Half-year Report

Tarsus Group plc

("Tarsus", the "Company" or the "Group") 

Interim results for six months to 30 June 2018

Strong organic growth, led by China

Financial results

Financial highlights

· Revenue of £35.6m up 32% against 2016

· Group like-for-like revenues* up 12%

· Adjusted profit before tax of £5.8m up 45% against 2016 (statutory loss before tax £1.3m)

· Adjusted earnings per share of 2.8p unchanged against 2016 (statutory loss per share 3.2p)

· Interim dividend of 3.3p per share up 10% on 2017

Operational highlights

· Buyer/visitor growth across the portfolio of 13%, led by Chinese events in first half

· Launch of Labelexpo Southeast Asia - one of the Group's strongest ever launches and profitable in its first edition

· Bolt-on acquisitions in Mexico and the US (Connect) and the purchase of an additional 25% minority interest in SIUF (China)

· Strong replications programme delivering accelerated returns

Current trading and outlook

· Forward bookings for 2018 up 10% on a like-for-like basis (adjusted for biennials and acquisitions)

· 43 launch portfolio events scheduled to be held in 2018, of which 17 are new this year

· Well positioned to deliver encouraging growth in 2018, in line with expectations 

Douglas Emslie, Group Managing Director, said:

"An integral part of our strategy for organic growth is to invest in and expand our leading brands globally through our growing launch programme. We are delighted by the performance of the first edition of Labelexpo Southeast Asia, demonstrating the strength of the Labelexpo brand.

"We have traded well in the first half, forward bookings are well up and we remain confident of delivering a strong performance in 2018 in line with the Board's expectations."

Overview

2018 has seen the launch of the next phase of the Quickening the Pace strategy - "QTP2: driving scale and momentum", a programme that builds on the original QTP strategy. The Group will deepen its presence in higher growth markets, look to maximise the scale of existing events and acquire new platforms for growth with the aim of continuing to drive strong shareholder returns.

Financial review

Group revenue for the period was £35.6m (2017: £39.8m). Adjusting for acquisitions and biennial events, underlying organic revenue growth of 12% was achieved in the smaller first half.

Adjusted profit before tax was £5.8m (2017: £6.8m; 2016: £4.0m), reflecting strong revenue growth, primarily in our Chinese portfolio. The Group incurred exceptional costs of £0.4m (2017: £0.6m) in respect of completed and pending corporate transactions. The Group also incurred an amortisation charge of £3.3m (2017: £3.7m). Other adjusting items are set out in note 6 to the financial statements below. Loss before tax was £1.3m (2017: £1.4m; 2016 £3.1m).

Adjusted earnings per share were 2.8p (2017: 3.5p). Basic loss per share was 3.2p (2017: 3.2p).

An interim dividend of 3.3p per share (2017: 3.0p) has been declared and will be paid on 11 January 2019 to Shareholders on the Register on 30 November 2018. The Group will continue to offer a scrip alternative to qualifying shareholders.

Operating cash inflow in the first half was £2.4m (2017: £16.1m). As expected net debt at 30 June 2018 increased to £94.7 million (2017: £85.3m), driven primarily by acquisitions. The Group remains on target to return to its stated long-term target range of 1.5 - 2.0x net debt: EBITDA by the end of the year.

Corporate activity 

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

In the US, Connect acquired 80% of eTourism Summit, an event linking 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.

In China, Tarsus has acquired a further 25% in SIUF, taking its overall stake to 75%, in line with our strategy to acquire minorities where appropriate.

Operating review

Geographic breakdown of results

Asia

In the Group's Chinese portfolio, which is heavily first half weighted, performance was strong and our Shenzhen events all performed well - in particular Hometex. The outlook for the second half events in China remains positive.

Labelexpo Southeast Asia, held in Bangkok in May was one of the Group's most successful launches ever, attracting nearly 8,000 attendees from 62 countries. The majority of other events in South-East Asia fall in the second half of the year.

Americas

Connect held 13 events in the first half and these performed in line with expectations. The Medical portfolio continues to perform well, including a strong launch of the Cardiometabolic West event. Off Price February 2018 performed in line with the previous edition.

In Mexico, trading was positive with another strong performance from Expo Manufactura. Plastimagen (the Group's largest event in Mexico) takes place on an 18 month cycle and did not occur in the period.

EMEA

Dubai saw a good performance across the events in the first half and the outlook for the second half is in line with our expectations.

The pattern of trading in Turkey is similar to 2017. Trade in the first half has been affected by both political uncertainty around the election and by a further depreciation of the Turkish lira. The outlook for the large shows in the second half is good.

Launch portfolio

A key part of our strategy will be continued investment in Tarsus' organic growth programme, particularly the replication of our events, which drives the growth of the Group's leading brands around the world and provides a lower risk, lower cost approach to driving organic growth. Tarsus has invested consistently in this portfolio over the last four years, leveraging strong brands including Labelexpo, GESS and Connect. The launch portfolio continues to be actively managed to ensure we focus on events that can scale in a reasonable timeframe. There are 17 new events planned for 2018 of which 8 were held in the first half. 14 previous events are not being repeated. Including 6 biennial events running next in 2019, the launch portfolio stands at 49.

With a growing launch portfolio the Group is confident of building on this progress going forward.

Outlook

Owing to the timing of the Group's events, revenues for the year as a whole are heavily weighted to the second half. Bookings for the full year are strong and are 10% ahead of 2017 on a like-for-like basis.

The Group is well placed to continue to deliver encouraging growth in 2018 and beyond.

For further information contact:

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 27 July 2018.

*Definitions can be found in note 17 to the financial statements

INDEPENDENT REVIEW REPORT TO TARSUS GROUP PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the Condensed Consolidated Interim Income statement, Condensed Consolidated Interim Statement of Comprehensive Income, Condensed Consolidated Interim Statement of Financial Position, the Condensed Consolidated Interim Statement of Cash Flows, Condensed Consolidated Interim Statement of Changes in Equity and the related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

25 July 2018

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

* See note 6 for adjusting item

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June

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.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

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

Douglas Emslie Daniel O'Brien

Group Managing Director Group Finance Director

25 July 2018

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. REPORTING ENTITY

Tarsus Group plc (the "Company") is a company incorporated in Jersey and resident in Ireland. The condensed consolidated financial statements of the Company as at and for the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities.

The consolidated financial statements of the Group as at and for the year ended 31 December 2017 are available upon request from the Company Secretary at 15 Harcourt Street, Dublin 2, Ireland.

Having reviewed the Group's liquid resources, borrowing facilities and cash flow forecasts, the directors believe that the Group has adequate resources to continue as a going concern for the foreseeable future.

2. STATEMENT OF COMPLIANCE

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 Interim Financial Reporting. They do not constitute the Group's statutory accounts.

The interim financial statements should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2017 which were prepared under International Financial Reporting Standards, as adopted by the European Union, and have been reported on by the Company's auditor. The auditor report was unqualified.

The financial statements of Tarsus Group plc, registered number 101579 (Jersey), were approved by the board and authorised for issue on 26 July 2018.

3. SIGNIFICANT ACCOUNTING POLICIES

Aside from the adoption of IFRS 9 and IFRS 15, which are described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2017.

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 1st 2017 are not restated.

The core principle of IFRS 15 if 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. The impact of this change on the balance sheets as at 30 June 2017 and 31 December 2017 is shown in the table below. There was no impact on the income statement for the six month period ended 30 June 2017 and year ended 31 December 2017.

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IFRS 15 (CONTINUED)

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 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.

4. ESTIMATES

The preparation of consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2017.

5. FINANCIAL RISK MANAGEMENT

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the end for the year ended 31 December 2017.

6. ADJUSTING ITEMS

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

7. SEGMENTAL ANALYSIS

As at 30 June 2018, the Group is organised into three main operating segments - Americas, Asia and EMEA.

The main activities of all segments are the production of exhibitions, conferences, magazines, directories and online media.

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

8. TAXATION CHARGE

The taxation charge for the six months ended 30 June 2018 is based upon the estimated effective tax rate of 18.0% on adjusted profit before tax (2017: 16.0%) for the year ending 31 December 2018.

9. EARNINGS PER SHARE

Basic earnings per share

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

Diluted earnings per share

Diluted earnings per share has been calculated on loss after tax attributable to ordinary shareholders for the six months (as shown on the Consolidated Income Statement) and the diluted weighted average number of ordinary 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 6 and the weighted average number of ordinary shares (as below) in issue in the year.

Adjusted diluted earnings per share

Adjusted diluted earnings per share is calculated using loss after tax as reconciled in note 6 and the weighted average number of diluted ordinary shares (as below) in issue in the year.

Weighted average number of ordinary shares (diluted):

10. INTANGIBLE FIXED ASSETS

The additions not through business combinations primarily relate to the recognition of the DAC licence for the period from 2020 to 2027.

11. FINANCIAL INSTRUMENTS

The carrying value of all financial instruments held in the Statement of Financial Position equals their fair value.

Level 1 - fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - fair values measured using indicative market valuations provided by banks for the identifiable asset of liability.

Level 3 - fair values using inputs or liabilities that are not based on observable market data. These are measured by using the latest management forecasts and using a country specific WACC rate to discount to the present value.

12. ACQUISITIONS

The Group completed the acquisition of 64% of eTourism, an exhibition business during the first half of 2018, in line with the Group's "Quickening The Pace 2" strategy.

Consideration paid for this transaction was £1.3 million of which £0.4million is a current estimate of contingent consideration.

Goodwill of £0.6m was recognised on this transaction.