Event group Tarsus (LON:TRS) has confirmed its commitment to emerging markets by selling a 51 percent interest in Modamont, its struggling French subsidiary, to a JV partner, Premiere Vision, for €6.1 million. The move marks a significant cut in Tarsus’ exposure to the economic gloom of the French market allowing a greater focus on the growth opportunities afforded by current operations in Asia, the Middle East and Turkey.
Speaking to Stockopedia, Douglas Emslie, the group managing director of Tarsus, said: “Eighteen months ago we launched our 50/13 strategy to get more into emerging markets and I see this as really a continuation of the execution of that strategy. Views on this have changed dramatically but Europe now looks like it will see slow growth to decline over the next 10 years. We saw the opportunity to reduce our exposure to France and it gives us more flexibility to bring in more emerging markets opportunities. The reality is that the growth is not in the UK, it is certainly not in France, but it is going to come from the Asian economies, the Middle East and Turkey – and those are the three areas that we are focused on.”
Emslie added that it was too early to tell whether the group would sell off its remaining French business – which now accounts for 10 percent of group revenues. Last year, Tarsus’ share of Modamont revenues and profits were approximately €2.2 million and €0.6 million respectively. On completion of the sale, Tarsus’ French operating division will repay a loan of €2.2 million to Modamont, with the net proceeds – believed to be around £3.2 million – earmarked to give additional balance sheet flexibility. That is expected to involve Tarsus channelling more resources into executing its plan to derive 50 percent of revenues from emerging markets by 2013 – what it calls its 50/13 strategy.
In a note to investors, Investec said the French disposal was “good news” and made good sense given Tarsus’ clear and aggressive targets to expand into emerging market growth assets. It estimated that, post disposal, the deal would take Tarsus’ emerging market sales from 37 percent to 41 percent and that net proceeds from the sale would come in at around £3.2 million. Investec noted that underlying trading remained strong and slightly ahead of its forecasts but left its full year expectations unchanged given macro uncertainty. It reiterated a “buy” rating for the stock, with a price target of 167p against Tarsus’ current price of 129p.
Since announcing its interim results at the end of July, Tarsus has held three major exhibitions. Fashion retail show Off Price took place in Las Vegas in August and generated a like-for-like revenue increase of approximately 6 percent. Modamont and Labelexpo Europe both took place in September and produced like-for-like revenue increases of 9 percent and over 10 per cent respectively. The group’s largest event in the fourth quarter, the Dubai Airshow, is on track to meet management expectations.
Emslie said: “In terms of trading, we have had our best third quarter ever. Labelexpo Europe is really a global show; we had exhibitors from 150 different countries participating. Apart from the fact that our revenues were up over 10 percent what was really interesting was the visitor attendance numbers, which are a core factor for us because if you deliver buyers it means that the next time around you can have a good event. Our attendance was up by 18.5 percent, which is phenomenal in this environment. We sold the 2013 show at the event and 81 percent of it is now contracted. The big problem the sales guys had was actually getting to speak to customers because they were just so busy – that’s a nice problem to have. It is looking very good and we are feeling really positive.”
Four months ago, Tarsus took its first step into the Turkish market with a deal to buy a stake in events group IFO. Emslie said that the acquisition was integrating well and that the Turkish market was still growing very strongly. “The team is very good and the products are very robust so we are looking to see what else we can do in Turkey; we have had a good experience and we want to do more,” he said. “The next show for us is the Sign Show at the beginning of December and it is tracking very much on target and we are very pleased with the performance to date.
In November Tarsus will host the Dubai Airshow, which is the largest event in its portfolio. Emslie said the show would be sold out and attract more than 1,000 exhibitors. Airlines Emirates and Qatar have both signalled their intention to place orders for new aircraft at the show and Emslie said there was also likely to be one major announcement of aircraft being purchased by a military customer.
Filed Under: Media,