Final Results

Tarsus Group plc 

Final results for year ended 31 December 2017

Record performance in 2017 - next phase of strategy set to deliver further growth

Tarsus Group plc (LSE: TRS, "Tarsus" or "the Group"), the international business-to-business media group, announces its results for the year ended 31 December 2017.

2017 saw the culmination of Tarsus' "Quickening the Pace" (QTP) strategy which delivered another year of strong performance. The Group saw like-for-like revenue growth of 7% over the year (at constant exchange rates) and across the portfolio buyers also increased by 7% on a like-for-like basis.

Financial results

Financial highlights

· Revenue of £117.7m up 35% against 2015

· Group like-for-like revenues* up 7%

· Adjusted profit before tax of £40.2m up 53% against 2015 (statutory profit before tax £27.9m up 46%)

· Adjusted earnings per share of 27.7p up 29% against 2015 (statutory earnings per share 21.5p up 49%)

· Proposed final dividend of 7.0p per share - total for year up 10% to 10.0p

· Banking facilities increased to £126m with interest rates fixed

Operational highlights

· Buyer/visitor growth across the portfolio of 7%, more than double the industry average

· Strong performances from leading events

· Recent acquisitions of Connect, Hometex and Intex all performed well

· 28 brand replications launched

· JV in Mexico expanded through acquisition of remaining nine E J Krause Mexico events

Current trading and outlook

· Next phase of Quickening the Pace strategy launched

· Trading off to a good start in 2018

· Forward bookings for 2018 on a like-for-like basis currently ahead of the Group's target range (adjusted for biennials and acquisitions)

· Well positioned to deliver another strong performance in 2018

Douglas Emslie, Group Managing Director of Tarsus, commented:

"2017 was a record year for Tarsus. It saw the culmination of the first phase of our Quickening the Pace strategy, which over the past few years has transformed the business and produced strong returns for our shareholders.

"The Group has grown significantly, both organically and through carefully targeted acquisitions and over the next four years of our strategy we will build further on the strong foundations we have laid down.

"Our growth ambitions are supported by the global industry outlook and enhanced by our own focus on deepening our presence in higher-growth markets, maximising the scale of our events and delivering high-quality buyers.

"2018 is off to a good start, with forward bookings currently ahead of our target range. Whilst we continue to be mindful of geopolitical uncertainty, the outlook for the year is good, and we proceed with confidence".

For further information contact:

Tarsus Group plc:

Douglas Emslie, Group Managing Director 020 8846 2700

Dan O'Brien, Group Finance Director

Neville Harris, Investor Relations 07909 976 044

The Company will be hosting a presentation to analysts at 11.30am today at the offices of Herbert Smith Freehills LLP, Exchange House, Primrose St, London EC2A 2EG. The presentation will be made available on Tarsus' website (www.tarsus.com) from 9.30am on 1 March 2018.

Glossary*

Adjusted profit before tax:

Profit before tax adjusted for share option charges, amortisation of intangible assets arising from business combinations, taxation on joint venture profits, unwinding of discount charges, changes in fair value of contingent consideration and put/call liabilities and acquisition related costs.

EBITDA:

Calculated using adjusted profit before interest, tax, depreciation and amortisation charges arising from business combinations.

Adjusted EPS:

Calculated on profit after tax attributable to ordinary shareholders adjusted for share option charges, amortisation of intangible assets arising from business combinations, unwinding of discount charges, changes in fair value of contingent consideration and put/call liabilities, acquisition related costs and the related taxation impact along with the abnormal impact of tax legislative changes, and the diluted weighted average number of ordinary shares in issue during the period. 

Pro-forma revenue:

Revenue excluding any disposals made in the year and including Group's share of any revenues recorded in joint venture companies not consolidated.

Like-for-like revenue:

Pro-forma revenue at constant exchange rates adjusted for biennial events, adjusting for acquisitions impacting for the first time in 2017, prior year disposals and non-recurring products and items.

Buyer Growth:

Buyers adjusted for biennial events, prior year disposals and non-recurring products and items.

See note 3 for a reconciliation showing the impact of adjusting items.

Strategic overview

2017 was a landmark year for Tarsus, which saw a record performance and the culmination of the first phase of the Group's "Quickening the Pace" strategy.

Launched in 2013, this strategy had one over-riding ambition: to accelerate the pace of financial returns to shareholders. This was to be achieved through two initiatives. First, by driving organic growth from the existing portfolio, replications and by increasing buyer attendance. Second, by making strategic acquisitions in selected high-growth geographies.

To execute the strategy Tarsus re-shaped its portfolio significantly and moved into fast-growing economies. In addition to the US and China - the world's largest exhibition markets - the Group's selected territories now comprise Mexico, South East Asia, Turkey and the Middle East (principally Dubai).

Tarsus targets not only high-growth geographies but also high-growth industries where technological innovation or substantial investment is driving growth.

Between 2013 and 2017, the first phase of the strategy delivered average revenue growth of 9% per annum, average buyer growth of 8% per annum and average adjusted earnings per share growth of 9% per annum. We have also driven a fundamental shift in the shape of Tarsus' business, in terms of where it operates, the business verticals that it serves and the overall scale of the Group. We have grown the number of events held from 65 to 153 over the five-year period, through a combination of acquisition and new launches. Total shareholder return over the period was 111%, approximately 50% better than our peer group.

2018 sees the launch of the next phase of the Quickening the Pace strategy - "QTP2: driving scale and momentum". The Group will deepen its presence in higher growth markets; look to maximise the scale of existing events; and acquire new platforms for growth. A key part of this will be continued investment in the Tarsus replication programme, which spreads the success of the Group's leading brands around the world.

The ability to deliver the strategy successfully is dependent on a number of factors, but two in particular are key:

First, the Group will continue to take an entrepreneurial approach towards developing its portfolio. Around the world, exhibition markets are consolidating, with high-quality assets in great demand. In this context, Tarsus' flexibility and willingness to work in partnership with vendors is increasingly seen by the Group as a point of differentiation from our competitors. Rather than seeking to impose a blue-print from above, we look for dynamic entrepreneurs to partner with in order to build a business together. This gives the Group an edge in acquiring the most promising new assets.

Second, the Group will continue to focus relentlessly on improving the experiences of its exhibitors and buyers. For Tarsus, everything depends on the user experience; the front line leads directly to the bottom line. Therefore attracting high-quality buyers will continue to be a priority - and with an industry-leading record in buyer growth, the Group is confident it can continue to drive up volumes.

To measure the success of this next phase of its strategy through to 2021, the Group has set itself three Key Performance Indicators: growth of 5% to 10% per annum in like-for-like revenue growth, buyer growth and earnings per share growth.

Financial results

The financial results for the year ended 31 December 2017 were in line with the Board's expectations. Group revenues for the full year were £117.7m (2016: £68.4m), up 35% on a biennial basis (2015: £86.9m). Like-for-like revenues, at constant exchange rates, increased by 7%.

Group adjusted profit before tax was £40.2m (2016: £19.2m), up 53% on a biennial basis (2015: £26.3m). Net interest expense of £4.2m (2016: £2.4m) reflected increased debt levels in 2017 as a result of acquisitions made during 2016 and 2017. Reported profit before tax was £27.9m (2016: £8.6m). 

The Group incurred an amortisation charge of £8.4m (2016: £6.9m).

The adjusted tax charge of £6.3m (2016: £2.9m) represents 16% (2016: 15%) of the Group's adjusted profit before tax. The reported tax charge is £1.1m (2016: £0.7m). 

Adjusted earnings per share were 27.7p (2016: 15.2p), 29% up on a biennial basis (2015: 21.4p). Basic earnings per share for 2017 were 21.5p (2016: 6.9p). 

The Group continued to deliver strong operating cash conversion, with £36.5m of cash generated from operations during the year (2016: £15.8 and 2015: £22.4m). The Group's net debt as at 31 December 2017 was £84.8m (2016: £69.5m) the increase during the year resulting from acquisitions made in the period.

Reflecting the strong financial performance during 2017, the Tarsus Board is proposing a final dividend of 7.0p per share, bringing the total for the year to 10.0p per share (2016: 9.1p per share), an increase of 10%. This proposed rise is the seventh consecutive year of increases to the dividend and represents a compound annual growth rate of 8%.

The final dividend, subject to shareholder approval, will be paid on 12 July 2018 to shareholders on the Register of Members on 1 June 2018. A scrip dividend will continue to be offered to Shareholders as an alternative.

Corporate activity

Two acquisitions were completed during the year: 

In January 2017, Tarsus acquired a 65% interest in Hometex, the leading bi-annual home textiles exhibition based in Shenzhen, China. The home furnishings market is now the fourth highest sector of family consumption in China, and Guangdong province itself accounts for more than 50% of the Chinese home furnishing market by value. Hometex takes place bi-annually in the spring and autumn. The spring edition, the larger of the two events, occupies all of the available venue capacity and there is a currently a waiting list for this event.

In September 2017, Tarsus' 50% owned joint venture in Mexico acquired a further nine events from EJ Krause, resulting in the JV now owning all of EJK Mexico's event portfolio. These new events include industry-leading brands such as Mexico Wind Power (energy), Green Expo (environmental energy and waste), EBIO (beauty and cosmetics), Intertraffic (traffic and road infrastructure) and Expo Produccion (textiles). The JV also provides a platform for Tarsus to continue to launch new replications, drawing on the Group's existing major brands. This has already seen the successful launch of GESS (launched 2015) and Airport Solutions (2017) into Mexico. This transaction will result in the JV being the largest international exhibition company in Mexico, a relatively fragmented but high-growth emerging market, with both domestic and international growth angles.

Operating Review 

Americas

Connect

Connect - purchased at the end of 2016 - performed in line with expectations, with the business making good strategic progress in terms of both expansion into new verticals and new launches. A total of 23 events were held and the main event, Connect marketplace (held in New Orleans this year) produced a very strong result.

Medical

The Medical division as a whole continued on its growth path in 2017. The Group's established anti-aging events again performed well with a particularly strong showing at the Las Vegas event in December. PAINWeek had another good year and while both South Beach Symposium (oncology) and the Cardiometabolic Health Congress continued to be adversely affected by weaker drug pipelines, the outlook for both in 2018 is improving.

Offprice

The Las Vegas event produced another solid performance across its two showings in 2017.

Mexico

There was a strong performance from Expo Manufactura (manufacturing) and Plastimagen (plastics) and bookings for 2018 are strong. The events acquired during the year as part of the Group's joint venture with EJ Krause all performed in line with the acquisition case. Two replications were also held and both did well.

EMEA

# French operations sold in 2015 

Dubai 

The biennial Dubai Airshow produced an excellent result, with record revenues and trade visitors to the show up by 7%. Exhibitor orders announced also reached an impressive $113.8 billion. Importantly, the Group extended its agreement with the Dubai Airports Corporation in respect of the event until 2027.

Tarsus' education event GESS produced a solid performance and - having launched into both Mexico City and Jakarta in the last two years - it further extended its reach with a launch into Turkey in October 2017. The smaller aerospace events portfolio also performed well.

Europe

The biennial Labelexpo Europe extended its long track record of growth with another record edition in 2017. Supported by the addition of an extra hall, and over 200 new product launches, buyer numbers rose by 6%. There has already been a strong rebook (84%) for the next edition in 2019. 

Turkey

Against a difficult political background at the start of the year, a number of first-half events saw weaker revenues compared to 2016. As the year progressed trading improved. The larger second half events all produced performances ahead of 2016. So far 2018 trading in Turkey is following a similar pattern.

Asia

China

The Group's exposure to China - the world's second largest exhibition market - has steadily increased in recent years and is a market in which Tarsus seeks to deepen its exposure. In order to take advantage of the transition occurring in the country's economic growth and demographics, the Group is focusing on internal markets led by consumer demand. The aim is also to create further scale in China's key cities of Shanghai and Shenzhen. This will be aided in the medium-term by significant new capacity coming on stream in Shenzhen, which is expected to provide a platform for further growth.

Overall, the portfolio performed in line with the Group's expectations in 2017. Hometex and Intex were both successfully bedded in. The biennial Labelexpo Asia grew strongly, achieving a record result. SIUF, Asia's largest underwear show, again performed well with buyer growth of 13%. AAITF showed good growth with overseas buyer numbers up by 20%. Hope, the Group's Central China division, continued to perform well with like-for-like revenues ahead of 2016. 

South East Asia

The overall portfolio performed weIl, with nine new replications launched in the region. In Indonesia, the established IIICE (Infrastructure) event, achieved good buyer attendance.

Central costs

Central costs have remained flat as the Group retains tight controls.

Outlook

Trading for the first two months of 2018 has been in line with management's expectations. We have made a good start to 2018 in the US and China in addition to particularly pleasing performances in Dubai and Mexico.

Bookings are currently ahead of our target range. We have launched the next phase of the Group's strategy and are focused on maximising the scale of our existing events and driving momentum in new markets. Though we are mindful of geopolitical uncertainty, we believe the fundamentals of the Tarsus strategy promise another year of good progress.

Neville Buch, Chairman 

Douglas Emslie, Group Managing Director

28 February 2018

Financing

The geographical composition of Tarsus' international event portfolio means that revenues and profits are generated in a range of currencies, principally US Dollars, Chinese Renminbi, Euros, Turkish Lira and Sterling. In 2017 approximately 58% of pro-forma revenues were generated in US Dollars, 21% in Chinese Renminbi, 10% in Sterling and 7% in Turkish Lira. As a result of the Group's currency composition, Sterling translated trading results are significantly affected by any changes in prevailing exchange rates during the year. The average exchange rates applicable were:

Cash flows

Tarsus continues to generate strong cash flows from its operations. The larger events in the Group's portfolio typically have a positive working capital cycle and the business in general has a low capital investment requirement.

The biennial nature of the Group's event portfolio results in an increase in working capital (excluding cash) in odd years (including 2017) which include the Group's two largest events. This occurs as deferred income relating to these events is released from the Statement of Financial Position which has been built up over the 2 year cycle ahead of the events taking place this year. During 2017, cash generated from operations was £36.5m (2016: £15.8m and 2015: £22.4m).

The key non-operating cash flows in 2017 included:

• Dividends paid of £9.9m

• Contingent consideration payments totalling £5.8m

• Tax and interest paid totalling £5.2m

• Acquisition of Hometex for £16.4m

• Acquisition of joint venture interests for £5.5m

• Share purchases by Employee Benefit Trust £0.6m

 Net debt

The Group's funding objective is to ensure that the business has sufficient resources, secured on competitive terms, to meet its various financial commitments as they arise. It achieves this objective by actively monitoring its cash flows and requirements on both an historic and forward looking basis. The Group is cautious in its approach, applying appropriate sensitivities to both the quantum and timing of its projections. The Group has a medium term gearing target of 1.5-2.0 x net debt/EBITDA across its two year earnings cycle. 

In July 2017 Tarsus' external bank debt facility of £111m was extended to £126m and remains in place until December 2020. At 31 December 2017 95% were of borrowings were denominated in Sterling with the remainder in US Dollars. The Group has entered into interest rate swaps to fix the interest rates payable under its banking facilities.

The Group's net debt was £84.8m at 31 December 2017 (31 December 2016: £69.5m).

Net assets

As at 31 December 2017 the Group had net assets of £75.7m (31 December 2016: £71.6m). 

Intangible assets

Intangible assets comprise goodwill, trademarks and customer lists. The carrying value of intangible assets at 31 December 2017 was £188.3m (31 December 2016: £186.8m).

Working capital

It is the Group's policy to recognise profits upon the completion of an event. Until completion, revenues and costs are held on the Statement of Financial Position. Included in net current liabilities as at 31 December 2017 is deferred income of £38.0m (2016: £35.8m; 2015: £24.1m). Prepaid event costs of £7.9m (2016: £7.9m; 2015: £4.8m) are included in Trade and Other Receivables. 

Adjusted Results

Adjusted results are presented in addition to statutory results as these are the measures the Board uses to manage the operating performance of the Group. The categories of adjusting items are consistent with prior years and many of the items are consistent with our peer group, aiding comparability across the sector, as well as our year on year performance.

Dan O'Brien

Group Finance Director

28 February 2018

CONSOLIDATED INCOME STATEMENT

*see note 3 for adjusting items

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Other comprehensive income relating to foreign exchange translation differences, fair value movements in cash flow hedges and the tax effects thereon may all subsequently be reclassified to profit and loss if certain conditions are met.

The amounts above are presented net of tax.CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The financial statements of Tarsus Group plc, registered number 101579 (Jersey), were approved by the board and authorised for issue on 28 February 2018 and signed on its behalf by:

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The results for the year ended 31 December 2017 have been prepared using accounting policies and methods of computation consistent with those used in the Group's annual report for the year ended 31 December 2016. The results have also been presented and prepared in a form consistent with that which will be adopted in the Group's annual report for the year ended 31 December 2017 and in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted by the European Union.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Jersey Financial Services Commission Companies Registry. Those for the year ended 31 December 2017 will be delivered following the Company's Annual General Meeting on 21 June 2018.

This financial information has been extracted from the Group's Annual Report and Accounts for the year ended 31 December 2017. The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by the emphasis without qualifying their report and did not contain statements under s.113B(3) or (4) Companies (Jersey) Law 1991 or equivalent preceding legislation. The Group intends to publish its 2017 Annual Report and Accounts in March 2018.

2. SEGMENTAL ANALYSIS

As at 31 December 2017, the Group was organised into three main segments - EMEA, Americas, and Asia. The main activities of all segments are the production of exhibitions supported by other media activities related to those exhibitions.

The following table sets out the revenue and profit information and certain asset and liability information for the Group's reportable segments:

* Includes JV profit before tax of £2.2m in Americas and £3.5m in Asia.

* Includes JV profit before tax of £1.3m in Americas and £3.1m in Asia.

3. ADJUSTING ITEMS

The following analysis details the adjusting items in the consolidated income statement. Adjusted profit is prepared to provide a better indication of operational financial performance and to reflect how the business is managed and measured on a day to day basis. The adjusted profit excludes share option charges, amortisation of intangible assets arising from business combinations, unwinding of discount charges, changes in fair value of contingent consideration and put/call liabilities, acquisition related costs and the related taxation impact along with the abnormal impact of tax legislative changes.

4. INCOME TAX EXPENSE

The tax charge below differs from the tax at the effective rate on the profit for the year. The differences are explained below: