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August 12, 2009

Redundancies despite profitable year, as the NEC Group plans for the recession to bite

Central England venue company the NEC Group has recently laid off more than 80 people, even through it made an impressive operating profit of £36.5 million in the year to 31 March 2009.

The main reason for the redundancies is to prepare for a tough 2009/10 trading year, particularly in exhibitions.

The group’s exhibition business, based at the NEC site in Solihull, delivered £40.3 million of operating profit, up 6.6% from 2007/8. But the company was keen to point out that the improvement reflected the traditional four-year exhibition cycle. On a like-for-like basis, operating profit for the exhibition business fell by around 3%, reflecting difficult trading conditions due to the general economic slowdown.

Difficult decision
“General economic and competitive conditions will hit the exhibition business very hard, and we have seen a material slowdown in corporate conference business at the ICC,” explained the NEC Group’s chief operating officer, John Hornby.

“We have taken the difficult, but responsible, decisions to reduce costs significantly in light of trading conditions. Part of that response has been a redundancy programme and, after a 90-day consultation, 82 employees were served notice of redundancy on 15 July 2009.

“It is always difficult to lose good people, but this programme is a necessary part of the steps we have taken to address trading conditions responsibly. We have provided a comprehensive support programme for the affected employees to assist them in moving forwards into training or new employment.”

Further results
The NEC Group’s Arenas and The Ticket Factory delivered record turnover and operating profit on the back of attendances at the two areas of over 1.5 million. Turnover was £20.7 million, up 6.2%, while operating profit was £4.9 million, up 16.7%.  Much of the growth was driven by The Ticket Factory, which is fast establishing itself as a national ticket agency.

The ICC also delivered record turnover and operating profit. Turnover was up 2.4% at £21.5 million and operating profit was up 21.4% at £6.8 million. The results reflected a strong year of activity at the ICC, but also the increasing level of profit from the group’s management contract for The Convention Centre Dublin, which opens in September 2010.

“These are a good set of financial results, with record profits from the Arenas and the Ticket Factory, and the ICC,” said Hornby. “The Arenas and the Ticket Factory continue to trade very strongly, despite the economic conditions, and we are very excited about the re-opening of the LG Arena in October of this year, with a spectacular launch season. The new arena will be unrivalled in the UK and will transform the experience our customers have before, during and after shows.”

Looking to the future
Hornby also commented on the progress the NEC has been making in securing a Large Casino licence.

“We will be working hard with our partner Genting UK to secure the license that will enable our Leisure and Entertainment Complex to progress,” he said. “That complex will complement the refurbished LG Arena, and will advance the transformation of the NEC site into a unique 365-day a year business and leisure destination. 

“Our contract to manage the new Convention Centre, Dublin is also progressing well. The venue is on target to open in September 2010 and we are pleased with the level of advanced bookings already secured."

Community and development
After taking into account interest payments on the historical loans taken out to build the venues, the NEC Group generated a surplus of £2.7 million for Birmingham City Council. The City Council used £1.7 million of this surplus to repay part of the loans.

Meanwhile, the programme of updating the NEC site continued throughout last year, with £35 million of the £40 million Venue Improvement Programme fund spent by 31 March 2009. In addition, £4.9 million was spent on long-term maintenance projects in the year, representing a £3 million increase on 2007/8.

The NEC Group’s highlights of 2008/9:
– Hosting a broad range of events, from Crufts, Clothes Show Live and Cirque du Soleil, to concerts by the Kaiser Chiefs and Katherine Jenkins.

– Launching Insight – a unique customer profiling capability to support event organisers in identifying and attracting visitors.
– Creating a partnership with US venue giant Global Spectrum to explore venue management contracts across Europe.

– Hosting Labour and Conservative Party conferences hosted at the ICC – bringing a combined £40m to regional businesses.

– The ICC being ranked a top Business Superbrand in 2008 and the NEC in 2009

– The ICC becoming only the second UK venue to secure international standards ISO9001 (quality) and 14001 (environmental) accreditation.

– The opening of a pre-treatment centre on the NEC site to sort exhibition waste for recycling.

– The opening of the new Ramada Encore hotel at the NEC.

– The opening of a Learning Zone, in partnership with Unite, at The NEC – a facility for the whole Birmingham region.

– Team GB getting kitted out for the Beijing Olympics at The NEC.

– The ICC’s green roof winning an environmental award.

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