Final Results

4 March 2014

Tarsus Group plc

Final results for year ended 31 December 2013

Record results and strong strategic progress

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 2013.

Tarsus launched its "Quickening the Pace" strategy early in 2013 focusing on accelerating the pace of financial returns to shareholders. The Group has made significant progress during the year on strengthening and investing in its core business to drive organic growth.

Financial highlights

· Revenue up 23% vs. 2011 to £75.9m

· Like-for-like revenues* up 11%

· Adjusted profit before tax* £24.2m (2011: £16.8m)

· Profit before tax £15.9m (2011: £3.0m)

· Adjusted earnings per share* 20.0p (2011: 17.0p)

· Earnings per share 12.2p (2012: 5.6p)

· Proposed final dividend of 5.0p - total for year up 7% to 7.3p (2012: 6.8p)

· Net debt £28.6m (2012: £15.7m)

Operational highlights

· Dubai Air Show revenues up 25%

· Dubai Air Show customers generated record orders of $206bn

· Record performance at Labelexpo Europe with revenues up 11%

· Emerging Market portfolio grew strongly

· Substantially completed geographic footprint with acquisitions in Indonesia and Mexico

· Brand replication strategy underway - eight launches in 2013 and strong programme for 2014 and 2015

Current trading and outlook

· Forward bookings for 2014, on a like-for-like basis, are currently 11% ahead of those for 2013 (adjusted for biennials and acquisitions)

· Three recent strategic acquisitions - SIUF(China), Komatek (Turkey) and Cardio (US)

· £10m equity fundraising maintains balance sheet strength

Financial Results

Neville Buch, Chairman of Tarsus, commented:

"Our "Quickening the Pace" growth strategy gained momentum in 2013. Visitor numbers were strong and we increased our share of revenues from Emerging Markets and the US. The moves made during the year into Indonesia and Mexico substantially complete our geographical footprint. Our strategy to replicate our major brands across our Emerging Market portfolio continues to gather pace.

"We have made a good start to 2014 operationally and the recent strategic acquisitions will provide us with additional momentum and opportunity. Despite the recent currency headwinds affecting some of our markets, with our portfolio of leading event brands we are confident Tarsus can deliver a strong performance in 2014."

 For further information contact:

Tarsus Group plc:

Douglas Emslie, Group Managing Director 020 8846 2700

Dan O'Brien, Group Finance Director 020 8846 2700

Neville Harris 07909 976 044

The Company will be hosting a presentation to analysts at 11.00am today at the offices of Investec Bank plc, 2 Gresham St, London, EC2V 7QP. A webcast of the presentation will be made available on Tarsus's website (www.tarsus.com) from 9.30 am on 5 March 2014.

Glossary *

Like-for-like revenue:

Constant exchange rates adjusted for biennial events, excluding acquisitions impacting for the first time in 2013, prior year disposals and non-recurring products and items.

Adjusted profit before tax:

Profit before tax adjusted for exceptional items, share option charges / credits, amortisation charges, impairment of intangibles, profit / loss on disposal of intangibles and tangible fixed assets, profit on sale of subsidiary and unwinding of discount for contingent consideration.

Adjusted EPS:

Profit after tax attributable to equity shareholders adjusted for exceptional items, share option charges / credits, amortisation charges, impairment of intangibles, profit / loss on disposal of intangibles and tangible fixed assets, profit on sale of subsidiary and unwinding of discount - contingent consideration. 

Strategic overview

At the start of 2013 Tarsus launched the next phase of its growth strategy - "Quickening the Pace." This followed the completion ahead of schedule of the Group's Project 50/13 target of deriving 50% of revenues from Emerging Markets by 2013.

The core focus of the "Quickening the Pace" strategy is to accelerate financial returns to the Company's shareholders. This is being driven by a combination of geographical replications of major brands into fast growth economies; organic growth from the existing portfolio; tight cost control and selective small strategic acquisitions in the US and Emerging Markets which the Group believes will continue to outpace mature Western economies.

During 2013, the Group made progress on all fronts. Visitor numbers at its key events showed strong increases; margins were maintained and the Group launched a number of replications of GZ Auto and Zuchex into new territories.

Financial Results

Group revenues for the full year were strong at £75.9m (2012: £51.5m) and up 23% on a biennial basis (2011: £61.7m). Like-for-like revenues, excluding acquisitions and foreign exchange movements, increased by 11%.

Group adjusted profit before tax was £24.2m (2012: £14.8m) and up 44% on a biennial basis (2011: £16.8m). Net interest expense rose to £1.5m (2012: £1.2m) reflecting increased debt levels across 2013 as a result of acquisitions completed. Reported profit before tax was £15.9m (2012: £8.4m).

The Group incurred a number of one-off costs relating to acquisitions and the extension of the Group's banking facilities during the year. These costs, amounting to £1.4m, have been excluded from adjusted profits. Additionally, a £3.9m impairment has been booked against the carrying value of goodwill of some of the older French IT events and a £2.5m credit resulting from a reduction in put/ call option liabilities based on fair value movements. None of these adjustments have been included in the adjusted profit figure.

The adjusted tax charge of £3.6m (2012: £2.2m) represents 15% (2012: 15%) of the Group's adjusted profit before tax. The reported tax charge is £2.7m (2012: £1.8m). The Group continues to focus on tax efficiency and generates nearly all of its profits outside of the UK, including markets with significantly lower tax rates.

Adjusted earnings per share were 20.0p (2012: 12.2p), 18% up on a biennial basis (2011: 17.0p). Basic earnings per share for 2013 were 12.2p (2012: 5.6p).

The Group generated £24.5m (2012: £12.2m) of cash from operations, an increase of 100% against 2011, the comparative biennial year (2011: £11.8m).

Acquisition costs during the year were offset by the strong operational cash generation. The Group's net debt at 31 December 2013 was £28.6m (2012: £15.7m).

The Board is proposing a final dividend of 5.0p per share, bringing the total for the year to 7.3p per share (2012: 6.8p per share), up 7%.

The final dividend, subject to Shareholder approval, will be paid on 9 July 2014 to Shareholders on the Register of Members on 30 May 2014. A scrip dividend will continue to be offered as an alternative.

Corporate Activity

The Group made two small acquisitions during the year. In January 2013, it acquired 51% of Indonesian exhibition organiser PT Infrastructure Asia ("PTIA") and in November 2013 it acquired 50% of two Mexican events from EJ Krause. These acquisitions, in two attractive markets, mean that the Group's desired geographical footprint is now substantially complete.

Tarsus agreed in December 2013 to acquire 50% of China (Shenzhen) International Brand Underwear Fair ("SIUF") in China, which runs the leading Asian show for underwear, to increase the percentage representation of China's economy in the Group's portfolio. Tarsus believes that SIUF will provide synergies with its US Off-Price business where lingerie is one of the largest categories.

Also in December 2013, the Group acquired the outstanding 25% of the issued share capital of Istanbul-based IFO having purchased the initial 75% in June 2011. IFO has shown strong growth under Tarsus' ownership and the acquisition will further consolidate the Group's position in the fast-growing Turkish market.

Early in 2014 the Group made two small acquisitions - 60% of Komatek, which runs Turkey's leading construction event and 100% of the assets of HealthScienceMedia Inc. in the US which organises the Cardiometabolic Health Congress ("Cardio"). These moves extend the Group's existing construction portfolio into a dominant position in Ankara, Turkey and further accelerate the development of its highly successful Medical Division in the US.

Operating Review

Emerging Markets

Dubai 

The Group's major event of 2013 was the biennial Dubai Air Show in November which was held for the first time at a new purpose-built venue. The event was a great success for exhibitors who received world record customer orders of $206bn. The performance of the event was ahead of expectations with revenues 25% higher than the 2011 show coupled with strong rise in visitor numbers of 11% on a like-for-like basis.

Earlier in the year, the education event GESS performed very well with excellent visitor attendance and revenues up 22%. Gulf Pack and Print also performed well in a difficult local commercial print market.

Turkey

The portfolio continued its impressive performance with like-for-like revenues increasing 13%. Zuchex (housewares and gifts) recorded a strong performance whilst Ideal Home (housewares and gifts) recorded revenues in line with expectations, its growth limited by venue constraints. Asansor (elevators) performed well with revenues up significantly on its previous edition. Yapi Decoor (decorative construction) held its first edition under Tarsus' ownership in Ankara, performing slightly ahead of pre-acquisition expectations. REW (recycling, environment technologies and waste management) had its third edition under Tarsus' ownership and again achieved revenue growth in line with management's expectations.

The Group has launched a number of replications of Zuchex into new territories beginning with Jakarta in Indonesia in November 2014.

China

Hope, the Group's Chinese joint venture, again performed well in 2013 with like-for-like revenues up 22%. Growth was driven primarily by a strong performance of the medical equipment portfolio in Central China.

GZ Auto (auto aftermarket) had its first event under Tarsus' ownership, following its purchase in late 2012, and delivered a very good result. This brand has been launched into other territories in 2014 including Indonesia and Thailand.

Labelexpo Asia, in its tenth edition, saw visitor numbers up 19% and revenues up 11%.

Indonesia

PTIA owns and organises three annual exhibitions and one seminar series in Indonesia, providing Tarsus with an important hub in the fast growing Indonesian exhibition market. It will enable the Group to develop a range of infrastructure sector exhibitions and provide a platform with which to launch a number of new exhibitions drawing on Tarsus' existing brands. PTIA held its infrastructure show in November 2013 which performed very strongly and is expected to benefit in 2014 from the joint venture with EJ Krause to run Expo Comm (information and communications) alongside it.

Mexico

In November 2013, the Group acquired 50% of two Mexican events from EJ Krause. These were Plastimagen, the leading event for the plastics industry in Mexico and Expo Manufactura, a leading event in metalworking and manufacturing. This joint venture provides a platform to launch Tarsus' brands into Mexico and to expand EJ Krause's brands into Tarsus' territories, beginning with Expo Comm in Jakarta in November 2014.

US

Medical

Overall, the Medical division's revenues for the year were slightly ahead of the previous year. This division's largest event was held in December 2013 in Las Vegas and performed well, with revenues up 24%. The Group is continuing to see a change in the mix of its education revenue streams with more being delivered online and a reduction in the volumes of on-site educational revenues.

The Group's acquisition of Cardio in early 2014 compliments Tarsus' existing Medical business and provides an established audience for the division's recently launched new mainstream product, the Metabolic Medicine Institute ("MMI"), in addition to a number of possible synergies with the Group's existing Medical division.

Off-Price

The February 2013 Off-Price show in Las Vegas was a record event and the 2013 August show also recorded good growth. Overall, revenues were up 4%. 

Europe

Labelexpo Europe

Labelexpo Europe took place in September 2013 in Brussels. It produced record increases of 11% in both like-for-like revenue and visitor attendance. As a result of this very strong event, re-bookings of 87% for the 2015 exhibition were secured.

France

Trading in the Group's French business ended the year broadly in line with the Board's expectations. The larger events were positive held back by IT shows and directories.

In January 2014 the Group sold up to 18% of its French business for €1.5m to Romuald Gadrat, the incumbent Managing Director of the division who will continue to run the business. This is in line with the Group's strategy of reducing its exposure in France.

Outlook

The Group's major events continue to go from strength to strength underlining the importance of our continuing to invest in Tarsus' market leading brands. Moves into Mexico and Indonesia in 2013 substantially complete the footprint of the geographical markets Tarsus is aiming to develop, whilst the Group's corporate activity in early 2014 will strengthen the portfolio and promote additional growth opportunities.

In the US, the purchase Cardio and the launch of MMI in February 2014 will enhance the prospects for the Medical business as it moves progressively into the mainstream.

Like-for-like bookings for 2014 are tracking 11% ahead of the equivalent time last year.

Off-Price was held in Las Vegas in February 2014 with revenues in line with expectations.

Owing to the incidence of large biennial events within the portfolio, profits generated in odd years are typically larger than those generated in even years. Adjusting for this biennial effect, the Group remains confident of delivering a good performance in 2014 on a constant currency basis.

Neville Buch Douglas Emslie

Chairman Group Managing Director

4 March 2014

Financing and Net Assets

The geographical composition of Tarsus' international event portfolio means that revenues and profits are generated in a range of currencies, principally US Dollars, Euros, Turkish Lira and Sterling. In 2013 approximately 49% of revenues were generated in US Dollars, 14% in Euros, 14% in Turkish Lira, 14% in Sterling and 8% in Chinese Renminbi. As a result, the Group's Sterling translated trading results are significantly affected by any changes in prevailing exchange rates during the year. The average exchange rates applicable for 2013 were:

· US$: 1.58 - a strengthening against Sterling of 1% compared with 2012

· Euro: 1.18 - a strengthening against Sterling of 3% compared with 2012

· Turkish Lira: 3.05 - a weakening against Sterling of 6% compared with 2012

2014 budgeted exchange rates are US$: 1.65, Euro: 1.20 and Turkish Lira: 3.60.

Cash flows

Tarsus continues to generate strong cash flows from its operations. The larger events 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 2013, which include the two largest events. This occurs as previously deferred income relating to these is released from the balance sheet and recognised as income.

During 2013, the Group generated £24.5m of cash from operations (2012: £12.2m).

The key non-operating cash flows in 2013 included:

• Dividends paid of £6.3m

• Deferred consideration payments totalling £18.8m

• Tax and interest paid totalling £4.8m

• Acquisition of PTIA and EJ Krause £5.5m

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.

Tarsus' external bank debt facility was extended in November 2013 to £60m and is a multi-currency facility which is in place until September 2017. Where foreign currency borrowings do exist they are hedged using forward currency contracts. At 31 December 2013 98% of all borrowings were denominated in Sterling with the remainder denominated 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 £28.6m at 31 December 2013 (31 December 2012: £15.7m).

Net Assets

As at 31 December 2013, the Group had net assets of £40.2m (31 December 2012: £47.0m).

Intangible assets

Intangible assets comprise goodwill, trademarks and customer lists. The carrying value of intangible assets at 31 December 2013 was £98.0m (31 December 2012: £102.6m).

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 2013 is deferred income of £18.4m (2012: £25.3m). Prepaid event costs of £2.8m (2012: £2.5m) are included in trade and other receivables.

Acquisitions

On 28 February 2013 the Company acquired 51% of the issued share capital of PTIA.  

On 26 November 2013 the Company acquired a 50% interest in a company that owns exhibitions in Mexico from E.J. Krause & Associates, Inc. ("EJK") to establish a joint venture (the "JV") with EJK.

On 18 December 2013 the Group agreed to acquire a 50% interest in the China (Shenzhen) International Brand Underwear Fair ("SIUF").

On 20 December 2013 the Group acquired the outstanding 25% of the issued share capital of Istanbul based IFO not already owned by Tarsus from Mr Selahattin Durak, a related party of the Company. The total consideration for the remaining 25% acquisition of IFO is capped at TL12.57m (approximately £3.7m) payable in cash. The Company purchased the initial 75% of IFO in June 2011.

Post balance sheet events

On 6 January 2014 the Company sold up to 18% of its French business to Romuald Gadrat, the incumbent Managing Director of the division and a related part of the Company, for €1.5m in cash.

On 7 February 2014 the Company acquired 60% of SADA Uzmanlik Fuarlari A.S. ("SADA") in Turkey. SADA organises a single event - Komatek - which is Turkey's largest trade exhibition for construction equipment and related products.

On 10 February 2014 the Company acquired 100% of the assets of HealthScienceMedia Inc. in the US. The total consideration for the acquisition of the assets is US$14.0m in aggregate payable in cash.

The Company also raised £10m (gross) through the placing of 5.0m new ordinary shares with existing and new investors on 10 February 2014 reducing the Company's gearing level following these acquisitions to be in-line with the Board's preferred and conservative target of 1.5 times net debt:EBITDA.

Key Performance Indicators

The Group measures its performance using a number of financial and operational measures which are commented upon throughout the Operating Review. These financial measures principally include like-for-like revenue growth, adjusted profit before tax, adjusted EPS and dividend per share.

The Group also focuses on the geographical and divisional composition of its business with the stated strategy of increasing the proportion of revenues from Emerging Markets and the US. Tarsus also has an operational target to grow the number of visitors attending its events by at least 5% per annum.

Dan O'Brien

Group Finance Director

4 March 2014

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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 4 March 2014 and signed on its behalf by:

J D Emslie D P O'Brien

Group Managing Director Group Finance Director

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

\* The reorganisation reserve was created as a result of the Scheme of Arrangement effective from 26 November 2008. Tarsus Group Limited, previously Tarsus Group plc, registered in England and Wales under company number 2000544, entered into a "Share for Share" exchange on a one-for-one basis with Tarsus Group plc, registered in Jersey under company number 101579.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The results for the year ended 31 December 2013 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 2012 and to be adopted for the financial year ended 31 December 2014. 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 2013 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 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Jersey Financial Services Commission Companies Registry. Those for the year ended 31 December 2013 will be delivered following the Company's Annual General Meeting on 23 June 2014.

This financial information has been extracted from the Group's Annual Report and Accounts for the year ended 31 December 2013. 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 2013 Annual Report and Accounts in March 2014.  

2. SEGMENTAL ANALYSIS

As at 31 December 2013, the Group was organised into three main segments - Europe, USA and Emerging Markets.

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:

3. PROFIT AND LOSS ANALYSIS

The following analysis illustrates the performance of the Group's activities and reconciles the Group's pre-tax profit to adjusted profit. Adjusted results are presented to provide an indication of underlying financial performance and to reflect how the business is managed and measured on a day-to-day basis. The adjusted profit before tax excludes exceptional costs, share option charges, amortisation and impairment charges, profit on sale of subsidiary, profit or loss on disposal of tangible and intangible assets and adjustments to contingent consideration.

In 2013, the Group incurred exceptional one-off costs of £1.4 million resulting from acquisitions or potential acquisitions. A £2.5 million credit was booked against the carrying value of put/call option liabilities. 

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:

Tax charge/(credit) recognised directly other comprehensive income

5. DIVIDENDS

An interim dividend of 2.3p per share (2012: 2.2p) was paid on 16 January 2014 to shareholders on the Register of Members of the Company as at 6 December 2013.

The directors announced the proposed final dividend for 2013, of 5.0p per share, on 4 March 2014. Subject to approval at the Annual General Meeting on 23 June 2014, the proposed date of payment is 9 July 2014 to Shareholders on the Register of Members as at 30 May 2014.

Dividends are recognised as a liability in the period in which they are appropriately authorised and are no longer at the discretion of the entity.

6. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share has been calculated on profit after tax attributable to ordinary shareholders for the year (as shown on the Consolidated Income Statement) and the weighted average number of ordinary shares in issue during the period (see below table).

Diluted earnings per share

Diluted earnings per share has been calculated on profit after tax attributable to ordinary shareholders for the year (as shown on the Consolidated Income Statement) and the diluted weighted average number of ordinary shares in issue during the period (see below table):

Weighted average number of ordinary shares (diluted):

Dilutive and anti-dilutive share options were determined using the average closing price for the period. The average share price used was 229.77 pence.

Adjusted earnings per share

Adjusted earnings per share is calculated using adjusted profit after tax as reconciled in note 3 and the weighted average number of ordinary shares (as above) in issue in the year.

Adjusted diluted earnings per share

Adjusted diluted earnings per share is calculated using adjusted profit after tax as reconciled in note 3 and the weighted average number of diluted ordinary shares (as above) in issue in the year.

7. ACQUISITION OF SUBSIDIARY

On 28 February 2013, the Group acquired 51% of the share capital of PT Infrastructure Asia ("PTIA"), an exhibition business.

The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group, in respect of this acquisition: