TIDMTMO
RNS Number : 1594H
Time Out Group plc
23 March 2020
23 March 2020
Time Out Group plc
("Time Out", the "Company" or the "Group")
Trading update for the year ended 31 December 2019
A year of transformation with the opening of five new food and
cultural markets
Time Out Group plc (AIM: TMO), the global media and leisure
business, in accordance with the announcement by the FCA on 22
March 2020, in which it requested all listed companies observe a
moratorium on the publication of preliminary financial statements,
will not be releasing its preliminary results for the year ended 31
December 2019 on 26 March 2020 as scheduled. Today the Company
issues a trading update for the 2019 financial year and does not
expect any deviation from these published figures once the audited
results are announced.
Financial highlights
-- Significant year-on-year growth with gross revenue increasing
by 58% to GBP77.1m (2018: GBP48.8m) and net revenue by 30% to
GBP63.3m (2018: GBP48.8m), driven by Time Out Market
expansion(1)
-- Group gross profit growth of 45%, further benefitting from
the continued progression of gross margin to 73% (2018: 66%)(2)
-- Group adjusted EBITDA(3) in line with expectations, with a
42% year-on-year improvement to a GBP4.7m loss (2018: GBP8.1m
loss), despite a year of significant investment in Time Out Market
cost base
-- Group operating loss declined by 18% to GBP13.4m (2018:
GBP11.4m); 10% underlying improvement excluding the benefit of IFRS
16 adoption and the prior year gain of GBP4.5m on disposal of
Flyt
-- Time Out Market net revenue grew by 158% to GBP23.2m (2018:
GBP9.0m), driven by a combination of Lisbon's continued progress
(7% growth) and the opening of five new markets in North
America
-- Time Out Media EBITDA loss improved by 72% to GBP2.2m loss
(2018: GBP7.9m loss), with the key milestone of positive EBITDA
achieved in H2
-- Adjusted net debt(4) of GBP29.9m at 31 December 2019 (2018:
GBP4.8m), which includes cash of GBP13.4m and debt of GBP43.3m.
Reported net debt was GBP62.3m including GBP32.4m of IFRS 16 lease
liabilities
-- Funding: Successful GBP17.1m equity placing and additional
GBP15.5m debt secured in the period
-- Outlook: The COVID-19 pandemic has had a significant effect
on trading with the temporary closure of all six Time Out Markets
and a slowing of advertising revenues. Gi ven the material
uncertainty of the situation it is not currently possible to
quantify the full trading impact of the outbreak. In the meantime,
the Group has cash reserves of GBP11.4m, as at 29 February 2020 and
an undrawn debt facility of GBP18m, alongside various cost
mitigations and other available options
Operational highlights
-- The Group's global brand audience increased by 18% to a
monthly average of 63.2m (2018: 53.6m), primarily driven by growth
in social media channels
-- Time Out Market's scale transformed by the opening of five new markets
-- Lisbon continued to exceed expectations with a record 4.1m
visitors (2018: 3.9m), GBP36.8m of TTV(5) (2018: GBP35.1m) and
adjusted EBITDA of GBP5.3m (2018: GBP4.4m)
-- Opening of four owned & operated markets in Miami, New
York, Boston and Chicago, and the first management agreement in
Montreal, growing the number of concessionaires to 139
-- Dubai management agreement signed (for an expected 2020
opening), increasing the number of contracted sites to eleven, with
a growing pipeline of attractive, global opportunities under
consideration
-- Time Out Media economics continued to rapidly improve
-- Digital advertising growth of 10% to GBP16.4m (2018:
GBP14.9m), driven by audience growth, programmatic advertising and
creative solutions
-- Focus on higher quality revenues and operational improvements
delivered a seven percentage-point increase in gross margins to
67%
-- Continued delivery of efficiencies with 9% year-on-year
savings in operating expenses
(1) See Appendix 1 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 property
lease costs which, under IFRS 16, is replaced by depreciation and
interest charges. This is a non-GAAP alternative performance
measure that management uses to aid understanding of the underlying
business performance.
(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 update, Julio Bruno, CEO of Time Out Group
plc, said:
"2019 was an exciting year for Time Out. The successful opening
of five new Time Out Markets saw the transformation of this
division from a single, highly popular market in Lisbon to a global
portfolio, demonstrating that the concept can be effectively
replicated in cities around the world. Notwithstanding recent
developments, the success of markets opened in 2019 indicates that
there is a growing demand for this concept globally as landlords
look for ways to increase the attractiveness and footfall of their
properties.
Our Media business also made significant progress during the
period. Digital advertising growth of 10% materially outperformed a
challenging market and the continued focus on higher margin
activities and operational efficiencies has rapidly improved the
economics of the division. With audience growth of 18%, Time Out
has strengthened its position as the leading global brand for
experiencing the best of a city.
Commenting on current trading, Mr Bruno added:
The outbreak of the COVID-19 pandemic has had a significant
recent impact on trading with the temporary closure of all six Time
Out Markets and a slowing of advertising revenues.
We are responding quickly to these unprecedented times with a
temporary "Time In" rebrand, a launch of an e-version of the
magazine, complementing our online digital content, a review of the
operating structure and preserving our cash position. We are in the
process of assessing the potential financial impact, which will be
highly dependent on the duration of the outbreak, coupled with the
response from governments and consumers alike. However, in the
meantime, our primary concern is the wellbeing and safety of our
employees, their families, our guests, concessionaires and their
teams."
This announcement is released by Time Out Group plc and contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in
accordance with the Company's obligations under Article 17 of
MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Julio Bruno, Chief Executive.
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
Clayton Bush / Andrew Godber / Edward Thomas
FTI Consulting LLP Tel: +44 (0)7768
216 607
+44 (0)7890 543
056
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 328 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,
Boston, Montreal and Chicago 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 Review
Group overview
Financial summary
Unaudited Audited
2019 2018 Change
GBPm GBPm %
Market 23.2 9.0 158%
Media 40.1 39.8 1%
---------------------------- ---------- -------- -------
Group net revenue(1) 63.3 48.8 30%
Gross margin % 73% 66% 7%
Market (0.6) 1.4 (145)%
Media (2.2) (7.9) 72%
---------------------------- ---------- -------- -------
Divisional adjusted EBITDA (2.8) (6.5) 57%
Corporate costs (1.9) (1.6) (18)%
Group adjusted EBITDA (4.7) (8.1) 42%
============================ ========== ======== =======
(1) See Appendix 1 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 GBP4.0m of
property lease costs which, under IFRS 16, is replaced by
depreciation and interest charges (see Appendix 1)
2019 was a transformational year for Time Out Group as it
continued to deliver on its key objectives of growing the Brand's
global audience, scaling Time Out Market ('Market') internationally
and significantly improving the economics of Time Out Media
('Media'), which delivered positive EBITDA in the second half of
the year.
Revenue growth
Group net revenue growth of 30% to GBP63.3m (2018: GBP48.8m) was
primarily driven by Market (158% growth), which benefitted from the
successful opening of five new food and cultural markets in North
America, including the first management agreement in Montreal; Time
Out Market Lisbon also continued to exceed expectations with net
revenue growth of 7% to GBP9.5m. Media revenue growth of 1% was
also encouraging within the context of a challenging media
landscape and the continued delivery of the operational plan to
focus on higher-margin activities and, in doing so, curtail the
volume of low-margin live events, optimise the frequency of certain
print publications and concentrate e-commerce efforts on organic
traffic.
EBITDA improvement
Media's strong focus on gross margins and operational
efficiencies enabled it to improve its full-year adjusted EBITDA
loss by 72% to a loss of GBP2.2m (2018: GBP7.9m loss). This
operational strategy further drove the seven percentage point
increase in Group gross margins to 73% (2018: 67%) and the overall
42% year-on-year improvement in Group adjusted EBITDA to a loss of
GBP4.7m (2018: GBP8.1m loss).
Although it was a period of significant investment in the Market
cost base, in support of the accelerated global roll-out, both
divisions made positive contributions to the Group achieving the
critical milestone of divisional adjusted EBITDA (before corporate
costs) of GBP0.9m in H2.
Operational summary
The following operating KPIs reflect the global, and
increasingly integrated, nature of the Group:
2019 2018 Change %
--------- --------- --------- -----
Global brand audience - monthly
average(1) 63.2m 53.6m 9.6m 18%
Market TTV(2) GBP65.5m GBP35.1m GBP30.4m 87%
Number of market concessionaires(3) 139 45 93 207%
(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), social followers (for other
social media platforms), 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
The growth and diversification of the brand's reach across Time
Out's digital, print and physical channels is a primary objective
for the Group. Results were positive during the year, with 18%
growth in global brand audience to a monthly average of 63.2m,
driven by material and accelerating gains across Time Out's social
channels and global websites
Social media audience
The expansion of Time Out's social media audience, which is
particularly attractive for the Group's advertising partners, was
the main driver of total Global brand audience in the year - with
full-year growth of 28% (48% in H2) to a monthly average of 32.0m
(2018: 25.0m). In particular, strong progress has been made on
Instagram where global unique users grew 177% to a monthly average
of 5.1m. The Group has delivered similarly encouraging gains on
Facebook, where unique users grew 22% to an average of 19.9m.
A key factor in this growth has been the deployment of AI
technology which has enabled the editorial teams to optimise the
production, scheduling and distribution of content - including
higher volumes of video and Instagram stories. On Instagram, new
Time Out Market handles were launched in North America, alongside
the streamlining of other Time Out handles to focus on highest
value pages. Furthermore, all social channels were seeded with
content series featuring Time Out Market chefs and bartenders, food
dishes and live media events (e.g. the 'Undateables Live'), which
combined to drive higher engagement rates.
Website audience
Strong growth in Time Out's global website audience was also
encouraging with a 12% year-on-year increase in unique users to a
monthly average of 23.8m - further reflecting the strong focus on
the upskilling of our teams to produce higher volumes of quality,
"digital-first" content, more efficiently.
While the team continued to produce and optimise content for
search engines ('SEO'), which remains the largest source of web
traffic (c.60% share) and grew 11%, the reliance on Google and its
competitors is reducing with social referrals now accounting for
20% of traffic and growing 63% in the period - a direct result of
the social strategy outlined above and a trend management expects
to continue in 2020.
The Group's content strategy maintained a strong focus on the
curation of the best things to do in cities around the world -
written by professional journalists. This regular, high-quality and
local content creation is supported by key global content projects
throughout the year including the highly successful 'Time Out
Index' of the world's best cities, the 'World's Coolest
Neighbourhoods', 'The DRINK List', 'The EAT List' and 'The DO List'
- which collectively drove 7% of all website traffic and generated
significant brand awareness through accompanying global press
coverage in leading publications such as BBC, CNN, Mail Online, NBC
and many more. At the same time, the expansion of Time Out
Market-related content has helped grow Time Out's engaged and
valuable audience in the food and drink category by 25%
year-on-year (41% in North America), providing a larger base of
food-and-drink consumers to which the markets can be promoted.
The growing profile of Time Out Market was further evidenced by
the strong growth in Time Out website audience in Market cities -
with Lisbon growing average monthly unique users by 45%. Strong
growth was also delivered in Miami (33%), Boston (139%) and
Montreal (averaging 170k unique users since its launch) - cities
where Time Out has not traditionally had a Media presence.
Beyond Market cities, growth of the 'unstaffed' locations
launched in H2 2018 has been very significant, now accounting for
16% of audience in 2019, with key 'staffed' APAC cities also
delivering similar levels of growth as the Market cities.
Print circulation
Circulation decreased 5% to a monthly average of 3.5m, due to
the decision to optimise the frequency of certain publications.
However, with 42 million magazines distributed in the period, Print
remains a key driver of Time Out's brand awareness and the
engagement with the magazines within Time Out Markets has been a
further positive demonstration of the synergies that exist between
the Media and Market propositions.
Time Out Market visitors and other KPIs
The profile and reach of the brand also continues to benefit
from the growth of the physical Time Out Market audience, which
grew 43% to 5.5m visitors in total in 2019 (2018: 3.9m) - driven by
the opening of the five new markets in North America - with Lisbon
alone attracting over 4m visitors (6% growth).
As a result, Time Out Market TTV grew 87% to GBP65.5m of which
Lisbon accounted for GBP36.8m (5% growth). Furthermore, the number
of concessionaires within the portfolio increased by 207% to 139,
consisting of 120 of the best chefs of the Time Out Market cities,
including six Michelin stars and nine James Beard Award
winners.
Time Out Market trading overview
Unaudited Audited
2019 2018 Change
GBP'000 GBP'000 %
Owned Operations 22.2 8.8 152%
Management Fees 1.0 0.2 400%
-------------------------------------------- ---------- -------- -------
Net Revenue(1) 23.2 9.0 158%
-------------------------------------------- ---------- -------- -------
Gross profit 19.6 8.0 145%
Gross Margin % 83% 89% (4)%
Operating expenses (trading) (14.3) (3.4) (321)%
-------------------------------------------- ----------
Trading EBITDA(2) 5.3 4.6 15%
Central costs (3.2) (2.5) (28)%
-------------------------------------------- ---------- -------- -------
Adjusted EBITDA (before pre-opening costs) 2.1 2.1 0%
Pre-opening costs (2.7) (0.7) (286)%
Adjusted EBITDA (0.6) 1.4 (143)%
============================================ ========== ======== =======
(1) See Appendix 1 for the explanation of gross and net revenue
(2) 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
Time Out Market P&L overview
2019 was a pivotal year for Time Out Market with a
transformation in scale, alongside significant investment in the
cost base. Net revenue growth of 158% to GBP23.2m (2018: GBP9.0m)
was primarily driven by the opening of four new 'owned &
operated' markets in Miami (May), New York (May), Boston (June) and
Chicago (November). Time Out Market Montreal, the Group's first
management agreement, also opened in November and, combined with
additional pre-development fee income from the signing of further
management agreements for upcoming Time Out Markets in Prague and
Dubai, drove the growth in management fees in 2019.
Despite the growth in trading-related operating expenses from
the opening of the four new owned & operated markets, the Group
delivered GBP5.3m of adjusted Trading EBITDA (2018: GBP4.6m), a 16%
year-on-year increase. However, a GBP0.7m (30%) increase in central
costs (primarily headcount-related), combined with a GBP2.0m
increase in operating costs of the new markets in the pre-opening
periods ('pre-opening costs'), drove an overall 143% decline in
adjusted EBITDA to a full year loss of GBP0.6m (2018: GBP1.4m).
Lisbon overview
Time Out Market Lisbon had another outstanding period of trading
in its 5(th) anniversary year exceeding all expectations. The
market updated and diversified its food offer by successfully
replacing eight concessionaires, including the addition of
Michelin-star chef João Rodrigues - clearly demonstrating the
continued strength and appeal of the concept to the best
restauranteurs and chefs of the city.
Net revenue grew 7% to GBP9.5m (2018: GBP8.8m), primarily driven
by the aforementioned growth in visitors, but also benefiting from
20% growth in Time Out Bar revenue and strong performances by the
Studio and Chef's academy. Good cost control further contributed to
an adjusted EBITDA of GBP5.3m, 23% ahead of the prior year.
New markets opened in 2019
The openings of the five new markets in North America were
successful with encouraging trading volumes from the outset -
driven by the strength of the chosen locations, quality and profile
of the chef line-ups, and extensive and sustained press coverage.
Consumer feedback has been very positive, generating a large number
of online reviews with an average Google review rating of 4.4 (out
of 5). Feedback from professional critics has been equally
positive, with just a few examples including reviews in the Miami
Herald ("Time Out Market Miami is the food hall to conquer all food
halls"), the New York Times ("In Brooklyn, a new food hall with
breath-taking views") and the Chicago Tribune ("The chef line up is
dazzling").
Visitors to the markets not only get to experience food from
some of the city's best chefs but also curated, cultural
experiences - a key differentiator versus other more formulaic food
hall offerings. As such, activation of the markets has been a key
focus from the outset, "bringing the magazine to life" through a
number of signature events (e.g. around Super Bowl, Valentines
Day), art installations (e.g. during Miami's Art Basel) and
smaller-scale, regular activations (e.g. live music, comedy) -
which engage locals and tourists alike, and grow awareness of the
markets.
As with the early stages of Time Out Market Lisbon, the
understanding of the US consumer base and local seasonality
patterns is evolving and the Group is developing targeted plans for
incremental marketing investments to supplement Time Out's
extensive owned Media platforms. The team is also exploring how
best to integrate online and app collection and delivery services
into the markets.
Key operational insights have also been leveraged from each
opening and rapidly applied across the portfolio, helping the Group
gradually deliver improvements to beverage mix and margins, as well
as efficiencies in staffing levels and outsourced services such as
cleaning and security.
At the time of publication of this announcement, the six Markets
have been temporarily closed in support of the local and global
efforts to contain the spread of COVID-19. During this period, the
Group will reduce the largely variable cost base and work to
support its staff and concessionaires.
Planned openings
Time Out Dubai, a management agreement which was signed in April
2019 with Emaar Malls, is currently expected to open before the
start of the Expo 2020 Dubai in October 2020. Located in Souk Al
Bahar, an Arabian-style retail, entertainment and dining
destination in the heart of downtown Dubai, the market will offer a
unique waterfront position next to the iconic Burj Khalifa. It will
occupy 30,000 sq ft, accommodating 670 seats and will include food
from 16 of the top chefs and restauranteurs of the city, three
lounges and cultural experiences. Construction has commenced, and
curation is progressing very well with approximately 50% of
concessionaire agreements already signed.
Beyond 2020, the schedule of planned Time Out Market openings
remains strong, including a mix of owned & operated and
management agreements:
-- London Waterloo (owned & operated) - currently expected
to open in late 2021, construction is underway and curation is
expected to commence in the second half of this financial year
-- Porto (owned & operated) - the project was formally
approved by the Directorate-General for Cultural Heritage during
the year, having consulted relevant authorities including UNESCO.
Full planning was submitted in January 2020 and an opening in H1
2021 is currently being targeted
-- London Spitalfields (owned & operated) - the revised
planning submission has been completed and the Group awaits the
outcome.
-- Prague (management agreement) - expected opening date in 2023
The current schedule of openings may be subject to delays should
the COVID-19 outbreak lead to a prolonged period of disruption.
Development pipeline
There is a strong and growing pipeline under review of other
potential locations in cities around the world. The Group is
particularly encouraged by the level of interest from potential
management agreement partners, with landlords viewing Time Out
Market as an excellent solution for their footfall
requirements.
Management agreements now appear to offer significantly greater
potential for the Group than initially envisaged, with these
projects requiring no capital outlay and provide long-term
visibility over guaranteed revenues.
Time Out Media trading overview
Unaudited Audited
2019 2018 Change
GBPm GBPm %
Digital advertising 16.4 14.9 10%
Print 14.8 15.4 (4)%
Live events 1.9 2.4 (21)%
Local Marketing Solutions 1.9 2.1 (10)%
--------------------------- ---------- -------- -------
Advertising sales 35.0 34.8 1%
E-commerce 3.9 3.8 3%
Franchising 1.2 1.2 0%
Net revenue 40.1 39.8 1%
--------------------------- ---------- -------- -------
Gross Profit 26.8 24.0 12%
Gross Margin % 67% 60% 7%
Operating expenditure (29.0) (31.9) 9%
Adjusted EBITDA (2.2) (7.9) 72%
=========================== ========== ======== =======
Time Out Media P&L overview
2019 was an outstanding year for Time Out Media, with rapid
progress made with the implementation of the operational plan
(announced in 2018) to focus on growing higher margin activities
and delivery of operational efficiencies. Net revenue growth of 1%,
combined with further gross margin improvements of seven percentage
points, drove growth in gross profit of 12%.
The shift in revenue mix to higher margin Digital Advertising
and E-commerce was a key contributor to this improvement in gross
margin. Importantly, material gains were also delivered within each
Media business line as a result of greater commercial discipline
and other operational improvements: Print gross margins increased 6
percentage points to 41% with the optimisation of frequency of
certain print publications, alongside changes to printing and
distribution, and better yield management; Live Event gross margins
improved 27 percentage points to 46% with a greater focus on
sponsor-led events, typically as part of a creative solutions; and
E-commerce gross margins improved 8 percentage points to 82%, as
the Company continued to focus on organic traffic.
This greater focus has also enabled further overhead
efficiencies, with operating expenditure savings of 9% (GBP2.8m) in
the year, most materially in headcount-related costs but with
further gains across almost all other cost categories.
The combined impact of the above has been a GBP5.7m (72%)
improvement in adjusted EBITDA to a loss of GBP2.2m (2018:
GBP7.9m), with Media reaching the key milestone of GBP0.7m positive
adjusted EBITDA in H2. EBITDA improvements were delivered across
all countries, with the most significant gains in the UK (GBP2.7m)
and US (GBP1.7m), where Media has its largest presence. The US
Media business, in particular, is critical to the growth of Time
Out Market in North America and, although it remains loss-making,
is expected to deliver further EBITDA gains in the medium term.
Digital advertising
Total Advertising sales grew 1% in the year which is an
encouraging performance in the context of the wider media landscape
and the operational changes outlined above. Importantly, the strong
focus on digital advertising has resulted in its revenues growing
10% in the year, with further notable gains in the UK (15% growth),
US (5%), Portugal (104%), Spain (33%) and Hong Kong / Singapore
(57%). While digital advertising revenue fell in France (-24%) and
Australia (-10%), both countries still delivered positive EBITDA in
the period.
Programmatic advertising growth of 28% has been the key driver
of the increase in Digital advertising revenue, benefiting from
audience growth as well as the restructuring and training of sales
teams to build more strategic relationships with agencies and media
trading desks. Tactics were also deployed to increase yields on
remnant inventory - including the global implementation of
'Prebid', an open source technology which allowed our supply-side
platform (SSP) partners to bid against each other, and 'Open
Bidding' to enable SSP bidding partners to compete with Google AdX.
During the period, due to industry-wide agency and client concerns
around transparency and fraud across the programmatic sector, the
Company aggressively pursued Private Marketplace (PMP) and
Programmatic Guaranteed (PG) business, enhanced with Time Out's
first party data, which further helped drive higher yields. Other
product developments, which helped deliver incremental direct and
programmatic video revenues, included changes to Time Out's video
player technology which enabled the business to serve individual
and carousel players with Time Out content.
Integrated Creative Solutions have been the other key driver of
digital advertising growth - incorporating brand content, which
leverages Time Out's in-house editorial capabilities, and social
display (as a rich media format). Sales teams have been upskilled
with digital capabilities and a strategic focus has been on
ensuring outgoing creative solution proposals include a higher
digital component.
Post year-end, in the wake of the COVID-19 outbreak anticipated
travel and leisure advertising campaigns have been suspended or
cancelled. Whilst this is expected to impact near term trading, the
quality of Time Out's content and audience will remain desirable
when digital marketing spend returns.
Print advertising
Print revenue, which declined 4% (approximately 2% adjusted for
the aforementioned changes to US print frequency), was a highlight
of 2019 within a global market in which magazine advertising is
estimated to have declined 10% (Source: Group M, This Year Next
Year, Dec 2019). This is further evidence of the authority of the
Time Out brand and the desirable audience its high-quality content
continues to reach.
The UK has been the standout success, with Print revenue growth
of 6% in a UK market that declined 12% in 2019 (Source: Group M).
While primarily driven by the sale of all available cover wraps in
the year, custom print (as part of wider creative solutions) has
also played a key role in this growth. For example, to drive
consideration of the new Seat Tarraco, Time Out created bespoke
Time Out Magazines in Glasgow, Manchester and Birmingham for the
first time in its 50-year history. 300,000 magazines were
distributed by co-branded teams and all content was also
represented online and amplified with high impact display ads,
native placements, dedicated emails and across Time Out's social
platforms.
Post year-end, in response to the COVID-19 outbreak printed
magazines have been suspended in all cities. Initiatives such as a
temporary "Time In" rebrand, the digitisation of the magazine and
house bound relevant content have sought to retain the Print
audience during this period of disruption.
Other revenues
The live event revenue decline was directly linked to the change
of strategy to focus on sponsor-led events as part of higher-margin
creative solutions, with gross profit growing by GBP0.5m (95%) in
the period. Examples included an experiential-driven campaign for
Nescafe's Azera brand, for which Time Out programmed a series of 15
street events supported by a media campaign which included printed
content. In the US, similar activations were staged for clients
such as Netflix and Nickelodeon and increasingly were integrated
with Time Out Market, where activations included custom cocktails
and tasting dinner for brands such as Fever Tree and Tap
Portugal.
Local Marketing Solutions (formerly Premium Profiles) had a more
challenging period with weak new subscriber acquisition in London
and Paris, impacted by turnover within the sales team and difficult
high street conditions for local operators.
E-commerce (formerly Affiliates & Offers) grew 3% in the
year, primarily relying on organic traffic. Technology improvements
and a strong mix of deals drove higher conversion rates of Offers.
Affiliates also had a strong year with all lines of business
growing in light of improvements to content in key verticals (e.g.
Hotels, Attractions), as well as the addition and renegotiation of
key partnerships.
Financial Review
Unaudited Audited
2019 2018
GBPm GBPm
Gross revenue(1) 77.1 48.8
Concessionaire share (13.8) -
----------------------------------------------- ---------- --------
Net revenue(1) 63.3 48.8
Gross profit 46.4 32.0
Operating expenses (51.1) (40.1)
----------------------------------------------- ---------- --------
Adjusted EBITDA (4.7) (8.1)
Property lease costs 4.0 -
Depreciation & amortisation
- Intangible and property, plant & equipment (8.4) (5.7)
- Right-of-use assets (3.0) -
Share-based payments (1.0) (0.8)
Exceptional items (0.3) 3.2
----------------------------------------------- ---------- --------
Operating loss (13.4) (11.4)
Finance income 0.7 0.1
Finance costs (7.8) (2.6)
Share of associate's loss and fair value
gain - (1.2)
Loss before tax (20.5) (15.1)
=============================================== ========== ========
(1) See Appendix 1 for the explanation of gross and net revenue
Revenue
Gross revenue for the year increased by 58% to GBP77.1m (2018:
GBP48.8m). While this was primarily driven by the expansion of Time
Out Market in the period, with five new markets opening in North
America since May 2019, it is also heavily impacted by the revenue
recognition for food sales in the new markets. Previous financial
reporting of Time Out Market revenue has almost exclusively related
to Time Out Market Lisbon, where revenue is reported after
concessionaires' share due to differences in the operational model
adopted. Therefore, and as explained further in Appendix 1, an
adjusted measure of 'net revenue' (which excludes concessionaires'
share of food sales) has been introduced to provide management and
investors with a clearer understanding of the underlying growth
trend. On this basis, Group net revenue increased by 30% in the
period to GBP63.3m (2018: GBP48.8m).
Gross margin
Group gross profit increased by 45% in the period, benefitting
from the improvement in gross margin (as a percentage of net
revenue) from 66% to 73%. This seven percentage-point gain was
primarily driven by Time Out Media, which improved its gross margin
from 60% to 67% in the year through its operational focus on
growing its highest-margin digital activities, while also improving
the gross margin across all business lines by implementing a range
of initiatives including curtailing low margin live events,
optimising the frequency and distribution of print, and focussing
e-commerce activities on organic traffic. Group gross margin will
further benefit in future from the shift of revenue to Time Out
Market which delivered 83% gross margin in 2019 which was slightly
lower than prior year due to the higher proportion of Time Out bar
sales in new markets than in Lisbon.
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 reported
operating loss of the Group by GBP1.0m and decreased net assets at
31 December 2019 by GBP4.2m.
Operating expenses
The significant growth in operating expenses in the year of 27%
(a GBP10.8m increase) was driven by Market, which increased its
total operating expenses by GBP13.3m in the period. This was
primarily a result of the trading-related operating costs of the
new markets (which increased by GBP10.6m), but also included
investments in the pre-opening costs of each market (GBP2.0m) and
the central infrastructure (GBP0.7m) required to scale the
operation globally. This increase was partially offset by Media,
which reduced its operating costs by GBP2.9m (a 9% year-on-year
saving) due to the continued delivery of headcount-related
efficiencies and savings across the majority of other cost
categories.
Adjusted EBITDA
Adjusted EBITDA is stated before interest, taxation,
depreciation, amortisation, share-based payments, share of
associate's losses and exceptional items. Although IFRS 16 was
adopted in the period, the GBP4.0m cost of property leases has been
included in the operating expenses discussed above, as the Board
believes it provides a fairer reflection of the operating margins
of the business.
The 42% growth in Group adjusted EBITDA to a GBP4.7m loss (2018:
GBP8.1m loss) was entirely as result of Media delivering a 72%
year-on-year improvement to an EBITDA loss of GBP2.2m (2018:
GBP7.9m) - driven by 1% net revenue growth, a seven
percentage-point increase in gross margin and 9% operating cost
savings. Importantly, the division also achieved the key milestone
of positive EBITDA in H2.
This was partially offset by the investment in Time Out Market's
cost base with the division delivering an EBITDA loss of GBP0.6m in
the period (2018: GBP1.4m profit). Corporate costs also increased
by GBP0.3m in the period due to higher executive remuneration.
Operating loss
The reported operating loss was GBP13.4m (2018: GBP11.4m), a 17%
year-on-year improvement, and includes an additional net benefit of
GBP1.0m from the adoption of IFRS 16 - comprising the saving of
GBP4.0m of property lease costs (previously reported in operating
expenditure), offset by GBP3.0m of incremental depreciation on the
right of use asset created in relation to these property leases.
Other items of note within the operating loss include:
Exceptional items
The net exceptional cost of GBP0.3m is materially lower than the
prior year on a like-for-like basis and 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). The net exceptional gain in the
prior year of GBP3.1m was driven by the GBP4.5m profit on disposal
of the Group's investment in Flyt Limited, partially offset by
staff restructuring costs of GBP0.8m and a GBP0.6m non-cash charge
relating to the revaluation of the option over the minority
interest in 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 12.9m options
outstanding at 31 December 2019 (31 December 2018: 9.7m).
Depreciation
The depreciation charge of GBP3.6m (2018: 1.1m) increased by
GBP2.5m, driven principally by the additional depreciation
following the construction and fit-out of the new Time Out Markets
(GBP2.7m). A further depreciation charge of GBP3.0m was recognised
on right-of-use assets after the implementation of IFRS 16.
Amortisation
The amortisation of intangible assets of GBP4.7m (2018: GBP4.6m)
includes GBP2.2m (2018: GBP2.2m) relating to acquired intangible
assets and GBP2.3m (2018: GBP2.2m) relating to other intangible
assets, primarily acquired and internally developed software.
Net finance costs
Net finance costs of GBP7.1m (2018: GBP2.5m) primarily relates
to interest on debt of GBP4.4m (2018: GBP1.9m) - driven by the
additional GBP32.7m of debt funding secured since 1 July 2018 -
coupled with the foreign exchange gain on financial liabilities of
GBP0.6m (2018: GBP0.3m loss), and the amortisation of deferred
financing costs of GBP0.3m (2018: GBP0.1m). In addition, the
interest costs in respect of lease liabilities following the
implementation of IFRS 16, was GBP3.0m in the period.
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 $1.27 (2018: $1.34). The operations reporting in
euros have been consolidated at a rate of EUR1.14 (2018:
EUR1.13).
Cash and borrowings
Unaudited Audited
31 December 31 December
2019 2018
GBPm GBPm
Cash and cash equivalents 13.4 24.3
Borrowings (43.3) (29.1)
------------ ------------
Adjusted net (debt) (29.9) (4.8)
IFRS 16 Lease liabilities (32.4) -
------------ ------------
Net (debt)/ cash (62.3) (4.8)
------------ ------------
Borrowings include 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
from Incus Capital Advisors, S.L. ("Incus"), principally on the
same economic terms as the EUR9.0m loan secured in November 2017.
At 31 December 2019, the balance of the Incus debt, including
accrued interest was GBP19.6m.
The Group also successfully completed a GBP17.1m cash placing in
October 2019. The Group also continues to have an option over an
additional debt facility of GBP18.0m should further liquidity be
required.
Outlook
As a result of the significant progress made in 2019, Management
remain confident in the Group's long-term prospects. However, in
the near term the COVID-19 pandemic has had, and will continue to
have, a significant impact on trading. We have already proceeded
with the temporary closure of the six Time Out Markets, for a
period as yet determined, and we have seen a slowing of advertising
revenues.
We are trading in an environment of rapidly changing
circumstances and are still assessing the full impact of COVID-19,
which will be dependent on the duration and severity of the virus
and the response by governments and consumers alike. The outcome of
this assessment may result in a material uncertainty over the
Group's ability to continue trading as a going concern. As a
consequence, we anticipate the audit report for the year ended 31
December 2019 to make reference to a material uncertainty related
to going concern. In the meantime, the Group has cash reserves of
GBP11.4m as at 29 February 2020 and a previously announced undrawn
debt facility of GBP18m, alongside various cost mitigations and
other available options.
Julio Bruno
Chief Executive Officer
Appendix 1
Unaudited summary consolidated income statement
For the year ended 31 December 2019
Time Out Time Out Corporate
Market Media costs Total
GBP'000 GBP'000 GBP'000
Gross revenue 37,086 40,054 - 77,140
Concessionaire share (13,857) - - (13,857)
----------------------------------- --------- --------- ---------- ---------
Net revenue 23,229 40,054 - 63,283
----------------------------------- --------- --------- ---------- ---------
Gross profit 19,580 26,847 - 46,427
Administrative expenses (23,859) (34,041) (1,886) (59,786)
----------------------------------- --------- ---------
Operating loss (4,279) (7,194) (1,886) (13,359)
Adjusted EBITDA (614) (2,203) (1,886) (4,703)
Exceptional items 28 (306) - (278)
Share based payments - (1,048) - (1,048)
Property lease costs 2,232 1,729 - 3,961
----------------------------------- --------- --------- ---------- ---------
EBITDA 1,646 (1,828) (1,886) (2,068)
Amortisation of intangible assets (825) (3,841) - (4,666)
Depreciation of property, plant
and equipment (3,308) (367) - (3,675)
Depreciation of right-of-use
assets (1,792) (1,158) - (2,950)
----------------------------------- --------- --------- ---------- ---------
Operating loss (4,279) (7,194) (1,886) (13,359)
----------------------------------- --------- --------- ---------- ---------
Finance income 690
Finance costs (7,809)
---------
Loss before income tax (20,478)
Income tax charge (430)
Loss for the period (20,908)
---------
In previous periods, the revenue in the Income Statement
includes all Media revenue, revenue generated from our Lisbon
market (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,
events and co-working spaces) and any fees from management
agreements.
During the year, the Group opened four new owned and operated
markets in which all transactions are made directly between Time
Out Market and the consumer. The Group also opened Time Out Market
Montreal, its first management agreement, in which Time Out
operates the bar and recognises the related revenue, in addition to
the on-going management fee. This contrasts with Lisbon market
where 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 the 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 year as property lease costs (GBP4.0m) are
no longer included within administrative expenses and instead are
replaced by additional depreciation costs (GBP3.1m) and interest
costs (GBP3.0m). 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.
Unaudited summary consolidated income statement
For the year ended 31 December 2018
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)
Adjusted EBITDA 1,374 (7,896) (1,595) (8,117)
Exceptional items (514) (813) 4,534 3,207
Share based payments - (838) - (838)
----------------------------------- --------- --------- ---------- ---------
EBITDA 860 (9,547) 2,939 (5,748)
Amortisation of intangible assets (834) (3,758) - (4,592)
Depreciation of property, plant
and equipment (626) (443) - (1,069)
Loss on disposal of property,
plant and equipment (22) (3) - (25)
----------------------------------- --------- --------- ---------- ---------
Operating loss (622) (13,751) 2,939 (11,434)
----------------------------------- --------- --------- ---------- ---------
Finance income 76
Finance costs (2,616)
Share of associate's loss (1,198)
---------
Loss before income tax (15,172)
Income tax charge (317)
Loss for the period (15,489)
---------
Appendix 2
Unaudited Consolidated Statement of Financial Position
Year ended 31 December 2019
Unaudited Audited
Year ended Year ended
31 December 31 December
2019 2018
------------- -------------
GBP'000 GBP'000
Assets
Non-current assets
Intangible assets - Goodwill 50,068 51,703
Intangible assets - Other 14,528 17,735
Property, plant and equipment 48,763 25,716
Right-of-use assets 28,309 -
Other receivables 5,815 5,154
147,483 100,308
------------- -------------
Current assets
Inventories 1,359 376
Trade and other receivables 15,801 15,118
Cash and cash equivalents 13,420 24,347
30,580 39,841
------------- -------------
Total assets 178,063 140,149
------------- -------------
Liabilities
Current liabilities
Trade and other payables (21,413) (20,352)
Borrowings (4,695) (1,106)
Lease liabilities (2,636) -
(28,744) (21,458)
------------- -------------
Non-current liabilities
Trade and other payables (1,271) (1,451)
Borrowings (38,616) (28,004)
Lease liabilities (29,786) -
Deferred tax liability (1,749) (2,357)
(71,422) (31,812)
------------- -------------
Total liabilities (100,166) (53,270)
------------- -------------
Net assets 77,897 86,879
------------- -------------
Equity
Called up share capital 148 135
Share premium 123,290 106,937
Translation reserve 5,647 8,941
Capital redemption reserve 1,105 1,105
Retained earnings / (losses) (47,420) (28,288)
Total parent shareholders' equity 82,770 88,830
------------- -------------
Non-controlling interest (4,873) (1,951)
Total equity 77,897 86,879
------------- -------------
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
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