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ITE's growth plan is priced in

The group's Russia operations look to be stabilising, but the business has struggled elsewhere
May 17, 2017

Growth in revenues in the first half of the year failed to trickle down to the bottom line for events group ITE (ITE). The company's challenges in Russia, its biggest geography by revenue, look as though they are easing, with management highlighting "ongoing stabilisation" in Moscow, where like-for-like volumes were up 5 per cent. But an unfortunate combination of event timings, foreign exchange movements and £2.3m of restructuring costs weighed heavily on pre-tax profits, which were down almost three-quarters (see table).

IC TIP: Hold at 168p

The restructuring costs were related to the group's three-year 'TAG' programme, short for 'transformation and growth', for which it will invest up to £20m in the future growth of the business. It hopes to see a return on the plan by 2020. The programme is divided into three parts, the first of which is investing in shows, talent and systems to create a scaleable events platform. The group will also tighten up its capital allocation and make "product-led" acquisitions - a move away from its traditional geography-led approach. Management plans to fund this entirely through cash generated from operations, while maintaining a net debt to cash profits ratio of 1.5 to 2 times.

​​Analysts at Numis are forecasting adjusted pre-tax profits of £29.5m for the year to September 2017, giving EPS of 8p (from £36.5m and 10.7p in FY2016).

ITE GROUP (ITE)
ORD PRICE:168pMARKET VALUE:£447m
TOUCH:167.5-168p12-MONTH HIGH:181pLOW: 125p
DIVIDEND YIELD:2.7%PE RATIO:na
NET ASSET VALUE: 29pNET DEBT:51%

Half-year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201663.610.62.81.50
201769.63.10.61.50
% change+9-71-79 -

Ex-div: 08 Jun

Payment 03 Aug

*Includes intangible assets of £184m, or 69p a share