Items (34.8) (40.6) Statutory PBT (3.2) (4.1) 34 /

36 Financial Analysis: Year Ended 30 September 2017 Revenue by region YE 2015 YE 2016 YE % 18% 12% 13% 135.8m 53% 14% 11% 39% 134.4m 152.6m 47% 14% 20% 3% 16% 13% 16% Russia Asia Central Asia E / S Europe Brands 35 /

37 Financial Analysis: Year Ended 30 September 2017 Volume & revenue by region m² 000s Revenue FY17 FY16 FY17 FY16 Russia m 52m LFL volumes up 9% Asia m 17m LFL volumes down 2% Central Asia m 22m LFL volumes down 9% East/South Europe m 19m LFL volumes down 8% Brands m 24m LFL volumes down 7% Total m 134m 36 /

38 Financial Analysis: Year Ended 30 September 2017 Revenue by sector Revenue by Sector YE 2016 figures in brackets Advanced Technologies (5%) 7% 7% 6% 6% Beauty & Healthcare (5%) Build & Interiors (26%) 9% 16% 28% Connect (6%) Oil, Gas & Energy (9%) Fashion (9%) Food & Packaging (13%) 7% 10% 3% Manufacturing & Industrial Tech (10%) Transport & Logistics (10%) Travel & Tourism (7%) 37 /

39 Performance analysis Financial Analysis: Year Ended 30 September 2017 Metres Revenue Gross Profit 000s m m Results from events Biennial (41) (4.6) (1.2) YE16 Timing (12) (4.5) (2.8) Non-recurring (34) (4.9) (1.5) Disposals - (0.6) (0.2) Recurring events b Acquisitions Launches YE17 FX translation TAG costs - - (2.0) Like-for-Like change a (2) Recurring events Timing (0.2) YE17 Biennial Results from events LFL growth (a/b) 0% 5% 1% 38 /

40 Financial Analysis: Year Ended 30 September 2017 Key exhibitions in YE17 gross profit order Rank Event Location YE17 m² sold YE16 m² sold LFL volume growth 1 MosBuild Moscow 34,525 31,809 9% Revenue by Event 2 WorldFood Moscow Moscow 21,314 20,187 6% Top 1-5 Top 6-10 Top % 21% 13% 3 MITT Moscow 13,767 11,658 18% 4 TurkeyBuild Istanbul Istanbul 33,003 38,383-14% Rest 21% 5 Yugagro Krasnodar Krasnodar 31,725 29,012 9% 6 Aquatherm Moscow Moscow 12,766 11,891 7% GP by Event 7 Africa Upstream Cape Town N/a N/a N/a Top 1-5 Top 6-10 Top Rest 25% 27% 30% 18% 8 Breakbulk Europe Antwerp 7,163 6,777 6% 9 Rosupack Moscow 11,435 9,400 22% 10 Acetech Mumbai Mumbai 27,777 27, % 39 /

41 Financial Analysis: Year Ended 30 September 2017 Adjusting items YE17 YE16 m m Amortisation of acquired intangible assets Non-cash (14.1) (15.5) Impairment of goodwill Non-cash (11.2) (24.6) Impairment of intangible assets Non-cash (1.4) - Operating items Impairment of investments in associates and joint ventures Non-cash (1.7) (1.9) Restructuring costs Cash (5.0) - Transaction costs Cash (0.4) (0.3) (Loss)/Profit on disposal of investments Non-cash (3.7) 1.5 Tax on income from associates and joint ventures Non-cash (1.5) (1.1) Financing items Revaluation of liabilities on completed acquisitions Non-cash Total (34.8) (40.6) 40 /

42 Financial Analysis: Year Ended 30 September 2017 Headline diluted EPS bridge (0.9p) 10.7p (0.6p) 0.1p (0.9p) (0.3p) 8.1p FY 2016 TAG costs Decrease in profits Decrease in NCI profits Change in effective tax rate Change in no of shares in issue FY /

43 Financial Analysis: Year Ended 30 September 2017 Consolidated balance sheet YE17 YE 16 m m Goodwill and intangible assets Non Current Assets Other non-current assets Trade debtors Prepayments Current Assets Other current assets Net debt (54.2) (49.7) (59.1) (39.0) 14.6 (6.3) Deferred revenue (82.6) (61.9) Trade and other payables (26.5) (20.8) Creditors Deferred consideration and equity option liabilities (13.5) (24.4) Net deferred tax liabilities (7.1) (9.6) Provisions (0.8) (0.4) (130.5) (117.1) Net Assets /

44 Financial Analysis: Year Ended 30 September 2017 Future consideration Deferred Consideration Cash Settle m Financial Year Payable ABEC Puts & Calls - Cash Settle m Financial Years* Fasteners Indobuild ECMI , 2020 Scoop (for 5% MI) Puts & Calls - Equity Settle m Financial Years* ABEC * Earliest financial year Puts & Calls are exercisable 43 /

45 Financial Analysis: Year Ended 30 September 2017 Banking facility > Net debt 49.7m > 1.4x Headline EBITDA The Group has negotiated a refinancing deal which achieves: Greater facility size allowing greater headroom for acquisition activity; Greater flexibility for disposals and acceptance of reinvestment of disposal proceeds; An extended tenor of facility to avoid refinancing pressures within the TAG period; A net debt covenant rather than a gross debt covenant; One-off TAG costs excluded from the calculation of covenants; Lower margin charges, lower arrangement fees and lower commitment fees. > Available Facility 100m (and 20m accordion) > Drawn Facility 75m > Term loan 50m amortising at 10m pa; balance RCF > Interest Rate LIBOR % % > Term November /

46 Financial Analysis: Year Ended 30 September 2017 Venue relationships Venue Loans / Prepayments YE17 m Russia 5.4 Central Asia 0.6 Eastern & Southern Europe 0.1 Total ( 2.5m < 1 Yr, 3.6m > 1 Yr) /

47 Financial Analysis: Year Ended 30 September 2017 Cash generated from operations YE17 YE16 m m Statutory operating loss (4.2) (2.3) Adjustments for non-cash items Operating cash flows before movements in working capital Working capital movements Cash generated from operations YE17 YE16 m m Cash generated from operations Interest received Interest paid (3.8) (3.5) Tax paid (6.8) (6.7) Free cash flow from the business /

48 Financial Analysis: Year Ended 30 September 2017 Shareholder structure (as at 11 November 2017) Country of Shareholder % of Total Shares No. of Shares (millions) Brandes Investment Partners USA Neptune Investment Management England Invesco Trimark Canada Fidelity Management & Research USA BlackRock England Amiral Gestion France Mawer Investment Management Canada MN Services Netherlands Fidelity Institutional Asset Management USA JO Hambro Capital Management England Other Institutions and individuals Total Shares in Issue /