HYVE.L Regulatory News (HYVE)

3 December 2019

Hyve Group plc

("Hyve" or the "Group")

PRELIMINARY RESULTS ANNOUNCEMENT

Transformation & Growth Programme (TAG) delivered, driving sustainable revenue growth and margin expansion

·; 7% like-for-like1 revenue growth

·; £220.7m revenue (2018: £175.7m) up 26% largely due to acquisitions

·; Top 10 TAG events1 grew 13% like-for-like following implementation of TAG initiatives

·; Headline profit before tax of £50.4m (2018: £35.4m); 16% like-for-like growth

·; Statutory profit before tax of £8.7m (2018: loss of £3.7m) after amortisation of intangible assets, transaction related costs and one-off TAG costs

·; Full year dividend cover1 maintained at two times cover

·; Net debt movement reflects acquisitions and TAG initiatives; maintained within two times EBITDA1

·; Forward bookings1 of £152m already contracted for FY20, representing 66% of market consensus and up 4% on a like-for-like basis

Strategy update

·; Integration of Ascential Events and Mining Indaba acquisitions completed

·; Strengthened portfolio with the sale of 56 non-core Russian events and the closure of 24 small Russian and Central Asian events during the year

·; Successful delivery of the transformation element of the TAG programme has led to an evolved vision, a new way of working and an invigorated culture, culminating in a new brand

·; TAG has fundamentally transformed the business to:

o A more balanced international presence from a purely emerging-markets focus

o A centralised operating model from a decentralised federal organisation

o A premium product business from a geographic market-share led company

o A diverse portfolio of market-leading events from a portfolio of mixed quality

·; The portfolio has halved since the launch of TAG - 269 events (May 2017) to 130 events - yet overall revenue has increased by 64%2

·; Returned the business to sustainable growth

·; On track to deliver all TAG investment targets ahead of schedule

Mark Shashoua, CEO of Hyve Group plc, commented:

"I am delighted that our first set of results as Hyve show like-for-like revenue growth of 7%, as well as a like-for-like increase in headline profit before tax of 16% and strong margin improvement. Double digit revenue growth from our Top 10 TAG Events was a key driver of this performance and is proof of the benefits of the TAG programme.

We are on a mission to deliver unmissable events, with a stronger and more diversified portfolio. The investments we have made to improve our portfolio through the TAG programme and our focus on must-attend events means that we are well-placed to continue to deliver further growth in FY20. While not immune from global economic and geopolitical uncertainties, including Brexit, forward bookings of £152m, representing 66% of market consensus, give us very good visibility as we enter FY20.

We are confident that with the investments we have made into our market-leading events, we are in a better position to face any potential global headwinds. We will look for opportunities to increase our customer market share, as during downturns customer spend often gravitates towards market-leading events.

Current trading for FY20 is in line with the Board's expectations and we enter the new financial year with a stronger portfolio of events than ever before."

Notes to Editors

1. In accordance with the Guidelines on APMs issued by the European Securities and Markets Authority (ESMA), additional information is provided on alternative performance measures (APMs) used by the Group in the Glossary. In the reporting of financial information, the Group uses certain measures that are not required under IFRS. These additional measures provide additional information on the performance of the business and trends to stakeholders and are defined in the Glossary.

2. Compared to FY16 revenue, the last reported annual results pre-TAG.

For further information please contact:

About Hyve Group plc

Hyve Group plc is a next generation global events business whose purpose is to create unmissable events, where customers from all corners of the globe share extraordinary moments and shape industry innovation. Hyve Group plc was announced as the new brand name of ITE Group plc in September 2019, following its significant transformation under the Transformation and Growth (TAG) programme. Our vision is to create the world's leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers.

Where business is personal, where meetings move markets and where today's leaders inspire tomorrow's.

Chairman's statement

Significant transformation and growth

Performance

The last three years have seen significant change for Hyve Group plc. The management teams' ambitious vision has led the company to centralise its operating model, improve its systems, complete significant acquisitions of market-leading events, integrate and restructure new teams, relocate its HQ, as well as sell or close a number of less profitable events. Finally, this culminated in the launch of an inspiring new corporate identity at the end of the year, to support the business going forward.

The TAG programme, which we announced in 2017 remains ahead of plan on all investment targets and l am happy to report that this has led to industry leading organic growth. As the TAG programme draws to a close in 2020, the business will consider this phase of its transformation complete.

Revenue for 2019 increased to £220.7m (2018: £175.7m), a 7% increase on a like-for-like basis, while statutory profit before tax increased to £8.7m (2018: loss of £3.7m). Headline profit before tax increased to £50.4m (2018: £35.4m), a 42% increase on last year, and headline diluted EPS was 4.9p (2018: 4.9p), in line with last year after the full-year impact of the additional shares issued through last year's rights issue.

On behalf of the Board, I would like to thank every colleague who has contributed to the business over the last 12 months for their continued passion and dedication to this company and its events.

Shareholder returns

The Group maintains its dividend policy, with dividends declared and paid twice annually to shareholders. The Group's dividend policy aims to achieve an appropriate balance between providing an immediate return to shareholders and reinvesting in the business to pursue growth opportunities and deliver a longer-term return. Prior to any dividend declaration, consideration is given to the availability of distributable reserves, the ability for the Group to remain within its available banking facility, stay compliant with its covenant targets and retain sufficient cash for working capital purposes. Dividend cover is typically maintained at greater than two times headline diluted earnings per share.

Board changes

Earlier this year, Neil England stepped down from his position as Non-Executive Director, following ten years on the Board. During this time, Neil held the post of Senior Independent Director and acted as Chairman for a period of nine months. I would personally like to thank Neil for his guidance and expertise throughout his time here and wish him well for the future.

We are pleased to welcome Nicholas Backhouse to the Board. Nicholas, who joined on 1st May 2019, brings extensive experience at Board level, including non-executive roles at Guardian Media Group plc, Hollywood Bowl Group plc and Loungers plc.

Following the AGM in January 2020, Nicholas will replace Stephen Puckett as Chair of the Audit Committee and continue the excellent work which Stephen has been leading. Stephen will remain on the Audit Committee and will also become the Chair of the Risk Committee, in addition to having taken up the role of Senior Independent Director and the employee representative on the Board.

It is the Board's intention to seek to appoint an additional Non-Executive Director during 2020 to complement the skills of the existing Board Members.

Outlook

After the TAG programme, the Group will continue to benefit from the best practices, globally standardised ways of working and a centralised operating model introduced over the last three years. Having now professionalised the business and implemented best practice, the Group will now introduce innovative and efficient ways of operating to amplify the impact of the revenue growth being delivered.

This positions the Group well to continue to drive growth, both organically and through selective acquisition.

Despite uncertainty both economically and geopolitically across many of our markets, we remain confident in the future growth prospects of the Group. The focus on quality introduced through the TAG programme has increased the resilience of our portfolio and positions our market-leading events well to gain market share as customers refocus both their time and investment.

Chief Executive Officer's statement

Our business is all about quality and globally consistent best practice

2019 has been a successful year and I'm pleased to be able to report strong year-end financial results. We have delivered a third consecutive year of growth, with revenues of £220.7m (2018: £175.7m), a like-for-like increase of 7%. Our top 10 TAG events have collectively delivered double-digit growth, which is attributable to our highly-successful Transformation and Growth programme.

We are reporting a headline profit before tax of £50.4m (2018: £35.4m) and a profit before tax of £8.7m (2018: loss before tax of £3.7m). This reflects the full year impact of the acquisitions we made in 2018 and 2019, combined with our strong underlying trading growth across most markets.

We have good visibility of our forward bookings for 2020, representing 66% of city consensus, and remain confident of continuing our growth trajectory.

Delivery on Transformation and Growth programme

This year has been all about delivery. We launched our Transformation and Growth (TAG) programme back in 2017, identifying three key pillars to drive our transformation. These three pillars were - building a scalable platform, managing our portfolio and making product-led acquisitions. We have now built our scalable platform, which encompassed creating a centralised operating model and defining consistent global processes and best practice ways of working. With TAG almost complete, we are starting to realise the return on the investments we have made.

At the same time, we have been working towards completion of the technology transformation, which has seen us implement new customer relationship management software, roll out a global, cloud-based people system, connect our international teams through Skype for Business and establish a 24/7 IT service. The end results of this are improved collaboration on a global scale, more intelligent management information enabling us to make better decisions, one global view of our customers which opens opportunities for international sales and flexibility to work anywhere, at any time and on any device.

Launch of Hyve brand

We also launched our new company brand, Hyve, to our 1,200 colleagues around the world, and our new company values. The values were created through a process whereby we listened to hundreds of opinions and voices from around the business and the final values were launched at the same time as our new brand. They're already being used across the company and we look forward to them guiding how we work in the future.

Our business has a clear vision, well defined strategy and a renewed energy. These significant changes signify that we are now a fundamentally different business.

Our previous brand name and identity were no longer fit for purpose after our significant transformation, so it was time for a change. Our new name and identity are a better reflection of who we are now and capture our ambitions for our future.

The benefits we're already seeing include an increase in pride within our teams, fantastic reactions and strengthened relationships from our customers and a much more effective employer brand which will support us when hiring the very best people across the world.

The Hyve icon is a mark of quality and reflects events which are premium quality, centred around human connections and forever improving. Our new corporate brand will strengthen our event brands, and this was clearly visible at the recent Africa Oil Week in Cape Town, which was the first Hyve event.

Product-led acquisitions

Over the course of the TAG programme we have greatly enhanced our portfolio through the product-led acquisitions we have made. We have strengthened our Global Brands division with the acquisitions of Bett, CWIEME and Mining Indaba, and have created a new UK division following the acquisition of Pure, Glee and Spring and Autumn Fair. The integration of these events is now complete.

We will continue to prioritise product-led acquisitions that will benefit from the scalable platform we have created and have been building a pipeline of potential opportunities. We will analyse that pipeline and actively look for future acquisitions which meet the criteria we outlined under the TAG programme.

Managing the portfolio

We will continue to review our portfolio to ensure that all of the shows we own are market-leading or have the potential to become market-leading. In October 2018 we completed the substantial sale of 56 smaller, regional Russian events and in December 2018 closed the loss-making Siberian business. This has given a greater focus to the must-attend shows in Moscow which have a better potential for continued growth.

We will continue to review the compatibility of all our events with our ambitions and, where deemed necessary, would consider selling or closing any events which no longer align with our strategy.

Strong platform for growth

Now that the TAG programme is largely complete, we are a fundamentally different business. Whilst the transformation component of the programme has ended, we will continue to work on our growth. Driving organic growth, making product-led acquisitions and managing our portfolio will remain our strategic focus.

As well as enhancing our portfolio of events, we are focusing on organic growth opportunities for our current portfolio of events. This could be through a variety of initiatives such as launching new adjacent sectors; one great example of this is the launch of Pawexpo, the new pet tradeshow, which will premiere at our next Glee event in September.

As an international events organiser we recognise that we are exposed to macroeconomic factors outside our control. However, we believe that due to the investment we have made into products, people and systems, the headwinds currently faced present opportunities for a business like ours since as, in times of economic uncertainty, there is a flight to quality. When times are harder and budgets tighter there is a move to attend just the market-leading show, as the one place where everyone wants to do business.

Of course, headwinds such as Brexit, geopolitical instability in Turkey and a global economic slowdown more generally, can affect our business and we are not immune to this. However, rather than see this as a threat to our prospects we are excited by the opportunities for winning customer market share that this presents.

Priorities for 2020

We have three strategic priorities for 2020.

The first is to embed our new company values: brilliant work, rich connections, fresh thinking and collective buzz. Already, these values have instilled a new sense of direction and purpose for our teams and we are seeing people make better decisions and create more innovative and collaborative team strategies as a result.

Secondly, we will work towards obtaining a greater customer market share. We will do this by continuing to invest in our events and helping our customers to define and realise a greater return on investment and time. We aspire to build loyalty and continue to grow retention among our existing customers as well as bring in new customers from competitor shows that do not offer the same returns.

Finally, we will optimise, simplify and innovate within our business model. As we reach the final stage of the TAG programme, our focus will shift more externally to improving the way we work with our customers. We will be analysing how we can make it even easier for our customers to do business with us and attend our shows, ensure our events are truly unmissable and create an environment that facilitates the richest connections possible between buyers and sellers at our events. We will also look to refine our new systems and processes to create further efficiencies.

Due to the progress we have made throughout the TAG programme, we have good visibility of our forward bookings for next year and are confident in our outlook for 2020. 

Chief Financial Officer's statement

Sustainable revenue growth at improved profit margins

Overview

Revenue

Revenue for the year was £220.7m (2018: £175.7m), up 7% on a like-for-like basis. This growth has been achieved despite headwinds in a number of the Group's markets and demonstrates the benefits of establishing a strong portfolio of market leading events. Deferred income has increased to £80.0m (2018: £77.6m), despite having disposed of a number of events in Russia and Azerbaijan and closed our Siberian business but after adding Mining Indaba to the portfolio. On a like-for-like basis forward bookings at 30 September 2019 were up 4%.

Profit before tax

The Group reported a profit before tax of £8.7m (2018: loss before tax of £3.7m), after including adjusting items of £41.7m (2018: £39.1m). The return to a statutory profit before tax is attributable to the acquisitions of Ascential Events and Mining Indaba in 2018 combined with strong underlying trading growth. Share of results of associates and joint ventures have increased to £6.4m (2018: £5.9m), following strong performance from the Chinacoat event, operated by our joint venture, Sinostar, and the stronger biennial year for our Russian joint venture, ITE MF.

Headline profit before tax is an alternative performance measure used by the Group to measure underlying trading performance. After excluding adjusting items, headline profit before tax was £50.4m (2018: £35.4m). On a like-for-like basis headline profit before tax has grown by 16%, building on the growth achieved in the previous year, and is significantly ahead of the rate of like-for-like revenue growth.

Earnings per share

Basic and diluted EPS were 0.4p (2018: (1.6)p). The Group achieved headline diluted EPS of 4.9p (2018: 4.9p). Headline diluted EPS is unchanged despite significant profit growth year-on-year as a result of the full-year impact of the higher number of shares in issue following the rights issue to fund the Ascential Events acquisition in July 2018.

Cash flow

Cash conversion[1] for the year was 94% (2018: 113%). The reduction reflects slower cash conversion at the acquired Ascential Events business compounded by Brexit uncertainty, which is causing some customers to withhold cash payments until later in the cycle, closer to the event dates. Action has been taken to improve cash conversion toward the end of the year which has had a positive impact and this will remain an ongoing area of focus in 2020, particularly whilst we face increased global macroeconomic pressures. Despite lower cash conversion, due to the Group's business model concerns over recoverability are limited.

Net debt at the year-end has increased to £111.7m from (30 September 2018: £82.7m) primarily as a result of additional drawn debt to fund the acquisition of the Mining Indaba event from Euromoney in October 2018 (total upfront consideration of £20.0m and deferred consideration paid in the year of £8.7m), and £2.6m of deferred consideration paid to Ascential plc. Excluding the net impact of acquisitions and disposals, cash flow from operations was sufficient to cover the Group's dividends, tax paid and the TAG costs incurred in the period.

At 30 September 2019, £146.2m of a total available £160.0m was drawn on the Group's banking facility. Bank loans presented in the Statement of Financial Position are £144.7m, net of £1.5m of capitalised borrowing costs.

Headline reconciliation

In addition to the statutory results, headline results are presented, which are the statutory results after excluding a number of adjusting items, as the Board consider this to be the most appropriate way to measure the Group's performance. In addition to providing a more comparable set of results year-on-year, this is also in line with similar adjusted measures used by our peer companies and therefore facilitates comparison across the industry.

The adjusting items presented are consistent with those disclosed in the previous year. The adjusting items have been presented separately in order to report what the Board consider to be the most appropriate measure of underlying performance of the Group and to provide additional information to users of the Annual Report.

Reconciliation of headline profit before tax to statutory profit/(loss) before tax:

Consolidated Income Statement

Consolidated Statement of Financial Position

Trading summary

In 2019 the Group ran 129 events (2018: 205). The decrease is primarily attributable to cancellations of smaller, less profitable events and the disposal of 56 non-core events in the Russian regions. A detailed analysis of volumes and revenues is presented below:

Segmental results

Following the integration of Ascential Events, the way in which costs are allocated to the Group's reportable segments has changed. Therefore the comparative segmental information has been restated to reflect the current year basis on which segments are reported to the Executive Team for the purpose of allocating resources and making strategic decisions. This has resulted in changes to the segment headline profit before tax as set out below.

Refer to the Divisional trading summary below for commentary on the performance of each operating segment.

Central costs include all costs that are not allocated to the Group's operating segments when headline profit before tax is reported to the Executive team for the purposes of allocating resource and making strategic decisions. These include the Group's corporate overheads and other central costs that are included within cost of sales. The corporate overheads are the costs of running the head office in London and are primarily comprised of staff costs, which include the Group's executive and non-executive directors, depreciation of the Group's centrally held assets, office rent and professional fees. The other central costs included within cost of sales include costs that are not event-specific but span the Group's portfolio of events.

The increase in central costs in 2019 is primarily due to a full year of costs associated with running a larger group after the acquisitions of Ascential Events and Mining Indaba and the full year impact of the move into our new headquarters in Paddington.

Foreign exchange

As a result of the territories in which we operate, we are exposed to changes in foreign exchange rates and significant movements, particularly in the Russian ruble, can have a significant impact on our results.

Further detail is provided on the impact of translational FX, which is included within the results of each division and only adjusted for when considering like-for-like measures of revenue or profit, transactional FX, which is presented separately in the Income Statement and is a loss of £1.1m in the year (2018: gain of £2.2m) and the impact on reserves recognised in the foreign currency translation reserve below.

Translational FX

Each month our subsidiary company results are translated into sterling, from the functional currencies of the subsidiary companies, on consolidation, using the prevailing foreign exchange rates for the month. Changes in foreign exchange rates result in fluctuations of the level of profits reported for the Group. The impact of the changes in foreign exchange rates is included within both the statutory and adjusted reported results, within the relevant lines in the Consolidated Income Statement. To aid comparability of trading results, when presenting like-for-like performance we adjust for the impact of changes in foreign exchange rates on translation.

Whilst the Russian ruble and Turkish lira were stronger against sterling at the end of 2019 compared to the end of 2018, for the majority of the year these currencies were weaker compared to the same period in the previous year, meaning the reported results were lower than in the comparative period by £2.3m for revenue and £0.8m for headline profit before tax.

Transactional FX

As well as translational foreign exchange movements arising on consolidation, the Group results are impacted by changes in foreign exchange rates within our subsidiary company results. Where monetary transactions are entered into in different currencies than the functional currency of the entity this gives rise to revaluation gains and losses following changes in exchange rates between the transaction date, month end and the settlement date. Each revaluation of the monetary assets and liabilities held on the balance sheet results in gains and losses, which are reported within the Consolidated Income Statement within the 'Foreign exchange gain on operating activities' line.

The strengthening of the Russian ruble and Turkish lira throughout the financial year relative to the position at September 2018 has contributed to the loss of £1.1m (2018: gain of £2.2m) recognised in the year, which has arisen on the revaluation of foreign currency monetary assets and liabilities held in our subsidiary companies in Russia and Turkey.

In order to minimise our exposure to changes in foreign exchange rates, particularly on euro denominated cash inflows held in sterling subsidiary companies, which accounts for approximately 15-20% of total revenues, the Group previously held foreign exchange forward contracts to provide certainty over the future euro cash inflows. The gains and losses on the forward contracts are deferred and recognised within revenue at the point at which the revenue is recognised. From July 2019 onwards, the Group did not hold foreign exchange forward contracts, but instead sought to naturally hedge results.

In the year, a loss of £0.9m (2018: loss of £1.7m) was recognised within revenue in respect of our forward contracts, reflecting the strengthening of the euro against sterling relative to the contracted rate on entering into the forward contracts, naturally offsetting the benefit received from this strengthening within our reported revenues.

Foreign currency translation reserve

Finally, our results are impacted by the translation of the subsidiary company balance sheets each month on consolidation into sterling. A change in foreign exchange rates gives rise to a movement which is recognised within reserves in the foreign currency translation reserve. This is on translation of the company balance sheets of our subsidiary companies, which are reported in their functional currencies before being translated into sterling on consolidation, at the prevailing period end rates.

The foreign currency translation reserve decreased by £7.9m, largely due to the strengthening of the Russian ruble, Turkish lira and the Indian rupee against sterling between the beginning and the end of the financial year. Due to the considerable goodwill and intangible assets held in these countries the value of the net assets within the consolidated statement of financial position has increased.

Venue arrangements

The Group has long-term arrangements with its principal venues in its main markets setting out Hyve's rights over future venue use and pricing.

The arrangements can take the form of a prepayment of future venue fees (advance payment), or a loan which can be repaid in cash or by offset against future venue fees (venue loan). Generally, the arrangements bring rights over future venue use and advantageous pricing arrangements through long-term agreements. Venue advances and prepayments are included in the Consolidated Statement of Financial Position under non-current and current assets.

Acquisitions and disposals

On 3 October 2018 the Group completed the disposal of ITE Expo LLC, the operating company for 56 of the Group's non-core, regionally-focused, smaller events in Russia, to Shtab-Expo LLC for consideration at fair value of £4.1m. The Group will receive principal consideration of approximately £10.0m over the nine years following completion together with additional variable consideration of up to approximately £4.7m based on ITE Expo LLC's incremental revenue growth during this period.

On 23 October 2018 the Group acquired the business and assets relating to Mining Indaba from Euromoney for £28.7m. Mining Indaba is the leading event dedicated to bringing together mining and investment experts in order to develop mining interests in Africa.

On 29 March 2020 the Group also completed a number of smaller disposals within the Central Asia region for combined consideration of £0.5m.

At 30 September 2019, equity options are held over further interests in our subsidiary companies, ABEC, Fasteners and Scoop, and our joint venture company Debindo.

Portfolio management

As part of our ongoing focus on Core events we have continued to review our portfolio of events. During the year we closed our Siberian business discontinuing 17 events that we previously operated in Ekaterinburg, representing the majority of the 24 events cancelled in 2019. The cancelled events had contributed £5.3m to Group revenue in 2018 and collectively were loss making, contributing a net loss of £0.5m to headline profit in the comparative period.

TAG overview

In May 2017, we announced our intention to invest up to £20.0m in the TAG programme over the three-year transformation period. In 2019 we invested £4.1m, comprised of £2.8m of one-off restructuring costs, which are presented within adjusting items, and £1.3m of capital expenditure. The costs incurred in the year include IT and system costs as part of the Group's technology transformation, costs associated with the rebrand to Hyve and the launch of value-based pricing at some of our Core events. Having invested £16.2m since May 2017, we anticipate investing up to £3.8m in FY20, focusing on building a new global finance system and implementing efficiencies within the Group's operating model. We therefore remain confident of delivering the overall TAG programme within the £20.0m one-off investment indicated.

During 2019, £8.0m (2018: £7.3m) of costs were included within our statutory and headline results in relation to the TAG programme. These represent costs in relation to the delivery of the Group's new strategy, rather than the costs of designing and implementing the strategy. These are costs that have arisen following changes to the way we operate as a result of the TAG programme and are expected to continue to be incurred as the Group's new operating model becomes fully embedded. These costs include direct costs incurred to drive future revenue growth, such as content and operations costs, to enhance the quality of our events and overhead costs in relation to maintaining best practice functions and teams and building capability and talent across the organisation.

In May 2017 we said that we expected the ongoing costs of TAG to exceed the incremental revenue it delivers during the three years ending 30 September 2019, with positive net operating profit after tax from the year ended 30 September 2020. As signalled last year, we can now confirm that we have met this target a year early, delivering a profit from TAG in the year ended 30 September 2019. We remain on course to deliver ROI from the TAG programme greater than our 2017 cost of capital a year ahead of plan, in the year ended 30 September 2020. This gives us confidence that we will meet all our TAG targets within the expected timeframe.

Divisional Trading Summary

Global Brands

The Group's Global Brands business now contains the results of the Africa Oil Week event and the Breakbulk portfolio of events. It also includes the Bett and CWIEME portfolios of events acquired as part of the Ascential Events acquisition in July 2018 and the Mining Indaba event acquisition completed in October 2018. During the year, the Group ran 15 (2018: 5) events in the Global Brands division.

Overall the portfolio reports a £38.2m increase in revenues and an £18.2m increase in profits. The considerable increase to both revenue and profits in the year is largely due to acquisitions, with the division having expanded rapidly over the past 18 months. On a like-for-like basis, revenues increased by 16% and headline profits before tax increased by 34% with the profit increase attributable to the trading results of our previously held Africa Oil Week and Breakbulk events which performed exceptionally in the year.

Africa Oil Week ran in October 2018 and considerably exceeded expectations with revenues growing in excess of 35% year on year, aided in part by the recovery of the oil price and with the benefits of TAG investment being realised.

The Bett portfolio is comprised of five events held across the globe with the showpiece event being the Bett event held in January at the ExCel in London, which is one of the Group's largest events by revenue. The event had been owned for less than a full event cycle when it was held in FY19, limiting the ability of the event teams to upgrade the event proposition to the full extent required, resulting in the event not achieving its full potential this year. Looking ahead, the portfolio is tracking ahead of the same time last year and after holding the events for a full cycle, the teams are optimistic for the growth trajectory across the portfolio.

The CWIEME portfolio is made up of three events in Germany, China and USA. The largest event in the portfolio is CWIEME Berlin which takes place in Messe Berlin each May. With a slightly longer run-up to the event post-acquisition from Ascential plc last year, the CWIEME event delivered in line with expectations, despite significant restructuring of the team during the year.

Mining Indaba, the South African mining exhibition and conference was acquired at the beginning of the financial year, four months in advance of the event. Whilst having limited time to affect any meaningful change at the event, small incremental improvements were made which have helped to position the event strongly for the future. The results of the current year event were ahead of expectations and the forward bookings for the 2020 event are considerably ahead of the same time last year.

Asia

The Group's Asian events take place in India and China, primarily operated by subsidiary companies in which the Group owns the majority but not all shares. Overall the Asia division reported lower results in the year across revenue and profit before tax, with the decline attributable to India as a result of known space constraints at ACETECH Delhi where the venue is under redevelopment, the cancellation of a number of smaller events and this being the weaker biennial year in which Paperex does not take place. On a like-for-like basis the region reported a revenue increase of 5% and a 2% increase in headline profit before tax.

The Group benefitted from another strong performance by its Sinostar joint venture, which is not included in consolidated revenues, but is included in consolidated profit before tax for the region. In South East Asia, the Group owns 50% of PT Debindo in Jakarta, Indonesia, which runs the IndoBuildTech series of construction exhibitions. While considerably smaller than Sinostar and therefore only having a minimal impact on the overall Group's performance, PT Debindo also contributed an increased share of profits in the year.

The Group operates two businesses in India: one through a wholly-owned subsidiary, Hyve India, which has its weaker biennial year in odd years, and the other through ABEC, one of India's largest exhibition organisers in which the Group has a 60% stake. ABEC's portfolio includes ACETECH, India's leading construction events. The Indian business as a whole delivered a like-for-like volume decline of 6%, and a like-for-like revenue decline of 5%, reflecting the space constraints at the Delhi venue. As a non-100% owned business, ABEC has not had the benefits of TAG or centralised operating model.

In China the Group has offices in Beijing and Shanghai and operates (through its Hong Kong headquartered 50% joint venture partner Sinostar) the Chinacoat/Surface Finishing China event. The December 2018 Chinacoat event in Shanghai recorded 26% volume growth on the equivalent previous edition. The 70% owned Gehua business performed well, exceeding expectations and delivering considerable year-on-year growth, supported by particularly strong growth from the food event which ran in August 2019. The Group's 70% owned Fasteners declined across all key metrics in the year, in the face of increased competition.

Central Asia

Hyve's principal offices in Central Asia are in Kazakhstan, Azerbaijan and Uzbekistan. All the economies in this region are heavily dependent on oil and gas for their overseas earnings and economic wealth and in the case of Kazakhstan a significant level of trade with Russia as well. The gradually improving oil price and the Russian economic stabilisation have had a positive impact on trading conditions within the region.

This year Hyve organised a total of 45 events (2018: 56) across these territories. Overall, reported results declined by 19% for revenue and 30% for headline profit before tax, but on a like-for-like basis, revenues increased by 13% and headline profit before tax remained flat. The decline in absolute results across the region is attributable to a combination of the sale of our small Azerbaijan portfolio, with only our largest event in the country, Caspian Oil & Gas, retained, the disposal of the Group's stand construction businesses in Azerbaijan and Kazakhstan and timing differences. The timing differences notably include KIOGE, the Kazakhstan oil and gas event, which took place in Almaty in October 2017 and again in September 2018 and so reported revenues on two event editions in the comparative year but none in 2019, and CAITME, the Uzbekistan textile machinery exhibition that took place in 2018 but did not run in 2019.

Kazakhstan is the Group's largest office in the region and the most notable year-on-year change was the KIOGE event not taking place in the period and the disposal of the stand construction business in March 2019, contributing to a decline compared to 2018. On a like-for-like basis results were comparable year-on-year.

Azerbaijan is the Group's smallest office in the region and has further decreased in size in the year as a result of the partial disposal of the business in March 2019. On a like-for-like basis results were in line with last year.

Hyve's Uzbekistan business has delivered significant growth in each of the last two years, driven to a large extent by the more favourable macroeconomic environment, with the current political regime taking a more favourable stance on international investment. Despite one of the Group's largest Uzbekistan events, CAITME, not taking place in the year due to timing differences, revenue and profit before tax both increased year-on-year.

Eastern and Southern Europe

The Eastern and Southern Europe region is represented by the Group's offices in Turkey and Ukraine. Overall the region reported growth in revenue and headline profit before tax on both an adjusted and statutory basis. 2019 is the stronger biennial year in Turkey, benefiting from the railway industry exhibition Eurasia Rail which takes place in Spring in alternate years. On a like-for-like basis, revenues increased by 6%, reflecting the success of the pricing strategy pursued in 2019, while headline profit before tax increased by 13% on a like-for-like basis.

Overall performance in Turkey was mixed, mirroring the turbulent economic and political environment. The majority of the events outperformed their previous editions but overall growth was slowed by challenges at our TurkeyBuild Istanbul event which was operating in a construction sector that contracted by over 45% in the year. On a like-for-like basis revenues were up 5% due to pricing power following the introduction of TAG initiatives and euro pricing at several events.

Trading in Ukraine has continued on the path to recovery. Overall like-for-like revenue growth of 7% and double-digit headline profit before tax growth was reported.

Russia

During the year Hyve held 17 events in Russia (2018: 89) and reported revenue of £62.6m, 15% lower than the previous year. This was due to the disposal of 56 of the Group's non-core, regionally-focused, smaller events in Russia, which previously contributed revenues of approximately £12.0m, the closure of the Siberian regional events and the weakening of the Russian ruble which had a negative impact of £0.8m on revenues and £0.3m on headline profit before tax. Excluding these effects, like for like revenues increased by 12% and headline profit before tax by 14%.

Headline profit before tax of £25.9m was 10% higher than the previous year, despite the disposal of the regional non-core events in the year. This was due primarily to strong underlying growth but was helped by this being the stronger biennial year for ITE MF, the Russian joint venture, which increased to a pre-tax share of profits of £1.7m (2018: £0.8m) and the closure of the Siberia business which was previously loss-making. Whilst the TAG benefits are now being felt, the trading environment in Russia has become less certain in the past year and the economic country's GDP growth is forecast to grow at below 2% for the next year. On a like-for-like basis headline profits before tax increased by 14% from the prior year.

Hyve's leading events in Russia have coped well in a challenging market, with the largest events delivering exceptional growth. MosBuild, the Group's largest event prior to the Ascential Events acquisition, grew volumes by 20% in the year, led by strong domestic exhibitor sales and significant growth from the ceramics sector. The majority of the other events in Moscow also performed well, proving resilient to the macroeconomic growth slowdown and international sanctions to deliver strong year-on-year growth in both revenue and profit. The one notable exception was MIOGE, the oil and gas event, which has continued to suffer from low exhibitor interest since becoming an annual event but not being the market-leading event in the sector in Russia, coupled with the effects of the sanctions on international energy companies operating in Russia. The event declined significantly year-on-year and has now been cancelled for 2020.

The sole event remining in the Russian regions is YugAgro in Krasnodar, the leading agriculture event, which, despite space constraints, continued its current growth trajectory since the launch of TAG and again delivered double-digit like-for-like revenue growth.

UK

The UK division contains the results of our Moda portfolio of fashion events, including Moda, Scoop and Jacket Required, as well as the majority of the acquired Ascential Events portfolio including Spring Fair, Autumn Fair, Pure and Glee. The events included in the like-for-like results are therefore those from the Moda portfolio as well as one of the Pure events, Glee and Autumn Fair, which ran in the short period under Hyve ownership in the last financial year.

The legacy fashion portfolio continued to decline on the prior year. This was due to the continued challenges facing the UK's mid-market fashion industry.

Pure, the high-end fashion event held at Olympia in London is comparable to Moda in so far as the event is run biannually to cater to the changing seasons but seeks to serve a higher end of the market which has been slightly more robust than the mid-market fashion sector. Although the current uncertainty in the UK surrounding Brexit and challenges facing the UK high-street are having an impact.

Spring Fair and Autumn Fair, the Birmingham based home and gift events have faced considerable challenges over the past few years with significant investment needed to stabilise the declines seen in light of underinvestment at the events, coupled with the wider political uncertainty and the knock-on impact on the UK economy. Spring Fair is now the largest event in the Group's portfolio and fills the majority of the NEC, with volume sales in excess of 68,000 SQM.

Glee, the UK gardening and outdoor living trade performed reasonably well, but struggled in the months leading up to the event with trading sluggish due to Brexit. There has been investment into the event in the past year to enhance the quality and ensure that the customer experience is improved.

Consolidated Income Statement

The results stated above relate to continuing activities of the Group. The accompanying notes 1 to 13 form an integral part of the consolidated financial statements.  

Consolidated Statement of Comprehensive Income

All items recognised in comprehensive income may be reclassified subsequently to the income statement.

The accompanying notes 1 to 13 form an integral part of the consolidated financial statements.

Consolidated Statement of Changes in Equity

The accompanying notes 1 to 13 form an integral part of the consolidated financial statements. 

Consolidated Statement of Financial Position

The balances for trade and other receivables and deferred income for the years ended 30 September 2018 and 30 September 2017 have been restated upon the adoption of IFRS 15 as described in note 2.

The accompanying notes 1 to 13 form an integral part of the consolidated financial statements.

The financial statements of Hyve Group plc, registered company number 01927339, were approved by the Board of Directors and authorised for issue on 3 December 2019. They were signed on their behalf by:

Mark Shashoua Andrew Beach Chief Executive Officer Chief Financial Officer

Consolidated Cash Flow Statement

The working capital movements in receivables and deferred income for the year ended 30 September 2018 have been restated upon the adoption of IFRS 15 as described in note 2. There are no net impacts on cash flows.

The comparative period drawdown of borrowings and repayment of borrowings amounts have been restated to include the impact of all drawdowns and repayments made on the Group's Money Market Lending facility. This is a short-term facility to provide immediate working capital for periods of between one to 30 days and forms part of the Group's bank loan and overdrafts.

The accompanying notes 1 to 13 form an integral part of the consolidated financial statements.

1 Basis of preparation

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), this announcement does not contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS later in December 2019. These will be available at www.hyve.group.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

The Directors have, at the time of approving the Consolidated Financial Statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the Consolidated Financial Statements.

Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the Group's accounting policies, a number of judgements and estimates have been made by management. Those that have the most significant effect on the amounts recognised in the financial statements or have the most risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Critical accounting judgements

Adjusting items

The classification of adjusting items requires significant management judgement after considering the nature and intentions of a transaction. The Group's definitions of adjusting items are outlined within the Glossary. These definitions have been applied consistently year on year.

Note 5 provides further details on current year adjusting items.

Key sources of estimation uncertainty

Impairment of goodwill and intangible assets

There are a number of estimates management considers when determining value in use, most significantly the growth rates applied to future cash flows and the discount rates used to derive the present value of those cash flows. Growth rates reflect management's view of the long-term forecast rates of growth, using third party sources such as the International Monetary Fund where appropriate. Discount rates are selected to reflect the risk adjusted cost of capital for the respective territories. The most significant area of estimation uncertainty relates to forecast cash flows at each cash generating unit. Forecast cash flows are based on Board approved budgets and plans. A significant change in the assumptions used in determining the value in use of certain CGUs, could potentially result in an impairment charge being recognised in relation to these CGUs. In particular, a 5% decline in the operating profit growth rate forecast for the UK CGU would result in an impairment charge of £25.1m.

The carrying value of goodwill and intangible assets at 30 September 2019 is £210.0m (2018: £201.8m) and £270.6m (2018: £267.3m) respectively.

Equity option liabilities

The valuation of equity option liabilities held over own equity, of £13.0m (2018: £11.6m), requires management to estimate the fair value of the liabilities to be settled in future years to acquire non-controlling interests in subsidiary companies. The liabilities are to be settled based on a multiple of future years' EBITDA. The EBITDA estimates are based on the latest budgeted information grown in line with projected GDP growth rates for the countries in which the subsidiaries operate. The valuation of the equity option liabilities is highly sensitive to changes to forecast results, given that the equity options are based on multiples of 7.5x-12.5x EBITDA. A £0.1m movement in EBITDA in the relevant period could therefore result in up to a £1.25m movement in the equity option liability valuation.

2 Impact of new accounting standards

In the current year, the Group has applied the below amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for the Group's accounting period that began on 1 October 2018.

The amendments to IFRS 2 Share-based payments have no impact.

In the current period the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRSs. IFRS 9 includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting IFRS 9 has had no material impact during the year.

On adoption of IFRS 15 Revenue from Contracts with Customers, the Group has elected to restate comparative information using the fully retrospective method for prior periods. Under IFRS 15, the deferred income, and corresponding trade receivable, may not be recognised until the earlier of the service being provided and the payment falling due, whereas previously they were recognised when contractually committed. This has resulted in a material reduction to the deferred income and trade receivables on adoption of the standard as a result of the Group's significant forward bookings, as only a portion of the payment is generally due upfront at booking.

The Group has applied the practical expedient to recognise the incremental costs of obtaining a contract, specifically sales commissions, as an expense when incurred, as the amortisation period of the asset if recognised would be less than the year on all but an immaterial number of the Group's contracts.

The impact of this change on the balance sheet as at 30 September 2018 and 30 September 2017 is shown in the tables below and there is no net asset impact of these adjustments. There was no impact on the income statement for the year ended 30 September 2018.

The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but are only effective for the Group's accounting period beginning on or after 1 October 2019. A list of these can be found below:

The Directors anticipate that the adoption of these standards and interpretations in future periods will not have a material impact on the financial statements of the Group, except as described below in relation to IFRS 16 Leases.

IFRS 16 eliminates the distinction between operating and finance leases for lessees. The standard requires lessees to recognise right of use assets and corresponding liabilities for all leases, unless the lease term is 12 months or less, or the underlying asset has a low value.

This is expected to have a significant impact on both the Consolidated Statement of Financial Position, due to the right of use assets and lease liabilities recognised, and the Consolidated Income Statement, through a changing of the expense profile and the financial statement lines in which the expenses are recognised.

The new standard replaces the operating lease expense with a depreciation charge on the underlying asset and an interest expense on the liability. This will increase the expense charged at the beginning of our lease contracts due to the front-loaded nature of the interest expense. This is expected to reduce profit before tax in the first three years of adoption.

Currently, our operating lease rentals are recognised within administrative expenses, but under IFRS 16, a portion of the cost, the interest expense on the lease liability, will be classified as a finance cost (the depreciation charge on the underlying asset will still be recognised within administrative expenses) and therefore operating profit is expected to increase on adoption.

The standard will primarily impact the Group's property and equipment leases. The treatment of venue leases is expected to remain unchanged, due to the cumulative tenancy dates over the term of each venue lease being less than 12 months. All current venue contracts are therefore expected to be exempt under IFRS 16.

The Group plans to apply IFRS 16 using the modified retrospective approach. Under this approach, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings on 1 October 2019, with no restatement of comparative information. Lease assets and lease liabilities will not be recognised for leases with a lease term ending within 12 months of 1 October 2019.

Adoption of IFRS 16 is expected to result in an increase in assets of £15.0m, and a corresponding increase in liabilities of £16.4m as at 1 October 2019. Operating profit for the year ending 30 September 2020 is estimated to increase by £0.5m, being the difference between the lease expense and depreciation, and profit before tax will decrease by £0.1m, reflecting a higher total lease interest expense in the initial years.

3 Segmental information

The Group has identified reportable segments based on financial information used by the Executive Team in allocating resources and making strategic decisions. The Executive Team (consisting of the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief People Officer, and General Counsel), are considered to be the Group's Chief Operating Decision Maker. The Group evaluates performance on the basis of headline profit or loss before tax.

The Group's reportable segments are operational business units and groups of events that are managed separately, either based on geographic location or as portfolios of events. The products and services offered by each business unit are identical across the Group.

Following the integration of Ascential Events, the way in which costs are allocated to the Group's reportable segments has changed. Therefore the comparative segmental information has been restated to reflect the current year basis on which segments are reported to the Executive Team for the purpose of allocating resources and making strategic decisions. This has resulted in changes to the segment profits and net assets as set out below.

The revenue and headline profit before tax are attributable to the Group's one principal activity, the organisation of trade exhibitions, conferences and related activities and can be analysed by operating segment as follows: