Final Results

Tarsus Group plc

Final results for year ended 31 December 2018

Strong performance in first year of QTP 2 Strategy

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 2018.

The Group launched the second phase of its "Quickening the Pace" strategy in January 2018. This focuses on further building the scale and momentum of the Group, driving the organic growth of existing businesses, replicating Tarsus brands and acquiring new platforms for growth.

This new phase has begun well with the Group delivering like-for-like revenue growth of 9% over the year (at constant exchange rates) and an increase in buyers across the portfolio of 10% on a like-for-like basis.

Financial results

* See glossary at end of this announcement for definitions of terms

Financial highlights

· Revenue of £99.7m up 46% against 2016

· Group like-for-like revenues* up 9%

· Adjusted profit before tax of £27.9m up 45% against 2016 (statutory profit before tax £16.5m up 93%)

· Adjusted earnings per share of 17.5p up 15% against 2016 (statutory earnings per share 9.4p up 36%)

· Proposed final dividend of 7.7p per share - total for year up 10% to 11.0p

· £150m refinancing completed with new five year revolving credit facility of £120m and £30m by way of a seven year bond

· Net debt at £78.8m, with gearing back at target range

Operational highlights

· Buyer/visitor growth across the portfolio of 10%, at the top end of the Group's KPI target of 5-10%

· Strong performances from leading events

· 19 brand replications launched, including 6 new Connect events

· Outstanding first edition of Labelexpo South East Asia with a strong rebook for 2020

· The Group announced six acquisitions in the year with the largest being the acquisition of the remaining 50% its joint venture with EJ Krause in Mexico

Current trading and outlook

· Trading off to a good start in 2019

· Forward bookings for 2019 on a like-for-like basis currently up 10%

· Well positioned to deliver another strong performance in 2019

Douglas Emslie, Group Managing Director of Tarsus, commented:

"2018 saw the launch of the latest phase of our Quickening the Pace strategy and we are delivering

against that strategy with another good year of progress both operationally and strategically.

"Our buyer/visitor growth of 10% was especially pleasing and results from the Group's focus on deepening our presence in higher-growth markets, maximising the scale of our events and constantly seeking to deliver high-quality buyers.

"Trading has got off to a good start for the first two months of 2019. Bookings for our larger biennial events, including the Dubai Airshow and Labelexpo Europe, are promising. We are pleased with the strong recovery in bookings for our shows in Turkey and bookings across the portfolio are at the top end of the Group's target range demonstrating the importance of a diversified portfolio. In addition, our programme of brand replications is steadily augmenting our growth.

2019 - the larger of the years in our biennial cycle - is shaping up to be another successful one for the Group. Our confidence in the future is reflected in the Board's recommended 10% full year dividend increase."

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 Group will be hosting a presentation to analysts at 11.00am today at the offices of Deutsche Bank plc, Winchester House, 1 Great Winchester St, London EC2N 2DB. A webcast of the presentation will be available on Tarsus's website (www.tarsus.com) from 9.30am on 28 February 2019.

Strategic overview

2018 saw the launch of the next phase of the Quickening the Pace strategy - "QTP2: driving scale and momentum". In this phase, 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.

First launched in 2013, the initial QTP strategy had one over-riding ambition: to accelerate the pace of financial returns to shareholders through two initiatives. First, by driving organic growth from the existing portfolio through replicating those events and by increasing buyer attendance. Second, by making strategic acquisitions in selected high-growth geographies.

To execute this 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 and the Middle East. Tarsus targets not only high-growth geographies but also high-growth industries where technological innovation or substantial investment is driving growth. The strategy drove 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. The number of events held grew from 65 to 153 over the five-year period, through a combination of acquisition and new launches.

Between 2013 and 2017, the first phase of the QTP strategy delivered average like-for-like revenue growth of 9% per annum, average buyer growth of 8% per annum and average adjusted earnings per share growth of 9% per annum. Total shareholder return over the period was 111%, approximately 50% better than our peer group.

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, which will contribute to the future growth of the Group.

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 delivering buyer growth, the Group is confident it can continue to drive up volumes as it has done again in 2018.

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

Financial Results

The financial results for the year ended 31 December 2018 were in line with the Board's expectations. Group revenues for the full year were £99.7m (2017: £117.7m), up 46% on a biennial basis (2016: £68.4m). Like-for-like revenues increased by 9%.

Group adjusted profit before tax was £27.9m (2017: £40.2m), up 45% on a biennial basis (2016: £19.2m). Net interest expense of £4.5m (2017: £4.2m). Statutory profit before tax was £16.5m (2017: £27.9m).

The Group incurred an amortisation charge of £9.5m (2017: £8.4m).

The adjusted tax charge of £4.5m (2017: £6.3m) represents 16% (2017: 16%) of the Group's adjusted profit before tax. The statutory tax charge is £2.5m (2017: £1.1m).

Adjusted earnings per share were 17.5p (2017: 27.7p), 15% up on a biennial basis (2016: 15.2p). Basic earnings per share for 2018 were 9.4p (2017: 21.5p).

The Group continued to deliver strong operating cash conversion, with £28.6m of cash generated from operations during the year, substantially ahead of 2016 (2017: £36.5m and 2016: £15.8m). The Group's net debt as at 31 December 2018 was £78.8m (2017: £84.8m) the decrease driven principally by the strong operating cash flow of the business. This represents net debt to EBITDA of 2.0x which is in line with the Group's medium term target of 1.5x - 2.0x geared.

Reflecting the strong financial performance during 2018 and given our confidence in the outlook, the Tarsus Board is proposing a final dividend of 7.7p per share, bringing the total for the year to 11.0p per share (2017: 10.0p per share), an increase of 10%. This proposed rise is the eighth consecutive year of increases to the dividend and represents a compound annual growth rate of 8%.

The final dividend will be paid, subject to shareholder approval, on 5 July 2019 to shareholders on the Register of Members on 24 May 2019. A scrip dividend will continue to be offered to Shareholders as an alternative.

Corporate activity

Six acquisitions were announced during the year, including buying in minority interests in three of the Group's businesses, as follows:

eTourism Summit: Tarsus' US business Connect acquired 80% of this business which links travel destination marketing executives with the latest products and services in digital marketing. The travel industry is one of the largest consumers of digital media.

EJ Krause: The Group acquired the remaining 50% of its joint venture with EJ Krause to consolidate its position in the fast-growing Mexican marketplace, where it is now the largest international exhibition company.

Expo Restaurantes: Tarsus and EJ Krause jointly acquired 60% of the leading restaurant show in Mexico which successfully ran its first event under our ownership in June.

Streamline: Tarsus entered into a strategic partnership in the UAE with Streamline Marketing Group resulting in the acquisition of 100% of the Global Space Congress, the Global Aerospace Summit and the World Aviation Safety Summit, representing a good bolt-on to the Group's existing aerospace portfolio in Dubai. This acquisition completed in January 2019.

SIUF: The Group purchased an additional 25% stake - taking its holding to 75% - of Asia's largest fair for intimate apparel.

AMB: The Group acquired an additional 25% in AMB in Southeast Asia, taking its holding to 75%.

Operating Review 

Americas

Connect again performed well and made further good progress in terms of both expansion into new verticals and new launches. A total of 23 events were held, including 6 new events and the main event, Connect marketplace (held in Salt Lake City this year) produced a strong result.

Medical - The Medical division made further progress in 2018. The established anti-aging events again performed well with an excellent showing at the Las Vegas event in December. PAINWeek had another solid year and expanded the number of its regional conferences from 27 to 32. South Beach Symposium (oncology) also achieved good results. The Cardiometabolic Health Congress had a strong performance in 2018 and also benefited from the launch of CMHC West in the first half.

Labelexpo Americas was the largest to date with 487 exhibitors and is already 83% rebooked for 2020.

Offprice - The two Las Vegas events produced solid performances in 2018 in a difficult retail environment in the US.

Mexico - There was a strong performance from Expo Manufactura (manufacturing) and the other events in the Group's Mexican portfolio all performed in line with expectations.

EMEA

Dubai - GESS, AIME and MRO achieved good performances. MEBAA had a solid performance in a slow regional market for business aviation. New launches included the Gulf Print and Pack Summit and the Global Air Traffic Management exhibition.

Turkey - The pattern of trade was similar to 2017 with a number of first-half events seeing weaker revenues but the larger events in the second half - including Zuchex - performing in line with expectations. The devaluation of the Lira in Turkey also held back the performance of the division.

Asia

In China, the Shenzhen based shows performed well, especially Hometex. CES in Shanghai recorded strong buyer growth as it continued to consolidate its position as a market leader in the region. SIUF again made progress and the Group has increased its stake to 75%.

In Southeast Asia, the inaugural Labelexpo Southeast Asia in Bangkok was the Group's most successful launch to date. Labelexpo India, in its sixth edition, saw a strong rise in buyers. Wofex, Philippines' biggest food show, had a good edition. In Indonesia, the fourth edition of GESS and the inaugural editions of Intertraffic Indonesia and the Indonesia Fintech Show were both encouraging.

Central costs

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

Outlook

Trading has got off to a good start for the first two months of 2019. Bookings for our larger biennial events, including the Dubai Airshow and Labelexpo Europe, are promising. We are pleased with the strong recovery in bookings for our shows in Turkey and bookings across the portfolio are at the top end of the Group's target range demonstrating the importance of a diversified portfolio. In addition, our programme of brand replications is steadily augmenting our growth.

2019 is the larger of the years in our biennial cycle and is shaping up to be another very successful one for the Group. Our confidence in the future is reflected in the proposed 10% dividend increase for 2018.

Neville Buch, Chairman 

Douglas Emslie, Group Managing Director

26 February 2019

Glossary*

1. Like-for-like revenue:

Pro-forma revenue at constant exchange rates adjusted for biennial events, adjusting for acquisitions impacting for the first time in 2018, prior year disposals and non-recurring products and items.

2. Adjusted EBITDA:

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

3. 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, corporate transactions, profit on disposal of joint venture and restructuring costs, along with the associated tax impact.

4. 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, corporate transactions, profit on disposal of joint venture and restructuring 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. 

5. Buyer/Visitor Growth:

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

Average metrics are an arithmetic average of the defined metrics over a specified period of time.

CONSOLIDATED INCOME STATEMENT

*see note 3 for adjusting items analysis and definition 

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

*2017 has been restated for the impact of IFRS15 implementation.

The financial statements of Tarsus Group plc, registered number 101579 (Jersey), were approved by the board and authorised for issue on 26 February 2019 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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

Aside from the adoption of IFRS 9 and IFRS 15, which are described below, the results for the year ended 31 December 2018 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 2017. 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 2018 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 2018 or 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Jersey Financial Services Commission Companies Registry. Those for the year ended 31 December 2018 will be delivered following the Company's Annual General Meeting on 20 June 2019.

This financial information has been extracted from the Group's Annual Report and Accounts for the year ended 31 December 2018. 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 2018 Annual Report and Accounts in March 2019.

IFRS 9

In the current period the Group has applied IFRS 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRSs. IFRS 9 introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities, 2) impairment for financial assets and 3) general hedge accounting. The only significant impact on the Group is in relation to the impairment of trade receivables and hedge accounting as detailed below.

In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model as opposed to an incurred credit loss model under IAS 39. The expected credit loss model required the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

As at 1 January 2018, the directors of the Company reviewed and assessed the Group's existing trade receivables for impairment using reasonable and supportable information that is available without undue cost of effort in accordance with the requirements of IFRS 9 to determine the credit risk of the respective items at the date they were initially recognised. No material adjustments were identified.

In accordance with IFRS 9's transition provisions for hedge accounting, the Group has applied the IFRS 9 hedge accounting requirements prospectively from the date of initial application on 1 January 2018. The Group's qualifying hedging relationships in place as at 1 January 2018 also qualified for hedge accounting in accordance with IFRS 9 and were therefore regarded as continuing hedge relationships. No rebalancing of any of the hedging relationships was necessary on 1 January 2018. As the critical terms of the hedging instruments match those of their corresponding hedged items, all hedging relationships continue to be effective under IFRS 9's effectiveness assessment requirements. The Group has also not designated any hedging relationships under IFRS 9 that would not have met the qualifying hedge accounting criteria under IAS 39.

Apart from this, the application of the IFRS 9 hedge accounting requirements has had no material impact on the results and financial position of the Group at 1 January 2018 or in the current period. No accounting policy changes have been made as a result of the adoption of this standard.

IFRS 15

In the current financial year the Group has adopted IFRS 15 Revenue from Contracts with Customers. The Group has elected to restate comparative information from prior periods upon adoption of IFRS 15 and has applied the practical expedient under which contracts that began and ended in 2017 or that were completed prior to January 2017 are not restated.

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under IFRS 15, deferred income and trade debtors may not both be recognised where neither the service has been performed or payment is due by the customer. As a result deferred income and trade debtors have both reduced by £15,543,000 in 2017.

2. SEGMENTAL ANALYSIS

As at 31 December 2018, 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 joint venture profit before tax of £377,000 in Americas and £2,317,000 in Asia.

* Includes joint venture profit before tax of £2,160,000 in Americas and £3,564,000 in Asia.

Segment assets and liabilities have been restated for impact of IFRS15 - see note 1.

3. ADJUSTING ITEMS

The following analysis details the adjusting items in the consolidated income statement. The directors believe that adjusted profit provides an additional useful indication of overall financial performance to complement statutory measures, and reflects how the business is managed and measured on a day to day basis due to the nature, materiality or frequency of certain items. This preparation is consistent with the way management measure financial performance and with how it is reported to the Board. In addition to providing a more comparable set of results year-on-year, this is also in line with similar adjusted measures used by our peer companies and therefore facilitates comparison across the industry.

Adjusted profit excludes certain recurring charges which in monitoring the business are excluded as they do not relate to the performance of our events. These include charges relating to share options, amortisation of intangible assets arising from business combinations, unwinding of discount on long term liabilities, changes in fair value of contingent consideration and put/ call liabilities, with the related taxation impact. It also excludes costs which, based on our judgement, we consider to be one-off in nature. These include costs associated with restructuring, corporate transaction costs (which include costs associated with acquisitions and minority purchases, the refinancing that took place during the year and costs relating to legal claims) and profit on disposal of joint venture, along with the associated taxation impact.

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:

* The impact of US tax reform rate change is created by a one off revaluation of deferred tax liabilities due to the reduction in federal tax rate from 38% to 21% partially offset by an anticipated charge on unremitted earnings of overseas subsidiaries.

Tax recognised directly in equity

5. DIVIDENDS

An interim dividend of 3.3p per share (2017: 3.0p) was paid on 11 January 2019 to shareholders on the Register of Members of the Company as at 30 November 2018.

The directors announced the proposed final dividend for 2018, of 7.7p per share, on 27 February 2019. Subject to approval at the Annual General Meeting on 19 June 2019, the proposed date of payment is 5 July 2019 to Shareholders on the Register of Members as at 24 May 2019.

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).

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.

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 299.52 pence.

7. OVERDRAFTS AND OTHER INTEREST-BEARING LOANS AND BORROWINGS

8. ACQUISITION OF SUBSIDIARY

i) On 1 September 2018, the Group acquired a further 25% of the share capital of AMB Tarsus Exhibitions SDN BHD, AMB Tarsus Exhibitions (Cambodia) Pte. Ltd and AMB Tarsus Exhibitions (Myanmar) Pte. Ltd ("AMB"), an exhibition business we previously treated as a joint venture due to our 50% ownership and we now fully consolidate. Voting rights are aligned to share ownership.

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:

The values used in accounting for identifiable assets and liabilities and related contingent consideration of this acquisition are estimates and therefore provisional in nature at the balance sheet date. If necessary, adjustments will be made to these carrying values and the related goodwill within 12 months of the acquisition date.

Contingent consideration, relates to payments to vendors, payable after completion, that are dependent on the outcome of future events. The contingent consideration is dependent on the financial performance of the exhibitions occurring in 2018.

From the date of acquisition to 31 December 2018, the acquisition has contributed £2,653,000 of revenue to the Group. If the acquisition had occurred on 1 January 2018 it would have contributed £3,845,000 of revenue to the Group.

Goodwill of £6,408,000, recognised on this acquisition, relates to certain assets that cannot be separated and reliably measured. These items include sector knowledge, customer loyalty and the anticipated future profitability that the Group can bring to the business acquired. Consistent with other media companies, goodwill makes up a large percentage of the fair value of the acquisition.

The Group incurred transaction costs of £317,000 in respect of the acquisition, which were expensed.

The values used in accounting for the identifiable assets and liabilities and related contingent consideration of this acquisition are estimates and are therefore provisional in nature at the balance sheet date. The non-controlling interest is measured as their proportionate share of the fair value of the net assets.

Consideration paid in cash represents the initial cash payment only.

ii) On 1 September 2018, the Group acquired the remaining 50% of the share capital of E.J. Krause Tarsus Events LLC, EJKT Mexico Events LLC and EJKT Exhibitions LLC ("EJK"), an exhibition business we previously treated as a joint venture due to our 50% ownership and we now fully consolidate. Voting rights are aligned to share ownership.

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: