interim results - ite group

Interim ResultsSix months to 31 March 2019

14 May 2019

ITE Group plc

› HY19 – Delivering

Transformation and GrowthMark Shashoua

› Interim results Andrew Beach

› TAG programme update Mark Shashoua

› Q&AMark Shashoua &

Andrew Beach

Agenda

1 /

2 /

HY19 – Delivering Transformation and Growth

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).

> TAG programme in final year – FY19 focus on execution

> Further strengthened portfolio

- Completed disposal of non-core events in Russia and closed a further 24 events during H1- Reduced size of portfolio whilst delivering strong revenue and profit growth

> Integration of Ascential brands and Mining Indaba on track

> TAG drives margin expansion

- LFL revenues up 6%1; top five TAG events in H1 up 14% - LFL profits up 7%1, improvement in operating margin

> Expect to reach most TAG targets earlier than planned and all targets within planned timeframe

> Secured multi-year deal with Crocus Expo for Russian events

Interim results

Andrew Beach

3 /

Financial highlights

4 /

Interim results: six months ended 31 March 2019

1 Restated for rights issue2 Pro forma basis, adjusted as if Ascential Events acquisition completed on 1 April 2018

HY19 HY18

Revenue £107.8m £75.4m LFL growth 6%; excluding Acetech Delhi 8%

Headline PBT £24.5m £16.0m LFL growth 7%; excluding Acetech Delhi 11%

Operating profit margin 25.1% 23.1% Increase of 2pp

TAG costs one-off £2.5m £2.9m

Within guidanceongoing £3.0m £2.7m

Ascential integration costs one-off £3.2m £nil Within guidance

Net debt £108.9m £51.2m <2x EBITDA2, within guidance

Headline diluted EPS 2.3p 2.3p1

Dividend 0.9p 0.9p1 In line with policy

Revenue bridge

5 /


(£5.5m)

(£3.0m) (£2.8m)

£40.3m

£3.4m

£75.4m

£107.8m

HY18 Net Biennial& Timing

Acquisitions& Disposals

Launches &Cancellations

FX Impact UnderlyingTrading

HY19

£m

RUB (1.4)

INR (0.6)

TRY (0.6)

Other (0.2)

£m

Russia 2.3

AOW 1.2

Acetech Delhi (1.2)

Other 1.1

£m

Ascential / Mining Indaba

49.4

ITE Expo (Russia) / ECMI (SE Asia)

(9.1)

Double digit revenue growth from top five TAG events in HY19

6 /

LFL revenue growth TOTAL events

6%LFL revenue growth top five TAG events

14%


Headline PBT bridge

7 /


(£1.9m)

(£0.9m)(£0.9m)

(£0.3m)

£11.8m

£0.7m

£16.0m

£24.5m

HY18 Net Biennial& Timing

Acquisitions& Disposals

Launches &Cancellations

FX Impact TAG Costs UnderlyingTrading

HY19

£m

Revenue translational (2.8)

Cost translational 2.3

Trading impact (0.5)

B/S transactional HY19 0.2

B/S transactional HY18 0.6

Movement (0.4)

£m

Ascential / Mining Indaba

14.0

ITE Expo (Russia) / ECMI (SE Asia)

(2.2)

TAG costs in line with guidance

8 /

> Total TAG one-offs will be within £20m

> TAG ongoing costs tracking at £8m-£9m annualised, in line with guidance

£2.5m

£14.5m

£20m

Actual HY19 Actual to date Total Guidance

TAG one-offs(Not included in Headline results)


Ascential integration costs also on track and within guidance

9 /

Ascential one-offs(Not included in Headline results)


> Total Ascential one-offs will be within £11m, in line with guidance

£9m integration

£2m synergy release

Actual HY19 Actual to date Total Guidance

£6.6m

£3.2m

£11m

10 /

Ascential Events integration largely complete

IntegrationSynergies

c.£5m annualised expected(vs £4m-£5m guidance)

Investment plansto drive FY20 growth

(£2m-£2.5m annualised cost)


On trackUpper endguidance

Largely complete

Strong revenue visibility for FY19 and FY20

11 /

£143m1

(of £158.6m2)= 90% of

total revenue

£200m3

(of £213.6m)= 94% of

consensus

LFL increase of

6%

FY19 FY20

£58m3

(of £227.0m)= 26% of

consensus

£50m1

(of £213.6m)= 23% of

consensus

LFL increase of

11%

1 Booked at 10 May 2018 at actual event FX rates2 Pro-forma total revenue excluding those relating to Ascential Events acquisition3 Booked at 10 May 2019 at actual event rates for past events and at FX rates at 9 May 2019 for future events


FY18at May 2018

FY19at May 2019

FY19at May 2018

FY20at May 2019

Ahead of plan on most TAG targets

12 /


TAG pillar1 Target Original plan Revised Status

1

Positive ROI FY20 FY19 Ahead

ROI>WACC FY21 FY20 Ahead

Cash payback FY21 FY21 Ahead2

1-3

High single digit LFL revenue growth FY22 FY18 Ahead

High 20s operating profit margin FY22 FY22 On track

1 TAG pillar 1 = Create a scalable platformTAG pillar 2 = Manage the portfolioTAG pillar 3 = Product-led acquisitions

2 Original plan delivery expected H2 FY21; revised to H1 FY21

On track to deliver our 3-year guidance

13 /


FY18 FY19 FY20

Revenue growth

Margin growth

EPS growth

Financial summary

Strong LFL revenue growth; top five TAG events double digit revenue growth

Profit growth above revenue growth

Ascential Events integration largely complete

Excellent FY19/FY20 forward booking growth

Early delivery expected on most TAG targets

14 /

Operational cash flows remain strong


TAG programme update

Mark Shashoua

15 /

Our vision

“To create the world’s leading portfolio of content-driven,

must-attend events delivering an outstanding experience and ROI for our customers.”

16 /

TAG programme update

TAG - the Transformation and Growth programme

Create a Scalable Platform

Underpinned by a performance-led culture

TAG Programme

17 /

TAG programme update – Create a scalable platform

Change Operating

Model

Drive a performance culture

Build a fit for purpose IT infrastructure & systems

Build capability & talent

Invest in show operations

Create best practice functions & teams

Create a Scalable Platform – best practice approach

18 /


19 /

Benefitting from investing in event operations

New customer service team helps exhibitors maximise success

Systematic lead generation for each core event

New business generation almost doubled

Exhibitor NPS increased 8% to +17; industry average is -17*

New high quality content attracts key visitors

Visitor NPS increased 5% to +29; industry average is +7**


*UFI & Explori, Global Exhibitor Insights, November 2017 Edition**UFI & Explori, Global Visitor Insights, 2018/19 Edition

› MosBuild moved to Crocus Expo, Russia’s largest venue,

from 2019

› Much improved content programme with Perfect Home,

VR design lab and MosBuild TV

› Volume up 15%

› Visitor numbers up 19%

› Key buyers up 19%

MosBuild 2019

20 /


Africa Oil Week 2018

21 /


› Speaker numbers increased 30%

› Government ministers attending increased 36%

› Paid delegates increased 54%

› New business more than quadrupled

› Delegate Net Promoter Score improved 18 points to +27

› Exhibitor Net Promoter Score improved 39 points to +32

FY 2017 FY 2018 FY 2019

Create ‘best practice’ functions & teams

Invest in event operations

Build a ‘fit for purpose’IT infrastructure& systems

Drive a performance culture

Build capability & talent

TAG milestones

New event content deployed

Roll out of event ‘blueprint’

Roll out of dedicated specific training programmes

Implementation of the ‘ITE way’Design of the ‘ITE way’

Setup of Customer Success team Implementation of value-based pricing methods

Setup of dedicated Content team

Review of performance structure

Development of Sales leadership

Standardisation of Performance Management

22 /

Systems design & development Systems deployed in phased waves

Launch of integrated sales and marketing systems

1st new hardware roll out Launch of ‘one view’ back office systems

Recruitment of key organisational roles

March 2019



TAG programme update – Manage the portfolio

Managethe Portfolio


TAG Programme

23 /

Improving the quality of the portfolio

24 /

269 events

130events

May 2017 Closed Divested Acquired May 2019

89

65 15

1 FY16 reported revenue2 FY19 market consensus

May 2017 May 2019

No. of events 269 130 52%

Revenue £134m1 £214m2 60%

Revenue per event £0.5m £1.6m 220%

TAG programme update – Manage the portfolio


TAG programme update – Product-led acquisitions

Product-led Acquisitions


TAG Programme

25 /

Ascential Events integration update

Integration largely complete

Synergy savings on track to meet upper end of guidance at c.£5m

Investment plans in place and best practice implementation started

26 /


Reinvesting half of the synergies to drive growth

27 / 1 Moda was an existing ITE event


Re-edit events and add new sectorsVisitor acquisition teams to target online and major chains

Sector expansion in GermanyRegional expansion in the US and ChinaInvestigate new markets over the longer term

Focus on customer proposition

Reinvesting half of the synergies to drive 2020 growthProduct

Re-edit events to improve customer experienceFocus on key accountsGrow international events to scale and investigate new markets

1

28 /

Mining Indaba acquisition

› Met the TAG acquisition criteria as the must-attend event in the

African mining industry

› Strong strategic rationale and complementary to Africa Oil Week

› AOW and MI teams now merged to drive synergies

› Implementation of ITE best practice will drive growth from FY20

onwards


28 /

HY19 Summary and Outlook

6% LFL revenue growth; top five TAG events 14% revenue growth

Margins grew to 25%as we benefitted from TAG

Forward bookings for FY20 up 11% on a LFL basis

Further benefits of TAG will flow from FY20

29 /

FY19 trading in line with Board expectations

Expect to reach most TAG targets earlier than planned

Summary and Outlook

Q&A

30 /

Interim results: Appendices

Six months ended 31 March 2019

31 /

Positive ROI

Plan Within 3 years (FY20)

Update Within 2 years (FY19)

FY17 FY18 FY19 FY20 FY21 FY22

TAG plan Update

In-year net operating profit after tax (“NOPAT”)

“Create a scalable platform” targets ahead of plan

Positive ROI in FY 2019

32 /

1

1 Based on May 2017 WACC

ROI > WACC1


Update Within 3 years (FY20)

Cash Payback


Update Within 3.5 years (FY21)

2

3


33 /

Driving sustainable revenue growth and operating profit margins

Operating profit margin %

Entry Velocity 2017 Low twenties

Exit Velocity 2022 High twenties

Like-for-like revenue growth %

Entry Velocity 2017 Low single digit

Exit Velocity 2022 High single digit

-10%-12%

-8%

5%

11%

LFL revenue growth

35% 36%

29%

23% 22%25% 26%

Operating profit marginCity consensus

4

5


Consolidated Income Statement

34 /

Headline Results HY19 HY18

£m £m

Revenue 107.8 75.4

Gross Profit 40.2 28.1

Gross Profit Margin 37% 37%

Admin Expenses/Operating Income (20.5) (18.0)

FX 0.1 0.6

Profit from Associates 7.3 6.7

Operating Profit 27.1 17.4

Net Finance Costs (2.6) (1.4)

PBT 24.5 16.0

EPS 2.3p 2.3p1

Statutory Reconciliation HY19 HY18

£m £m

Headline PBT 24.5 16.0

Adjusting Items (22.6) (14.7)

Statutory PBT 1.9 1.3

1 Restated from HY18 EPS of 3.7p due to rights issue


Divisional analysis

35 /

HY19 HY18

Revenue HPBT Revenue HPBT

£m £m £m £m

Global Brands 31.7 13.4 6.7 2.6 > Ascential Events acquisition (4 events in H1)

Asia 12.4 9.5 16.7 10.6> Impact of biennial> Profit supported by strong growth from Sinostar joint venture

Central Asia 6.7 0.7 7.5 1.4> Timing differences> Some recovery from oil prices

E/S Europe 3.7 - 4.6 (0.1)> FX impact> LFL growth in revenue

Russia 24.1 8.0 35.3 11.0> Strong performance of Core events, offset by currency impact > Largest allocation of TAG investment

UK 29.2 8.7 4.6 0.8 > Ascential Events acquisition (3 events in H1)

Other Income 0.1 0.1 > Management fee income from associates

Central Costs (13.5) (9.6) > Planned TAG cost increases

FX Gain 0.1 0.6 > Balance sheet retranslation of monetary assets and liabilities

Net Finance Costs (2.5) (1.4) > Interest on bank loans and bank charges, offset by deposit income

Total 107.8 24.5 75.4 16.0


21%

11%

11%

7%

27%

23%

FY18 Pro forma1

Russia

E/S Europe

Asia

Global Brands

Central Asia

UK

6%

15%

14%

9%

42%

14%

FY18 Actual

Russia

E/S Europe

Asia

Global Brands

Central Asia

UK

36 /

Revenue by division

10%

90%

Non-core

Core

1 After divestment of 56 Russian non-core events, acquisition of Mining Indaba, and full year of Ascential events

29%

12%

6%4%

22%

27%

HY19 Actual

Russia

E/S Europe

Asia

Global Brands

Central Asia

UK


37 /

Revenue by sector

HY19 (HY18 figures in brackets)

19%

15%

13%

9%

9%

8%

8%

5%

5%3%

3% 3%

Retail (0%)

Build & Interiors (26%)

Education (0%)

Fashion (9%)

Travel & Tourism (13%)

Food & Packaging (12%)

Connect (1%)

Transport & Logistics (7%)

Oil, Gas & Energy (7%)

Manufacturing & Industrial Tech (12%)

Advanced Technologies (7%)

Beauty & Healthcare (6%)


Performance analysis

38 /

Metres Revenue Gross Profit

000s £m £m

HY18

Results from events 353 75.4 28.1

Biennial (27) (4.7) (1.7)

Timing (12) (2.1) (1.0)

Non-recurring (16) (3.0) (1.0)

Disposals (44) (9.1) (3.2)

Recurring events b 254 56.5 21.2

HY19

Acquisitions 104 49.4 19.2

Launches - - -

FX translation - (2.8) (0.9)

TAG costs - - (0.5)

LFL change a (7) 3.4 0.4

HY19

Recurring events 351 106.5 39.4

Timing 1 0.5 0.4

Biennial 2 0.8 0.4

Results from events 354 107.8 40.2

LFL growth (a/b) (3%) 6%


Headline diluted EPS bridge

39 /

(0.1p)

(0.1p)

(1.6p)1.6p

0.2p

2.3p1 2.3p

HY18 TAG costs Increase inunderlying profits

Decrease inNCI profits

Change in effectivetax rate

Change in no. ofshares in issue

HY19

1 Restated for rights issue


Adjusting items

40 /

HY19 HY18

£m £m

Operating items

Amortisation of acquired intangible assets Non-cash (12.0) (5.8)

Derecognition of goodwill on cessation of trade Non-cash - (2.2)

Loss on disposal Non-cash (2.4) -

Transaction costs Cash (1.4) (0.7)

Integration costs and costs of realising synergies Cash (3.4) -

Restructuring costs Cash (2.1) (4.1)

Tax on income from associates and joint ventures Non-cash (1.7) (1.5)

Financing items Revaluation of assets and liabilities on completed acquisitions and disposals Non-cash 0.4 (0.4)

Total (22.6) (14.7)


Consolidated balance sheet

41 /

HY19 HY18

£m £m

Non-current assets

Goodwill and intangible assets 491.8 143.2

Other non-current assets 57.2 59.0

549.0 202.2

Current assets

Trade debtors 35.2 39.4

Prepayments 13.2 10.6

Other current assets 17.0 12.0

65.4 62.0

Creditors

Net debt (108.9) (50.2)

Deferred revenue (93.4) (86.9)

Trade and other payables (33.6) (19.5)

Deferred consideration and equity option liabilities (21.1) (13.8)

Net deferred tax liabilities (35.0) (12.6)

Provisions (1.9) (0.8)

(293.9) (183.8)

Net assets 320.5 80.4

(78.6) (56.4)


Future consideration

1 Earliest financial year Puts & Calls are exercisable42 /

Deferred Consideration – Cash Settle £m Financial Year Payable

ABEC 0.8 2019

Mining Indaba 8.7 2019

9.5

Puts & Calls - Cash Settle £m Financial Years1

Fasteners 0.1 2020

Indobuild 1.6 2020

Scoop (for 5% MI) 0.1 2019

1.8

Puts & Calls - Equity Settle £m Financial Years1

ABEC 11.3 2020

11.3


Banking facility

43 /

£144m

£16m

At 31 March 2019

Drawn

Undrawn

› Net debt - £108.9m

› 2.0x headline EBITDA

› Available Facility – £160m (and £30m accordion)

› Drawn Facility – £144m1

› Term loan £65m amortising at £17.5m / £17.5m / £30m; balance RCF

› Interest Rate – LIBOR + 2-2.75%

› 2.5x net debt:EBITDA covenant

› Term – November 2021

1 Shown on Balance Sheet as £142m, net of capitalised refinance fees


Net debt bridge

44 /

(£82.7m)

(£108.9m)

£21.3m

£0.8m

(£13.9m)

(£5.5m)(£23.3m)

(£5.6m)

September 2018

Cash Flow fromOperations(excl. TAG) Dividends & Tax TAG

Acquisitions anddisposals FX Net other March 2019

£m

Dividends (7.3)

Tax (6.6)

£m

Ongoing (3.0)

One-off (1.6)

Capex (0.9)

£m

Acquisitions (22.8)

Disposals (0.5)

£m

Net finance costs

(2.5)

Minority dividends

(1.4)

Capex (1.0)

Investment (0.5)

Other (0.2)


Venue relationships

45 /

Venue Loans / Prepayments HY19 HY18

£m £m

Russia 7.0 6.6

Central Asia 0.8 1.3

Total (£7.0m < 1 Yr, £0.8m > 1 Yr) 7.8 7.9


Cash generated from operations

46 /

HY19 HY18

£m £m

Statutory operating profit 4.0 3.1

Adjustments 10.1 4.6

Operating cash flows before movements in working capital 14.1 7.7

Working capital movements 2.5 4.4

Cash generated from operations 16.6 12.1

HY19 HY18

£m £m

Cash generated from operations 16.6 12.1

Interest received 0.3 0.4

Interest paid (2.9) (1.8)

Tax paid (6.4) (4.0)

Free cash flow from the business 7.6 6.7


47 /

Shareholder structure as at 30 April 2019

Country of Shareholder % of Total Shares No. of Shares (millions)

RWC Partners UK 15.3 113.5

Brandes Investment Partners USA 13.6 100.7

Fidelity Management & Research UK, USA 8.5 62.8

Bestinver Asset Management Spain 5.2 38.9

Invesco Canada 4.8 35.5

Legal & General Investment Management UK 4.3 32.2

Amiral Gestion France 3.9 28.6

JO Hambro Capital Management UK 3.8 28.1

BlackRock UK 3.8 27.9

MN Services Netherlands 3.1 22.6

Directors 0.2 1.7

Other institutions and individuals 33.5 261.8

Total Shares in Issue 100 754.3


48 /

Consensus forecast1

Consensus Minimum Maximum

2019

Turnover (£m) 213.6 210.0 216.8

Headline profit before tax (£m) 50.2 50.1 50.3

Headline diluted EPS (pence) 4.9 4.9 4.9

Net debt (£m) 111.5 107.4 115.0

2020

Turnover (£m) 227.0 223.6 229.9

Headline profit before tax (£m) 55.6 55.1 56.0

Headline diluted EPS (pence) 5.3 5.2 5.4

Net debt (£m) 94.4 90.0 97.7

1 Based on analyst reports to 8 May 2019


49 /

192175

136 134

153

176

Revenue (£m)

FY13 FY14 FY15 FY16 FY17 FY18

-11%CAGR

+9%1

CAGR

TAG

Setting the context

May 2017

› Limited organic growth

› Decentralised model

› Large, unfocused portfolio

› Underinvested

1 Excluding Ascential Events


50 /

Divisional structure of recently acquired events

UKEvents Acquired from

Ascential

Ascential

Ascential

Ascential

Ascential

Ascential

Ascential

Euromoney

Global Brands


Driving growth from Ascential events from FY20

51 /

Investment Phase Growth Phase

FY19 FY20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec


35%

Top 10 as a % of our portfolio

Top 10 Other

Previous portfolio

52 /

A more balanced portfolio for the combined groupTop 10 events – May 2017

1 MosBuild Russia

2WorldFoodMoscow

Russia

3 MITT Russia

4AquaThermMoscow

Russia

5 TurkeyBuild E/S Europe

6AcetechMumbai

Asia

7 MIOGE Russia

8 RosUpack Russia

9 YugAgro Russia

10Breakbulk Europe

Global Brands

Top 10 events – May 2019

1 Spring Fair UK

2 MosBuild Russia

3 Bett UK Global Brands

4 Autumn Fair UK

5WorldFoodMoscow

Russia

6CWIEME Berlin

Global Brands

7MiningIndaba

Global Brands

8 MITT Russia

9 RosUpack Russia

10Breakbulk Europe

Global Brands

Note: Events ranked by revenue1 Bett, CWIEME and Mining Indaba classified under Global Brands; other acquired revenue under UK. Moda moved from Global Brands to UK

11%3%

20%

13%

53%

Revenue by division1

Global Brands Asia Central Asia E/S Europe Russia UK

24%

10%

7%7%

28%

24%

44%

Current portfolio


Phase 1 Quick screening

Phase 2Thorough analysis

Phase 3Due diligence

Phase 4Transaction

Objective “be effective” “identify pearls” “don’t miss risk” “fair deal”

Activity Screen events employing a set ofclear criteria

Assessment of concrete potential for ITE

Strategic / market DDFinancial DDSynergy estimate

Integration planning

Final price negotiationDeal structuring (e.g. earnout)

TAG programme - Product-led acquisitions

M&A funnel

Example Screening Criteria

Size

Distinct Customer Value Proposition

Structurally Attractive Market for Exhibitions

High Growth Underlying Market

Organic Revenue Growthand Profit Margin

International Roll Out Potential

ROIC

EPS Accretion

53 /


interim results - ite group

Documents