Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2019

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 £9.7m, comprising £9.5m cash at bank and £0.2m in escrow.  In addition, the Group secured additional funding of €15.0m in the period and a further £2.5m in August 2019.  The Group also has the option over an undrawn debt facility of £18.0m.

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:

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)

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 (£1.1m) are no longer included within administrative expenses and instead are replaced by additional depreciation costs (£1.3m) and interest costs (£1.2m).  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)

Year ended 31 December 2018

(Audited)

Gross revenue is analysed geographically by origin as follows:

5.    Exceptional items

Exceptional items are analysed as follows:

The costs in the period relate to redundancy costs (2018: £0.4m) 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.

7.    Cash and debt

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 £20.0m of loan notes from Oakley Capital Investments Limited plus accrued interest.  In addition, Time Out Market secured further debt funding of €15m in H1 from Incus Capital Advisors, S.L., principally on the same economic terms as the €9.0m loan secured in November 2017. At 30 June 2019, the balance of the Incus debt was £21.6m.

8.    Notes to the cash flow statement

Reconciliation of loss before income tax to cash used in operations

9.    Share capital

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 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

Impact on the Statement of Financial Position

11.  Post balance sheet events

In August 2019, the Group secured a further £2.5m 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.