ITE Group PLC Managing Downturn in Emerging Markets Managing Downturn in Emerging Markets
Russell Taylor Neil Jones Chief Executive Officer Group Finance Director ITE Group PLC ITE Group PLC 1 About ITE Group plc – Apr 2010
ITE Group ITE Group PLC PLC Founded in 1992, floated in 1997 � ITE is a leading organiser of B2B trade exhibitions in emerging and developing markets � Dominant in Russia – with a leading position in many Central Asian states, Turkey and India � ITE has 23 international offices and runs 180 events per year in 10 emerging markets � 2 About ITE Group plc – Apr 2010
ITE World ITE World Offices in these locations Events held in this territory 3 About ITE Group plc – Apr 2010
ITE’S Key ITE’S Key strengths strengths Geographic focus Geographic focus – fast growing markets � Sector Sector – big international businesses � Brands Brands – international and local recognition � Venue Relat Venue elationshi nships ps– availability of high quality space in the right locations � In Infrastru astructu ture re – network of local offices � 4 About ITE Group plc – Apr 2010
Rev Revenue nue by by Regi Region FY on FY 2009 2009 ITE Group Revenue by Region UK & Western Eastern & Southern Europe Europe 6% 8% Central Asia & Caucasus 16% R Russia i 70% 5 About ITE Group plc – Apr 2010
Rev Revenue nue by by Sector Sector FY 2009 FY 2009 ITE G ITE Group Revenue by Sector R b S t Other 13% Motor & Transport Construction 5% 40% Fashion & Textiles 7% Food & Drink 9% Travel 12% Oil & Gas 14% 6 About ITE Group plc – Apr 2010
ITE ‘Pre – Crisis’ e C s s 7 About ITE Group plc – Apr 2010
Character Characteristics of stics of the Mark the Market Place et Place (at September (at September 2008) 2008) End of sustained period of economic growth in our markets 5% - 10% � Construction sector – ‘frothy growth’ � Under funded and immature banking system � Local businesses built in era of growth - no credit facilities/ no experience � of downturn International customers – bigger, more experienced and better funded � 8 About ITE Group plc – Apr 2010
Charac aracteristics of teristics of IT ITE’S E’S bu busin siness ss model-pre model-pre crisis ( isis (1) Bookings made in Bookings made in Booking Booking made in advanc made in advanc advance by advance by by custome by custome customers (1-9 months customers (1-9 months s (1-9 months befor s (1-9 months befor before eve before eve event) event) � � Payments collected in advanc Payments collected in Payments collected in advanc Payments collected in advance of advance of of exhibi of exhibi exhibition exhibition on on � � Trade visitors invit Trade visitors invit Trade visi Trade visi rs invited/non paying rs invited/non paying d/non paying d/non paying � � Customers 50% ‘emerging’ / 50% developed Customers 50% ‘emerging’ / 50% developed � � 95% of revenues priced in hard currency 95% of revenues priced in hard currency � � 9 About ITE Group plc – Apr 2010
Charac aracteristics of teristics of IT ITE’S E’S bu busin siness ss model-pre model-pre crisis ( isis (2) Cost structure of an event: Cost structure of an event: � � 50% venue commitment 50% venue commitment - 1 year before - 1 year before • • 20% 20% staff 20% staff 20% staff staff - semi variable - semi variable emi variable emi variable • • 20% marketing 20% marketing 20% marketing 20% marketing - essential to quality - essential to quality essential to quality essential to quality • • 10% on-site 10% on-site cost 10% on-site cost 10% on-site cost cost - variable - variable ariable ariable • • Central & office overhead (15% of revenues) Central & office overhead (15% of revenues) Central & office overhead (15% of revenues) Central & office overhead (15% of revenues) � � 10 About ITE Group plc – Apr 2010
Economic Crisis Economic Crisis Economic Crisis Economic Crisis 11 About ITE Group plc – Apr 2010
What happened What happened? Economic “brakes” hit hard in December 2008 � Little Government Intervention � Bank finance not available � Currency devaluation – circa 30% across all markets � 12 About ITE Group plc – Apr 2010
Resul Result Over Dec 08/ Sep 09: � - ‘Local Sales’ traumatised for future events - Cancellations/reductions on existing bookings - International sales more resilient I t ti l l ili t 13 About ITE Group plc – Apr 2010
ITE’S Weekly ITE’S Weekly Sales Sales Pre close Statement L4L Sales Volumes +10% YOY Year On Year M2 Comparison M2 30,000 Prelims Prelims L4L Sales Volumes 25,000 -3% YOY 20,000 FY 08 15,000 FY 09 10,000 5,000 0 29 ‐ Aug 26 ‐ Sep 24 ‐ Oct 21 ‐ Nov 19 ‐ Dec 30 ‐ Jan 27 ‐ Feb 27 ‐ Mar 24 ‐ Apr 22 ‐ May (5,000) 14 About ITE Group plc – Apr 2010
ITE’S Weekly ITE’S Weekly Sales Sales Year On Year Cumulative M2 Comparison M2 450,000 L4L Sales Volumes 400,000 turn negative 350,000 FY 08 300,000 250,000 FY FY 200,000 09 150,000 100,000 50 000 50,000 ‐ 29 ‐ Aug 26 ‐ Sep 24 ‐ Oct 21 ‐ Nov 19 ‐ Dec 30 ‐ Jan 27 ‐ Feb 27 ‐ Mar 24 ‐ Apr 22 ‐ May 15 About ITE Group plc – Apr 2010
Result Resul Over Dec 08/ Sep 09: � - ‘Local Sales’ traumatised for future events - Cancellations/reductions on existing bookings - International sales more resilient I t ti l l ili t ITE’s largest sector (40%) - construction was hardest hit � 13 About ITE Group plc – Apr 2010
How did How did ITE manage ITE manage Management experience of late 1990’s – needed to take decisive action � Reduced exposure to soft currencies - Dec 08 Reduced exposure to soft currencies - Dec 08 � � Cut venue commitments- Jan 09 � All ‘exhibition costs’ (except marketing) cut pro-rata to m 2 sales decline � Acted quickly on fixed costs – reduced staffing by 10%+ � Worked with customers to ensure continued participation � Pricing/exchange rate flexibility offered to local customers � Little discounting � 16 About ITE Group plc – Apr 2010
After the Crisis After the Crisis 17 About ITE Group plc – Apr 2010
Final Analysis Final Analysis 2009 ‘Like-for-like’ volume sales down by 20% + � Working capital drain on ITE’s business circa £10m Working capital drain on ITE s business circa £10m � � We retain #1 exhibitions & events in markets � Retained customers � Overhead & costs ‘rightsized’ for recovery � Balance sheet remained strong after absorbing financial impact � 18 About ITE Group plc – Apr 2010
12 Months La 12 Months Late ter Markets Markets National markets (Moscow) recovering well � Regional markets Regional markets – stable but not yet in recovery stable but not yet in recovery � Sectors Sectors ‘Consumer sectors’ Food/Travel stronger � Construction – recovery in Moscow / stable elsewhere y / � Oil & Gas – recovery in line with oil price � Customers Customers Locals strong in Moscow / stable elsewhere � Internationals weak throughout � - poor sales last year - ‘domestic economies’ under pressure 19 About ITE Group plc – Apr 2010
Positione Positioned for for recov recovery ry – – Russian Economy ussian Economy Russia is the worlds 11 th largest economy � 140m people – abundance of natural resources � Little public debt – @5% of GDP (UK +80%) � Little consumer debt � Dependant on oil prices � Significant investment required in new industries and infrastructure � 20 About ITE Group plc – Apr 2010
Positione Positioned for for recov recovery ry Smaller competition has been reduced/eliminated � Good assets available at lower prices � Opportunities for ITE to expand sector spread � 21 About ITE Group plc – Apr 2010
Conclus Conclusions ons Experience helps – read the signs � Financial structure to absorb downturn � Take decisive action early – especially on cost base � Work with customers � Protect your best assets � Take advantage of new market opportunities k d f k � 22 About ITE Group plc – Apr 2010
Q + A Q + A 23 About ITE Group plc – Apr 2010
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