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Annual Report and Accounts 2018
Trusted
Service
Ten Lifestyle Group Plc
To become the
world’s most
trusted service
business
Our mission is to be the world’s most
trusted service business. Since 1998,
we’ve combined personalised, premium
and specialist knowledge – with world
class expert-led customer service –
and continuous innovation in technology.
Today, we serve millions of members,
working with more than 50 corporate partners,
from 20 operational offices located in the
most important wealth centres.
In this report
Strategic Report
1
Highlights
2
Ten by Numbers
4
At a Glance
6
Chairman’s Statement
8
Chief Executive’s Statement
11
Business Model
13
Markets
Strategy
14
Financial and Operating Review 16
Principal Risks and Uncertainties 20
22
Corporate Governance
Board of Directors
Statement of Corporate
Governance
24
Audit and Risk Committee Report 28
Remuneration Committee Report 30
33
Nomination Committee Report
34
Directors’ Report
41
36
42
Financial Statements
Independent Auditor’s Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Company Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Company Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Company Statement
47
of Cash Flows
Notes to the Financial Statements 48
46
45
43
44
Strategic Report
Highlights
Operational
> Large contracts increased from four to six and Medium contracts1 increased from eleven to 18 in the year
> Seven new Medium or Large contracts won and launched in the year, including Visa International,
HSBC and OCBC Bank
> Two Small contracts have grown into Medium contracts in the year
> Ten’s enhanced proprietary digital platform launched during the year in all three global regions
> £10.5m spent on proprietary digital platform, communications and technologies
> Member satisfaction improved in all three global regions
> Admitted to AIM in November 2017
Financial
> Net Revenue2 up 13% to £37.4m (2017: £33.2m)
> Growth in the first half of the Year followed by a marked increase
in the growth rate as the Year progressed
Find out more about
us at tengroup.com
> Especially strong growth in APAC3 (43%) and good growth in the
Americas (16%)
> Net Revenue flat in EMEA4
> Adjusted EBITA5: £(3.9)m (2017: +£1.7m) reflects significant investment
in technology, investment in new markets and international roll out
> Adjusted EBITA margin: (10.4)% (2017: +5.1%)
> Strong cash position of £20.7m, following £25.1m raised at IPO
Net Revenue
£m
£37.4m
2017: £33.2m
Operating loss before interest and tax
£m
£(8.0)m
2017: £(1.7)m
Adjusted EBITA
£m
£(3.9)m
2017: £1.7m
Loss for the year
£m
£(8.1)m
2017: £(1.6)m
Adjusted EBITA
%
(10.4)%
2017: 5.1%
1 Ten categorises its corporate client contracts based on the annualised value paid, or expected to be paid, by the corporate client for the provision of concierge and related
services by Ten as: Small contracts (below £0.25m); Medium contracts (between £0.25m and £2m); Large contracts (over £2m); and Extra Large contracts (over £5m). This
does not include the revenue generated from suppliers through the provision of concierge services.
2 Net Revenue excludes the direct cost of sales relating to certain member transactions managed by the Group.
3 The Asia-Pacific region.
4 The Europe, the Middle East and Africa region.
5
Adjusted EBITA is operating (loss)/profit before interest, taxation, amortisation, share-based payments and exceptional costs.
Ten Lifestyle Group Plc Annual Report and Accounts 2018
1
Strategic ReportCorporate GovernanceFinancial Statements Ten by Numbers
Ten’s 20th Year
5m+
Over 5m requests actioned to date
26+
Over 26+ languages spoken
by Lifestyle Managers
52
Digital platform in 52 countries
100k+
Partnerships with over 100k travel &
lifestyle suppliers
2
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Strategic Report 290k+
Dining covers booked in the year
70,000+
An average of over 70,000 requests
actioned per month during the year
2m+
Over 2m registered members
50+Over 50 corporate partners
Ten Lifestyle Group Plc Annual Report and Accounts 2018
3
Strategic ReportCorporate GovernanceFinancial Statements At a Glance
24 Large or Medium contracts1
Net Revenue
Adjusted EBITA2
Large
Medium
EMEA
Americas
APAC
Global
2018
2017
Increase
6
18
24
4
11
15
+2
+7
+9
EMEA
Americas
APAC
2018
2017
Increase
9
10
4
1
24
9
4
2
—
15
—
+6
+2
+1
+9
2018
£m
17.4
11.4
8.6
37.4
2017
£m % Change
17.4
9.8
6.0
33.2
0%
16%
43%
13%
EMEA
Americas
APAC
Adjusted EBITA
margin
2018
£m
3.1
(6.8)
(0.2)
(3.9)
(10.4%)
2017
£m
3.9
(1.5)
(0.7)
1.7
5%
1
2
Large contracts (over £2m), Medium contracts
(between £0.25m and £2.0m).
Adjusted EBITA is operating (loss)/profit before
interest, taxation, amortisation, share-based payments
and exceptional costs.
20 operational offices
San Francisco | Las Vegas | Mexico City | Miami | Toronto | New York | Sao Paulo | Bogota | Buenos Aires | London | Brussels |
Zurich | Cape Town | Dubai | Mumbai | Singapore | Hong Kong | Shanghai | Melbourne | Tokyo |
4
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Strategic Report
Ten’s enhanced proprietary platform for
travel and concierge. Allows members to
access up to five core modules: Travel,
Dining, Entertainment, Events and
Benefits on a self-serve basis.
The editorial and personalised
communications power behind
Ten used to leverage editorial
and insights for its members.
A dedicated team focused on leveraging
technology and data to better serve
members and corporate clients by
delivering personalised reporting,
analytics, insights and
predictive modelling.
1 Customer-relationship management (CRM).
Ten’s proprietary knowledge base
which encompasses a booking system,
workflow, performance management
and management information
reporting infrastructure.
A team of In-House Developers,
Product Managers, User Experience
Designers, User Interface Designers,
Quality Assurance Testers and
Database Administrators working
on an integrated and collaborative
basis to deliver enhancements to
Ten Platform and Ten MAID.
Ten’s Lifestyle Managers work from
20 global locations and between
them speak more than 26 languages,
delivering specialist travel and lifestyle
and concierge services to our members.
Ten Lifestyle Group Plc Annual Report and Accounts 2018
5
Strategic ReportCorporate GovernanceFinancial Statements Chairman’s Statement
A year of investment
into our core services,
global growth
and launch of our
enhanced digital
platform
Bruce Weatherill
Chairman
6
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Introduction
I am pleased to deliver my first
Chairman’s Statement since joining
the Board in October 2017 to update
shareholders on what has been a
transformational year for the business.
In the year in which we celebrate our
20th anniversary, the Group now operates
from 20 offices worldwide and serves
over 2m registered users, working with
over 50 corporate partners. To achieve
our objective of becoming the world’s
most trusted service platform, we have
combined investment in technology
innovation with expert travel and
lifestyle knowledge. The strength of
this proposition was reflected in our
IPO on the AIM market of the London
Stock Exchange in November 2017,
which raised £25.1m to finance the
next phase of our growth.
Strategy
Ten provides concierge services to its
corporate customers using a combination
of its market-leading lifestyle and travel
proprietary digital platform and the
expertise of its Lifestyle Managers.
Ten’s corporate clients include private
banks, retail banks, premium payment
card providers and luxury brands who
offer Ten’s services to segments of
their premium customers.
Ten assists its members to discover,
organise and book travel, dining, and
live entertainment, seeking to save
them both time and money. Through
Ten’s service proposition, members
can achieve superior access,
experiences, and outcomes, more
cost-effectively and conveniently, than
they could have achieved on their own.
As a result of making arrangements
on behalf of its combined membership
base of wealthy individuals, Ten has
access to better rates and/or enhanced
benefits from its suppliers compared
to other existing service providers,
both online and offline.
Our ambitious objective is to become
the most trusted service platform
globally. Our strategic goals to achieve
this ambition are: to continuously
improve service levels to our members;
to deliver value to our corporate partners;
to continue to invest in our proprietary
technology; and to grow Net Revenue
from enhancing existing corporate
partnerships and entering new
geographic and vertical markets.
Strategic Report Ten is a business in growth mode with
a unique technology service offering,
which sets it apart from its peer group
and offers a unique consumer value
proposition which provides an excellent
platform for the business to achieve
its goals.
I would like to extend a huge thanks to
my fellow Board members and to Ten
employees worldwide, who have worked
tirelessly to enhance our proposition
and build the required technology platform
to enable us to grow in the future. This
was Ten’s 20th year, and its first as a
listed business and I look forward to
updating shareholders further in 2019
as the business develops.
Bruce Weatherill
Chairman
27 November 2018
Results
I can report that we have made good
progress during the year towards each
of these goals and while Net Revenue
has come in below expectations set at
IPO, at 13% growth, we saw several
important new client wins, including a
Large contract with Visa International
and our first contracts, with HSBC, OCBC
Bank and Japanese MI Card. During
the Year we continued to invest – both
in people and technology – to underpin
our growth plans. We maintained
excellent client retention levels and 2018
saw the much-anticipated launch of our
significantly enhanced proprietary
member-facing platform. We enter
2019 with our strongest ever service
levels, a larger client base, new hires
in place and our enhanced technology
offering, which will help achieve our
future growth goals.
Lower Net Revenue than expected
by the Board at IPO was caused by
several factors, but principally reflected
slower revenue growth from new and
existing territories, slower roll out into
new verticals and slower roll out of
larger, more integrated contracts.
We ended the year with a strong
cash position of £20.7m (2017: £8.2m),
reflecting the proceeds from the
IPO and improved working capital
performance in the year, offset by
significant investment in infrastructure
and people during the year. While we
remain in an investment phase, the
focus is on future business growth
which clearly impacts profitability in
the short term.
We run our business based on three
regions: EMEA, the Americas and
APAC. Our most mature region is EMEA
which continued to perform strongly
although Adjusted EBITA was held back
by the investment in our proprietary
technology platform and enhancement
of content. The effects of the investment
programme were more pronounced in
the two higher-growth regions of the
Americas and APAC. In the Americas,
we set up two new offices, made a
number of significant senior hires and
committed resource to support the
contracts won to date, and to build the
platform to allow for further growth.
We have now built the scale required to
support operations for our existing and
future corporate partners in the region.
In APAC, we saw strong Net Revenue
growth and Adjusted EBITA again close
to break even but reflecting investment
to support recent and expected
contract wins.
People
The Board is committed to a strict
corporate governance and, as Chairman,
I am the custodian of the corporate
governance approach adopted by
the Board to ensure that the Group has
the right people, strategy, and culture
to deliver success. The Board comprises
four Executive Directors and three
independent Non-Executive Directors,
of which I am one. At the same
time as my appointment, two other
Non-Executive Directors were appointed:
Julian (“Jules”) Pancholi and Gillian
Davies, further details about whom
are included in the Board of Directors’
biographies included on pages 22
and 23.
In addition to these Board appointments,
the Group has invested in quality
Lifestyle Managers around the world
as well as a number of senior hires
globally. We were pleased to appoint
a global Chief Technology Officer (CTO)
and a Global Head of IT Infrastructure.
Both of these appointments reflect the
importance of the growth and development
of our technology offering.
Corporate Governance
With effect from 28 September 2018,
all AIM companies are required to adopt
a recognised corporate governance
code and to make additional corporate
governance related disclosures on their
websites. I am pleased to announce
that the Company has adopted the
Quoted Companies Alliance’s Corporate
Governance Code (the “QCA Code”).
Summary
When I was approached to become
Chairman, I was attracted by the
Company’s market-leading service
proposition, the potential to accelerate
its international expansion and the
opportunity to leverage technology to
drive service levels, and profitability.
I write today, one year on, with just as
much excitement as I did when I joined.
Ten Lifestyle Group Plc Annual Report and Accounts 2018
7
Strategic ReportCorporate GovernanceFinancial Statements Chief Executive’s Statement
Our objective is
to become the
world’s most trusted
service business
Alex Cheatle
Group Chief Executive Officer
and Co-Founder
8
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Introduction
In my first Chief Executive’s Statement
for Ten as a listed business, I can
report a year of improving service
levels, Net Revenue growth and
continued development of our digital
technologies that will help drive future
increases in revenues and margin, as
well as improvements in competitive
advantage and service levels.
Our objective is to become the world’s
most trusted service business. In each
quarter of the year we have: grown
the number of affluent and wealthy
members who we help; improved
member experience of our service in
each global region; grown our global
reach and developed technologies that
underpin our future success. All these
achievements build on our competitive
advantage, take us closer to our
objective and provide a solid foundation
for the future.
Net Revenue grew at a slower rate than
initially expected, developing at an
increased rate as the year progressed.
Other key financial metrics – notably
cash and Adjusted EBITA – have been
at, or better than, the levels the Board
anticipated at IPO.
How did we do in 2017/2018?
We secured the capital for the next
phase of Ten’s development.
We believed at the start of 2017 that
we should raise capital to be able to
execute on two strategies. Firstly, to
increase our investment into technology
to improve service levels, reduce costs
of service delivery, improve scalability
and develop a winning competitive
position. Secondly, to continue to
expand regionally into our key growth
markets. To achieve this, we listed on
the AIM market of the London Stock
Exchange in November 2017. The
resulting £25.1m of net cash to the
Group is allowing us to finance planned
growth into immature or new markets
as well as continue investment into our
technology platform, which we believe
will drive increased member satisfaction,
maintain our competitive advantage
and drive further major contract
wins globally.
Strategic Report We improved service quality.
This underpins our success. The higher
our service levels, the more our members
trust our service, the more they use our
service, the more they advocate our
service and justify our corporate
partners spending more with us.
We are delighted to have achieved
record member satisfaction levels,
measured by both Net Promoter Score
(NPS) and our internal quality assurance.
We have had positive client feedback
on our service on both existing
programmes and new launches. We
believe this grows our reputation and
credibility in the market.
We have developed and launched
a competitive digital platform into
multiple global markets.
Ten’s proprietary digital platform is
now available in nine languages and
36 currencies. The enhanced platform
went live in June 2018 behind HSBC’s
High-Net-Worth ‘Jade’ proposition into
all three global regions and has now
been launched by multiple other client
brands into a total of 52 countries.
The launch of our enhanced digital
platform was delayed with new and
existing corporate partners. This was
to help ensure optimal impact by
launching the platform with a more
complete offering. The consequence of
this was that some new client launches
have been pushed back, and some
existing contracts have delayed marketing
of the service, which grows usage and
hence revenues, until the platform is in
market. The platform is now live in
market in all global regions and we
believe this will unlock revenue growth
on existing contracts. The high hurdles
that we have successfully overcome in
developing the platform have resulted
in a more robust and more valuable
platform. We are now in a strong
position with what we believe to be the
only multi-category transactional
lifestyle and travel platform in market
and available to our corporate partners
and prospects. Most new contract
tenders mandate a strong digital
platform as part of their
desired specification.
We have made great progress in
globalising our service.
Our global reach has grown, we have
won new contracts in each of our three
regions and we have opened two new
offices in the Americas in the year.
We have seen efficiency improvements
to our high-touch service in maturing
markets. In the Americas, we grew from
195 staff at 31 August 2017 to 326 staff
at 31 August 2018 to support contract
Investing in Technology
growth and have now achieved scale
in Spanish, Portuguese and French
Canadian as well as English-speaking
staff. In APAC, the HSBC win has
allowed us to start to benefit from scale
in the key High-Net-Worth centres of
Hong Kong and Singapore, which is
further supported by a contract launch
in September 2018 with the Bank of
Singapore/OCBC. Most of the growth
in 2019 is expected to come in markets
where we already have a presence, which
should allow us to be more efficient, so
we expect to see improving revenues
per employee across 2019.
Ten Lifestyle Group Plc Annual Report and Accounts 2018
9
Strategic ReportCorporate GovernanceFinancial Statements Chief Executive’s Statement continued
Summary
We believe our competitive position
is stronger than ever driven by our
enhanced proprietary technology
platform, our market-leading service
levels, our integrated global infrastructure
and the strength of our management
team. We have won multiple contracts
from competitors in the last year and
are targeting more wins from competitors
and new contracts in 2019.
Continued improvements in service
levels increase engagement, repeat use
and justify higher levels of investment
from our corporate partners. We have
seen this in recent weeks as one Large
contract has grown to become an Extra
Large contract in the current financial
year. We then believe that increasing
scale can drive increasing service levels
and the efficiency that drives profitability,
helping us progress towards our objective
of becoming the most trusted service
business in the world.
2018 has been a year of significant
investment and Product Development
and we enter 2019 with a unique platform
to meet the needs of our members and
global corporate clients. I would like
to extend thanks to the Ten team
worldwide, for their hard work and
immense contribution this year.
Alex Cheatle
Group Chief Executive Officer
and Co-Founder
27 November 2018
How did we do in 2017/2018?
continued
New hires have strengthened the
leadership team and the operational
and technology teams
We have grown the business from
570 to 823 people globally, which is
indicative of our investment strategy.
In addition, we have made senior hires
in the first half of the year including
a Global Head of IT Infrastructure, and
a Business Development Leader in
each of the US and Europe. New hires
in the second half of the year included
a new Managing Director of Employee
Loyalty, senior finance hires and a
Head of Legal and Compliance.
In summer 2018, we also hired a leader
specifically responsible for developing
the customer acquisition strategy in the
region of North America, with a focus
on financial services.
In addition, we made the important
hire in August 2018 of a new, highly
experienced CTO who has, since
joining, further strengthened our
technology teams, processes and
output. We are benefiting from his
twenty plus years of experience of
developing complex consumer facing
enterprise platforms and personalisation.
We have benefited from a Board that
includes three Non-Executive Directors,
including our Chairman who joined us
shortly before the IPO. I have very much
appreciated their experience and
guidance this year.
Corporate Governance
With effect from 28 September 2018,
all AIM companies are required to
adopt a recognised corporate
governance code and to make
additional corporate governance
related disclosures on their websites.
I am pleased to announce that the
Company has adopted the Quoted
Companies Alliance’s Corporate
Governance Code (“QCA Code”).
10
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Strategic Report Business Model
Market leading
Ten Lifestyle Group (“Ten”) provides
concierge services to its customers
which include large corporates
and High-Net-Worth Individuals
(HNWIs)1, using a combination of
its market-leading lifestyle and travel
proprietary digital platform and the
expertise of its Lifestyle Managers.
Ten’s corporate clients include
private banks, retail banks, premium
payment card providers and luxury
brands who offer Ten’s services to
segments of their premium customers.
Member Benefits
Our wealthy and mass affluent demographic allows us to negotiate far better
services than we could negotiate for the general public, from the free loan of
a premium brand car for a weekend, to a luxury brand shopper evening with
champagne and canapés.
Many suppliers – from hotel groups and airlines to entertainment venues
and retailers – are willing to consider better prices and/or value-add benefits
for our valuable customer segments.
1
High-Net-Worth-Individuals with $1m in liquid financial asset (HNWIs).
Ten Lifestyle Group Plc Annual Report and Accounts 2018
11
Strategic ReportCorporate GovernanceFinancial Statements Business Model continued
Our world view
We believe that for individuals and their families to thrive, they want to be
supported by people, technologies and services that they can genuinely trust
to have their best interests at heart and deliver to their needs.
We believe that there is huge market potential for a service that can be trusted
to meet people’s needs better than any other service provider – notably in travel,
eating out, entertainment, and retail. We have identified these four categories as
important for our members and where we can add value at scale. This is the
travel and lifestyle service that we are building at Ten and towards which we
made many significant steps forward this year. From the early days of Ten,
twenty years ago, we have been guided by our insight that the most trusted
service business in the world would need to have four characteristics.
1.
Subscription-led. The commercial incentive in our business model is
to please our members, not to create value for our third-party supplies.
Our subscription revenue stream allows us to be on the members’ side
with no conflict of interest. Furthermore, not being reliant on commissions or
mark-ups enables material differentiation both in terms of value and access.
2.
Multi-category. To provide enough frequency of contact to become
central to our members’ lives. We support our members across multiple
areas – notably eating out, all types of travel, entertainment, and retail.
In these areas we can organise and negotiate better prices, access or benefits
for our members than they can typically achieve on their own.
3.
Focused on the wealthy and mass affluent. Our members benefit
from having access to an exclusive service closed to non-members
(a closed user-group) that is available to the wealthy or affluent.
By having these people as our members, we can demand better service and
benefits from our suppliers than if we were mass market.
4.
Technology driven. The most trusted service business in the world would
need to offer the member a choice of channels (e.g. live interaction with
an expert Lifestyle Manager for complex matters or an easy-to-use
self-service platform for transactional requests) to access the service. In addition,
the most trusted service business would want to use technology to drive up the
scalability of the service and drive down the cost of service delivery. We would
also want to leverage technology to drive personalisation of the service to each
individual member.
The revenue model
Ten’s services are generally made
available to members through Ten’s
corporate clients who pay for Ten’s
services on their individual customers’
behalf. The majority of Ten’s corporate
clients are financial services institutions
who offer Ten’s services as part of their
ancillary benefits package, which are
complementary to their products such
as premium credit cards or premium
banking services. By offering Ten’s
services, the corporate client expects
to see resulting improvements to their
customer metrics that drive their
profitability, including customer
retention, value, and advocacy.
Ten typically charges its corporate clients
on a “per request” basis – whether high
touch (which involve a Lifestyle Manager)
or low touch (which are completely or
largely fulfilled through the Ten Platform).
A request is typically an instruction
received from a member to research,
advise or arrange something on their
behalf. Requests principally relate to
travel, dining, and live entertainment,
but can extend to more general lifestyle
12
Ten Lifestyle Group Plc Annual Report and Accounts 2018
support services. Other service-related
revenue-generating activities paid for
by Ten’s corporate clients include
negotiating special offers or benefits
with suppliers and creating bespoke
editorial content. We are also beginning
to see additional revenue from
delivering and licensing our digital
platform to clients.
Ten also earns revenue from its supplier
base, such as hotels, airlines, and
event promoters who sometimes pay
commission to Ten. This constituted
13% of Net Revenue for the year.
Digital
The Ten Platform is an end-to-end
fully-transactional platform for concierge
services and is Ten’s digital interface
with members. Members can use desktop
computers, tablets, and smartphones to
access the Ten Platform on a self-serve
basis, at all times. Members can choose
from five core modules: Travel, Dining,
Entertainment, Events, and Benefits.
These modules feature content,
Ten-procured inventory and – varying
by market – API1 integrations with
suppliers and providers (airlines
in Travel, or ticketing providers in
Entertainment, for example). The result
is a data-rich, end-to-end transactional
platform that mirrors the service level,
access, and proposition of the Lifestyle
Manager-led service.
The underlying technology is bespoke
and proprietary, having been created by
Ten’s internal technology development
team, and we believe this proposition
provides a unique point of differentiation
for the Group. The development team
responsible for ongoing product
innovation comprises Product Managers,
User Experience Designers, User
Interface Designers, Front-End
Developers, Back-End Developers,
and Quality Assurance Managers.
1 Application programming interface (API).
Strategic Report Markets
A growing global
market
Ten’s objective is to become the most trusted
service business in the world by being the
pre-eminent provider of global travel, lifestyle
and concierge services to the world’s wealthy
and mass affluent, fulfilling its members’ travel,
dining, live entertainment, and retail requirements.
We believe that this represents a substantial market
opportunity with significant growth potential.
We believe that there is significant
potential to increase its position
internationally, where the provision of
concierge services is at varying stages
of development. Outside of the UK, Ten
has been awarded 21 of the last 26
international financial contracts for
which it has tendered or re-tendered
since 2015, including elsewhere in
EMEA, the Americas and APAC.
We believe that the global financial
services industry is currently the largest
procurer of concierge services.
Customer satisfaction and brand affinity,
however, are common objectives for other
verticals, such as luxury brands and
premium automobile manufacturers,
and the Directors believe that these
will provide further opportunities for
the provision of concierge services.
As the market for concierge services
evolves, we believe that HNWIs and the
mass affluent will increasingly recognise
the benefits of fulfilling their requirements
through concierge services enhanced by
technology. The buying power afforded
by fulfilling these requirements at scale
should allow the provider of concierge
services to deliver superior rates and
enhanced benefits compared with those
that an individual could achieve directly
through traditional providers of travel,
live entertainment, dining solutions and
premium retail both online and offline.
We believe that this will further increase
the attractiveness of concierge services.
In addition, current concierge services
are primarily fulfilled through individuals
responding to requests typically made
by telephone or email. We believe that the
rate of adoption of concierge services will
be significantly increased by the ability
to self-serve via technology enabled
platforms offering a higher level of
personalisation and convenience.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 13
Strategic ReportCorporate GovernanceFinancial Statements Strategy
A strategy
for growth
4
3
Strategy
for growth
1
2
The Group had identified four
main strategic goals in 2018:
Improve service levels
Improving service levels means that members increasingly
benefit from the service, helping to drive corporate partner
investment from new and existing clients as we deliver
improvements to their customer’s value metrics.
Grow Net Revenue
This is both through organic growth and through new contract
wins in both existing and new geographic markets.
Invest in technology
This improves efficiency and service quality, driving
operational profitability, and providing a clear and
demonstrable point of differentiation for Ten.
New vertical markets
We aimed to widen the Group’s reach with the world’s wealthy
and mass affluent from primarily supporting financial services
clients. In the year we have increased activity to develop
other vertical markets, notably to support employees of
selected organisations and the most valuable customers
of luxury brands.
These strategies were supported by the funding from
the IPO in November 2017 and the development of our
Senior Leadership Team.
14
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Progress against
strategy
1. Improve service levels
Service levels have improved in each
of the global regions in 2018 (EMEA,
the Americas and APAC). We measure
this primarily by gathering NPS in
each region. We also measure against
our own internal quality assurance
standards and use a basket of other
measures to build an in-depth
understanding of the drivers of member
satisfaction. These include response
times, tone of voice, the level of
personalisation on a request and the
relevant success criteria on different
types of request (e.g. Were we able to
buy face-value tickets for the popular
show? Were we able to secure the
desired table at the top restaurant?
Did the member book the suggested
hotel or flight through us?).
Where we have taken over concierge
servicing from an incumbent competitor
during the year, each of our corporate
clients of the Medium or Large new
contract launches have told us that they
believe that we had improved on the
service levels of the previous providers.
We believe that we deliver improved
high-touch service levels though a
mixture of ingredients that include
well-developed hiring and training
programmes, strong and positive
performance management, improving
technology and systems, improving
leverage with our supplier base, a
greater depth and range of pre-prepared
content, faster response times and a
focus on retaining a service culture.
In the year, we aimed to deliver
improved digital service levels by
improving the look, feel, speed and
usability of the digital platform, the
functionality of the platform and the
depth and breadth of both the content
and the supplier base.
We consider both our high-touch and
digitally delivered services to be
increasingly well engineered.
Strategic Report 2. Grow Net Revenue
Ten categorises its key corporate client
contracts based on the annualised
value paid, or expected to be paid, by
the corporate client for the provision
of concierge and related services. This
does not include the revenue generated
from suppliers through the provision of
concierge services. Since year-end, we
announced that one Large contract is
expected to grow to over £5.0m annual
value, becoming Ten’s first Extra Large
contract; the impact of this will be felt
from the commencement of its term
on 1 October 2018. Ten’s contract
classifications are now: Extra Large
contracts (over £5.0m), Large contracts
(over £2.0m), Medium contracts (between
£0.25m and £2.0m) and Small contracts
(below £0.25m).
As at 31 August 2018, Ten had 50
(2017: 47) corporate clients across the
Group. Large and Medium contracts
represented 79% (2017: 77%) of its total
Net Revenue.
3. Invest in technology
Over the year we launched our enhanced
digital, member-facing platform. The
enhanced platform includes a new
and improved user interface, more
functionality, and the ability to scale
globally across multiple brands,
languages, currencies, and different
content requirements. This investment
was significant in the year with £5.4m
spent on our platform development and
associated editorial and content. The
benefits will largely be felt in 2018/2019
because the enhanced platform went
live with our first client, HSBC Jade, in
seven markets across all three global
regions in June 2018 and we believe
that it will replace our existing platform
in the UK and roll out with multiple new
corporate partners in 2018/2019.
We overhauled and upgraded of our
IT and communications infrastructure.
In the year our overall spend on our
IT infrastructure was £5.1m. We expect
these upgrades to improve servicing
speed, allow more cost-effective global
call routing, allow better member
access to the service (e.g. live chat),
and improve functionality in 2019.
Again, we expect that much of the
impact of this investment on efficiency
and service quality will be felt in
2018/2019 and beyond.
We are pleased that we retained our
PCI DSS Level 1 accreditation during
the year, which provides comfort to our
corporate clients around our data and
payment security measures.
Contracts
2018
2017
Increase
change
+2
+7
+9
6
18
24
4
11
15
79%
77%
+2%
Large
Medium
% of Net
Revenue
Large and Medium contracts are
typically of a multi-year duration of
three years or more. Only one of the
Group’s corporate clients accounted
for more than 10% of total Net Revenue
in 2018 and this client is contracted
until 31 December 2020. Two Small
contract grew into Medium contracts
in the year.
Ten’s Net Revenue growth in the year
has largely been delivered by signing
additional long-term contracts with large
global clients in financial services. The
contracts are currently focused on defined
groups of their premium customers.
As Ten demonstrates the commercial
impact of its high service levels and
continues to build out its technology,
having these blue-chip contracts ensures
the Group is well placed to grow its
concierge services with these clients
and via new clients, and continue to
grow its Net Revenue.
4. New vertical markets
In the year, we have invested to start to
develop several new vertical markets.
Employee Loyalty market
We believe leading employers are
interested in providing lifestyle
management support to their valued
employees to save time and increase
staff productivity, retention, and morale.
Ten hired a Managing Director for this
new Employee Loyalty business in the
second half of 2018, who has gone
on to build a small sales and support
team. The first phase of marketing
and selling activity began at the end
of the financial year. We are building
a pipeline of appropriate employers.
Luxury brand market
Luxury brands have also begun to
provide concierge services to their
customers as they seek to enhance
their general satisfaction levels and
brand affinity with their top customers
who provide an over-sized proportion
of their revenues. Ten has already
secured contracts with luxury brands
including in the high-end retail and
premium automobile manufacturers.
Private membership
Ten has a small private membership
base. Historically private membership
has not been a focus for the Group,
however, we hired a new Head of
Private Membership in August 2018
and we will make small investments
into marketing during 2019 to test
its potential behind the enhanced
digital platform.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 15
Strategic ReportCorporate GovernanceFinancial Statements Financial and Operating Review
Well placed
for growth
Net Revenue increased by 13% compared to
the previous year. Our planned investment in
technology and international expansion has, as
expected, impacted profitability in 2018 but leaves
the Group well placed for growth going forward.
Net Revenue
£m
£37.4m
(2017: £33.2m)
+13%
Adjusted EBITA
£m
-£3.9m
(2017: £1.7m)
Sean Hegarty
Chief Financial Officer
16
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Revenue
Net Revenue
Operating
expenses and
Other Income
2018
£m
40.1
37.4
2017
£m
34.9
33.2
(41.3)
(31.5)
Adjusted EBITA
(3.9)
Adjusted EBITA %
(10.4%)
Amortisation
(2.8)
1.7
5.1%
(2.3)
Share-based
payments and
exceptional Items
charge
Operating loss
before interest
and tax
Net finance
expense
Loss before
taxation
Taxation credit
Loss for the year
Net Cash at
31 August
(1.3)
(1.1)
(8.0)
(1.7)
(0.5)
(0.5)
(8.5)
0.4
(8.1)
(2.2)
0.5
(1.6)
20.7
8.2
Revenue
Revenue for twelve months to
31 August 2018 was £40.1m, up 15%
on the twelve months to 31 August 2017.
Net Revenue, which excludes the
direct cost of sales relating to member
transactions managed by the Group
(such as the cost of airline tickets sold
under the Group’s ATOL licences)
is Ten’s preferred measure of operating
revenues. Net Revenue for twelve months
to 31 August 2018 was £37.4m, up 13%
compared to the prior year.
This revenue growth has been supported
by new contract launches. In the year
to 31 August 2018, we launched Large
contracts across multiple countries
with Visa and HSBC as well as a series
of Medium contracts with Mastercard,
amongst others. We have seen good
organic growth with two Small contracts
becoming Medium contracts in the
year. We also benefited from additional
revenues relating to the delivery and
licensing of our digital platform
launched this year.
Strategic Report Large and Medium Contracts
Contracts
2018
2017
Increase
Large
Medium
6
18
24
4
11
15
+2
+7
+9
In APAC, we have continued to grow
existing contracts. Furthermore,
contracts with Mastercard and the
launch of HSBC concierge has benefited
the APAC region in the second half of
the year resulting in an annual growth
rate in the region of over 40%.
Almost all of the new contract wins
have been in the Americas and APAC.
HSBC is considered a global contract
as it covers all regions.
Contracts by region
2018
2017
Increase
EMEA
Americas
APAC
Global
9
10
4
1
24
9
4
2
—
15
—
+6
+2
+1
+9
This pattern of contract growth is reflected
in the regional segmentation of our Net
Revenue. While there is a clear overlap
between the geographic location of our
clients and their members’ requests,
members use our concierge services
across all the regions. Therefore, our
segmental revenue reporting reflects
our servicing location rather than the
location of our corporate clients. This
allows us to understand and track
the efficiency and profitability of our
operations around the world, so our
segmental financial reporting is a
more relevant measure on this basis.
Net
Revenue
EMEA
Americas
APAC
2018
£m
17.4
11.4
8.6
37.4
2017
£m
17.4
9.8
6.0
%
change
0%
16%
43%
33.2
13%
EMEA revenue was flat compared to the
same period of the prior year.
In the Americas, we have experienced 16%
growth chiefly as a result of contract
wins already noted.
Operating expenses
As the year to 31 August 2018 was
a period of investment for the Group,
operating expenses increased from
£31.5m in the same period in 2017 to
£41.1m. A large proportion of growth
was due to increased headcount
which grew to 823 by 31 August 2018
(2018 average: 750; 2017 average: 550).
This increase in headcount is due to
expansion in American and APAC
markets, where we hired ahead of
contract launch date and reflects
Ten’s market expansion strategy in the
year where were hired proportionally
more operational staff in our expanding
markets (including regional leadership,
local quality assurance and account
managers). This rate of increase is not
expected to continue as we are now
established in those markets. There
were also some shorter-term increases
this year in our technology and content
teams, where we also brought in
contractor support ahead of our digital
platform launches. The remainder of
this cost reflects the running costs of
our additional offices and additional
spend on IT infrastructure to build
platform resilience as we scaled up.
Adjusted EBITA margin
Whilst Adjusted EBITA is not a statutory
measure, the Board believe it is necessary
to include this as an additional metric
as it is one of they main measures of
performance used within the business
and the principal profit measure for senior
management. It reflects the underlying
profitability of our business operations,
excluding amortisation of historic
investment in platform infrastructures,
exceptional costs and share-based
payment expense.
Adjusted EBITA as reported takes
account of all costs in the Group, other
than amortisation £2.8m (2017: £2.3m)
share-based payment expenses of
£0.9m (2017: £0.7m) and exceptional
costs of £0.4m primarily relating to the
IPO in November 2017 (2017: £0.3m).
On this basis, Adjusted EBITA was a
loss of £3.9m (2017 profit of £1.7m).
After allocating our indirect costs of IT,
platform support, real estate costs and
senior management, the Adjusted EBITA
for each regional segment is as below:
Adjusted EBITA
EMEA
Americas
APAC
Total
2018
£m
3.1
(6.8)
(0.2)
(4.2)
Adjusted EBITA % (10.4%)
2017
£m
3.9
(1.5)
(0.7)
1.7
5.1%
Adjusted EBITA margin in EMEA,
defined as our Adjusted EBITA as a
percentage of Net Revenue, remains
strong and reflects our most mature
market, which has continued to deliver
operational efficiency even though
revenue growth has been slower.
Overall, margin has declined from
23% to 18% in EMEA due to the
allocation of our increased spend
in content and technology.
This impact has been felt even more
strongly in the Americas region where
Adjusted EBITA margin has declined
year on year reflecting the short-term
impact of the market expansion where
we have invested in training, service
quality and building our local expertise
as we build scale in this market. We have
hired significant new teams, set up two
new offices and created new content
and supplier relationships to support
the contracts won in the region. We
expect this ‘launch’ investment to
continue into the first half of 2019
before increasing operational maturity
brings this region to a profitable level
over time. We now have the footprint,
offices and staff in place to manage
English, Spanish, Portuguese and
French Canadian at scale – which will
allow efficiencies to flow. Beyond the
2018 financial year, no major ‘new’
market launches are planned in
the Americas.
Ten Lifestyle Group Plc Annual Report and Accounts 2018
17
Strategic ReportCorporate GovernanceFinancial Statements
Financial and Operating Review continued
Adjusted EBITA margin continued
APAC has benefited from improving
efficiencies in countries where we have
had a longer-term presence as we have
built scale within the existing business.
Adjusted EBITA remained close to break
even in 2018, with strong revenue and
contribution growth in the region offset
by increased investment in IT and support
functions to expand our capability in
APAC to support recent and expected
contract wins. Once these markets mature,
they are expected to generate positive
margins in line with our strategy.
Amortisation
Amortisation costs, relating to our
internal platform (TenMAID) and our
customer facing platforms were higher
at £2.8m in 2018 (2017: £2.3m) reflecting
increased development activity over the
previous years.
Net finance expenses
Net finance expense in the year was
£0.5m (2017: £0.5m). This includes the
interest cost of shareholder debt until
repayment on 30 November 2018 following
the AIM listing of £0.2m (2017: £0.4m);
finance expense related to the convertible
loan that was converted to equity on
listing (2018: £0.2m; 2017: £0.1m). In
addition, the translation of balances
denominated in foreign currencies in
the year resulted in a £0.1m expense
(2017: £nil).
Exceptional costs and
share-based payments charge
The share-based payments charge
in the year were £0.9m (2017: £0.7m)
which reflected grants made under
new management incentive plans
established after listing on AIM
(see note 25 to the accounts). The
exceptional costs of our IPO listing
on AIM were £0.4m (2017: £0.3m).
Loss before tax
The loss before tax increased from
£2.2m in 2017 to £8.5m.
Taxation
The tax credit for the year was £0.4m
(2017: £0.5m) which includes £0.8m
(2017: £1.0m), of R&D tax credit received.
Loss per share
On 19 October 2017, the Company
re-designated the ordinary C shares as
ordinary shares and made a bonus issue
of ordinary shares on the basis of seven
ordinary shares for each ordinary share
then held. In addition, on admission to
AIM, 13.4m new ordinary shares were
issued, convertible loan notes of £3.2m
were converted to 3.1m ordinary shares
and 13.6m share options were exercised.
This is discussed in more detail in note
24 to the Financial Statements.
The weighted average number of shares
increased from 48.7m to 73.1m as a result
of the above shares issued. The total
comprehensive loss for the year was
£8.2m (2017: £1.6m), resulting in a
loss per share of 11.1p (2017: 3.4p loss).
The Board does not recommend the
payment of a dividend.
Group balance sheet and cash flow
Loss before tax
Net finance
expense
Working capital
changes
Non-cash items
(share-based
payments,
depreciation and
amortisation
charges)
Operating cash
flow
Capital expenditure
Investment in
intangibles
Taxation
Cash outflow
Funded by
Equity from listing
on the AIM
Other equity issued
in the period
Movement in
shareholder loans
Repayment of
finance leases
and interest paid
Net funding
Increase in cash
Cash balance
2018
£m
(8.5)
0.5
0.5
2017
£m
(2.2)
0.6
(0.4)
4.4
3.9
(3.1)
(1.5)
(4.3)
0.4
(8.5)
—
25.1
0.3
(3.9)
1.9
(0.4)
(3.1)
1.0
(0.6)
—
—
2.2
4.1
(0.2)
(0.6)
21.3
12.8
20.7
5.7
5.1
7.9
18
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Strategic Report Operating cash outflows were £3.1m (2017: £1.9m inflow), reflecting the operating loss previously noted offset by a positive
change in working capital. Further investment in our IT infrastructure as well as our digital platform, held in the balance sheet
as an intangible asset, meant that the overall cash outflow was £8.5m. This cash outflow was funded by the equity fundraising
noted above, meaning that the Group’s cash position has significantly improved overall, with £20.7m cash at bank at the end
of the year and a small amount of finance lease obligations outstanding as shown in the summary Balance sheet below.
Balance sheet
Intangible assets
Property, plant and equipment
Cash
Other current assets
Total current liabilities
Long-term borrowings
Other non-current liabilities
Net assets
Share capitals/share premium
Reserves
Total equity
2018
£m
7.7
1.7
20.7
9.1
(10.5)
—
—
28.7
28.6
0.1
28.7
2017
£m
6.1
0.9
8.2
7.2
(9.2)
(6.0)
(0.2)
7.0
9.7
(2.7)
7.0
Net assets remain strong with a significant cash position after the noted investment in our platform and property, plant and
equipment. Furthermore, prior year borrowings were extinguished with funds raised from our IPO.
Key performance indicators (KPIs)
The Group monitors its performance using a number of financial performance indicators which are agreed at Board meetings
and monitored at operational and Board level.
Number of Large contracts
Number of Medium contracts
Net Revenue growth (%)
6
2018
2017
18
6
2018
+13%
18
2018
13
4
2017
11
2017
37
Adjusted EBITA margin (%)
Loss after tax margin (%)
-10.4
(10.4)
-20.2%
2018
(20.2)
2017
5.1
2018
(4.7)
2017
Sean Hegarty
Chief Financial Officer
27 November 2018
Ten Lifestyle Group Plc Annual Report and Accounts 2018 19
Strategic ReportCorporate GovernanceFinancial Statements Principal Risks and Uncertainties
The Board considers the risks set out below to be the principal risks to the Group’s business. The Board continually reviews
the risks facing the Group and ensures appropriate steps are taken to mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the possible adverse effects on the Group. The Board
recognises that the nature and scope of risks can change and there may be other risks to which the Group is exposed
so the list is not intended to be exhaustive.
OPERATIONAL
TECHNOLOGY
MACROECONOMIC/MARKET
Loss of clients
International expansion
Loss of key suppliers
technological failure or interruption
fraud and malicious attack
Industry landscape
Potential Impacts
Mitigation
The Group’s performance in
new markets may be below
the strategic plan and reduce
revenue, profitability and
cash resources.
Growth and expansion of the
Group into new markets may
strain the Group’s managerial,
operational and control
systems, making it harder to
retain key personnel.
Suppliers of services supporting
the Group’s business, including
travel, IT and payments could
cease operations, become
non-compliant or terminate
agreements due to lack of
performance, conflicting
corporate agreements or
takeover. If the support could
not be replaced with a suitable
alternative, it could result in
loss of functionality.
The Board approves expansion
plans into new markets presented
by Executive management.
Wherever possible the business
seeks to hire experienced
personnel in the new market
who have clear reporting lines
and support from experienced
senior management.
The Group maintains robust
commercial and contractual
relations with all critical
suppliers and the business
is clear on which alternative
suppliers there are in the
market should a change
be required.
If the Group’s commercial
relationship with any of its
Medium, Large or Extra Large
corporate clients terminates for
any reason, or if one of its key
corporate clients significantly
reduces its business with the
Group and the Group is unable
to enter similar relationships
with other corporate clients on
a timely basis, or at all, the
Group’s business, the growth
and profitability levels set out
in the strategic plan may not be
achieved and cash generation
may be impacted.
Most of our corporate clients
are subject to multi-year
contracts with multiple month
notice periods (for convenience).
The Group undertakes regular
account reviews with all clients
to ensure their ongoing
satisfaction of the Group’s
service and aims to prove the
commercial value of the services
we offer in monthly and quarterly
reporting. We aim to ensure all
levels of management and
leadership within our corporate
clients understand the value
that we deliver.
20
Ten Lifestyle Group Plc Annual Report and Accounts 2018
The Group may experience
disruptions due to hacking, viruses,
Online security breaches and service
Failure of the business to adequately
If any misappropriation or compromise
The Group operates in a highly competitive
deliver Platform performance and
in the Group’s security measures were
industry and the advent of new
functionality in line with contractual
to occur, or if the Group’s websites
technologies and industry practices
requirements and members expectations
or other systems were to experience
may adversely affect the Group’s
could result in contractual risk, delayed
service outages or other interruptions,
business, results of operations and
launches and reputational damage.
the Group’s reputation may be harmed
financial condition.
If the Group’s key IT systems were to
and its business, financial condition
experience service outages or other
and results of operations and customer
interruptions, it would impact the
confidence may be materially
Group’s ability to effectively service
adversely affected.
customers. Revenue and profitability
may be impacted by a major IT failure
or interruption. Depending on the
cause and/or severity of the incident,
the Group’s reputation may be harmed.
The Group continues to make significant
The Group invests significant amounts
The Directors believe that the Group’s
investment into technology upgrades of
into what we believe to be ‘best in class’
investment in technology is competitive.
the Group’s technology hardware and
security software and processes and
The Board conducts competitive scans
cloud-based infrastructure, including
we are Payment Card Industry Data
to identify key risks and opportunities.
the Ten platform. The technology
Security Standard Level 1 (PCI DSS)
management team has been strengthened,
accredited to the highest levels required
including the appointment of a new highly
of us by our corporate clients. PCI
experienced global CTO managing the
DSS accreditation is conducted by
technology roadmap. Robust back-up
an independent external auditor each
and recovery processes and procedures
year and augments the other checks
are in place to minimise disruption.
that are run by the Group and by our
other corporate clients.
Strategic Report OPERATIONAL
TECHNOLOGY
MACROECONOMIC/MARKET
Loss of clients
International expansion
Loss of key suppliers
Potential Impacts
If the Group’s commercial
relationship with any of its
The Group’s performance in
Suppliers of services supporting
new markets may be below
the Group’s business, including
Medium, Large or Extra Large
the strategic plan and reduce
travel, IT and payments could
corporate clients terminates for
revenue, profitability and
any reason, or if one of its key
cash resources.
Growth and expansion of the
Group into new markets may
strain the Group’s managerial,
operational and control
systems, making it harder to
retain key personnel.
cease operations, become
non-compliant or terminate
agreements due to lack of
performance, conflicting
corporate agreements or
takeover. If the support could
not be replaced with a suitable
alternative, it could result in
loss of functionality.
Mitigation
Most of our corporate clients
The Board approves expansion
The Group maintains robust
are subject to multi-year
plans into new markets presented
commercial and contractual
contracts with multiple month
by Executive management.
relations with all critical
Wherever possible the business
seeks to hire experienced
personnel in the new market
who have clear reporting lines
and support from experienced
senior management.
suppliers and the business
is clear on which alternative
suppliers there are in the
market should a change
be required.
corporate clients significantly
reduces its business with the
Group and the Group is unable
to enter similar relationships
with other corporate clients on
a timely basis, or at all, the
Group’s business, the growth
and profitability levels set out
in the strategic plan may not be
achieved and cash generation
may be impacted.
notice periods (for convenience).
The Group undertakes regular
account reviews with all clients
to ensure their ongoing
satisfaction of the Group’s
service and aims to prove the
commercial value of the services
we offer in monthly and quarterly
reporting. We aim to ensure all
levels of management and
leadership within our corporate
clients understand the value
that we deliver.
Online security breaches and service
disruptions due to hacking, viruses,
fraud and malicious attack
If any misappropriation or compromise
in the Group’s security measures were
to occur, or if the Group’s websites
or other systems were to experience
service outages or other interruptions,
the Group’s reputation may be harmed
and its business, financial condition
and results of operations and customer
confidence may be materially
adversely affected.
Industry landscape
The Group operates in a highly competitive
industry and the advent of new
technologies and industry practices
may adversely affect the Group’s
business, results of operations and
financial condition.
The Group may experience
technological failure or interruption
Failure of the business to adequately
deliver Platform performance and
functionality in line with contractual
requirements and members expectations
could result in contractual risk, delayed
launches and reputational damage.
If the Group’s key IT systems were to
experience service outages or other
interruptions, it would impact the
Group’s ability to effectively service
customers. Revenue and profitability
may be impacted by a major IT failure
or interruption. Depending on the
cause and/or severity of the incident,
the Group’s reputation may be harmed.
The Group continues to make significant
investment into technology upgrades of
the Group’s technology hardware and
cloud-based infrastructure, including
the Ten platform. The technology
management team has been strengthened,
including the appointment of a new highly
experienced global CTO managing the
technology roadmap. Robust back-up
and recovery processes and procedures
are in place to minimise disruption.
The Group invests significant amounts
into what we believe to be ‘best in class’
security software and processes and
we are Payment Card Industry Data
Security Standard Level 1 (PCI DSS)
accredited to the highest levels required
of us by our corporate clients. PCI
DSS accreditation is conducted by
an independent external auditor each
year and augments the other checks
that are run by the Group and by our
other corporate clients.
The Directors believe that the Group’s
investment in technology is competitive.
The Board conducts competitive scans
to identify key risks and opportunities.
This strategic report and information referred to herein was approved on behalf of the Board on 27 November 2018.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 21
Strategic ReportCorporate GovernanceFinancial Statements Board of Directors
Board structure
Gender
Male
Female
2
Board composition
Chairperson
Executive Directors
Non-Executive Directors
5
1
4
3
12+
The Chairman is responsible for
leading the Board effectively
and overseeing the adoption,
delivery and communication of the
Company’s corporate governance
model. The Chairman makes
sure that the Board’s agenda
concentrates on the key issues,
both operational and financial,
with regular reviews of the
Company’s strategy and
its overall implementation.
A
N
R
Audit and Risk Committee
Nomination Committee
Remuneration Committee
Chairperson
Bruce Weatherill
Independent
Non-Executive Chairman
Alex Cheatle
CEO (Group) and Co-Founder
Andrew Long
Group COO, CEO (APAC) and
Co-Founder
A N
N
Career
Alex Cheatle co-founded
the business in 1998. Alex
is responsible for the Group
strategy to become the most
trusted service business in the
world and the related focus to
always be improving service
levels. Prior to founding Ten,
Alex was a marketing manager
at Procter & Gamble. Alex has
a degree in Philosophy, Politics
and Economics from Oxford
University. Alex is based
in London.
The Chief Executive Officer is
responsible for the management
of the Company’s business and
for implementing the Company’s
strategy. Alex co-founded the
business in 1998.
Career
Andrew Long is responsible for
key account strategy and the
development of the operational
and technology infrastructure.
Prior to founding Ten, he was
the head of the London office,
and account director, of an event
management business. Andrew
has been based in Singapore
with particular leadership
responsibilities in APAC
since 2012.
Andrew was appointed as
Group COO and CEO APAC
in 2012. Andrew co-founded
the business in 1998 and is
responsible for operational
and technology infrastructure
as well as having leadership
responsibilities in APAC.
Career
Bruce Weatherill joined Ten
in October 2017. Bruce has over
40 years’ experience in the global
financial services industry,
providing a range of audit and
consulting services to global
financial service companies.
Until 2008, Bruce was a partner
at PwC in charge of a number of
Asset Management and Wealth
Management clients. During his
time at PwC, Bruce was global
leader of PwC’s Private Banking
and Wealth Management practice.
Since leaving PwC, Bruce set
up Weatherill Consulting and
provides consulting services to
Wealth Management Companies
around the world. Bruce is
a non-executive director of
Fidelity Holdings (UK) Limited
and ComPeer Limited, and
Chairman of JDX Consulting,
ClearView Financial Media
(WealthBriefing) and the Wisdom
Council. He has previously served
as Deputy Chairman of the
Chartered Institute of Securities
and Investments Wealth
Management Focus Group
and regularly chairs Wealth
Management conferences
around the world.
Bruce was appointed Chairman
in October 2017, bringing over
40 years’ experience in the global
financial services industry with
relevant leadership, financial
control and commercial expertise
as well as proven history at
Board level.
22
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance50
+
38
+
P
I
n
d
e
p
e
n
d
e
Sean Hegarty
CFO
Sarah Hornbuckle
Client Services Director
Career
Sarah Hornbuckle joined Ten in
2001. Sarah is responsible for
the client services strategy,
leading the team that develops
long-term partnerships with
Ten’s corporate clients. Sarah
has overseen the launch of all of
the company’s major corporate
programmes in EMEA, as well
as many programmes globally.
Prior to joining Ten, Sarah was
a senior brand manager at
Unilever Bestfoods and Mars
Confectionery for several years,
responsible for launching new
product lines and developing
ATL and BTL advertising and
marketing campaigns.
Career
Sean Hegarty joined Ten in 2012
from Reed Elsevier where he was
Head of Commercial Finance.
Prior to joining Ten, Sean had
more than 16 years’ experience
working in the media and
publishing sectors and held
a number of senior commercial
and finance roles with Yahoo!
Europe, MTV Networks
International and BskyB plc.
Sean qualified as a Chartered
Accountant with Coopers
& Lybrand.
Sean was appointed as Chief
Financial Officer in 2012. Sean
brings financial expertise as a
Chartered Accountant having
held a variety of roles covering
financial planning and control,
commercial decision support,
treasury and both internal and
external reporting.
Julian Pancholi
Independent
Non-Executive Director
Gillian Davies
Independent
Non-Executive Director
N R
A
R
Career
Julian (“Jules”) Pancholi joined
Ten in October 2017. Jules is
an experienced technology and
marketing services entrepreneur,
which includes serving as
a non-executive director of
Skyscanner Limited, the travel
fare comparison website until
its sale to C TRIP for over
£1.4bn in 2016. Jules is Managing
Director of Nitro Digital Limited,
an independent digital agency.
His other ventures include
Nixxie Limited (a US-focused
advertising tech business),
Estimo Technologies Limited
(a B2B SaaS workflow solution),
Nitro Property Limited
(a syndicate-based property
portfolio business) and a
number of other ventures
in Fintech and Healthtech.
Julian was appointed as
Non-Executive Director in
October 2017. Jules has
relevant industrial experience
in technology and marketing
services and is a proven
non-executive director.
Career
Gillian Davies is a Chartered
Accountant who qualified with
KPMG. Gillian has held a number
of senior financial positions in
both listed and private equity
backed international companies,
including Zeneca plc, Avecia
Limited and Georgia Pacific. More
recently, Gillian spent 11 years
as Group Finance Director of
FTSE listed 4imprint Group plc,
during which time 4imprint
Group plc was extensively
restructured and delivered
significant growth.
Gillian was appointed
as Non-Executive Director
in October 2017. She brings
financial expertise as a
Chartered Accountant and
has substantial experience as
a Group Finance Director of a
FTSE listed company. Gillian
is currently Interim CFO of
AIM-listed Harwood Wealth
Management Group.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 23
Strategic ReportCorporate GovernanceFinancial Statements
Statement of Corporate Governance
Introduction from
the Chairman
The Company was admitted to the London
Stock Exchange’s (LSE) AIM market for smaller
growing companies in November 2018.
“ As Chairperson, I am
the custodian of the
corporate governance
approach adopted by
the Board to ensure
that the Company has
the right people,
strategy and culture to
deliver success in the
medium to long term.”
On 8 March 2018, the LSE issued
revised rules for AIM-listed companies,
within which was a requirement (Rule 26)
for AIM companies to apply a recognised
corporate governance code from
28 September 2018.
Taking account of this, the Board has
adopted the Quoted Company Alliance’s
(QCA) Corporate Governance Code for
Small and Mid-Size Quoted Companies
(“QCA Code”). The principal means of
communicating our application of the
Code are this annual report and our
website (www.tengroup.com/investors/).
As Chairman, I am the custodian of
the corporate governance approach
adopted by the Board to ensure that
the Company has the right people,
strategy and culture to deliver success
in the medium to long term. Since
adopting the QCA Code I have led
the Company’s application of its ten
principles to ensure that the Company’s
strategy is linked to and supported by
its governance arrangements.
The remainder of this statement sets
out the Company’s application of the
Code including, where appropriate,
cross references to other sections
of the annual report.
1. Establish a strategy and
business model which
promote long-term value
for shareholders
2. Seek to understand and
meet shareholder needs
and expectations
3. Take into account wider
stakeholder and social
responsibilities and
their implications for
long-term success
4. Embed effective risk
management,
considering both
opportunities and
threats, throughout
the organisation
Ten’s business model and strategy is set out on
pages 11 and 12 and 14 and 15.
The business model is focused on securing and
maintaining corporate clients to deliver the growth to
the business and value to shareholders. The Board’s
four strategic goals are: (i) improve service levels; (ii)
grow Net Revenue; (iii) invest in technology; and (iv)
new geographic and vertical markets.
Primary responsibility for investor relations rests with
the CEO, Alex Cheatle, supported by the CFO, Sean
Hegarty, who regularly meet with shareholders as well
as potential investors and report their feedback to the
Board. In addition to investor presentations, web-based
videos and meetings, the Board will use its first Annual
General Meeting since IPO to make a presentation to
shareholders on the Group’s performance.
The Annual General Meeting also provides an
opportunity for shareholders to raise any questions
regarding the Company’s management or performance.
The Board is responsible for directing the Group’s
wider stakeholder and social responsibilities and
sustainability strategy.
The Board reviews annual employee surveys to better
understand the needs of the Company’s growing workforce.
The service value to our corporate partners is intrinsically
linked to member satisfaction, which we rigorously monitor
through NPS and our internal quality assurance metrics
to understand their needs and reacting to their
feedback to improve our services.
The risks that the Board consider to be principal risks
to the Group’s business are set out on pages 20 and
21. The Audit and Risk Committee monitors the Group’s
risk and control management system framework, as
described below and further set out on page 29.
24
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance 5. Maintain the Board as
a well‑functioning,
balanced team
led by the Chairman
6. Ensure that between
them the Directors have
the necessary up-to-date
experience, skills
and capabilities
7. Evaluate Board
performance based
on clear and relevant
objectives, seeking
continuous improvement
8. Promote a corporate
culture that is based
on ethical values
and behaviours
9. Maintain governance
structures and
processes that are fit for
purpose and support
good decision-making
by the Board
10. Communicate how the
Company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
The QCA Code requires that the boards of AIM
companies have an appropriate balance between
Executive and Non-Executive Directors and that each
board should have at least two independent Directors.
The Board is made up of three independent Directors
and four Executive Directors, as described on page 26.
The Board’s biographies are set out on pages 22 and 23.
The Board believes that has the right blend of Executive
Directors with the proven abilities to develop and deliver
the strategy and business model and Non-Executives
with the expertise to support and challenge the executives.
The Non-Executive Directors hold other executive positions
and together with an experienced Chair they have the
required skills and personal qualities to give stability
and structure to the Board.
The Board evaluation process is described on page 27.
“ Since adopting the
QCA Code I have
led the Company’s
application of its ten
principles to ensure
that the Company’s
strategy is linked to
and supported by
its governance
arrangements.”
The Group has an anti-corruption and bribery policy
which applies to all employees. It sets out their
responsibilities in observing and upholding a zero-tolerance
position on bribery and corruption, as well as providing
guidance on how to recognise and deal with bribery
and corruption issues and the potential consequences.
The Company expects all employees, suppliers, contractors
and consultants to conduct their day-to-day business
activities in a fair, honest and ethical manner.
Management at all levels are responsible for ensuring
that those reporting to them, internally and externally,
are made aware of and understand this policy.
The Group places great value on its culture and the
Board promotes ethical values and behaviours
internally through leading by example and providing
periodic training and support to its employees.
Our corporate governance structures and processes
are summarised and discussed under the heading
“Board operation” on page 26.
In addition to the activities summarised under the
QCA Code principle, “Seek to understand and meet
shareholder needs and expectations” the Company
provides information for investors on its website,
arranges Investor meetings and maintains contact
with institutional shareholders and fund managers.
The Company’s joint-brokers provide independent
feedback to the Board on market views and produce
regular research notes on the Company. This enables
the Board to understand the concerns of shareholders
and the wider investment community.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 25
Strategic ReportCorporate GovernanceFinancial Statements Statement of Corporate Governance continued
Risk management
and internal controls
The Board has ultimate responsibility
for the Group’s risk management
controls. Previously, the Board dealt
with this matter and from July 2018, it
was determined by the Board that this
function was best achieved by delegating
the responsibility of monitoring the
Group’s risk and control management
system framework to the Audit and Risk
Committee. The Board determines the
appropriateness of the internal controls
upon the Committee’s recommendations.
The risk and control management
system framework includes:
> close management of the day-to-day
activities of the Group by the Executive
Directors and the Senior
Leadership Team;
> periodic reviews of its risk register;
> a comprehensive annual budgeting
process, which is approved by
the Board;
> detailed monthly reporting of
performance against budget; and
> central control over key areas such
as capital expenditure authorisation
and banking facilities.
Board operation
Prior to the Company’s Admission
to AIM, the Board was assembled by
identifying the necessary skills and
experience required by the Company
in the context of the strategy and
business model set out in the Company’s
Admissions Document. With this in
mind, the members of the Board were
appointed to include Executive Directors
with the proven abilities to develop and
deliver the business model strategy and
Non-Executives with the expertise to
support and challenge the Executives
and an experienced Chairman to give
stability and structure to the Board.
The Board is responsible for formulating,
reviewing and approving the Group’s
strategy, budgets and corporate actions.
The Company holds Board meetings
at least eight times each financial year
and at other times as and when required.
On Admission, the Board has established
three Committees: the Audit and Risk
Committee (formerly the Audit Committee),
the Remuneration Committee and the
Nomination Committee, each having
written terms of reference. Reports by
the Chairs of the three Committees are
reported separately on pages 28 and
29 for the Audit and Risk Committee,
pages 30 to 32 for the Remuneration
Committee and page 33 for the
Nomination Committee.
The Board consists of four Executive
and three Non-Executive Directors.
The Remuneration Committee is comprised
of two independent Non-Executive
Directors and the Audit and Risk
Committee and Nomination Committee
are chaired by independent
Non-Executive Directors, in
accordance with the QCA Code.
The Board considers that Bruce Weatherill,
Julian Pancholi and Gillian Davies are
independent. The Board is therefore
compliant with the QCA Code in
having at least two independent
Non-Executive Directors.
The Non-Executive Directors are
considered independent of management
and free of any relationship that could
materially interfere with the exercise
of their independent judgement. The
Chairman was considered independent
upon his appointment.
At present, the formal role of Company
Secretary is undertaken by Sean Hegarty,
the CFO. In practice, the majority of
the work is undertaken by a full-time
employee who acts as Secretary to the
Board and its Committees. It may be
appropriate at some time in the future
to separate the Company Secretary
role from the executive, and we keep
this under review.
26
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance Annual General Meeting (AGM)
The Annual General Meeting of the
Group will take place on 5 February 2019.
Full details will be included in the Notice
of Meeting which will be published on
our website in due course
(www.tengroup.com/investors/).
Bruce Weatherill
Chairman
27 November 2018
Board effectiveness
Board and Committee meetings are
scheduled in advance for each calendar
year. Additional meetings are arranged
as necessary. Since IPO, the scheduled
Board and Audit Committee meetings
and attendance during the year ending
31 August 2018 were as follows:
Bruce Weatherill
Alex Cheatle
Andrew Long
Sean Hegarty
Sarah Hornbuckle
Julian Pancholi
Gillian Davies
Board
14/14
14/14
12/14
13/14
13/14
12/14
14/14
Audit
& Risk
4/4
NA
NA
NA
NA
NA
4/4
The Executive Directors are all
employed full-time by the Company,
except Sarah Hornbuckle, who works
four days’ a week for the Company.
The Non-Executive Directors have
commitments outside the Company.
These are summarised in the Board
biographies on pages 22 and 23. All the
Non-Executive Directors give the time
to fulfil thoroughly their responsibilities
to the Company, which normally involves
a time commitment of two to three days
per month.
The Board was appointed prior to
Admission and following the first
anniversary of the Company’s
Admission and retire by rotation
thereafter, the Chairman will lead
robust annual performance assessment
of the Board and its Committees
against the following performance
evaluation indicators:
> clear purpose and strong leadership
by the Chairman;
> balance of skills, experience and
independence;
> Directors that work as a team;
> understanding of the business and
its strategy;
> information and engagement
with shareholders and other
stakeholders; and
> Board performance evaluation.
The performance effectiveness process
will include each Director completing a
performance evaluation questionnaire,
the anonymised results and feedback
from which will be collated into a summary
and discussed by the Board. The
Board shall explain how the Company
approaches succession planning and
the process following the first performance
evaluation. The Chairman will consider
whether external advice or a third-part
facilitator is needed to refresh the
performance evaluation process
every three years.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 27
Strategic ReportCorporate GovernanceFinancial Statements Audit and Risk Committee Report
I am pleased to present the report on behalf of
the Audit Committee, formed on 9 November 2017
and renamed the Audit and Risk Committee by
the Board in July 2018.
Gillian Davies
Chairperson of the Audit and
Risk Committee
The Committee is responsible for
challenging the quality of internal and
external controls and for ensuring that
the financial performance of the Group
is properly reported and reviewed.
The Committee reviews reports on the
interim and annual accounts, financial
announcements, the Company’s
accounting and financial control
systems, changes to accounting
policies, the extent of the non-audit
services undertaken by the external
auditor and the appointment of the
external auditor. From July 2018, the
Board delegated its responsibility to
assess and manage the Company’s
risk management process to the
Committee, further details below.
During the period the Audit and Risk
Committee reviewed draft interim and
annual reports and associated results
announcements. The Committee
considered the accounting policies and
principles adopted in these accounts
as well as significant accounting issues
and areas of judgement and complexity.
Composition
The Committee is composed of
myself (Gillian Davies) as Chairperson
and Bruce Weatherill. We are both
independent, Non-Executive Directors
and have significant recent and relevant
financial experience. I am a Chartered
Accountant and have held a number of
senior financial positions in both listed
and private equity backed international
companies. Bruce was a partner at
PwC and global leader of its banking
and wealth management practice.
He currently holds a number of
Non-Executive Chairman and Director
roles. The Board is of the view that we
have recent and relevant financial
experience. Alex Cheatle (CEO) and
Sean Hegarty (CFO) and other Executive
Directors may attend Committee meetings
by invitation. The Committee met four
times in the period since its formation.
I report to the Board following an Audit
Committee meeting and minutes are
available to the Board.
Duties
The main duties of the Committee are
set out in its terms of reference, which
are available on Ten’s website. The
main items of business considered by
the Committee in this period since its
formation included:
> review and approval of the 2018 audit
plan and audit engagement letter;
> consideration of key audit matters
and how they are addressed;
> review of suitability of the
external auditor;
> review of the unaudited interim report
and annual report (including the
audited financial statements);
> consideration of the management
representation letter;
> consideration of the principal
judgemental accounting matters
for the Group based on reports as
determined by executive management;
> review of the risk management and
internal control systems; and
> meeting with the external auditor
without management present.
Financial reporting
The Committee reviews whether
suitable accounting policies have been
adopted and whether management has
made appropriate judgements and
estimates. The Committee reviews
accounting papers prepared by
management providing details on the
main financial reporting judgements
as well as assessments of the impact
of potential new accounting standards.
The Committee also reviews reports
28
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance During the year, the internal control
process has been monitored and
reviewed by the Committee and
the Board and where necessary
improvements have been identified and
implemented. During the period, the
Committee has reviewed the Board’s
process and the Committee is satisfied
that the risk management and internal
control systems in place are currently
operating effectively.
External auditor
BDO was appointed auditor of the
Group in 2017. The Committee
considers that its relationship with the
auditor is working well and is satisfied
with their effectiveness.
The Committee is responsible for
ensuring there is a suitable policy for
ensuring that non-audit work undertaken
by the auditor is reviewed to ensure it
will not impact their independence and
objectivity. The breakdown of fees
between audit and non-audit services
is provided in note 6 to the Group’s
financial statements. The non-audit
fees primarily relate to Group
taxation compliance.
As necessary the Committee held
private meetings with the auditor
to review key items in its sphere
of responsibility. Taking into account
the auditor’s knowledge of the Group
and experience, the Committee has
recommended to the Board that the
auditor is re-appointed for the period
ending 31 August 2019.
Gillian Davies
Chairperson of the Audit and
Risk Committee
27 November 2018
provided by the external auditor on
the annual results which highlight
any observation from the work they
have undertaken.
There were no significant changes in
accounting policies applying to the Group
for the year ended 31 August 2018.
In the financial year commencing
1 September 2018, the Group will apply
IFRS 15 ‘Revenue from Contracts with
Customers’ and IFRS 9 ‘Financial
Instruments’ for the first time. The
Committee has reviewed the assessments
of the treatment and impact, and adoption
of these is not expected to have a
material impact on the Group’s results
for the year ending 31 August 2018.
Risk management and
internal controls
The risk and control management
framework of the Group is designed to
manage rather than eliminate the risk of
failure to meet the Group’s objectives
and the system can only provide reasonable
and not absolute assurances against
material misstatement or loss. The
Group faces a number of risks, the
significant ones of which are set out in
the section on Principal Risks and
Uncertainties on pages 20 and 21.
Through the control systems outlined in
the Statement of Corporate Governance
on pages 24 to 27. The Group operates
an ongoing process of identifying,
evaluating and managing significant
risks faced by the business. This
process includes the following:
> defined organisation structure and
appropriate delegation of authority;
> formal authorisation procedure
for investments;
> clear responsibility for management
to maintain good financial control
and the production and review of
detailed, accurate and timely
financial information;
> identification of operational risks and
mitigation plans developed by senior
management; and
> regular reports to the Board from
Executive Directors.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 29
Strategic ReportCorporate GovernanceFinancial Statements Remuneration Committee Report
I am pleased to present this Remuneration
Committee Report, which sets out the remuneration
policy and the remuneration paid to the Directors
for the period.
As part of the AIM Admission process
the structure of the Directors’
remuneration packages were evaluated
in the light of the Group’s objectives
and with consideration of industry best
practice and revised appropriately. The
Long Term Incentive Plan (LTIP) known
as the Management Incentive Plan
(MIP) was introduced. Since IPO,
no adjustments have been made to
Directors’ pay. On 9 November 2018
the Board delegated responsibility
to the Remuneration Committee to
assess the remuneration packages
for new appointments to the Senior
Leadership Team.
Composition and role
The Remuneration Committee’s members
are Julian Pancholi, who is the Chairman
of the Committee and Gillian Davies.
The Committee operates under the
Group’s agreed terms of reference
and is responsible for reviewing the
remuneration packages for Executive
Directors as well as all senior executive
appointments and determining the
Group’s policy in respect of the terms of
employment for key employees. The
Remuneration Committee met once
during the period and is required to
meet at least twice per year. The Group’s
approved remuneration policy has been
detailed below.
Jules Pancholi
Chairman of the Remuneration
Committee
The Committee’s main role and
responsibilities are to:
> have responsibility for setting the
remuneration policy for all Executive
Directors and such other members of
the executive management as it is
designated to consider;
> recommend and monitor the level
and structure of remuneration for
senior management;
> obtain reliable, up-to-date information
about remuneration in other companies
of comparable scale and complexity
in the light of reviewing the ongoing
appropriateness and relevance of
the remuneration policy;
> review the design of all share
incentive plans for approval by
the Board;
> approve the design of, and determine
targets for, any performance-related
pay schemes operated by the Company
and approve the total annual payments
made under such schemes; and
> ensure that contractual terms on
termination, and any payments made,
are fair to the individual, and the
Company, that failure is not rewarded
and that the duty to mitigate loss is
fully recognised.
30
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance Remuneration policy
The Remuneration Committee aims to support the creation of long-term value for shareholders by attracting, motivating and
retaining high quality individuals who will contribute to the achievement of the Group’s strategy. The policy and principles support
the needs of our business over the next few years and the strategy to focus on growth in order to create long-term value for
our Shareholders.
It is the Remuneration Committee’s intention that remuneration should reward achievement of objectives and that these are
aligned with shareholders’ interests over the medium term. Remuneration consists of the following elements:
Element
Salaries
Purpose and link to strategic objectives of the Group
Performance metrics
To provide an appropriate level of fixed salary to
attract and retain individuals with the qualities,
skills and experience required to deliver our strategic
objectives and create value for our shareholders.
None.
Management Incentive Plan To reward and retain executives while aligning
their interests with those of shareholders by
incentivising performance over the longer term.
Performance measures are linked to longer-term
creation of shareholder value.
Awards made to the Executive Directors vest
on the achievement of performance conditions
based on total shareholder return and, for some
participants, operational targets as set out on
page 32. The vesting of any deferred bonus may
be reduced or cancelled, in line with malus
provisions, and is subject to claw back provisions
at the absolute discretion of the Committee.
Pension-related benefits
To aid attraction and retention of individuals
with the qualities, skills and experience required
to deliver our strategic objectives, allowing such
executives to provide for their retirement.
None.
Directors’ remuneration
The following table summarises the total gross remuneration for the qualifying
services of the Directors who served during the year to 31 August 2018.
Executive
Alex Cheatle
Andrew Long
Sean Hegarty
Sarah Hornbuckle
Malcolm Berry
Benjamin Horner
Non-Executive
Bruce Weatherill
Julian Pancholi
Gillian Davies
2018
Basic salary/fee
(£)
Pension
(£)
Gain on options
exercised at IPO
(£)
Total
(£)
255,000
277,279
135,000
76,000
10,071
—
45,833
39,600
31,523
3,717
3,230,200
3,488,917
—
1,879,660
2,156,939
1,933
1,093
718
—
—
—
—
508,585
645,518
998,320
1,075,413
621,209
631,998
130,500
130,500
—
—
—
45,833
39,600
31,523
870,306
7,461
7,368,474
8,246,241
In November 2017, Alex Cheatle
exercised all options held resulting in
the receipt of 4,520,000 ordinary shares.
At IPO 2,938,000 ordinary shares were
sold representing 20% of his enlarged
shareholding. Alex paid the exercise
prices to realise the share options, the
post-tax cash proceeds to Alex from
the IPO was £0.3m. Alex’s remaining
shares were retained.
In addition, Andrew Long exercised all
options held, resulting in the receipt
of 2,410,024 ordinary shares. At IPO,
1,418,000 shares were sold representing
23% of his enlarged shareholding.
Andrew paid the exercise prices to
realise the share options, the net
post-tax cash proceeds to Andrew
from the IPO was £0.5m. Andrew’s
remaining shares were retained.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 31
Strategic ReportCorporate GovernanceFinancial Statements
Remuneration Committee Report continued
Management Incentive Plan
Annual awards to Executive Directors under this plan are underpinned by financial
performance measures. No options have been granted to Non-Executive Directors
of the Group.
Directors’ interests
Directors’ interests in the shares of
the Company are shown below:
The Remuneration Committee has overall responsibility for the operation and
administration of the new MIP and has discretion to select the employees and
Executive Directors to whom MIP Options are granted; the Board may also grant
MIP Options to Non-Executive Directors.
Number of
ordinary shares
under option
Date of grant
Exercise price
Exercise period
Alex Cheatle
07/12/2017
Andrew Long
07/12/2017
Sean Hegarty
07/12/2017
400,000
200,000
120,000
£0.001 07/12/2017–07/12/2020
£0.001 07/12/2017–07/12/2020
£0.001 07/12/2017–07/12/2020
Sarah Hornbuckle
07/12/2017
60,000
£0.001 07/12/2017–07/12/2020
Initial awards of MIP Options will vest on the achievement of performance conditions
based on total shareholder return and, for some participants, operational targets.
For Alex Cheatle, Sean Hegarty and Sarah Hornbuckle, this performance condition
is wholly linked to the compound annual growth rate, vesting after three years.
Andrew Long’s performance condition is linked to the compound annual growth
rate as well as to Net Revenue growth in APAC and profit making in that region.
The Committee believes the aforementioned performance metrics are aligned
with achieving KPI growth and driving the Company’s strategy forward.
On Admission to the AIM, all share options held by Directors under the other schemes
were exercised and therefore the table above reflects Directors’ interests in
options over shares and conditional shares as at 31 August 2018.
Fees paid for remuneration related services
The Company paid £25,500 in fees for remuneration related services throughout the
financial year which were specifically in relation to the setup of share option incentives.
Number
as at
31 August
2018
%
shareholding
Executive
Alex Cheatle
11,676,008
14.48%
Andrew Long
4,796,573
Sean Hegarty
233,059
Sarah Hornbuckle
757,483
Non-Executive
Bruce Weatherill
646,523
Julian Pancholi
316,664
Gillian Davies
20,000
5.95%
0.29%
0.94%
0.80%
0.39%
0.02%
Executive Directors’ service
contracts
The Executive Directors signed new
service contracts with the Group on
Admission to AIM in November 2017.
These are not of fixed duration. All the
Executive Directors’ contracts are
terminable by either party giving
six months’ written notice.
Non-Executive Directors
The Non-Executive Directors signed
letters of appointment with the Group for
the provision of Non-Executive Directors’
services, which may be terminated by
either party giving three months’ written
notice. The Non-Executive Directors’
fees are determined by the Board.
It being the first AGM since IPO in
November 2017, all Executive Directors
and Non-Executive Directors are due to
retire and, being eligible, offer themselves
for re-election at the forthcoming AGM
on 5 February 2019.
Jules Pancholi
Chairman of the Remuneration Committee
27 November 2018
32
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance Nomination Committee Report
Bruce Weatherill
Chairman of the Nomination Committee
As part of the IPO process, the Board
undertook a review of its appointments
to ensure that the Board and its
Committees have the appropriate
balance of skills, experience, availability,
independence and knowledge required
to effectively discharge their respective
responsibilities. As a result, in October
2017 the Board decided to strengthen
the Board by appointing Bruce Weatherill
as Non-Executive Chairman as well
as Jules Pancholi and Gillian Davies
as Non-Executive Directors.
The Board formed the Nomination
Committee on 9 November 2017,
which delegated the responsibility to
lead the process for Board appointments.
The Committee is composed of
Bruce Weatherill as Chairman and
its other members are Alex Cheatle
and Jules Pancholi.
The main duties of the Committee
are set out in its terms of reference,
which are available on Ten’s website.
There were no requirements for the
Committee to meet in this period as new
appointments to the senior management
were considered directly by the
Board with recommendations from
the Remuneration Committee.
The Committee met in October 2018
to consider succession planning for
Directors and other senior managers,
taking into account the challenges and
opportunities facing the Group, and
the skills and expertise needed on the
Board in the future. The Committee
also reflected on the diversity of the
Board and senior managers and
recognised the progress the Group
had made with regard to gender
diversity and considered how it
could achieve further inclusion.
Bruce Weatherill
Chairman of the Nomination Committee
27 November 2018
Ten Lifestyle Group Plc Annual Report and Accounts 2018 33
Strategic ReportCorporate GovernanceFinancial Statements Directors’ Report
The Directors present their annual report
and financial statements for the year ended
31 August 2018. An indication of likely future
developments in the business is set out in
the Strategic Report.
Directors
The Directors who held office during
the year and up to the date of signature
of the financial statements were
as follows:
Financial risk management
objectives and policies
Further detailed commentary on
financial risk management is included
in note 28.
Alex Cheatle
Sarah Hornbuckle
Andrew Long
Malcolm Berry
(Resigned 25 September 2017)
Benjamin Horner
(Resigned 29 November 2017)
Bruce Weatherill
(Appointed 1 October 2017)
Julian Pancholi
(Appointed 1 October 2017)
Sean Hegarty
(Appointed 25 October 2017)
Gillian Davies
(Appointed 25 October 2017)
Liquidity risk
The Group seeks to manage financial
risk by ensuring sufficient liquidity is
available to meet foreseeable needs
and to invest cash assets safely and
profitably. Short-term flexibility is
achieved by holding significant cash
balances in major currencies notably
UK Sterling and the US Dollar. In the
year the invoice financing facility was
closed as it was not needed following
the IPO. The Board will keep this option
under review.
Credit risk
The principal credit risk for the Group
arises from its trade receivables. In
order to manage credit risk customers
can be required to pay in advance of
services being provided and credit
controllers regularly review credit limits
in conjunction with debt ageing and
collection history.
As at 31 August 2018, there were no
material credit risk balances that were
not provided for.
Foreign exchange risk
The Group has significant operations in
both the UK and overseas. Profits are
exposed to variations in exchange rates
and therefore reported profits. There is
some natural hedging of transactional
foreign exchange risk, however, the
Group remains subject to translation
exchange risk.
Overseas branches
The Group has three branches outside
the United Kingdom located in Dubai,
Argentina and Colombia.
Research and development
The Group continues to dedicate
resources to further develop the
bespoke TenMAID platform and
enhance the customer facing digital
platform offering to our partners.
Expenses incurred are capitalised
when it is probable that future
economic benefits will be attributable
to the asset and that these costs can
be measured reliably (see note 12).
Political donations
The Group did not make any political
donations during the year.
Post-reporting date events
The Board considers that no material
post-reporting events occurred between
the end of the period and the date of
publication of this report.
34
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Corporate Governance Substantial shareholders
As at 25 November 2018, the Shareholders listed below had notified the Company
of a disclosable interest of 3% or more in the nominal value of the ordinary share
capital of the Group.
Mr Alexander Cheatle
Merian Global Investors (UK) Limited
Soros Fund Management
Mr Andrew Long
Mr Ben Horner
Mr Luke Ding
Quinto Corporation
Number of
ordinary shares
Percentage of
ordinary shares %
11,676,008
9,546,600
7,176,734
4,796,573
4,586,836
3,295,397
2,829,161
14.48
11.84
8.90
5.95
5.69
4.09
3.51
Purchase of own shares
There was no purchase of own shares
in the financial year.
Corporate governance
The Company has adopted the QCA
Corporate Governance Code for
Small and Mid-Size Quoted
Companies (“QCA guidelines”)
as set out on pages 24 and 25.
Dividends
No ordinary dividends were paid
(2017: £nil). The Directors do not
recommend payment of a
final dividend.
Share option schemes
Details of employee share schemes
are set out in note 25 to the
financial statements.
Statement of Directors’
responsibilities
The Directors are responsible for
preparing the annual report and the
financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the
Directors have elected to prepare the
Group and Company financial
statements in accordance with
International Financial Reporting
Standards (IFRS) as adopted by the
European Union. Under company law
the Directors must not approve the
financial statements unless they are
satisfied that they give a true and fair
view of the state of affairs of the Group
and Company and of the profit or loss
of the Group and Company for that
period. The Directors are also required
to prepare financial statements in
accordance with the rules of the
London Stock Exchange for companies
trading securities on AIM.
In preparing these financial statements,
the Directors are required to:
> select suitable accounting policies
and then apply them consistently;
> make judgements and accounting
estimates that are reasonable
and prudent;
> state whether they have been
prepared in accordance with IFRSs
as adopted by the European Union,
subject to any material departures
disclosed and explained in the
financial statements; and
> prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Company
and enable them to ensure that the
financial statements comply with the
requirements of the Companies Act
2006. They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of
fraud and other irregularities.
Website publication
The Directors are responsible for
ensuring the annual report and the
financial statements are made available
on the Company’s website. Financial
statements are published on the
Company’s website in accordance
with legislation in the United Kingdom
governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is
the responsibility of the Directors. The
Directors’ responsibility also extends
to the ongoing integrity of the financial
statements contained therein.
Disclosure of information to
the auditor
Each of the Directors of the Company
at the time when this report was
approved confirms that:
> so far as the Director is aware, there
is no relevant audit information of
which the Company’s auditor is
unaware; and
> he or she has taken all the steps that
he or she ought to have taken as a
Director in order to make himself or
herself aware of any relevant audit
information and to establish that the
Company’s auditor is aware of that
information. This confirmation is
given in accordance with Section
418(2) of the Act.
Auditor
BDO LLP was appointed as auditor
to the Company and in accordance
with Section 485 of the Companies
Act 2006, a resolution proposing that
they be re-appointed will be tabled at
a General Meeting.
Approval
This Directors’ Report was approved on
behalf of the Board on 27 November 2018.
Sean Hegarty
Chief Financial Officer
27 November 2018
Ten Lifestyle Group Plc Annual Report and Accounts 2018 35
Strategic ReportCorporate GovernanceFinancial Statements Independent Auditor’s Report
to the members of Ten Lifestyle Group Plc
Opinion
We have audited the financial statements of Ten Lifestyle
Group Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 31 August 2018 which
comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position,
the company statement of financial position, the consolidated
statement of changes in equity, the company statement of
changes in equity, the consolidated statement of cash flows,
the company statement of cash flows and notes to the
financial statements, including a summary of significant
accounting policies.
The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial statements,
as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion the financial statements:
> give a true and fair view of the state of the group’s and
of the parent company’s affairs as at 31 August 2018 and
of the group’s loss and the parent company’s profit for the
year then ended;
> the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
> the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
> the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
group and the parent company in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters
in relation to which the ISAs (UK) require us to report to
you where:
> the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate; or
> the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting
for a period of at least twelve months from the date when
the financial statements are authorised for issue.
36
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Revenue Recognition
Key audit matter
The Group has a number of revenue streams. Details of the accounting policies applied during the
period are given in note 1.5 to the financial statements.
We considered there to be a significant audit risk arising from inappropriate or incorrect recognition of
revenue. The risk of material misstatement in relation to revenue recognition concerns the recognition
around the year-end and services required to be delivered throughout the year, in relation to all the
group’s different types of revenue and that the group’s revenue recognition accounting policies, are
in line with the applicable International Financial Reporting Standards, as adopted by the European
Union (IFRSs).
How the risk was
addressed in our audit
We assessed whether the revenue recognition policies adopted by the group comply with IFRSs and
industry standard practices. The relevant IFRS is IAS 18 Revenue. We have reviewed the adopted
policies, and confirmed that consistent application has been adhered to throughout the year.
In relation to service fees, we reviewed a sample of contracts to assess whether the revenue had
been recognised in accordance with the group’s accounting policy, whether it was recognised
appropriately from a timing perspective and whether any other terms within the contract had any
material accounting or disclosure implications.
In making our assessment of compliance with the group’s accounting policy, we tested whether
revenues recognised were in line with our expectations based on source documentation including
customer contracts, sales invoices issued and payment terms during the year.
In relation to travel and experience income, we tested a sample of revenue transactions recognised in
the general ledger to source documentation including sales invoices, sales orders and cash receipts.
In making our assessment of compliance with the group’s accounting policy, we also checked that
revenues were only recognised at the time of the date of travel, stay or the date the experience event
occurred. Furthermore, consideration was made as to whether the group was the principal or agent
in the transaction.
We also checked the completeness, existence and accuracy of accrued income and deferred revenue
balances shown in the statement of financial position at year end to ensure no material misstatements
were identified. We checked a sample of revenue transactions occurring either side of the year-end
reporting date across all revenue streams and checked that the revenues recognised for the year
under audit and accrued income and deferred revenues recognised at the year-end reporting date
did not include any material misstatements.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 37
Strategic ReportCorporate GovernanceFinancial Statements Independent Auditor’s Report
to the members of Ten Lifestyle Group Plc continued
Key audit matters continued
Capitalisation of Development Costs
Key audit matter
The group capitalises costs in relation to development of the software it provides to its clients,
being the Ten Maid platform. Such costs must satisfy certain criteria as set out in the Company’s
accounting policy in note 1.6. In determining which costs to capitalise management make certain
estimates in relation to the allocations of contractor costs and payroll costs between those which
should be capitalised and those which should be expensed through profit and loss.
Capitalised costs are amortised over the period within which the group expects to derive benefits
from the product developed.
There is a significant risk that:
(a) the required criteria are not met and therefore development costs are incorrectly capitalised;
(b) management’s estimates in relation to the costs capitalised may be materially misstated; and
(c) capitalised costs are not amortised over the period within which the group expects to benefit
from selling the product developed.
How the risk was
addressed in our audit
We assessed whether the group’s accounting policy is in accordance with the requirements of IFRSs
and performed testing to confirm that consistent application has been adhered to throughout the year.
In relation to a number of projects on the Ten Maid platform during the year, we have:
> checked the accuracy of the contractor and payroll data included in the calculations for
capitalised costs to supporting documentation including employment contracts and
agreements with contractors;
> considered the proportion of time allocations for employees and contractor roles and made
enquiries of management in relation to changes to percentage rates which were outside of
expectations, corroborating management’s explanations to supporting evidence;
> reviewed the reasonableness of the estimated proportion of time allocations for a sample of
employees and contractors by making enquiries of individual employees and contractors and
critically reviewing written responses to questionnaires which they completed in relation to their
roles, duties and tasks performed in relation to developing the platform asset;
> revisited management’s estimate of the amortisation period applied to the asset, establishing
whether any indicators of impairment exist taking account of any changes in usability of amounts
previously capitalised; and
> assessed the ability of the asset to generate future economic benefits for the business which at
least exceed its carrying value.
Our application of materiality
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect of
misstatements. At the planning stage we set an overall level
of materiality for the financial statements as a whole based
on our understanding of the elements of the financial
statements that are likely to be of greatest significance
to users. In order to reduce to an appropriately low level
the probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality,
to determine the extent of testing needed. lmportantly,
misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of
the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Materiality
Materiality for the group financial statements as a whole
was set at £400,000 (2017: £349,000), which represents 1%
(2017: 1%) of group revenue. Revenue provides a consistent
year on year basis for determining materiality and has been
concluded as the most relevant performance measure to the
stakeholders of the group, while also providing a more stable
measure year on year when compared to the group loss
before tax. Parent company materiality has been set at
£300,000 (2017: £220,000) reflecting 2% (2017: 2%) of net
assets of the entity, capped at 75% of the group materiality
which is considered a suitable benchmark for a non-trading
holding parent company.
38
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements Our application of materiality continued
Performance Materiality
Based upon our assessment of the risks within the group
and the group’s control environment, performance materiality
for the financial statements was set at £300,000 (2017: £261,750),
being 75% (2017: 75%) of overall financial statement materiality.
Performance materiality levels used for the three key
components identified, Ten Lifestyle Management Limited,
Ten Lifestyle Management USA Inc. and Ten Lifestyle
Management Switzerland GmbH within the group ranged
from £59,530 to £228,750 (2017: £59,250 to £195,750).
Reporting Threshold
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of £20,000
(2017: £17,450), which is set at 5% (2017: 5%) of planning
materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial
statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of the other
information, we are required to report that fact. We have
nothing to report in this regard.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work undertaken in the course
of the audit:
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in
forming our opinion.
> the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding
of the group and its environment, including the group’s system
of internal control, and assessing the risks of material
misstatement in the financial statements at the group level.
We obtained an understanding of the internal control
environment related to the financial reporting process and
assessed the appropriateness, completeness and accuracy
of group journals and other adjustments performed
on consolidation.
Three principal trading subsidiaries, noted above, were
identified as significant components and were subject to full
scope audit for group reporting purposes by the group audit
team. These components accounted for 95% (2017: 97%)
of the group’s revenue and 73% (2017: 84%) of the group’s
loss before tax. Financial information for the remaining
components not identified as significant was reviewed for
group reporting purposes, using analytic procedures.
Other information
The directors are responsible of the other information.
The other information comprises the information included
in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible
for the other information. Our opinion on the financial statements
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
> the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
Matters on which we are
required to report by exception
In the light of the knowledge and understanding of the group
and the parent company and its environment obtained in the
course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
> adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
> the parent company financial statements are not in
agreement with the accounting records and returns; or
> certain disclosures of directors’ remuneration specified by
law are not made; or
> we have not received all the information and explanations
we require for our audit.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 39
Strategic ReportCorporate GovernanceFinancial Statements Independent Auditor’s Report
to the members of Ten Lifestyle Group Plc continued
Use of our report
This report is made solely to the parent company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the parent company’s members
those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone
other than the parent company and the parent company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Iain Henderson
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
27 November 2018
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 35, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
40
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements Consolidated Statement of Comprehensive Income
for the year ended 31 August 2018
Revenue
Air ticket cost of sales
Net Revenue
Other cost of sales
Gross profit
Administrative expenses
Other income
Operating (loss)/profit before interest, taxation, amortisation, share-based payments
and exceptional items ("Adjusted EBITA")
Amortisation
Share-based payment expense
Exceptional items
Operating loss
Finance income
Finance expense
Loss before taxation
Taxation credit
Loss for the year
Other comprehensive (expense)/income:
Foreign currency translation differences
Total comprehensive loss for the year
Loss per ordinary share
Notes
4
4
12
25
4
5
9
10
4
2018
£’000
40,122
(2,746)
2017
£’000
34,853
(1,626)
37,376
33,227
(762)
(577)
36,614
32,650
(44,769)
(34,302)
150
—
(3,882)
(2,758)
(947)
(418)
1,695
(2,287)
(740)
(320)
(8,005)
(1,652)
18
(511)
(8,498)
386
(8,112)
(110)
(8,222)
8
(522)
(2,166)
532
(1,634)
14
(1,620)
(3.4)p
11
(11.1)p
The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the parent
company profit and loss account.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 41
Strategic ReportCorporate GovernanceFinancial Statements
Consolidated Statement of Financial Position
as at 31 August 2018
Company No: 08259177
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Obligations under finance leases
Borrowings
Provisions
Total current liabilities
Net current assets
Non-current liabilities
Borrowings
Deferred tax liabilities
Obligations under finance leases
Total non-current liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Merger relief reserve
Treasury reserve
Foreign exchange reserve
Retained deficit
Total equity
Notes
12
13
16
18
19
22
21
20
21
23
22
Note
24
2018
£’000
7,715
1,702
9,417
88
9,014
20,659
29,761
39,178
(10,027)
(64)
—
(396)
(10,487)
19,274
—
—
(32)
(32)
2017
£’000
6,160
918
7,078
43
7,123
8,193
15,359
22,437
(7,336)
(74)
(1,441)
(346)
(9,197)
6,162
(5,993)
(200)
(47)
(6,240)
(10,519)
(15,437)
28,659
7,000
2018
£’000
2017
£’000
81
28,480
1,993
77
(498)
(1,474)
28,659
6
9,743
1,993
(84)
(388)
(4,270)
7,000
The financial statements were approved by the Board of Directors and authorised for issue on 27 November 2018 and are
signed on its behalf by:
Alex Cheatle
Director
Sean Hegarty
Director
42
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements
Company Statement of Financial Position
as at 31 August 2018
Company No: 08259177
Non-current assets
Investments
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Net current assets
Net assets
Equity
Called up share capital
Share premium account
Retained earnings
Total equity
Notes
2018
£’000
2017
£’000
14
16
16
19
24
5,276
25,408
30,684
52
11,491
11,543
42,227
(118)
(118)
11,425
42,109
81
28,480
13,548
42,109
743
7,531
8,274
12
2,737
2,749
11,023
(3)
(3)
2,746
11,020
6
9,743
1,271
11,020
As permitted by s408 Companies Act 2006, the Company has not presented its own statement of comprehensive income
and related notes. The Company’s profit for the year was £1,368,497 (2017: £10,071 loss).
The financial statements were approved by the Board of Directors and authorised for issue on 27 November 2018 and are
signed on its behalf by:
Alex Cheatle
Director
Sean Hegarty
Director
Ten Lifestyle Group Plc Annual Report and Accounts 2018 43
Strategic ReportCorporate GovernanceFinancial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 August 2018
Share
capital
£’000
Share
premium
account
£’000
Merger
relief
reserve
£’000
Foreign
exchange
reserve
£’000
Notes
Treasury
reserve
£’000
Retained
deficit
£’000
Total
£’000
7,532
1,993
(402)
—
(3,376)
5,753
6
—
—
—
—
—
—
6
—
—
—
—
—
14
3
—
—
81
14
44
18,248
(44)
—
—
—
(9,961)
(655)
7,566
3,583
—
—
—
—
—
2,211
—
—
—
—
—
—
—
—
—
14
14
—
—
—
9,743
1,993
(388)
—
—
—
—
—
—
—
—
—
—
—
—
(110)
(110)
—
—
—
—
—
—
—
—
28,480
1,993
(498)
—
—
—
—
(84)
—
(84)
—
—
—
—
—
—
—
—
—
161
—
77
(1,634)
(1,634)
—
14
(1,634)
(1,620)
—
—
740
2,211
(84)
740
(4,270)
7,000
(8,112)
(8,112)
—
(110)
(8,112)
(8,222)
— 18,262
—
9,961
—
—
—
—
947
—
—
(655)
7,580
3,586
161
947
(1,474)
28,659
Balance at 31 August 2016
Loss for the year
Foreign exchange
Total comprehensive income for the year
Issue of share capital
Shares allocated to EBT
Equity-settled share-based payments charge
Balance at 31 August 2017
Loss for the year
Foreign exchange
Total comprehensive income for the year
Issue of share capital
Bonus issue of share capital
Cancellation of balance on share
premium account
Costs relating to issue of shares on
Initial Public Offering (IPO)
Exercise of share options
Shares issued on conversion of
convertible loan
Shares sold by Employee Benefit Trust (EBT)
Equity-settled share-based payments charge
Balance at 31 August 2018
24
24
24
24
24
24
24
25
44
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements
Company Statement of Changes in Equity
for the year ended 31 August 2018
Notes
Share
capital
£’000
Balance at 31 August 2016
Year ended 31 August 2017
Loss for the year
Issue of share capital
Equity-settled share-based payments
Balance at 1 September 2017
Year ended 31 August 2018
Profit for the period
Total comprehensive income for the period
Issue of share capital
Bonus issue of share capital
Cancellation of balance on share premium account
Costs relating to issue of shares on Initial Public Offering (IPO)
Exercise of share options
Shares issued on conversion of convertible loan
Equity-settled share-based payments charge
Balance at 31 August 2018
24
24
24
24
25
24
25
6
—
—
—
6
—
—
14
44
—
—
14
3
—
81
Share
premium
account
£’000
7,532
—
2,211
—
9,743
—
—
18,248
(44)
(9,961)
(655)
7,566
3,583
—
Retained
earnings
£’000
541
(10)
—
740
Total
£’000
8,079
(10)
2,211
740
1,271
11,020
1,369
1,369
—
—
9,961
—
—
—
947
1,369
1,369
18,262
—
—
(655)
7,580
3,586
947
28,480
13,548
42,109
Ten Lifestyle Group Plc Annual Report and Accounts 2018 45
Strategic ReportCorporate GovernanceFinancial Statements
Consolidated Statement of Cash Flows
for the year ended 31 August 2018
Notes
2018
£’000
2017
£’000
Cash flows from operating activities
Loss for the year, after tax
Adjustments for:
Taxation credit
Finance expense
Investment income
Amortisation of intangible assets
Depreciation of property, plant and equipment
Equity-settled share-based payment expense
Change in value of derivatives
Movement in working capital:
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Cash (used)/generated by operations
Tax received, net of tax paid
Net cash (used)/generated by operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Finance income
Net cash used by investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of the issue of shares
Proceeds from other loans
Proceeds from treasury shares
Repayment of other loans
Payment of finance lease obligations
Interest paid
Finance lease interest paid
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash at bank and in hand
Invoice financing facility
Cash and cash equivalents
46
Ten Lifestyle Group Plc Annual Report and Accounts 2018
(8,112)
(1,634)
(386)
324
(18)
(532)
522
(8)
2,758
2,287
661
947
187
(45)
(1,891)
2,435
(3,140)
389
(2,751)
(4,313)
(1,445)
—
23
855
740
79
8
(2,104)
1,679
1,892
957
2,849
(3,059)
(379)
2
8
(5,735)
(3,428)
10
9
12
13
25
21
12
13
13
24
24
25,884
(655)
—
161
21
(3,895)
(90)
(134)
(12)
21,259
12,773
7,886
20,659
—
18
20,659
2,211
—
4,142
—
(92)
(137)
(395)
(48)
5,681
5,102
2,784
8,193
(307)
7,886
Financial Statements Company Statement of Cash Flows
for the year ended 31 August 2018
Cash flows from operating activities
Profit/(loss) for the year after tax
Movement in working capital:
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Net cash (used by)/generated from operating activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of the issue of shares
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2018
£’000
2017
£’000
1,368
(10)
(17,958)
115
(16,475)
24
25,884
(655)
25,229
8,754
2,737
11,491
450
—
440
2,211
—
2,211
2,651
86
2,737
Ten Lifestyle Group Plc Annual Report and Accounts 2018 47
Strategic ReportCorporate GovernanceFinancial Statements Notes to the Financial Statements
1. Accounting policies
Company information
Ten Lifestyle Group Plc (registered company 08259177) is a public company, limited by shares and listed on the Alternative
Investment Market (AIM) in November 2018. The Company is incorporated and domiciled in the UK. The registered office is
Floor 2 355 Euston Road, London, NW1 3AL. The Company previously traded under the name Ten Lifestyle Holdings Limited
until 2 November 2017.
1.1 Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and
IFRS Interpretations Committee (IFRS IC) interpretations as adopted for use in the European Union and with those parts of
the Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated).
The financial information has been prepared on the historical cost basis except that the derivative financial instruments are
stated at their fair value.
The financial statements are prepared in Sterling, which is the functional currency of the Company. Monetary amounts in
these financial statements are rounded to the nearest £’000.
The Group applied all standards and interpretations issued by the IASB that were effective as of 1 September 2017. The
accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in this
financial information.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The area
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in note 3.
1.2 Consolidation
The financial information represents the consolidated financial information of the Company and its subsidiaries (“the Group”)
as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated
in full. The results of subsidiary undertakings are included in the consolidated statement of comprehensive income from the
date that control commences until the date that control ceases. The Company controls a subsidiary/investee if all three of
the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability
of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control. In assessing control, the Group takes into
consideration potential voting rights that are currently exercisable.
In the year ended 31 August 2013, Ten Lifestyle Group Plc, formerly Ten Lifestyle Holdings Limited, a Company under
common control of the Ten Lifestyle Management Limited shareholders, acquired Ten Lifestyle Management Limited from
its shareholders in return for an issue of shares. As a combination of entities under common control, the transaction falls
outside the scope of the standard IFRS 3 ‘Business Combinations’.
Paragraph 10 of IAS8 Accounting Policies, Changes in Accounting Estimates and Errors requires management to use its
judgement in developing and applying a policy that is relevant, reliable, represents faithfully the transaction, reflects the
economic substance of the transaction, is neutral, is prudent and is complete in all material respects when selecting the
appropriate methodology for consolidation accounting.
In the absence of IFRS guidance, the Group has applied merger accounting in accordance with “FRS102: Section 19 Business
Combinations and Goodwill”, as the business combination meets the requirements set out in paragraph 27, namely:
> the use of the merger accounting method is not prohibited by company law or other relevant legislation;
> the ultimate equity holders remain the same, and the rights of each equity holder, relative to the others, are unchanged; and
> no non-controlling interest in the net assets of the Group is altered by the transfer.
In accordance with merger accounting, consolidated accounts have been prepared for the reconstructed Group as if it had
always been in existence. The carrying value of assets and liabilities have not been adjusted to fair value. The difference
between the nominal value of the shares issued and the nominal value of the shares received has been recorded in the
merger reserve.
The cost of the Company’s shares held by the Employee Benefit Trust (EBT) is deducted from equity in the consolidated
statement of financial position. Any cash received by the EBT on disposal of the shares it holds is also recognised directly
in equity. Other assets and liabilities of the EBT are recognised as assets and liabilities of the Group other than when they
relate to other Group companies and are therefore eliminated.
48
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements 1. Accounting policies continued
1.3 Segment reporting
The Group’s operating segments are based on the management reporting used by the CEO (who is considered to be the
chief operating decision maker) and reviewed Board of Directors to make strategic decisions and allocate resources.
1.4 Going concern
The Directors have at the time of approving the financial statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future. The Directors have plans and forecasts that show
the Group will be able to continue as a going concern for at least a period of twelve months from the date of balance sheet
approval regardless of receipts of funds from investor transactions. Thus they continue to adopt the going concern basis
of accounting in preparing the financial statements.
1.5 Revenue
Revenue comprises commissions received on agent transactions and fees earned where the Group is the principal. Revenue
is stated exclusive of VAT, sales tax and trade discounts.
Revenue is recognised when the significant risks and rewards of ownership have passed to the buyer, when the services
are delivered.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can
be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
The following specific recognition criteria are applied to each revenue stream:
Service fees and offers income
Service fees and offers income is recognised over the year to which the fees or offer year relates. Where invoiced in advance,
the fees and offer income is deferred and released over the year of the service with the balance recorded within deferred income
in the statement of financial position.
Travel and experience income
Travel and Experience income is recognised on the date of travel, stay or receiving the experience. Where invoiced in advance,
the income is deferred and released on the date of travel, stay or receiving the experience with the balance recorded within
deferred income in the statement of financial position.
Expenses
Direct expenses relating to inclusive tours arranged by the Group’s leisure travel providers are taken to the income statement
on holiday departure or over the period to which they relate as appropriate. Indirect expenses are recognised in the income
statement over the period to which goods and services are received by the Group.
Membership income
Membership income is recognised over the year to which the membership relates. Where membership income is invoiced
in advance, the income is deferred and released over the year of membership with the balance recorded within deferred
income in the statement of financial position.
Commission income
Commission income is recognised on the point of provision of the good or service.
Licensing income
Income generated from licensing digital products is recognised over the term of the licence. Where licence income is invoiced
in advance, the income is deferred and released over the year of the licence with the balance recorded within deferred income
in the statement of financial position.
Digital platform income
Income generated from providing digital products is recognised on delivery of the service. Where income is based on time
and rate cards are recognised at the contracted rates as labour hours are incurred. Where development income is invoiced in
advance, the income is deferred and released on service delivery with the balance recorded within deferred income in the
statement of financial position.
Concierge enabling income
Income generated from the activities performed to enable a product offering to go live is generated on delivery of the services
based on the contractual amount or at the point which the services are no longer required. Where set up income is invoiced in
advance, the income is deferred and released on service delivery with the balance recorded within deferred income in the
statement of financial position.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 49
Strategic ReportCorporate GovernanceFinancial Statements 1. Accounting policies continued
1.6 Intangible assets
Research expenditure is expensed to the income statement in the year in which it is incurred, expenditure on internal
projects is capitalised if it can be demonstrated that:
> it is technically and commercially feasible to develop the asset for future economic benefit;
> adequate resources are available to maintain and complete the development;
> is the intention to complete and develop the asset for future economic benefit;
> the Group is able to use the asset;
> use of the asset will generate future economic benefit; and
> expenditure on the development of the asset can be measured reliably.
Other development expenditure is recognised in the income statement as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses.
Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of intangible assets.
Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Trademarks
10% straight line
Capitalised development costs
20% straight line
Website
33% straight line
The basis for choosing these useful lives is with reference to the years over which they can continue to generate value for
the Group.
Amortisation charges are included within administrative expenses in the consolidated statement of comprehensive income.
The Group reviews the amortisation year and methodology when events and circumstances indicate that the useful life may
have changed since the last reporting date.
1.7 Property, plant and equipment
Property, plant and equipment are initially measured at historical cost and subsequently measured at historical cost, net
of depreciation and any impairment losses.
Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts to their
residual values over their estimated useful lives, as follows:
Leasehold improvements
Over the term of the lease
Fixtures and fittings
20% straight line
Office equipment
20% to 33% straight line
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the
carrying value of the asset, and is recognised in the income statement.
1.8 Non-current investments
The Company’s interests in subsidiaries are initially measured at cost and subsequently measured at cost less any
accumulated impairment losses.
1.9 Impairment of tangible and intangible assets
All tangible and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
largely independent cash inflows (CGUs).
50
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued
1. Accounting policies continued
1.10 Financial assets
Financial assets are recognised in the Group and Company’s statement of financial position when the Group and Company
becomes party to the contractual provisions of the instrument.
The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition.
Financial assets are initially measured at fair value plus transaction costs, other than those classified as fair value through
profit and loss, which are measured at fair value.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments
with original maturities of three months or less, bank overdrafts and invoice financing facilities. Bank overdrafts and invoice
financing facilities are shown within borrowings in current liabilities.
The Group no longer holds an embedded derivative within the convertible loan notes issued in June 2017 (see note 21) which
was previously recorded as a liability within non-current liabilities. The convertible loan notes converted into ordinary shares
at a 20% discount to the share price at listing on IPO. The loss on re-measurement to fair value was recognised immediately
in finance expense.
Loans and receivables
Trade receivables and other receivables that have fixed or determinable payments and are not quoted in an active market
are classified as ‘Loans and Receivables’. Loans and receivables are measured at amortised cost using the effective interest
method, less any impairment. All trade receivables are considered current.
Impairment of financial assets
Financial assets, other than those at fair value through profit and loss (FVTPL), are assessed for indicators of impairment
at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the asset have been affected.
1.11 Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.
Financial liabilities at fair value through profit or loss
Financial liabilities are stated at fair value with differences taken to the consolidated income statement. Interest paid on
financial liabilities up to maturity is included in the finance costs line item in the statement of comprehensive income.
Trade and other payables
Trade and other payables are not interest bearing and are stated at their fair value on initial recognition. For disclosure
purposes, the fair values of trade and other payables are estimated at the present value of future cash flows, discounted
at the market rate of interest at the reporting date. As trade and other payables are short term in nature as at the reporting
date, the carrying value is considered to be a reasonable approximation of fair value.
Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs. They are subsequently measured at
amortised cost using the effective interest method, with interest expense recognised on an effective rate basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant year. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability to the net carrying amount on initial recognition.
Convertible loan note
When convertible loan notes are issued the underlying terms are assessed to determine whether an equity or financial
derivative exists within the arrangement. If a financial derivative exists it is identified and recognised in terms of the
derivatives accounting policy note. The convertible loan notes were recognised in accordance with the treatment of
borrowings as per the other financial liabilities accounting policy note.
Derivatives
Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised
immediately in profit or loss.
1.12 Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Dividends payable
on equity instruments are recognised as liabilities once they are no longer at the discretion of the Company.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 51
Strategic ReportCorporate GovernanceFinancial Statements 1. Accounting policies continued
1.13 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
Any tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the reporting end date.
Research and development tax credit
Companies within the Group may be entitled to claim special tax allowances in relation to qualifying research and development
expenditure (e.g. R&D tax credits). The Group accounts for such allowances as tax credits, which means that they are recognised
when it is probable that the benefit will flow to the Group and that benefit can be reliably measured. R&D tax credits relating
to previous financial years reduce current tax expense and, to the extent the amounts due in respect of them are not settled
by the balance sheet date, reduce current tax payable. R&D tax credits relating to current financial year, are now claimed
taking account of the ‘above the line’ (ATL) or research and development (R&D) expenditure credit (RDEC) tax credit scheme
and are recognised through other income on the income statement and other receivables on the balance sheet, until the
cash is received.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred
tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to
‘other comprehensive income’, in which case the deferred tax is also dealt with in ‘other comprehensive income’. Deferred
tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.14 Provisions
Provisions are recognised when the Group has a legal or constructive present obligation as a result of a past event, it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the
Group obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
1.15 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required
to be recognised as part of the cost of inventories or non-current assets. The cost of any unused holiday entitlement is
recognised in the year in which the employee’s services are received.
1.16 Retirement benefits
The Group operates a defined contribution pension plan, under which the Group pays contributions to privately administered
pension plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions
have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
52
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 1. Accounting policies continued
1.17 Share-based payments
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the
equity instruments granted using appropriate pricing models. The fair value determined at the grant date is expensed on a
straight line basis over the vesting year, based on the estimate of shares that will eventually vest. A corresponding adjustment
is made to equity.
The Group schemes, which awards shares in the parent entity, includes recipients who are employees in certain subsidiaries.
In the consolidated financial statements, the transaction is treated as an equity-settled share-based payment, as the Group
has received services in consideration for the Group’s equity instruments. An expense is recognised in the Group income
statement for the grant date fair value of the share-based payment over the vesting year, with a credit recognised in equity.
In the subsidiaries’ financial statements, the awards, in proportion to the recipients who are employees in said subsidiary,
are treated as an equity-settled share-based payment, as the subsidiaries do not have an obligation to settle the award.
An expense for the grant date fair value of the award is recognised over the vesting year, with a credit recognised in equity.
The credit to equity is treated as a capital contribution, as the parent company is compensating the subsidiaries’ employees
with no cost to the subsidiaries as there is no expectation to recharge this cost. In the parent company’s financial statements,
there is no share-based payment charge where the recipients are employed by a subsidiary, with the parent company
recognising an increase in the investment in the subsidiaries as a capital contribution from the parent and a credit to equity.
1.18 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the Group. All other leases are classified as operating leases.
Rentals payable under operating leases, less any lease incentives received are charged to income on a straight line basis
over the term of the lease.
1.19 Foreign currency
Transactions in foreign currencies are translated at the exchange rate at the date of transaction. Monetary assets and
liabilities in foreign currencies are translated at the rates of exchange at the statement of financial position date. Any gain
or loss arising from a change in the exchange rates subsequent to the date of the transaction is included as a gain or loss
in other comprehensive income.
The statements of financial position of the foreign subsidiaries are translated into Sterling at the rate at the year end. The results
of the foreign subsidiaries are translated into Sterling at the average rate of exchange during the financial year. Exchange differences
which arise from the translation of opening net assets of the foreign subsidiary undertakings are included in the consolidated
statement of comprehensive income.
1.20 Descriptions of nature of each component of equity
The components of the Group’s equity can be described as follows:
> Share capital – The amount for the nominal value of shares issued.
> Share premium – The amount subscribed for share capital in excess of nominal value, after deducting costs of issue.
> Foreign exchange reserve – This reserve relates to exchange differences arising on the translation of the balance sheet of
the Group’s foreign operations at the closing rate and the translation of the income statement of those operations at the
average rate.
> Merger reserve – Under the provisions of s612 of the Companies Act 2006, the merger reserve represents the difference
between the consideration paid and the book value of the net assets acquired, as part of a legacy Group reconstruction,
detailed in note 1.2.
> Treasury reserve – The reserve relates to shares held in the Group’s Employee Benefit Trust.
> Retained deficit – The retained deficit reserve contains the net gains and losses recognised in the consolidated statement
of comprehensive income.
1.21 Inventories
Inventories comprise tickets held for resale and are stated at the lower of cost or net realisable value. Consignment tickets
are not included within stocks held by the Group. Inventories are valued using a First-in First-out (FIFO) method.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 53
Strategic ReportCorporate GovernanceFinancial Statements 2. Adoption of new and revised standards
The Group implemented amendments to IAS 7 ‘Cash Flow Statements’ (effective for annual years beginning on or after
1 January 2017) with no material impact on disclosure to the Statement of Cashflow.
At the date of authorisation of these financial statements, the following standards and interpretations which have not been
applied were in issue but not yet effective (and in some cases had not yet been endorsed by the EU):
IFRS 15 ‘Revenue from Contracts with Customers’
This standard deals with revenue recognition and establishes principles for reporting useful information to users of financial
information about the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and this has the ability to direct the use and
obtain the benefits from the good or service.
The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is
effective for annual years beginning on or after 1 January 2018 and earlier application is permitted.
The Group has performed an assessment of its financial information in the light of the required adoption of IFRS 15 in the
year ending 31 August 2019. The Directors have reviewed the standard and its potential effects in the context of the Group’s
revenue policy and have concluded that, on adoption, there is not expected to be a material impact on or change to the
Group’s revenue.
IFRS 9 ‘Financial Instruments’
This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets
and liabilities and covers three distinct areas. Phase 1 contains new requirements for the classification and measurement of
financial assets and liabilities. Phase 2 relates to the impairment of financial assets and requires the calculation of impairment
on an expected loss basis rather than the current incurred loss basis. Phase 3 relates to less stringent requirements for
general hedge accounting.
The Group will need to apply an expected credit loss model when calculating impairment losses on its trade and other
receivables (both current and non-current). This will potentially result in increased impairment provisions and greater
judgement due to the need to factor in forward looking information when estimating the appropriate amount of provisions.
In applying IFRS 9 the Group must consider the probability of a default occurring over the contractual life of its trade
receivables and contracts asset balances on initial recognition of those assets.
The standard is effective for annual years beginning on or after 1 January 2018 and earlier application is permitted.
The Group has performed an assessment of its financial information in the light of the required adoption of IFRS 9 in
the year ending 31 August 2019. The Directors conclude adoption of IFRS 9 is not expected to have a material impact
on the Group’s year ending 31 August 2018 results.
In addition to the above, the following IFRS standards, interpretations and amendments have been issued but not yet
endorsed by the EU:
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ is effective for annual years beginning on or after 1 January 2019 and sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier
(‘lessor’) and provides a single lessee accounting model, requiring lessees to recognise right of use assets and lease liabilities
for all applicable leases. IFRS 16 completes the IASB’s project to improve the financial reporting of leases and replaces the
previous leases standard, IAS 17 ‘Leases’, and related interpretations.
If the standard were to be adopted during the current financial period and applied to the operating leases currently in
the Group, will bring all operating leases onto the balance sheet in line with the accounting treatment for finance leases.
The impact would be an increase in the assets and liabilities of the Group by amounts which are similar to the amounts
disclosed as operating lease commitments in note 26. Furthermore, instead of recognising an operating expense for its
operating lease payments, the Group will instead recognise interest on its lease liabilities and amortisation on its right of use
assets. This will increase the reported Adjusted EBITA by the amount of its current operating lease cost. It is envisaged that,
as the Group expands, the use of operating leases will increase. As such, the Group has determined the financial statements
will be materially impacted on adoption of IFRS 16 given the requirements of the standard and materiality of operating leases
held by the Group.
A number of other new standards, amendments and interpretations are effective for years beginning on or after 1 January 2018
and have not been applied in preparing the financial statements of the Group.
The impact of these is not being assessed by Audit Committee, with a particular focus on amendments to IFRS 2 ‘Share-based
Payments’ (effective for annual years beginning on or after 1 January 2018). The Directors do not believe they will have a
material impact on the Group.
54
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 3. Critical accounting judgements and key sources of estimation uncertainty
IAS 1 requires disclosure of the judgements, apart from those involving estimations, that management has made in the process
of applying the entity’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.
In addition, IAS 1 requires disclosure of information about the assumptions the entity makes about the future, and other major
sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes
to the financial statements include details of their nature and carrying amount at the end of the reporting period.
In the application of the Group and Company’s accounting policies, the Directors are required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates. The Directors do believe there are two areas within the financial statements
which constitute critical accounting judgements as follows:
Capitalisation of development costs
Development costs are capitalised based on an assessment on whether they meet the criteria specified in IAS 38 for capitalisation.
During each reporting period, an assessment is performed by management to determine their time spent developing the
intangible assets (note 12) as a proportion of total time spent in the year. This represents an area of judgement and impacts
the value of intangible costs capitalised (2018: £4.3m; 2017: £3.1m).
Useful economic lives
Capitalised development costs in respect of the Ten MAID platform are amortised over their useful life of five years. The useful
life is based on management’s judgement which reflects the period over which the asset is expected to generate future
economic benefits, and is annually reviewed for appropriateness.
Material estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to material accounting estimates
are recognised in the year in which the estimate is revised and future years as appropriate.
4. Segment reporting
The total revenue for the Group has been derived from its principal activity; the provision of concierge services.
The Group has three reportable segments: Europe, the Middle East and Africa (EMEA), North and South America (“Americas”)
and Asia-Pacific (APAC). Each segment is a strategic business unit and includes businesses with similar operating characteristics.
They are managed separately in similar time zones to reflect the geographical management structure.
EMEA
Americas
APAC
Net Revenue
Add back: air ticket cost of sales
Revenue
EMEA
Americas
APAC
Adjusted EBITA
Amortisation
Share-based payment expense
Exceptional items
Operating loss
Foreign exchange (loss)/gain
Other net finance expense
Loss before taxation
Taxation credit
Loss for the year
2018
£’000
17,411
11,406
8,559
37,376
2,746
40,122
3,069
(6,785)
(166)
(3,882)
(2,758)
(947)
(418)
2017
£’000
17,433
9,757
6,037
33,227
1,626
34,853
3,933
(1,520)
(718)
1,695
(2,287)
(740)
(320)
(8,005)
(1,652)
(117)
(376)
(8,498)
386
(8,112)
79
(593)
(2,166)
532
(1,634)
Ten Lifestyle Group Plc Annual Report and Accounts 2018 55
Strategic ReportCorporate GovernanceFinancial Statements 4. Segment reporting continued
Statutory Revenues for the Americas and APAC segments are the same as the Net Revenues amounts disclosed above.
Statutory Revenues for the EMEA segment were £20,157k (2017: £19,059k).
The Group’s statutory revenue from external customers is generated from commercial relationships entered into by various
Group companies, which, given the global nature of the Group’s service delivery model, may not reflect the location where
the services are delivered, as reflected in the Net Revenue segmentation noted above. The Group’s statutory revenue split by
contracting country is as laid out below:
UK
USA
Switzerland
Brazil
Rest of world
Revenue
2018
£’000
2017
£’000
27,697
23,049
2,852
7,430
1,043
1,100
2,978
7,836
530
460
40,122
34,853
Net Revenue is a non-GAAP company measure that excludes the direct cost of sales relating to member transactions
managed by the Group, such as the cost of airline tickets sold under the Group’s ATOL licences. Net Revenue is the measure
of the Group’s income on which segmental performance is measured.
Adjusted EBITA is a company non-GAAP specific measure excluding interest, taxation, amortisation, share-based payment
and exceptional costs, the latter being expenses which are considered to be one-off and non-recurring in nature which relate
to the IPO in the current year.
Adjusted EBITA is the main measure of performance used by the Company’s Chief Executive Officer, who is considered to
be the chief operating decision maker. Adjusted EBITA is the principal profit measure for a segment.
The statement of financial position is not analysed between reporting segment. Management and the chief operating
decision maker consider the statement of financial position at Group level.
One customer generated more than 10% of total revenue during the year ended 31 August 2018. The total revenue received
from this customer was £5.5m (2017: £5.4m) and is reported in the EMEA segment.
4.1 Exceptional items
Cost of admission to the AIM
Employee share option advisory costs
2018
£’000
378
40
418
2017
£’000
320
—
320
An additional £0.7m was recognised as a deduction against share premium in the year representing the costs associated
with issuing equity on IPO and therefore are not included in exceptional items in the profit or loss account.
5. Operating loss
Operating loss for the year is stated after charging:
Exchange losses
Research and development costs
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rental
56
Ten Lifestyle Group Plc Annual Report and Accounts 2018
2018
£’000
2017
£’000
117
878
661
2,758
3,853
79
736
855
2,287
3,242
Financial StatementsNotes to the Financial Statements continued 6. Auditor’s remuneration
For audit services
Audit of the financial statements of the Company
Audit of the financial statements of the Company's subsidiaries
For other services
Tax services for the Company
Tax services for the Company's subsidiaries
Adviser fees in respect of IPO
2018
£’000
2017
£’000
85
15
100
12
5
—
17
70
15
85
12
—
105
117
7. Employees
The average monthly number of persons (including Directors) employed by the Group during the year was:
UK
International
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share-based payments
2018
Number
2017
Number
215
535
750
2018
£’000
24,861
2,588
348
947
195
355
550
2017
£’000
20,335
2,218
279
740
28,744
23,572
The Company had no employment costs for the year (2017: £nil) since the 9 (2017: 5) Directors who held office during the year
to 31 August 2018 had their remuneration paid by subsidiary companies.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 57
Strategic ReportCorporate GovernanceFinancial Statements 8. Directors’ remuneration
Remuneration for qualifying services
Pension contributions to defined contribution schemes
Share-based payments – gain on the exercise of share options during year
2018
£’000
870
7
7,369
8,246
2017
£’000
682
8
—
690
During November 2018, at the same time as the initial public offering of the Company’s shares, four Directors exercised
share options totalling to 9,516,840 options at an exercise price which ranged from £0.09p to £0.875p. The market value of the
shares at the time of sale was £12.7m and this resulted in a gain on exercise of share options of £7.4m.
Full details of Directors’ remuneration is presented in the Remuneration Committee Report on pages 30 to 32.
Remuneration disclosed above includes the following amounts paid to the highest paid Director:
Remuneration for qualifying services
Share-based payments – gain on the exercise of share options during year
2018
£’000
277
1,880
2,157
2017
£’000
314
—
314
The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to 3 (2017: 3).
9. Finance expense
Losses on foreign exchange
Interest on bank overdrafts and loans
Interest on loan notes
Interest on obligations under finance leases
Change in value of financial derivative (see note 21)
Total finance expense
10. Income tax expense
Current tax
Foreign taxes
Research and development tax credits
Deferred tax
Origination and reversal of temporary differences
Total tax credit
58
Ten Lifestyle Group Plc Annual Report and Accounts 2018
2018
£’000
117
1
194
12
187
511
2018
£’000
568
(754)
(186)
(200)
(386)
2017
£’000
—
7
387
48
80
522
2017
£’000
511
(1,043)
(532)
—
(532)
Financial StatementsNotes to the Financial Statements continued 10. Income tax expense continued
The credit for the year can be reconciled to the loss per the income statement as follows:
Loss before taxation
Expected tax credit based on a corporation tax rate of 19% (2017: 19.58%)
Effect of expenses not deductible in determining taxable profit
Accelerated capital allowances
Movement in deferred tax not recognised
Research and development tax credits
Overseas tax rate differences
Overseas tax due to transfer pricing adjustments
Taxation credit for the year
2018
£’000
(8,498)
(1,615)
90
(200)
1,846
(754)
197
50
(386)
2017
£’000
(2,166)
(424)
60
—
330
(1,043)
454
91
(532)
The Group has tax losses carried forward at 31 August 2018 of £15.5m (2017: £4.9m). The movement in deferred tax not
recognised is a result of the increase in these losses.
The Group has an unrecognised deferred tax asset of approximately £0.1m (2017: £0.4m) in respect of possible future tax
deductions from the exercise of Company share options. The unrecognised deferred tax asset noted was reduced by the
exercise of share options on IPO. No deferred tax asset has been recognised in respect of the losses or the exercise of the
share options due to the Company not currently forecasting to generate sufficient taxable profits to realise the asset in the
foreseeable future.
The movement in deferred tax not recognised is largely due to the significant increase in losses during the period.
Changes in the applicable tax rates
A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) was substantively enacted on
26 October 2015. An additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016.
11. Loss per share
On 19 October 2017, the Company re-designated the ordinary C shares as ordinary shares and made a bonus issue of
ordinary shares on the basis of seven ordinary shares for each ordinary share then held.
Loss attributable to equity shareholders of the parent
Weighted average number of ordinary shares in issue
Impact of bonus issue
2018
£’000
2017
£’000
(8,112)
(1,634)
28,988,054
6,086,223
44,083,154
42,603,557
Weighted average number of ordinary shares in issue adjusted for bonus issue
73,071,208
48,689,780
Basic loss per share (pence)
(11.1)p
(3.4)p
Basic loss per ordinary share
Basic loss per ordinary share is calculated by dividing the net result for the year attributable to shareholders by the weighted
number of ordinary shares outstanding during the year, as adjusted to reflect the re-designation of ordinary C shares and the
subsequent bonus issue of ordinary shares which occurred during the year.
Diluted loss per ordinary share
Where the Group has incurred a loss in the year, the diluted loss per share is the same as the basic loss per share as the loss
has an anti-dilutive effect. Therefore, basic and diluted loss per share for the years ended 31 August 2017 and 31 August 2018
are calculated on the same basis.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 59
Strategic ReportCorporate GovernanceFinancial Statements 12. Intangible assets
Cost
At 31 August 2016
Additions
At 31 August 2017
Additions
Disposals
At 31 August 2018
Accumulated amortisation
At 31 August 2016
Charge for the year
At 31 August 2017
Charge for the year
Disposal
At 31 August 2018
Carrying amount
At 31 August 2017
At 31 August 2018
Website
£’000
Trademarks
£’000
Total
£’000
Capitalised
development
costs
£’000
14,093
2,819
16,912
4,313
(408)
1,669
240
1,909
—
—
20,817
1,909
9,939
1,681
11,620
2,151
(408)
435
606
1,041
607
—
13,363
1,648
5,292
7,454
868
261
55
—
55
—
—
55
55
—
55
—
—
55
—
—
15,817
3,059
18,876
4,313
(408)
22,781
10,429
2,287
12,716
2,758
(408)
15,066
6,160
7,715
All additions relate to internal expenditure. The useful economic life of the capitalised development platforms and website are
assessed to be five years and three years respectively.
60
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued
13. Property, plant and equipment
Cost
At 1 September 2016
Additions
Disposals
At 31 August 2017
Additions
At 31 August 2018
Accumulated depreciation
At 1 September 2016
Charge for the year
At 31 August 2017
Charge for the year
At 31 August 2018
Carrying amount
At 31 August 2017
At 31 August 2018
Leasehold
improvements
£’000
Fixtures
and fittings
£’000
Office
equipment
£’000
481
—
(2)
479
98
577
163
102
265
95
360
214
217
312
9
—
321
128
449
106
65
171
78
249
150
200
3,167
370
—
3,537
1,219
4,756
2,295
688
2,983
488
3,471
554
1,285
Total
£’000
3,960
379
(2)
4,337
1,445
5,782
2,564
855
3,419
661
4,080
918
1,702
The net carrying value of tangible fixed assets includes £78,090 (2017: £111,640) in respect of assets held under finance
leases or hire purchase contracts. All assets held under finance leases or hire purchases contracts are included in office
equipment. The value of the additions of such assets in the year was £64,650 (2017: £62,000). The depreciation charge in
respect of such assets amounted to £60,110 (2017: £217,000) for the year.
The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.
14. Investments
All investments held by the Company are investments in subsidiaries which are held at cost.
Investments in subsidiaries
Cost
At 31 August 2017
Additions
At 31 August 2018
Carrying amount
At 31 August 2017
At 31 August 2018
2017
£’000
743
2018
£’000
5,276
743
4,533
5,276
743
5,276
The addition in the year represents capital contributions made to the Company’s subsidiaries in respect of the share option
expense recognised on share options issued by the Company to employees of the appropriate subsidiaries.
In addition, there was conversion of £3.6m to equity of historic convertible loans made to subsidiaries within the Group.
Both of these transactions represent non cash transactions during the year.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 61
Strategic ReportCorporate GovernanceFinancial Statements 15. Subsidiaries
Details of the Company’s subsidiaries at 31 August 2018 are as follows:
Name of undertaking
Ten Lifestyle Management Limited1
Country of
incorporation
UK
Ten Lifestyle Management (Asia) Limited
Hong Kong
Ten Lifestyle Management USA Inc.
Ten Lifestyle Management (Canada) ULC
Ten Group Singapore PTE Limited
Ten Group Japan K.K.
Ten Lifestyle Commercial Consulting (China)
USA
Canada
Singapore
Japan
China
Ten Lifestyle Management Limited S DE RL DE CV
Mexico
Ten Lifestyle Management Africa (Pty) Limited
South Africa
Ten Lifestyle Management India Private Limited
Ten Servicos de Concierge do Brasil Limited
Ten Group Belgium BVBA
Ten Group Australia Pty Limited
India
Brazil
Belgium
Australia
Ten Lifestyle Management Switzerland GmbH
Switzerland
Ten Group France SAS
Ten Group (RUS) LLC
Ten Latin America Limited
Ten South America Limited
Ten Global Services Limited
Ten Travel Limited
Ten Professional Services Limited
Bailey Medical Support Limited
1 Shares held directly by Ten Lifestyle Group Plc.
France
Russia
UK
UK
UK
UK
UK
UK
Ownership
interest
(%)
Voting
power held
(%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Nature of business
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Concierge services
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
62
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 15. Subsidiaries continued
The registered offices of the Company’s subsidiaries are as follows:
Name of undertaking
Registered office
Ten Lifestyle Management Limited
2nd floor, Fitzroy House, 355 Euston Road, London, NW1 3AL, United Kingdom
Ten Lifestyle Management (Asia) Limited
10/F Mass Mutual Tower, 33 Lockhart Road, Wanchai, Hong Kong
Ten Lifestyle Management USA Inc
10th floor, 33 New Montgomery Street, Suite 1090, San Francisco CA, 94105, USA
Ten Lifestyle Management (Canada) ULC
1200 Bay Street, Suite 202, Toronto, Ontario M5R 2A5, Canada
Ten Group Singapore PTE Limited
63 Market Street, #11-04 Bank of Singapore Centre 048942, Singapore
Ten Group Japan K.K.
Ten Lifestyle Commercial Consulting (China)
Ten Lifestyle Management S DE RL DE CV
7F Sumitomo Sasazuka Taiyo Building, 1-48-3 Sasazuka, Shibuya-ku,
Tokyo 151-0073, Japan
Floor 12 Platinum Building, 233 Tai Cang Road, Huangpu District, Shanghai,
200020, China
Torre Reforma Latino, Reforma 296, Piso 14, Suite 1400 Colonia Juárez,
Mexico D.F., 06600
Ten Lifestyle Management Africa (Pty) Limited
7th Floor, 19 Louis Gradner Street, Foreshore, Cape Town 8001, South Africa
Ten Lifestyle Management India Private Limited The Ruby, South East Wing, 9th Floor, 29 Senapati Bapat Marg, Dadar (W),
Mumbai 400028, Maharashtra, India
Ten Servicos de Concierge do Brasil Limited
Rua Gomes de Carvalho, No 1356, Connjunto 131, Jardim Paulista, CEP 04547-005,
Sao Paulo, Brazil
Ten Group Belgium BVBA
Brussels Airport Corporate Village, Leonardo Da Vin-cilaan, 91935 Zaventem, Belgium
Ten Group Australia Pty Limited
HWT Tower Level 23 Suite 2401, 40 City Road, Melbourne 3006, Australia
Ten Group France SAS
Ten Group (RUS) LLC
66 avenue des Champs-Élysées, 75008, Paris, France
Office 612, Smolenskaya Square 3, 121099, Moscow, Russia
Ten Lifestyle Management Switzerland GmbH
Bellerivestrasse 17, 8008 Zürich, Switzerland
The registered office of the dormant subsidiaries incorporated in the UK is 2nd floor, Fitzroy House, 355 Euston Road,
London, NW1 3AL, United Kingdom.
16. Trade and other receivables
Trade receivables disclosed below are classified as loans and receivables and are therefore measured at amortised cost.
Group
Trade receivables (note 17)
Provision for bad and doubtful debts
Other receivables
Prepayments and accrued income
2018
£’000
3,852
—
3,852
1,005
4,157
9,014
2017
£’000
3,450
(288)
3,162
1,376
2,585
7,123
The fair value of trade and other receivables below are the same as the carrying value as credit risk has been addressed as
part of impairment provisioning and due to the short-term nature of the amounts receivable, they are not subject to other
ongoing fluctuations in market rates.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 63
Strategic ReportCorporate GovernanceFinancial Statements 16. Trade and other receivables continued
Company
Amounts falling due within one year:
Other receivables
Total other receivables due within one year
Amounts falling due after more than one year:
Amounts due from Group undertakings
Total other receivables due in more than one year
2018
£’000
2017
£’000
52
52
25,408
25,408
12
12
7,531
7,531
The Company does not consider any of the amounts due from Group undertakings to be overdue. There are no significant
doubts as to the future recoverability of these balances, and as such, no provision for bad and doubtful debts has been
raised against the amounts due from Group undertakings.
Amounts due from Group undertakings have been classified as falling due after more than one year based on the agreed
terms of repayment by subsidiaries in the future periods. The Company provides regular funding to Ten Lifestyle
Management Limited at an appropriate annual interest rate of 9%. The Directors consider the terms of this transaction to be
at arm’s length.
17. Trade receivables – credit risk
Ageing of due and past due but not impaired receivables
0 – 30 days
30 – 60 days
60 – 90 days
90 – 120 days
120+ days
Provision for bad and doubtful debts
2018
£’000
2,668
847
126
41
170
3,852
—
3,852
2017
£’000
2,502
817
48
23
60
3,450
(288)
3,162
The Group provides against trade receivables where there are significant doubts as to future recoverability based on prior
experience, on assessment of the current economic climate and on the length of time that the receivable has been overdue.
Movement in the allowances for doubtful debts
Balance at 1 September 2017
Additional allowance recognised
Amounts written off as uncollectable
Balance at 31 August 2018
2018
£’000
288
—
(288)
—
2017
£’000
389
148
(249)
288
The Group had an invoice financing arrangement in place until June 2018 relating to trade receivables due from large
corporate clients of Ten Lifestyle Management Ltd that are denominated in US$ and GBP£. Until extinguishment of the
facility, the Group retained the credit risk on these receivables, and presented these receivables gross within the reported
current assets and the liability arising from the invoice financing with as borrowings within current liabilities. The value of
debts over which the invoice financing facility was secured is equal to the amount of cash advanced from the facility.
64
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 18. Cash and cash equivalents
Cash at banks and on hand – unrestricted
Cash at banks and on hand – restricted
Cash and cash equivalents
Invoice financing facility
Cash and cash equivalents in the statement of cash flows
2018
£’000
20,411
248
20,659
—
20,659
2017
£’000
7,971
222
8,193
(307)
7,886
Cash at bank earns interest at floating rates based on daily bank deposit rates.
The Group holds cash in a restricted access account in respect of guarantees. These guarantees arise in the ordinary course
of business and relate to the Group’s travel operations. The guarantees are required under consumer protection schemes in
certain markets and are provided by banks, who hold restricted cash to support the guarantee. As such, this guarantee will
be required for the long term, unless local regulations are amended.
19. Trade and other payables
Group
Trade payables
Accruals and deferred income
Social security and other taxation
Other payables
Company
Accruals
The fair value of trade and other payables are the same as the carrying values.
20. Provisions for liabilities
Provision for overseas liabilities
Movements on provisions:
At beginning of period
Additional provisions in the year
At end of period
2018
£’000
1,453
6,346
1,246
1,982
10,027
2018
£’000
118
2018
£’000
396
346
50
396
2017
£’000
1,241
4,468
1,272
355
7,336
2017
£’000
3
2017
£’000
346
255
91
346
The provision related to potential overseas tax liabilities. The provisions will reverse when these tax liabilities are known as
overseas tax filings are completed.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 65
Strategic ReportCorporate GovernanceFinancial Statements 21. Borrowings
Current
Invoice financing facility (secured)
Unsecured loan notes
Non-current
Unsecured loan notes
Convertible loan notes
Financial derivative – convertible loan note
Movement in financial derivative:
At 1 September 2017
Change in value of financial derivative (note 9)
Conversion to ordinary shares
At 31 August 2018
2018
£’000
2017
£’000
—
—
—
307
1,134
1,441
2018
£’000
2017
£’000
—
—
—
—
2,843
2,520
630
5,993
2018
£’000
630
187
(817)
—
The invoice financing facility was secured over the trade receivables of Ten Lifestyle Management Limited and was extinguished
within the financial year.
During the year, the Group settled all unsecured loan notes amounting to £4.0m of which interest of 9% was charged per annum
in quarterly arrears.
In addition, convertible loan notes of £3.0m were converted to 3,050,021 ordinary shares on IPO (note 24). On conversion
of the convertible loan note, the overall financial derivative liability of £0.8m was realised, comprising the liability of £0.6m
recognised in the previous financial year and a further charge of £0.2m, reflecting change in fair value of the derivative to the
date of redemption. This was recognised in finance expense in the consolidated statement of comprehensive income.
The embedded derivative was valued by calculating the inherent increase in the capital value of the convertible loan notes
arising from the application of the 20% discount to the share price (£1.34) at listing on 29 November 2017.
66
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 22. Finance lease obligations
Amounts payable under finance leases:
Within one year
In two to five years
2018
£’000
64
32
96
2017
£’000
74
47
121
The Directors have assessed that the present value of the minimum lease payments is not materially different to the carrying value.
The Group’s finance leases relate to some of the computer equipment used within its business. Such assets are classified as
finance leases when the rental year amounts to the estimated useful economic life of the assets concerned and the Group
has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount.
23. Deferred taxation
The movement in the deferred tax liability is shown below.
Deferred tax liability at 1 September 2016
Deferred tax movements in prior year
Charge to profit or loss
Deferred tax liability at 31 August 2017
Deferred tax movements in current year
Release to profit or loss
Deferred tax liability at 31 August 2018
Accelerated
capital
allowances
£’000
200
—
200
(200)
—
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised or the liability settled, based on tax rates that have been enacted or substantively enacted at the balance sheet
date and therefore these have been measured at 17% to 19%.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 67
Strategic ReportCorporate GovernanceFinancial Statements 24. Share capital
5,268,952 ordinary shares of £0.001 each
1,002,988 ordinary C shares of £0.001 each
80,650,049 ordinary shares of £0.001 each
Reconciliation of movements during the year
At 1 September 2017
Issue of fully paid shares
C shares re-designated
Bonus issue
Convertible loan issue
Issue of fully paid shares IPO
Options Exercised
At 31 August 2018
2018
£’000
—
—
80,650
80,650
2017
£’000
5
1
—
6
Ordinary
Number
Ordinary C
Number
5,268,952
1,002,988
43,667
—
1,002,988
(1,002,988)
44,209,249
3,050,021
13,432,836
13,642,336
80,650,049
—
—
—
—
—
There were no share issues during the financial year ended 31 August 2017. All shares are fully paid.
During September 2017 the Group issued 43,667 shares at a price of £6.00 giving rise to a share premium of £0.3m.
On 19 October 2017, a resolution was passed to re-designate 1,002,988 ordinary C shares into ordinary shares of £0.001.
On the same date, a resolution was passed to approve the allotment of 44,209,249 ordinary shares of £0.001 each by way
of a seven for one bonus issue to existing shareholders from share premium. In addition, a special resolution was passed to
approve the cancellation of the balance of the share premium account of the Company after the issue of the bonus shares,
and for this balance of £10m to be credited to the retained earnings reserve.
On 29 November 2017 the Group issued 13,432,836 shares as part of an IPO on the AIM at a price of 134p, giving rise to a
share premium of £18m. Costs related to the IPO amounting to £0.7m have been recognised within share premium in respect
of costs incurred to issue new shares. Where share option vesting was conditional on an exit event, share options of 13,642,336
(note 25) were exercised at various prices giving rise to a share premium of £7.6m.
On completion of the IPO, the Group’s unsecured convertible loan notes (note 21) of £3.0m were converted into 3,050,021
ordinary shares at 107p; a 20% discount to the share price at listing, giving rise to a share premium of £3.6m. The Group’s
EBT exercised its holding of share options in the Company resulting in a net cash holding and an income gain. This cash has
been included in the Group cash balances and the gain of £0.2m has been taken to the Treasury reserve.
Own shares held
An Employee Benefit Trust (Ten Group Employee Benefit Trust) was established in February 2012. As at 31 August 2018, the
employee benefit trust subscribed for 273,120 ordinary shares at £0.1m representing the holding in the previous financial year
after a seven for one bonus issue (2017: 34,410, £0.1m). These are treated as Treasury shares and are included in Treasury
reserve in the consolidated statement of financial position.
During the year, the employee benefit trust exercised its right to acquire 50,000 ordinary shares and sold all received ordinary
shares for a profit of £0.2m.
68
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 25. Share options
All share options relating to the UK tax authority approved Enterprise Management Incentive (EMI) share option plan and the
unapproved share option plan fully vested on completion of the IPO other than those options with performance conditions
which were not met and therefore lapsed in the year. The Company Share Option Plan (CSOP) remains in place and the new
Management Incentive Plan (MIP) commenced on 9 November 2017.
For all current schemes, the holder must be in continued employment of the Company for three years for the option to vest.
All options unexercised after a period of ten years from the date of grant expire. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
Options are exercisable at a range of between £0.001 per share and £1.60 per share. The weighted average remaining contractual
life of the share options outstanding at 31 August 2018 is 8.9 years.
The total expense recognised for year ending 31 August 2018 arising from equity-settled share-based payment transactions
amounted to £0.9m (2017: £0.7m).
Number of options outstanding at 31 August 2016
Granted in the year − CSOP
Granted in the year – Unapproved
Forfeited in the year – EMI
Number of options outstanding at 31 August 2017 for legacy outstanding share options
Bonus issue in the year (7 to 1)
Granted in the year – CSOP
Granted in the year – MIP
Exercised in the year – EMI
Exercised in the year – Unapproved
Forfeited in the year – CSOP
Lapsed in the year – EMI
Number of options outstanding at 31 August 2018
Number of options exercisable at 31 August 2018
Weighted average
Number exercise price (£)
1,448,778
241,305
470,000
(43,141)
2,116,942
14,818,602
124,897
1,360,956
(9,882,336)
(3,760,000)
(60,000)
(1,169,352)
3,549,709
283,856
3.40
6.00
7.00
3.98
4.58
0.57
1.55
0.00
0.56
0.88
0.56
0.56
0.42
Ten Lifestyle Group Plc Annual Report and Accounts 2018 69
Strategic ReportCorporate GovernanceFinancial Statements 25. Share options continued
Grant to expiry period
January 2013 to January 2023
January 2013 to January 2023
January 2013 to January 2023
January 2013 to January 2023
January 2013 to January 2023
January 2013 to January 2023
January 2013 to January 2023
May 2014 to January 2023
December 2015 to December 2025
December 2015 to December 2025
August 2017 to August 2027
August 2017 to June 2018
December 2017 to December 2027
February 2018 to February 2028
March 2018 to March 2028
April 2018 to April 2028
May 2018 to May 2028
August 2018 to August 2028
Number
as at
31 August 2018
Number
as at
31 August 2017 1
Exercise
Price (£)
Remaining
contractual
life
EMI
EMI
EMI
EMI
EMI
EMI
EMI
EMI
EMI
EMI
—
120,000
97,336
24,672
—
—
2,620,000
2,007,072
502,360
609,016
9,440
2,307,648
—
360,000
29,416
—
271,120
40,000
122,992
2,498,328
CSOP
1,780,000
1,840,000
Unapproved
—
3,760,000
MIP
1,292,000
CSOP
CSOP
MIP
CSOP
CSOP
19,354
9,375
68,956
44,444
51,724
—
—
—
—
—
—
3,549,709
16,935,544
0.09
0.22
0.54
0.58
0.63
0.41
0.64
0.41
0.56
0.56
0.75
0.88
0.001
1.55
1.60
0.001
1.35
0.87
4.4
4.4
4.4
4.4
4.4
4.4
4.4
4.7
7.3
7.3
9.0
—
9.3
9.5
9.5
9.6
9.7
10.0
1 Number of ordinary shares under option reflecting the seven for one bonus issue during the year ending 31 August 2018.
The period noted in the table below reflects the month during which the options were awarded to the month of expiration.
For the share options granted during the year, the weighted average fair value of the options is £1.55.
Management Incentive Plan (new)
Under the MIP, 1,204,956 options were issued conditional of achievement of performance conditions based on total shareholder
return (market) and, for some participants, operational targets (non-market). A further 156,000 share options were issued,
conditional on three years of employment service (non-market) from the date of grant. All share options granted under the
MIP can be exercised at nominal ordinary share value (£0.001p).
70
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 25. Share options continued
Valuation of share options
The fair value of options subject to non-market based vesting conditions were measured using a Black Scholes model and
those options with market based conditions using a Monte Carlo simulation model.
The fair value of the outstanding options without performance conditions was measured using the Black Scholes options
valuation model. The inputs to that model in respect of the share options outstanding under each issue as at the year ended
31 August 2018 and 31 August 2017 were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted average risk-free rate
Expected dividend yield
Weighted average option life (years)
Weighted average fair value at date of grant
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted average risk-free rate
Expected dividend yield
Weighted average option life (years)
Weighted average fair value at date of grant
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted average risk-free rate
Expected dividend yield
Weighted average option life (years)
Weighted average fair value at date of grant
EMI
£3.31
£3.31
72%
EMI
£3.31
£3.31
58%
EMI
£3.31
£5.08
72%
EMI
£4.50
£4.50
72%
1.00%
1.56%
1.02%
1.20%
—
5
£1.94
EMI
£5.00
£4.50
58%
0.51%
—
4
£2.38
MIP
£1.43
£0.00
30%
—
4
—
5
—
5
£1.52
£1.64
£2.65
EMI
CSOP
Unapproved
£6.00
£4.50
42%
0.21%
—
3
£2.36
CSOP
£1.50
£1.55
30%
£6.00
£6.00
72%
0.44%
—
5
£3.49
CSOP
£1.60
£1.60
30%
£6.00
£7.00
21%
0.14%
—
0.35
£0.04
CSOP
£1.35
£1.35
30%
0.56%
1.08%
0.60%
0.63%
—
3
—
5
—
5
—
5
£1.42
£1.52
£1.29
£0.86
Ten Lifestyle Group Plc Annual Report and Accounts 2018 71
Strategic ReportCorporate GovernanceFinancial Statements 25. Share options continued
Valuation of share options continued
The fair value of the outstanding options with performance conditions was measured using the Monte Carlo simulation model.
The inputs to that model in respect of the share options outstanding under each issue as at the year ended 31 August 2018
and 31 August 2017 were as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Weighted average risk-free rate
Expected dividend yield
Weighted average option life (years)
Weighted average fair value at date of grant
MIP
£1.43
£0.00
30%
MIP
£1.15
£0.00
30%
0.56%
0.56%
—
3
—
3
£0.49
£0.39
The share price volatility fluctuated for the different share option schemes due to different years that apply to each of the
schemes in existence. The risk-free rate is based on the average Bank of England base rate in the year.
Expected share price volatility is based on similar listed entities and varies due to the different years that apply to each of
the schemes in existence.
26. Operating leases
Lessee
The Group operates from various leased properties around the world. The terms of property leases vary location to location.
The Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases.
2018
£’000
3,853
2,832
6,327
9,159
2017
£’000
3,113
2,663
2,099
4,762
2018
£’000
2017
£’000
64
32
96
74
47
121
Operating lease rental
Future commitments
Within one year
Between two and five years
Finance lease obligations
Amounts payable under finance leases:
Within one year
In two and five years
27. Capital commitments
At 31 August 2018 the Group had no material capital commitments (2017: £nil).
72
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 28. Financial instruments and financial risk management
Financial instruments – Group
The Group’s principal financial liabilities comprise trade and other payables and borrowings. The primary purpose of these
financial liabilities is to finance the operations. The Group has trade and other receivables and cash that derive directly from
its operations.
Financial assets
Cash at banks and on hand – unrestricted
Cash at banks and on hand – restricted
Trade and other receivables
Financial liabilities
Trade and other payables
Invoice financing facility
Loan notes
Convertible loan notes
Other loans
Finance lease obligations
Financial derivative
2018
£’000
20,411
248
6,227
2018
£’000
4,922
—
—
—
—
96
—
The Directors consider that the carrying amount for all financial assets and liabilities approximates to their fair value.
Financial instruments – Company
The Company has limited financial liabilities as its primary purpose is to hold investments in other Group Companies.
The Company’s receivables largely relate to its funding of the operations of the Group.
Financial assets
Cash at bank and in hand – unrestricted
Loan to other Group companies
Trade and other receivables
Financial liabilities
Trade and other payables
2018
£’000
11,491
25,408
5
2018
£’000
118
2017
£’000
7,971
222
4,538
2017
£’000
3,026
307
3,976
2,520
—
121
630
2017
£’000
2,737
7,531
12
2017
£’000
3
The Directors consider that the carrying amount for all financial assets and liabilities approximates to their fair value.
Financial risk management
The Company is exposed to market risk, which includes interest rate risk and currency risk, credit risk and liquidity risk.
The senior management oversees the management of these risks and ensure that the financial risk taken is governed by
appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the
Group’s policies and risk appetite.
The Board of Directors review and agree the policies for managing each of these risks, which are summarised below:
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 73
Strategic ReportCorporate GovernanceFinancial Statements 28. Financial instruments and financial risk management continued
Foreign currency risk management
The Group is exposed to transactional and translation exchange risk. Transactional foreign exchange risk arises from sales
or purchases by a Group company in a currency other than that Company’s functional currency. Translation foreign exchange
risk arises on the translation of profits earned in Euros, US Dollar, Swiss Francs, Brazilian Real and Japanese Yen to Sterling
and the translation of net assets denominated in Euros, US Dollar, Swiss Francs, Brazilian Real and Japanese Yen into Sterling,
the Group’s functional currency.
Each of the companies in the Group trades almost exclusively in its functional currency, minimising transactional foreign
exchange risk.
Year ended 31 August 2017
Average rate
Year-end spot rate
Year ended 31 August 2018
Average rate
Year-end spot rate
EUR 1
USD 1
CHF 1
JPY 1
BRL 1
1.15
1.10
1.13
1.12
1.27
1.30
1.35
1.29
1.25
1.25
1.31
1.27
139.94
142.37
148.66
142.87
4.07
4.09
4.62
5.04
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 5% decrease in Great British Pounds against the relevant foreign
currencies which the Directors believe could have the most significant impact on the performance of the Group. 5% is the
sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s
assessment of the reasonably possible change in foreign exchange rates.
For a 5% strengthening of GBP against the relevant currency there would be a comparable impact on the profit and other
equity, in the opposite direction.
Euros
US Dollar
Swiss Francs
Japanese Yen
Brazilian Real1
Profit or loss
Other equity
2018
£’000
(27)
(413)
(138)
(165)
45
(698)
2017
£’000
(25)
(553)
(218)
(184)
—
(980)
2018
£’000
(27)
(413)
(138)
(165)
45
(698)
2017
£’000
(25)
(553)
(218)
(184)
—
(980)
1
The Directors did not consider Brazilian Real transactions to have a significant impact on the performance of the Group in the year ending 31 August 2017 and therefore this has not
been disclosed.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Group accepts the risk of losing interest on deposits due to interest rate reductions. Any interest
charged on outstanding loan notes is at fixed rates.
The Directors do not believe the interest rate risk to be material and therefore no sensitivity analysis has been prepared.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables)
and from its financing activities, including cash deposits with banks and financial institutions.
74
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial StatementsNotes to the Financial Statements continued 28. Financial instruments and financial risk management continued
Trade receivables
Customer credit risk is managed subject to the Group’s established policy, procedures and control relating to customer
credit risk management. Outstanding receivables are regularly monitored and discussed at executive management and
Board level.
The requirement for impairment is analysed at each reporting date. The calculation is based on actual incurred historical data.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed
above. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to
trade receivables as low as receivables are principally with large financial institutions.
Financial instruments and cash deposits
Credit risk from cash balances with banks and financial institutions is managed in accordance with the Company’s policy.
Credit risk with respect to cash is managed by carefully selecting the institutions with which cash is deposited.
Liquidity risk
The Group is not currently cash-generative, however funds were raised as part of the IPO. In addition the funds generated by
operating activities are managed to fund short-term working capital requirements. The Board carefully monitors the levels of
cash and is comfortable that it has sufficient cash for normal operating requirements. The Group has no committed lines of
credit, with the exception of the invoice financing facility which was closed during the current year.
The following table details the Group’s remaining contractual maturity for its financial liabilities based on undiscounted
contractual payments:
At 31 August 2017
Trade and other payables
Invoice financing liability
Loan notes
Convertible loan notes
Finance lease obligations
At 31 August 2018
Trade and other payables
Finance lease obligations
Within 1 year
£’000
1 to 2 years
£’000
2 to 5 years
£’000
3,026
307
1,134
—
74
10,027
64
—
—
1,842
—
47
—
32
—
—
1,000
3,150
—
—
—
Total
£’000
3,026
307
3,976
3,150
121
10,027
96
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while also maximising the
operating potential of the business. The capital structure of the Group consists of cash and cash equivalents and equity
attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings as disclosed in
the consolidated statement of changes in equity. The Group is not subject to externally imposed capital requirements.
29. Financial instruments carried at fair value
Financial instruments carried at fair value are measured by reference to the following fair value hierarchy:
> Level 1: quoted prices in active markets for identical assets or liabilities;
> Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
> Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Derivative financial instruments are carried at fair value and measured under level 3 valuation method. The fair value charge
to profit or loss on the convertible loan note for the year ended 31 August 2018 is £0.2m (2017: £0.1m).
Details of the basis of the fair value measurement of derivative financial instruments are included in note 21.
Ten Lifestyle Group Plc Annual Report and Accounts 2018 75
Strategic ReportCorporate GovernanceFinancial Statements Notes to the Financial Statements continued
30. Events after the balance sheet date
There are no significant events to report after the balance sheet date.
31. Related party transactions
Short-term employee benefits
Post-employment benefits
Share-based payments – gain on the exercise of share options during year
2018
£’000
1,268
19
2,476
3,763
2017
£’000
1,214
13
—
1,227
Remuneration of key management personnel
The remuneration of key management personnel, including Directors, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures. Key Management personnel comprise the Directors of the Company, and
senior staff with management responsibilities across the entire Group.
Related party transactions
At 31 August 2017 a relative of a Director of the Company held loan notes issued by the Group of £0.9m, due for repayment
in August 2019. The loan notes were unsecured, and interest was charged at 9% per annum. Interest charged during the year
totalled £21,500 (2017: £81,000). The loan and interest were settled in full during the financial year.
At 31 August 2017 a relative of a Director of the Company held loan notes issued by the Group of £0.5m, due for repayment
in August 2019. The loan notes were unsecured, and interest was charged at 9% per annum. Interest charged during the year
totalled £12,000 (2017: £45,000). The loan and interest was settled in full during the financial year.
At 31 August 2017 a Director was owed £27,200 (2016: £27,198) by the Group. This amount was repayable on demand with
no interest charged on the amount. The loan was settled in full during the financial year.
At 31 August 2017 relatives of a Director of the Company held loan notes issued by the Group of £60,000. The loan notes
were unsecured, and interest was charged at 9% per annum. Interest charged during the year totalled £500 (2017: £1,400).
The loan and interest were settled in full during the financial year.
32. Controlling party
In the opinion of the Directors, there is no one ultimate controlling party.
76
Ten Lifestyle Group Plc Annual Report and Accounts 2018
Financial Statements Ten Lifestyle Group Plc’s commitment to environmental
issues is reflected in this Annual Report which has been
printed on Novatech Silk, an FSC® Mix Certified paper,
which ensures that all virgin pulp is derived from
well-managed forests and other responsible sources.
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Ten Lifestyle Group Plc
2nd Floor, Fitzroy House
355 Euston Road
London, NW1 3AL,
United Kingdom
www.tengroup.com