Canaccord leaves ITE Group at 'hold' after trading update

Canaccord Genuity has kept its ‘hold’ rating and target price of 145p unchanged for ITE Group after the exhibitions organiser reported its first half trading update.

The company on Monday reported a 12% increase in first half revenue to £63m, lifted by strong performances from acquisitions including Breakbulk and Africa Oil Week.

On a like-for-like basis, revenues fell 4% but represented a material improvement from the 13% decline in its first quarter.

ITE said the results were in line with management expectations.

The group warned that its like-for-like trading volumes for full year 2016 are around 9% less than this time last year, and like-for-like revenues are also 9% behind last year's comparative. Both are in line with expectations, ITE said.

Canaccord said the full year declines implied a further deterioration into the third quarter at an estimated like-for-like decline of 15%, reflecting the impact of the weak macro-economic backdrop particularly in Russia, impacting key events such as Mosbuild.

However, the broker said it should be offset a modest improvement in the rouble against the pound and the rising oil price.

“Overall, we see little reason to change our full year forecasts, with pre-tax profit (norm) of £37.0m and fully diluted earnings per share of 11.1p, both broadly in line with consensus,” said Canaccord analyst Simon Davies.

He added that given recent weak performance with shares down 8% in the year to date, Canaccord expected to see a modest short-term rally.

“ITE is trading on a calendarised 2016 price to earnings ratio of 12.9x and a 10.0x enterprise value / earnings before interest, tax, depreciation, and amortisation at our target price of 145p,” Davies said.

“This represents a modest discount to its peer group, merited by its high exposure to Russia/Commonwealth of Independent States. And with £70m of net debt, we see limited scope for additional M&A to drive upgrades."

However, he did note that the shares do offer an "attractive" 5.1% dividend yield.