RIMINI - The Board of Directors of Italian Exhibition Group S.p.A.(IEG) a company listed since last June 2019 on the MTA (screen-based stock exchange) organized and managed by Borsa Italiana S.p.A., has approved the Half-Yearly Financial Report as at June 30, 2020.
The excellent performance of the events organized in the first two months of the year, which recorded overall growth for the third consecutive year, the outbreak of the COVID-19 health emergency, which caused the suspension of trade exhibitions and congresses starting from the end of February, the decisive measures adopted by the Group to protect the safety and health of the staff and combat the financial and economic impacts of this serious crisis are the salient facts that have characterized these first six months of 2020 and have produced the results that will be hereinafter presented.
The main consolidated results of the first half of 2020
The total revenues of the IEG Group in the first half of 2020 stood at 61.8m. euros, down by 38.1% compared with the 99.9m. euros in the same period of 2019. The excellent performance recorded in the first two months of the year, which generated an overall organic growth of 2.4m. euros (+2.4%), was suddenly halted by the spread, also in our country, of the COVID-19 pandemic which caused an overall reduction in revenues of 40.3m. euros (-40.3%) compared with the first half of 2019.
The measures adopted by the Group to counteract the economic effects of the crisis, as well as the flexibility of the operating cost structure that characterizes the Company’s business have made it possible to mitigate the impact of the contraction in revenues on the Group’s operating results which all show positive values in absolute terms. The EBITDA1 of the first six months stood at 15.6m. euros, down by 41.5% (-11.1m. euros) compared with the same period of the previous year. EBITDA Margin, for the reasons explained above, remains in positive territory, i.e. 25.3%, with only a 1.4 percentage point decrease (26.7% was the index value as at June 30, 2019). As mentioned above, EBIT also remained in positive territory – 3.4m. euros against 17.8m. euros in the first half of 2019 (-80.8%) – despite the absence of business operations in the second quarter and a non-recurring write-down of intangible assets for about 2.6m. euros.
Pre-tax results amounted to 10.8m. euros– down by 4.4m. euros compared with the first half of 2019 (-29.0%) – benefiting from a positive result of the financial operations for 7.7m. euros (against a loss of 2.7m. euros in the first half of 2019) achieved primarily following the restatement, for 9.3m. euros, of payables for put options provided to the minority interests of some subsidiaries. The Group’s result for the period amounted to 9.4m. euros, down 1.4m. euros (-13.1%) compared to the same period of the previous year. The result for the period attributable to the Parent Company’s shareholders amounted to 9.8m. euros compared to 9.7m. euros in the first six months of 2019, up by 0.1m. euros (+1.2%). However, even excluding the positive net contribution of the non-recurring items, this result would have been positive at 3m. euros (-67.7% compared with the first half of 2019).
As at June 30, 2020, the net financial position stood at 104.8m. euros, substantially unchanged versus the 104.5m. euros of the position as at December 31, 2019. The monetary NFP – which, therefore, does not take into account the debit of 27.6m. euros deriving from the application of IFRS 16, of financial payables for any future put options of 5.7m. euros and for derivative financial instruments of 5.7m. euros – amounted to 65.8m. euros, i.e. an increase of 12.6m. euros compared to 53.2m. euros as at December 31, 2019. At the same time, the non-monetary items of the afore-mentioned NFP, as at June 30, 2020, equal to 39m. euros, showed a decreased indebtedness of approximately 12.1m. euros compared with the end of the 2019 period, due primarily to the effects of the afore-mentioned restatement of the payable for put options.
The consolidated shareholders’ equity as at June 30, 2020 amounted to 115m. euros compared to 106.1m. euros as at December 31, 2019.
Results by business area in the first half of 2020
The effects of the pandemic have caused the suspension of the Group’s operations starting from the end of February and for the remaining months of the half year period. Therefore, the business activities carried out in the second quarter were substantially close to zero: 1.4m. euros in revenues in the second quarter of 2020 compared with 32.7m. euros in the second quarter of 2019 (-95.6%). Consequently, all the business lines of the Group showed, in the first six months of 2020, a significant decrease in revenues compared with the same period of the previous year. However, it is important to note that this contraction is the result of several different factors. The first is represented by an organic growth mainly resulting from Organized Events and equal to 2.4m. euros (+2.4%), only a small portion of which was offset by the negligible decrease in revenues of approximately 0.3m. euros (-0.3%) due to the changed trade fair calendar of the Parent Company compared to the same period of the previous year. The outbreak of the COVID-19 health emergency (“COVID-19 effect”) has suddenly halted this additional growth phase of the Group causing an overall decline in revenues by 40.3m. euros (-40.3%) compared with the first half of 2019. The effects of the pandemic can be categorized into two types. The first is represented by the cancellation of trade exhibitions and congresses scheduled in the first six months of 2020 and the suspension of business activities for companies operating in the related services business (“cancellation effect”), which resulted in a loss in revenues of 33.8m. euros (-33.8%). The second is represented by the postponement, due to the rescheduling to a later date in 2020 from the first six month period, of organized/hosted trade exhibitions and congresses (“postponement effect”), which has led to a decrease in revenues of 6.5m. euros (-6.5%).
The Group’s core business, represented by the direct organization of trade exhibitions, accounted for 70.3% of total revenues during the first half of the year and recorded a decrease of € 10.2 million (-19%) compared to the same period of the previous year. Similar to total revenues, this contraction, also for this business line, was the result of different factors. First of all, this segment recorded a significant organic growth of 2.6m. euros (+4.9%), achieved thanks to the two most important trade exhibitions of the Parent Company, Sigep and Vicenza Oro held in January. However, this growth was completely absorbed by the “COVID-19 effect” in terms of both the “cancellation effect” for 9.1m. euros (-17.1%) and the “postponement effect” for 3.4m. euros (-6.4%). This business line also reflected a negligible calendar effect, for 0.2m. euros (-0.4%), due to the less important “Mondomotori” event which did not take place.
Congresses include the results from the management of the Palacongressi di Rimini and the Vicenza Convention Centre (VICC). Revenues in the first half of 2020 totalled 0.9m. euros, marking a contraction of 6.7m. euros (-88.4%) compared to the same period in 2019, entirely attributable to the “cancellation effect” from COVID-19. In fact, this business line was affected by the legislative provisions linked to the Coronavirus emergency over a period, such as the spring, which is historically full of events; furthermore, based on the already acquired contracts, it also relied for the current year on national and international congresses that were cancelled, or in fewer numbers, rescheduled for both the current and the following year.
Revenues from Related Services – represented by stand fitting, catering and cleaning – in the first half of 2020 represents 26.6% of the overall revenues and amounts to 16.5m. euros, down by approximately 18.7m. euros (-53.2%) compared with the same period of the previous year. Starting from March, all activities of this business line were suspended: only some small cleaning and catering services were provided. The “cancellation effect” has entailed a loss in revenues of 17.1m. euros (-48.6%) and the “postponement effect” a loss of 1.9m. euros (-5.3%). Overall, the crisis has caused a loss in revenues of 19m. euros equal to 53.9% of the revenues generated in the first half of 2019.
Events after the end of the six month period and business outlook
Beginning on August 18, the IEG conference-related activities have resumed at the Palacongressi in Rimini, for the important cultural event “Meeting for Friendship Amongst Peoples” – although in a “special edition” to comply with the current measures for containing the spread of the pandemic – which will be followed, from August 27-29, by the national convention ANMCO - Associazione Nazionale Medici Cardiologici Ospedalieri [Italian Association of Hospital Cardiologists]. As regards the organization of trade exhibitions, the first event on the calendar is VOICE–Vicenza Oro International Community Event (Vicenza, September 12-14) which will be the first example in Italy of a hybrid fair since it will involve the physical presence of the operators with the new communication opportunities provided by digital technologies. The Related Services activities are cautiously resuming as regards both the business generated by the Parent Company and the activities carried out for third parties.
Therefore, although the months following the first half of 2020 show an improvement in the health emergency and a slow recovery of the Company’s activities, it is reasonable to also expect, for the next few months, given the impossibility of predicting the development of the virus spread, a context where the risk of new restrictions affecting the development of economic activities and substantial limitations to international mobility will continue. Therefore it is likely that also the events that have been confirmed to date will be significantly affected by this current crisis.
In this situation of uncertainty, the Company will continue to work with its customers and partners to organize as best as possible the currently scheduled trade exhibitions and congresses, it will continue to apply the action plans defined for the safety and health of its stakeholders and to mitigate the economicfinancial impacts of the crisis while remaining committed to the implementation of the strategic development guidelines of its own business plan.
Regarding the initiatives aimed at supporting its Organized Events, beginning in August, the Company has made available to its trade fair customers a team in charge of supporting them in their request for loans to be granted by SIMEST, including a non-repayable amount, for participating in trade exhibitions qualified as “international”. The commitment to the development of opportunities related to the digitalization process is also very strong. Given the strategic nature of this approach, the Parent Company has established a specific working group guided by a newly hired digital manager.
As regards the health and safety protection of its stakeholders, the Group has defined a strict protocol of measures, called #safebusiness project, aimed at guaranteeing the highest level of safety for the events taking place at its venues. In July, this project achieved the GBAC STARTM program accreditation for the purpose of meeting the strict international protocols for the sanitation of its venues.
Regarding the measures aimed at guaranteeing financial stability, in addition to those already implemented, in July, taking advantage of the opportunities offered by the “Liquidity Decree”, the Parent Company has entered into loan agreements with Intesa San Paolo S.p.A. and Cassa Depositi e Prestiti S.p.A., covered by SACE guarantees, for a total of € 50 million. Thanks to these initiatives, the Group currently has sufficient liquidity, in addition to granted and not drawn down credit lines for a total amount of at least 62 m. euros.
The Group will continue to pay particular attention to maximizing its financial resources, will strengthen its activities for containing operating costs and will consistently monitor any opportunity to benefit from future support measures introduced by the government authorities.
Also as regards investments, the primary objective of the strategy is to limit them to essential ones, although continuing to devote resources to those development activities that are provided for in the business plan and that can be implemented given the current situation. To this end, it must be noted that on August 10, a binding agreement was executed for the purchase of 100% of the company HBG Events FZ LLC located in the United Arab Emirates. The Company organizes the simultaneous events “Dubai Muscle Show” and “Dubai Active”, which represent the main fitness events in the Middle East. Although this is an operation of modest size, it still gives an important signal about how the Group, even within the current context of uncertainty, continues to pursue its projects for growth.
Despite the effects of this unprecedented crisis and the continuation of these uncertainties that characterize the global economy, the Group is looking to the future with determination. The efficacy of the initiatives undertaken in the previous few months as regards the identification of adequate safety protocols, the acquisition of financial resources that would guarantee a financial stability and a cost containment policy, represent a strong basis with which management is facing the challenge of resuming the Group’s activities, confident of the important role that the trade fair industry will play in the relaunch of the economic system of our country.
