Tarsus Regulatory News (TRS)

1 March 2017

Tarsus Group plc

Final results for year ended 31 December 2016

Driving scale and momentum

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 2016.

Tarsus continued to focus on its strategy of "Quickening the Pace" to accelerate the pace of financial returns to shareholders. The Group saw like-for-like revenue growth of 8% over the year (at constant exchange rates) and across the portfolio buyers increased by 7% on a like for like basis; well ahead of the Group's target of 5%.

Financial results

Financial highlights

· Revenue up 13% against 2014

· Group like-for-like revenues* up 8%

· Adjusted profit before tax up 13% against 2014

· Adjusted earnings per share up 20% against 2014

· Proposed final dividend of 6.4p - total for year up 8% to 9.1p

· Successful share placing raising £23m and banking facilities increased to £111m

Operational highlights

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

· Four acquisitions - Connect in the US, Intex and Hometex in China and PEP in SE Asia

· 10 new brand replications

· New divisional structure with strengthened senior management

Current trading and outlook

· Good start to 2017

· Forward bookings for 2017, on a like-for-like basis, currently +10% ahead of those for 2016 (adjusted for biennials and acquisitions)

· Record rebook for global brands (Labelexpo Europe and the Dubai Airshow)

· Well positioned to deliver a strong performance in 2017

Douglas Emslie, Group Managing Director of Tarsus, commented:

"Our 'Quickening the Pace' growth strategy continued to deliver in 2016. Organic growth was strong at 8% and we grew our buyer attendance, a key metric for us, by a very encouraging 7%. Strategically, we delivered 10 new replications of our leading brands and further deepened our presence in the world's largest exhibition markets, the US and China, with three earnings enhancing acquisitions towards the end of the year.

"We are anticipating increasing economic activity in the geographies and sectors served by our exhibitions, with the exception of Turkey, and have budgeted accordingly.

"Forward bookings for 2017 are 10% ahead. Whilst we are mindful of geopolitical uncertainty, 2017 - the larger year in our biennial cycle - is looking exciting for the Group."

For further information contact:

Tarsus Group plc:

Douglas Emslie, Group Managing Director 020 8846 2700

Dan O'Brien, Group Finance Director

Neville Harris, Investor Relations 07909 976 044

The Company will be hosting a presentation to analysts at 11.00am today at the offices of Investec Bank at 2 Gresham St., London EC2V 7QP. The presentation will be made available on Tarsus's website (www.tarsus.com) from 9.30 am on 2 March 2017.

Glossary*

Like-for-like revenue:

Constant exchange rates adjusted for biennial events, excluding acquisitions impacting for the first time in 2016, prior year disposals and non-recurring products and items.

Adjusted profit before tax:

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

Adjusted EPS:

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

Pro-forma revenue:

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

Adjusted operating cash:

Cash from operations adjusted for non-operating items and disposals. 

Buyer Growth:

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

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

Strategic overview

The Group made further progress in delivering its "Quickening the Pace" strategy which is focused on accelerating financial returns to shareholders. This is being achieved through a combination of organic growth from the existing portfolio, geographical replications of major brands across faster growth economies and the identification of acquisitions in our selected geographies.

The Group ran ten new replications during the year and expects this to increase in 2017.

Tarsus announced three acquisitions towards the end of the year, one in the US (Connect) and two in China (Hometex and Intex), thus deepening its presence in the world's two largest exhibition markets. Earlier in the year, the Group purchased 51% of PEP in the Philippines, further extending the Group's reach into the fast growing South East Asia economies. The Group's entrepreneurial culture, flexibility and willingness to collaborate with its partners in the development of their businesses, is proving attractive to vendors and was instrumental in enabling us to secure these acquisitions for the Group in 2016.

In addition, in line with its strategy, the Group continued to buy-in its minority interests. Accordingly, Tarsus acquired further minority interests in Turkey and Indonesia in the year. Tarsus' policy remains to buy-in outstanding minority interests at the appropriate time.

The Group assesses its performance against two KPIs:

1. Accelerating EPS growth

Through targeting underlying growth at its exhibitions in growth markets, the Group aims to deliver enhanced financial returns to its shareholders. By proactively managing its portfolio of events, adjusted EPS grew (on a constant currency basis over the biennial cycle) 5% per annum to 15.2p, against a 5-10% growth per annum target.

2. Buyer growth

The Group aims to drive buyer attendance at its events and strong like for like growth of 7% in 2016 compares favourably with an industry average of 3% and an internal target of 5%. This performance is being assisted by executing a focused programme for every show and by higher levels of knowledge sharing and by best practice disciplines across the Group.

Financial results

The financial results for the year ended 31 December 2016 were in line with the Board's expectations. Group revenues for the full year were £68.4m (2015: £86.9m), up 13% on a biennial basis (2014: £60.6m). Like-for-like revenues, at constant exchange rates, increased by 8%. Revenues were positively impacted by foreign exchange in 2016 principally from a strengthening in the US dollar.

Group adjusted profit before tax was £19.2m (2015: £26.3m), up 13% on a biennial basis (2014: £17.0m). Net interest expense of £2.4m (2015: £2.0m) reflected increased debt levels across 2016 as a result of acquisitions made during the year. Reported profit before tax was £8.6m (2015: £19.1m).

The Group incurred an amortisation charge of £6.9m (2015: £5.2m) and there was no impairment charge in 2016 (2015:£1.8m on the disposal of its French business).

The adjusted tax charge of £2.9m (2015: £3.8m) represents 15% (2015: 15%) of the Group's adjusted profit before tax. The reported tax charge is £0.7m (2015: £2.2m). We expect this rate to increase over time, owing to the changing profile of the countries in which we operate.

Adjusted earnings per share were 15.2p (2015: 21.4p), 20% up on a biennial basis (2014: 12.7p). Basic earnings per share for 2016 were 6.9p (2015: 14.4p).

The Group continued to deliver strong operating cash conversion, generating £20.3m of adjusted operating cash* during the year (2015: £27.0 and 2014: £19.5m). The Group's net debt as at 31 December 2016 increased to £69.5m (2015: £43.8m).

Reflecting the strong financial performance during 2016 the Tarsus Board is proposing a final dividend of 6.4p per share, bringing the total for the year to 9.1p per share (2015: 8.4p per share), an increase of 8%. This proposed rise is the sixth consecutive year of increases to the dividend and represents a compound annual growth rate of 8%.

The final dividend, subject to Shareholder approval, will be paid on 6 July 2017 to Shareholders on the Register of Members on 26 May 2017. A scrip dividend will continue to be offered to Shareholders as an alternative.

Corporate activity

Four acquisitions were agreed during the year.

In April 2016, Tarsus acquired 51% of PEP in the Philippines, organisers of WOFEX (World Food Expo) which runs annually in August and is the country's largest food trade show. This links strongly with the Group's food interests in Myanmar and Cambodia and substantially increases sector scale in the region.

In October 2016, Tarsus acquired a 50% interest in Intex, a major event organising business based in Shanghai, China. It has a portfolio of nine shows, four of which are major brands: Music China (Musical Instruments), CES Asia (Consumer Electronics), The Flower Show and Rail & Metro China. The business has strong support from local government.

In December 2016, Tarsus acquired 80.1% of Connect, a leading US business travel and meetings event company. Connect serves the business travel and meetings sector through a combination of national, regional and vertically focused events which are supplemented by an integrated media offering. These events bring together meeting professionals and planners with suppliers from the business travel and meetings sector. In addition to increasing Tarsus' exposure to the important US market, the potential expansion of Connect both within the US and internationally offers an attractive growth opportunity.

In December 2016, Tarsus agreed to acquire a 65% interest in Hometex, the leading bi-annual home textiles exhibition based in Shenzhen, China; with the acquisition completing in January 2017. The home furnishings market is now the fourth highest sector of family consumption in China and Guangdong province itself accounts for more than 50% of the Chinese home furnishing market by value. Hometex takes place bi-annually in the spring and autumn. The spring edition, the larger of the two events, occupies all of the available venue capacity and there is a currently a waiting list for this event.

The new exhibition centre planned for Shenzhen will see the venue triple in size to 300,000m2. This will allow for potential expansion of the Hometex event from the 2019 edition onwards, and will potentially benefit the wider Tarsus portfolio. Hometex will work closely with Tarsus's housewares and home interiors events in Istanbul and Jakarta to exploit the synergies between each of them to grow, broaden and internationalise the events.

In addition to the above acquisitions, in line with its stated strategy, Tarsus also acquired the outstanding minority interests in CYF and Life Media, both in Turkey and PTIA in Indonesia.

In December 2016 Tarsus placed 10,252,610 new ordinary shares of 5 pence each in the capital of Tarsus Group plc to new and existing shareholders at a price of 235 pence per share, representing approximately 9.9 per cent of Tarsus' issued share capital raising net proceeds of £23.3 million.

Operating Review

The Group has changed its reporting structure in 2016, to reflect more accurately the geographic management of the businesses. Previously the Group reported under US, Europe and Emerging Markets. The segments are now Americas (US and Latin America), EMEA (Europe, Middle East and Turkey) and Asia (China and South East Asia).

Americas

Labels

Labelexpo Americas produced an excellent performance with visitor numbers up 8%, including a strong interest from Latin America. The show had more machinery on display than ever before and the continuing development of digital printing is helping to drive growth. As a result the event has had a very strong rebook for 2018.

Medical

Encouragingly the Medical division as a whole returned to growth in 2016. The Group's established anti-aging events in Orlando (May) and Las Vegas (December) were both record shows with increased attendances. Additionally, PAINWeek performed well in its first full year of ownership with a significant increase to the number of PAINWeekend events held across the US. While PAINWeek was helped by a strong new analgesic drug pipeline, both South Beach Symposium (oncology) and the Cardiometabolic Health Congress were adversely affected by weaker pipelines in those therapeutic areas.

Offprice

Offprice in Las Vegas produced another solid performance in 2016 and despite the August event being impacted by a religious holiday.

Mexico

There was a good performance from Expo Manufactura (manufacturing) and Plastimagen (plastics) and bookings for 2017 are strong.

EMEA

* French operations sold in 2015 

Dubai 

Tarsus' education event GESS performed well with buyer attendance up 18%. GESS is one of the Group's key brands being replicated into other markets. The second editions of the events in Mexico City and Jakarta were both good performances with buyer attendance up significantly. Our aerospace events, MEBAA, AIME and MRO in Dubai, also performed well.

Turkey

There was a good performance across the portfolio with the larger shows trading well. Notwithstanding a challenging geopolitical environment, the Group's events remained resilient, buoyed by continuing strength in local buyer attendance. Going forward additional investment is being made to further strengthen existing exhibitions and increase market share.

Ideal Homex, Zuchex, Sign and The Flower Show all enjoyed good performances and in 2017 the biennials, Asansor (Lifts) and Komatek (Construction) return. Overall Turkey now comprises 7% of Group pro-forma revenue.

Europe

Following the disposal of its French business in 2015, Tarsus's principal exposure in Europe is through the biennial Labelexpo where the bookings for 2017 are encouraging. The ongoing Labels publishing business continues to grow steadily, while the Additive Manufacturing show (formerly 3D print) has been relaunched as a B2B event and had an encouraging debut in Amsterdam.

Asia

China

Tarsus' strategy in China is twofold. Firstly, focusing on internal markets led by consumer demand to take advantage of the transition occurring in the country's economic growth and demographics. Secondly, focusing on creating scale in the country's key cities of Shanghai and Shenzhen.

SIUF, Asia's largest underwear show, demonstrated good progress over the 2015 edition with buyer growth of 13%. AAITF showed good growth in its second edition in its new venue in Shenzhen with revenue returning to previous levels. Hope, the Group's Central China division continued to perform well with revenues ahead of 2015. 

South East Asia

In Indonesia, the established IIICE (Infrastructure) event now in its sixth year, achieved strong buyer attendance and the second edition of Big 5 Construct, held via a joint venture with DMGT, performed well. GESS (Dubai-based) also enjoyed a strong second edition in Jakarta.

The Group substantially increased its regional presence with the acquisition of 50% of AMB in July 2015 adding Malaysia, Myanmar, Cambodia and the Philippines to its geographic portfolio. This scale was further increased with the acquisition of PEP during the year. Performance across these regions was encouraging in 2016 and going forward Tarsus will be focused on scaling up in these territories. The first edition of Wofex (World Food expo) in the Philippines was strong.

Outlook

Trading for the first two months of 2017 has been in line with management's expectations. AAITF showed good growth in its third edition in Shenzhen. AIME and MRO in Dubai also performed well. In the US the South Beach Symposium and Off Price were solid events. Expo Manufactura recorded a record performance in Mexico in February 2017.

Bookings for our flagship biennial events, the Dubai Airshow and Labelexpo Europe, are promising. Whilst we are mindful of geopolitical uncertainty, 2017 the larger year in our biennial cycle, is looking exciting for the Group.

Neville Buch, Chairman 

Douglas Emslie, Group Managing Director

Financing

The geographical composition of Tarsus' international event portfolio means that revenues and profits are generated in a range of currencies, principally US Dollars, Chinese Renminbi, Euros, Turkish Lira and Sterling. In 2016 approximately 64% of pro-forma revenues were generated in US Dollars, 1% in Euros, 10% in Turkish Lira, 3% in Sterling and 17% in Chinese Renminbi. As a result of the Group's currency composition, Sterling translated trading results are significantly affected by any changes in prevailing exchange rates during the year. The average exchange rates applicable were:

Cash flows

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

The biennial nature of the Group's event portfolio results in a decrease in working capital (excluding cash) in even years (including 2016) which do not include the Group's two largest events. This occurs as deferred income relating to these events builds up in the Statement of Financial Position ahead of the events in the following year.

During 2016, the Group generated £20.3m of adjusted operating cash* (2015: £27.0m; 2014: £19.5m).

The key non-operating cash flows in 2016 included:

• Dividends paid of £8.9m

• Contingent consideration payments totalling £4.9m

• Tax and interest paid totalling £3.1m

• Acquisition of Intex, PEP and Connect £42.5m

• Acquisition of minority interests £4.4m

• Net proceeds of share placing £23.4m

• Share purchases by Employee Benefit Trust £1.1m

Net debt

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

In December 2016 Tarsus' external bank debt facility of £75m was extended to £111m and remains in place until December 2020. At 31 December 2016 all borrowings were denominated in Sterling. The Group has entered into interest rate swaps to fix the interest rates payable under its banking facilities.

The Group's net debt was £69.5m at 31 December 2016 (31 December 2015: £43.8m).

Net assets

As at 31 December 2016 the Group had net assets of £71.6m (31 December 2015: £39.9m).

Intangible assets

Intangible assets comprise goodwill, trademarks and customer lists. The carrying value of intangible assets at 31 December 2016 was £186.8m (31 December 2015: £127.1m).

Working capital

It is the Group's policy to recognise profits upon the completion of an event. Until completion, revenues and costs are held on the Statement of Financial Position. Included in net current liabilities as at 31 December 2016 is deferred income of £35.8m (2015: £24.1m; 2014: £28.5m). Prepaid event costs of £7.9m (2015: £4.8m; 2014: £3.7m) are included in Trade and Other Receivables. 

Dan O'Brien

Group Finance Director

1 March 2017

CONSOLIDATED INCOME STATEMENT

*see note 3 for adjusting items

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

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

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The results for the year ended 31 December 2016 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 2015. 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 2016 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 2016 or 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Jersey Financial Services Commission Companies Registry. Those for the year ended 31 December 2016 will be delivered following the Company's Annual General Meeting on 19 June 2017.

This financial information has been extracted from the Group's Annual Report and Accounts for the year ended 31 December 2016. 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 2016 Annual Report and Accounts in March 2017.

2. SEGMENTAL ANALYSIS

As at 31 December 2016, the Group was organised into three main segments - EMEA, Americas, and Asia. This has changed from the prior year when the three main segments were - Europe, USA, and Emerging Markets. The change in segments reflects the format in which the key decision makers now review the business, the composition of the business and strategic intent. We have restated the prior year segmental analysis to reflect the new segments.

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: