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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Time Out Group Plc | LSE:TMO | London | Ordinary Share | GB00BYYV0629 | ORD GBP0.001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 52.50 | 50.00 | 55.00 | 52.50 | 52.50 | 52.50 | 1,024,564 | 07:34:06 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Services, Nec | 104.64M | -26.12M | -0.0771 | -6.81 | 177.77M |
From Apr 2019 to Apr 2024
TIDMTMO
RNS Number : 7062N
Time Out Group plc
26 September 2019
26 September 2019
Time Out Group plc
("Time Out", the "Company" or the "Group")
Unaudited Half Year Results for the six months ended 30 June 2019
Transformation accelerates with the successful opening of three new food & cultural markets
Time Out Group plc (AIM: TMO), the global media and leisure business, is pleased to announce its unaudited results for the six months ended 30 June 2019.
Financial highlights
-- Continued growth in Group net revenue(1) : year-on-year growth of 10% to GBP24.7m (2018: GBP22.4m), driven by expansion of Time Out Market
-- Strong gross profit performance: growth of 25% which further benefitted from the continued delivery of material improvements in gross margin(2) to 71% in H1 (2018: 63%)
-- Group adjusted EBITDA(3) : GBP4.5m loss (2018: GBP6.4m loss), a 29% year-on-year improvement despite a period of significant investment in Time Out Market cost base
-- Time Out Market momentum: 72% growth in net revenue to GBP6.6m (2018: GBP3.8m) driven by the continued success of Lisbon and the opening of Miami, New York and Boston markets in Q2
-- Time Out Media losses reduced: 2% revenue decline to GBP18.1m (2018: GBP18.5m), with the focus on higher margin activities and operational efficiencies driving a 51% improvement in adjusted EBITDA loss to GBP2.9m in H1 (2018: GBP5.8m loss)
-- Operating loss improvement: operating loss reduced to GBP8.6m (2018: GBP10.2m loss)
-- Adjusted net debt(4) : GBP34.4m at 30 June 2019, which includes available cash of GBP9.7m and debt of GBP44.1m. Reported net debt was GBP60.4m including GBP26.0m of IFRS 16 lease liabilities
-- Funding: GBP15.5m additional debt funding secured since year end
-- Outlook: H2 adjusted EBITDA expected to be positive at a Group level, with Time Out Market driving top line growth and Time Out Media profitability improving
Operational highlights
-- Time Out Market: substantial progress with existing and new markets
- Lisbon continues to perform strongly with 6% growth in total transaction value (TTV(5) ) to GBP17.7m (2018: GBP16.8m) and 46% growth in adjusted EBITDA to GBP2.4m (2018: GBP1.6m)
- Miami, New York and Boston opened in Q2 with strong early trading - Chicago and Montreal on track to open in Q4 with complete chef line-ups
- Dubai management agreement signed in the period (2020 opening), increasing the number of contracted sites to eleven, with a further pipeline of global locations under review
-- Time Out Media: significant improvement in economics continues - Focus on high margin activities drove a 7ppts year-on-year improvement in gross margin to 65% - Continued delivery of operational efficiencies with 11% year-on-year overhead savings (1) See note 4 for the explanation of gross and net revenue (2) Gross margin calculated as gross profit as a percentage of net revenue
(3) Adjusted EBITDA is stated before interest, taxation, depreciation, amortisation, share based payments, share of associate's loss and exceptional items. It also includes GBP1.1m of property lease costs which, under IFRS 16, is replaced by depreciation and interest charges (see note 4)
(4) Adjusted net debt excludes lease-related liabilities arising from the implementation of IFRS 16
(5) Total transaction value includes food, bar and retail sales
Commenting on the results, Julio Bruno, CEO of Time Out Group plc, said:
"The continued growth of Time Out Market Lisbon and the successful opening and early trading of three new markets in Q2 further demonstrate the format's global appeal, quality of curation and breadth and engagement of the Time Out audience. The new sites, which bring the best chefs, drinks and cultural experiences of the city under one roof, have attracted significant footfall from day one with minimal marketing spend, and the reviews have been overwhelmingly positive. At the heart of Time Out remains its content that helps millions go out better in cities around the world and for which the Markets are proving to be another unique and effective channel.
"My thanks go to the team for its continued hard work, skill and dedication in successfully opening the new markets within such a concentrated timeframe. Two more (Chicago and Montreal) are set to open in 2019, and by year end there will be six Time Out Markets offering food from 120 of the best chefs of these cities, occupying 185,000 sq ft and accommodating almost 4,000 seats. With the economics of the Media division continuing to improve, we look forward to a successful second half for the Group."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) no 596/2014.
Hot Features
Premium
For further information, please contact:
Time Out Group plc Tel: +44 (0)207 813
3000
Julio Bruno, CEO
Adam Silver, CFO
Steven Tredget, Investor Relations Director
Liberum (Nominated Adviser and Broker) Tel: +44 (0)203 100
2222
Steve Pearce / Will Hall
FTI Consulting LLP Tel: +44 (0)203 727
1000
Edward Bridges / Stephanie Ellis
Notes to editors
About Time Out Group plc
Time Out Group is a global media and leisure business that helps people explore and experience the best of the city through its two divisions - Time Out Media and Time Out Market. Time Out launched in London in 1968 with a magazine to help people discover the exciting new urban cultures that had started up all over the city. Today, the Group's digital and physical presence comprises websites, mobile, magazines, live events and Time Out Market. Across these platforms Time Out distributes its curated content - written by professional journalists - around the best food, drink, culture, entertainment and travel across 327 cities in 58 countries. Time Out Market is a food and cultural market which brings the best of the city under one roof: its best chefs, drinks and cultural experiences - based on editorial curation. The first Time Out Market opened in Lisbon in 2014 and Miami, New York and Boston followed in 2019 with a further pipeline in other global locations. Time Out Group, 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
Group overview
Financial summary
Six months Six months
ended 30 ended 30 Constant
June 2019 June 2018 Change currency(1)
GBP'000 GBP'000 % %
----------- ----------- ------- -------------
Market 6,593 3,842 72% 73%
Media 18,095 18,534 (2)% (4)%
----------- ----------- ------- -------------
Group net revenue(2) 24,688 22,376 10% 9%
Gross margin %(3) 71% 63% 8% 9%
------------------------------- ----------- ----------- ------- -------------
Market (811) 426 (290)% (291)%
Media (2,875) (5,848) 51% 53%
----------- ----------- ------- -------------
Divisional adjusted EBITDA(4) (3,686) (5,422) 32% 35%
Corporate costs (857) (980) 13% 13%
Group adjusted EBITDA(4) (4,543) (6,402) 29% 31%
=========== =========== ======= =============
(1) Year-on-year growth on a constant currency basis calculated by applying 2019 exchange rates to actual 2018 results
(2) See note 4 for the explanation of net revenue (3) Gross margin calculated as gross profit as a percentage of net revenue
(4) Adjusted EBITDA is stated before interest, taxation, depreciation, amortisation, share based payments, share of associate's loss and exceptional items. It also includes GBP1.1m of property lease costs which, under IFRS 16, is replaced by depreciation and interest charges (see note 4)
It has been a transformational period for Time Out Group with the opening of three new food and cultural markets in North America. Combined with the ongoing success of Time Out Market Lisbon, this has driven H1 net revenue growth of 72% for the Time Out Market ('Market') business and total Group net revenue growth of 10%. During the period, Time Out Media ('Media') revenue declined 2%, reflecting the focus on higher margin activities and the implementation of the operational plan - announced in the 2018 interim statement - to curtail the volume of low margin live events, reduce the frequency of certain print publications as well as the spend on traffic acquisition.
While these actions impacted Media revenue growth, the key outcome has been further year-on-year improvements in the Group's gross margins of 8 ppts to 71%. Media also delivered material overhead savings, enabling it to reduce its adjusted EBITDA loss by 51% to GBP2.9m (2018: GBP5.8m). At the same time, Market delivered an adjusted EBITDA loss of GBP0.8m (2018: GBP0.4m profit) reflecting the additional investment in its cost-base required to support the opening and ongoing operation of the new markets.
Corporate costs of GBP0.9m (2018: GBP1.0m), which include Board and other costs related to being a listed entity, are 13% lower than prior year.
The combined impact of the above was a Group adjusted EBITDA loss of GBP4.5m (2018: GBP6.4m) in H1, a 29% year-on-year improvement, and the Group anticipates reporting positive adjusted EBITDA in H2.
Operating KPIs
In light of the recent business transformation, the Directors have streamlined and redefined the Group's operating KPIs (as set out below) to better reflect the global, and increasingly integrated, nature of the business.
Six months Six months
ended 30 ended 30
June June
2019 2018 Change
----------- ----------- ---------------
Global brand audience -
monthly average(1) 57.0m 54.0m 3.0m 6%
Market TTV(2) GBP21.8m GBP16.8m GBP5.0m 30%
Number of market concessionaires(3) 101 45 56 124%
(1) Global brand audience is the estimated monthly average in the period including all owned & operated cities and franchises. It has been redefined to include print circulation, unique website visitors, unique social users (as reported by Facebook and Instagram, with social followers on other platforms used as a proxy for unique users), opted-in members and Market visitors. Facebook and Instagram have only reported unique users since September 2018 and therefore the H1 2018 unique users has been estimated by applying the growth in followers on these platforms between H1 2018 and H1 2019
(2) Total transaction value across all Time Out Markets including food, drink and other retail sales
(3) Number of concessionaires across all markets opened at period end
Time Out's content proposition has been strengthened through the launch of three new markets, helping to accelerate the synergies between the Media and Market divisions, raise the Group's profile and grow its highly engaged audience across all channels. The Group's global brand audience (as defined above) grew by an estimated 6% to 57.0m in H1 - including 6% growth of average monthly unique visitors to all global Time Out websites to 22.8m. The average monthly Time Out Market visitors grew 8% to 350,000, with a total of 2.1m visitors in the period (2018: 1.9m).
The Group has also been successful in leveraging its Market and chef-related content to grow its social media presence with its monthly average users across all social platforms increasing by an estimated 8% to 27.0m. Instagram has been a particular focus with average monthly unique users estimated to have grown by 39% to 2.4m in the period. Furthermore, video, as a brand engagement and marketing tool which consumers and brands love, has been a crucial part of growing content reach in H1, especially around the new market launches - with over 400,000 video views on Time Out Market social accounts alone. Externally, increased coverage of the brand, especially around the Miami, New York and Boston openings, helped to increase awareness of each market and drive footfall in the opening phase. Just a few examples included CBS (which called the Boston market a "food lovers' paradise"), Miami Herald ("Time Out Market Miami is the food hall to conquer all food halls") and the New York Times ("In Brooklyn, a New Food Hall with Breath-taking Views").
Time Out Market generated TTV of GBP21.8m (2018: GBP16.8m) in H1, an increase of 30%, and by the end of the period has grown to over 100 concessionaires and over 2,500 seating capacity which, together with the two additional markets scheduled to open in H2, is expected to drive significant future growth.
Time Out Market trading overview
Six months Six months
ended ended
30 June 2019 30 June 2018 Change
GBP'000 GBP'000 %
-------------- -------------- -------
Owned & Operated 6,266 3,842 63%
Management Agreements 327 - n/a
-------------- -------------- -------
Net Revenue 6,593 3,842 72%
Gross profit 5,683 3,343 70%
Gross Margin % 86% 87% (1)%
---------------------------- -------------- -------------- -------
Operating expenditure (3,365) (1,628) (107)%
-------------- -------------- -------
Adjusted trading EBITDA(1) 2,318 1,715 35%
Pre-opening costs (1,470) (237) (520)%
Market central costs (1,659) (1,052) (58)%
Adjusted EBITDA (811) 426 (290)%
============== ============== =======
(1) Trading EBITDA represents the adjusted EBITDA from owned and operated markets post opening, and the development fees relating to management agreements. It is presented before pre-opening costs of new markets and other central costs of the Market business
H1 was a pivotal period for the Market business with 72% growth in net revenue primarily driven by owned & operated markets - including three new markets which opened in Q2. While fees from the Montreal, Prague and Dubai management agreements remain small during this development phase, they contributed GBP0.3m and will increase significantly on the opening of each market. This revenue growth drove a 35% increase in adjusted trading EBITDA to GBP2.3m in H1 (2018: GBP1.7m) and although the profitability of the new markets was impacted by additional operating expenditure during the initial months of operation, efficiencies are expected to be delivered thereafter.
The adjusted EBITDA loss of GBP0.8m (2018: GBP0.4m profit) reflects the significant investment in pre-opening costs of the new markets and additional central costs from the scaling of the central functions, as well as additional travel costs and advisory fees in support of the continued development of the business.
Lisbon had another outstanding period of trading with growth in TTV of 6% to GBP17.7m (2018: GBP16.8m). Combined with strong Time Out Bar sales and the full benefit of improved contract terms with concessionaires (which were implemented throughout H1 2018), this has enabled Lisbon to deliver 16% net revenue growth and adjusted EBITDA of GBP2.4m (46% ahead of prior year).
As outlined above, Time Out successfully launched three new markets during the second quarter - in Miami (on 9(th) May), New York (31(st) May) and Boston (27(th) June) - with unparalleled chef line-ups, positive reviews and strong early trading. Encouraging visitor numbers since opening validates the chosen locations and is an early indicator of success. These openings have transformed the scale and breadth of Time Out Market with the addition of 65,000 sq ft of floor space, over 1,600 seats and 56 concessionaires, and this momentum is set to continue into the second half with the opening of Chicago and Montreal (Time Out Market's first management agreement).
Beyond 2019, and in addition to the growth that these new markets are expected to deliver, the schedule of further planned openings is very strong - and includes the recent addition of Time Out Market's third management agreement in Dubai, which was signed in April 2019 with Emaar Malls. Time Out Market Dubai is expected to open in 2020 and will be located in Souk Al Bahar, an Arabian-style retail, entertainment and dining destination in the heart of Downtown Dubai, offering a unique waterfront position next to the iconic Burj Khalifa. The market will occupy 30,000 sq ft, accommodating 670 seats and will include food from 16 of top chefs and restauranteurs, three lounges and cultural experiences.
Other previously announced markets include:
-- London Waterloo - scheduled 2021 opening
-- London Spitalfields - planning application due to be re-submitted in Q4 with a potential opening anytime from late 2020
-- Porto - the project has now been formally approved by Direção Geral do Património Cultural, having consulted relevant authorities including UNESCO. Full planning application will be submitted over the coming months with a potential opening anytime from late 2020
-- Prague (management agreement) - 2022 opening
Furthermore, the Group has a strong pipeline under review of other potential locations in cities around the world, including a strong interest in management agreements, often in cities where Time Out has limited or no presence, reinforcing the strength of Time Out's global brand. Given these agreements require no capital investment, they are expected to form an important part of the portfolio mix as Time Out Market is rolled out over the coming years.
Time Out Media trading overview
Six months Six months
ended ended
30 June 2019 30 June 2018 Change
GBP'000 GBP'000 %
-------------- -------------- -------
Digital advertising 7,253 6,968 4%
Print 6,958 7,342 (5)%
Affiliates & Offers 1,833 1,800 2%
Live events 589 858 (31)%
Premium Profiles 954 1,061 (10)%
International 508 505 0%
-------------- -------------- -------
Revenue 18,095 18,534 (2)%
Gross Profit 11,834 10,672 11%
Gross Margin % 65% 58% 7%
----------------------- -------------- -------------- -------
Operating expenditure (14,709) (16,521) 11%
-------------- -------------- -------
Adjusted EBITDA (2,875) (5,849) 51%
============== ============== =======
Media has continued to focus on the quality of its revenue in H1, with the overall revenue decline of 2% reflecting the operational decisions taken in H2 2018 to reduce the frequency of certain print publications and low margin live events, and to focus on organic traffic over paid acquisition. In spite of these changes and the impact on revenue growth, gross profit still grew 11% in the period as result of the 7ppts gross margin improvement. Furthermore, the continued focus on operational efficiencies delivered 11% overhead savings in H1. These efficiencies drove a GBP2.9m (51%) year-on-year improvement in the H1 adjusted EBITDA loss, with additional improvements expected in the second half - which will further benefit from the historic seasonality of the Media operation.
Encouragingly, Digital advertising revenue grew 4% in the period with the UK and US growing 7% and 5% respectively as well as notable progress in Portugal (+140%), Spain (+28%), Hong Kong (+49%) and Singapore (+65%) which was partially offset by declines in Australia (-24%) and France (-32%). The Group continued to focus on developing its programmatic capabilities in H1 with the addition of new exchange partners helping grow programmatic revenue by 30%, with increases recorded across all countries. This will continue to be a priority for the business with the focus on developing the programmatic sales capabilities across the commercial teams and entering new agreements with additional demand-side platforms, mobile and video specialist partners. Furthermore, the Group's global sales approach continues to reap rewards with strong creative solution campaigns, delivered across multiple territories, for the likes of Google, Norwegian Airlines, Netflix and TAP in the period.
Overall Print revenue declined year-on-year by 5% although, as outlined above, these results were materially impacted by the decision to cut the frequency of certain US print publications in the second half of 2018 - with underlying revenue broadly flat year-on-year. This is an encouraging result in a challenging sector and further evidence of the authority of the brand and its high-quality content, as well as the desirable audience Time Out continues to reach. In particular, the UK had an exceptional period, with revenue growth of 7% driven by strong cover wrap sales and demand for custom print solutions. US print revenue declined by 41%, approximately half of which was due to aforementioned frequency changes. While the US market environment remains challenging, there are early signs of improvement after a recent focus on optimising content and production quality, coupled with the success of the magazines around Market launches in Miami, New York and Boston.
Affiliates & Offers remains steady with year-on-year growth impacted by the traffic acquisition cuts implemented throughout 2018; encouragingly this change in strategy has driven 16ppts gross margin improvements and gross profit growth of 28%. Elsewhere, the live events revenue decline reflects the business decision to materially reduce the volume of events throughout 2018 and to pursue higher margin, sponsor-led events - resulting in 27ppts gross margin improvements and 79% gross profit growth. Premium Profiles declined 10% following a clean-up of the portfolio towards the end of 2018, with new sales insufficient to deliver growth in the period. Changes to the sales team and proposition are expected to stabilise this business line in the second half.
Other financial items
Implementation of IFRS 16 (Leases)
IFRS 16 was adopted on 1 January 2019 and for comparison purposes, the impact of this new standard on key financial measures has been highlighted below and further explanation provided in note 10. In summary, the adoption of IFRS 16 has increased the H1 operating loss of the Group by GBP0.2m and decreased net assets at 30 June 2019 by GBP3.6m.
Revenue
Group gross revenue increased in H1 by 20% to GBP26.9m (2018: GBP22.4m). However, as set out in note 4, an adjusted measure of 'net revenue', which excludes concessionaires' share of revenue and aligns with previous financial reporting, has been introduced to provide a clearer understanding of the growth of the business in the period. On this basis, Group net revenue has grown by 10% to GBP24.7m (2018: GBP22.4m) in H1.
Operating loss
The H1 operating loss was GBP8.6m (2018: GBP10.2m), a 15% year-on-year improvement, and includes an additional net charge of GBP0.2m from the adoption of IFRS 16. This net charge comprises a benefit of GBP1.1m of property lease costs (previously included in operating expenditure) which is more than offset by GBP1.3m of incremental depreciation on the right of use asset created in relation to these property leases. Other items within the operating loss include:
Exceptional items
The net exceptional cost of GBP0.1m (2018: GBP0.4m) relates to employee redundancy costs and a small gain arising on the exercise of the Time Out Market option over the remaining 3.7% of MC-Mercados da Capital (Time Out Market Lisbon).
Share based payments
The value of these options at issuance has been amortised over the time to vesting of the option. There were 13.0m options outstanding at 30 June 2019 (31 December 2018: 9.7m).
Depreciation
The depreciation charge of GBP2.3m (2018: GBP0.4m) increased by GBP1.9m, driven principally by the additional depreciation following the opening of new markets (GBP0.5m) and on right-of-use assets after the implementation of IFRS 16 (GBP1.3m).
Amortisation
The amortisation of intangible assets of GBP2.2m (2018: GBP2.2m) includes GBP1.0m (2018: GBP1.0m) relating to acquired intangible assets and GBP1.1m (2018: GBP1.1m) relating to other intangible assets, primarily acquired and internally developed software.
Net finance costs
Net finance costs of GBP3.4m (2018: GBP0.8m) primarily comprise of interest on debt of GBP2.1m (2018: GBP0.5m) - driven by the additional GBP32.7m of debt funding secured since 1 July 2018 - coupled with the foreign exchange loss on financial assets of GBP0.1m (2018: GBP0.1m) and interest costs in respect of lease liabilities following the implementation of IFRS 16 (GBP1.2m).
Foreign exchange
The revenue and costs of Group entities reporting in dollars have been consolidated in these financial statements at an average exchange rate of $1.30 (2018: $1.33). The operations reporting in euros have been consolidated at a rate of EUR1.14 (2018: EUR1.15). The combined income statement impact of foreign exchange movements has been relatively immaterial in H1 with net revenue benefitting by GBP0.3m and adjusted EBITDA reduced by GBP0.2m.
Cash flow
Cash and cash equivalents decreased by GBP14.6m in H1 (2018: GBP11.0m). The most significant outflow was GBP20.3m of capital expenditure, primarily in relation to the construction and fit out of new Time Out Market locations. Media invested a further GBP0.9m in capitalised software development costs relating to the teams working on the Group's digital platforms. While the Group will complete the construction of Time Out Market Chicago in H2, Time Out Market Montreal (as a management agreement) requires no outlay by the Group and therefore total capital expenditure will be materially lower than H1.
Cash used in operations of GBP4.2m (2018: GBP5.3m) was driven by the H1 EBITDA loss and a net working capital outflow of GBP0.6m (2018: GBP1.4m inflow), which was heavily impacted by the GBP1.9m repayment and discontinuation of invoice discounting facilities. The other material outflow relates to the acquisition of the remaining 3.7% of MC-Mercados da Capital (Time Out Market Lisbon) for GBP1.2m in June 2019.
Additional debt finance of GBP12.7m was secured in the period which helped fund the investments outlined above.
Net cash and borrowings
30 June 30 June 31 Dec
2018 2017 2018
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 9,726 18,873 24,347
Borrowings (44,164) (9,483) (29,110)
--------- --------- ---------
Adjusted net (debt)/ cash (34,438) 9,390 (4,763)
IFRS 16 Lease liabilities (26,006) - -
--------- --------- ---------
Net (debt)/ cash (60,444) 9,390 (4,763)
========= ========= =========
Borrowings includes the GBP20.0m of loan notes from Oakley Capital Investments Limited ("OCI") plus accrued interest. In addition, Time Out Market secured further debt funding of EUR15m in H1 from Incus Capital Advisors, S.L., principally on the same economic terms as the EUR9.0m loan secured in November 2017. At 30 June 2019, the balance of the Incus debt was GBP21.6m.
Furthermore, the Group continues to have an option over an additional debt facility of GBP18.0m (announced in September 2018) should further liquidity be required.
Post balance sheet events
In August 2019, the Group secured a further GBP2.5m (in the form of loan notes) from OCI, principally on the same terms as the existing debt, which brings the total additional debt funding since year end to GBP15.2m. The Group has also agreed an extension of the term of all OCI borrowings by one year to 31 October 2021.
Outlook
The Group's significant recent progress is expected to continue in the second half with Time Out Market opening two further locations and delivering strong adjusted trading EBITDA across its portfolio. The underlying economics of Time Out Media are also expected to continue to improve, with the division further benefiting from the historic seasonal weighting of trading towards the second half of the year.
Overall, Management is confident in the Group's trading outlook for the year ahead and expects to deliver positive adjusted EBITDA in H2 and, combined with lower capital expenditure, materially improved cash flow.
Julio Bruno
Group Chief Executive
26 September 2019
Condensed Consolidated Income statement
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
Note June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
1,
Gross revenue 4 26,897 22,376 48,778
Cost of sales 4 (9,380) (8,307) (16,732)
----------- -----------
Gross profit 17,517 14,069 32,046
Administrative expenses (26,152) (24,246) (43,480)
----------- ----------- -------------
Operating loss (8,635) (10,177) (11,434)
Finance income 28 16 76
Finance costs (3,398) (833) (2,616)
Share of associate's loss - (1,096) (1,198)
----------- -----------
Loss before income tax 4 (12,005) (12,090) (15,172)
Income tax (charge)/credit (254) 210 (317)
----------- -----------
Loss for the period (12,259) (11,880) (15,489)
----------- ----------- -------------
Loss for the period attributable
to:
Owners of the parent (11,417) (11,492) (14,630)
Non-controlling interests (842) (388) (859)
(12,259) (11,880) (15,489)
----------- ----------- -------------
Loss per share:
Basic and diluted loss per
share (p) 6 8.5 8.6 10.9
Condensed Consolidated Statement of Other Comprehensive Income
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Loss for the period (12,259) (11,880) (15,489)
Other comprehensive income:
Items that may be subsequently
reclassified to the profit or
loss:
Currency translation differences 237 1,154 3,042
Other comprehensive income for
the period, net of tax 237 1,154 3,042
Total comprehensive expense for
the period (12,022) (10,726) (12,447)
----------- ----------- -------------
Total comprehensive expense for
the period attributable to:
Owners of the parent (10,977) (10,408) (11,734)
Non-controlling interests (1,045) (318) (713)
(12,022) (10,726) (12,447)
----------- ----------- -------------
Condensed Consolidated Statement of Financial Position
At 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
Note June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets - Goodwill 51,774 50,668 51,703
Intangible assets - Other 17,001 18,349 17,735
Property, plant and equipment 44,523 12,598 25,716
Right-of-use assets 22,424 - -
Investment in associate - 5,102 -
Other receivables 5,357 1,252 5,154
141,079 87,969 100,308
----------- ----------- -------------
Current assets
Inventories 968 300 376
Trade and other receivables 16,428 13,881 15,118
Cash and cash equivalents 7 9,726 18,873 24,347
27,122 33,054 39,841
----------- ----------- -------------
Total assets 168,201 121,023 140,149
----------- ----------- -------------
Liabilities
Current liabilities
Trade and other payables (20,172) (17,966) (20,352)
Borrowings (2,656) (1,421) (1,106)
Lease liabilities (2,143) - -
Provisions - (16) -
(24,971) (19,403) (21,458)
----------- ----------- -------------
Non-current liabilities
Trade and other payables (2,369) (3,511) (1,451)
Borrowings (41,508) (8,062) (28,004)
Lease liabilities (23,863) - -
Deferred tax liability (1,945) (2,407) (2,357)
(69,685) (13,980) (31,812)
----------- ----------- -------------
Total liabilities (94,656) (33,383) (53,270)
----------- ----------- -------------
Net assets 73,545 87,640 86,879
----------- ----------- -------------
Equity
Called up share capital 9 135 134 135
Share premium 106,937 106,042 106,937
Translation reserve 9,326 7,129 8,941
Capital redemption reserve 1,105 1,105 1,105
Retained earnings / (losses) (40,686) (25,214) (28,288)
Total parent shareholders'
equity 76,817 89,196 88,830
----------- ----------- -------------
Non-controlling interest (3,272) (1,556) (1,951)
Total equity 73,545 87,640 86,879
----------- ----------- -------------
Condensed Consolidated Statement of Changes in Equity
At 30 June 2019 (Unaudited)
Called
up Capital Retained Total parent Non-
share Share Translation Redemption earnings/ Shareholders' Controlling Total
capital premium reserve reserve (losses) equity interest equity
-------- --------- ------------ ----------- ---------- -------------- ------------ ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2019 135 106,937 8,941 1,105 (28,288) 88,830 (1,951) 86,879
Implementation
of IFRS 16 - - - - (1,568) (1,568) (276) (1,844)
-------- --------- ------------ ----------- ---------- -------------- ------------ ---------
At 1 January
2019 (restated) 135 106,937 8,941 1,105 (29,856) 87,262 (2,227) 85,035
Changes in
equity
Loss for the
period - - - - (11,417) (11,417) (842) (12,259)
Other
comprehensive
income - - 385 - - 385 (148) 237
-------- --------- ------------ ----------- ---------- -------------- ------------ ---------
Total
comprehensive
income - - 385 - (11,417) (11,032) (990) (12,022)
Share based
payments - - - - 532 532 - 532
Adjustment
arising on
change
in
non-controlling
interest - - - - 55 55 (55) -
Balance at 30
June 2019 135 106,937 9,326 1,105 (40,686) 76,817 (3,272) 73,545
-------- --------- ------------ ----------- ---------- -------------- ------------ ---------
30 June 2018 (Unaudited)
Called up Capital Retained Total parent Non-
Share Share Translation Redemption earnings/ Shareholders' Controlling Total
capital premium reserve reserve (losses) equity interest equity
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
shares 1 - - - - 1 - 1
Balance at 30
June 2018 134 106,042 7,129 1,105 (25,214) 89,196 (1,556) 87,640
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
Condensed Consolidated Statement of Changes in Equity
31 December 2018 (Audited)
Called up Capital Retained Total parent Non-
Share Share Translation Redemption earnings/ Shareholders' Controlling Total
capital premium reserve reserve (losses) equity interest equity
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
year - - - - (14,630) (14,630) (859) (15,489)
Other
comprehensive
income - - 2,896 - - 2,896 146 3,042
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
Total
comprehensive
income - - 2,896 - (14,630) (11,734) (713) (12,447)
Share-based
payments - - - - 838 838 - 838
Issue of
shares for
acquisitions 2 895 - - - 897 - 897
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
Balance at 31
December 2018 135 106,937 8,941 1,105 (28,288) 88,830 (1,951) 86,879
---------- --------- ------------ ----------- ---------- -------------- ------------ ---------
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June 2019
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
Note June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash used in operations 8 (4,211) (5,287) (11,817)
Interest paid (42) (118) (1,223)
Tax paid (550) - (228)
Net cash used in operating
activities (4,803) (5,405) (13,268)
Cash flows from investing
activities
Purchase of property, plant
and equipment (20,319) (3,334) (14,989)
Purchase of intangible assets (885) (1,266) (2,917)
Interest received 28 16 76
Proceeds from disposal of
investment - - 9,470
Net cash used in investing
activities (21,176) (4,584) (8,360)
Cash flows from financing
activities
Advance of borrowings 12,651 - 20,000
Repayment of borrowings - (967) (3,044)
Repayment of finance leases - (32) (74)
Acquisition of minority
interests (1,248) - -
Net cash from financing
activities 11,403 (999) 16,882
Decrease in cash and cash
equivalents (14,576) (10,988) (4,746)
Cash and cash equivalents
at beginning of period 24,347 29,839 28,746
Effect of foreign exchange
rate change (45) 22 347
Cash and cash equivalents
at end of period 9,726 18,873 24,347
----------- ----------- -------------
Notes to the condensed consolidated statements
1. Basis of preparation
The unaudited condensed interim consolidated financial information for the six months ended 30 June 2019 has been prepared following the recognition and measurement principles of IFRS as adopted by the European Union. The condensed interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the audited statutory financial statements for the year ended 31 December 2018.
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 is unaudited and has not been reviewed by the Group's auditor. The financial information for the year ended 31 December 2018 is derived from the audited financial statements for the year ended 31 December 2018, 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 2018 have been delivered to the Registrar of Companies. The comparative financial information for the period ended 30 June 2018 does not constitute statutory financial statements for that period.
These statements were approved by the Board on 26 September 2019.
Going Concern
The condensed interim financial information for the six-month period has been prepared on a going concern basis. The statements were approved by the Board on 26 September 2019. The Directors confirm they have a reasonable expectation that the Company and Group has adequate resources to continue in operation for the foreseeable future and at least 12 months from the date of signing the Group and Company financial statements and consider it appropriate to adopt the going concern basis of accounting in preparing the Group and Company financial statements.
This confirmation is made having considered its current financial position, latest trading forecasts and the capital expenditure requirements of the growing Time Out Market business. The Directors have subjected the forecasts to sensitivity analysis and considered the options available to mitigate any downside risks. The Group's available cash at 30 June 2019 was GBP9.7m, comprising GBP9.5m cash at bank and GBP0.2m in escrow. In addition, the Group secured additional funding of EUR15.0m in the period and a further GBP2.5m in August 2019. The Group also has the option over an undrawn debt facility of GBP18.0m.
For these reasons, they continue to adopt the going concern basis of accounting in preparing these financial statements.
2. Accounting policies
On 1 January 2019, the Group implemented IFRS 16 "Leases". The impact of implementation is set out in Note 10.
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.
3. Exchange rates
The significant exchange rates to UK Sterling for the Group are as follows:
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2019 2018 2018
Closing Average Closing Average Closing Average
rate rate rate rate rate rate
-------- -------- -------- -------- -------- --------
US dollar 1.27 1.30 1.32 1.33 1.27 1.34
Euro 1.12 1.14 1.13 1.15 1.11 1.13
Australian dollar 1.81 1.83 1.78 1.76 1.81 1.79
Singaporean dollar 1.72 1.76 1.79 1.79 1.74 1.81
Hong Kong dollar 9.90 10.17 10.32 10.41 9.97 10.51
Canadian dollar 1.66 1.74 - - 1.74 1.73
4. Segmental information
In accordance with IFRS 8, the Group's operating segments are based on the figures reviewed by the Board, which represents the chief operating decision maker. The Group comprises two operating segments:
-- Time Out Market - this includes Time Out's share of concessionaires' sales, revenues from Time Out operated bars and other revenues include retail, events and sponsorship
-- Time Out Media - 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 & Offers"), and fees from third party licensees.
Six months ended 30 June 2019
(Unaudited)
Time Out Time Out Corporate
Market Media costs Total
GBP'000 GBP'000 GBP'000
Gross revenue 8,802 18,095 - 26,897
Concessionaire share (2,209) - - (2,209)
----------------------------------- --------- --------- ---------- ---------
Net revenue 6,593 18,095 - 24,688
----------------------------------- --------- --------- ---------- ---------
Gross profit 5,683 11,834 - 17,517
Administrative expenses (7,697) (17,598) (857) (26,152)
----------------------------------- --------- ---------
Operating loss (2,014) (5,764) (857) (8,635)
Operating loss (2,014) (5,764) (857) (8,635)
Amortisation of intangible assets - 2,191 - 2,191
Depreciation of property, plant
and equipment 760 250 - 1,010
Depreciation of right-of-use
assets 769 574 - 1,343
----------------------------------- --------- --------- ---------- ---------
EBITDA (485) (2,749) (857) (4,091)
Property lease costs (298) (813) - (1,111)
Share based payments - 532 - 532
Exceptional items (28) 155 - 127
----------------------------------- --------- --------- ---------- ---------
Adjusted EBITDA (811) (2,875) (857) (4,543)
----------------------------------- --------- --------- ---------- ---------
Finance income 28
Finance costs (3,398)
---------
Loss before income tax (12,005)
Income tax charge (254)
Loss for the period (12,259)
---------
In previous periods, the revenue in the Income Statement includes all Media revenue, revenue generated from Time Out Market Lisbon (representing Time Out's share of the food and beverage sales made by concessionaires to consumers, and other revenue from Time Out operated bars, sponsorship, retail, the Time Studio and events) and any fees from management agreements.
In H1 2019 the Group opened three new markets in which all transactions are made directly between Time Out Market and the consumer. This contrasts with Lisbon in which consumers transact directly with the concessionaires for any food and beverage purchases (excluding the Time Out operated bar) and Time Out Market is paid a share of revenue by the concessionaires. Therefore, the total value of all food, beverage and retail transactions in these new markets is included in the income statement, representing the gross revenue of these operations.
To aid comparability between periods, an adjusted revenue measure ('net revenue') has been introduced which is calculated as gross revenue less the concessionaires share of revenue. There was no difference between gross and net revenue in prior periods and Time Out Market Lisbon revenue will continue to recognise revenue on the same basis as it has historically.
The implementation of IFRS 16 on 1 January 2019 materially benefitted EBITDA in the period as property lease costs (GBP1.1m) are no longer included within administrative expenses and instead are replaced by additional depreciation costs (GBP1.3m) and interest costs (GBP1.2m). Adjusted EBITDA is presented including the property lease costs to aid comparison of profitability between periods.
Due to the rapid transformation of the Group, the most appropriate measures of performance are evolving and will be subject to continual review.
Six months ended 30 June 2018
(Unaudited)
Time Out Time Out Corporate
Market Media costs Total
GBP'000 GBP'000 GBP'000
Gross and net revenue 3,842 18,534 - 22,376
----------------------------------- --------- --------- ---------- ---------
Gross profit 3,343 10,726 - 14,069
Administrative expenses (3,142) (19,992) (1,112) (24,246)
----------------------------------- --------- ---------
Operating loss 201 (9,266) - (10,177)
Operating loss 201 (9,266) (1,112) (10,177)
Amortisation of intangible assets 2,174 - 2,174
Depreciation of property, plant
and equipment 225 223 - 448
----------------------------------- --------- --------- ---------- ---------
EBITDA 426 (6,869) (1,112) (7,555)
Share based payments - 774 - 774
Exceptional items - 247 132 379
----------------------------------- --------- --------- ---------- ---------
Adjusted EBITDA loss 426 (5,848) (980) (6,402)
----------------------------------- --------- --------- ---------- ---------
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)
---------
Year ended 31 December 2018
(Audited)
Time Out Time Out Corporate
Market Media costs Total
GBP'000 GBP'000 GBP'000 GBP'000
Gross and net revenue 8,999 39,779 - 48,778
----------------------------------- --------- --------- ---------- ---------
Gross profit 8,011 24,035 - 32,046
Administrative expenses (8,633) (37,786) 2,939 (43,480)
----------------------------------- ---------
Operating loss (622) (13,751) 2,939 (11,434)
Operating loss (622) (13,751) 2,939 (11,434)
Amortisation of intangible assets 834 3,758 - 4,592
Depreciation of property, plant
and equipment 626 443 - 1,069
Loss on disposal of fixed assets 22 3 - 25
----------------------------------- --------- --------- ---------- ---------
EBITDA 860 (9,547) 2,939 (5,748)
Share based payments - 838 - 838
Exceptional items 514 813 (4,534) (3,207)
----------------------------------- --------- --------- ---------- ---------
Adjusted EBITDA 1,374 (7,896) (1,595) (8,117)
----------------------------------- --------- --------- ---------- ---------
Finance income 76
Finance costs (2,616)
Share of associate's loss (1,198)
---------
Loss before income tax (15,172)
Income tax credit (317)
Loss for the period (15,489)
---------
Gross revenue is analysed geographically by origin as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Europe 15,913 15,461 33,736
Americas 9,322 5,253 11,149
Rest of World 1,662 1,662 3,893
26,897 22,376 48,778
----------- ----------- -------------
5. Exceptional items
Exceptional items are analysed as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Restructuring costs 155 354 802
Gain on disposal of investment
in associate - - (4,469)
Fair value (gain)/loss on
option over non-controlling
interest (28) - 514
Fair value gain on settlement
of deferred consideration - - (65)
Fees relating to acquisitions - 14 -
Office relocation costs - 11 11
127 379 (3,207)
----------- ----------- -------------
The costs in the period relate to redundancy costs (2018: GBP0.4m) and the difference on the exercise of the option over non-controlling interest in MC-Mercados da Capital (Time Out Market Lisbon) exercised in the period.
The 2018 restructuring costs include employee redundancy costs and fees relating to acquisitions. The fair value loss relates to the remeasurement of the option over non-controlling interest in Time Out Market Limited. The profit on disposal relates to the sale of shares on Flyt Limited, an associate investment, in December 2018.
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. Diluted loss per share is equal to basic loss per share.
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
------------ ------------ -------------
Number Number Number
Weighted average number of
ordinary shares for the purpose
of basic and diluted loss
per share 133,000,470 133,378,525 133,867,852
GBP'000 GBP'000 GBP'000
Losses from continuing operations
for the purpose of loss per
share 11,417 11,492 14,630
Pence Pence Pence
Basic and diluted loss per
share 8.5 8.6 10.9
7. Cash and debt
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Cash and cash equivalents 9,473 11,530 18,092
Restricted cash - Escrow 253 3,826 6,255
Restricted cash - Letters
of credit and deposits - 3,517 -
----------- ----------- -------------
Total cash 9,726 18,873 24,347
Borrowings (44,164) (9,483) (29,110)
----------- ----------- -------------
Adjusted net debt (34,438) 9,390 (4,763)
IFRS 16 Lease liabilities (26,006) - -
----------- ----------- -------------
Net debt (60,444) 9,390 (4,763)
----------- ----------- -------------
Monies held in restricted accounts 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. Escrow accounts relate to cash balances used to part fund the construction of the Boston and Miami markets. Letters of credit and deposits relate to rent deposits paid in respect of leased properties. These balances are disclosed within long term debtors as at 30 June 2019 and 31 December 2018. This treatment will be applied to future periods.
Borrowings includes the GBP20.0m of loan notes from Oakley Capital Investments Limited plus accrued interest. In addition, Time Out Market secured further debt funding of EUR15m in H1 from Incus Capital Advisors, S.L., principally on the same economic terms as the EUR9.0m loan secured in November 2017. At 30 June 2019, the balance of the Incus debt was GBP21.6m.
8. Notes to the cash flow statement
Reconciliation of loss before income tax to cash used in operations
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
----------- ----------- -------------
GBP'000 GBP'000 GBP'000
Loss before income tax (12,005) (12,090) (15,172)
Add back:
Net finance costs 3,370 817 2,540
Share based payments 532 774 838
Depreciation charges 2,353 448 1,069
Amortisation charges 2,191 2,174 4,592
Fair value (gain)/loss on option
over non-controlling interest (28) - 514
Gain on disposal of investment
in associate - - (4,469)
Non-cash movements 20 - 242
Share of associate's loss - 1,096 1,198
Increase in inventories (594) (21) (86)
Increase in trade and other
receivables (1,432) 622 (3,094)
Increase in trade and other
payables 1,382 893 11
----------- ----------- -------------
Cash used in operations (4,211) (5,287) (11,817)
----------- ----------- -------------
9. Share capital
Unaudited Unaudited Audited
Nominal Six months Six months Year ended
value ended 30 ended 30 31 December
per share June 2019 June 2018 2018
------------ ------------ -------------
Number Number Number
Ordinary shares 135,000,470 133,541,468 134,651,891
Aggregate amounts 135,000,470 133,541,468 134,651,891
------------ ------------ -------------
GBP'000 GBP'000 GBP'000
Ordinary shares GBP0.001 135 134 135
Aggregate amounts 135 134 135
------------ ------------ -------------
10. Implementation of IFRS 16 Leases
This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements.
The Group has adopted IFRS 16 Leases retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 12%.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
-- applying a single discount rate to a portfolio of leases with reasonably similar characteristics
-- relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review - there were no onerous contracts as at 1 January 2019
-- accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases
-- excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
-- using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.
Measurement of lease liabilities 2019
---------
GBP'000
Operating lease commitments disclosed as at 31 December
2018 57,473
Other adjustments (15,395)
---------
42,078
Discounted at the incremental borrowing rate (21,832)
---------
Lease liability recognised as at 1 January 20,246
---------
Of which are:
Current lease liabilities 1,249
Non-current lease liabilities 18,997
---------
20,246
---------
Measurement of right-of-use assets
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied.
Impact on the Income Statement
Six months
ended 30
June 2019
-----------
GBP'000
Reduction in property lease costs 1,111
-----------
Decrease in EBITDA loss 1,111
Increase in depreciation costs (1,344)
-----------
Increase in operating loss (233)
Increase in interest costs (1,248)
-----------
Net decrease in loss before tax (1,481)
-----------
Impact on the Statement of Financial Position
1 January 30 June
2019 2019
---------- --------
GBP'000 GBP'000
Right-of-use assets 18,048 22,424
Lease liabilities - Current 1,249 2,143
- Non-current 18,997 23,863
---------- --------
20,246 26,006
---------- --------
Retained earnings 1,844 n/a
11. Post balance sheet events
In August 2019, the Group secured a further GBP2.5m loan facility from OCI principally on the same terms as the existing debt. The Group has also agreed an extension of the term of all OCI borrowing by one year to 31 October 2021.
12. Principal risks and uncertainties
The 2019 Annual Report sets out on pages 22 and 23 the principle risks and uncertainties that could impact the business. There are no changes to these risks and uncertainties.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LFFSIAVIEFIA
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