Half-year Report

RNS Number : 7830B

Time Out Group plc

25 September 2018

 

25 September 2018

Time Out Group plc

("Time Out", the "Company" or the "Group")

Unaudited Half Year Results for the six months ended 30 June 2018

Time Out Market momentum continues, with Time Out Digital margins improving

Time Out Group plc (AIM: TMO), the global media and entertainment business, is pleased to announce its unaudited half year results for the six months ended 30 June 2018.

Financial highlights

●    Group revenue - year-on-year growth of 20% to £22.4m (2017: £18.7m), driven by a combination of underlying* growth (+8%) and prior year acquisitions

●    Group gross profit - strong growth of 42% (25% underlying), with material improvements in H1 gross margin to 63% (2017: 53%)

●    Time Out Market division - revenue growth of 50%, with Time Out Market Lisbon continuing to deliver strong growth in EBITDA in the period

●    Time Out Digital division - revenue growth of 15% (1% underlying), primarily driven by digital advertising growth of 56% (22% underlying); offset by underlying declines in Live
(-50%), due to the strategic decision to discontinue low margin events, and Print (-5%)   

●    Adjusted EBITDA** - loss of £6.4m (2017: £9.4m), a 32% improvement on prior year and expected to be significantly lower in the second half

●    Operating loss - loss of £10.2m (2017: £15.6m); underlying overhead savings of 5%

●    Net cash and cash equivalents - £9.4m at 30 June 2018

●    Loan facility - Existing £20.0m facility unutilised at 30 June 2018, with term extended to 31 October 2020

Operational highlights

●    Time Out Market division - Strong momentum continues

§ Continued success of Time Out Market Lisbon, with a record 1.9m visitors (2017: 1.7m)

§ The Group's top strategic priority remains the global roll out of the successful Time Out Market format, with five new markets on track to open in North America next year, including New York, Miami, Boston and Chicago, as well as Time Out Market's first management agreement in Montreal

●    Time Out Digital division - Margins improving

§ Gross margin improvements - strong operational focus in the first half helped drive a 10% (absolute) year-on-year margin improvement to 58%; key measures included the discontinuation of low margin live events, prioritisation of organic traffic and optimisation of US print frequency and distribution

§ Overhead savings - delivery of significant efficiencies, leveraging benefits of greater scale from acquisitions and new operational practices; additional savings to be delivered in the second half

Commenting on the results, Julio Bruno, CEO of Time Out Group plc, said: 

"Time Out is celebrating its 50th year and continues to provide incredible content to our global users across digital, print and physical platforms. Our first Time Out Market in Lisbon continues to exceed our expectations, with records broken again in the first half as visitors grew 12% to 1.9m. Over the next 12 months we will open 'owned and operated' markets in New York, Miami, Boston and Chicago and our first franchise location in partnership with Ivanhoé Cambridge in Montreal. We are in the unique position to attract the best chefs and food offerings in a city, and to drive customers to the locations through our global digital reach.

Following the successful integration of our franchises in Spain, Australia, Hong Kong and Singapore and the expansion of our content, we now own and operate the Time Out Digital business in 288 cities and have licence agreements in 27 others. Through these recent acquisitions and further improvements in our operating structure we will benefit from a much-rationalised cost base going forward. Furthermore, following a review of revenue lines, Time Out Digital has removed low margin activity, leading to significantly improved gross margins which we expect to continue into the second half. Digital advertising continues to perform well, growing sales 56% in the period. Whilst this reduces our revenue outlook for the year, it ensures we will deliver significantly lower losses in the second half and remain on track to deliver the near-term priority of EBITDA profitability."

*	Underlying results are presented on a constant currency basis and exclude the contribution from the acquisitions of the Australia franchisee in June 2017 and the Spain franchisee in September 2017, and the addition of Singapore and Hong Kong
**	Adjusted measures are stated before interest, taxation, depreciation, amortisation, share based payments and one-off exceptional items

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) no 596/2014.

For further information, please contact:
Time Out Group plc	Tel: [phone]
Julio Bruno, CEO
Adam Silver, CFO
Steven Tredget, Investor Relations Director
Liberum (Nominated Adviser and Broker)	Tel: [phone]
Steve Pearce / Trystan Cullen
FTI Consulting LLP	Tel: [phone]
Edward Bridges / Stephanie Ellis

Notes to editors

About Time Out Group plc

Time Out Group is a multi-platform media and e-commerce business with a global content distribution network comprising magazines, online, mobile apps, mobile web and physical presence via Live Events and Time Out Market.  Using these platforms and its well-established global brand, Time Out seeks to inspire and enable people to experience the best of a city, through curated content around food, drink, music, theatre, art, travel and entertainment across 315 cities and in 58 countries. Time Out, listed on AIM, is headquartered in the United Kingdom.

FORWARD-LOOKING STATEMENTS 

This document contains "forward-looking statements", which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, the impact of competitive pricing, volatility in stock markets or in the price of the Group's shares, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and each of Time Out Group Plc and the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Time Out Group Plc's or the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Group, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document. 

Chief Executive's Statement

Overview

Time Out Group is the leading global media and entertainment business that inspires and enables people to make the most of the city through its two highly synergistic divisions, Time Out Digital and Time Out Market. Time Out Digital is a multi-channel media and e-commerce platform with a global brand that advertisers and consumers love and trust.  Time Out Market leverages this brand to bring a city's best restaurants, bars and cultural experiences together under one roof. Time Out Market currently operates in Lisbon, with new openings scheduled in 2019 for New York, Miami, Boston, Chicago and Montreal, and a further pipeline of other global locations.

Operational review

The following operating KPIs are used by the Group to assess its performance against its objectives.

Operating KPIs

	Six months ended 30 June 2018		Six months ended 30 June 2017		Change
Traffic:
Global unique visitors - monthly average	21.7m		22.1m		(2)%
O&O† unique visitors - monthly average	17.7m		16.7m		6%
E-commerce:
Time Out membersα	3,161k		2,190k		44%
Items sold	308k		412k		(25)%
Transactions (including live events)	155k		202kβ		(23)%
Premium Profiles:
Active listers	1,107		1,190		(7)%
Time Out Market:
Total tenant turnover	£15.6m		£12.8m		22%
Visitors	1.9m		1.7m		12%

† O&O is the Time Out 'owned and operated' business. Monthly average is calculated as a rolling six-month average

α Members who have opted in and engaged with Time Out in the last 12 months

β 2017 metrics restated to correct data inconsistencies in live events ticket sales

Audience & Traffic development

During the period, the Group achieved a global monthly average audience reach of 156.5 million, a 35% decline from the same period last year. Time Out, like many other online content brands, has been heavily impacted by Facebook's recent algorithm changes.  Despite the impact of these changes, Time Out's global monthly unique visitor base remained broadly in line with prior year (with O&O unique visitors growing 6%), a clear reflection of the attractiveness and excellent organic search performance of Time Out's unique content.

To help grow its audience through content, Time Out has increased the number of cities in which it curates the best 'Things to Do' to 315 cities and in 58 countries. In the period, the Group also launched Paris and Madrid magazines, as well as a Hong Kong magazine in traditional Chinese, to complement the digital, mobile and social presence in those cities. Launching free magazines across relevant cities remains part of Time Out's content strategy and can create a halo effect on digital metrics, audience engagement and brand awareness, thereby offering advertising clients differentiated multi-channel solutions within brand-safe environments.

Furthermore, the recent migration to a new CRM system is enabling greater personalisation and targeting of communication to users and, despite GDPR, the business grew its membership base by 44% in the period.

Business performance

The Group's revenue performance is as follows

		Six months ended 30 June 2018		Six months ended 30 June 2017		Change	Underlying change*
		£'000		£'000
Digital advertising		6,918		4,445		56%	22%
E-commerce		2,700		3,072		(12)%	(15)%
Affiliates & Offers		1,845		1,509		22%	18%
Live events		855		1,563		(45)%	(50)%
Premium Profiles		1,061		981		8%	11%
Digital revenue		10,679		8,498		26%	7%
Print		7,350		7,022		5%	(5)%
International		505		621		(19)%	(5)%
Time Out Digital		18,534		16,141		15%	1%
Time Out Market		3,842		2,554		50%	48%
Group Revenue		22,376		18,695		20%	8%
Gross Profit		14,069		9,873		42%	25%
Operating expenditure		(20,471)		(19,238)		(6)%	5%
Adjusted EBITDA		(6,402)		(9,365)		32%	38%
*	Underlying results are presented on a constant currency basis and exclude the contribution from the acquisitions of the Australia franchisee in June 2017 and the Spain franchisee in September 2017, and the addition of Singapore and Hong Kong

Time Out Digital division

Digital advertising 

Digital advertising revenue grew 56% (22% underlying) in the period, with the UK and US delivering strong growth of 42% and 13% respectively. The business continues to benefit from ongoing technology investments, with viewability increasing year-on-year from 45% to 64%, load speeds improving by 23% to 10.23ms by June 2018 (June 2017: 13.20ms), and the launch of new video capabilities.  This has reaped dividends with high-profile advertising clients including Transport for London, Unilever, Cadburys and British Airways advertising across digital and print mediums. The Unilever partnership, and in particular their Magnum brand, involved a revolutionary hi-jack of the Time Out logo promoting their marketing message of 'Time In'.

Premium Profiles

Revenue from Premium Profiles grew by 8% (11% underlying) even though the number of active listings decreased by 7% to 1,107 at 30 June 2018 (June 2017: 1,190). The main drivers of revenue growth were pricing increases and the sales of new advertising enhancements that have further improved the visibility of Time Out clients to the consumer base.

Print advertising

Global print revenue grew 5%, driven by the print revenue of acquired franchises, with underlying revenue declining 5%.  Although the UK and Portugal grew 4% and 6% respectively, difficult market conditions and short-term disruption from changes in the sales organisation drove a 33% decline in US print revenue.  In light of this result, Management has taken decisive actions to improve the profitability of the US print operation including reducing the frequency of the New York magazine to fortnightly, optimising its distribution strategy and discontinuing loss-making publications in Austin and Philadelphia.

E-commerce (including Affiliates & Offers and Live Events)

Overall, e-commerce revenues declined 12% in the first half, with transaction volumes heavily impacted by the strategic decision to stage fewer, relatively low margin, live events and cut spend on traffic acquisition.

A&O revenue still grew year-on-year by 22% with growth across all O&O countries. The US delivered revenue growth of 52%, and the UK 12%, benefiting from continued expansion of new products such as restaurant gift boxes, coupled with further new partnerships with e-commerce players such as Get Your Guide, Design My Night, La Fourchette and Skimlinks. At the same time, the Group has stopped working with certain lower margin partners.  As such, while A&O transactions have declined 15% (to 143k), average revenue per transaction, has grown 44% to £12.94.

As outlined above, Management has also decided to focus on fewer, higher margin Live events (with greater sponsorship potential), resulting in a 45% decline in revenue but a 72% improvement in total average revenue per transaction (including tickets and sponsorship) to £79.67 in the period (2017: £46.26). As a result of this strategy, over the same period, the number of tickets sold fell from 34k to 11k.

International

In addition to its O&O network, which serves 288 cities across 45 countries (as of June 2018), the Group has a presence in a further 27 cities across 13 countries through its international licensing arrangements. Here rights are granted to third parties to publish print magazines and produce digital content under the Time Out brand, generating revenue through the payment of fees and royalties by third party licensees.  International revenue decreased 19% YoY primarily due to Australia, Spain, Hong Kong and Singapore becoming O&O markets in 2017, with underlying revenues declining 5%.

Time Out Market division

The Lisbon market continues to exceed expectations, delivering 50% revenue growth in the first half driven by record visitor numbers, total transaction value and improved contract terms.

The Group's top strategic priority remains the global roll out of the successful Time Out Market format and, although behind schedule, strong progress has been made towards a very busy 2019, a summary of which is set out below:

·     Miami - Expected to open in Q1 2019, with construction well advanced and the chef line up complete

·     New York - Expected to open in Q1 2019.  The original site has been extended, with additional riverside access space secured, and strong progress is being made with the chef line up

·     Boston - Expected to open in Q2 2019

·     Chicago - Construction is currently underway, and the site is expected to open in Q4 2019

·     Montreal - Time Out Market's first management agreement, with the market due to open in Q4 2019

While the business continues to pursue planning consent for the Spitalfields site in London, if successful, opening would not occur before H2 2020.  Furthermore, the business still awaits final UNESCO approval for the site in Porto.

The Group continues to build its pipeline of additional locations in other cities around the world and is considering several attractive opportunities. The management agreement that the Company entered in May, with global real estate company Ivanhoé Cambridge, illustrates the potential for new sites which require no capital expenditure by Time Out.   The Group considers this model, whereby Time Out Market will take primary responsibility for branding, curation and day-to-day management, in return for a share of revenue and profit (subject to a minimum guaranteed management fee), to be an excellent complement to its portfolio of O&O markets and will continue to monitor other similar opportunities to leverage the Time Out brand in this way.

Financial performance

Revenue

Group revenue grew 20% year-on-year in the first six months to £22.4m (2017: £18.7m), an underlying growth rate of 8%, excluding acquisitions and at constant currency.

Gross margin

As detailed above, a clear focus of the Group in the first half was to improve gross margins, which has helped deliver 42% growth in gross profits.  This was achieved through a range of initiatives including a reduction in traffic acquisition spend, curtailing low margin live events and improvements to print operations.  This focus, coupled with an ongoing shift in product mix to higher margin digital products and the Time Out Market, drove a 10% margin (absolute) improvement to 63%, compared with 2017, and will deliver further benefits in the second half.   

Operating expenditure

Group operating expenditure, before exceptional costs, share-based payments, depreciation and amortisation, was £20.5m (2017: £19.2m). Of this increase, £2.7m relates to incremental operating costs of acquired businesses.  Time Out Digital underlying operating costs decreased by 9%. Time Out Market operating costs increased by £0.5m driven by the global roll-out of new markets and the growth in the Lisbon market.

The Group continues its strong focus on overhead efficiencies and recent actions are expected to deliver further savings in the second half, the full benefit of which will be delivered in 2019.

Adjusted EBITDA

Adjusted EBITDA shown in the income statement represents the profit or loss before interest, taxation, depreciation, amortisation, share based payments and one-off exceptional items.

Adjusted EBITDA loss for the period was £6.4m (2017: £9.4m loss), substantially reduced following the improvement in gross margin, operating expenditure savings and the continuing outperformance by Time Out Market. 

Time Out Market Lisbon delivered an adjusted EBITDA of £1.6m in the period (2017: £0.8 million). After the costs of the central team, the Time Out Market division delivered adjusted EBITDA of £0.4m compared to a loss of £0.2m in H1 2017. 

Group revenue is typically biased towards the second half and this additional income, combined with an improvement in operating margin in the second half, is expected to result in a significantly lower level of losses in the second half of the year.

Exceptional costs

Exceptional costs in the first half of £0.4m (2017: £2.6m) principally relate to staff restructuring costs.  Prior year costs also included staff restructuring costs of £1.7m, £0.3m of costs in respect of the acquisitions of the franchises in Australia and Spain and the revaluation (£0.6m loss) of the put option granted by the Group to acquire the remaining minority interest in Time Out Market in Lisbon.

Operating loss

The operating loss for the period was £10.2m (2017: £15.6m) including depreciation of £0.4m (2017: £0.5m) and amortisation of intangible assets of £2.2m (2017: £2.2m).

The amortisation of intangible assets included £1.0m (2017: £1.1m) relating to acquired intangible assets. Other intangible asset amortisation, primarily amortisation of software both acquired and internally developed, was £1.2m (2017: £1.1m).

Net finance costs

Net finance costs, mainly comprising interest on financing of £0.8m, has doubled compared to last year following the loan secured in November 2017. In August 2018, the Group drew £15.0m from existing credit facilities and will therefore start incurring additional interest costs in the second half.  These interest amounts are payable at the end of the facility term which has been extended to 31 October 2020.

Foreign exchange

The revenues and costs of Group entities reporting in US dollars have been consolidated in these financial statements at an average exchange rate of $1.33 (2017: $1.26). The operations reporting in euros have been consolidated at a rate of €1.15 (2017: €1.16).

Associates

The Group has a 37.8% shareholding in Flypay, a mobile technology platform providing solutions for ordering and payment within the hospitality sector. The shareholding is accounted for as an associate and the Group's share of Flypay's loss for the period since acquisition is included as 'Share of associate's loss' in the income statement.

Cash flow

	First half				Full year
	2018		2017		2017
	£'000		£'000		£'000
Adjusted EBITDA	(6,402)		(9,365)		(14,217)
Movement in working capital	1,494		(1,772)		(3,725)
Cash used in operations	(4,908)		(11,137)		(17,942)
Exceptional cash flows	(379)		(2,088)		(2,877)
Capital expenditure	(4,600)		(2,475)		(4,386)
Operating cash flow	(9,887)		(15,700)		(25,205)
Net interest paid	(102)		(81)		(389)
Tax received	-		9		3
Free cash flow	(9,989)		(15,772)		(25,591)
(Repayment)/advance of new borrowings	(530)		(379)		7,809
Repayment of borrowings	(437)		(555)		(1,169)
Repayment of finance leases	(32)		(29)		(59)
IPO costs	-		(2)		-
Fair value movements in debt	-		(71)		-
Costs relating to share issue	-		-		(5)
Acquisition of non-controlling interest	-		(196)		(196)
Acquisitions of subsidiaries, net of cash	-		37		(470)
Movement in cash and cash equivalents	(10,988)		(16,967)		(19,681)

Operating cash flow

The cash used in operations before exceptional costs improved, versus the same period last year, with an outflow of £4.9m (2017: £11.1m).  The net working capital inflow of £1.5m improved significantly compared to the same period last year (2017: £1.8m outflow) primarily driven by higher deferred income in respect of a five-year Time Out Market Lisbon sponsorship deal signed in H1 2018. Capital expenditure of £4.6m (2017: £2.5m) includes Time Out Market capital expenditure as well as capitalised technology staff costs of the teams working on the digital platforms.

Net cash and available facilities

Net cash at the period end was £2.3m (31 December 2017:  £19.3m) as follows:

	At 30 June 2018 £'000		At 30 June 2017 £'000		At 31 December 2017 £'000
Cash and cash equivalents (see note 9)	18,873		32,922		29,839
Borrowings	(9,483)		(2,025)		(9,398)
Net cash and cash equivalents	9,390		30,897		20,441

Total available cash, including the unutilised £20.0m credit facility, was £31.5m at 30 June 2018. Furthermore, of the additional £7.3m restricted cash on the balance sheet at 30 June 2018, Time Out Market held £3.8m in escrow which is available to be used towards construction costs.

£15.0m of the £20.0m credit facility was drawn in August to progress the roll-out of Time Out Markets, the majority of which remains available.

Post balance sheet events

On 27 March 2018 the Company entered into a £20.0m term loan facility agreement with Oakley Capital Investments Limited ("OCI").  The facility was for a period of 19 months expiring on 31 October 2019 and had an interest rate of between 10% to 15% depending on amounts drawn. At today's date, £15.0m of the facility has been drawn.

The Company has reached agreement with OCI on an amendment and conversion of the £20.0m term loan facility agreement into a Loan Note agreement, with an extended term to 31 October 2020.  In return for granting security over certain Time Out trademarks and domain name, the previous interest rate mechanism will also be replaced with a flat rate of 12%.  The proceeds under the Loan Notes are to be used by the Group in the same way to fund future Time Out Market developments.

OCI is a substantial shareholder in the Company as defined by the AIM Rules and as such entering into the amendment and conversion of the loan agreement constitutes a related party transaction pursuant to AIM Rule 13. With the exception of Peter Dubens, who is a director of OCI, and Alex Collins, who is a partner of Oakley Capital Private Equity, the Directors of the Group consider that, having consulted with Liberum, the terms of the transaction are fair and reasonable insofar as shareholders are concerned.

Outlook

Time Out Market's excellent growth and positive EBITDA is expected to continue in the second half, with Management focused on the opening of five new markets in 2019. Time Out Digital's priority will remain a focus on growing its highest margin product areas and the delivery of other overhead efficiencies.

At a Group level, whilst this will result in a lower level of revenue than previously expected, the continued focus on gross margin improvement and further efficiency savings, together with the historic weighting of trading towards the second half of the year, is expected to result in a significantly lower level of losses in H2.

Julio Bruno

Group Chief Executive

24 September 2018

Condensed Consolidated Income statement

Six months ended 30 June 2018

		Unaudited		Unaudited		Audited
	Note	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
		£'000		£'000		£'000
Revenue	4	22,376		18,695		44,364
Cost of sales	4	(8,307)		(8,822)		(19,709)
Gross profit		14,069		9,873		24,655
Administrative expenses		(24,246)		(25,429)		(49,293)
Operating loss		(10,177)		(15,556)		(24,638)
Finance income		16		89		72
Finance costs		(833)		(405)		(825)
Share of associate's loss		(1,096)		(416)		(954)
Loss before income tax	4	(12,090)		(16,288)		(26,345)
Income tax credit		210		262		325
Loss for the period		(11,880)		(16,026)		(26,020)
Loss for the period attributable to:
Owners of the parent		(11,492)		(15,643)		(25,048)
Non-controlling interests		(388)		(383)		(972)
		(11,880)		(16,026)		(26,020)
Loss per share:
Basic and diluted loss per share (p)	6	8.6		11.9		19.0

Condensed Consolidated Statement of Income and Other Comprehensive Income

Six months ended 30 June 2018

		Unaudited		Unaudited		Audited
		Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
		£'000		£'000		£'000
Loss for the period		(11,880)		(16,026)		(26,020)
Other comprehensive income:
Items that may be subsequently reclassified to the profit or loss:
Currency translation differences		1,154		(1,320)		(3,151)
Other comprehensive income for the period, net of tax		1,154		(1,320)		(3,151)
Total comprehensive expense for the period		(10,726)		(17,346)		(29,171)
Total comprehensive expense for the period attributable to:
Owners of the parent		(10,408)		(16,957)		(28,169)
Non-controlling interests		(318)		(389)		(1,002)
		(10,726)		(17,346)		(29,171)

Condensed Consolidated Statement of Financial Position

At 30 June 2018

		Unaudited		Unaudited		Audited
	Note	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
		£'000		£'000		£'000
Assets
Non-current assets
Intangible assets - Goodwill	7	50,668		50,485		50,057
Intangible assets - Other		18,349		19,640		19,044
Property, plant and equipment		12,598		8,552		8,834
Investment in associate		5,102		6,737		6,199
Trade and other receivables		1,252		-		958
		87,969		85,414		85,092
Current assets
Inventories		300		272		276
Trade and other receivables		13,881		13,330		14,602
Cash and cash equivalents	9	18,873		32,922		29,839
		33,054		46,524		44,717
Total assets		121,023		131,938		129,809
Liabilities
Current liabilities
Trade and other payables		(17,966)		(16,799)		(17,839)
Provisions		(16)		(86)		(67)
Borrowings		(1,421)		(833)		(1,220)
		(19,403)		(17,718)		(19,126)
Non-current liabilities
Trade and other payables		(3,511)		(2,404)		(2,291)
Deferred tax liability		(2,407)		(2,610)		(2,623)
Borrowings		(8,062)		(1,192)		(8,178)
		(13,980)		(6,206)		(13,092)
Total liabilities		(33,383)		(23,924)		(32,218)
Net assets		87,640		108,014		97,591
Equity
Called up share capital	10	134		133		133
Share premium		106,042		105,278		106,042
Translation reserve		7,129		7,852		6,045
Capital redemption reserve		1,105		1,105		1,105
Retained earnings / (losses)		(25,214)		(5,730)		(14,496)
Total parent shareholders' equity		89,196		108,638		98,829
Non-controlling interest		(1,556)		(624)		(1,238)
Total equity		87,640		108,014		97,591

Condensed Consolidated Statement of Changes in Equity

At 30 June 2018 (Unaudited)

	Called up share capital	Share premium	Translation reserve	Capital redemption reserve	Retained earnings/ (losses)	Total parent Shareholders' equity	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2018	133	106,042	6,045	1,105	(14,496)	98,829	(1,238)	97,591
Changes in equity
Loss for the period	-	-	-	-	(11,492)	(11,492)	(388)	(11,880)
Other comprehensive income	-	-	1,084	-	-	1,084	70	1,154
Total comprehensive income	-	-	1,084	-	(11,492)	(10,408)	(318)	(10,726)
Share based payments	-	-	-	-	774	774	-	774
Issue of new shares	1	-	-	-	-	1	-	1
Balance at 30 June 2018	134	106,042	7,129	1,105	(25,214)	89,196	(1,556)	87,640

30 June 2017 (Unaudited)	Called up share capital	Share premium	Translation reserve	Capital Redemption reserve	Retained earnings/ (losses)	Total parent Shareholders' equity	Non- Controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2017	131	103,071	9,166	1,105	9,025	122,498	(236)	122,262
Changes in equity
Loss for the period	-	-	-	-	(15,643)	(15,643)	(383)	(16,026)
Other comprehensive income	-	-	(1,314)	-	-	(1,314)	(6)	(1,320)
Total comprehensive income	-	-	(1,314)	-	(15,643)	(16,957)	(389)	(17,346)
Share based payments	-	-	-	-	888	888	-	888
Acquisition of minority interest	-	-	-	-	-	-	1	1
Issue of shares for acquisition	2	2,207	-	-	-	2,209	-	2,209
Balance at 30 June 2017	133	105,278	7,852	1,105	(5,730)	108,638	(624)	108,014

Condensed Consolidated Statement of Changes in Equity

31 December 2017 (Audited)

	Called up share capital	Share premium	Translation reserve	Capital Redemption reserve	Retained earnings/ (losses)	Total parent Shareholders' equity	Non- Controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at I January 2017	131	103,071	9,166	1,105	9,025	122,498	(236)	122,262
Changes in equity
Loss for the year	-	-	-	-	(25,048)	(25,048)	(972)	(26,020)
Other comprehensive income	-	-	(3,121)	-	-	(3,121)	(30)	(3,151)
Total comprehensive income	-	-	(3,121)	-	(25,048)	(28,169)	(1,002)	(29,171)
Share-based payments	-	-	-	-	1,527	1,527	-	1,527
Issue of shares for acquisitions	2	2,971	-	-	-	2,973	-	2,973
Balance at 31 December 2017	133	106,042	6,045	1,105	(14,496)	98,829	(1,238)	97,591

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2018

		Unaudited		Unaudited		Audited
	Note	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
		£'000		£'000		£'000
Cash flows from operating activities
Cash used in operations	8	(5,287)		(13,101)		(20,819)
Interest paid		(118)		(126)		(459)
Tax credits received		-		9		3
Net cash used in operating activities		(5,405)		(13,218)		(21,275)
Cash flows from investing activities
Purchase of property, plant and equipment		(3,334)		(1,040)		(1,954)
Purchase of intangible assets		(1,266)		(1,435)		(2,432)
Interest received		16		45		70
Acquisition of subsidiaries, net of cash acquired		-		37		(470)
Net cash used in investing activities		(4,584)		(2,393)		(4,786)
Cash flows from financing activities
Costs related to share issues		-		(2)		(5)
Advance / (repayment) of new borrowings		(530)		(379)		7,809
Repayment of borrowings		(437)		(750)		(1,169)
Repayment of finance leases		(32)		(29)		(59)
Acquisition of minority interests		-		(196)		(196)
Net cash from financing activities		(999)		(1,356)		6,380
(Decrease)/Increase in cash and cash equivalents		(10,988)		(16,967)		(19,681)
Cash and cash equivalents at beginning of period		29,839		50,082		50,082
Effect of foreign exchange rate change		22		(193)		(562)
Cash and cash equivalents at end of period		18,873		32,922		29,839

Notes to the condensed consolidated statements

1.     Basis of preparation

The unaudited interim consolidated financial information for the six months ended 30 June 2018 has been prepared following the recognition and measurement principles of IFRS as adopted by the European Union. The interim consolidated financial information does not include all the information and disclosures required in the annual financial information and should be read in conjunction with the audited statutory financial statements for the year ended 31 December 2017.

The condensed interim financial information contained in this interim statement does not constitute financial statements as defined by section 434(3) of the Companies Act 2006.  The condensed interim financial information has not been audited.  The financial information for the year ended 31 December 2017 is derived from the audited financial statements for the year ended 31 December 2017, which were unqualified and did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006.  Statutory accounts for Time Out Group plc for the year ended 31 December 2017 have been delivered to the Registrar of Companies.  The comparative financial information for the period ended 30 June 2017 does not constitute statutory accounts for that period.

The statements were approved by the Board on 24 September 2018.

Going Concern

The Board has assessed the Group's ability to operate as a going concern based on its current financial position, latest trading forecasts and the capital expenditure requirements of the growing Time Out Market business.  The Directors have subjected these forecasts to sensitivity analysis and considered the options available to mitigate any downside risks.  The Group's available cash at 31 August 2018 was £19.0m, including £14.0m cash at bank and the balance of the £20.0m credit facility, the term of which has been extended to 31 October 2020. The Group also held £10.0m in escrow at 31 August 2018, available for use towards Time Out Market construction costs.

Although, at the date of this report, all required funding is not contracted, the Group continues to explore all potential funding sources which includes an option over an additional debt facility of £18.0m. Given this progress, the Directors are confident that the Group will be able to raise the necessary capital to continue to execute its current strategy.  For these reasons, they continue to adopt the going concern basis of accounting in preparing these financial statements.

2.     Accounting policies

On 1 January 2018, the Group implemented IFRS 15 "Revenue from contracts with customers" and IFRS 9 "Financial Instruments".  There was no prior year impact on implementation of the standard and no material impact is expected in the year. 

Apart from the implementation described above, the same accounting policies and methods of computation are followed in these condensed set of financial statements as applied in the Group's latest annual audited financial statements.

The Group is working towards the implementation of IFRS 16 "Leases" on 1 January 2019.  Adoption of this new standard is likely to have an impact on the Group and the Directors are currently completing the assessment of this impact.

3.     Exchange rates

The significant exchange rates to UK Sterling for the Group are as follows:

	Six months ended 30 June 2018			Six months ended 30 June 2017			Year ended 31 December 2017
	Closing rate	Average rate		Closing rate	Average rate		Closing rate	Average rate
US dollar	1.32	1.33		1.30	1.26		1.35	1.29
Euro	1.13	1.15		1.14	1.16		1.13	1.14
Australian dollar	1.78	1.76		1.69	1.69		1.73	1.69
Singaporean dollar	1.79	1.79		-	-		1.80	1.80
Hong Kong dollar	10.32	10.41		10.15	9.95		10.54	10.18

4.     Segmental information

In accordance with IFRS 8, the Group's operating segments are based on the figures reviewed by the Board of Directors, which represents the chief operating decision maker.  The Group is organised into two operating segments:

·    Time Out Digital - this includes the sale of digital and print advertising, local business listings ("Premium Profiles"), Live Events tickets and sponsorship, commissions generated by online bookings and transactions ("Affiliates and Offers"), and fees from third party licensees.

·    Time Out Market - predominantly turnover related rent from restaurants in the market and charges for services.

Six months ended 30 June 2018

(Unaudited)

	Time Out Digital		Time Out Market		Total
	£'000		£'000		£'000
Revenue	18,534		3,842		22,376
Cost of sales	(7,808)		(499)		(8,307)
Gross profit	10,726		3,343		14,069
Administrative expenses					(24,246)
Operating loss					(10,177)
Analysed as:
Adjusted EBITDA loss					(6,402)
Share based payments					(774)
Exceptional items					(379)
EBITDA loss					(7,555)
Depreciation of property, plant and equipment					(448)
Amortisation of intangible assets					(2,174)
Operating loss					(10,177)
Finance income					16
Finance costs					(833)
Share of associate's loss					(1,096)
Loss before income tax					(12,090)
Income tax credit					210
Loss for the period					(11,880)

Six months ended 30 June 2017

(Unaudited)

	Time Out Digital		Time Out Market		Total
	£'000		£'000		£'000
Revenue	16,141		2,554		18,695
Cost of sales	(8,450)		(372)		(8,822)
Gross profit	7,691		2,182		9,873
Administrative expenses					(25,429)
Operating loss					(15,556)
Analysed as:
Adjusted EBITDA loss					(9,365)
Share based payments					(888)
Exceptional items					(2,605)
EBITDA loss					(12,858)
Depreciation of property, plant and equipment					(537)
Amortisation of intangible assets					(2,161)
Operating loss					(15,556)
Finance income					89
Finance costs					(405)
Share of associate's loss					(416)
Loss before income tax					(16,288)
Income tax credit					262
Loss for the period					(16,026)

Year ended 31 December 2017

(Audited)

	Time Out Digital		Time Out Market		Total
	£'000		£'000		£'000
Revenue	38,393		5,971		44,364
Cost of sales	(18,877)		(832)		(19,709)
Gross profit	19,516		5,139		24,655
Administrative expenses					(49,293)
Operating loss					(24,638)
Analysed as:
Adjusted EBITDA loss					(14,217)
Share based payments					(1,527)
Exceptional items					(3,155)
EBITDA loss					(18,899)
Depreciation of property, plant and equipment					(1,124)
Amortisation of intangible assets					(4,420)
Profit / loss on disposal of fixed assets					(195)
Operating loss					(24,638)
Finance income					72
Finance costs					(825)
Share of associate's loss					(954)
Loss before income tax					(26,345)
Income tax credit					325
Loss for the year					(26,020)

Revenue is analysed geographically by origin as follows:

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
	£'000		£'000		£'000
Europe	15,461		11,277		26,575
Americas	5,253		6,536		14,313
Rest of World	1,662		882		3,476
	22,376		18,695		44,364

5.     Exceptional items

Exceptional items are analysed as follows:

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
	£'000		£'000		£'000
Restructuring costs	354		1,683		1,787
Fees relating to acquisitions in the year	14		326		539
Advisory fees in relation to the IPO	-		-		7
Fair value loss on deferred consideration	-		596		596
Office relocation costs	11		-		226
	379		2,605		3,155

The 2018 restructuring costs include employee redundancy costs as part of moving the business to a global model and is part of the initiative started in 2017.  The acquisition fees relate to final fees in respect of prior year acquisitions.  The office relocation costs relate to additional work required after the company relocated in November 2017.

The 2017 restructuring costs include employee redundancy costs incurred to as part of a plan to shift the business to a global model.   The acquisition fees are costs associated with the acquisition of subsidiaries and associates in the period and include a partial release of the provision made in 2016 for an onerous lease.  The fair value loss relates to a minority interest held in Time Out Market.

6.     Loss per share

Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted average number of shares during the period.

For diluted loss per share, the weighted average number of shares in issue is adjusted to assume conversion for all dilutive potential shares.  All potential ordinary shares including options and deferred shares are antidilutive as they would decrease the loss per share, and are therefore not considered, therefore diluted loss per share is equal to basic loss per share.

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
	Number		Number		Number
Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	133,378,525		131,404,208		131,985,250
	£'000		£'000		£'000
Losses from continuing operations for the purpose of loss per share	11,492		15,643		25,048
	Pence		Pence		Pence
Basic and diluted loss per share	8.6		11.9		19.0

7.     Goodwill

The Group performs its annual impairment review at the end of each financial year. Ongoing trading losses are an indicator of potential impairment and, therefore, a full review was undertaken at 30 June 2018. The nature of the key inputs to the review were consistent with the review performed at 31 December 2017 and were applied to the Group's updated forecasts.  The review did not require an impairment charge in the period.

As part of this review, Management has also considered the way operations are monitored and how resources are allocated to achieve the Group strategy.  This review concluded that the Digital and Print cash generating units ("CGU") should be combined.  Therefore, the cash generating units of the Group now comprise Time Out Digital and Time Out Market as set out below.

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
Time Out Digital	42,550		42,433		41,919
Time Out Market	8,118		8,052		8,138
	50,668		50,485		50,057

At 30 June 2017 the carrying value of the Digital CGU was £34.0m (31 December 2017: £33.3m) and of the Print CGU was £8.6m (31 December 2017: £8.1m).

8.     Notes to the cash flow statement

Reconciliation of loss before income tax to cash used in operations

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
	£'000		£'000		£'000
Loss before income tax	(12,090)		(16,288)		(26,345)
Add back:
Net finance costs	817		315		753
Share based payments	774		888		1,527
Depreciation charges	448		537		1,124
Amortisation charges	2,174		2,161		4,420
Fair value loss / (gain) on investments	-		525		626
Loss on disposals of fixed assets	-		50		195
Non-cash movements	-		118		(256)
Share of associate's loss	1,096		416		954
Deferred consideration paid	-		(30)		-
Decrease/(increase) in inventories	(21)		(40)		(51)
Increase in trade and other receivables	622		(796)		(2,230)
Decrease in trade and other payables	893		(957)		(1,536)
Cash used in operations	(5,287)		(13,101)		(20,819)

9.     Cash and cash balances

	Unaudited		Unaudited		Audited
	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
Cash	11,530		32,922		28,746
Monies held in restricted accounts and deposits	7,343		-		1,093
Cash and cash equivalents	18,873		32,922		29,839
Borrowings	(9,483)		(2,025)		(9,398)
Net cash and cash equivalents	9,390		30,897		20,441

Monies held in restricted accounts and deposits represent cash held by the Group in accounts with conditions that restrict the use of these monies by the Group and, as such, does not meet the definition of cash and cash equivalents.

10.  Share capital

		Unaudited		Unaudited		Audited
	Nominal value per share	Six months ended 30 June 2018		Six months ended 30 June 2017		Year ended 31 December 2017
		Number		Number		Number
Ordinary shares		133,541,468		132,823,574		133,362,889
Aggregate amounts		133,541,468		132,823,574		133,362,889
		£'000		£'000		£'000
Ordinary shares	£0.001	134		133		133
Aggregate amounts		134		133		133

11.  Post balance sheet events

On 27 March 2018 the Company entered into a £20.0m term loan facility agreement with Oakley Capital Investments Limited ("OCI").  The facility was for a period of 19 months expiring on 31 October 2019 and had an interest rate of between 10% to 15% depending on amounts drawn. At today's date, £15.0m of the facility has been drawn.

The Company has reached agreement with OCI on an amendment and conversion of the £20.0m term loan facility agreement into a Loan Note agreement, with an extended term to 31 October 2020.  In return for granting security over certain Time Out trademarks and domain name, the previous interest rate mechanism will also be replaced with a flat rate of 12%.  The proceeds under the Loan Notes are to be used by the Group in the same way to fund future Time Out Market developments.

OCI is a substantial shareholder in the Company as defined by the AIM Rules and as such entering into the amendment and conversion of the loan agreement constitutes a related party transaction pursuant to AIM Rule 13. With the exception of Peter Dubens, who is a director of OCI, and Alex Collins, who is a partner of Oakley Capital Private Equity, the Directors of the Group consider that, having consulted with Liberum, the terms of the transaction are fair and reasonable insofar as shareholders are concerned.

 

END

 

 

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