2nd Mar 2006 07:01
Tarsus Group PLC02 March 2006 Tarsus Group plc Preliminary results for the year ended 31 December 2005 Record Results Tarsus Group plc ("Tarsus" or "the Group"), the international media group withinterests in exhibitions, conferences, publishing and online media is pleased toannounce record results for 2005. Financial Highlights • Profit before tax up 105% to £5.6 million (2004: £2.7 million)• Adjusted profit before tax* up by 101% to £6.0 million (2004: £3.0 million)• Basic EPS up 92% to 9.0p (2004: 4.7p)• Adjusted EPS* up 87% to 9.4p (2004: 5.0p)• Continuing strong operating cash flow of £5.5 million (2004: £2.6 million)• Dividends increased by 30% to 3.25p (2004: 2.5p) Glossary * Adjusted = Adjusted to add back share option charges, amortisation andprofit before minority interests' share of losses.tax Adjusted EPS = Calculated using profit after tax adjusted to add back share option charges, amortisation and minority interests' share of losses. Operational Highlights • Strong performance from all of the Group's major shows, led by Labelexpo Europe.• Good results from all geographic regions.• Record results from our French division boosted by the mid-year acquisitions of the Heavent and Mobile Office exhibitions.• Twenty new products launched across the portfolio. Neville Buch, Chairman of Tarsus, commented:"Tarsus performed very well in 2005 and is now positioned for further growth. Weare particularly excited about our organic product developments which have beenfavourably received by the markets they serve. Although the cycling of our majorlabelling events favours the odd years over the even years, we remain confidentthat 2006 will be a year of further progress with strong like-for-like growth." For further information, please contact: Tarsus Group plc:Douglas Emslie, Group Managing Director: 020 8846 2700 Media:Matthew Moth, Madano Partnership: 020 7593 4000 Investors/Analysts:Neville Harris, IRfocus: 07909 976044 CHAIRMAN AND MANAGING DIRECTOR'S STATEMENT RESULTS We are pleased to report that 2005 was another year of very strong progress atTarsus. Once again, our established brands excelled, with the Group's largestshow, Labelexpo Europe, achieving revenues 23% greater than the equivalent 2003show. In addition, we began to reap the benefits of the new launch programmeinitiated in 2003, with 16% of 2005 revenues generated from products under threeyears old. Group revenue, excluding our share of joint ventures, was £23.2 million (2004:£14.6 million), an increase of 58% with underlying organic growth of 19%(excluding acquisitions that impacted for the first time in 2005). Profit before tax was £5.6 million compared with £2.7 million in 2004. Theadjusted profit before tax of £6.0 million (2004: £3.0 million) was up by 101%,of which acquisitions contributed £1.2 million. Basic earnings per share were 9.0p (2004: 4.7p) and adjusted earnings per sharerose by 87% to 9.4p (2004: 5.0p). Operating cash flow continued to be strong at £5.5 million representing 96% ofoperating profit. The good conversion rate reflected the continuing focus onmanaging working capital as the business expands. Your directors are proposing a final dividend of 2.25p, bringing the total forthe year to 3.25p - an increase of 30% over 2004. The final dividend will bepaid on 28 April 2006 to Shareholders on the Register of Members of the Companyon 10 March 2006. We will continue to offer a scrip alternative. STRATEGIC DEVELOPMENTS During the year your Board decided that the Group's French operations wouldbenefit from increased scale and that efforts should be made to increase thesize of its portfolio. To this end, Tarsus acquired the Heavent and MobileOffice exhibitions in June 2005 for a total consideration of approximately £7.4million excluding transaction costs. The Group continued its new launch programme in its core sectors with specificemphasis on the United States and China. Further resources were applied to ouronline media activities which experienced rapid growth. OPERATING REVIEW USA •Revenues of £4.2 million •Profit before tax of £1.5 million The Off-Price clothing shows in February and August both traded well withrevenue increases of 10% and 4% respectively. The prospects in the US should befurther enhanced in 2006 by additional Off-Price Home Goods shows in partnershipwith the Las Vegas Market which hosts the largest furniture and decorativeaccessories exhibitions in the United States. With this segment of the retailmarket in the US continuing to make progress, we believe the outlook for ourOff-Price division remains favourable. Our launch into the packaging market went extremely well with the PackagingServices Expo in May immediately profitable. This sector represents an excitingopportunity for the Group going forward and we have now expanded the offeringinto the related packaging containers and materials sectors. Europe •Revenues of £17.6 million •Profit before tax of £5.4 million The biennial Labelexpo Europe - the Group's largest single exhibition - wasanother notable success with revenues at £5.2 million, 23% higher than in 2003.Labels and Labeling magazine continued to enjoy good growth with revenues up19%. Our online media division grew dramatically with revenues increasing by72%, driven by strong visitor traffic and new launches. Further growth from ouronline media division is anticipated in 2006 following the acquisition of DHPublishing Limited, a leading B2B global online recruitment industry portal,which we announced in January 2006. We are particularly pleased at the progress achieved in France where we arebeginning to reap the benefits of the progressive restructuring undertaken overthe last three years. Revenues rose by 77% to £10.1 million (2004: £5.7 million)and, operating profits more than tripled to £2.3 million (2004: £0.7 million).The acquisitions made over the last two years have transformed the division'sprofitability and strengthened our market position. Our two largest exhibitions, Heavent and Educatec, enjoyed strong growthrelative to 2004. Educatec, in its twenty-third year, saw its revenues rise by16%, while Heavent, under our management for the first time, increased revenuesby 28%. Our French directory business, which comprises 13% of our Frenchrevenues, enjoyed further good growth with revenues ahead by 21%. Emerging Markets •Revenues of £1.3 million •Profit before tax of £0.2 million Notwithstanding an aggressive launch programme in China, India and South Americaour emerging markets activities were profitable in 2005. A major step forwardwas taken during the year with the establishment of an office in Shanghai. Thiswill enable us to maximise opportunities in the region as early as possible. Thecore driver of this division was Labelexpo Asia which was more than double thesize of the 2003 event. The Latin American Label Summit in Brazil wasimmediately profitable and the 2006 event - to be held in Mexico - is bookingwell. Outlook The number of events held by the Group is growing steadily with 39 events in 11countries scheduled for 2006. By focusing largely on existing sectors or sectorsthat are closely related to our core areas of expertise, we are able to maximizethe value inherent in our brands whilst minimizing the risk of launch failure.This organic expansion is supported by a strong backbone of cash-generative coreevents which themselves continue to grow. Tarsus performed very well in 2005 and is now positioned for further growth. Weare particularly excited about our organic product developments which have beenfavourably received by the markets they serve. Although the cycling of our majorlabelling events favours the odd years over the even years, we remain confidentthat 2006 will be a year of further progress with strong like-for-like growth. Neville Buch Douglas EmslieExecutive Chairman Group Managing Director2 March 2006 2 March 2006 FINANCIAL REVIEW EARNINGS PER SHARE Basic earnings per share improved to 9.0p from 4.7p in 2004. The Group achievedadjusted earnings per share of 9.4p compared with 5.0p in 2004. Adjustedearnings per share is based on profits after tax adjusted to add back shareoption charges, amortisation and minority interests' share of losses. On a fullydiluted basis earnings per share improved to 8.6p compared with 4.6p in 2004. ACQUISITIONS In June, the Group made two acquisitions for its French operations, for a totalconsideration of approximately £7.4 million (before acquisition costs). Theacquisitions were settled by a combination of 3,332,100 ordinary shares in the company and €5.5 million (£3.7 million) in cash. During the year the Group also made the following smaller acquisitions: - June 2005, Tarsus Travel Exhibitions Limited for a total consideration of approximately £0.7 million. - October 2005, the Group purchased the rights of the "Packaging Summit" for an initial consideration of $50,000. - November 2005, the Group purchased a portfolio of small IT events in France for €250,000. TAX CHARGE The tax charge of £1.2 million represents 20% of adjusted profit before tax. TheGroup anticipates that in the medium term the tax charge will remain at thislevel as it continues to benefit from existing tax assets. CASH FLOW Net debt at 31 December 2005 was £8.1 million (2004: £7.8 million). Net cashinflow from operating activities was £5.5 million (2004: £2.6 million). Duringthe year the Group paid out £3.7 million for acquisitions and paid £1.2 millionin dividends. As a result of continued strong cash generation, the Group restructured its debtprofile during the year, repaying a total of £3.5 million of term loan infavour of £3.0 million of short term debt. At 31 December 2005, the Group's net debt was denominated in US dollars (2005:US$2.9 million; 2004: $12.5 million) and euros (2005: €10.0 million; 2004:•nil). FOREIGN CURRENCY RISK The Group is exposed to movements in foreign exchange rates against sterling fortrading transactions, the translation of net assets and the income statementaccounts of overseas operations. The principal exposure is to the US dollar andeuro exchange rates which form the basis of pricing for customers. The Group'spolicy is not to hedge its foreign currency trading exposures. ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS Tarsus now prepares financial statements under International Financial ReportingStandards (IFRS), with effect from the 2005 financial year. The 2004 financialstatements have been restated under IFRS, adopting a 1 January 2004 transitiondate. The 2005 Interim Financial Statements set out the accounting policiesadopted under IFRS, the principle differences to UK GAAP previously applied, andthe restatement and reconciliation of the 2004 financial statements. The required changes in Tarsus accounting policies in adopting IFRS were in fivemajor areas: • Goodwill and intangible assets - goodwill is no longer amortised.• Share based remuneration - the fair value of share options, determined at date of grant, is expensed over the vesting period.• Deferred taxation -full provision is made for nearly all differences between the balance sheet amounts of assets and liabilities and their corresponding tax bases.• Financial Instruments - financial instruments are required to be measured and disclosed in the financial statements, hedge accounting is only permissible where effectiveness criteria are met; certain financial instruments are recorded at fair value and changes are recognised in the income statement.• Dividends - an accrual is made for dividends only when they have been appropriately authorised and are no longer at the discretion of the entity. Douglas EmslieGroup Managing Director CONSOLIDATED INCOME STATEMENT Notes Year to Year to 31 December 31 December 2005 2004 £000 £000------------------------- ------ --------- ----------Group revenue plus share of joint ventures 23,844 15,655Less: share of revenue of joint ventures (673) (1,007)------------------------- ------ --------- ---------- Group revenue 2 23,171 14,648 Operating costs (17,436) (11,764) --------- ---------- Group operating profit 5,735 2,884 Share of profit of joint venture -accounted 130 256for using the equity methodInterest receivable 52 5Interest payable and other financial (363) (439)expenses --------- ---------- Profit before taxation 5,554 2,706 Taxation expense 5 (1,162) (657) --------- ---------- Profit for the financial year 4,392 2,049 ========= ========== Profit for the financial year attributableto 8 4,630 2,201equity shareholders of the parent company Loss for the financial year attributableto 8 (238) (152)minority interests --------- ---------- 4,392 2,049 ========= ========== Notes Year to Year to 31 December 31 December 2005 2004Earnings per share (pence) 7 - basic 9.0 4.7- diluted 8.6 4.6 Dividends 6 £000 £000Equity - ordinary2004/2003 final dividend paid (2.5p/2.2p per share) 1,236 9822005 interim dividend paid (1p per share) 531 - --------- ---------- 1,767 982 --------- ---------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year to Year to 31 December 31 December 2005 2004 £000 £000 Foreign exchange translation differences (396) 176Net loss on hedge of net investment in foreignsubsidiary (187) - --------- ----------Net (deficit)/gain recognised directly in equity (583) 176 Profit for the financial year 4,392 2,049 --------- ----------Total recognised income and expense for the year 3,809 2,225 ========= ========== Attributable to:Equity holders of the parent 4,047 2,377Minority interest (238) (152) --------- ----------Total recognised income and expense for the year 3,809 2,225 ========= ========== CONSOLIDATED BALANCE SHEET Notes 31 December 31 December 2005 2004 £000 £000NON-CURRENT ASSETSProperty, plant and equipment 350 150Intangible assets 27,308 18,733Investments in joint ventures 305 214Deferred tax assets 2,259 1,659 --------- ---------- 30,222 20,756 CURRENT ASSETS --------- ----------Trade and other receivables 8,160 5,672Prepaid taxes 87 -Cash and cash equivalents 664 932 --------- ---------- 8,911 6,604 CURRENT LIABILITIES --------- ----------Trade and other payables (8,827) (6,085)Deferred income (6,615) (6,267)Provisions (131) (505)Bank overdrafts (3,011) -Other interest bearing loans andborrowings (1,350) (1,614)Deferred tax liability (244) (112)Liabilities for current tax (2,007) (260) --------- ---------- (22,185) (14,843) --------- ---------- NET CURRENT LIABILITIES (13,274) (8,239) --------- ---------- TOTAL ASSETS LESS CURRENT LIABILITIES 16,948 12,517 NON-CURRENT LIABILITIES --------- ----------Other payables - (675)Interest bearing loans and borrowings (4,416) (7,156) --------- ---------- (4,416) (7,831) --------- ---------- NET ASSETS 12,532 4,686 ========= ========== EQUITYShare capital 8 2,663 2,473Share premium account 8 33,707 29,404Reserves 8 (1,370) (787)Retained earnings 8 (22,190) (26,055) --------- ---------- Issued capital and reserves attributableto equity holders of the parent 12,810 5,035 MINORITY INTEREST 8 (278) (349) --------- ---------- TOTAL EQUITY 8 12,532 4,686 ========= ========== CONSOLIDATED CASH FLOW STATEMENT Year to Year to 31 December 31 December 2005 2004 £000 £000Cash flows from operating activitiesProfit for the year 4,392 2,049Adjustments for:Depreciation 130 150Amortisation 22 8Share option charge 216 136Share of operating profit in joint venture (130) (256)Taxation charge 1,162 657Net interest 311 434 --------- ---------- Operating profit before changes in working capitaland provisions 6,103 3,178 Decrease in trade and other receivables 354 430Decrease in current trade and other payables (582) (573)Decrease in provisions (382) (393) --------- ---------- Cash generated from operations 5,493 2,642 Interest paid (267) (408)Income taxes paid (45) (126) --------- ---------- Net cash from operating activities 5,181 2,108 --------- ---------- Cash flows from investing activitiesInterest received 52 5Proceeds from sale of property, plant andequipment 11 -Acquisition of property, plant and equipment (283) (64)Acquisition of subsidiaries, net of cash acquired (2,986) (934)Acquisition of intangible fixed assets (429) (890)Deferred consideration paid (145) (192) --------- ---------- Net cash outflow from investing activities (3,780) (2,075) --------- ---------- Cash flows from financing activitiesRepayment of borrowings (3,504) (4,594)Proceeds from the issue of share capital 75 3,912Cost of share issue (17) (134)Dividends paid (1,214) (727) --------- ----------Net cash outflow from financing activities (4,660) (1,543) --------- ---------- Net decrease in cash and cash equivalents (3,259) (1,510)Opening cash and cash equivalents 932 2,545Effect of exchange rate fluctuations on cash held (20) (103) --------- ----------Closing cash and cash equivalents (2,347) 932 --------- ---------- 1. BASIS OF PREPARATION The preliminary results for the year ended 31 December 2005 have been preparedin accordance with International Financial Reporting Standards (IFRS) as adoptedby the EU and are in line with the accounting policies set out in the interimfinancial statements for the six months to 30 June 2005. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2005 or 2004 but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theRegistrar of Companies, and those for 2005 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. SEGMENTAL ANALYSIS Primary segment As at 31 December 2005, the Group is organised into three main geographicalsegments - Europe, USA and Emerging markets. These segments are the basis onwhich the Group reports its primary segment information. The main activities of all segments is the production of exhibitions supportedby other media activities related to those exhibitions. The following table sets out the revenue and profit information and certainasset and liability information for the Group's business segments: 31 December 2005 Europe USA Emerging Central costs Group £000 £000 markets £000 £000 £000 Revenue 17,625 4,225 1,321 - 23,171 -------- -------- -------- -------- -------- Profit from operatingactivities 5,182 1,298 199 (944) 5,735 Net financing costs - - - (311) (311) Share of profit from jointventure 130 - - - 130 Add back minority interestlosses 76 162 - - 238 -------- -------- -------- -------- -------- Profit/(loss) before taxafter minority interest 5,388 1,460 199 (1,255) 5,792 Amortisation of intangibleassets 22 - - - 22 Cost of share options - - - 216 216 -------- -------- -------- -------- -------- Adjusted profit before tax 5,410 1,460 199 (1,039) 6,030* ======== ======== ======== ======== ======== Segment assets 26,907 8,867 1,208 - 36,982 Share of joint ventureassets 305 - - - 305 Unallocated assets - - - 1,846 1,846 -------- -------- -------- -------- -------- Total assets 27,212 8,867 1,208 1,846 39,133 ======== ======== ======== ======== ======== Segment liabilities (12,556) (4,963) (420) - (17,939) Unallocated liabilities - - - (8,662) (8,662) -------- -------- -------- -------- -------- Total liabilities (12,556) (4,963) (420) (8,662) (26,601) ======== ======== ======== ======== ======== Capital expenditure 244 24 15 - 283 -------- -------- -------- -------- -------- Depreciation charge (105) (25) - - (130) Amortisation charge (22) - - - (22) -------- -------- -------- -------- -------- Total significant non-cashexpenses (127) (25) - - (152) ======== ======== ======== ======== ======== * Adjusted profit before tax represents Group profit before tax excluding,amortisation of intangible assets, the cost of share options and minorityinterests' share of losses. 31 December 2004 Europe USA Emerging Central Group £000 £000 markets costs £000 £000 £000 Revenue 7,295 6,975 378 - 14,648 -------- -------- -------- -------- -------- (Loss)/profit from operatingactivities (201) 3,923 117 (955) 2,884 Net financing costs - - - (434) (434) Share of profit from jointventure 256 - - - 256 Add back minority interestlosses 49 103 - - 152 -------- -------- -------- -------- -------- Profit/(loss) before taxafter minority interest 104 4,026 117 (1,389) 2,858 Amortisation of intangibleassets 8 - - - 8 Cost of share options - - - - 136 -------- -------- -------- -------- -------- Adjusted profit before tax* 112 4,026 117 (1,023) 3,002 ======== ======== ======== ======== ======== Segment assets 18,824 5,835 701 - 25,360 Share of joint ventureassets 214 - - - 214 Unallocated assets - - - 1,786 1,786 -------- -------- -------- -------- -------- Total assets 19,038 5,835 701 1,786 27,360 ======== ======== ======== ======== ======== Segment liabilities (10,159) (3,740) (447) - (14,346) Unallocated liabilities - - - (8,328) (8,328) -------- -------- -------- -------- -------- Total liabilities (10,159) (3,740) (447) (8,328) (22,674) ======== ======== ======== ======== ======== Capital expenditure 47 17 - - 64 -------- -------- -------- -------- -------- Depreciation charge (130) (20) - - (150) Amortisation charge (8) - - - (8) -------- -------- -------- -------- -------- Total significant non-cashexpenses (138) (20) - - (158) ======== ======== ======== ======== ======== * Adjusted profit before tax represents Group profit before tax excluding,amortisation of intangible assets, the cost of share options and minorityinterests' share of losses. 3. PROFIT AND LOSS ANALYSIS The following analysis illustrates the performance of the Group's activities andreconciles the Group's statutory profit to adjusted profits. Adjusted resultsare presented to provide a better indication of overall financial performanceand to reflect how the business is managed and measured on a day-to-day basis.The adjusted results exclude share option charges, amortisation of intangibleassets and minority interests' share of losses. 2005 2004 £000 £000 Revenue 23,171 14,648Cost of sales (10,647) (6,257) ----------- ----------- Gross profit 12,524 8,391 Administrative expenses (6,789) (5,507) ----------- ----------- Group operating profit 5,735 2,884 Share of operating profit in joint ventures 130 256Net interest (311) (434) ----------- -----------Profit before taxation 5,554 2,706 Add back:Minority's share of losses 238 152Share option charge 216 136Amortisation charge 22 8 ----------- ----------- Adjusted profit before tax 6,030 3,002 ----------- ----------- 4. ACQUISITIONS 2005 acquisitions: Mobile Office SAS and Heavent SAS On 17 June 2005 the Group acquired all of the ordinary shares of Mobile OfficeSAS and Heavent Expo SAS. Mobile Office SAS runs the Mobile Office exhibition which is the premierEuropean exhibition addressing mobile solutions for businesses. The total consideration related to Mobile Office was £2.8 million satisfied by: •Cash of £1.0 million; •The issuance of 2.05 million shares valued at £2.4 million;* •Less an adjustment to deferred consideration based on 2005 profits of £0.6 million. The cash paid includes transaction costs of £0.2 million. Heavent SAS operates two annual events both under the title Heavent, focused onthe broad spectrum of suppliers to the events industry. The total considerationrelated to Heavent was £5.0 million satisfied by: •Cash of £3.1 million; •The issuance of 1.28 million shares valued at £1.5 million;* •Plus an adjustment to deferred consideration based on 2005 profits of £0.4 million. The cash paid includes transaction costs of £0.2 million. * 116.5 pence per share based on their fair value at the date of exchange beingthe published market price. The acquisition had the following effect on the Group's assets and liabilities. Acquiree's net assets at the date of acquisition: Heavent Mobile Office Total carrying value carrying value carrying value and fair value and fair value and fair value £000 £000 £000Property,plant andequipment 43 34 77Trade andother debtors 395 1,435 1,830Cash and cashequivalents 637 494 1,131Trade andother payables (731) (1,822) (2,553) ----------- ----------- -----------Netidentifiableassets andliabilities 344 141 485Goodwill onacquisition(carryingvalue was £nilonacquisition) 4,346 2,546 6,892Otherintangibles onacquisition 292 118 410 ----------- ----------- ----------- 4,982 2,805 7,787 ----------- ----------- -----------Consideration paid:Satisfied incash 3,104 1,013 4,117Satisfied byshares 1,489 2,393 3,882Movement ondeferredconsideration 384 (606) (222)Unpaid 5 5 10 ----------- ----------- ----------- 4,982 2,805 7,787 ----------- ----------- ----------- Considerationpaid in cash 3,104 1,013 4,117Cash(acquired) (637) (494) (1,131) ----------- ----------- -----------Total net cashoutflow 2,467 519 2,986 ----------- ----------- ----------- The allocation of the purchase price for the acquisitions of Heavent and MobileOffice for assets acquired and liabilities assumed including intangible assetshas only been determined provisionally and is based on estimates and certainassumptions that the directors believe are reasonable under the circumstances.This provisional allocation has been necessary due to the late timing of thefirst editions of the acquired shows under the Group's ownership and the need toconsider these fully in the allocation process. If required, the allocation ofthe purchase price will be adjusted in the subsequent period upon finalisationof such estimates and assumptions. Heavent generated revenues of €720,000 (£497,000) and made a profit of €19,000(£13,000) from the 1 January 2005 to the date of acquisition and contributedrevenues of €2,296,000 (£1,583,000) and profit of €559,000 (£386,000) from thedate of acquisition to 31 December 2005. Mobile Office generated revenues of €167,000 (£115,000) and made a profit of€20,000 (£14,000) from the beginning of its financial year to the date ofacquisition and contributed revenues of €1,516,000 (£1,046,000) and profit of€284,000 (£196,000) from the date of acquisition to 31 December 2005. Other 2005 acquisitions During the current period other smaller acquisitions were made. On 14 February2005 the Group exercised its right to purchase 75% of the issued ordinary sharecapital in Tarsus Travel Exhibitions Limited. On 1 June 2005 the Group acquiredthe remaining 25% of the issued ordinary share capital of that company. Totalgoodwill is £710,000 satisfied by £304,000 of cash paid in 2005, the balance waspaid in cash in 2004 by means of a working capital loan. The Group purchased the rights to the "Packaging Summit" event, a forum foreducation, business networking and promotion for those involved in the packagingof products for consideration of £44,000 including transaction costs of £15,000.The deferred consideration is dependent on the growth of the show to 2010 andhas not been recorded in the current period. Once the amount becomes probableand can be measured reliably it will be recorded. The Group also purchased the right and intellectual property of the followingevents: Convention VoIP, Convention RFID, Convention GES and Convention SecuriteManagement. Consideration totalled £219,000 which includes transaction costs of£50,000. The above acquisitions resulted in £1.0 million of goodwill. The allocation of the purchase price for these smaller acquisitions for assetsacquired and liabilities assumed including intangible assets has only beendetermined provisionally and is based on estimates and certain assumptions thatthe directors believe are reasonable under the circumstances. This provisionalallocation has been necessary due to the late timing of the first editions ofthe acquired shows under the Group's ownership and the need to consider thesefully in the allocation process. If required, the allocation of the purchaseprice will be adjusted in the subsequent period upon finalisation of suchestimates and assumptions. 2004 acquisitions: SECA SA On 5 August 2004 the Group acquired all of the ordinary shares of SECA SA and,as a result, the remaining 65% shareholding in MM Star SA. SECA SA holds theSeCA exhibition which is the premier European event for call centres and ClientRelationship Management (CRM). The total consideration paid was approximately£1.8 million including transaction costs of £77,000. The acquisition had the following effect on the Group's assets and liabilities. Acquiree's net assets at the date of acquisition: Carrying value and fair value £000Property, plant and equipment 1Trade and other debtors 191Cash and cash equivalents 834Trade and other payables (370) -----------Net identifiable assets and liabilities 656Goodwill on acquisition (carrying value was£nil on acquisition) 936Other intangibles acquired on acquisition(carrying value was £nil on acquisition) 176 -----------Consideration paid, satisfied in cash 1,768Cash (acquired) (834) -----------Net cash outflow 934 ----------- The acquired undertaking generated revenues of €2,407,000 (£1,660,000) and madea profit before tax of €780,000 (£538,000) from the beginning of its financialyear to the date of acquisition and contributed revenues of •nil (£nil) andprofit before tax of •nil (£nil) from the date of acquisition to 31 December2004. Post acquisition, SECA SA was merged with Tarsus Groupe MM SA and theoverhead costs combined. Goodwill of £1,185,000 relating to the Group's 35% shareholding in MM Star SAwas transferred from "Interest in joint venture" to goodwill on 5 August 2004. Solutions Linux exhibition On 5 August 2004 the Group acquired all the rights of the Solutions Linuxexhibition, an initial consideration of €1.05 million (£0.72 million) was paidincluding transaction costs of €83,000 (£57,000). Total consideration is cappedat €3.0 million (£2.1 million) with deferred consideration of up to €1.95million payable if profit targets are achieved for the two editions of theexhibition in 2005 and 2006. No net assets were acquired. During 2005 deferredconsideration of €153,000 (£105,000) was paid based on the 2005 result.Estimated consideration totalled £1,574,000: £1,360,000 relates to goodwill and£214,000 to trademarks. 2006 contingent consideration will be accounted for oncethe contingency is resolved and the amount becomes determinable. Related parties: Agreement with William Jage relating to the Off-Price Home Goods Show By an agreement dated 10 May 2004 and made between the Company and Bill Jage(who is Chairman and Chief Executive Officer of Off-Price Specialist Center, Inc("OPSC"), a subsidiary of the Company) Bill Jage agreed on behalf of Cedar TreesManagement LLC ("Cedar") a company owned by him, that Cedar would organise theHome Goods Show under a licence from OPSC of the Off-Price trade mark and tradenames. Under the licence agreement OPSC receives 70% of the net pre-tax profitsof the show, less US$50,000. Tarsus has a call option, exercisable at any time,to purchase the entire equity share capital of Cedar (which owns theintellectual property rights to the show) for a consideration equal to 1.41times the net pre-tax profits of the Home Goods Show in calendar year 2007, butnot exceeding US$3.0 million. Assuming the option is exercised before 31 December 2007, Cedar will also bepaid, by way of additional consideration (but subject to the cap of US$3.0million), 30% of the after-tax profits of any edition of the Home Goods Showheld in 2006 and 2007 plus US$50,000 per annum. There will be deducted from the consideration an amount equal to any workingcapital loan outstanding from Cedar to Tarsus at the date the call option isexercised. A key element of the transaction is that Bill Jage provides a non-competitioncovenant in relation to his activities in the Off-Price apparel market, the homegoods market and certain other market sectors. The transactions were made on terms equivalent to those that prevail in armslength transactions. 5. INCOME TAX EXPENSE 2005 2004 £000 £000Corporation tax:UK tax on profits for the period 1,046 211Overseas tax on profits for the period 357 438Adjustments to UK corporation tax in respect of previousperiods (302) (183)Adjustments to overseas corporation tax in respect ofprevious (262) -periods ----------- -----------Current tax charge for the period 839 466 ----------- ----------- Deferred tax:Origination and reversal of temporary timing differences 546 34Adjustment in respect of previous periods (benefit oftax losses (185) 157recognised)Adjustments in respect of previous periods (benefit oftemporary (38) -difference recognised) ----------- -----------Total deferred tax 323 191 ----------- ----------- ----------- -----------Tax charge for the year 1,162 657 ----------- ----------- The current tax charge for the year is lower than the standard rate ofcorporation tax in the UK. The differences are explained below: 2005 2004 £000 £000 Profit before taxation 5,554 2,706 ----------- ----------- Tax at the standard rate of corporation tax in UK of 30% 1,666 812Effects of:Permanent differences:Expenses not deductible 296 223Income not chargeable to tax (78) (320)Deductions for tax purposes (256) -Timing differences:Overseas current period losses unrecognised 184 -Utilisation of unrecognised losses (785) -Effect of tax rates in overseas jurisdictions 141 47Over provision in respect of prior periods (100) (151)Other temporary differences 94 46 ----------- -----------Tax on profit on ordinary activities 1,162 657 ----------- ----------- 6. DIVIDENDS 2005 2004 £000 £000 Dividend paid 2004/2003 final dividend (2.5p/2.2p per share) 1,236 982 2005 interim dividend (1p per share) 531 - ----------- ----------- 1,767 982 ----------- ----------- Dividend proposed Dividend proposed in the period (2.25p/2.5p per share) 1,199 1,236 =========== =========== The directors announced the proposed final dividend for 2005, of 2.25p pershare, on 2 March 2006. Subject to approval at the Annual General Meeting on 19April 2006 the proposed date of payment is 28 April 2006 to shareholders on theregister on 10 March 2006. Dividends are recognised as a liability in the period in which they areappropriately authorised and are no longer at the discretion of the entity. 7. EARNINGS PER SHARE 2005 2004Basic earnings per share (pence) 9.0 4.7Diluted earnings per share (pence) 8.6 4.6Adjusted earnings per share (pence) 9.4 5.0 Basic earnings per shareThe basic earnings per share has been calculated on profits after taxattributable to ordinary shareholders for the year of £4,629,673 (2004:£2,200,827) and 51,533,755 (2004: 46,887,267) ordinary shares being the weightedaverage number of shares in issue during the year. Diluted earnings per share The diluted earnings per share has been calculated on profits after taxattributable to ordinary shareholders for the year of £4,629,673 (2004:£2,200,827) and 53,616,193 (2004: 47,618,414) ordinary shares being the weightedaverage number of shares in issue during the year calculated as follows: Weighted average number of ordinary shares (diluted): 2005 2004Weighted average number of ordinary shares 51,533,755 46,887,267Effect of share options 2,082,438 731,147 ----------- -----------Weighted average number of ordinary shares (diluted) 53,616,193 47,618,414 =========== =========== Dilutive and anti-dilutive stock options were determined using the averageclosing price for the period. The average share price used was 141 pence. Adjusted earnings per share The adjusted earnings per share is calculated using profit after tax adjusted toadd back share option charges, amortisation and minority interests' share oflosses, of £4,868,206 (2004: £2,344,512) and 51,533,755 (2004: 46,887,267)ordinary shares being the weighted average number of shares in issue during theyear. 8. RECONCILIATION OF MOVEMENTS IN EQUITY Share Share Minority Capital Retained Foreign Total capital premium interest redemption earnings exchange account reserve reserves £000 £000 £000 £000 £000 £000 £000As at 31December2005:Profitattributabletoshareholders - - - - 4,630 - 4,630Scrip 19 535 - - - 554dividendNew sharecapitalsubscribed 171 3,785 - - - - 3,956Cost ofshares - (17) - - - - (17)issuedRecognisedforeignexchangelosses forthe - - - - - (396) (396)periodRecognisedforeignexchangelosson the hedge - - - - - (187) (187)in theperiodShare optioncharge - - - - 216 - 216Movement indeferred tax - - - - 786 - 786Dividend - - - - (1,767) - (1,767)paidAcquisitionofminority'sshare of - - 309 - - - 309subsidiaryMinorityinterestloss - - (238) - - - (238)for the ------- -------- --------- --------- --------- -------- -------periodNet changeinshareholders 190 4,303 71 - 3,865 (583) 7,846fundsOpeningequityshareholders 2,473 29,404 (349) (443) (26,055) (344) 4,686funds ------- -------- --------- --------- --------- -------- -------Closingequityshareholders 2,663 33,707 (278) (443) (22,190) (927) 12,532funds ======= ======== ========= ========= ========= ======== ======= As at 31December2004:Profitattributabletoshareholders - - - - 2,201 - 2,201Scrip 13 243 - - - - 256dividendNew sharecapitalsubscribed 225 3,685 - - - - 3,910Cost ofshares - (134) - - - - (134)issuedRecognisedforeignexchangelosses forthe - - - - - (259) (259)periodRecognisedforeignexchangegain - - - - - 435 435for theperiodShare optioncharge - - - - 136 - 136Movement indeferred tax - - - - 105 - 105Dividend - - - - (982) - (982)paidMinority'sshare oflosses onacquisitionsof - - (197) - - - (197)subsidiaryMinorityinterestloss - - (152) - - - (152)for the ------- -------- --------- --------- --------- -------- -------periodNet changeinshareholders 238 3,794 (349) - 1,460 176 5,319deficitOpeningequityshareholders 2,235 25,610 - (443) (27,515) (520) (633)deficit ------- -------- --------- --------- --------- -------- -------Closingequityshareholders 2,473 29,404 (349) (443) (26,055) (344) 4,686funds ======= ======== ========= ========= ========= ======== ======= 9. POST BALANCE SHEET EVENT 11 January 2006 - Acquisition of DH Publishing Limited By an agreement dated 11 January 2006 and made between David Hurst and TarsusExhibitions & Publishing Limited, Tarsus acquired the whole of the issued sharecapital of DH Publishing Limited for a consideration of up to a maximum of £1.3million of which £350,000 was paid upon signature of the agreement. DH Publishing Limited is focused on the business to business global onlinerecruitment industry principally through its portal www.onrec.com and themagazine Online Recruitment as well as a range of associated conferences. Acquiree's net assets at the date of acquisition: Carrying value £000Property, plant and equipment 3Trade and other debtors 54Cash and cash equivalents 6Trade and other payables (63) -----------Net identifiable assets and liabilities -Goodwill on acquisition 350 -----------Consideration paid, satisfied in cash 350Cash (acquired) (6) -----------Net cash outflow 344 ----------- 10. EXPLANATION OF TRANSITION TO IFRS In the current year, the Group has adopted International Financial ReportingStandards "IFRS", for the first time and the financial statements have beenprepared under Adopted IFRS. The Group has applied IFRS1 "First Time Adoption of IFRS" to provide a startingpoint for reporting under IFRS. The date of transition to IFRS, was selected as1 January 2004 and all comparative information in these financial statements hasbeen restated to reflect the Group's adoption of IFRS. As required under IFRS the Group sets out below a reconciliation of equity andprofit and loss for the year to 31 December 2004 and an opening equityreconciliation as at 1 January 2004, along with an explanation of why thosechanges arise. Opening equity reconciliation £000 Opening equity under UK GAAP at 1 January 2004 (2,626) IAS 12 recognition of unused losses 546 IAS12 adjustment for deferred tax on share options 289 IAS12 adjustment for deferred tax resulting from timing differences 176 Reverse 2003 final dividend accrual 982 ------------ Restated equity under IFRS at 1 January 2004 (633) ============ IAS12 "Income Taxes" (IAS12) The group has computed its tax charge under IAS12 for the current year havingpreviously adopted the UK GAAP requirements contained in FRS16 "Current Tax"(FRS16) and FRS 19 "Deferred Tax" (FRS19) respectively. Recognition and measurement of current and deferred taxes for IAS12 is similarto FRS16. There are, however, some important differences. •Under previous GAAP the Group did not recognise a deferred tax asset for the carry forward of unused tax losses. In accordance with Adopted IFRS's such losses are recognised as deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. •The tax reconciliation for IAS12 is a total tax charge reconciliation (current and deferred) as compared to being only a current tax charge reconciliation under FRS19 "Deferred Tax" under UK GAAP. •The principle for recognising deferred taxes under IAS12 is based on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base, whereas under UK GAAP deferred tax was recognised by comparing the profit and loss account to the tax computation. This requirement has not materially impacted the tax charge for the year. •Under UK GAAP, current and deferred tax is recognised as income or an expense in the profit and loss account for the period, except where that tax arises from a transaction or event which is recognised directly in equity or from a business combination. Under IAS12, however, where current or deferred tax relates to items that are credited or charged directly to equity, the current or deferred tax shall also be charged or credited directly to equity. This requirement has not materially impacted the tax charge for the year. •The key impact of adopting IFRS for Tarsus Group plc are the recognition of deferred tax liabilities on intangible assets separately identified from goodwill under IFRS3 Business Combinations and the recognition of a deferred tax asset for the excess of the anticipated tax deduction on exercise of share options over the IFRS2 Share-based Payment expense for the consumption of employee services. • The Group is also required under IFRS to recognise any temporary differences arising in the carrying value of investments in subsidiaries, branches or associates/interest in joint ventures and to recognise any deferred tax liability arising in respect of undistributed earnings of subsidiaries and associates/joint ventures. There has been no material impact on the group tax charge from this particular requirement. IAS 32 and 39: "Financial Instruments": Recognition and measurement The Group adopted IAS32 and 39 on 1 January 2004 and has included theappropriate comparative disclosures in the notes to these financial statements. IAS10: Events after the Balance Sheet date (IAS10) Under IAS10, the liability for dividends is not recognised until such time asdividends are appropriately authorised and are no longer at the discretion ofthe Group. As a result the 2003 final dividend paid in April 2004 of £982,000 isshown in the results to 31 December 2004 and is excluded from the openingbalance sheet at 1 January 2004. Reconciliation of profit for the year ended 31 December 2004 Notes to IFRS As reported Effects of Reported under under transition UK GAAP To IFRS IFRS £000's £000's £000's------------------------- ------ --------- --------- ----------Group revenueplus share ofjoint ventures 2 15,491 164 15,655 Less: share ofrevenue ofjoint ventures (1,007) - (1,007)------------------------- ------ --------- --------- ---------- Group revenue 14,484 164 14,648 Operatingcosts 1,2,5 (12,462) 698 (11,764) --------- --------- ---------- Groupoperatingprofit 2,022 862 2,884 Share ofprofit ofjoint venture- accountedfor using theequity method 1,4 247 9 256 Interestreceivable 5 - 5 Interestpayable andotherfinancialexpenses (439) - (439) --------- --------- ---------- Profit beforetaxation 1,835 871 2,706 Taxationexpense (657) - (657) --------- --------- ---------- Profit for thefinancialperiod 1,178 871 2,049 ========= ========= ========== Profit for thefinancialperiodattributableto equityshareholdersof the parentcompany 1,178 1,023 2,201 Loss for thefinancialperiodattributableto minorityinterests 2 - (152) (152) --------- --------- ---------- 1,178 871 2,049 ========= ========= ========== Dividend paidin the period 7 (1,236) 254 (982) ========= ========= ========== Reconciliation of equity as at 31 December 2004: Notes to IFRS As reported Effects of Reported under under transition UK GAAP To IFRS IFRS £000's £000's £000'sNON-CURRENT ASSETS Property,plant andequipment 147 3 150 Intangibleassets 1,2,3 17,516 1,217 18,733 Investments 2 491 (491) - Investments injoint venture 1 205 9 214 Deferred taxassets 6 431 1,228 1,659 --------- --------- ---------- 18,790 1,966 20,756 CURRENT ASSETS --------- --------- ----------Trade andotherreceivables 2 5,447 225 5,672 Cash and cashequivalents 909 23 932 --------- --------- ---------- 6,356 248 6,604 CURRENTLIABILITIES 2 --------- --------- ----------Trade andother payables (13,412) 1,060 (12,352) Provisions (505) - (505) Other interestbearing loansand borrowings (1,614) - (1,614) Deferred tax liability - (112) (112) Liabilitiesfor current tax (260) - (260) --------- --------- ---------- (15,791) 948 (14,843) --------- --------- ---------- NET CURRENTLIABILITIES (9,435) 1,196 (8,239) --------- --------- ---------- TOTAL ASSETSLESS CURRENTLIABILITIES 9,355 3,162 12,517 NON-CURRENTLIABILITIES --------- --------- ----------Other payables (675) - (675) Interestbearing loansand borrowings (7,156) - (7,156) --------- --------- ---------- (7,831) - (7,831) --------- --------- ---------- --------- --------- ---------- NET ASSETS 1,524 3,162 4,686 ========= ========= ========== EQUITY Share capital 2,473 - 2,473 Share premiumaccount 29,404 - 29,404 Reserves (787) - (787) Retainedearnings (29,566) 3,511 (26,055) --------- --------- ---------- Issued capitaland reservesattributableto equityholders of theparent 1,524 3,511 5,035 MINORITYINTEREST 2 - (349) (349) --------- --------- ---------- TOTAL EQUITY 1,524 3,162 4,686 ========= ========= ========== Notes to the IFRS adjustments 1. Goodwill Under IFRS 3, goodwill on acquisitions is no longer amortised, but is held atits UK GAAP carrying value at the transition date and is then subject to anannual impairment review. No impairment was identified as at 1 January 2004following our review. An adjustment of £1,140,000 was made to the incomestatement to reflect the reversal of amortisation under UK GAAP for the yearended 31 December 2004. Of the £1,140,000 adjustment, £1,131,000 increased thecarrying value of goodwill on the balance sheet, and £9,000 of amortisationrelating to goodwill in joint ventures increased the carrying value ofinvestments accounted for using the equity method on the balance sheet. 2. Investments Certain investments, which have been accounted for by the Group as fixed assetinvestments under UK GAAP in 2004 are now accounted for as subsidiaries andfully consolidated within the Group's IFRS financial statements. The changeresults from the Group's ability to exert significant influence in contrast toUK GAAP where the influence has actually to be exerted. Due to the change in treatment for certain investments the Group has includedadditional losses within the detail of the income statement account of £152,000for the year ended 31 December 2004, together with an equivalent balance forminorities' share of these losses. The net effect on the Group's retained profitfor the period is £nil. 3. Acquisitions under IFRS Under IFRS transitional rules the Group is required to restate acquisitions madein 2004 - Linux and SeCA - to comply with IFRS 3. The Group has opted not torestate any earlier acquisitions. As a result of the restatement of these two acquisitions, a portion of theDecember 2004 goodwill balance has been reclassified as trademarks and customerlists based on the fair value of these assets at the date of acquisition. 4. Joint ventures IFRS requires the share of profit from joint ventures to be accounted for in theincome statement, net of interest and tax. Under UK GAAP joint venturearrangements were accounted for under the gross equity method which requiredincome to be split between operating profit, interest and tax, and net assets tobe split between gross assets and gross liabilities. Under IFRS the Group's share of the joint venture's assets is included in thebalance sheet as one caption. 5. Share-based payments Under IFRS 2, the fair value of share options and other share-based payments isrecognised as an expense through the income statement over the expected periodthrough to the vesting date. The standard requires recognition of the fair valueof all share-based payments granted from November 2002 onwards that are unvestedat 1 January 2005. The impact on the income statement, in the year to 31December 2004, was a charge of £136,000. All the Group's share based paymentsare equity settled. 6. Deferred taxation Under IAS 12 deferred tax is assessed by comparing the balance sheet value of anasset or liability to its tax base, which is broadly defined as the amount oftax to be paid on realisation of an asset, or tax credit to be claimed onsettlement of a liability. Under UK GAAP deferred tax was assessed by comparingthe profit and loss account to the tax computation. The difference in methods has resulted in the Group recognising a furtherdeferred tax asset of £612,000 at 31 December 2004 resulting from theanticipated exercise of share options, and a further £26,000 of deferred taxliabilities resulting from timing differences at 31 December 2004. 7. Dividend creditor not accrued under IFRS Under IAS 10, the liability for dividends is not recognised until such time asthey are appropriately authorised and are no longer at the discretion of theGroup. As a result, the final dividend at 31 December 2004 of £1,236,000 is notaccrued and the 2003 final dividend paid in April 2004 of £982,000 is shown inthe results to 31 December 2004 and is excluded from the opening balance sheetas at 1 January 2004. 8. Cashflow statement Under IFRS the Group's cashflow statement differs from that under UK GAAP in anumber of ways. The most significant are:i) taxation is now required to be analysed between operating andfinancing cashflow, previously this split was not required;ii) interest receivable is classified as coming from an investingactivity and interest payable as an operating cashflow; previously they wereboth considered as returns on investments and servicing of finance; andiii) dividends are now considered as a financing cashflow; previously thiswas a separate caption. 9. Presentational changes The change to IFRS has resulted in a number of presentational changes to theprimary statements, the most significant being:i) the analysis of profit for the financial period attributable to theequity shareholders of the parent company and minority interest being amemorandum item only;ii) the dividend paid being treated as an appropriation of profitrather than a deduction from the income statement;iii) assets and liabilities are classified as current ornon-current though deferred tax assets are always regarded as non-current; andiv) minority interests are treated as a component of equity withinthe balance sheet. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tarsus