Events. The UK listed exhibitions organiser ITE Group is disposing of no fewer than 56 of its smaller events in Russia, to Shtab-Expo LLC, a company owned by ITE’s former Russia chief. These events, which are said to comprise “a significant proportion” of ITE’s “non-core” events in Russia, last year generated profits of £1.3 on revenues of £12m. This ensures that the conditional disposal price of £8-13m (effectively as low as 5x earnings) will dilute the company’s profits, more so because payment is actually spread across eight years. The deferred payments (and the fact that the deal does not include all of ITE’s troublesome non-core Russian events) betray the enthusiasm to get rid. But the deal is also a sign that the profits of these small regional exhibitions are still in decline some years after they were first rocked by the perfect storm of sanctions on Russia, the conflict in Ukraine, and uncertainty in Turkey. This long tail of events has long been a burden for a company which has 16 major mostly Moscow-based events which will be retained. But ITE had been wary of the impact that a disposal would have on its trademark Russian events, including MosBuild, WorldFood Moscow, YugAgro and MITT. These events will now be operated by the newly-formed ITE Expo International LLC. The disposals follow those of Metaltech Malaysia and the closure of more than 30 unprofitable or marginal exhibitions. But nothing has so defined the two-year-old get-fit regime of CEO Mark Shashoua as this year’s £300m acquisition of seven UK exhibitions (including the legendary International Spring Fair) from his former employer Ascential Plc. That “insider” connection has encouraged some ITE investors who were momentarily spooked by the mere idea of buying a seemingly mature group of exhibitions from Ascential, an events company that has proved so adept at cutting costs and squeezing profit margins. With almost £80m of revenue in 2017, it is now believed that these events could triple ITE’s revenue to at least £230m with profit margins of more than 25%. Revenues from Russia are forecast to fall to some 25% of the ITE total, compared with more than double that just a few years ago. The UK will be bigger than Russia. If the company does achieve its targeted £5m of cost savings on the acquired exhibitions (and as long as any kind of Brexit-forced slowdown does not seriously erode the earnings of the UK retail-oriented shows), Shashoua will have delivered a whole lot more stability to a company once so sensitive to the volatility of Russia and other developing economies. If he soon manages to get some cash in return for the other non-core Russian shows, investors will be cheering even more. But, if there is another wobble in ITE earnings growth, there will be no shortage of exhibitions companies waiting to pounce on the 27-year-old £620m company. New global leader Informa and Blackstone-owned Clarion are watching. The smart money, though, is on ITE delivering – and then going on a spending spree of its own in 2019. After all, like-for-like revenue is more than 10% up so far this year. We’re backing you, Mark.
Context: Why Reed Exhibitions may be sold