The National Exhibition Centre faces the toughest downturn for more than three decades as the corporate sector cuts back drastically in the face of the recession.
The warning was issued by the NEC’s Chief Operating Officer John Hornby after the group revealed operating profits of £36.5 million for the year to March 31 2009.
Mr Hornby warned that 2009-10 would see the business “hit very hard,” with smaller events replacing large-scale exhibitions as organisations rein in spending.
The group’s exhibition arm fought back against the downturn to clock up £40.3 million in operating profits whilst the ICC delivered record turnover of £21.5 million with profits up 21.4 per cent to £6.8 million.
Mr Hornby said: “These are a good set of financial results, with record profits from The Arenas and Ticket Factory and The ICC.
“The exhibition business delivered an acceptable result as incredibly tough trading conditions started to bite.
“However, we are planning for 2009/10 to be a very challenging financial year. 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. The corporates are not spending as much money on conferences.”
Mr Hornby predicted exhibitions would face inevitable cutbacks as the recession drags on: “One of the benefits of our business is that we have got good visibility in terms of the forward booking of events, particularly exhibitions – they go into the diary some time ahead.
“Our concern is not about events not happening, it is just that they will be smaller. The exhibitions business was established in the mid-70s and has been through a number of economic downturns, but this is more severe.”
Mr Hornby said the NEC Group had taken “difficult but responsible” decisions to reduce costs significantly in light of trading conditions, including a programme of 82 redundancies completed two weeks ago.
“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.
“The Arenas and Ticket Factory businesses continue to trade very strongly, despite 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.
“We are also pleased that the Solihull MBC process that will lead to the awarding of a Large Casino licence has started. We will be working hard with our partner Genting UK to secure the licence that will enable our Leisure and Entertainment Complex to progress.
“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.”
After interest payments on loans were taken out from the £36.5 million operating profits, a surplus of £2.7 million was left.