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ITE deal cuts Russia dependence
From the Financial Times of Tue, 23 Dec 2014 15:56:44 GMT
A Konecranes rubber tire gantry (RTG) crane moves a shipping container on the dockside at the container terminal operated by JSC Sea Port of Saint-Petersburg in Saint Petersburg, Russia, on Tuesday, May 20, 2014. The Saint Petersburg International Economic Forum (SPIEF) is an annual international conference dedicated to economic and business issues which takes place at the Lenexpo exhibition center May 22-24. Photographer: Andrey Rudakov/Bloomberg©Bloomberg

Exhibitions company ITE has bought rival trade show operator Breakbulk for $42m, as it steps up its efforts to diversify and reduce its dependence on Russia, which it relies on for 60 per cent of revenues.

Breakbulk specialises in bulk logistics and transport exhibitions, with big trade shows in Houston, Antwerp and Shanghai.

Neil Jones, ITE’s finance director, said the deal represented a significant geographical expansion. “This will give us our second show in China, our first in America and our first in mainland western Europe,” he said.

ITE has suffered as the armed conflict in Ukraine and subsequent economic sanctions imposed on Russia have hit its business. Its shares have lost about half their value in the past 12 months.

Mr Jones said the $42m price for Breakbulk — to be paid in cash with $2m held back until the end of next year — was likely to be about 8.5 times Breakbulk’s 2015 earnings before interest, tax, depreciation and amortisation. Its exhibitions had “great visibility of earnings”, he added, noting high levels of rebooking for the following year while its current shows were taking place.

ITE said that forward bookings worth about 90 per cent of the budget for Breakbulk’s three main events next year have already been placed.

Mr Jones said that Alli McEntyre, Breakbulk’s managing director, would remain with the group and was “very committed to driving the business forward”.

Breakbulk was auctioned by Electra Partners-backed AQXIO Data Group, which bought it from UBM early last year. Canaccord said the multiple that ITE was paying for Breakbulk compared well with the 11.2 times earnings that Informa paid for Hanley Wood and the 10 times paid by UBM for Advanstar — both larger US-based acquisitions announced in the past couple of months.

Analysts said they expected the deal to be modestly earnings enhancing in 2015 and said it fitted ITE’s strategy of reducing its Russian exposure. Investec estimated that, on a pro forma basis, the percentage of profit derived from Russia would fall from 60 per cent to about 55 per cent after the acquisition.

Earlier in December, ITE had acknowledged the impact of difficult trading conditions in Russia and Ukraine, as well as the strength of sterling.

Revenues slipped 9 per cent to £174.8m, although headline profit rose slightly to £60.3m.

However, ITE emphasised its confidence in its prospects, based on good cash flow and balance sheet strength.

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