ITE Group (LSE: ITE) reported a successful fiscal 2013, as revenue was up 12% to £192 million and earnings per share climbed 9% to 14p as the Russia-focused exhibit operator benefited from solid economic growth in Russia as well as a growing portfolio of exhibitions in other emerging markets.
During the year, the company sold more 3% more exhibition space at 7% higher prices in order to drive the revenue growth. Offsetting this was increased investment in making the shows more appealing to exhibitors and visitors, as well as increased staff costs.
ITE has made several acquisitions in the past few years to bolster its presence in markets like Turkey, Ukraine, India, Malaysia and most recently China. Management expects these acquisitions to provide the company with new growth markets as well as exhibitions in new industries.
Eventually, the company plans to replicate its most profitable shows in all of its markets, and these acquisitions provide fast access to exhibitors and venues.
With the shares currently trading on almost 22 times earnings, the market is expecting the company to deliver on these promises of growth.
These shares may strike many investors as too pricey, especially as the dividend only provides a 2.2% yield despite being raised 8% this year, but I think the potential for strong growth in coming years — as well as the highly attractive cash flow characteristics of the exhibition business — is more than attractive enough for patient investors.
This is why I’ve recommended the company to members of Motley Fool Share Advisor. I think ITE has the potential for strong growth in coming years as it integrates its recent acquisitions and works to develop its successful Russian exhibitions in a whole new set of markets.
Of course, there is the risk that ITE won’t be able to live up to my — or the market’s — expectations and we could see the shares punished.
> Nate does not own shares in any company mentioned. The Motley Fool has recommended shares in ITE Group.