Commentary

Ladies and Gentlemen,

A weak exhibition schedule, without Swissbau and the exhibitions staged every three years, downturns in many areas of the Swiss exhibition and event business, initial declines in Baselworld, and the additional expenditure incurred on strategy implementation have had a major negative impact on the financial result for 2017. These factors have meant that, as had been expected, the consolidated profit from ordinary business activity, at CHF 10.0 million, is clearly below the level of previous years. Added to this come the special measures totalling CHF 120.0 million that are necessary in order to adjust the balance sheet. All these factors ultimately result in a loss of CHF -110 million.

The downscaling of Baselworld 2018 has necessitated a value adjustment for the exhibition buildings in Basel, leading to extraordinary depreciation of CHF 102.3 million. The value reduction decided upon, equivalent to approximately 25% of the value to date, is based on the expected development of business at the Basel location in 2018 and subsequent years.

In addition, provisions of CHF 17.7 million are being made for structural and organisational optimisations in the national exhibition and event business. At the Lausanne location, costs are to be minimised through the alignment of the group’s business activity. In the live-marketing solutions field, the range of services offered in strategic and conceptual consulting is to be expanded. And, at the same time, a simplification of the company structure is being examined, among other options.

In the light of the strengthened balance sheet that has been achieved over the past few years, the company is in a position to absorb these special measures. They do not affect cash and cash equivalents, which are in excess of CHF 115 million. The equity ratio is still clearly above 30%. The balance sheet is strong and healthy.

Despite 2017 being a weak year in terms of exhibition cycles and despite the declines that have come about in the national exhibition and event business, sales in the 2017 financial year were increased by 12% over the previous year, to stand at CHF 493.3 million. This is first and foremost due to the acquisition of American live marketing company MC² (“MC-squared”), which has not so far, however, had an impact over a full year.

With MC², clear shifts have resulted in the operating income by division and geographical market compared with the previous year. The Exhibitions division (MCH exhibitions) accounts for 59.8% (2016: 75.6%) of overall operating income. The share accounted for by the Live Marketing Solutions division has risen to 32.7% (2016: 14.9%). The Venues division (third-party exhibitions) holds a share of 7.5% (2016: 9.5%). The share of operating income generated abroad has increased from 13.9% to 33.0% compared with the previous year.

The MCH Group is well-positioned in both strategic and operative terms. It has been clear for many years that the economic climate for the national exhibition and event business is becoming increasingly difficult. We thus took measures at an early stage to diversify, internationalise and digitise our business activity.

Over the past few years, the Live Marketing Solutions segment has been expanded and its international position greatly strengthened, especially through the acquisition of the MC² company in the USA in the 2017 financial year. With the expansion of its international position in the art market through new initiatives such as “Art Basel Cities” and the holding acquired in ART DÜSSELDORF, and also with the group’s development of its “Collector Events Strategy” through the launch of Grand Basel and the acquisition of Masterpiece London, further future-oriented initiatives were started last year.

The group is still pushing ahead intensively with the implementation of its strategic initiatives for further diversifying, internationalising and digitising its business activity. As of 1 January 2018, the organisational structure of the MCH Group has been tailored to the implementation of its corporate strategy to an even greater extent. These structural and organisational alignments will make it possible to create and exploit more synergies both for the development of our international business activity and for boosting the national MCH and third-party events.

The extraordinary depreciation and special provisions, and also the implementation of the group's strategy, will generate positive effects for the 2018 business year but will not, however, permit the declines in the exhibition and event business in Switzerland to be offset over the short term. The implementation of the corporate strategy will additionally give rise to further development costs. The 2018 financial year will thus be a difficult one again, but we expect a positive result for our ordinary business activity.

It is our overriding aim to be able to build on the company’s success of the past years and decades once again as soon as the current transformation and restructuring phase has been completed. We are convinced that we have set the right course for this with the necessary adjustments and the measures that have been instigated, and particularly with the implementation of our strategic initiatives.

We would like to thank everyone who contributed to the success (despite the financial loss) of our group last year. Special thanks go to all the group's employees as well as to the members of the Executive Board and the Board of Directors. We would also like to extend our wholehearted thanks to you, our shareholders, for your loyalty and support.