ITE Group plc. Interim Results. Six months to 31 March May 2018

Transcription

1 ITE Group plc Interim Results Six months to 31 March May 2018

2 Agenda Interim results TAG programme update including transaction Financials of transaction Summary Andrew Beach Mark Shashoua Andrew Beach Mark Shashoua Q&A Mark Shashoua / Andrew Beach 1 /

3 Interim results: six months to 31 March 2018 Operational highlights > Benefitting from early TAG initiatives o Like for like revenues (1) up by 8% o Return to growth in most markets o First like for like growth in yield and volume since 2014 > Strong visibility of earnings o Revenues booked for 2018: 89% of consensus, 13% ahead of last year (2) o Revenues booked for 2019 up 31% on like for like basis (2) > Russia continues to perform well with new home for MosBuild 2019 > Proposed acquisition fits our criteria and accelerates TAG 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). 2. As at 11 May 2017

4 Interim results: six months to 31 March 2018 Financial highlights > Strong trading performance Revenues 75.4m; HPBT 16.0m; HDEPS 3.7p > LFL growth in yield and volume - first time since 2014 LFL revenue growth of 8%; LFL profit growth of 2% > LFL growth across most markets Several markets returning to growth > TAG investment on track Expenditure within budget > Continued strong cash generation Net debt of 51.2m (<1.5x EBITDA) > Interim dividend maintained Interim dividend of 1.5p in line with policy > Excellent revenue visibility for full year c.89% of FY18 consensus revenue booked (HY17: 89%) 3 /

5 Interim results: six months to 31 March 2018 Revenue bridge 0.5m ( 1.6m) 4.3m ( 3.5m) 6.2m m m 69.6m RUB 1.3 UZS 0.8 Other 1.4 Russia 2.5 Other m H Net Biennial & Timing Acquistions & Disposals Launches & Cancellations FX Impact Underlying Trading H /

6 Interim results: six months to 31 March 2018 Headline PBT bridge 2.4m 0.4m 0.0m 0.2m ( 2.7m) 0.2m 15.4m m Revenue translational (3.5) Cost translational 2.9 Trading benefit (0.6) B/S transactional HY B/S transactional HY17 (0.2) Movement m H Net Biennial & Timing Acquisitions & Disposals Launches & Cancellations FX Impact TAG Costs Underlying Trading H /

7 Interim results: six months to 31 March 2018 TAG financial update One-off (Not included in Headline results) HY18 Ongoing (Included in Headline results) 2.9m 7.9m 5m 10m 2.7m 4.5m Actual HY18 Actual to date Guidance HY18 Guidance to date Actual HY18 Guidance HY18 > H218 one-offs at < 7m taking FY18 est. to < 10m > Total TAG one-offs will be within 20m 6 /

8 Interim results: six months to 31 March 2018 Contracted revenue FY 2018 LFL increase of 13% FY m* (of 152.6m) = 89% of total revenue 144m** (of 160.8m) = 89% of consensus 27m** (of 160.8m) = 17% of consensus LFL increase of 31% 31m** (of 166.6m) = 19% of consensus *% booked at 12 May 2017 at actual event FX rates. Expressed as a % of actual revenue. **% booked at 11 May 2018 at actual event rates for past events and at FX rates at 10 May 2018 for future events. 7 /

9 Interim results: six months to 31 March 2018 Financial takeaways TAG programme delivering improved financial performance Yield and volume growth for first time since 2014 Strong performance allowing reinvestment for further growth Operational cash flows remain strong Dividends maintained at >2x cover Excellent FY18/19 revenue visibility 8 /

10 TAG programme update including transaction Mark Shashoua 9 /

11 TAG programme update including transaction Our vision To create the world s leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers. 10 /

12 TAG programme update including transaction TAG - the Transformation & Growth programme TAG Programme Create a Scalable Platform Managing the Portfolio Product-led Acquisitions Underpinned by a performance-led culture 11 /

13 Creating a scalable platform 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 12 /

14 Creating a scalable platform EMITT 2018 Greater focus on core sectors and targeted use of content Revenues grew 30% Buyers increased 40% with first hosted buyer programme Exhibitor Net Promoter Scores up 30 points Onsite re-bookings were 45% compared to 0% in /

15 Creating a scalable platform 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 14 /

16 TAG milestones high level representation on track 30 September March 2018 FY18 FY19 FY 2017 FY 2018 FY 2019 Creating a scalable platform Create best practice functions & teams New onsite rebooking strategy launched Design of the ITE way Implementation of the ITE way Invest in show operations Build a fit for purpose IT infrastructure & systems Drive a performance culture Build capability & talent Setup of Customer success team Implementation of value-based pricing methods Roll out of show blueprint Setup of dedicated Content team New show content deployed 1 st new hardware roll out Launch of one view back office systems Launch of integrated sales and marketing systems Systems design & development Systems deployed in phased waves New sales incentive scheme launched Review of performance structure Development of Sales leadership Standardisation of Performance Management Governance framework in place Recruitment of key organisational roles Roll out of dedicated specific training programmes 15 /

17 Scale Managing 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 59 less profitable shows discontinued since start of TAG Large > 1m revenue Use full suite of transformational levers Enable sales & marketing to drive volume growth Pricing, show value and content to drive yield and retention Manage pro-actively, solve issues across commercial, content and operations Top priority Medium priority Successful disposal of TradeLink ITE Malaysia Medium m revenue Small < 0.5m revenue Invest in content and shows to drive great customer experience Non-Core Low priority Continue to review all options for less profitable shows 16 /

18 Product-led acquisitions TAG programme Product-led acquisitions > Proposed acquisition of Ascential Exhibitions Business Brands > Proposed acquisition of 7 market leading and scalable event brands (1) 2017 Revenue of 77.5m; EBITDA of 24.0m (2) Proposed cash consideration of 300m to be funded through an underwritten rights issue (c. 265m) and new debt (c. 50m) (3) > Strong strategic and financial rationale > Meets all of our acquisition criteria as part of the TAG programme 17 / 1. Bett and CWIEME are global market leaders; Spring Fair, Autumn Fair, BVE and Glee are UK market leaders; Pure is London s leading 3 day fashion trade show 2. The financial information for the Ascential Exhibitions Business has been extracted from the consolidated management accounts of Ascential Events Limited and subsidiaries, after removing results of events not being acquired, discontinued event revenue and profit, certain corporate allocations and other pro forma adjustments. The amounts are stated on a constant currency basis 3. Total funding requirement of 315m expected including deal costs

19 Product-led acquisitions Strong strategic rationale 1 Product-led portfolio with global and market leading brands 2 Significant potential under our management as Core events 3 Further value through synergies 4 A more balanced portfolio for the enlarged group 5 Strong financial rationale; earnings enhancing in /

20 Product-led acquisitions Global brands increased from 1 to 3 > Market leading and integral to their customers businesses > Attractive end markets and high growth niches Leading global educational technology show > Investment to drive scale in existing geo-clones > Opportunities for geo-cloning into ITE historic territories Leading event for coil winding, electric motor and transformer manufacturing technologies > Deeper customer partnerships (e.g. Bett and Microsoft) FY17 Revenue: 25.5m 9.4% CAGR /

21 Product-led acquisitions UK brands market leading events Highly profitable and cash generative assets with a clear plan to deliver growth FY17 Revenue: 42.7m > Market leader, covering 14 retail sectors not closely correlated with underlying retail trends > Operational rigour improvements > Re-editing should result in revenue uplift; product categorisation is key > Develop international sales > Hosted buyer programme > Market leader, focus on men, younger women, accessories > Complements our other market leading brands Moda (footwear, Mother of the Bride ) & Scoop (premium) > c.50% international customers > Giving increasingly broad proposition in fashion Other UK brands are BVE and Glee 20 /

22 Product-led acquisitions A more balanced portfolio for the combined group Current portfolio top 10 Enlarged portfolio top 10 Top 10 as a % of our portfolio 1 MosBuild Russia 1 Spring Fair UK Current portfolio Enlarged group (1) 2 Breakbulk Brands 3 WorldFood Moscow Russia 2 Bett Brands 3 MosBuild Russia 38% 46% 4 Moda Brands 4 Autumn Fair UK Top 10 Other 5 MITT Russia 5 CWIEME Brands 6 7 AquaTherm Moscow TurkeyBuild Istanbul Russia East & South Europe 8 MIOGE Russia 9 RosuPack Russia 6 Pure UK 7 BreakBulk Brands 8 WorldFood Moscow Russia 9 Moda UK 12% 11% 14% 16% Revenue by division (2) 27% 47% 15% 7% 31% 11% 9% 10 Yugagro Krasnodar Russia 10 MITT Russia Russia Central Asia Brands Asia East / South Europe UK 21 / Note: Brands ranked by revenue (1) Pro forma based on revenue, uncalendarised (2) Bett and CWIEME classified under Brands; other acquired revenue under UK. Moda moved from Brands to UK

23 Financials of transaction Andrew Beach 22 /

24 Financials of transaction Strong financial rationale Expected to be earnings enhancing in 2019 Highly profitable portfolio, accretive to Group margins Revenue growth opportunities under our ownership Synergies from the first full year net of investment Leverage comfortably within stated range of 1.5x - 2x EBITDA 23 /

25 Financials of transaction Opportunity for growth under our management Pro forma revenue (1)(3) 1 FY17 revenue growth: Global brands: 9%; Total: 2% Scope for improvement: 12% and 11% delivered in FY m 77.5m 152.6m 152.6m 2 FY17 cash conversion: 91% Scope for improvement: 107% delivered in FY15 Current portfolio Pro forma EBITDA (2)(3) Enlarged group 63.5m 2.5m 3 FY17 retention rates - e.g. 76% at Bett in FY17 Scope for improvement: 83% delivered in FY m 24.0m 37.0m 4 EBITDA margins: 30%+ in every year from 2014, surpassing TAG programme margin targets Current portfolio Enlarged group Ascential Exhibitions Business Revenue growth 2015 vs (3) 2015 Rev Growth vs Rev Growth vs. 16 Global brands 21.8m 11.6% 25.5m 9.1% UK portfolio 52.7m 10.7% 52.0m (0.9%) Total 74.5m 11.0% 77.5m 2.2% 24 / 1. Pro forma revenue uncalendarised, based on historical 2017 financial information for both ITE and the Ascential Exhibitions Business 2. Include net synergies of 2.5m. Pro forma EBITDA uncalendarised, based on historical 2017 financial information for both ITE and the Ascential Exhibitions Business 3. The financial information for the Ascential Exhibitions Business has been extracted from the consolidated management accounts of Ascential Events Limited and subsidiaries, after removing results of events not being acquired, discontinued event revenue and profit, certain corporate allocations and other pro forma adjustments. The amounts are stated on a constant currency basis

26 Financials of transaction Significant cost synergies and revenue growth opportunities Material cost synergies achievable net of investment; growth potential under our management Cost synergies from FY19 Investment from FY19 Net synergies from FY19 4m - 5m 2m - 2.5m 2m - 2.5m Designed to drive additional revenue growth from FY20 25 /

27 Financials of transaction Acquisition financing > Cash consideration of 300m > Proposed acquisition to be funded from cash raised through: > Rights issue to raise c. 265m (includes deal costs) > Debt c. 50m > Rights issue underwritten at point of announcement fundraise to be launched in late May with full terms to be confirmed > Pro forma net debt / EBITDA (1) of less than 2x; subsequently deleveraging with strong cash flows > Existing debt facility expected to be extended from 100m to 160m, with c. 120m expected to be drawn on completion > Expected headroom post completion of 40m with accordion of 30m also expected to be available 26 / 1. Based on pro forma 2017 uncalendarised EBITDA

28 Summary Mark Shashoua 27 /

29 Strong strategic and financial rationale 1 Product-led portfolio with global and market leading brands 2 Significant potential under our management as Core events 3 Further value through synergies 4 A more balanced portfolio for the enlarged group 5 Strong financial rationale; earnings enhancing in /

30 2018 Outlook Continue to strengthen lead generation, customer success and content Launch new CRM and HR systems Continue to actively manage portfolio Integrate acquisition quickly and efficiently 29 /

31 Summary Benefitting from early TAG initiatives Return to growth in most markets First like-for-like volume and yield growth since 2014 Strong forward bookings for 2018 and 2019 Acquisition enables us to accelerate strategy and boost results of TAG 30 /

32 Q&A 31 /

33 Appendices 32 /

34 Interims results: Financial analysis Six months to 31 March /

35 Interims results: Financial analysis - six months to 31 March 2018 Consolidated Income Statement Headline Results HY18 HY17 m m Revenue Gross Profit Gross Profit Margin 37% 40% Admin Expenses/Operating Income (18.0) (15.3) FX 0.6 (0.2) Profit from Associates Operating Profit Net Finance Costs (1.4) (1.7) PBT EPS 3.7p 3.9p Statutory Reconciliation HY18 HY17 m m Headline PBT Adjusting Items (14.7) (12.3) Statutory PBT /

36 Interims results: Financial analysis - six months to 31 March 2018 Divisional analysis HY18 HY17 Revenue ( m) HPBT ( m) Revenue ( m) HPBT ( m) Russia Asia Central Asia East/South Europe 4.6 (0.1) > Strong performance of Core events, plus biennial impact > Largest allocation of TAG investment > Impact of biennial and acquisition > Profit supported by Sinostar joint venture > Timing differences and fx impact > LFL growth > Biennial and fx impact > LFL growth Brands > Timing (BB Americas), Moda decline Other Income > Rental income on property subleases Central Costs (9.6) (7.4) > TAG costs impact FX Gain/(Loss) 0.6 (0.2) > Balance sheet retranslation of monetary assets and liabilities Net Finance Costs (1.3) (1.6) > Interest on bank loans and bank charges, offset by deposit income Total /

37 Interims results: Financial analysis - six months to 31 March 2018 Revenue by region HY 2018 HY 2017 FY % 14% 12% 6% 10% 75.4m 47% 10% 12% 69.6m 45% 11% 152.6m 47% 14% 22% 19% 16% Russia Asia Central Asia E / S Europe Brands 36 /

38 Interims results: Financial analysis - six months to 31 March 2018 Volume & revenue by region m² 000s Revenue HY18 HY17 HY18 HY17 Russia m 31m LFL volumes up 6% Asia m 13m LFL volumes up 1% Central Asia m 9m LFL volumes up 10% East/South Europe m 7m LFL volumes up 4% Brands m 10m LFL volumes down 14% Total m 70m 37 /

39 Interims results: Financial analysis - six months to 31 March 2018 Revenue by sector Revenue by Sector HY 2018 (HY 2017 figures in brackets) FY 2017 Advanced Technologies (8%) Advanced Technologies 7% 13% 7% 6% Beauty & Healthcare (6%) Build & Interiors (29%) Connect (2%) 9% 7% 8% 6% 6% Beauty & Healthcare Build & Interiors Connect 11% 12% 9% 2% 7% 26% Oil, Gas & Energy (9%) Fashion (10%) Food & Packaging (12%) Manufacturing & Industrial Tech (6%) Transport & Logistics (5%) 16% 7% 10% 3% 28% Oil, Gas & Energy Fashion Food & Packaging Manufacturing & Industrial Tech Transport & Logistics Travel & Tourism (13%) Travel & Tourism 38 /

40 Performance analysis Interims results: Financial analysis - six months to 31 March 2018 Metres Revenue Gross Profit 000s m m Results from events Biennial (10) (1.9) (0.9) HY17 Timing (11) (2.0) (1.3) Non-recurring (21) (2.9) (0.4) Disposals - (0.7) (0.1) Recurring events b Acquisitions Launches HY18 FX translation - (3.5) (1.3) TAG costs - - (1.0) Like-for-Like change a (0.1) Recurring events Timing HY18 Biennial Results from events LFL growth (a/b) 3% 10% 0% 39 /

41 Interims results: Financial analysis - six months to 31 March 2018 Adjusting items HY18 HY17 m m Amortisation of acquired intangible assets Non-cash (5.8) (7.8) Derecognition of goodwill on cessation of trade Non-cash (2.2) - Operating items Restructuring costs Cash (4.1) (2.3) Transaction costs Cash (0.8) (0.2) Tax on income from associates and joint ventures Non-cash (1.5) (1.1) Financing items Revaluation of liabilities on completed acquisitions Non-cash (0.4) (0.8) Total (14.8) (12.2) 40 /

42 Interims results: Financial analysis - six months to 31 March 2018 Headline diluted EPS bridge (0.3p) (0.1p) (0.8p) 1.0p 3.9p 3.7p HY2017 TAG costs Increase in underlying profits Change in effective tax rate Change in no. of shares in issue HY /

43 Interims results: Financial analysis - six months to 31 March 2018 Consolidated balance sheet HY18 YE17 m m Goodwill and intangible assets Non Current Assets Other non-current assets Trade debtors Prepayments Current Assets Other current assets Net debt (54.7) (51.2) (49.7) (54.2) Deferred revenue (85.2) (82.6) Trade and other payables (17.5) (26.5) Creditors Deferred consideration and equity option liabilities (14.0) (13.5) Net deferred tax liabilities (10.2) (7.1) Provisions (0.6) (0.8) (127.5) (130.5) Net Assets /

44 Interims results: Financial analysis - six months to 31 March 2018 Future consideration Deferred Consideration Cash Settle m Financial Year Payable ABEC Puts & Calls - Cash Settle m Financial Years* Fasteners Indobuild ECMI Scoop (for 5% MI) Puts & Calls - Equity Settle m Financial Years* ABEC * Earliest financial year Puts & Calls are exercisable 43 /

45 Interims results: Financial analysis - six months to 31 March 2018 Banking facility > Net debt 51.2m > 1.5x headline EBITDA > Available Facility 100m (and 20m accordion) > Drawn Facility 77m > Term loan 50m amortising at 10m pa; balance RCF > Interest Rate LIBOR % % > 2.5x net debt:ebitda covenant > Term November /

46 Interims results: Financial analysis - six months to 31 March 2018 Net debt bridge September 2017 Cash Flow from Operations (excl. TAG) Dividends & Tax TAG Other March 2018 m m m Dividends (6.0) Ongoing (2.9) Financing (0.7) ( 49.7m) Tax (4.0) One-off (2.3) Capex (0.7) Capex (1.0) Effect of FX rates (0.3) ( 51.2m) 17.3m ( 10.0m) ( 5.9m) Cash classified as held for sale ( 2.9m) (0.9) 45 /

47 Interims results: Financial analysis - six months to 31 March 2018 Venue relationships Venue Loans / Prepayments HY18 m Russia 6.6 Central Asia 1.2 Total ( 2.8m < 1 Yr, 5.0m > 1 Yr) /

48 Interims results: Financial analysis - six months to 31 March 2018 Cash generated from operations HY18 HY17 m m Statutory operating profit Adjustments for non-cash items Operating cash flows before movements in working capital Working capital movements Cash generated from operations HY18 HY17 m m Cash generated from operations Interest received Interest paid (1.8) (1.9) Tax paid (4.0) (2.6) Free cash flow from the business /

49 Interims results: Financial analysis - six months to 31 March 2018 Shareholder structure (as at 10 April 2018) Country of Shareholder % of Total Shares No. of Shares (millions) Brandes Investment Partners USA Fidelity Management & Research UK, USA Neptune Investment Management UK BlackRock UK, USA Invesco Trimark Canada Amiral Gestion France Legal & General Investment Management UK JO Hambro Capital Management UK Mawer Investment Management Canada MN Services Netherlands Other Institutions and individuals Total Shares in Issue /

50 Further TAG case studies 49 /

51 Further TAG case studies MITT 2018 First event in Russia with full content programme Four content arenas with airport-themed design attracted 4,000 visitors 111 professional speakers 20% increase in repeat visits Exhibitor Net Promoter Score up 5 points 12,600 meetings requested via new matchmaking app 50 /

52 Further TAG case studies MosBuild 2018 Over 150 speakers Highlights included Bathroom Biennale and Facades 360 Forum Key buyers increased 14% Exhibitor Net Promoter Score increased 7 points MosBuild moves to Crocus Expo, Russia s largest venue, in /

53 Transaction details 52 /

54 Transaction details Acquisition and rights issue timetable > Transaction announced on 15 May > Prospectus issued / rights issue announced in late May / early June > Completion expected by early July Rights issue & Class 1 acquisition timetable 15 May Announcement date - acquisition agreement signed & rights issue underwritten on a standby basis 15 May Interim results published and investor roadshow commences Late May / Early June Announcement of rights issue terms, publication of prospectus & class 1 circular Late May Early June Mid / Late June Mid / Late June Late June / Early July Late June / Early July Late June / Early July Late June / Early July General meeting notice period General Meeting to approve rights issue & transaction Admission of Rights Issue Shares and dealings in Nil Paid Rights on the London Stock Exchange End of Nil Paid Rights trading Results of Rights Issue announced Dealing in Rights Issue Shares, fully paid, commence on the London Stock Exchange Expected date of completion 53 /

55 Transaction details The Ascential Exhibitions Business portfolio ITE s CEO and COO ran these events previously and have a clear plan for them as a Core part of the ITE portfolio Event brand What it is? FY17 Revenue Market leader? Leading global educational technology show 16.1m Leading event for coil winding, electric motor and transformer manufacturing technologies 9.4m UK s #1 home and gift shows for the retail industry 33.6m London s leading 3 day fashion trade show held at Olympia 9.1m UK's leading garden and outdoor living trade show for the retail industry 3.5m UK's largest broadcast, production and media tech event 2.3m 54 / Note: Total revenue of 77.5m includes other revenue of 3.5m. The financial information for the Ascential Exhibitions Business have been extracted from the consolidated management accounts of Ascential Events Limited and subsidiaries, after removing results of events not being acquired, discontinued event revenue and profit, certain corporate allocations and other pro forma adjustments. The amounts are stated on a constant currency basis

56 Transaction details The Ascential Exhibitions Business calendar Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 55 /