Time Out Regulatory News (TMO)

28 March 2019

Time Out Group plc

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

Results for the year ended 31 December 2018

A year of significant progress

Financial highlights

· Group revenue: 10% year-on-year growth to £48.8m (2017: £44.4m), driven by a combination of 5% underlying growth(1) and the full year impact of 2017 acquisitions(2)

· Group gross profit: strong growth of 30% (23% underlying), driven by material improvements in gross margins to 66% (2017: 56%)

· Time Out Market: revenue growth of 51% to £9.0m, with Time Out Market Lisbon delivering strong EBITDA in the period of £4.3m, up 95% year-on-year (2017: £2.2m)

· Time Out Media: revenue growth of 4% to £39.8m (-3% underlying), primarily driven by digital advertising growth of 23% (12% underlying); offset by underlying reductions in Live (-40%) and Print (-7%), impacted by the strategic decision to discontinue certain low margin events and print publications

· Adjusted EBITDA(3): significantly reduced loss of £8.1m (2017: £14.2m loss), in line with expectations and a £6.1m (43%) improvement on prior year

· Operating loss: loss of £11.5m (2017: £24.6m), including the £4.5m gain on disposal of the investment in Flyt

· Net debt: £4.8m at 31 December 2018, which includes available cash of £24.3m and debt of £29.1m

· Funding: New €10 million loan secured in March 2019, supporting growth ambitions for Time Out Market

Operational highlights

· Time Out Market division: strong momentum continues

o Continued success of Time Out Market Lisbon, with a record 3.9m visitors (2017: 3.6m)

o Five new markets on track to open in North America this year, including Miami (opening in Q2), New York (Q2), Boston (Q2), Chicago (Q3), as well as Time Out Market's first management agreement in Montréal (Q4)

o Time Out Market London-Waterloo conditional lease agreement (planned 2021 opening) and Prague management agreement (2022 opening) signed

· Time Out Media division: significant improvement in economics

o Gross margin improvements - strong operational focus throughout 2018, helping drive a 9% (absolute) improvement to 60% (2017: 51%); key measures included the discontinuation of low margin live events, prioritisation of organic traffic and optimisation of US print frequency and distribution

o Overhead savings - delivery of significant efficiencies throughout 2018 which will further benefit 2019

(1) Underlying measures are presented on a constant currency basis and exclude any 2018 results from acquisitions(2) in the period prior to the first anniversary of joining the Time Out Group

(2) Acquisitions include the Australia franchisee (acquired June 2017) and the Spain franchisee (acquired September 2017), and the addition of Hong Kong (in May 2017) and Singapore (in October 2017)

(3) Adjusted measures are stated before interest, taxation, depreciation, amortisation, share based payments, share of associate's loss and exceptional items

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

"I am pleased to report that Time Out has achieved a number of key milestones in the last twelve months. Our Media business materially grew its digital advertising revenue, in a challenging market, and its focus on the most profitable activities drove a significant improvement in the economics of the division. The Group published its award-winning content in 207 more cities in 2018, bringing the total to 315. Time Out Market Lisbon was visited by almost four million people, driving 95% growth in EBITDA to £4.3m. As part of the roll out of the Time Out Market format, four new locations have been announced, including two management agreements, bringing the total number of contracted sites to ten.

In light of the progress made in 2018, we are confident in the outlook for the Group in the year ahead. 2019 will be a transformative year as Time Out opens its doors to five new markets in Miami, New York, Boston, Chicago and Montréal. By the end of the year, Time Out will have markets totalling 185,000 sq ft with almost 4,000 seats and offering food from 120 of some of the best chefs in these cities. Most importantly, whether on our print, digital or physical platforms, we will continue to focus on curating the best of the city, helping our global audience go out better."

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

Notes to editors

About Time Out Group plc

Time Out Group is a global media and entertainment business that helps people make the most of the city. Its digital and physical presence comprises websites, mobile, magazines, Live Events and Time Out Market. Across these platforms Time Out distributes its curated content around the best food, drink, music, theatre, art, travel and entertainment across 315 cities and in 58 countries. Time Out, listed on AIM, is headquartered in the United Kingdom. 

FORWARD-LOOKING STATEMENTS 

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

Chief Executive's Statement

Overview

Time Out Group is a global media and entertainment business that helps people explore and enjoy the best of the city through its two business divisions, Time Out Media (previously reported as Time Out Digital) and Time Out Market. Time Out Media's digital and physical media proposition comprises websites, mobile, social media, magazines and live events. Across these platforms, Time Out distributes its high-quality content - written and curated by local expert journalists - around the best food, drinks, culture, travel and entertainment in 315 cities and 58 countries. Since its launch in 1968, Time Out has become a global brand that advertisers and consumers love and trust. Time Out Market is a food and cultural market leveraging the Time Out brand to bring 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 new openings are scheduled in 2019 in Miami, New York, Boston, Chicago and Montréal, with a further pipeline of other global locations.

Operational review

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

(1) O&O is the Time Out 'owned and operated' business. Monthly average is calculated as a rolling 12-month average

(2) Members who have opted in and engaged with Time Out in the last 12 months

Audience & traffic development

During the year, the Group achieved an average global monthly audience reach of 144 million, 33% lower than prior year. This decline was primarily the result of a Facebook algorithm change in early 2018 which de-prioritised publishers' content, heavily impacting many online content brands and driving Time Out's average Facebook reach from 178 million in 2017 to 106 million in 2018. Although this has affected Time Out's social media reach, the average number of social media followers has increased by 16% to 15.6m and Time Out continues to grow other platforms, such as Instagram, where average monthly video views have increased by 37% and followers by 149%.

Despite this decline in overall social media reach, which only accounts for 20% of Time Out website traffic, the Group grew O&O unique visitors by 4% in the period. This is a clear reflection of the attractiveness and excellent organic search performance of Time Out's unique content, with SEO traffic increasing 13% and now representing 70% of Time Out web traffic. Lisbon web traffic grew particularly well (+45%), further demonstrating the halo effect that Time Out Market has on Time Out Media, the Group's media division.

To help grow audience through content, Time Out has significantly increased the number of cities with expert local curated content to 315 (2017: 108), with the creation and global distribution of the DO list, EAT list and DRINK list. The results of this initiative have been very encouraging with an incremental one million visits per month. During 2018, the Group also launched a Madrid magazine, as well as a Hong Kong magazine in traditional Chinese, to complement the digital, mobile and social presence in those cities.

Strong progress with the Group's CRM strategy was made during the year, with opted-in members growing by 16% to 3.3 million, despite the implementation of GDPR. A new CRM system has enabled greater personalisation and targeting of communication with material year-on-year improvements in all key metrics such as delivery rates (from 80% to 98%), open rates (10.4% to 17.4%) and click-through rates (0.8% to 1.4%). New placements have been implemented on desktop and mobile to make email sign-up easier and members continue to also be acquired through wifi sign-up in Time Out Market Lisbon and the effective use of competitions.

Throughout the year, Time Out Group generated over 1,000 pieces of press coverage globally across traditional and digital media. This PR effort was focused on increasing awareness around what the business stands for today, and activations included Time Out's 50th anniversary and various Time Out Market PR announcements which consistently drove positive sentiment ahead of the 2019 market openings. In June 2018, Time Out won the International Media Brand of the Year which was awarded by the Professional Publishers Association (PPA), one of the UK's leading media bodies. The judges chose Time Out for this prestigious award as it is a "genuinely global brand" and because of its "incredible international reach and growth".

Business performance

The performance of the Group is as follows:

(1) Underlying measures are presented on a constant currency basis and exclude any 2018 results from acquisitions(2) in the period prior to the first anniversary of joining the Time Out Group

(2) Acquisitions include the Australia franchisee (acquired June 2017) and the Spain franchisee (acquired September 2017), and the addition of Hong Kong (in May 2017) and Singapore (in October 2017)

TIME OUT MEDIA

Digital advertising

Digital advertising revenue grew 23% year-on-year (12% underlying) with the strongest growth coming from the UK (17%) and Portugal (40%), the latter of which continues to gain from the halo effect of Time Out Market. US digital advertising revenue grew 1% in the year. The division continues to benefit from ongoing technology investments, with ad viewability improving 28 percentage points to an average of 73.5% in December 2018, load speeds reducing by 38% by December 2018 and new video and programmatic capabilities being launched.

The Group's global approach and proposition has continued to reap rewards during the year and cross-platform creative solutions remain an increasingly important driver of digital advertising revenue with high-profile campaigns in the year for clients including Facebook, Deliveroo, British Airways, Cadburys, Unilever, TAP, Verizon, Samsung, Google, Apple and Netflix. One such example is the Transport for London (TfL) partnership which ran for nine months in 2018. As a London-centric advertiser, the Time Out audience was an ideal fit for TfL. The campaign combined Time Out editorial with high-impact digital and print formats to enable TfL to transmit its message and shift awareness of TfL price variances in off-peak times, and to change customer behaviour to increase engagement with activities around London. Time Out also partnered with Apple, helping the brand reach its global audience and generate awareness of the free in-store "Today at Apple Classes". Time Out was able to deliver on the international brief by serving high-impact rich media takeovers in San Francisco, Chicago, New York, London, Milan, Singapore, and Dubai. The Group's focus on certain key sectors has also paid dividends with travel sector advertising revenue doubling in the year.

The development of the Group's programmatic capabilities across all markets was a key priority in 2018, with revenue growing 31% year-on-year. The most significant technology improvement was the implementation of 'header bidding', using Prebid open source technology. Once in place, this enabled the media sales team to expand the number of exchange partners Time Out works with (including programmatic video advertising) and to create a robust bidding environment for in-page inventory that has driven CPM increases.

Print advertising

Global print revenue of £15.4 million was slightly down year-on-year by 1% (-7% underlying) but was impacted by the strategic decision to reduce the frequency of some US print publications, as outlined below. The UK had a strong year, growing magazine revenue by 2% in a sector which is estimated to have declined by 8%(1); this is further evidence of the quality and authority of the brand in its 50th year, as well as the desirable audience that Time Out continues to reach. Key drivers were strong sales of cover wraps and successful Kids, Property and Travel supplements during the year. 

US print performance has been more challenging, with revenue down 36% year-on-year. This has been heavily impacted by significant changes throughout the US sales organisation, challenging market conditions (US print sector declined 17%(2)) and the strategic decisions to reduce the frequency of the New York magazine to fortnightly and discontinue low margin publications in smaller cities such as Austin and Philadelphia. 

During the year, new magazines were launched in Madrid and Hong Kong, and there has been growing demand for custom print solutions from clients across all markets, especially Tourism Boards.

Combined with the aforementioned changes to US frequency, decisive action has been taken during the year to deliver efficiencies in print, paper and distribution, with gross margin improvements achieved in the second half of the year which are expected to continue into 2019.

Source: (1) Group M, This Year Next Year, Dec 2018; (2) Magna Advertising Forecasts (Winter 2018 update), Dec 2018

E-commerce (including Live)

Affiliate & Offers revenue grew 14% year-on-year despite transaction volumes falling 2%, the latter of which was a direct result of the decision to cut spend on traffic acquisition and to focus on higher margin organic traffic. This strong revenue growth was driven by higher value Offers - primarily the roll-out of restaurant boxes, which increased from five, in Lisbon and London in 2017, to 14 (including new boxes in Spain and New York). Due to the above, Affiliates & Offers gross margins materially increased year-on-year from 18% to 52%.

Overall e-commerce (including Live) revenue declined 14% year-on-year, and transaction volumes by 12%, but this was entirely driven by Live events (38% year-on-year revenue decline) and the direct result of the strategic decision to discontinue low margin events, focusing instead on larger, sponsor-led events or those forming part of a (typically cross-platform) creative solution. An example in the year of such a campaign was an integrated partnership for Deliveroo, combining inspiring content about the best of London's food scene with digital and print media exposure promoting four unique Food Battles. From Battle of the Burger to Fried Chicken Prize Fight, over 1,000 paying customers attended each event to try superb cuisine cooked by top vendors, with one winner crowned at the end of each event.

Premium Profiles

Active listers fell 15% year-on-year, impacted by a combination of London high street conditions (with restaurants and bars facing budgetary constraints) and staff changes within the sales team. In spite of this decline, revenue held up well (-1% year-on-year) reflecting the increasing average order values of new listers (through bundling of subscriptions and add-on advertising solutions), a focus on upselling to existing listers and the relatively low order values of listers which have churned during the period.

International franchises

Revenue from international franchises decreased 17% year-on-year. This was impacted by Australia, Spain, Hong Kong and Singapore franchises becoming O&O markets in 2017, with underlying revenues down 10% year-on-year. Despite this decline, this business line continues to make a material contribution to Time Out Media given the limited associated costs. 

TIME OUT MARKET

The Time Out Market strategy comprises two business models, Owned & Operated (e.g. Time Out Market Lisbon) and Management Agreements (e.g. Time Out Market Montréal). Under both models, Time Out Market will take responsibility for the design, curation, branding and day-to-day operational management of the market, with the market primarily generating revenue from a share of food turnover and bar sales. Under a management agreement, however, the real estate partner funds all capital and operational expenditure and, in return, the Group will receive a pre-development fee and, once the market is trading, a share of revenue and profit of that market (subject to a minimum guaranteed fee). While the profit potential is therefore lower under a management agreement, it enables Time Out to scale the Time Out Market concept and expand the brand, with no capital requirement, especially into territories where Time Out does not currently have a material presence.

2018 has been a year of significant progress for the Time Out Market division on all fronts. Time Out Market Lisbon had another outstanding year of trading, with a record 3.9 million visitors helping drive growth in total tenant turnover by 14%. Along with the successful implementation of improved contract terms with tenants, this has enabled Time Out Market Lisbon to deliver 48% revenue growth and EBITDA of £4.3m (+95%).

In addition to the highly successful Lisbon market, the Group is on track to launch five new markets in North America in 2019 with unparalleled chef line-ups and exceptional PR coverage.

• Miami - Scheduled to open in Q2 2019. Just off Miami South Beach's Lincoln Road, at 1601 Drexel Avenue, Time Out Market Miami offers 18 kitchens, three bars, a demo kitchen and an art space across 18,200 sq ft, accommodating 320 seats indoors and 120 outdoors. The fully signed line-up features some of Miami's most celebrated chefs including James Beard Award-winner Norman van Aken; Top Chef Season 13 winner Jeremy Ford; Antonio Bachour, one of the world's greatest pastry chefs; Suzy Batlle with her legendary creamery Azucar and Chef of the Year nominee Michael Beltran. 

• New York - Scheduled to open in Q2 2019. Located in DUMBO, Brooklyn at 55 Water Street, Time Out Market New York will occupy two floors of the historic Empire Stores. The original site has been extended, with additional riverside access space secured. A rooftop will offer impressive views of the Brooklyn Bridge and lower Manhattan skyline. Across 21,000 sq ft, there will be 21 kitchens, three bars and a performance stage, accommodating 630 seats indoors and outdoors. The chef line-up is almost complete and includes Nur, Chef Ivy Stark, pizza legend Juliana's, Reserve Cut (with a fully Kosher concept) and internationally-renowned Clinton St. Baking Company & Restaurant. 

• Boston - Scheduled to open in Q2 2019. Time Out Market Boston will be in the 401 Park Drive building at the heart of the Fenway neighbourhood, home to city's highest concentration of cultural institutions, nightlife, shopping, universities and colleges, as well as Fenway Park, home to the Boston Red Sox - all attracting millions of visitors to the area each year. It will showcase 15 kitchens, two bars, a demo kitchen and a retail shop across 25,500 sq ft, accommodating 500 seats indoors and 136 seats outdoors. The inaugural line-up of noted chefs includes James Beard Award winners Tony Maws, Michael Schlow and Tim & Nancy Cushman.

• Chicago - Scheduled to open in Q3 2019 with construction well underway. Located at 916 W Fulton Market - at the centre of the Fulton Market District - the 50,000 sq ft space will feature 18 kitchens, three bars, a demo kitchen and retail area across three floors, accommodating 600 seats indoors and 140 outdoors. Time Out Market Chicago will house an event venue, a viewing and entertainment platform with bleacher seating and a rooftop bar. The first notable and award-winning chefs to join the line-up were announced in March 2019 and include Brian Fisher of Michelin-starred Entente, Bill Kim and Zoe Schor.

• Montréal - Scheduled to open in Q4 2019. In May 2018, the Group entered into the first Time Out Market management agreement in Montréal, partnering with global real estate company Ivanhoé Cambridge. Located in the Centre Eaton de Montréal, on Sainte-Catherine Street downtown, Time Out Market Montréal will showcase 17 top chefs and restaurateurs. Across 40,000 sq ft, there will also be two bars, a demo kitchen, cooking academy, retail shop and cultural stage, accommodating 550 seats. Under the management agreement, Time Out Market will take primary responsibility for branding, curation and day-to-day management, in return for a share of revenue and profit (subject to a minimum guaranteed management fee). This requires no capital expenditure by the Group.

Beyond 2019, the schedule of planned openings, including a mix of owned & operated and management contracts, is very strong until 2022.

• London (Waterloo) - In December 2018, the Board signed a lease agreement for a new Time Out Market in London-Waterloo. Based in the popular South Bank, it will anchor the new retail and leisure development in the former Waterloo Eurostar Terminal. Expected to open in 2021, it will occupy 32,500 sq. ft over two floors and accommodate 17 kitchens and 518 seats.

• Porto - Project plans were submitted to UNESCO for approval in February 2018. In early 2019, a further submission of information was delivered to UNESCO which is now pending approval.

• London (Spitalfields) - With the support of the landlord, the Group has completed design amendments with the formal application due to be submitted in Q2 2019. The potential opening, from late 2020 onwards, is subject to the usual planning and licensing approvals.

• Prague - In Q4 2018, the Group entered into its second management agreement, partnering with Crestyl Group. With opening expected in early 2022, Time Out Market Prague will be located at the heart of the historic city centre near the famous Wenceslas Square, the city's main retail and cultural centre.

The Time Out Market division incurred central costs of £2.5m (2017: £1.8m), in addition to pre-opening costs of £0.8m (2017: £0.2m) in respect of new markets.

The Group continues to consider proposals for new locations in other 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.

Financial performance

Revenue

Reported Group revenue for the year has increased by 10% from £44.4m to £48.8m through a combination of organic growth and the acquisition of Time Out franchise partners in Australia and Spain, and the additions of Singapore and Hong Kong. Underlying growth was £2.0m (a 5% year-on-year increase).

Gross margin

As detailed above, a clear focus of the Group over the year was to improve gross margins, which helped drive a 30% increase in gross profit. The overall gross margin of the Group improved by ten percentage points to 66%. This was predominantly driven by a curtailment of lower margin live events and print publications, improvements to print operations and the prioritisation of organic traffic. In addition, the gross margin in Time Out Market increased by three percentage points to 89% driven by the implementation of improved contract terms with the chefs and restaurateurs in the Lisbon market.

Operating expenditure

Group operating expenditure before exceptional costs, share based payments, depreciation, amortisation and the share of associate income was £40.2m (2017: £38.9m). Of this increase, £2.6m relates to incremental operating costs of acquired businesses. Time Out Media underlying operating costs decreased by £2.5m (a 7% saving). Time Out Market operating costs increased by £1.7m driven by the set-up costs associated with the global roll-out of new markets and the growth in the Lisbon market.

Adjusted corporate costs of £1.6m (2017: £1.9m) include the costs of the central management team and related costs of administering the listed entity. The annual saving is due to non-recurring costs following the 2016 IPO and lower executive remuneration.

Adjusted EBITDA

Adjusted EBITDA represents the profit or loss before interest, taxation, depreciation, amortisation, share based payments, share of associate's loss and exceptional items.

Adjusted EBITDA loss was £8.1m (2017: £14.2m loss), a significant year-on-year improvement of £6.1m driven by higher gross margins, underlying reductions in the overhead cost base and the continuing growth of Time Out Market. This is further reflected by a loss of £1.7m in the second half compared to the H1 loss of £6.4m reported in the 2018 interim statement.

Time Out Media delivered an EBITDA loss of £7.9m (2017: £12.5m loss), with a 40% underlying improvement of £4.9m.

Time Out Market Lisbon delivered an adjusted EBITDA of £4.3m (2017: £2.2 million). After the costs of the central team and pre-opening costs relating to the 2019 market openings, the Time Out Market division delivered adjusted EBITDA of £1.3m (2017: £0.2m). 

Exceptional items

The net exceptional gain of £3.1m (2017: £3.2m loss ) principally relates to the £4.5m profit on disposal of the Group's investment in Flyt Limited, partially offset by staff restructuring costs of £0.8m (2017: £1.8m) and a £0.6m (2017: £0.6m) non-cash charge relating to the revaluation of the option over the minority interest in Time Out Market Lisbon.

Prior year exceptional costs also included £0.5m related to acquisitions and £0.2m of office relocation costs.

Share based payments

The value of these options at issuance has been amortised over the time to vesting of the option. There were 9.7m options outstanding at year end (2017: 10.9m).

Operating loss

The operating loss for the year was £11.5m (2017: £24.6m) including depreciation of £1.1m (2017: £1.1m) and amortisation of intangible assets of £4.6m (2017: £4.4m).

The amortisation of intangible assets included £2.2m (2017: £2.3m) relating to acquired intangible assets. Other intangible asset amortisation, primarily amortisation of software both acquired and internally developed, was £2.3m (2017: £2.1m).

Net finance costs

Net finance costs in 2018 of £2.5m (2017: £0.8m) comprise interest on debt, the foreign exchange loss on financial assets and the amortisation of deferred financing costs.

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 $1.34 (2017: $1.29). The operations reporting in euros have been consolidated at a rate of €1.13 (2017: €1.14).

Associates

The Group disposed of its 37.8% shareholding in Flyt Limited on 21 December 2018. Flyt is a mobile technology platform providing solutions for ordering and payment within the hospitality sector. The investment was accounted for as an associate up to the date of disposal. Group's share of Flyt's loss for the year was £1.2m (2017: £1.0m) and is included as 'Share of associate's loss' on the income statement. The profit on the disposal was £4.5m and is included within exceptional items for the year.

Cash flow

Operating cash flow

The cash used in operations before exceptional costs was £11.1m (2017: £17.9m) including a net working capital outflow of £3.2m (2017: £3.7m).

The capital expenditure cash outflow of £17.9m (2017: £4.4m) includes £15.0m (2017: £1.5m) in respect of the development of new Time Out Market locations and £2.9m (2017: £2.5m) of capitalised software development costs relating to the teams working on the website and digital platforms.

Net cash and borrowings

Cash and cash equivalents represent available cash balances of £18.1m and £6.3m held in escrow accounts to meet the near-term capital expenditure requirements of Time Out Market in Boston and Miami.

The Group has a £20.0m term loan facility agreement with Oakley Capital Investments Limited ("OCI"). The initial facility was for a period of 19 months expiring on 31 October 2019 and had an interest rate of between 10% to 15% depending on amounts drawn. During the year, the facility was converted into a Loan Note agreement, with an extended term to 31 October 2020. In return for granting security over certain assets, the previous interest rate mechanism was also replaced with a flat rate of 12%. At year end, the full facility has been drawn with the proceeds used to fund future Time Out Market developments.

Furthermore, the option over an additional debt facility of £18.0m remains available should the Board deem it in the best interests of the Group and its shareholders.

In March 2019, Time Out Market increased its current loan from Incus Capital Advisors, S.L. by an additional €10.0m, principally on the same economic terms as the €9.0m loan secured in November 2017.

Outlook

The significant progress made in 2018 is expected to continue in 2019 with Time Out Market opening five new markets and Lisbon delivering strong EBITDA growth. The economics of Time Out Media will continue to improve as a result of the Group's strong focus on digital advertising growth, gross margin improvements and overhead efficiencies.

Management remains confident in the trading outlook for the year ahead.

Julio Bruno

Group Chief Executive Officer

28 March 2019

Consolidated Income statement

Year ended 31 December 2018

Consolidated Statement of Other Comprehensive Income

Year ended 31 December 2018

Consolidated Statement of Financial Position

At 31 December 2018

Consolidated Statement of Changes in Equity

Year ended 31 December 2018

Consolidated Statement of Cash Flows

Notes to the Accounts

Year ended 31 December 2018

1. Basis of Preparation

The financial information in this preliminary announcement has been extracted from the Group audited financial statements for the year ended 31 December 2018 and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements and this preliminary announcement were approved by the Board of Directors on 27 March 2018.

The auditors have reported on the Group's financial statements for the years ended 31 December 2018 and 31 December 2017 under s495 of the Companies Act 2006. The Auditors' reports are unqualified and do not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2017 have been filed with the Registrar of Companies and those for the year ended 31 December 2018 will be filed following the Company's Annual General Meeting.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') and IFRS Interpretations Committee ('IFRS IC') as adopted and endorsed by the European Union and have been prepared under the historical cost convention.

The same accounting policies, presentation and computation methods are followed in this preliminary announcement as in the preparation of the Group financial statements. The accounting policies have been applied consistently by the Group year-on-year, except as described below:

· IFRS 15, 'Revenue from contracts with customers' was implemented on 1 January 2018. There was no impact on the group on implementation;

· IFRS 9, 'Financial Instruments' was implemented on 1 January 2018. Except for disclosure related changes, there was no impact on the group on implementation.

2. Going concern

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 31 December 2018 was £24.3m, comprising £18.1m cash at bank and £6.2m in escrow at available for use towards Time Out Market construction costs. The Group also has the option over an undrawn debt facility of £18.0m. In addition, the Group secured additional funding of €10.0m in March 2019.

For these reasons, they continue to adopt the going concern basis of accounting in preparing these 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. During the year a review was undertaken as to how operations are monitored and resources are allocated to achieve the Group's strategy. This review concluded that the Digital, Print and International segments should be combined. Therefore, the Group now comprises two operating segments:

● 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.

● Time Out Market - predominantly turnover related rent from restaurants in the market and charges for service. It also includes owned bar revenue and ancillary revenue including the Time Out Store, Cooking Academy and studio rentals.

Revenue is analysed geographically by origin as follows:

The Group earns its revenues by selling both goods and services. These can be analysed as follows:

There are no revenues from any single customer that exceed 10% of the Group's revenues.

5. Exceptional items

The 2018 restructuring costs include employee redundancy costs as part of moving the business to a global model and is part of the initiative started in 2017. The acquisition fees relate to final fees in respect of prior year acquisitions. The office relocation costs relate to additional work required after the company relocated in November 2017. The fair value loss relates to the minority interest held in Time Out Market. The profit on disposal relates to the sale of shares on Flyt Limited, an associate investment.

The 2017 restructuring costs include employee redundancy costs incurred to as part of a plan to shift the business to a global model. The acquisition fees are costs associated with the acquisition of subsidiaries and associates in the period and include a partial release of the provision made in 2016 for an onerous lease.

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 year.

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. Goodwill

There were no impairment losses relating to goodwill at the end of the year (2017: £nil).

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group's interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquired. Goodwill acquired in a business combination is allocated to each of the cash generating units (CGUs) that is expected to benefit from the synergies of the combination. In the prior year, the Group's CGUs consisted of Print, Digital and Market. This represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

During the year, management has considered the way operations are monitored and how resources are allocated to achieve the Group strategy. This review concluded that the Digital and Print cash generating units ("CGU") should be combined. Therefore, the CGUs of the Group now comprise Time Out Media and Time Out Market.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

The recoverable amount of each CGU has been determined based on value in use calculations. These calculations use pre-tax cash flow projections based on a detailed bottom up budget for the initial 12 month period. A further four years are forecast using relevant growth rates and CGU specific operation and financial assumptions. Cash flows beyond the five year period are extrapolated into perpetuity using an estimated long term growth rate of 2%. The cash flows are then discounted using a weighted average cost of capital of 10%.

A range of sensitivities have been applied and there remains significant headroom in both the Media and Markets CGUs when any sensitivity, or combination of sensitives, is applied. A full sensitivity analysis has not been disclosed as management believes that any reasonable change in assumptions would not cause the carrying value of the Time Out Media or Time Out Market CGUs to exceed their recoverable amounts.

8. Cash and bank balances

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 fund expected Time Out Market construction costs.

Letters of credit and deposits relate to rent deposits paid in respect of leased properties for Time Out Market locations. These balances are disclosed within long term debtors as at 31 December 2018 and will be in all future periods.

9. Borrowings

The Group has the following facilities:

· A £20.0m term loan facility agreement with Oakley Capital Investments Limited ("OCI"). The initial facility, which was agreed in March 2018, was for a period of 19 months expiring on 31 October 2019 and had an interest rate of between 10% to 15% depending on amounts drawn. In September 2018, the facility was converted into a Loan Note agreement, with an extended term to 31 October 2020. In return for granting security over certain Time Out trademarks and domain name, the previous interest rate mechanism was also be replaced with a flat rate of 12%. At year end, the full facility has been drawn with the proceeds used fund future Time Out Market developments;

· A loan provided by a local Urban Development Fund as part of the Joint European Support for Sustainable Investment in City Areas (JESSICA) initiative of £1.1m (2017: £1.2m), charged at a rate of the six-moth EURIBOR rate plus 1.75% repayable in instalments to 2024; and

· A term loan facility of £6.9m at a rate of 11% above EURIBOR, repayable in instalments annually through to November 2022;

· A bank loan of £0.3m at a rate of EURIBOR plus 3% subject of a minimum of 3% and a maximum of 4%, repayable in July 2021.

· The option over an additional debt facility of £18.0m remains available to the Group.

10. Notes to the cash flow statement

Group reconciliation of loss before income tax to cash used in operations

11. Post balance sheet events

Borrowings

In March 2019, Time Out Market increased its current loan from Incus Capital Advisors, S.L. by an additional €10.0m, principally on the same economic terms as the €9.0m loan secured in November 2017.