The situation
ITE is an organiser of exhibitions and conferences specialising in emerging and developing markets. ITE organises high-quality events of an international standard throughout the 15 countries in which it operates. The business is managed in five main geographic sectors: Russia, Central Asia & Caucasus, Eastern & Southern Europe, UK & Western Europe and Rest of World. As an exhibition organiser, ITE hires venues at which it stages its events and markets the events to both exhibitors and visitors. Exhibitions and conferences provide an opportunity for participants from national and international companies to meet, network and transact business. The exhibition media is the best media for suppliers to display and demonstrate their products to potential buyers. This is particularly powerful in emerging and developing markets where culturally face to face meetings are the norm and where alternative media, B2B publishing and on-line marketing opportunities are less developed.
More information about the ITE group on Blackboard (ITE Annual Report 2014).
The task
You have been asked to advise a group of investors about investing in shares of ITE. You may use information from financial statements of other events companies so as to make comparisons and support your arguments. You should research extensively about ITE and the airline industry overall. The report should follow academic standards and should be well referenced.
you will prepare a 1,400-1,800- word report that deals with the following issues:
Required
a) Write a brief introduction to the assignment and include discussion about the role of accounting information. 10 marks
b) Calculate the gross profit margin and operating profit margin for 2013 and 2014 (4 marks) and discuss the factors that may influence the operating profit margin in events companies and in the particular case of ITE (11 marks). 15 marks
c) Define the concept of trade payables (3 marks). Calculate the trade payables (in days) for 2013 and 2014 (2 marks) –consider that credit purchases is the same as the cost of sales-. Discuss the convenience of increasing the number of days (5 marks). Total 10 marks
d) Calculate the current ratio for 2013 and 2014 (2 marks, 1 for each year) and discuss any reasons for differences in liquidity (8 marks). 10 marks
e) Compare and contrast the usefulness of these two investment ratios for appraising investments: Dividend Yield and Price Earnings Ratio (5 marks). Calculate the P/E ratio and dividend yield for 2013 and 2014 (4 marks) –using the share price at the end of the financial year- and discuss any differences (6 marks). Total 15 marks
f) Define the item “Foreign Exchange gain/loss on operating activities” (4 marks) (4 marks) and discuss any differences between the two years (6 marks) Total 10 marks
g) Prepare at least seven (7) sets of minutes for meetings of the group. Detail attendees, date and time of meeting, outcomes (how work was distributed and contribution of every member). If students do not attend and contribute to the assignment that has to be reflected in the minutes of the meeting and their mark will also reflect that. That means that if there are no contributions and this is recorded, that may cause the student to fail the assignment. Students should attend at least five (5) meetings. Total 10 marks. NOTE: If you have not done the assignment as part of a group you have to write a 400-500 word essay reflecting on the learning and challenges of this module.
h) Based on the evaluation of financial figures that you calculated before, the current business environment where ITE operates, and other items from the financial statements, conclude on the financial return of ITE and conclude whether it is right to sell, hold or buy shares in this organisation. This will be a conclusion to the report. (15 marks)
Note that the final five (5) marks will be awarded for the quality of your report format, list of contents, appendices with Excel spread-sheets, clear workings of calculations, use of headings and subheadings, page numbering and labelling and references using Harvard referencing system. (5 marks)
TOTAL OUT OF (100 MARKS)
Learning outcomes for this assignment
On completion of this assignment you should have demonstrated your ability to:
a) Apply accounting concepts.
b) Calculate and interpret performance measures within context.
c) Explain the role of accounting information.
d) Process data using computer packages.
e) Write a report on the findings of an analysis.
f) Work co-operatively as a member of a team
ITE group
Consolidated income statement for the year ended 30 September 2014 (In 000 £)
Continuing operations
2014 2013
Revenue 174,827 192,261
Cost of Sales 94,067
104,118
Gross Profit 80,760 88,143
Other operating income 369 278
Administrative expenses
Administrative expenses 27,982 31,229
Amortisation of acquired intangibles 11,815 13,116
Impairment loss 6,212
Foreign exchange gain/loss on operating activities 3,986
-154
Total administrative expenses 42,023 44,499
Income from investments and associates 2725 1080
Operating Profit 41,831 45,002
Investment revenue 1,026
1,063
Finance costs 1,379 2,171
Profit on ordinary activities before taxation 41,478 43,894
7399 8,223
Profit for the period 34,079 35,671
Earnings per share (pence)
Basic 13.8 14.2
Diluted 13.8 14.0
Share price at the end of the year 145.5 304.0
Dividend 7.4 7.0
ITE group
Consolidated statement of financial position for the year ended 30 September 2014
in 000£ 2014 2013
Non-current assets
Goodwill 67,016 78,575
Other intangible assets 35,405 43,734
Interests in associates & joint ventures 52,367 17,916
Property plant and equipment 2,198 2,316
Other non-current assets 9,557 5,761
141,871 138,365
Current assets
Trade and other receivables 44,666 50,881
Tax pre-payment 2,211 3,332
Derivative financial instruments 1,985 586
Cash and cash equivalents 28,145 44,040
Total current assets 77,007 98,839
Total assets 243,550 247,141
Current liabilities
Bank overdraft – 17,577
Deferred income 60,776 76,806
Trade and other payables 21,615 21,202
Other current liabilities 1,696 5,244
Total current liabilities 84,087 120,829
TURN PAGE
Non-current liabilities
Bank Loan 42,900 3,000
Provisions 220 421
Deferred tax liabilities 10,932 11,443
Derivative financial instruments 0 2,150
Total non-current liabilities 54,052 17,014
Equity
Share Capital 2,497 2,494
Share Premium account 2,947 2,938
Reserves – 34,101
-19,988
Retained earnings 133,126 119,335
Equity attributable to equity holders of the parent 104,469 104,779
Non-controlling interests 942 4,519
Total equity 105,411 109,298
Total equity plus liabilities 243,550 247,141
