T i m e O u t G r o u p p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 1 Annual Report and Accounts 2021 for 18 months ended 30 June 2021 Time Out Group plc 1st Floor 172 Drury Lane London WC2B 5QR United Kingdom Time Out Group is a global media and hospitality business that inspires connection and joy by capturing the soul of the world’s greatest cities. Across its digital and physical platforms, Time Out’s professional journalists curate the best things to Do, See and Eat in 331 cities in 59 countries. The Time Out mission is to become one of the most respected and admired global brands in media and hospitality, connecting people to iconic cities of the world and everything they offer. For more information visit timeout.com Overview OVERVIEW 2021 financial and operating summary At a glance The World’s Greatest Food Hall Chairman’s letter STRATEGIC REPORT Our business model Strategy update Chief Executive’s review Financial review Corporate social responsibility Section 172 statement Principal risks and uncertainties GOVERNANCE Board of Directors Corporate governance report QCA code principles and disclosures Audit committee report Directors’ remuneration report Directors’ report Independent auditors’ report FINANCIAL STATEMENTS Consolidated income statement 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 01 02 04 08 12 14 16 23 28 30 34 38 40 43 45 48 52 56 66 67 68 69 70 71 72 Notes to the financial statements 73 Company information 110 2021 financial and operating summary Net revenue1 £37.8m (2019: £63.3m) Gross margin 80% (2019: 73%) Decline due to the forced closure of Market sites and the sharp decline in advertising revenues generated by Media from the travel and leisure sectors Gross profit as a percentage of net revenue increased by 7-percentage points despite gross profit decline reflecting Media’s higher digital revenue mix Adjusted EBITDA2 loss £25.1m (2019: £4.7m) Includes the benefit of cost reduction initiatives implemented in the period Cash £19.1m (2019: £13.4m) Loss for the period £70.5m (2019: £4.7m) Reflects the overall challenging trading conditions over the 18 month period, including exceptional charges Equity raised £62.4m (2019: £17.1m) All current period measures are based on an 18 month financial period ended 30 June 2021. Comparative information relates to the 12 month period ended 31 December 2019. • The Group’s global brand audience decreased by only 7% to a monthly average of 64.5m (2019: 69.2m) despite the closure of the Markets, limited print offerings and global travel and leisure restrictions. The relevance and continued appeal of Time Out’s editorially curated content has been reflected in the average social followers which were maintained at a monthly average of 36m • Time Out Markets heavily disrupted due to extended government restrictions • All markets were largely closed during the period, but with repeated periods of re-opening and subsequent re-closure and significant restrictions. All Markets reopened by June 2021, and have remained consistently open since with encouraging initial trading • Time Out Market Dubai market opened on 7 April 2021 with performance exceeding expectations • Time Out Market Abu Dhabi management agreement signed in January 2021 (2023 opening) • Withdrawal from the planned development of the Waterloo (owned & operated) market due to the impact of the pandemic and to focus on the strong pipeline of management agreement opportunities • Time Out Media faced significant reductions in advertising spend due to lockdowns • Travel and hospitality industry particularly adversely affected • Continued focus on higher-margin digital offerings, with Creative Solutions successfully attracting global brand partnerships • Print suspended with only a limited return in the UK, Spain and Portugal in response to advertiser demand and where economically viable See our Strategy update on page 14 1 2 See note 4 for the explanation of gross and net revenue. Adjusted EBITDA is stated before interest, taxation, depreciation, amortisation, share-based payments, share of associate’s loss and exceptional items. It also includes property lease costs which, under IFRS 16, is replaced by depreciation and interest charges (see note 4). This is a non-GAAP alternative performance measure that management uses to aid understanding of the underlying business performance. 01 02 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021GovernanceStrategic ReportFinancial Statements At a glance Time Out was born out of the simple idea to help people go out better and experience cities around the world. Today it is a trusted and much loved global brand helping our 64.5m strong audience connect physically and digitally with their city. This is delivered through our distinct but complementary Market and Media businesses. Time Out Media 331 cities in 59 countries Time Out Media is the only international city-focused media brand. We create and distribute our high-quality content – written and curated by local expert journalists – showcasing the best food, drinks, culture, art, music, theatre, travel and entertainment to our global audience through our digital and print platforms. Time Out Media comprises websites, mobile, social media, print and live events. We monetise our global reach and desirable audience by offering multi-platform advertising solutions and e-commerce opportunities to worldwide, national and local businesses. Time Out Market 7 Markets in 4 countries Time Out Market is the world’s first editorially curated food and cultural market, bringing the best chefs, restaurateurs and cultural experiences of the city together under one roof. A unique proposition, with the best local food and drink complemented by cultural activities from cooking classes with top chefs to installations from local artists and live entertainment. There are seven Time Out Markets around the world in Lisbon, Miami, New York, Boston, Chicago, Montreal and Dubai. A further pipeline of openings includes Porto, Abu Dhabi, Prague and more. Moving forward, Time Out Market will focus on Management Agreements, demonstrating the strength of our brand and its appeal for the world’s leading real estate companies. Find out more about Time Out Market on pages 4 to 7. 03 04 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements The World’s Greatest Food Hall Owned and Operated Markets There are currently five Owned & Operated Time Out Markets around the world. In this model, Time Out Market takes responsibility for the design, curation, branding and day-to-day operational management, with the Market generating revenue from a share of food turnover and bar sales. The original Time Out Market opened in 2014, when Time Out Lisbon editors turned a historic market hall in the city into Time Out Market, creating the world’s first food and cultural market. Following Time Out Market Lisbon’s success, five new Time Out Markets opened in North America in 2019: Miami, New York, Boston, Chicago and Montréal (the latter being the Group’s first Management Agreement, see next page). I C O M N G S O O N Lisbon REOPENED POST-COVID JUNE 2021 Miami REOPENED POST-COVID MARCH 2021 New York REOPENED POST-COVID MAY 2021 Boston REOPENED POST-COVID MAY 2021 Chicago REOPENED POST-COVID JUNE 2021 Porto OPENING 2022 In 2014 a once neglected building and neighbourhood was turned into a popular destination for both locals and tourists, and hundreds of jobs were created. In 2019, 4.1m visitors came to the Market to explore excellent food from the city’s local favourite, award-winning restaurants, enjoy drinks from eight bars and cafés, buy from five shops, attend cooking workshops in the Chef’s Academy or events in the Time Out Studio, a 900-capacity entertainment venue. The second Time Out Market location, and first in North America, Time Out Market Miami is located just off South Beach’s famed Lincoln Road. Close to the iconic Art Deco District, the fabulous beach and some of the best hotels, its curated mix features top talent making up the city’s vibrant culinary scene. Time Out Market New York occupies two floors of the historic Empire Stores at 55 Water Street in Dumbo, Brooklyn. The ground floor hosts culinary concepts and two bars; and the fifth floor has four additional chef-driven eateries, a bar, a stage for cultural experiences and an outdoor rooftop overlooking the East River, offering spectacular views of Manhattan’s skyline, the Brooklyn Bridge and the Manhattan Bridge. Time Out Market Boston is located at the iconic 401 Park – a striking Art Deco building right at the heart of the popular and dynamic Fenway neighbourhood. The market is a unique food and cultural destination in this part of the city which already attracts millions of visitors each year with its museums, restaurants, bars, universities and Fenway Park, home to the Boston Red Sox. Located at 916 W Fulton Market and spanning 50,000 sq ft across three floors, Time Out Market Chicago is the largest of the North American sites – it is a big celebration of a city rich in culinary and cultural experiences. There is a communal dining area surrounded by the kitchens and an impressive bar on the ground floor; the first floor offers a demonstration and an event kitchen, a speakeasy plus an entertainment platform with bleacher seating; a rooftop bar, Tony’s, is an ode to Time Out’s founder, with an amazing skyline view. Following the incredible success of the flagship Time Out Market in Lisbon, Time Out Market is set to open a second Portuguese location, in Porto, housed in the iconic and historic São Bento train station. Sq ft: 32,000 Restaurants: 32 Bars: 8 Sq ft: 18,000 Restaurants: 18 Bars: 3 05 Sq ft: 21,000 Restaurants: 21 Bars: 3 Sq ft: 25,000 Restaurants: 15 Bars: 2 Sq ft: 50,000 Restaurants: 18 Bars: 3 06 Sq ft: 22,000 Restaurants: 15 Bars: 4 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements The World’s Greatest Food Hall continued Management Agreement Markets Time Out Market transforms spaces that become the anchor in prime locations to drive consumer footfall. Montréal REOPENED POST-COVID JULY 2021 Time Out Market Montréal is the centrepiece of Centre Eaton de Montréal on Sainte-Catherine Street – a major downtown destination owned and managed by global real estate leader Ivanhoé Cambridge with whom the Company partnered for its first Management Agreement. The fact that Ivanhoé Cambridge chose Time Out Market as strategic partner, making a significant investment, is proof of the strength of the format and the brand. Sq ft: 40,000 Restaurants: 16 Bars: 3 07 With the success of Time out Market Montreal, moving forward Time Out Market will focus on Management Agreements, with a strong and growing pipeline of proposals from around the world. Under a Management Agreement, the real estate partner funds all capital and operational expenditure and, in return, the Group will receive a pre-development fee and, once the market is trading, a share of revenue and profit of that market (subject to a minimum guaranteed fee). Time Out Market provides a premium environment, supported by strong consumer-led marketing and a cost-effective structure for restaurateurs. At a time when commercial landlords and real estate developers face the increasing challenge of attracting customers, Time Out Market transforms spaces that become the anchor in prime locations to drive consumer footfall. We expect to sign more sites in the year ahead, growing the Group’s recurring earnings stream, without the need for further capital expenditure. Time Out Market Abu Dhabi, in partnership with Aldar, and Time Out Market Prague with Crestyl are planned to open in 2023 and 2025 respectively. I C O M N G S O O N I C O M N G S O O N Dubai OPENED APRIL 2021 Abu Dhabi OPENING 2023 Prague OPENING 2025 Time Out Market Dubai is the most exciting, one-of-a-kind culinary and cultural destination – and the largest food hall – to open in the UAE. Opened in partnership with Emaar Malls, it is located in the Souk Al Bahar with incredible scenic views from the 3,000 sq ft wraparound outdoor terrace, overlooking the Dubai Fountain and the Burj Khalifa. Fully licensed, the concessions are complemented by three unique bars that surround the open and intimate dining spaces. Sq ft: 43,000 Restaurants: 17 Bars: 3 Time Out Market Abu Dhabi will be the Group’s second location in the UAE. Working together with leading real estate developer, Aldar Properties, Time Out Market will open in Abu Dhabi’s Saadiyat Island, a prime destination that attracts millions of locals and visitors each year. Time Out Market Prague will open in partnership with Crestyl Group – a leading developer in the Czech Republic. Located in the Savarin, a development in the historic downtown neighbourhood around the famous Wenceslas Square, this prime retail and cultural centre is the perfect location for Time Out Market to curate the best of the city. Sq ft: 35,000 Restaurants: 15 Bars: 3 08 Sq ft: 25,000 Restaurants: 14 Bars: 2 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Chairman’s letter The appeal of the Market concept continues to grow with chefs, customers and landlords alike. Read my biography on page 38 Peter Dubens Non-Executive Chairman I would like to thank everyone at Time Out for their perseverance, creativity and resilience in what has been a very challenging period for all. Since I last wrote to you our shareholders following the release of the 2019 full year results much has happened, with our lives and lifestyles being unrecognisable during the extraordinary events of the last 18 months. The Board believed then, in the early stages of the outbreak, that thanks to a successful equity fundraising, a cost reduction programme and further strategic initiatives that the Group would emerge with a stronger brand, a sustained audience and be well positioned to continue the successful Time Out Market roll-out which transformed the Group in 2019. And so it has proven to be that as movement restrictions have begun to lift so our audience has returned to city life, and to once again using Time Out as the gateway to the best of restaurants, bars, theatre and much more. RESULTS NOW MORE THAN EVER PEOPLE We cannot be certain when and if the trading impacts of the pandemic will be behind us, but we do know that the challenge commercial landlords face in attracting footfall has grown ever greater, with the high street facing a continuing decline in traffic in the face of Covid-19 and competition from online marketplaces. As a consequence the appeal of the Markets concept, a city’s best chefs and culture under one roof, has grown with concessionaires, customers and landlords a like. Given the strength of the concept and the achievable returns, it will remain the focus of this Board to continue to grow the Markets platform, signing management agreements to build a physical footprint for the very best of local on a global scale. On behalf of our Board I would like to thank everyone at Time Out Group for their perseverance, creativity and resilience in what has been a very challenging period for all. Your commitment and passion for the brand and what it stands for is very evident and truly appreciated. We would also like to thank our shareholders for their continued support during the period. As a result of the equity fundraisings the Group is on a firm footing and we enter a new trading period with increased optimism. Peter Dubens Non-Executive Chairman There is no escaping the material impact that the Covid-19 pandemic has had on the trading of the Time Out Group. In the 18 months to 30 June 2021, gross revenue fell to £44.9m and with it the adjusted EBITDA loss grew to £25.1m, as all areas of the Company suffered under global lockdowns. Time Out Media faced significant reductions in advertising spend as the travel and hospitality industry were particularly adversely affected. Time Out Market was in turn heavily disrupted with repeated and extended periods of closure. In spite of this unavoidable disruption, Time Out responded quickly to ensure its content still remained engaging and relevant and in doing so was able to maintain its social media followers at a monthly average of 36.4m and its website traffic at an average of 23.7m a month. As we know it is not just the size of the Time Out audience that attracts our advertisers, but it’s also a highly desirable, discerning, young demographic with a high intent to travel and to participate in city culture. In turn the Markets concept remains as popular as ever, with the new Dubai Market opening to high acclaim and footfall in April of this year and Time Out Market Abu Dhabi announcing it will be joining the roster in 2023. 09 10 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Strategic Report Our business model Strategy update Chief Executive’s review Financial review Corporate social responsibility Section 172 statement Principal risks and uncertainties 12 14 16 23 28 30 34 Strategic Report Time In. COVID-19 RESPONSE Our Time In mission was to help our audience find light and joy in their homebound life. We adapted our content to provide entertainment indoors, to support local businesses and to inspire readers to try new things and discover their hidden talents while staying in. With our change to Time In, we embarked on different new initiatives. For example, we launched our Love Local campaign, which spotlights content around small businesses. We also created new content strands such as “Time In Daily” and “The best of the city – straight to your sofa”. Furthermore, we launched a new e-newsletter called “Time In Couchbound”, which focused on local and global content that is relevant during this time. Influential global partners like Instagram, PayPal, Uber Eats and Google joined our Love Local campaign to connect with our trusted, engaged audience of small businesses and the locals who spend their time and money with them. Activities included supporting imperilled venues with fundraising efforts, platform takeovers and promotions to help restaurants and bars stay in touch with their customers. During this period of Time In, Time Out Market continued to stay engaged with our guests and support our chefs and restaurateurs. We created visibility and support through activities including our digital cooking series Social Dish-stancing with Time Out Market chefs, promoting takeaways, deliveries and the purchase of gift certificates through Time Out’s editorial and social media channels. Our Time In mission was to help our audience find light and joy in their homebound life. 10 11 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceFinancial Statements Our business model Our ambition is to become one of the most respected and admired global brands in media and hospitality. WHAT WE HAVE WHAT WE DO WITH IT WHAT WE ARE CREATING WHAT IT DRIVES The voice of authority • Across its digital and physical platforms, Time Out’s professional journalists curate the best things to Do, See and Eat in 331 cities in 59 countries. For over 50 years, Time Out has been the trusted voice of the city, focused on unlocking the secrets of metro life and unearthing local champions • With over 150 editors and city experts around the world, as well as over 100 of the world’s best chefs and restaurateurs as part of Time Out Market – Time Out is a global brand with a local soul A large and engaged global audience • Time Out’s 64.5m global audience is an engaged community of urban-dwelling, open minded and educated, experience-loving social adventurers – they are young, with a female skew – and 95% take action after reading Time Out • Time Out has the unique ability to deliver both authentic content and experiences to this highly desirable audience across Time Out’s multiple platforms and products – digital, print, social, e-commerce, live events and physical Time Out Market locations around the world • This global brand reach attracts some of the world’s biggest and most dynamic brands, including Google, Apple, Facebook, PayPal, Uber Eats and many more We are rolling out the Time Out Market blueprint to cities worldwide Sustainable returns • We bring together the best homegrown, award- winning chefs and restaurateurs, unparalleled beverage programmes and not-to-be-missed cultural activations all under one roof • Time Out Market is already present in Europe, North America and the Middle East, and we’re expanding this footprint with an exciting pipeline of openings including Porto, Abu Dhabi, London, Prague and many more • Time Out Market is appealing to guests, landlords and chefs alike – bringing expertise and experience. Time Out editors know the destinations intimately to curate the best selection of concessionaires; operations and marketing know the business partners and guests like no one else to bring about a successful and financially viable proposition for all • Through management agreements, Time Out Market provides a premium environment, supported by strong consumer-led marketing and a cost-effective structure for restaurateurs. At a time when commercial landlords and real estate developers face the increasing challenge of attracting customers, Time Out Market transforms spaces that become the anchor in prime locations to drive consumer footfall • A growing platform of Markets, whose management agreements provide Time Out a contracted minimum contribution, is driving an increasing high quality of recurring earnings, without the need for capital expenditure • A highly desirable audience continues to attract advertising revenue. A focus on scalable digital advertising solutions drives margin growth Engaged and motivated staff • Time Out attracts creative, cultured lovers of city life, whose passion for food, drink and the arts is reflected in their pride at working for this dynamic, global brand • The brand is known for providing a platform and voice for all in society and that in turn is reflected in a diverse and inclusive workplace Shareholder returns As we emerge from the impact of the pandemic, Time Out’s valuation and share price will grow with: • A recovery in trading revenues • Announcement and opening of new Markets • The scale and recognition that comes with a global market footprint • The increasing visibility of future earnings, driven by Market management agreements 12 13 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Strategy update Consistent strategic direction during and post the impact of Covid-19. Accelerate Time Out Market global expansion Grow digital revenue through world-class content Highly engaged and diverse global audience PROGRESS IN THE PERIOD PROGRESS IN THE PERIOD • Time Out Market Dubai opened on 7 April 2021 to high acclaim, strong footfall and a performance which is exceeding expectations • Time Out Market Abu Dhabi management agreement signed in January 2021 with a planned 2023 opening • Growing pipeline of market management agreement opportunities, with increasing landlord engagement in cities around the world • Pivoted our professionally curated content to align with homebound audience • Maximised digital revenue through review of partners and investment in systems • Continued focus on higher-margin digital offerings, with Creative solutions successfully attracting global brand partnerships PROGRESS IN THE PERIOD • Despite the pandemic, our content remained relevant and our audience engaged such that social media followers and website traffic was maintained at a combined monthly average of 60.1 million • Operational efficiencies were fast-tracked and now represent sustainable future operating cost savings UPDATE ON SEGMENT STRATEGY UPDATE ON SEGMENT STRATEGY • Manage the return of each Market to pre-Covid trading levels concessionaire curation, market activations and media campaigns • Drive to EBITDA positive performance through enhanced targeting capabilities developed by our in-house technology team to improve advertising yields UPDATE ON SEGMENT STRATEGY • Technology innovations to grow and target our audience in a more consistent and specific manner • Target growth in higher quality revenue with optimised • Focus on the signing of market management agreements which drives growth of the Group’s contracted recurring earnings stream, without the need for further capital expenditure • Rebuild e-commerce revenue as Covid-19 restrictions ease cost base 14 15 TIME OUT MARKETTIME OUT MEDIATIME OUT GROUPwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Chief Executive’s review No aspect of Time Out or the world has remained untouched by the pandemic. Read my biography on page 38 Julio Bruno Chief Executive Officer GROUP OVERVIEW This particularly challenging period for the travel and leisure industry required us to make some difficult choices and to adapt how we operated. Some of the structural changes we have made to our cost base will deliver sustained benefits. I am immensely proud of the response of our people and partners in these tough circumstances, and of their continued support and resilience as we navigate our way through these early days of recovery. The period started in line with management expectations, with the Group building on the transformative progress it made in 2019. The five newly opened Time Out Market (‘Market’) in North America were enjoying growing footfall, Time Out Market Lisbon continued to grow its EBITDA despite its maturity and outperformance to date and Time Out Media (‘Media’) was driving higher margin digital advertising on a reduced cost base. In March 2020, as a result of the restrictions imposed in response to the growing pandemic, all Markets were closed, Media operations were drastically curtailed, and all staff shifted to working from home. Thereafter trading in the period proved challenging as the travel and leisure industry faltered in the face of global government restrictions which shifted in response to the rise and fall of infection rates. GROUP OVERVIEW Market Media Group net revenue1 Gross profit Gross margin %2 Divisional adjusted operating expenses Divisional adjusted EBITDA3 Market Media Corporate costs Group adjusted EBITDA 18 months to 30 June 2021 £’000 12 months to 31 December 2019 £’000 12,233 25,570 37,803 30,170 80% (53,625) (23,455) (14,526) (8,929) (1,622) (25,077) 23,229 40,054 63,283 46,427 73% (49,244) (2,817) (614) (2,203) (1,886) (4,703) 1 2 3 See note 4 for the explanation of net revenue. Gross margin calculated as gross profit as a percentage of net revenue. Adjusted measures are stated before interest, taxation, depreciation, amortisation, share based payments, and exceptional items. It also includes £7.5m of property lease costs which, under IFRS 16, is replaced by depreciation and interest charges (see note 4). Early 2021 showed tentative signs of recovery following the easing of restrictions in various countries as the world emerged from what was regarded as the peak of the pandemic. This allowed the partial re- opening of all Markets, except Miami and the relaunch of our print editions in certain countries. However, trading remained significantly constrained due to legal capacity limits on indoor dining, strictly limited international travel and virtually no tourism. These factors together made the prospect of any substantive recovery in the period slow and inconsistent. The Group’s net revenue declined to £37.8m (2019: £63.3m) driven by delayed Media travel and leisure campaigns and Market closures in addition to the faltering recovery of trading later in the period. As expected, adjusted EBITDA decreased sharply due to the fall in revenue. In response to the impact on trading the Group took immediate action to manage the impact on cash. All 2020 salary increases were reversed, all current period bonus schemes were cancelled, up to 30% of staff were furloughed across the Group and the senior management team took a temporary pay cut of 25%. These initial measures were followed by a review of all teams across the Group to identify further changes to be made in the light of the reduced operations, which resulted in some staff redundancies and further use of furlough schemes. As a consequence of this rationalisation, we re-evaluated office space requirements and have relocated a number of our offices, including those in London, New York and Sydney, to smaller, more economical premises. We also opened discussions with all Market landlords to secure rent deferrals and/or abatements over the period of closure. Together these actions secured immediate cash savings and reduced adjusted operating expenses to £53.6m for the 18-month financial period compared to £49.2m for the prior 12-month period. We believe that these initiatives will allow the Group to emerge from the pandemic with a sustainable cost-efficient operating base and improved margins. 16 17 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Chief Executive’s review continued OPERATING KPIS Global brand audience – monthly average1 Market TTV2 18 months to 30 June 2021 12 months to 31 December 2019 64.5m £28.6m 69.2m £43.7m Change (4.7)m % (7)% 1 Global brand audience is the estimated monthly average in the period including all owned & operated cities and franchises. It includes print circulation (O&O), unique website visitors, unique social users (as reported by Facebook and Instagram with social followers on other platforms used as a proxy for unique users), social followers (for other social media platforms), opted in members and Market visitors. 2 Total transaction value across all Time Out Markets including food, drink and other retail sales. In response to the challenges the pandemic imposed, Time Out innovated, rapidly pivoting to “Time IN”, launching an e-magazine and created a community to share unique daily information of virtual resources available in cities – all helping our audience to explore and experience the best of their city while staying in. An example is the continuing Love Local campaign, which celebrates local neighbourhoods and culture, food and other close-to-home services while our audience remained at home. As a result of these measures and despite the closure of the Markets, limited print offerings and global travel and leisure restrictions the average monthly global audience only declined 7% compared to the prior year. Notably the relevance and continued appeal of Time Out’s editorially curated content led to social media followers being maintained over this period at a monthly average of 36.4m and website traffic maintained at a monthly average of 23.7m. Our ability to retain this audience throughout the period allowed us to form partnerships with social platforms, for example the small business festivals via our Instagram channels in London, New York, Madrid and Los Angeles. The gradual partial easing of restrictions in cities has contributed, as our audience returned to restaurants and hotels, re-engaging with our authoritative and professionally generated content. Print circulation fell by 80% due to the decision made in late March 2020 to cease the printed edition of Time Out and only resuming in limited volumes in response to advertiser demand and only where economically viable. The decline in Time Out Market total transaction value (TTV) is a direct result of Market closures. TIME OUT MARKET TRADING OVERVIEW Owned operations Management fees Net revenue Gross profit Gross Margin % Operating expenses (trading) Trading EBITDA1 Market central costs Pre-opening costs Adjusted EBITDA 18 months to 30 June 2021 £’000 12 months to 31 December 2019 £’000 10,112 2,121 12,233 10,272 84% (20,431) (10,159) (4,367) – (14,526) 22,180 1,049 23,229 19,580 84% (14,230) 5,350 (3,210) (2,754) (614) 1 Trading EBITDA represents the adjusted EBITDA from owned and operated markets post opening, and the fees relating to management agreements. It is presented before pre-opening costs of new markets and other central costs of the Market business. The 18-month reporting period started with encouraging trading performance from the six Time Out Markets (“Market”). The prior year had seen the successful launch of five of these: Miami and New York (May 2019), Boston (June 2019), Chicago and Montreal (November 2019) and all continued gaining further traction with locals and receiving growing plaudits in early 2020. Time Out Market Lisbon also continued to grow footfall and average spend despite its relative maturity. By 16 March 2020 however, in response to the global efforts to contain the spread of Covid-19, all Markets were temporarily closed as Time Out focussed on the wellbeing and safety of our employees, guests, concessionaires and their teams. As outlined earlier in this report, in response to closures, immediate cost saving initiatives were introduced to help mitigate the lost revenue. We engaged in productive discussions with our landlords and secured vital support through rent deferrals, abatements and amendments to other lease terms. While this still results in an accounting rent charge within Market adjusted EBITDA, these agreements afforded some cash preservation ahead of the Markets re-opening. The closure periods were used to adapt each market to include table partitioning, cashier shields and sanitisation teams, which would allow chefs and consumers to enjoy its unique offerings in a safe and socially distanced environment on re-opening. Markets partially re-opened in July and August 2020 but with on-going restrictions severely constraining Market capacity limits and the range of food offerings available. In December 2020, further lockdown measures were introduced in response to a second wave of pandemic infections and all Markets were again forced to close. The Group took swift action to mitigate the impact of this closure, laying off all staff except for a small skeleton team of one or two individuals in each Market. Following the successful roll-out of vaccination programmes by many countries and the easing of certain restrictions, all Markets were re-launched by June 2021. Initial trading has reflected the gradual pace of customers returning to city life and the capacity and travel restrictions that remain in place. However, we are encouraged by the recovery and the visibility it provides for the gradual return to pre-COVID trading levels. Just as importantly the Time Out Markets have returned with exceptional chef line ups and in doing so retaining their unique fine food and cultural experience. With Markets ability to transform spaces and drive footfall, more real estate developers are turning to Time Out to attract customers to their locations, with the opening of new markets and the signing of new management agreements in the period, despite restrictions. Time Out Market of Dubai opened on 7 April 2021 and has so far exceeded trading expectations. The site featuring 17 of Dubai’s top chefs and celebrated restaurateurs is the first in the Middle East and has a unique waterfront position on Burj Lake, next to The Dubai Mall and the iconic Burj Khalifa – a location that attracts millions of visitors each year. LOVE LOCAL Time Out launched the global Love Local campaign in an effort to help support the local restaurants, bars, galleries, live music venues, theatres and clubs that make each city unique. The mission of the Love Local campaign was to partner with small and independent businesses by lending Time Out’s voice to a range of crucial causes fighting to support local food, drink, culture and entertainment businesses in cities around the world including London, LA, NYC, Chicago, Miami, Montreal, Barcelona, Madrid and Paris as well as Singapore and Hong Kong. Some of the great initiatives supported included London’s National Time In, Barcelona’s Raise Your Fork, LA’s Arts Covid-19 Relief Fund, Sydney’s Keep Our Venues Alive, and many more, which all aim to keep local food, drink and culture businesses on their feet. As a part of the campaign, Time Out shared content and contributions from users, influencers and celebrities highlighting their favourite neighbourhood spots. Time Out editors shone a spotlight on their favourite local hangouts to encourage urbanites to support their city’s culture and enterprises. Additionally, the brand highlighted other initiatives including local fundraising campaigns, ordering takeout or delivery, buying merchandise, purchasing vouchers and gift cards in addition to buying art or products from independent businesses and creatives. 18 19 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Chief Executive’s review continued On 3 February 2021 Time Out announced the signing of the fourth management agreement with leading real estate developer, Aldar Properties, to develop Time Out Market Abu Dhabi which is expected to open in 2023. It will be located in one of the region’s prime destinations that attracts millions of locals and visitors annually. The Market will span over 35,000 square feet and include 15 of Abu Dhabi’s best restaurateurs, 3 bars and a cultural and entertainment space. In addition to the arrangements for Abu Dhabi, the current planned timings for new markets, subject to any further Covid-19 related delays, are unchanged: • Porto (owned & operated) – calendar 2022 • London Spitalfields (owned & operated) – Listed Building consent application has been submitted and the Group awaits the outcome. • Prague (management agreement) – calendar 2025 TIME OUT MEDIA TRADING OVERVIEW Digital advertising Print Live events Local Marketing Solutions Advertising sales E-commerce Franchises Net revenue Gross Profit Gross Margin % Operating expenditure Adjusted EBITDA On 23 March 2021, the Group announced that it no longer intended to proceed with the development of Time Out Market Waterloo due to the impact of the Covid-19 pandemic. The Group will instead focus on its prospective management agreement partners in a strong and growing pipeline of proposals from around the world. Given the strength of the Time Out Markets proposition we expect to sign more sites in the year ahead, growing the Group’s recurring earnings stream, without the need for further capital expenditure. 18 months to 30 June 2021 £’000 12 months to 31 December 2019 £’000 14,923 4,516 131 1,762 16,346 14,742 1,946 1,933 21,332 34,967 3,169 1,069 25,570 19,898 78% (28,827) (8,929) 3,932 1,155 40,054 26,847 67% (29,050) (2,203) The pattern of performance has been repeated in the Media division. A period that started in line with expectations driven by continued growth in digital advertising, was severely impacted by the pandemic, the subsequent lockdowns and travel restrictions. Most major advertisers, especially in travel and leisure immediately paused material media spend and awaited greater certainty with regards freedom of movement and consumer sentiment. In response, we implemented the cost saving measures outlined above and suspended all print publications. Faced with a challenging operating environment during lockdown, the Group successfully pivoted its brand and content to “Time IN” allowing it to remain relevant to and engaged with our home-bound audience. We have returned to our “Time Out” headline, however “Time IN” continues. This represents a new way for us to share up-to-date professionally curated content relevant to our audience, whether at home or heading out. As the cities of the world re-emerge, we look forward to re-connecting this audience to these cities, championing independent venues, local neighbourhoods and their unique culture – the Soul of The City. Following the easing of restrictions in early 2021, we saw the first green shoots of recovery in advertising with a limited return of print editions in the UK, Portugal and Spain. However the sustained disruption has materially impacted the gross profit compared to the prior year, despite the improved gross margin reflecting the greater focus on digital revenue. Programmatic revenue, a key element of our digital performance, was initially hampered as supply exceeded demand and our audience transitioned to increased mobile usage with a lower average yield. Our terms with each programmatic partner were critically assessed to ensure maximum revenue from our inventory and the ability to offer more innovative and engaging formats on mobile devices. This optimisation of our programmatic partners has increased our demand portfolio by reducing our dependence on any one significant partner and giving us access to specific expertise on formats suitable for mobile devices, which helps better target our audience. PRIDE WORLDWIDE 2020 In June 2020 Time Out partnered with Global Pride – the only virtual event being curated and hosted by Pride organisations from around the world – for first-ever #PrideWorldwide campaign. The month-long #PrideWorldwide campaign showcased the innovative ways local LGBTQ+ individuals and groups were continuing to keep their communities vibrant – from digital drag shows and virtual dinner parties to online clubs and parties. Throughout the month, LGBTQ+ content was featured across all Time Out platforms globally. The lineup included highlights of how urban LGBTQ+ communities were adapting to these unprecedented times, and how local community members brilliantly keep the spirit of Pride alive in their cities. The celebratory month concluded with Global Pride’s 24-hour live stream event uniting 1,500 Prides virtually and Time Out’s DIY #PrideWorldwide party, encouraging local audiences to tune into the live stream and celebrate wherever they were. 20 21 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Chief Executive’s review continued Financial review Our core focus of championing city life, led to innovative integrated propositions from the Creative Solutions team who, in the UK, partnered with Google in the first full print and digital take-over. Edited by UK actor and songwriter Ashley Walters, it celebrated Black History Month by giving all advertising pages to local black businesses, highlighting their contributions to the city and bringing their stories to the Time Out audience. For Uber Eats, in conjunction with the Love Local editorial campaign to support London’s food, drink, culture and entertainment businesses, we created a digital offering including a 25% discount on food when ordering via the Uber Eats app. Over the period and across the world, we built upon the Love Local campaign by extending its editorial focus on local neighbourhood culture, food and other close-to-home services while our audience remained at home. The decline in print revenue reflects the cessation of print during the initial lockdown. Our print products will be re-introduced and continue when supported by advertiser demand, requested as part of a bespoke product and when economically viable. This strategic change together with the broader impact of Covid-19 has resulted in an exceptional impairment charge of £20.0m being recognised in respect of Media goodwill. We have actively focussed on the high performing e-commerce partners offering on-line courses, live-stream theatre and virtual cultural events. These partnerships will continue to strengthen and benefit future performance. OUTLOOK Whilst there can be no certainty over the future imposition of trading and movement restrictions in response to Covid-19, the Board is encouraged by the current trading and prospects of the Group. All seven of the Time Out Market sites are open and despite the lack of city tourism and social distancing restrictions, the growing level of footfall has underlined the strength of the proposition and as a result we remain optimistic about the return to pre-Covid trading levels in the months ahead. We are particularly encouraged by the growing pipeline of potential new Time Out Market management agreements and the recurring earnings stream they offer, without the need for further capital expenditure. The Media division is experiencing a significant recovery in advertising. With a continued digital advertising focus and an optimised cost base, we expect operating margins to continue to grow in the current period. Notwithstanding the requirement to refinance the existing debt facility, the equity fund raises in the period have provided the Group with lower net debt and a period end cash balance of £19.1m. Julio Bruno Chief Executive Officer With an optimised cost base and lower net debt, we emerge from a challenging period better positioned to thrive in the post-pandemic recovery and beyond. SUPPORTING BLACK-OWNED BUSINESSES Time Out London and Google announced a joint partnership to support Black-owned businesses in the capital as part of Google’s collaboration with Black Pound Day and continued commitment to help local businesses bounce back. The partnership saw both brands launch an ongoing integrated campaign that combined print, digital and social, with a series of Instagram Stories highlighting talented Black-owned businesses and encouraging people to shop locally at their stores on Black Pound Day. The campaign launched with a special Time Out London magazine edition featuring only Black businesses, restaurants and contributors – including all photographers, writers, and illustrators. The iconic issue was curated by Time Out London in collaboration with guest editor Ashley Walters (who also took over Time Out London’s Instagram for the day), alongside an array of exciting contributors featuring: TV personality June Sarpong, British historian David Olusoga, viral comedian Munya Chawawa, Labour MP David Lammy, 12:51 chef James Cochran and the creator of Black Pound Day, Swiss. In a Time Out London first, Google was the 100% solus advertiser of this special issue of Time Out London and donated 80% of the ad space to Black-owned businesses to showcase their creative talents and goods to Londoners. Other Google integrations included an online hub with articles championing brilliant Black-owned businesses, and Google reviews integrated into Time Out London content. Neil Wood Chief Financial Officer REVENUE AND GROSS PROFIT Group gross revenue for the period decreased by 42% to £44.9m (2019: £77.1m) reflecting the cumulative impact of a highly disruptive and uncertain period as a result of the pandemic. Group gross profit decreased by 35% in the period compared to the 42% reduction in gross revenue, benefitting from the improvement in gross margin (as a percentage of net revenue) from 73% to 80%. This 7-percentage point gain was primarily driven by the Media revenue mix, which was skewed to higher margin digital operations, resulting in a Media gross margin of 78% (2019: 67%). Time Out Market gross margin was flat at 84%. 22 23 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Financial review continued Gross revenue Concessionaire share Net revenue Gross profit Operating expenses Operating loss Operating loss Property lease costs Depreciation and amortisation: – Intangible assets and property, plant and equipment – Right-of-use assets Share-based payments Exceptional items Loss on disposal of property, plant and equipment Adjusted EBITDA Finance income Finance costs Loss before tax 18 months to 30 June 2021 £’000 12 months to 31 December 2019 £’000 44,896 (7,093) 37,803 30,170 (90,717) (60,547) (60,547) (7,509) 16,617 4,952 1,480 19,894 36 (25,077) 35 (10,544) (71,056) 77,140 (13,857) 63,283 46,427 (59,786) (13,359) (13,359) (3,961) 8,341 2,950 1,048 278 – (4,703) 690 (7,809) (20,478) OPERATING EXPENSES Adjusted Group operating expenses only increased to £55.2m despite the longer financial period (2019: £51.3m). Market adjusted operating expenses increased to £24.8m (2019: £20.2m), comprising trading operating expenditure increase (£6.2m), pre-opening costs decrease (£2.8m) and an increase in central costs (£1.2m). Media adjusted operating expenses decreased to £28.8m (2019: £29.1m). Corporate costs also decreased to £1.6m (2019: £1.9m). These comparisons are skewed due to the 18-month period, however the overall underlying decrease in Group-wide operating expenses was part of a focussed cost savings exercise which included a review of contracts with all non-essential spending suspended and all material lease agreements reviewed with landlords to secure savings. The period benefitted from the measures taken following the initial global lockdown in March 2020. This included reversing all 2020 salary increases, cancelling related bonus schemes and introducing temporary salary reductions for senior staff. This was followed by a review of all teams across the Group and to identify further changes to be made in light of the reduced operations, with resulting staff redundancies and further use of government furlough schemes. As a consequence, we revaluated the office space requirements and have relocated a number of our offices, including London, New York and Sydney media offices, to smaller, more economic premises. Together these actions have secured immediate and ongoing cash savings. ADJUSTED EBITDA Adjusted EBITDA is stated before interest, taxation, depreciation, amortisation, share-based payments and exceptional items. Although IFRS 16 has been applied in the period, the £7.5m cost of property leases has been included in the operating expenses discussed above, as the Board believes it provides a fairer reflection of the operating margins of the business. The material decrease in Group adjusted EBITDA to a £25.1m loss (2019: £4.7m loss) was driven by the reduced revenue, partially offset by the cost reductions described above. OPERATING LOSS The reported operating loss was £60.5m (2019: £13.4m). This includes the IFRS 16 impact of lower property lease costs of £7.5m (2019: £4.0m), which for adjusted EBITDA was reported in operating expenditure and higher depreciation of £5.0m (2019: £2.9m) on the right-of-use assets recognised. Net exceptional costs were £19.9m (2019: £0.3m) comprising principally of an impairment charge of £20.0m relating to the goodwill allocated to the Media business. Staff redundancy costs (£1.2m) and property lease exit costs (£0.9m) were incurred as part of our response to Covid-19. In addition, the two equity fundraise processes resulted in professional fee costs (£0.1m) and a write- off of deferred financing fees following the full settlement of the outstanding loan notes. These costs were offset in part by a net gain following the de-recognition of two properties following changes in the contractual terms. The depreciation charge of £21.6m (2019: £11.4m) increased by £10.2m, driven principally by the additional depreciation related to the four US owned and operated Markets that opened over the comparative period and the extended financial period. SHARE BASED PAYMENTS The fair value of options at the grant date has been amortised over the time to vesting of the option. In December 2020, the share schemes were modified to better reflect the current and anticipated performance of the Group, whereby certain historic option grants were replaced by revised grants linked to the Group’s share price performance over a five-year period. There were 27.5m options outstanding at 30 June 2021 (31 December 2019: 12.9m). NET FINANCE COSTS Net finance costs of £10.5m (2019: £7.8m) primarily relates to interest on debt of £4.8m, amortisation of deferred financing costs (£0.4m), interest cost in respect of lease liabilities (£4.9m), and the foreign exchange loss on financial liabilities of £0.3m. FOREIGN EXCHANGE The revenue and costs of Group entities reporting in dollars have been consolidated in these financial statements at an average exchange rate of $1.32 (2019: $1.27). The operations reporting in euros have been consolidated at a rate of €1.14 (2019: €1.14). 24 25 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Financial review continued CASH FLOW Cash and cash equivalents Borrowings Adjusted net debt IFRS 16 lease liabilities Net debt CHANGE OF FINANCIAL YEAR END In November 2020 we announced that the Group was changing its accounting reference date and financial year end from 31 December to 30 June with immediate effect. The Group’s activities have continued to evolve in recent years, notably with the global roll out of Time Out Markets. The division’s trading in the medium to long term (post-Covid) is likely to be a very significant contributor to the Group’s revenues and profits, as well as being increasingly seasonally weighted to the second half of the calendar year. Therefore, the Board believes that a 30 June year end will be in the best interest of the Group. These results cover an 18-month financial period ending 30 June 2021. Cash and cash equivalents increased by £5.7m to £19.1m. This was driven primarily by £64.1m of net cash raised following two successful equity raises in the period offset by the EBITDA loss of £25.1m (2019: £4.7m), a net working capital outflow of £2.7m (2019: £2.3m), and debt and interest repayments of £27.7m. In order to preserve cash, except for capital expenditure related primarily to the final construction and fit out costs of the Time Out Market Chicago, all non-essential Market capital expenditure was deferred with £0.2m invested in making the markets COVID-safe, offset by £0.6m of cash contributions received from landlords in respect of previously completed construction. Media invested £2.1m (2019: £1.8m) in capitalised software development costs to support the Group’s increasingly important digital platforms. Borrowings now comprise principally the Incus facility which was £21.9m at period end. In June 2020, the Incus facility was revised to defer capital and interest payments due in June 2020 and November 2020 to November 2021, with the next covenant testing date extended to 31 December 2021. In September 2021, Incus formally waived further covenant tests for the remainder of the facility which is due for settlement in full in November 2022. Cash utilisation continues to be closely monitored. The next significant cash requirement is the settlement of the Incus facility described above. However, the Group is satisfied that this facility can be refinanced within the existing timelines. The Group is therefore confident that it has sufficient funding to cover its operational needs for the foreseeable future. Further information is included below and in note 1. GOING CONCERN The financial statements have been prepared under the going concern basis of accounting as the Directors have a reasonable expectation that the Group and Company will continue in operational existence and be able to settle their liabilities as they fall due for the foreseeable future, being a period of not less than one year from the date of approval of the financial statements. In making this determination, the Directors have considered the financial position of the Group, projections of its future performance and the financing facilities that are in place. 18 months to 30 June 2021 £’000 12 months to 31 December 2019 £’000 19,070 (23,517) (4,447) (22,453) (26,900) 13,420 (43,311) (29,891) (32,422) (62,313) The Covid-19 pandemic has had a significant adverse impact on the Group’s current trading and any projection of future performance is inherently uncertain. The key drivers of uncertainty include the impact of the global vaccination programme on any further waves of the pandemic, the actions that may be taken by governments to respond (which could restrict our ability to operate our Market business) and the response of our customers themselves to adverse changes in their economic circumstances (which will impact on revenues in both our Market and Media businesses). We have taken, and will continue to take, steps to minimise our discretionary expenditure and therefore the principal driver of our future profitability and cash flows will be the revenue we are able to generate from our two businesses. We have also agreed with our lender, Incus Capital Finance, that the quarterly financial covenants that apply to their loan will be waived for the balance of the facility term. Whilst the facility is due to expire in November 2022, the Directors are confident that the loan will be refinanced on acceptable terms. The Group has modelled two financial scenarios over the next 12 months that reflect the potential continued impact of the pandemic. The Group intends to refinance the debt but as the refinancing has yet to be undertaken, the Directors have concluded that attention should be drawn to the fact that a material uncertainty exists which may cast significant doubt on the Group and Company’s ability to continue as a going concern. The global recovery from the impact of the pandemic is just beginning. However, after consideration of the matters set out above, the Directors are satisfied that there is a reasonable expectation that the Group and Company has adequate funding to cover its operational needs for the foreseeable future and therefore consider it appropriate to prepare the financial statements under the going concern basis. Neil Wood Chief Financial Officer The base case assumes a cautious year of recovery across both Market and Media. Market revenue is assumed to be lower than the pre-pandemic period due to reduced capacity and international travel restrictions during the next financial year. All Markets are only assumed to reach full capacity during the 2022/23 financial year. Media revenue is assumed to gradually increase over the year, with revenue levels excluding print, recovering to pre-pandemic levels in the 2022/23 financial year. The changing revenue mix is expected to yield higher margins while maintaining the reduced cost base achieved through strategic decisions taken during the period. This scenario does not include the impact of further protracted lockdown periods. The downside case assumes a further 10% reduction in revenue of each business against the base case during the next financial year, with revenue returning to budgeted levels in July 2022 and no corresponding reduction in budgeted costs over this period. In addition, this does not reduce the assumed capital expenditure over this period. The Directors consider the modelled reduction in revenue to be unlikely given the recent performance post restrictions being lifted and the Markets reopening. However, with the continued uncertainty of new restrictions this scenario is considered severe but plausible. Under both scenarios there would be adequate cash available to the Group up until November 2022 when the balance of the Incus Capital Finance facility totalling £22.1m will need to be refinanced and given the Group has insufficient funding in place to settle their contractual obligation in full, the Group would need to seek additional funding by raising new equity or by refinancing the debt within the going concern period in order to continue in operational existence. 26 27 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Corporate social responsibility Championing diversity and inclusion, engaging with local communities and limiting waste. DIVERSITY AND INCLUSION Time Out believes the richness of the world is in its diversity. The cities it represents are melting pots of different people, ideas, experiences and beliefs. To champion these cities and inform readers, Time Out must reflect them. Time Out has advocated for diversity and inclusion since 1968: our founder, Tony Elliott, was passionate about equality and diversity. We believe that diversity develops creativity and enables personal and professional growth. Our aim is to create an open culture where ideas are shared candidly and where there is no fear of failure, but rather an understanding that we must experiment and have the freedom to succeed. Time Out Group is committed to supporting and celebrating diversity and equality and we consciously work towards reflecting this in our organisation. Steps we are taking as a company to be more diverse and inclusive include: • We have an editorial ethos that reflects the cities we serve. Our hiring and commissioning of employees, freelancers, illustrators and photographers reflect diverse backgrounds, perspectives and voices. • We practice blind recruitment and for applications received from third parties we insist on a candidate long list where more than one gender or ethnicity is represented. • We have rolled out a global, annual education programme dealing with conscious and unconscious bias for all employees. • We are joining institutions – within the media and hospitality sectors – that work locally as champions of D&I, including signing the If Not Now, When? pledge to commit to clear and specific actions that increase inclusion and equality for Black and ethnic minorities in the workplace. • We connect our senior leaders and employees to mentoring schemes that support talent from diverse backgrounds to ensure that they thrive. • We support women leaders by ensuring gender equality within our senior leadership team and at all levels of the organisation. Moving forward we have committed to: • All employees completing an ethnicity census, so that we have a baseline to measure and improve upon; • Elevating Black and ethnic minority voices through listening groups and conversation; and • Educating our workforce on experiences of Black and ethnic minorities. SUPPORTING CHARITIES AND VOLUNTEERING Time Out members of staff in offices around the world regularly organise and participate in local charity initiatives. This includes Payroll Giving, staff participating in marathons and other charity support. This year, team members were keen to support where they could during the recent Covid-19 pandemic, with a number of staff members involved in the logistics of rolling out the Covid-19 vaccine to the UK population. We believe that diversity develops creativity and enables personal and professional growth. Following the devastating collapse of the Champlain Towers South condominium in Miami, Time Out committed to help the relief effort and those impacted by the catastrophe, providing meals for volunteers, donating proceeds from bar sales to the Support Surfside Organization and signposting how locals can support directly through Time Out editorial and social channels. LOVE LOCAL In May 2020, Time Out launched a global Love Local campaign to help support the local restaurants, bars, galleries, live music venues, theatres and clubs that make each city unique. Partnering with small and independent businesses, Time Out lent its voice to a range of crucial causes fighting to support local food, drink, culture and entertainment businesses in key cities including London, LA, NYC, Chicago, Miami, Montreal, Barcelona, Madrid and Paris as well as Singapore and Hong Kong. As the Markets reopened, Love Local was brought to life at each Time Out Market, offering visibility to local chefs, artists, musicians and independent businesses. Time Out Market New York collaborated with “The Migrant Kitchen” – a local New York catering concept focused on providing meaningful opportunities for immigrants – through a pop-up kitchen, where for every meal purchased, one is donated to a New Yorker in need. LIMITING WASTE Time Out is dedicated to produce, deliver and distribute its magazines in a sustainable way, ensuring our suppliers are environmentally conscious and have ethical business practices. In the UK our printer uses eco-friendly materials and processes, reducing and eliminating single-use plastic, minimising the carbon footprint, robust recycling processes (e.g. for plates used on the printing presses and materials like coloured cardboards) and using compostable paper. In addition, Time Out Market uses chinaware, cutlery and glassware to serve guests. 28 29 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Section 172 statement Maximising value and ensuring long-term success includes taking account of what is important to our key stakeholders. Our stakeholders Why we engage What matters to this group How we engage Shareholders and debt providers Employees Continued access to capital is important for our business as we continue to grow, for example by developing two further owned and operated Time Out Markets in Porto and London. We work to ensure that our shareholders and key debt providers have a good understanding of our strategy and business model, growth opportunities and performance. Our experienced and diverse workforce is our key asset, and attracting and retaining this talent is critical to our success. • Strategy and business model, incorporating responses to continuing impacts of global Covid-19 pandemic • Demonstrating flexibility and maximising resilience against the impacts of the Covid-19 pandemic • Long-term growth potential • Financial performance • Capital expenditure requirements and liquidity • Business strategy and financial stability, including resilience against impacts of the global Covid-19 pandemic • Opportunities for development and progression • Key values such as diversity and inclusion • Fair pay and benefits • Job satisfaction • Working for an innovative company rooted in an iconic brand, with a strong sense of our values • Appropriate adjustments to office working, and home working opportunities, due to global Covid-19 pandemic • The CEO, CFO and Investor Relations Director conduct an ongoing investor relations programme which includes individual meetings with institutional shareholders following the interim and full-year results • Copies of the Annual Report are sent to all shareholders and can be downloaded from the investor section on www.timeout.com, which also contains other information relevant to our investors • Shareholders have the opportunity to ask the Board questions during each Annual General Meeting • The Group CFO and Time Out Market CEO hold an annual meeting with the Group’s key debt provider, and gave informal updates around Time Out Market temporary closures due to the global Covid-19 pandemic • The CEO conducts Quarterly Vision inductions for all new starters globally to ensure understanding of the brand, our company values and business objectives • The CEO provides video updates to all global staff, covering key recent developments in the business • Executive management team makes presentations to all global staff providing an update on financial performance, business strategy and key progress • Employee engagement, onboarding and exit surveys provide employees a chance to provide anonymous feedback which is shared with management and used to develop strategies to increase employee satisfaction • Annual performance reviews (with mid-year check-ins) engage staff about their contribution, development and career aspirations, as well as their alignment with the Company’s values. There is also a company-wide culture of weekly one-to-ones with line managers, team meetings and regular functional “stand-ups” • Virtual social events are organised by local social committees, being replaced with in-person events, as and where Covid-19 restrictions allow • In response to the global Covid-19 pandemic, all offices globally have implemented adjustments through home working and periods of temporary office closure and/or changes to the physical office space, and corporate headquarters in London has implemented a hybrid model of combined home working and office working for the next 12 months • A diversity and inclusion framework is being developed which extends beyond local anti-discrimination legislation. This is in response to the CEO signing the “If not now, when?” pledge which commits the Company to reporting on sustainable and long-term actions implemented to address Black inclusion in the workplace • Unconscious bias training has been rolled out as a compulsory course for all employees to attend. Other training opportunities include management development, GDPR refresher training, a “lunch and learn” series and financial contributions to professional training contracts • Environment initiatives are led by cross-functional teams across our regional offices Our stakeholders Why we engage What matters to this group How we engage Global audience Time Out’s brand and curated content, and the audience that engages with it, is at the heart of everything we do. Advertising clients Agency and direct client relationships are critical to generation and growth of advertising revenues. • High-quality, independent • All Time Out’s interactions with our audience are tracked in real time and professionally generated content which helps our audience discover and experience the best things to do in a city when they are out and – new this year – when they are in • The confidence that they can trust Time Out’s curation and recommendations • A consistent, authentic brand experience across all our print, digital (web and social) and physical channels • The ability to experience the best food, drink and cultural events in a unique single location at all Time Out Markets • Brands are seeking innovative, integrated and bespoke advertising solutions from a trusted media partner which can reach a highly desirable audience • Advertising clients seek a positive, brand-space environment for their campaigns which Time Out’s trusted high-quality content and global brand can offer through multiple analytics platforms • We also engage with our audience via large-scale surveys, panels, user- generated content, voting and via content which inspires direct consumer action – as well as through Markets and live events • Time Out works with professional journalists to ensure expertise, experience and local knowledge • During the global Covid-19 pandemic, natural searches for Time Out content fell by up to 80%. We maintained our number of global Unique Visitors and engagement with its audience by pivoting to a social-first entertainment-led content strategy, creating clusters of daily Time In content on streaming, film, music, podcasts, wellbeing and social life, and helping its audience navigate a changing world of restrictions, openings and closures • In the Time Out Markets, we regularly refresh the proposition to ensure the culinary mix is up to date and the experience is as frictionless as possible – an example of which is the current initiative to implement a mobile app to enable pre or at-table ordering for visitors • Regular sales calls, in person (often in Time Out Markets) and via video conference drive deep, long-term relationships and immersion into the brand • Senior management hold a series of meetings with agency investment teams to update them on our business proposition • Agency-wide presentations and “lunch and learn” events, to strengthen mutual understanding and build awareness of our brand • Attendance at industry events, conferences and networking groups to grow and enrich client relationships, whilst widening our footprint in the market • C-level introductions (in-person) elevate Time Out’s relationships with key advertising clients, so we better understand their business needs • Production of custom print executions for the benefit of our clients’ employees, sharing our editorial expertise on their local office area • Integrated campaigns bringing media and markets together generating larger revenue, long-term deals, offering multi-platform and on-site activations • We leverage our editorial voice to create bespoke branded content solutions to offer our clients a 360 platform campaign 30 31 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Section 172 statement continued Our stakeholders Why we engage What matters to this group How we engage Concessionaires Time Out Market’s proposition depends on attracting and retaining the best chefs and restaurateurs of a city – it is crucial that we build strong partnerships that create long-term value for both parties. • Visitor volumes and consistent footfall • Weekly operational communication by Time Out Market General Managers with each concessionaire • Revenue and margin • Chief Marketing Officer delivers a quarterly marketing plan, including potential summaries of recent activity and planned upcoming activity • The accolade of being the • One to two meetings every year with Time Out Market CEO • Commercial Manager, assisted by the General Managers, completes a performance review, which includes a deep dive on menu, pricing, sales, covers, average spend and customer service “best of a city” • Access to a new Commercial Manager who holds quarterly meetings (in person or via video conference) providing advice and insights • Building a profile with an international customer base Landlords Strong, long-term relationships with landlords – whether owned operated or management agreements – in a unique location are key to creating long-term value for both parties. • Visitor footfall to drive site appeal to other potential tenants • Time Out Market CEO maintains regular contact with all landlords and meets with them in person, quarterly or half-yearly • Time Out Market General Managers interact with landlords and/or the • Real estate value growth landlord’s representative(s) on a monthly basis • Long-term partnership • General Managers hold monthly meetings with Management Agreement • The addition of a new destination to their site, neighbourhood and city partners for operational reviews • Time Out Market Finance Director conducts monthly meetings with each Management Agreement partner’s Finance team to review results • The value of working with a highly recognised, global brand • Time Out Market CEO and key staff hold quarterly meetings with Management Agreement partners to review operations, financial performance and relationship Community and environment We are committed to engaging with and supporting the communities we operate in and minimising the impact our business operations on the environment. • Time Out readers are interested in sustainability • Time Out Market being a responsible neighbour and minimising disruption • Waste management working with local recycling • Sustainable sourcing • Charitable donations • Time Out is dedicated to raising awareness amongst its readers around green issues and sustainability through regular editorial features and campaigns • Time Out is dedicated to producing, delivering and distributing its magazines in a sustainable way • Time Out Market is dedicated to companies and suppliers, and part of this is to engage with the local community; for example, top chefs host charity events in the markets, supporting local organisations and causes • Time Out members of staff in offices around the world organise and participate in charity initiatives 32 33 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Principal risks and uncertainties The Board continually reviews the potential risks facing the Group and the controls in place to mitigate any potential adverse impacts. The Board also recognises that the nature and scope of risks can change and that there may be other risks to which the Group is exposed. The list is therefore not intended to be exhaustive. REGULATORY RISKS Risk Mitigation Action/Control Privacy and data protection risk As the Group’s digital offering expands, the Group increasingly needs to gather and use customers’ personal data in order to transact with both businesses and customers. Unauthorised access to customer data could lead to reputational damage, compliance issues and a loss of customer confidence. The Group relies on third- party contractors and its own employees to collect personal data and to maintain its databases and therefore the Group is exposed to the risk that such data could be wrongfully appropriated, lost or disclosed, damaged or processed in breach of data protection regulations. The Group has developed and implemented information security policies and procedures (for example, password policies and remote access policies), security monitoring software, physical access limitations and detection and monitoring of fraud from internal staff. Access to the network is protected by a firewall system supplied by specialist third parties. The Group also operates fraud detection systems which use various industry standard anti-fraud rules to prevent fraudulent transactions in real time. The Group encrypts sensitive data such as passwords and other certain information to ensure there is an additional layer of security. Health and safety The health and safety of the Group’s employees and customers is a key priority. We are required to comply with local health and safety legislation, including fire safety, food hygiene and allergens. Each Time Out Market location completes site-specific risk assessments and general managers are required to undertake regular compliance inspections. Furthermore, third-party consultants conduct bimonthly “mock” inspections at each market and any action points are addressed by the general manager. Each Time Out Media location has a nominated health and safety co-ordinator to ensure that local health and safety requirements are fully assessed, and the required actions are implemented to ensure compliance. In response to Covid-19, all Group locations have been modified to include sanitation facilities and to allow social distancing. In our Media offices, app-based booking systems allow staff to book a desk in the office while ensuring that the maximum capacity is not exceeded. OPERATIONAL RISKS Risk Mitigation Action/Control Technological risk IT systems The Group is particularly dependent on its IT infrastructure, and any system performance issues or shortcomings, such as system, software or infrastructure failure, damage or denial of access, could cause significant business interruption. The efficient and uninterrupted operation of the systems, technology and networks on which the Group relies and its ability to provide consumers with reliable, real-time access to its products and services is fundamental to the success of the Group’s business. Technological risk Technological advancements The Group mitigates these risks by moving critical systems to the cloud where possible and is currently completing the migration of its publishing system to the cloud. The Group continues to partner with specialist third-party solution providers to review and maintain our business continuity and disaster recovery plans, to ensure these can be effectively delivered if required. Time Out’s continued growth is dependent on up-to-date and effective technological systems. Any failure to ensure that IT capacity and capability keep pace with the business could impair the Group’s ability to grow. The Group makes ongoing investments in IT systems, security and people to ensure that systems keep pace with the development of the business. Key investment areas are identified annually, and progress tracked regularly to ensure that the objectives are being met. Risk Mitigation Action/Control Key management The Group’s success depends on its key personnel, particularly its senior management team, and its ability to retain them and hire other qualified employees. The loss of a significant number of key personnel may have a negative effect on the Group’s ability to deliver its products in a timely manner and would, amongst other things, require the remaining key personnel to divert immediate and substantial attention to seeking a replacement. Potential security incidents The HR department monitors employee satisfaction through employee surveys and forums and uses the information to develop staff retention programmes. The Remuneration Committee also seeks to ensure that rewards correspond with performance and retention, and key individuals are incentivised through the Group’s LTIP scheme. Each Time Out Market is exposed to some risk of terrorist and/or other visitor incidents. These incidents would have an immediate impact on the Group’s revenue and a longer-term impact on the Group’s reputation. Each market engages third-party security specialists to provide a visible security presence throughout, in addition to market-wide CCTV monitoring. Each market has a general manager responsible for ongoing monitoring of physical security and regular testing of evacuation plans. This is supplemented by “Active Shooter” training to ensure that local teams react appropriately. General managers regularly meet with local police to understand and address any additional threats and provides regular communication to concessionaires about relevant government policies. Brand protection The Group depends on its brand name and any damage to its brand or reputation could impact the ability to attract and retain customers with a resultant impact on revenue, as well as its ability to attract high-calibre employees. The Group has brand guidelines in place which are regularly communicated to all employees and key third parties to ensure consistency of voice and approach throughout all marketing activities. There is also a robust strategy in place for actively pursuing and defending the Time Out brand name and all supporting trademarks, domain names and other intellectual property in all key markets in all relevant classes. Furthermore, the Group employs internal and external legal personnel who are experts in intellectual property to manage the trademark and domain name portfolios and there is an ever-increasing number of trademarks and domain names applied for and registered across the world. ECONOMIC RISKS Risk Mitigation Action/Control Consideration of risk posed by Covid-19 The Covid-19 pandemic has had a seismic impact on the Group and industry, causing major disruption to the travel, tourism and hospitality sectors which has materially impacted the operations of the Time Out Markets and has created significant delays and cancellations to Time Out Media advertising campaigns. Competition The recovery from this challenging period will be gradual and may be impacted by further government mandated restrictions and changes in consumer behaviour. These pose a risk to our medium and longer-term trading. During the period of closure and lockdown, we have taken all possible action to reduce our cost base. The Board continues to monitor government advice and actively communicate with our employees, customers and suppliers as operations return to a pre-Covid-19 level. 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 is subject to several risk factors relating to product demand, prices, recognition of the Time Out brand and the ability to attract and retain new customers. The Group continues to invest in the development of its digital offering to ensure that it remains innovative, competitive and attractive in the markets in which it operates. The focus on the quality of offerings means that the Group can respond to changes in the competitive landscape and to the needs of its readership audience and commercial partners. Consideration of risks posed by Brexit The Group continues to monitor the impact on its business now that the UK has left the European Union. The Group currently considers that key areas of risk are around staff, currency volatility and data privacy regulation. To date there has been limited impact on the Group’s operations. 34 35 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Governance Board of Directors Corporate governance report QCA code principles and disclosures Audit committee report Directors’ remuneration report Directors’ report Independent auditors’ report 38 40 43 45 48 52 56 Governance Covid-19 safe Markets. COVID-19 RESPONSE Time Out Market paused operations in March 2020 to protect the health and safety of its employees and guests. We used this period to implement new systems and safety precautions to be ready when we reopened. In late Summer, Markets reopened in line with local guidelines and our new advanced safety measures. Key areas of Market improvements include advanced air circulation and filtration systems, plexiglass shields at all eateries, specially created entrance signage on safety protocols and sanitisation, dedicated cleaning staff, personal protective equipment for all workers, introduced delivery options and a brand new Time Out Market app for contactless ordering. In addition, relevant Markets took advantage of eased restrictions, utilising public spaces for expanded socially distanced outdoor seating. As Covid-19 cases spiked around the world in Autumn 2020, once again the Markets put safety first and chose to hibernate for the Winter. As cities re-emerged and restrictions in hospitality venues eased from Spring 2021, Time Out Markets began to reopen and guests were eager to return. Time Out Market Miami was the first to reopen in March, followed by Boston and New York in May, Lisbon and Chicago in June and Montreal in July. In even more positive news, Time Out Market Dubai opened in April 2021 – the largest, one-of-a-kind culinary and cultural destination to launch in the UAE. Opened in partnership with Emaar Malls, Time Out Market Dubai showcases the benefits and success of a management agreement. As cities re-emerged and restrictions in hospitality venues eased from Spring 2021, Time Out Markets began to reopen and guests were eager to return. 36 37 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewStrategic ReportFinancial Statements Board of Directors PETER DUBENS Non-Executive Chairman CHRIS OHLUND Executive Vice-Chairman JULIO BRUNO Chief Executive Officer LORD ROSE OF MONEWDEN Non-Executive Director ALEXANDER COLLINS Non-Executive Director DAVID TILL Non-Executive Director DATE JOINED Mr Dubens joined the Group in November 2010 as a Non-Executive Director and was appointed Non- Executive Chairman in May 2016. Mr Ohlund joined the Group in July 2021 as Executive Vice-Chairman. Mr Bruno joined the Group in October 2015 as Executive Chairman and was appointed Group CEO in June 2016. He resigned on 29 October 2021. EXPERIENCE Mr Dubens is the founder and Managing Partner of the Oakley Capital Group, a privately owned asset management and advisory group comprising Private Equity, Venture Capital and Corporate Finance operations managing over €3bn. Mr Dubens founded Oakley Capital in 2002 to be a best-of-breed, entrepreneurially-driven investment house, creating an ecosystem that supports the companies the Oakley Capital Group invests in, whether they are early-stage companies or established businesses. The vision of Oakley Capital has always been to encourage and back entrepreneurship. To that end, Oakley Capital Private Equity invests in and supports the continued growth and development of some of Europe’s leading companies. Mr Dubens has substantial public company experience, he is a Director of Oakley Capital Investments plc and previously held the position of Chairman of Pipex Communications plc and 365 Media Group plc. Mr Ohlund has over 25 years of leadership experience in international digital businesses ranging from leading media brands, consumer platforms and film production. He has served on various boards including as Chairman of then-publicly listed Ricardo (part of Tradus) – which was eventually sold to Naspers for $1.9 billion. Mr Ohlund served as Non-Executive Director at Oscar-winning Condor Films in Switzerland, London-based internet start-up Shutl.com (until its sale to eBay), Facile and Casa in Italy and currently serves on the board of the UK’s leading PropTech, Residently. As CEO of Germany’s leading online comparison portal Verivox, his innovative transformation leadership quadrupled annual revenue and increased enterprise value sixfold to over €500 million during his tenure of six years. Previously he turned around the digital business unit of “Blick”, a daily Swiss newspaper, to become the number one digital news portal in Switzerland, including developing number one apps in news, sports and entertainment. Prior he served as CEO of logistics firm DPD with annual revenues in excess of €1 billion and a workforce of 11,000 strong. Mr Bruno has a successful international executive career, spanning several countries and top companies in sectors such as media, travel, technology and e-commerce. He previously was TripAdvisor’s Global Vice President of Sales (B2B) based in New York, Travelport’s Vice President for Canada, Latin America & the Caribbean and Cendant Corporation’s Managing Director (President) of Continental Europe & South America. Prior to this, Mr Bruno held senior international positions at Regus plc, Energizer and Diageo plc. He is involved with the startup community as an investor and board adviser in various companies globally. Mr Bruno holds a Master’s degree in International Business from the University of London, a BSc in Business and Economics from SUNY (State University of New York), a postgraduate certificate on leadership from Wharton, University of Pennsylvania, and completed an executive program in Silicon Valley at Singularity University. In 2019, he was awarded the Officers’ Cross of the Order of Civil Merit of Spain. Julio was recognised as ‘Business Leader of the Year – Consumer Media’ at the Campaign Publishing Awards and was listed as one of EMpower’s ‘50 Advocate Executive Role Models’. Lord Rose joined the Group in December 2015 as Chairman of Time Out Market Limited and was appointed as a Non-Executive Director in June 2016. Lord Rose has worked in retail for over 40 years, including as Chief Executive and then Chairman of Marks & Spencer plc (2004 to 2010). He also held Chief Executive positions at Arcadia Group plc, Booker plc, and Argos plc. He is the current Chairman of EG Group, Majid Al Futtaim Retail, and Zenith Automotive. Lord Rose was knighted for services to the retail industry and corporate social responsibility in 2008 and was appointed to the House of Lords in 2014. He is the Chair of the Audit Committee and the Remuneration Committee. Mr Collins joined the Group in November 2010 as a Non-Executive Director. Mr Till joined the Group in October 2020 as a Non-Executive Director. Mr Till co-founded the Oakley Capital Group in 2002 with Peter Dubens. David plays a key role within the Oakley Capital Group and has overall responsibility for operations, finance, due diligence, compliance and fund formation. David holds a BA (Hons) in Economics from Essex University, qualified as a chartered accountant with Coopers & Lybrand and worked in industry as a finance director, before returning to the profession holding senior M&A roles before co-founding Oakley Capital. Mr Till is a member of the Audit Committee and the Remuneration Committee. Mr Collins is a Partner at Oakley Capital Private Equity and has 20 years of private equity investment and operational experience, including originating and structuring transactions in a range of sectors and geographies, including growth equity, MBOs, restructuring and turnaround situations. Mr Collins joined Oakley Capital Private Equity in 2007 as one of the founding partners and has been an investment and board director of a range of international businesses, including Host Europe, Emesa, Intergenia, Verivox, North Sails, Facile, Idealista and Ocean Technology Group. Prior to joining Oakley Capital Private Equity, Mr Collins started his career at GE Capital in 1995 before being seconded to Advent International for two years as an Associate Director. He subsequently joined Henderson Private Capital as Principal and was then a Partner at Wharfedale Capital, where he was involved in the purchase of secondary direct private equity assets. Mr Collins holds an MSc from the London School of Economics and a BA in Economic History from Union College, New York. 38 39 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Corporate governance report COMPOSITION OF THE BOARD The Board is the link between the shareholders and executive management and is responsible for the successful stewardship of the Group. As such the Board plays a key role in the corporate governance process. During the period 1 January 2020 to 17 July 2020, the Board comprised seven Directors, two of whom were Executive Directors and five of whom were Non- Executive Directors. Tony Elliott passed away on 17 July 2020 and Adam Silver resigned from the Board on 31 July 2020, therefore from 1 August 2020 the Board comprised five Directors, one of whom was an Executive Director and four of whom were Non-Executive Directors. From 1 October 2020 when David Till joined the Board, until 9 February 2021, the Board was comprised of six Directors, one of whom was an Executive Director and five of whom were Non-Executive Directors. Matthew Riley resigned from the Board on 9 February 2021, following which the Board was comprised of five Directors, one of whom was an Executive Director and four of whom were Non- Executive Directors. The composition of the Board throughout 2020 and 2021 reflects a blend of different experiences and backgrounds. Biographical details of current Board members during the period 1 January 2020 to 30 June 2021 are shown on pages 38 and 39. The Board believes that the composition of the Board brings a desirable range of skills and experience in light of the Company’s challenges and opportunities, while at the same time ensuring that no individual (or small group of individuals) can dominate the Board’s decision- making. Notwithstanding Lord Rose’s entitlements under the Time Out Market Equity Incentive Plan (which ceased 24 December 2020) and his entitlements under the Group’s Long Term Incentive Plan granted 5 February 2021, the Company regarded Lord Rose and Matthew Riley as “Independent Non-Executive Directors” within the meaning of the QCA Code and free from any business or other relationship that could materially interfere with the exercise of their judgement. The Board’s composition and skill set is considered appropriate for the Group’s current stage of development. The experience and knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise performance. As the Board is small, there is not a separate Nominations Committee and recommendations for appointments to the Board will be considered by the Board as a whole after due evaluation. On 31 July 2020, Adam Silver resigned from the Board and his role as Chief Financial Officer and on 5 November 2020 Neil Wood joined the Group as Chief Financial Officer (without joining the Board). BOARD ROLE AND MEETINGS The Board is responsible for the Group’s strategy and for its overall management, as well as setting the Group’s values and standards. The operation of the Board is documented in a formal schedule of matters reserved for its approval which is reviewed annually. These matters relate to: • all of the Group’s strategic aims and objectives; • the structure and capital of the Group; • financial reporting, controls and policies including those around cyber protection; • setting budgets and forecasts; • internal controls; • approval of any significant contracts, expenditure, partnerships and/or ventures; • effective communication with shareholders; • any changes to the Board membership or structure, including delegation of authority; • approval of remuneration for Executive Directors; and • approval of appointment of Key Management Personnel and Directors. Non-Executive Directors communicate directly with Executive Directors and senior management between formal Board meetings. The Board met nine times during the period 1 January 2020 to 30 June 2021. Directors are expected to attend all meetings of the Board and committees on which they sit, and to devote sufficient time to their duties to the Group. In the event that Directors are unable to attend a meeting, their comments on papers to be considered at the meeting will be discussed in advance with the Chairman so that their contribution can be included in the wider Board discussion. The following table shows Directors’ attendance at scheduled Board and Committee meetings for the period 1 January 2020 to 30 June 2021: Peter Dubens David Till (appointed 1 October 2020) Lord Rose Alexander Collins Tony Elliott (deceased 17 July 2020) Matthew Riley (resigned 9 February 2021) Julio Bruno* Adam Silver (resigned 31 July 2020) Board Audit Remuneration 9/9 5/5 8/9 9/9 0/2 5/6 9/9 1/3 – 3/3 4/4 – – 1/2 3/3 – – – 1/1 – – 1/1 – – * This Director is not a member of the Audit Committee but is invited to be in attendance at some meetings. BOARD COMMITTEES The Board has delegated specific responsibilities to the Audit Committee and the Remuneration Committee, details of which are set out below. Each committee has written terms of reference setting out its duties, authorities and reporting responsibilities. AUDIT COMMITTEE The Audit Committee has primary responsibility for monitoring the quality of internal controls to ensure that the financial performance of the Group is properly measured and reported. It receives and reviews reports from the Group’s management relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. It meets with the external Auditors throughout the year to discuss their findings in relation to the annual accounts. The Audit Committee aims to meet not less than three times in each financial year, and it has unrestricted access to the Group’s external Auditors. From 1 January 2020 until 9 February 2021 the Audit Committee was comprised of Lord Rose and Matthew Riley and was chaired by Mr Riley. On 9 February 2021 Mr Riley resigned from the Board and therefore from 9 February 2021 and currently, the Audit Committee is comprised of Lord Rose and David Till and is chaired by Lord Rose. More information about this Board committee can be found in the Audit Committee report on page 45. REMUNERATION COMMITTEE The Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of service. The Remuneration Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any employee share option scheme or equity incentive plans in operation from time to time. The Remuneration Committee meets as and when necessary, but aims to meet at least twice each year. From 1 January 2020 until 9 February 2021 the Remuneration Committee was comprised of Lord Rose and Matthew Riley and was chaired by Mr Riley. Mr Riley resigned from the Board on 9 February 2021 and therefore from 9 February 2021 and currently, the Remuneration Committee is comprised of Lord Rose and David Till and is chaired by Lord Rose. More information about this Board Committee can be found in the Directors’ remuneration report on page 48. BOARD EFFECTIVENESS All Directors take part in a thorough induction process on joining the Board, tailored to the existing knowledge and experience of the Director concerned. The performance of the Board is fundamental to the Company’s success. The performance of the Board and its Committees, including individual members, is evaluated regularly by the Chairman, with the aim of improving their effectiveness. All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Chief Financial Officer. KEY MANAGEMENT The key management roles that have been identified by the Board are as follows: • Group Chief Executive Officer; • Chief Executive Officer, Time Out Market; and • Chief Financial Officer. INTERNAL CONTROLS The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However well the system is designed to manage risk, it cannot eliminate all risk, and therefore it provides reasonable, not absolute, assurance against material misstatement or loss. The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Group. The principal elements of the Group’s internal control system include: • close management of the day-to-day activities of the Group by the Executive Directors; • an organisational structure with defined levels of responsibility, which promotes entrepreneurial decision making and rapid implementation whilst minimising risks; • a comprehensive annual budgeting process, producing a detailed integrated profit and loss, balance sheet and cash flow, 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. The Group continues to review its system of internal control to ensure compliance with best practice, whilst also having regard to its size and the resources available. The Board considers that the introduction of an internal audit function is not appropriate at the current time, however an internal review is completed by internal senior members of the finance function in order to ensure accuracy in the financial reporting. The Group continues to refine its approach to business continuity and disaster recovery and further testing and risk assessments were carried out through 2020 and 2021 for both head office and overseas locations. The Group continues to mitigate risks by moving critical systems to the cloud where possible. The Group uses the services of a specialised third- party solution provider, currently working on refining business continuity and disaster recovery plans, to ensure these shall be effectively delivered if needed. 40 41 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Corporate governance report continued QCA code principles and disclosures The Group has an ongoing programme of individual meetings with institutional shareholders and analysts following the preliminary and half-year results presentations to the City. These meetings allow the Group Chief Executive Officer and the Chief Financial Officer to update shareholders on strategy and the Group’s performance. Additional meetings with institutional investors and/or analysts are arranged from time to time. All members of the Board receive copies of feedback reports from the City presentations and meetings, thus keeping them in touch with shareholder opinion. Shareholders are given the opportunity to ask questions and raise issues at the Annual General Meeting (“AGM”); this can be done formally during the meeting or informally with the Directors after it. The Annual General Meeting will be held on 13 December 2021 at 1st Floor, 172 Drury Lane, London, WC2B 5QR. The Notice of the Annual General Meeting accompanies this Annual Report and Accounts. Approved by the Board and signed on behalf of the Board by Anne Crompton Company Secretary THE QCA CODE The Company continues to observe the QCA Code (the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies, published by the Quoted Companies Alliance Code). In accordance with the requirements of the QCA Code, the Board continues to set out its corporate governance statement on the Group’s website, including clear signposting to the availability of corporate governance disclosures by the Group, which are also set out in the section following this one. IMPACTS AND RISKS OF BREXIT During the period 1 January 2020 to 30 June 2021 the impacts on the Group of the UK leaving the European Union were not material. The Group continues to consider the potential impacts on its business, now that the UK has left the European Union. The Group currently considers that key areas of risk are around staff, currency volatility and data privacy regulation. The Group will continue to monitor developments and to assess risks and to plan, in order to effectively manage any impacts on the business. RELATIONS WITH SHAREHOLDERS Copies of the Annual Report are sent to all shareholders. Copies of the annual and interim reports can be downloaded from the investors section on www.timeout.com. Other information for shareholders and interested parties is also provided on that website. Written or emailed enquiries are handled by the Group’s Investor Relations Director and/or the Company Secretary. Principal Disclosure Establish a strategy and business model which promotes long-term value for shareholders. The Group’s business model and strategy is set out on pages 12 to 15 of the Annual Report and Accounts for the period 1 January 2020 to 30 June 2021. The business model and strategy promote long-term value for our shareholders. Seek to understand and meet shareholder needs and expectations. Both the Chairman and Executive Director engage frequently with shareholders. There is an ongoing programme of individual meetings with institutional shareholders following the preliminary and half-year results presentations, at which the CEO and CFO update shareholders on strategy and the Group’s performance. Copies of the Annual Report and Accounts are sent to all shareholders and copies of the Annual and Interim reports can be downloaded from the investors section on www. timeout.com, where other information for investors and shareholders is also available. Shareholders have the opportunity to ask questions of the Board during each Annual General Meeting and to speak with Board members informally after the meeting. The Group has an Investor Relations Director, engaging with shareholders. Take into account wider stakeholder and social responsibilities and their implications for long-term success. The Group takes its impact on the environment seriously. Employees are required to use the organisation’s equipment and materials wisely and reduce wastage where possible. In local offices there are initiatives seeking to limit environmental impacts, such as a group planning and implementing practical local initiatives and delivering reminders to all, in order to reduce environmental impact by staff and the Company. Embed effective risk management, considering both opportunities and threats, throughout the organisation. Staff members engage with charities in cities where the Company has a presence, by volunteering their time and through fundraising activities. The Group has a whistleblowing policy in place and arrangements for employees to report any concerning activity, so that appropriate action can be taken. The Board and Group’s approach to risk is set out in the Audit Committee report on page 45 in the Annual Report and Accounts for the period 1 January 2020 to 30 June 2021 and Principal Risks and Uncertainties on pages 34 and 35. The Board has overall responsibility for the system of internal control and for reviewing its effectiveness in managing the risks we face. Such systems are designed to manage rather than eliminate risks and can provide only reasonable and not absolute assurance against material misstatement or loss. Each year, on behalf of the Board, the Audit Committee reviews the effectiveness of these systems. This is achieved primarily by considering the risks potentially affecting the Group and from discussions with the external auditor. The Audit Committee, on behalf of the Board, reviews the risk environment faced by the Group on a regular basis and how the Group manages and mitigates these risks. The key risks of the Group are summarised in the Annual Report and Accounts for the period 1 January 2020 to 30 June 2021 on pages 66 to 110. On the recommendation of the Audit Committee, the Board has determined that an internal audit function is not required due to the small size of the Group administrative function and the high level of Director review and authorisation of transactions. The Board will keep this matter under review as the Group develops. A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. In addition, the Group conducts regular re-forecasts. The Group’s results, as compared against budget and the latest forecast, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board. Maintain the board as a well- functioning, balanced team led by the chair. The Board meets at least six times a year. In addition to full Board meetings, there are regular discussions on various matters, including strategy, business updates and KPIs, between individual Board members and/or smaller group(s) from the Board. The Audit Committee and Remuneration Committee report to the Board. Each Director serves on the Board until the annual general meeting following his or her election or appointment. The Board is comprised of experienced individuals, with current skills and capabilities from a mix of global and local industries. Biographies for the Board Directors are on pages 38 and 39 of the Annual Report and Accounts for the period 1 January 2020 to 30 June 2021 and also on the Investor Relations area of www.timeout.com. 42 43 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements QCA code principles and disclosures continued Audit committee report Principal Disclosure Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities. The Board’s members, between them, bring current experience and skills from a variety of business sectors and territories across the world. The Board is comprised of a Non-Executive Chairman, one Executive Director and three Non-Executive Directors. For the purposes of the QCA Code, the Company considers that from the four Non-Executive Directors (being the Non-Executive Chairman and three other Non-Executive Directors) Lord Rose of Monewden is an independent Director and he has been CEO of publicly listed companies. Biographies for the Board Directors are on pages 38 and 39 of the Annual Report and Accounts for the period 1 January 2020 to 30 June 2021 and also on the Investor Relations area of www.timeout.com. Evaluate all elements of board performance based on clear and relevant objectives, seeking continuous improvement. The Board is relatively small and relatively recently formed. The Board has not at this time adopted a formal Board evaluation process/cycle. The Chairman regularly evaluates the Board, individual members and its committees, with the aim of improving their effectiveness. The Company considers this appropriate given the Company’s size and current stage of development. Promote a corporate culture that is based on sound ethical values and behaviours. Maintain governance structures and processes that are fit for purpose and support good decision making by the board. Communicate how the company is governed by maintaining a dialogue with shareholders and other relevant stakeholders. The Company has adopted the following policies: Anti-Bribery Policy; Anti-Fraud Policy; Business Ethics Policy; Code of Conduct; Communication Policy; Data Protection Policy; Employee Privacy Notice; IT Security Policy; Mental Health Policy; Risk Management and Identification Policy; Travel & Expense Policy; Whistleblowing Policy; so that all aspects of the Company are run in a robust and responsible way. The Company has adopted a share dealing code to ensure Directors and employees do not abuse, and do not place themselves under suspicion of abusing, inside information of which they are in possession, and to comply with its obligations under the Market Abuse Regulation, which applies to the Company by virtue of its shares being traded on AIM. Furthermore, the Company’s share dealing code is compliant with the AIM Rules for Companies published by the London Stock Exchange (as amended from time to time). The Company has a Human Resources team and resources available, including a Company HR Portal accessible by all, where a wide variety of resources can be accessed, including employee support services, all Company policies and an anonymous “suggestions box” with publicly posted responses. The Company encourages personal development, inter-departmental communication and team strategising and building through provision of training, department/team summits, and social events which are free to attend. The Group has established committees and policies, to ensure that: • it is led by an effective Board which is collectively responsible for the long-term success of the Group; • the Board and the committees have the appropriate balance of skills, experience, independence, and knowledge of the Group to enable them to discharge their respective duties and responsibilities effectively; • the Board established a formal and transparent arrangement for considering how it applies the corporate reporting, risk management, and internal control principles and for maintaining an appropriate relationship with the Group’s auditors; and • there is a dialogue with shareholders based on the mutual understanding of objectives. In compliance with UK best practice, the Board has established an Audit Committee and Remuneration Committee. There is an ongoing programme of meetings between Executive Directors with existing shareholders and also between Executive Directors with potential investors. The Annual Report and Accounts is sent to all shareholders and copies of both the Annual and Interim reports are available to the general public and can be downloaded from www.timeout.com. On the Investor Relations section of the website there is other information available for investors and shareholders, including on how the Company is governed and compliance with the QCA Code. Shareholders have the opportunity to ask questions of the Board during each Annual General Meeting and to speak with Board members informally after the meeting. Both the Chairman and Executive Directors engage frequently with shareholders, including via scheduled meetings following full-year and half-year results. The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported and reviewed. Read my biography on page 39 Lord Rose Of Monewden Chairman of the Audit Committee Its role includes monitoring the integrity of the financial statements (including the Annual Report and Accounts and interim accounts and results announcements), reviewing internal control and risk management systems, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by the external Auditors, and advising on the appointment of the external Auditors. ACTIVITIES FOR THE PERIOD The main activities for the period included: • review of the FY20/21 audit plan and audit engagement letter; • consideration of key audit matters and how they are addressed; • review of the interim financial results and Annual Report and Accounts; • consideration of the external audit report and management representation letter; • going concern review; • review of levels of financial processes and procedures; • meeting with the external Auditors without management present; • consideration of the external Auditors’ lead Partner rotation, and alternative external Auditors service providers; and • review of whistleblowing and anti-bribery arrangements. 44 45 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements COMMITTEE MEMBERS Lord Rose of Monewden (formerly a member and then Chair, from 9 February 2021) David Till (member, from 9 February 2021) Matthew Riley (Chair until 9 February 2021) MEETINGS IN THE PERIOD 4 Audit committee report continued COMPOSITION AND ROLE OF THE AUDIT COMMITTEE The Audit Committee’s members from 1 January 2020 until 9 February 2021 were Lord Rose of Monewden and Matthew Riley who was Chair of the Audit Committee, until his resignation on 9 February 2021. From 9 February 2021 and currently, the Audit Committee’s members were David Till and Lord Rose of Monewden who is Chair of the Audit Committee. From 1 January 2020 until his resignation on 31 July 2020, Adam Silver also attended Committee meetings in his role as Chief Financial Officer. From 5 November 2020 and currently, Neil Wood attended Committee meetings in his role as Chief Financial Officer. The Committee met four times in the period from 1 January 2020 until 30 June 2021 and aims to meet at least three times annually. Details on attendance for these meetings can be found in the Corporate Governance Report on page 40. The Board is satisfied that the members of the Committee during the period from 1 January 2020 until 30 June 2021 have appropriate, recent and relevant financial experience. Lord Rose and Mr Riley each have experience as Chief Executive Officers in major listed companies, ultimately responsible for finance functions, and Mr Till is a qualified chartered accountant, with a wealth of experience in finance including ultimate responsibility for finance functions. More information on Mr Riley, Lord Rose and Mr Till’s backgrounds can be found in the Directors’ biographies on pages 38 and 39. The main duties of the Audit Committee are set out in its Terms of Reference which are available on the Company’s website www.timeout.com and are also available on request from the Company Secretary. The main items of business to be considered by the Audit Committee include: • review of the Annual Report and Accounts; • consideration of the external audit report and management representation letter; • going concern review; • review of the audit plan and audit engagement letter; • review of the suitability of the external Auditors; • review of the risk management and internal control systems; • review of the interim results and dividend; • assessment of the need for an internal audit function; and • review of the regular whistleblowing reports. ROLE OF THE EXTERNAL AUDITORS The Audit Committee monitors the relationship with the external Auditors, PricewaterhouseCoopers LLP who were appointed in 2014, to ensure that auditor independence and objectivity are maintained. As part of its review the Committee monitors the provision of non- audit services by the external Auditors. The breakdown of fees between audit and non-audit services is provided in note 7 of the Group’s accounts. The non-audit fees relate to advice on the administration of the share option scheme. The Audit Committee also assesses the Auditors’ performance. Having reviewed the Auditors’ independence and performance, the Audit Committee has recommended that PricewaterhouseCoopers LLP be reappointed as the Company’s Auditors at the next Annual General Meeting. AUDIT PROCESS WHISTLEBLOWING The Group has in place a whistleblowing policy which sets out the formal process by which an employee of the Group may, in confidence, raise concerns about possible improprieties in financial reporting or other matters. Whistleblowing is a standing item on the Committee’s agenda and updates are provided at each meeting. During the year there were no incidents for consideration. Approved by the Board and signed on behalf of the Board by Lord Rose of Monewden Chairman of the Audit Committee The Auditors prepare an audit plan for their review of the full-year financial statements. The audit plan sets out the scope of the audit, areas to be targeted and the audit timetable. This plan is reviewed and agreed in advance by the Audit Committee. Following its review, the Auditors present their findings to the Committee for discussion. Areas of significant risk and other matters of audit relevance are regularly communicated. INTERNAL AUDIT At present, the Group does not have an internal audit function, and the Committee believes that management is able to derive assurance as to the adequacy and effectiveness of internal controls and risk management procedures without one. The Committee will continue to review this decision. RISK MANAGEMENT AND INTERNAL CONTROLS As described on page 41 of the Corporate Governance report, the Group has established a framework of risk management and internal control systems, policies and procedures. The Audit Committee is responsible for reviewing the risk management and internal control framework and ensuring that it operates effectively. During the year, the Committee has reviewed the framework and the Committee is satisfied that the internal control systems in place are currently operating effectively. 46 47 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Directors’ remuneration report The Group is not required to prepare a Directors’ remuneration report. The following disclosures are prepared on a voluntary basis. COMMITTEE MEMBERS Lord Rose of Monewden (formerly a member, then Chair, from 9 February 2021) David Till (member from 9 February 2021) Matthew Riley (Chair, until 9 February 2021) MEETINGS IN THE PERIOD 2 Lord Rose Of Monewden Chairman of the Remuneration Committee COMPOSITION AND ROLE The Remuneration Committee’s members during the period 1 January 2020 until 9 February 2021 were Lord Rose of Monewden and Matthew Riley who was Chair of the Committee. On 9 February 2021 Matthew Riley resigned from the Board and David Till joined the Remuneration Committee alongside Lord Rose who was Chair of the Remuneration Committee. The Committee operated under the Terms of Reference and was responsible for reviewing the performance of the Executive Directors and for making recommendations to the Board on matters relating to their remuneration and terms of service. The Committee was also responsible for making recommendations to the Board on proposals for the granting of share options. The Remuneration Committee met twice during the period 1 January 2020 to 30 June 2021. More information about the members of this Committee can be found on pages 38 and 39 in the Directors’ biographies. REMUNERATION POLICY The objective of the Group’s remuneration policy is to attract, motivate and retain high-quality individuals who will contribute fully to the success of the Group. To achieve this objective, the Group provides competitive salaries and benefits to all employees. Executive Directors’ remuneration is set to create an appropriate balance between both fixed and performance-related elements. Remuneration is reviewed each year in light of the Group’s business objectives. 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. No Director has any involvement in setting their own remuneration. Remuneration consists of the following elements: • Basic salary; • Performance-related annual bonus; • Share options; • Pensions; and • Benefits including insurance and allowances. SHARE OPTIONS The Company operates a Long Term Incentive Plan (“LTIP”) which is a discretionary share plan. The LTIP is designed to encourage continual improvement and to align the interests and objectives of senior management with those of shareholders in the medium term. More details of this scheme are in note 27 of the consolidated accounts. The Remuneration Committee supervises the operation of the LTIP and the grant of Awards to Executive Directors and the Board oversees the LTIP for employees. SERVICE CONTRACTS AND LETTERS OF APPOINTMENT EXECUTIVE DIRECTORS The service agreement of the Group Chief Executive Officer is terminable by the Company giving him 12 months’ notice in writing, or by the Group Chief Executive Officer giving the Company nine months’ notice in writing. The service agreement of the Chief Financial Officer is ordinarily terminable by either party giving the other six months’ notice in writing. Currently the Chief Financial Officer is serving in an interim capacity under a short-term consultancy contract terminable by either party giving the other written notice of one month. NON-EXECUTIVE DIRECTORS The Non-Executive Directors’ letters of appointment may be terminated by either party giving three months’ written notice. DIRECTORS’ REMUNERATION The following table summarises the actual total gross remuneration, for qualifying services, of the Directors who served during the period 1 January 2020 to 30 June 2021 and prior year. 1 JANUARY 2020 TO 30 JUNE 2021 (AUDITED) EXECUTIVE Julio Bruno1 Adam Silver (resigned 31 July 2020) NON-EXECUTIVE Peter Dubens Lord Rose of Monewden2 Alexander Collins Tony Elliott (deceased 17 July 2020) Matthew Riley (resigned 9 February 2021)3 David Till (appointed 1 October 2020) TOTAL Salary £’000 Benefits £’000 Pension £’000 Termination £’000 Share Options £’000 413 100 – 56 – 23 50 – 642 14 7 – – – 12 – – 33 41 6 – – – – – – – 182 – – – – – – 47 182 – – – – – – – – – Total £’000 468 295 – 56 – 35 50 – 904 1 2 Julio Bruno received £26,000 in cash in lieu of pension contributions. Lord Rose of Monewden receives £10,000 per annum in respect of his committee chair fees from February 2021. 3 Matthew Riley received £10,000 per annum in respect of his committee chair fees. 48 49 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Directors’ remuneration report continued DIRECTORS’ REMUNERATION CONTINUED YEAR ENDED 31 DECEMBER 2019 (AUDITED) EXECUTIVE Julio Bruno1 Adam Silver2 NON-EXECUTIVE Peter Dubens Lord Rose of Monewden3 Alexander Collins Tony Elliott Matthew Riley4 TOTAL Salary £’000 Benefits £’000 Pension £’000 Bonus £’000 Share Options £’000 300 200 – 35 – 35 45 615 7 6 – – – 18 – 31 28 10 – – – – – 300 160 – – – – – 205 – – – – – – 38 460 205 1,349 Total £’000 840 376 – 35 – 53 45 1 2 3 Julio Bruno received £28,000 in cash in lieu of pension contributions. Adam Silver received £10,000 in cash in lieu of pension contributions. In addition to the amounts disclosed above, Lord Rose of Monewden received a consultancy fee of £23,000 for services provided to Time Out Market. This consultancy agreement was discontinued in June 2019. 4 Matthew Riley receives £10,000 per annum in respect of his committee chair fees. DIRECTORS’ SHAREHOLDINGS The Directors, who served in the period 1 January 2020 to 30 June 2021 and who held an interest in the ordinary shares of the Company, were as follows: EXECUTIVE Julio Bruno Adam Silver NON-EXECUTIVE Peter Dubens Lord Rose of Monewden Alexander Collins Estate of Tony Elliott Matthew Riley David Till Shareholding at 30 June 2021 Shareholding at 31 December 2019 392,124 392,124 – – 4,945,022 2,650,302 – – – – 1,822,347 1,822,347 – 214,280 – – DIRECTORS’ INTERESTS Options granted to Directors in the period 1 January 2020 to 30 June 2021 and 2019, together with details of the share option schemes, are set out in note 27. In the period 1 January 2020 to 30 June 2021, Adam Silver exercised options over 133,333 ordinary shares on 19 January 2021. 16,666 options were awarded at nil cost on 13 April 2018, 16,667 options were awarded at nil cost on 13 April 2019, and 100,000 options were awarded at nil cost on 28 March 2019. Mr Silver sold all 133,333 of the ordinary shares exercised at an average price of 33p per share on the same day. Following this share option exercise, Mr Silver does not hold any shares in the Company. In the period 1 January 2020 to 30 June 2021, Julio Bruno did not exercise any options. At 30 June 2021, the total number of shares Mr Bruno holds in the Company was 392,124. In 2019, Julio Bruno exercised options over 200,000 ordinary shares on 25 April 2019. The options were awarded on 21 April 2017 and 13 April 2018 at nil cost. Mr Bruno continues to hold the shares. At 30 June 2021, the total number of shares Mr Bruno holds in the Company was 392,124. SHARE PRICE The market price of the Company’s ordinary shares at 30 June 2021 was 60p (31 December 2019: 119p) and the range during the year was 28p to 122p (2019: 68p to 135p). Approved by the Board and signed on behalf of the Board by: Lord Rose of Monewden Chairman of the Remuneration Committee 50 51 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Directors’ report The Directors present their report together with the audited consolidated financial statements for the period 1 January 2020 to 30 June 2021. The Corporate Governance report on pages 38 to 44 also forms part of the Directors’ report. GENERAL INFORMATION BRANCHES OUTSIDE THE UK The Company referenced in the Annual Report and Accounts is Time Out Group plc, a company registered in England and Wales and located at 1st Floor, 172 Drury Lane, London WC2B 5QR. The Group referenced in the Annual Report and Accounts includes the Company as well as the subsidiaries listed in note 15 of the financial statements. PRINCIPAL ACTIVITIES Time Out launched in London in 1968 with a magazine to help people discover the exciting new urban cultures that had started up all over the city. Today, the Group’s digital and physical presence comprises websites, mobile, magazines, live events and Time Out Market. Across these platforms Time Out distributes its curated content – written by professional journalists – around the best food, drink, culture, entertainment and travel across 327 cities in 58 countries. Time Out Market is a food and cultural market which brings the best of the city under one roof: its best chefs, drinks and cultural experiences – based on editorial curation. The first Time Out Market opened in Lisbon in 2014, followed by Miami, New York, Boston, Montreal and Chicago in 2019, and Dubai in 2021. A pipeline of further global locations is in development. REVIEW OF BUSINESS This Annual Report and Accounts has been prepared to provide shareholders with a fair and balanced review of the Group’s business and the outlook for the future development of the Group as well as the principal risks and uncertainties which could affect the Group’s performance. The table below identifies where to find specific information related to the business review: Content Section Key Performance Indicators (“KPIs”) Strategic section Business Review including Outlook Strategic section Principal Risks & Uncertainties Strategic section Corporate Governance Governance section Accounts and Note Disclosure Financial statements Pages 1, 16 16 34 40 66 The Group has subsidiaries in the UK, Portugal, Spain, Australia, Hong Kong, Singapore, Canada, Czech Republic and the United States of America. It also operates a branch in France. FUTURE DEVELOPMENTS A review of the Group’s outlook can be found in the Chief Executive’s Review on page 16. RESULT AND DIVIDENDS The Group has reported its audited accounts in accordance with International Financial Reporting Standards as adopted by the European Union. The Group’s results are set out in the Consolidated Income Statement on page 66. The Company has prepared the individual Company accounts in accordance with UK GAAP, including The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 101). The Group loss for the period after taxation was £70.5m (2019: £20.9m). The Directors do not recommend the payment of a dividend (2019: £nil). POST BALANCE SHEET EVENTS On 29 October 2021, Julio Bruno, Group Chief Executive stepped down with immediate effect in order to pursue other business interests. There were no further events since the end of the year. DIRECTORS The Directors of the Company who were in office during the period and up to the date of this report, together with their biographical details, are shown on pages 38 and 39. DIRECTORS’ INTERESTS The Directors’ interests in the Company’s shares and options over ordinary shares are shown in the Directors’ remuneration report on page 48. Up to 24 December 2020, Lord Rose participated in an equity incentive plan in Time Out Market Limited. Under the plan, Lord Rose subscribed for 3% of the equity in Time Out Market Limited, including direct subsidiaries, subject to provisions in respect of continued service. In the absence of an earlier exit event such as the disposal of Time Out Market Limited, the members of this plan could have exercised these vested awards within three months of the publication of Time Out Group plc’s audited accounts in 2021. The value of the awards would have been determined by reference to the 2020 adjusted EBITDA of Time Out Market. This equity incentive scheme and Lord Rose’s participation in it ceased on 24 December 2020. On 5 February 2021, Lord Rose was granted 2,000,000 share options at nil cost under the Group’s Long Term Incentive Plan (600,000 share options being subject to service, and 1,400,000 share options being subject to share price targets). Except for the amounts disclosed in the remuneration report, no Director has any beneficial interest in the share capital of any subsidiary or associate undertaking. DIRECTORS’ INDEMNITY AND LIABILITY INSURANCE The Company has purchased and maintained throughout the period 1 January 2020 to 30 June 2021 Directors’ and Officers’ liability insurance in respect of itself and its Directors. The Directors also have the benefit of the indemnity provision contained in the Company’s Articles of Association which represents a qualifying third-party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the financial period and at the date of approval of the financial statements. STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and the company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law, 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 for that period. In preparing the financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the financial statements; • make judgements and accounting estimates that are reasonable and prudent; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors of the ultimate parent Company are responsible for the maintenance and integrity of the ultimate parent Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. In the case of each Director in office at the date the Directors’ report is approved: • so far as the Director is aware, there is no relevant audit information of which the Group and Company’s Auditors are unaware; and • they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company’s Auditors are aware of that information. WEBSITE PUBLICATION The Directors are responsible for ensuring the Annual Report and Accounts are made available on a website and are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of the Annual Report and Accounts, 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 Annual Report and Accounts contained therein. POLITICAL DONATIONS The Company made no political donations during the period 1 January 2020 to 30 June 2021 (2019: £nil). FINANCIAL INSTRUMENTS AND RELATED MATTERS The financial risk management objectives and policies of the Group, including credit risk, interest rate risk and currency risk are provided in note 22 of the accounts. 52 53 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Directors’ report continued SHARE CAPITAL CONFLICTS OF INTEREST The Company’s share capital comprises one class of ordinary shares with a nominal value of £0.001 each. At 30 June 2021, 331,960,417 ordinary shares were in issue (2019: 148,486,076 ordinary shares). SUBSTANTIAL SHAREHOLDINGS In accordance with the Disclosure and Transparency Rules DTR 5, the Company as at 19 October 2021 (being the last practicable date before the publication of this report) has been notified of the following disclosable interests in its issued ordinary shares: Save as set out below, there are no actual or potential conflicts of interest between the duties of the Directors of the Company and the private interests or other duties that they may also have. Peter Dubens is a managing partner of and founder of Oakley Capital and has direct involvement in that company, its subsidiaries and associated companies. David Till is managing partner of and founder of Oakley Capital and has direct involvement in that company, its subsidiaries and associated companies. Shareholder Ordinary shares held % of ownership Alexander Collins is also a partner of Oakley Capital. Oakley Capital Private Equity Limited 80,461,015 Oakley Capital Investment Limited 67,436,385 Lombard Odier Asset Management 67,965,969 Richard Caring Invesco Perpetual Asset Management Landsdowne Partners 19,977,057 16,744,000 13,483,717 24.24% 20.31% 20.47% 6.02% 5.04% 4.06% Up to 24 December 2020, Lord Rose had a minority interest in Time Out Market Limited as described in the Directors’ Interests section of this report, and this interest ceased on 24 December 2020. Matthew Riley was a Director and significant shareholder in Daisy Group Holdings Limited. Time Out England Limited engages with a subsidiary company to provide information technology services. Further information is set out in note 28 of the accounts. Invesco Perpetual has an interest in Oakley Capital Investment Limited that pre-dates its ownership interest in the Company. RELATIONSHIPS WITH MAJOR SHAREHOLDERS AND ASSOCIATES On admission of its shares following the IPO in June 2016, the Company entered into a relationship agreement with TO (Bermuda) Limited, TONY (Bermuda) Limited, Oakley Capital Investment Limited, Oakley Capital Private Equity (“Oakley Entities”), the principal purpose of which is to ensure the Company is capable of carrying on, at all times, its business independently of them and their associates. Under the relationship agreement, providing that the Oakley Entities’ combined holdings are greater than 20%, they shall be entitled to appoint two Directors. EMPLOYEE INVOLVEMENT The Group is committed to being an equal opportunities employer and opposes all forms of discrimination. Applications from people with disabilities will be considered fairly and if existing employees become disabled, every effort is made to retain them within the workforce wherever reasonable and practicable. The Group also endeavours to provide equal opportunities in the training, promotion and general career development of disabled employees. The Group regularly provides employees with information of concern to them, which incorporates the Group’s current performance and its future aims and strategies. The Group has created an HR portal to ensure all employees have access to relevant policies and information. We also use it to encourage suggestions from employees in areas that are important to them. SHARE OPTION SCHEMES DIVERSITY Details of employee share option schemes are set out in note 27 of the accounts. GOING CONCERN The Directors’ assessment of going concern is set out on page 26 of the Strategic Report. RESEARCH AND DEVELOPMENT The Group undertakes activity which could be classified as research and development. This is further explained in note 2 of the accounts. The Group is committed to reflecting diversity in its workforce and aims to improve this balance going forward. As of 30 June 2021, the Group had the following employees: All employees Senior managers Board of Directors Male 190 17 5 Female 209 14 – Total 399 30 5 STREAMLINED ENERGY AND CARBON REPORTING We are aware of the impact our business has on the environment and it is our aim to ensure that we minimise any adverse impacts from our operations. Given the nature of its activities, the Group’s direct impact on the environment is relatively modest. Nonetheless, policies and standards are in place which aims to minimise this impact wherever possible. These include: The Notice of Annual General Meeting and ordinary and special resolutions to be put to the meeting are included at the end of this Annual Report and Accounts. OTHER POLICIES IN PLACE The Group has policies in place to mitigate risk surrounding fraud, bribery, modern slavery and whistleblowing amongst other things. It operates a Code of Conduct. • compliance with all relevant national legislation as a minimum standard • employment of practical energy efficiency and waste minimisation measures • use of technology to reduce the need for business travel Greenhouse gas emissions and kWh consumption data for the 18 month period for Time Out England Limited, the Group’s UK trading subsidiary, is set out below: Scope Scope 1 Scope 2 Activity Tonnes CO2e kWh Natural gas 26.24 129,291 Grid-supplied electricity 70.25 330,838 STATEMENT S172 The Directors are required by law to act in a way that promotes the success of the Company for the benefit of shareholders as a whole. In doing so, the Company must also give due consideration to the wider expectations of responsible business behaviour, having regard to the interests of its key stakeholders, as set out in the Strategic Report on page 29. The Board is conscious of its obligations under the Companies Act 2006, including s172 duties. DUTY TO PROMOTE THE SUCCESS OF THE COMPANY As required by Section 172 of the UK’s Companies Act, a director of a company must act in the way he/she considers, in good faith, would most likely promote the success of the company for the benefit of shareholders. In doing this, the director must have regard, amongst other matters, to the: Energy Intensity measure Tonnes CO2e per £m revenue 2.1 • likely consequences of any decisions in the long term; • interests of the company’s employees; We have used the UK Government GHG Conversion Factors for Company Reporting 2021 to calculate our total CO2 emissions figures. • need to foster the company’s business relationships with suppliers, customers, and others; • impact of the company’s operations on the community and HUMAN RIGHTS The Group communicates its ethical standards to employees through the Group’s Business Ethics Policy and our Code of Conduct, which includes bribery, competition, conflicts of interest, inside information, confidentiality, gifts and entertainment, discrimination, harassment and fair dealing with customers and suppliers. Information on the above as well as a statement of compliance with the Modern Slavery Act 2015 is contained on our website. In addition, the Group’s whistleblowing policy and procedures means every employee can have a voice and a means to raise concerns to the Group. environment; • company’s reputation for high standards of business conduct; and • need to act fairly as between members of the company. By understanding our key stakeholder groups, we can factor their concerns and needs into boardroom discussions. Board processes are reviewed and will be updated where necessary to ensure key stakeholders are considered in those discussions. The Directors’ report was approved by the Board on 29 October 2021 and signed by order of the Board. INDEPENDENT AUDITORS PricewaterhouseCoopers LLP (“PwC”) has expressed willingness to continue in office as Auditors and a resolution to reappoint them will be proposed at the Annual General Meeting. Anne Crompton Company Secretary ANNUAL GENERAL MEETING The Annual General Meeting will be held on 13 December 2021. The ordinary business comprises receipt of the Directors’ report and the audited financial statements for the period starting 1 January 2020 and ending 30 June 2021, the re-election of Directors, the reappointment of PwC as independent Auditors and authorisation of the Directors to determine the Auditors’ remuneration. 54 55 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Independent auditors’ report to the members of Time Out Group plc REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION In our opinion: • Time Out Group plc’s group financial statements and company financial statements (the “financial statements”) give a true and fair view of the state of the group’s and of the company’s affairs as at 30 June 2021 and of the group’s loss and the group’s cash flows for the 18 month period then ended; • the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; • the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report and Accounts 2021 (the “Annual Report”), which comprise: the consolidated and company statements of financial position as at 30 June 2021; the consolidated income statement and consolidated statement of comprehensive income, the consolidated statement of cash flows, and the consolidated and company statements of changes in equity for the period then ended; and the notes to the financial statements, which include a description of the significant accounting policies. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. INDEPENDENCE We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. MATERIAL UNCERTAINTY RELATED TO GOING CONCERN In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2 to the financial statements concerning the group’s and the company’s ability to continue as a going concern. Note 2 to the financial statements indicates the challenges posed by the Covid-19 pandemic and the impact this has on the group’s and the company’s ability to continue as a going concern in both a base case and a severe but plausible downside scenario. The group’s forecast cash flows contain assumptions over revenue, profitability and cash generation. These forecasts have been stress- tested for severe but plausible scenarios that could impact the group. Whilst the forecast cash flows show that the group and company have sufficient liquidity up to and including November 2022 when the group’s existing facility expiries, the group and company have forecasted that it has insufficient funding in place to settle their contractual obligations in full and thus the group would need to seek additional funding by raising new equity or debt within the going concern period in order to continue in operational existence. These conditions, along with the other matters explained in note 2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the group and the company were unable to continue as a going concern. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting included: • We obtained from management their latest assessments supporting their conclusions with respect to the going concern basis of preparation of the financial statements; • We evaluated the historical accuracy of the budgeting process to assess the reliability of the data; • We evaluated management’s base case forecast and downside scenarios, and challenged the adequacy and appropriateness of the underlying assumptions, including the impact on revenue and cash liquidity of an extended period of restrictions as a result of COVID-19; • We reviewed the disclosures made in respect of going concern included in the financial statements; and • We inspected the facility agreement and associated covenant waiver. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OUR AUDIT APPROACH OVERVIEW Audit scope • The group is organised into 29 individual reporting components and the group financial statements are a consolidation of these reporting components. • Of the 29 components we identified 7 which, in our view, required a full scope audit either due to their size or risk characteristics, 6 of these were audited by the group engagement team. • There is one significant component based overseas, Time Out Market Mercados da Capital LDA, which has been audited by PwC component auditors. • Audit procedures were performed in 1 further reporting unit, Time Out Market Limited due to their contributions to the financial statement line items in the group financial statements. • As a result of this scoping we obtained coverage over 77% of the consolidated revenues and 96% of the consolidated loss before tax. Key audit matters • Material uncertainty related to going concern (group and company) – see Material Uncertainty section above. • Valuation of impairment of goodwill and intangible assets (group). • Impact of COVID-19 (group and company). Materiality • Overall group materiality: £765,000 (2019: £765,000) based on 5% of loss before tax restricted to 2019 overall materiality. • Overall company materiality: £726,750 (2019: £726,750) based on 1% of total assets capped at 95% of Group materiality. • Performance materiality: £573,000 (group) and £545,000 (company). 56 57 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Key audit matter How our audit addressed the key audit matter Impact of COVID-19 (group and parent) COVID-19 was declared a global pandemic by the World Health Organisation on 11 March 2020 and the on-going response is having an unprecedented impact on the economy which was considered as part of the audit. As set out within the Annual Report, management has considered the impact of COVID-19 on the Group, alongside the actions that have been taken in response to the pandemic. As a result of the pandemic there is a heightened level of uncertainty in accounting estimates. This increased estimation uncertainty is most significant in relation to the assessment of impairment due to challenges in forecasting macroeconomic inputs. Management has also considered the potential impact of COVID-19 in undertaking their assessment of going concern. In addition, management’s ways of working, including the operation of key financial controls, have been impacted by COVID-19 as a result of employees working remotely and using technology-enabled working practices. There has also been an impact on our audit working practices as certain audit activities that have historically been undertaken in person, including inventory counts and component auditor oversight procedures, have had to be undertaken remotely. Our procedures in respect of impairment for both the Group and parent company are set out in the related key audit matter above. Our procedures and conclusions in respect of going concern are set out separately within the material uncertainty related to going concern section of this report. We considered whether changes to working practices brought about by COVID-19 had an adverse impact on the effectiveness of management’s business processes and IT controls. Our work did not identify any changes which had a significant impact on our audit approach other than needing to complete most of our work remotely. We increased the frequency and extent of our oversight over our component audit team, using video conferencing and remote working paper reviews to satisfy ourselves as to the appropriateness of audit work performed at local components. We considered the appropriateness of disclosures in the financial statements in relation to the impact of the pandemic on the relevant accounting estimates and deemed these to be appropriate. Independent auditors’ report to the members of Time Out Group plc continued The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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) identified by the auditors, including 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, and any comments we make on the results of our procedures thereon, 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. In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit. Revenue recognition of the markets, which was a key audit matter last year, is no longer included due to the fact that the risk was specific to the initial recording of revenue relating to the markets which opened within the year ended 31 December 2019. Otherwise, the key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter Valuation of impairment of goodwill and intangible assets (group) see notes 11 and 12 The group has £28.9 million (2019: £50.0 million) of goodwill. A total impairment charge of £20.0 million has been recorded by management in the current year in respect of goodwill within the group. The risk we have focused on is that these non-current assets could be overstated and a further impairment charge may be required. The determination of whether or not these non- current assets are impaired involves subjective judgements and estimates about the future results and cash flows of the business. On an annual basis, management calculates the amount of headroom between the value in use of the group’s Cash Generating Units (‘CGUs’) and their carrying value (higher of value in use and fair value less costs of disposal) to determine whether there is a potential impairment of the goodwill and relating to those CGUs. The value in use of the CGU with respect to goodwill within the group is dependent on a number of key assumptions which include • Forecast cash flows for the next five years; • A long-term (terminal) growth rate applied beyond the end of the five year forecast period; and • A discount rate applied to the model. Management consider there to be 2 CGUs in respect of goodwill within Time Out Group plc, we have therefore assessed each CGU separately to assess the future cash flows of the relevant entities which represent the CGU’s. See the accounting policies section within the financial statements for disclosure of the related accounting policies, judgements and estimates and Note 11 for detailed goodwill disclosures within the consolidated financial statements. We understood and evaluated management’s budgeting and forecasting process. Upon obtaining the group’s impairment analysis we tested the reasonableness of the key assumptions, including the following: • Verifying the mathematical accuracy of the impairment models and agreeing the carrying value of non-current assets being assessed for impairment to the balance sheet and no issues were noted on the conclusion of procedures performed; • We evaluated and assessed the reasonableness of the group’s future cash flow forecasts, and the process by which they were prepared, confirming that they were the forecasts approved by the board of directors, assessing the reasonableness of the budget, including the revenue, costs and EBITDA included in those budgets based on our understanding of the group and the past performance of the group; • We tested the directors’ key assumptions for long-term growth rates outside the budget period, by comparing them to forecast long-term growth rates using our valuation experts; • We tested the mathematical integrity of the forecasts and the models and reconciled them to the board approved budget; • We assessed the discount rate by utilising our valuation experts to assess the cost of capital for the group and comparable organisations; and • We performed our own sensitivities over the key drivers of the cash flow forecasts, being revenue, EBITDA, the long-term growth rate and the discount rate used. We have reviewed the financial statement disclosures made with respect to the sensitivity of the discount rate, cash flows and growth rates. We have also considered the impact of which COVID-19 has had on future cash flows for each CGU with further detail on procedures performed included within ‘Impact of COVID-19 (group and parent)’. 58 59 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Independent auditors’ report to the members of Time Out Group plc continued HOW WE TAILORED THE AUDIT SCOPE We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. The group is organised into 29 reporting components and the group financial statements are a consolidation of these reporting components. The reporting components vary in size and we identified 7 components, in the UK and Portugal, that required a full scope audit of their financial information due to either their size or risk characteristics, 6 of these were audited by the group engagement team. There is one significant component based overseas, Time Out Market Mercados da Capital LDA which has been audited by PwC component auditors. Our audit scope was determined by considering the significance of each component’s contribution to revenue, and individual financial statement line items, with specific consideration to obtaining sufficient coverage over significant risks. As a result of this scoping we obtained coverage over 77% of the consolidated revenues and 96% of the consolidated loss before tax. The group engagement team were significantly involved at all stages of the component audits by virtue of numerous communications throughout, including the issuance of detailed audit instructions and review and discussions of the audit approach and findings, in particular over our areas of focus. The group audit team met with local management and the component audit teams and attended their clearance meetings. In addition, we reviewed the component team reporting results and their supporting working papers, which together with the additional procedures performed at group level, gave us the evidence required for our opinion on the financial statements as a whole. Our audit procedures at the group level included the audit of the consolidation, goodwill and other intangible assets and taxes. The group engagement team also performed the audit of the company. MATERIALITY The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Financial statements – group Financial statements – company Overall materiality £765,000 (2019: £765,000). £726,750 (2019: £726,750). How we determined it 5% of loss before tax restricted to 2019 overall materiality Rationale for benchmark applied Based on the benchmarks used in the Annual Report, loss before tax is the primary measure used by the shareholders in assessing the performance of the group, and is a generally accepted auditing benchmark. We have chosen this as our benchmark as it is a key performance measure disclosed to users of the financial statements. This figure takes prominence in the Annual Report, as well as the communications to both the shareholders and the market. Based on this it is considered appropriate to use loss before tax figure for the year as an appropriate benchmark 1% of total assets capped at 95% of Group materiality We believe that total assets are considered to be appropriate as it is not a profit oriented company. The company is a holding company only and therefore total assets is deemed a generally accepted auditing benchmark. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between £600,000 and £726,750. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £573,000 for the group financial statements and £545,000 for the company financial statements. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with those charged with governance that we would report to them misstatements identified during our audit above £38,000 (group audit) (2019: £38,000) and £38,000 (company audit) (2019: £38,000) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. REPORTING ON OTHER INFORMATION The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. 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 an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of 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 this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. STRATEGIC REPORT AND DIRECTORS’ REPORT In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report for the period ended 30 June 2021 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ report. 60 61 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements USE OF THIS REPORT This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. OTHER REQUIRED REPORTING COMPANIES ACT 2006 EXCEPTION REPORTING Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of directors’ remuneration specified by law are not made; or • the company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Mark Jordan (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 29 October 2021 Independent auditors’ report to the members of Time Out Group plc continued RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS As explained more fully in the Statement of Directors’ Responsibilities in respect to the financial statements, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they 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 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 company or to cease operations, or have no realistic alternative but to do so. AUDITORS’ 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 auditors’ 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to international tax regulations, health and safety regulations, and the coronavirus job retention scheme, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate revenue and financial performance and management bias included within accounting judgements and estimates. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included: • Review of board minutes, discussions with management and the group’s legal function, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud; • Evaluation of management’s controls designed to prevent and detect fraudulent financial reporting; • Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations including to revenue; • Assessing management’s significant judgements and estimates in particular to those relating to the recoverability of goodwill and intangible assets and the judgements and estimates used in respect of the group’s COVID-19 assessment; and • Assessing and evaluating the correct application of COVID-19 government assistance programmes, including the UK government’s Coronavirus Job Retention Scheme. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non- compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. 62 63 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Financial Statements Consolidated income statement 66 Consolidated statement of comprehensive income 67 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 Notes to the financial statements Company information 68 69 70 71 72 73 110 Re-emerging and new locations. COVID-19 RESPONSE With all Time Out Markets open, the Group looks to the future with an exciting pipeline of Time Out Market openings around the world in Porto (2022), Abu Dhabi (2023), Prague (2025) and London, and many more conversations ongoing. With a renewed focus on Management Agreements over the owned and operated model, the success of Time Out Market Montreal and Dubai represent a winning model for Management Agreements moving forward. The future of Time Out Media looks positive as we emerge from Covid-19, with a focus on returning to profitability. Strategic changes include a renewed effort to focus on digital capabilities, tech advancements and maximising our digital presence, and maintaining and growing our unique audience. There is a limited return of print in the UK, Spain and Portugal in response to advertiser demand and where economically viable – reflecting the continued appeal of Time Out’s editorially curated content. The success of Time Out Market Montreal and Dubai represent a winning model for Management Agreements moving forward. 64 65 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Consolidated income statement for the 18 months ended 30 June 2021 Consolidated statement of comprehensive income for the 18 months ended 30 June 2021 Gross revenue Cost of sales Gross profit Administrative expenses Operating loss Finance income Finance costs Loss before income tax Income tax credit/(charge) Loss for the period Loss for the period attributable to: Owners of the parent Non-controlling interests Loss per share: Basic and diluted loss per share (p) Note 4 4 18 months ended 30 June 2021 £’000 Year ended 31 December 2019 £’000 44,897 (14,727) 30,170 (90,717) (60,547) 35 (10,544) (71,056) 507 (70,549) (66,770) (3,779) (70,549) 77,140 (30,713) 46,427 (59,786) (13,359) 690 (7,809) (20,478) (430) (20,908) (18,354) (2,554) (20,908) 10 (27.9) (13.3) All amounts relate to continuing operations. The notes on pages 73 to 110 are an integral part of these consolidated accounts. 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. Loss for the period Other comprehensive expense: Items that may be subsequently reclassified to the profit or loss: Currency translation differences Other comprehensive expense for the period, net of tax Total comprehensive expense for the period Total comprehensive expense for the period attributable to: Owners of the parent Non-controlling interests 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 (70,549) (20,908) (2,458) (2,458) (3,424) (3,424) (73,007) (24,332) (69,360) (3,647) (73,007) (21,648) (2,684) (24,332) 66 67 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Consolidated statement of financial position As at 30 June 2021 Company statement of financial position As at 30 June 2021 Assets Non-current assets Intangible assets – Goodwill Intangible assets – Other Property, plant and equipment Right-of-use assets Trade and other receivables – Non-current Current assets Inventories Trade and other receivables Cash and bank balances Total assets Liabilities Current liabilities Trade and other payables Borrowings Lease liabilities Non-current liabilities Trade and other payables Deferred tax liability Borrowings Lease liabilities Total liabilities Net assets Equity Called up share capital Share premium Translation reserve Capital redemption reserve Accumulated losses Total parent shareholders' equity Non-controlling interest Total equity Note 30 June 2021 £’000 31 December 2019 £’000 11 12 13 14 17 16 17 18 19 20 21 19 9 20 21 24 28,911 10,253 39,037 17,031 3,197 98,429 995 9,932 19,070 29,997 50,068 14,528 48,763 28,309 5,815 147,483 1,359 15,801 13,420 30,580 128,426 178,063 (11,286) (5,395) (985) (17,666) (1,158) (1,185) (18,122) (21,468) (41,933) (59,599) (21,413) (4,695) (2,636) (28,744) (1,271) (1,749) (38,616) (29,786) (71,422) (100,166) 68,827 77,897 332 185,563 3,057 1,105 (121,182) 68,875 (48) 68,827 148 123,290 5,647 1,105 (47,420) 82,770 (4,873) 77,897 Assets Non-current assets Investments Current assets Trade and other receivables Total assets Liabilities Current liabilities Trade and other payables Non-current liabilities Borrowings Total liabilities Net assets Equity Called up share capital Share premium Capital redemption reserve Retained earnings Total equity Note 15 17 19 20 30 June 2021 £’000 31 December 2019 £’000 77,496 77,496 87,042 87,042 121,232 121,232 137,783 137,783 198,728 224,825 – – – – – (171) (171) (23,242) (23,242) (23,413) 198,728 201,412 24 332 148 185,563 123,290 1,105 11,728 198,728 1,105 76,869 201,412 The Company loss for the 18 months ended 30 June 2021 was £66.6m (2019: loss of £4.9m). The financial statements on pages 66 to 110 were authorised for issue by the Board of Directors on 29 October 2021 and were signed on its behalf. Julio Bruno Chief Executive Officer Time Out Group plc Registered No: 07440171 The financial statements on pages 66 to 110 were authorised for issue by the Board of Directors on 29 October 2021 and were signed on its behalf. Julio Bruno Chief Executive Officer Time Out Group plc Registered No: 07440171 68 69 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Consolidated statement of changes in equity for the 18 months ended 30 June 2021 Company statement of changes in equity for the 18 months ended 30 June 2021 Called up share capital £’000 Note Share premium £’000 Translation reserve £’000 Capital redemption reserve £’000 Retained earnings/ (accumulated losses) £’000 Total parent shareholders' equity £’000 Non- controlling interest £’000 Total equity £’000 Balance at 1 January 2019 135 106,937 8,941 1,105 (30,169) 86,949 (2,134) 84,815 Changes in equity Loss for the year Other comprehensive expense Total comprehensive expense Share-based payments 27 Adjustment arising on change in non-controlling interest – – – – – – – – – – Issue of shares 13 16,353 – (3,294) (3,294) – – – – – – – – – (18,354) (18,354) (2,554) (20,908) – (3,294) (130) (3,424) (18,354) (21,648) (2,684) (24,332) 1,048 1,048 – 1,048 55 – 55 (55) – 16,366 – 16,366 Balance at 31 December 2019 148 123,290 5,647 1,105 (47,420) 82,770 (4,873) 77,897 Changes in equity Loss for the 18-month period Other comprehensive expense Total comprehensive expense Share-based payments 27 Adjustment arising on change in non-controlling interest Issue of shares Balance at 30 June 2021 – – – – – 184 332 – – – – – 62,273 – (2,590) (2,590) – – – – – – – – – (66,770) (66,770) (3,779) (70,549) – (2,590) 132 (2,458) (66,770) (69,360) (3,647) (73,007) 1,480 1,480 – 1,480 (8,472) (8,472) 8,472 – – 62,457 – 62,457 185,563 3,057 1,105 (121,182) 68,875 (48) 68,827 Balance at 1 January 2019 Changes in equity Loss for the year Total comprehensive expense Share-based payments Issue of shares Balance at 31 December 2019 Changes in equity Loss for the 18 month period Total comprehensive expense Share-based payments Issue of shares Balance at 30 June 2021 Note 27 27 Called up share capital £’000 Share premium £’000 Capital redemption reserve £’000 Retained earnings £’000 Total equity £’000 135 106,937 1,105 80,713 188,890 – – – 13 148 – – – – – – 16,353 123,290 – – – 184 332 62,273 185,563 – – – – (4,892) (4,892) 1,048 – (4,892) (4,892) 1,048 16,366 1,105 76,869 201,412 – – – – (66,621) (66,621) (66,621) (66,621) 1,480 – 1,480 62,457 1,105 11,728 198,728 70 71 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Consolidated statement of cash flows for the 18 months ended 30 June 2021 Notes to the financial statements Cash flows from operating activities Cash used in operations Interest paid Tax credits received Net cash used in operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Interest received Proceeds from the disposal of investments Net cash used in investing activities Cash flows from financing activities Costs relating to share issues Proceeds from share issue Advance of new borrowings Repayment of borrowings Repayment of lease liabilities Acquisition of minority interest Net cash from financing activities Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate change Cash and cash equivalents at end of period Note 25 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 (20,219) (5,430) (311) (25,960) (3,108) (2,145) 35 – (1,934) (980) (665) (3,579) (26,195) (1,895) 53 – 1. CORPORATE INFORMATION The consolidated financial statements of Time Out Group plc and its subsidiaries (the “Group”) for the 18 months ended 30 June 2021 were authorised for issue in accordance with a resolution of the Directors on 29 October 2021. Time Out Group plc (the “Company”) is a public limited company incorporated in England and Wales whose shares are publicly traded on the Alternative Investment Market. The registered office is located at 1st Floor, 172 Drury Lane, London WC2B 5QR. The Company has taken advantage of the exemption from preparing a cash flow statement under paragraph 8(g) of the disclosure exemptions for qualifying entities included in Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The Time Out Group plc consolidated financial statements for the 18 months ended 30 June 2021 contain a consolidated statement of cash flows. The Company is exempt under paragraph 8(k) of the disclosure exemptions included in FRS 101 for qualifying entities from disclosing related party transactions with entities that form part of the Time Out Group plc group of which Time Out Group plc is the ultimate parent undertaking. The Company’s financial statements are presented in pounds sterling (£), which is also the Company’s functional currency, and all values are rounded to the nearest thousand (£’000) except when otherwise indicated. The Company’s financial statements are individual entity financial statements. The principal activities of the Group are described in the Strategic Report that accompanies these financial statements. (5,218) (28,037) 2. ACCOUNTING POLICIES (1,835) 64,148 3,865 (22,500) (6,731) – 36,947 (757) 17,110 15,478 (5,897) (3,898) (1,248) 20,788 5,769 (10,828) 13,420 (119) 19,070 24,347 (99) 13,420 The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. ALTERNATIVE PERFORMANCE MEASURES Adjusted EBITDA is profit or loss before interest, taxation, depreciation, amortisation, share-based payments, share of associate’s loss and exceptional items. It also includes property lease costs which, under IFRS 16, is replaced by depreciation and interest charges. It is used by management and analysts to assess the business before one-off and non-cash items. A reconciliation of adjusted EBITDA to operating loss is presented in note 4. Net revenue is calculated as gross revenue less the concessionaires’ share of revenue and is further explained in note 4. Adjusted net debt is cash less borrowings and excludes any finance lease liability recognised under IFRS 16. BASIS OF PREPARATION The consolidated financial statements of Time Out Group plc have been prepared under the historical cost convention except for certain financial liabilities measured at fair value and in accordance with in accordance with the recognition and measurement criteria of International Accounting Standards (“IAS”) in conformity with the requirements of the Companies Act 2006. The Company financial statements were prepared in accordance with FRS 101 and the Companies Act 2006. The financial statements are prepared on a going concern basis under the historical cost convention except for certain financial liabilities measured at fair value. The accounting policies which follow in note 2 set out those policies which apply in preparing the financial statements for the 18 months ended 30 June 2021 and have been applied consistently to all periods presented. The Company has taken advantage of the disclosure exemptions under FRS 101 in respect of: a. IFRS 3 Business Combinations; b. IFRS 7 Financial Instruments: Disclosures; c. IFRS 13 Fair Value Measurement; d. Share-based payments; e. Intra-Group-related party transactions; f. Related party transactions; and g. IAS 7 Statement of cash flows. GOING CONCERN These financial statements have been prepared under the going concern basis of accounting as the Directors have a reasonable expectation that the Group and Company will continue in operational existence and be able to settle their liabilities as they fall due for the foreseeable future, being a period of not less than one year from the date of approval of these financial statements. In making this determination, the Directors have considered the financial position of the Group, projections of its future performance and the financing facilities that are in place. 72 73 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED GOING CONCERN CONTINUED The Covid-19 pandemic has had a significant adverse impact on the Group’s trading and any projection of future performance is inherently uncertain. The key drivers of uncertainty include the impact of the global vaccination programme on any further waves of the pandemic, the actions that may be taken by governments to respond (which could restrict our ability to operate our Markets business) and the response of our customers themselves to adverse changes in their economic circumstances (which will impact on revenues in both our Markets and Media businesses). We have taken, and will continue to take, steps to minimise our discretionary expenditure and therefore the principal driver of our future profitability and cash flows will be the revenues we are able to generate from our two businesses. We have also agreed with our lender, Incus Capital Finance, that the quarterly financial covenants that apply to their loan will be waived. Whilst the facility is due to expire in November 2022, the Directors are confident that the loan will be refinanced on acceptable terms. The Group has modelled two financial scenarios over the next 12 months that reflect the potential continued impact of the pandemic. The base case assumes a cautious year of recovery across both Market and Media. Market revenue is assumed to be lower than the pre-pandemic period due to reduced capacity and international travel restrictions during the next financial year. All Markets are only assumed to reach full capacity during the 2022/23 financial year. Media revenue is assumed to gradually increase over the year, with revenue levels excluding print, recovering to pre-pandemic levels in the 2022/23 financial year. The changing revenue mix is expected to yield higher margins while maintaining the reduced cost base achieved through strategic decisions taken during the period. This scenario does not include the impact of further protracted lockdown periods. The downside case assumes a further 10% reduction in revenue of each business against the base case during the next financial year, with revenue returning to budgeted levels in July 2022 and no corresponding reduction in budgeted costs over this period. In addition, this does not reduce the assumed capital expenditure over this period. The Directors consider the modelled reduction in revenue to be unlikely given the recent performance post restrictions being lifted and the markets reopening. However, with the continued uncertainty of new restrictions this scenario is considered severe but plausible. Under both scenarios there would be adequate cash available to the Group up until November 2022 when the balance of the Incus Capital Finance facility totalling £22.1 million will need to be refinanced and given the Group has insufficient funding in place to settle their contractual obligations in full, the Group would need to seek additional funding by raising new equity or by refinancing the debt within the going concern period in order to continue in operational existence. The Group intends to refinance the debt but as the refinancing has yet to be undertaken, the Directors have concluded that attention should be drawn to the fact that a material uncertainty exists which may cast significant doubt on the Group and Company’s ability to continue as a going concern. The global recovery from the impact of the pandemic is just beginning. However, the Directors are confident that as a result of the measures taken to optimise the cost base and following the completion of the equity fundraise in April 2021, the Group and Company will have sufficient funding to cover its operational needs for the foreseeable future and therefore consider it appropriate to prepare the financial statements under the going concern basis. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP During the 18 months ended 30 June 2021, the following standards and guidance were adopted by the Group and had no material impact on the financial statements: References to Conceptual Framework in IFRSs (amended); IAS 1 and IAS 8 (amended) – Definition of Material; IFRS 3 (amended) – Definition of a business; IFRS 16 (amended) – Covid-19 – Related Rent Concessions. BASIS OF CONSOLIDATION The Group financial statements consolidate the financial statements of Time Out Group plc and all its subsidiary undertakings drawn up to 30 June each year. As permitted by S408 of the Companies Act 2006, the income statement of the parent Company is not presented as part of these financial statements. The parent Company’s loss for the financial period was £66.6m (2019: £4.9m loss). The parent Company is primarily a holding company and had minimal cash flows during the period. It did not hold any cash or cash equivalents at the beginning or end of the period. SUBSIDIARIES Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. In the Group financial statements the acquisition method is adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the period are consolidated for the periods from or to the date on which control is passed. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and presented as exceptional items. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9, either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated on consolidation. When necessary, amounts reported by subsidiaries have been adjusted to conform to the Group’s accounting policies. NON-CONTROLLING INTERESTS Transactions with non-controlling interests that do not result in a loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non- controlling interests are also recorded in equity. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity and consist of the amount of those interests at the date of the original business combination plus their share of changes in equity since that date. SEGMENTAL REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the group of key management personnel, as identified in the Strategic Report, that makes strategic decisions. FOREIGN CURRENCIES The functional and presentational currency of the Group is pound sterling. Assets and liabilities of subsidiaries with a functional currency which is a foreign currency are translated into sterling at rates of exchange ruling at the end of the financial period and the result of foreign subsidiaries are translated at the average exchange rate for the period. All transactions denominated in foreign currency are translated at the rate of exchange ruling at the time of the transaction. All foreign exchange differences are taken to the income statement in the period in which they arise. At the statement of financial position date, monetary assets and liabilities denominated in foreign currencies are translated using the closing rate. Upon the translation of any subsidiary’s results for the year and financial position at any given year end, the foreign exchange differences which may arise are recognised directly in other comprehensive income as currency translation differences. 74 75 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED PROPERTY, PLANT AND EQUIPMENT The cost of property, plant and equipment includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost, less estimated residual value, of each asset over its expected useful life, as follows: Computer equipment – over three years on a straight-line basis Fixtures and fittings – over five years on a straight-line basis Leasehold improvements – over the lease term or useful life, whichever is shorter The Group operates in jurisdictions which have set useful lives for certain types of assets, and where different, local guidelines override the Group policies mentioned above. However, the Group confirms that this treatment does not materially change the accounts. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. GOODWILL Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over Time Out Group plc’s interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each cash-generating unit (“CGU”) that is expected to benefit from the synergies of the combination. Each CGU to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. When the ownership of an acquired company is less than 100%, the non-controlling interest is measured at either the proportion of the recognised net assets attributable to the non-controlling interest or at the fair value of the acquired company at the date of acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of identifiable net assets acquired is recorded as goodwill. INTANGIBLE ASSETS Trademarks and copyrights Trademark and copyright assets are amortised over a period of 15 years from the month of acquisition. Development costs Development costs comprising costs incurred relating to websites and other digital platform elements are written off over a period of two, three or four years, depending on the relevant project. The cost of internally generated and acquired technology is recognised as an intangible asset providing it satisfies all of the conditions set out in the research and development policy below. Assets are subsequently measured and amortised on a straight-line basis over their useful economic lives, from the month in which the expenditure is incurred. Service concession arrangements The concession granted by the Municipality of Lisbon to occupy and operate an area within the Mercado da Ribeira in Lisbon is accounted for as a service concession arrangement under IFRIC 12 “Service Concession Arrangements”. The present value of all payments to the Municipality are capitalised and recognised as a separate intangible asset and a corresponding obligation is recognised. The intangible asset is amortised on a straight-line basis over the life of the concession arrangement. Customer relationships and other intangible assets These intangible assets are comprised of customer and advertiser relationships and internally generated software related to the US business, acquired in 2014, reacquired trade-name rights and customer relationships relating to the Portuguese businesses acquired in 2015 and 2016 respectively, as well as those relating to the acquisition of Australia and Spain in 2018. The fair value of these assets was determined by agreement between the Directors and an independent valuation consultant, and was conducted in order to comply with IAS 3, “Business Combinations”. These assets are amortised over five years (internally generated software and customer relationships), 15 years (advertiser relationships), or two years (reacquired trade-name rights). RESEARCH AND DEVELOPMENT Expenditure on the research phase of an internal project is recognised as an expense in the period in which it is incurred. Development costs incurred on specific projects are capitalised when all of the following conditions are satisfied: • completion of the asset is technically feasible so that it will be available for use or sale; • the Group intends to complete the asset and use or sell it; • the Group has the ability to use or sell the asset and it will generate probable future economic benefits; • there are adequate technical, financial and other resources to complete the development and to use or sell the asset; and • the expenditure attributable to the asset during its development can be measured reliably. Development costs not meeting the criteria for capitalisation are expensed as incurred. The cost of an internally generated asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee (other than Director) costs incurred along with third-party costs. IMPAIRMENT OF NON-FINANCIAL ASSETS Non-financial assets that are not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may 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). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. GOVERNMENT GRANTS Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and that the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants, and they are credited to the income statement on a straight-line basis over the expected lives of the related assets. During the period, the Group has utilised the Coronavirus Job Retention Scheme, in which the Government reimbursed 80% of the wages of certain employees who were asked to stop working (“furloughed”) during Covid-19, but who were retained as employees. These grants have been credited against Staff Costs (note 5) FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. FINANCIAL ASSETS Classification of financial assets The Group classifies its financial assets in the following categories: at fair value through profit or loss; loans and receivables; and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current. 76 77 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED Loans and receivables financial assets Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise of “trade and other receivables” and “cash and cash equivalents” in the balance sheet. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Foreign exchange gains and losses The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. Specifically: • for financial assets measured at amortised cost that are not part of a designated hedging relationship, exchange differences are recognised in profit or loss in the “other gains and losses” line item; • for debt instruments measured at FVTOCI that are not part of a designated hedging relationship, exchange differences on the amortised cost of the debt instrument are recognised in profit or loss in the “other gains and losses” line item. Other exchange differences are recognised in other comprehensive income in the investments revaluation reserve; • for financial assets measured at FVTPL that are not part of a designated hedging relationship, exchange differences are recognised in profit or loss in the “other gains and losses” line item; and • for equity instruments measured at FVTOCI, exchange differences are recognised in other comprehensive income in the investments revaluation reserve. Impairment of financial assets The Group recognises a loss allowance for expected credit losses (“ECL”) on investments in financial assets that are measured at amortised cost or at FVTOCI, trade receivables and other receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL for trade receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is: (i) contingent consideration of an acquirer in a business combination; (ii) held for trading; or (iii) it is designated as at FVTPL. Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss to the extent that they are not part of a designated hedging relationship. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in profit or loss. However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained earnings upon derecognition of the financial liability. Financial liabilities measured subsequently at amortised cost Financial liabilities that are not: (i) contingent consideration of an acquirer in a business combination; (ii) held for trading; or (iii) designated as at FVTPL, are measured subsequently at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability. Foreign exchange gains and losses For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments. These foreign exchange gains and losses are recognised in the profit or loss for financial liabilities that are not part of a designated hedging relationship. For those which are designated as a hedging instrument for a hedge of foreign currency risk foreign exchange gains and losses are recognised in other comprehensive income and accumulated in a separate component of equity. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss for financial liabilities that are not part of a designated hedging relationship. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. FINANCIAL LIABILITIES AND EQUITY CLASSIFICATION AS DEBT OR EQUITY INVESTMENTS Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. FINANCIAL LIABILITIES Investments held as fixed assets are stated at cost less provision for impairment. The Company assesses these investments for impairment wherever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the recoverable amount is less than the value of the investment, the investment is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account. INVENTORIES Inventories are valued at the lower of cost and net realisable value, after making due allowance for obsolete items. Inventories are comprised of raw materials and goods held for resale. Cost is determined on a first-in, first-out (“FIFO”) method. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL. TRADE RECEIVABLES Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. 78 79 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED CASH AND BANK BALANCES Cash and bank balances comprises cash and cash equivalents, being cash at bank and in hand and short-term deposits with a maturity of three months or less, and monies held in restricted accounts and deposits which represent cash held by the Group in accounts with conditions that restrict the use of these monies by the Group and, as such, does not meet the definition of cash and cash equivalents. SHARE CAPITAL Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally, the Group is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference is the deferred tax liability not recognised. Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is no intention to settle the balances on a net basis. Ordinary shares are classified as equity, only to the extent that they do not meet the definition of a financial liability. Incremental costs directly attributable to the issue of new ordinary shares of options are shown in equity as a deduction, net of tax, from the proceeds. Tax grants related to research and development expenditure are recognised under IAS 12 against expenditure and are recognised when reasonably certain estimates can be made. TRADE PAYABLES EMPLOYEE BENEFIT COSTS Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. BORROWINGS All interest-bearing loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre- payment for liquidity services and amortised over the period to which it relates. The Group contributes to certain employees’ personal pension plans on a defined contribution basis. A defined contribution plan is a pension plan under which the Group and employee pay fixed contributions, on a mandatory, contractual or voluntary basis depending on the location, to a third-party financial provider. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense in the income statement when due. SHARE-BASED PAYMENTS The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. Preference shares that are mandatorily redeemable on a specific date are classified as liabilities. The dividends on these preference shares are recognised in the income statement as an interest expense. When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium. BORROWING COSTS General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. TAXATION The charge for taxation is based on profits for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and accounting purposes. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Current and deferred tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, respectively. The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts. The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction. PROVISIONS Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provision due to the passage of time is recognised as an interest expense. 80 81 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED REVENUE RECOGNITION Revenue, which is stated net of sales tax, represents the amounts derived from the sale of goods and services which fall within the Group’s ordinary activities. • Advertising revenue is recognised at the time the advertisement is published. • Subscription and Premium Profiles revenue is recognised evenly over the length of each subscription. • Circulation revenue is recognised at the time of sale. Provision is made for returns of distributor returns. • Ticket revenues for Time Out events are recognised in the month of the event. Tickets for Time Out offers and commissions for sales of tickets to external events and experiences are recognised at the point of sale. • Licence/royalty revenue is recognised over the contract period in accordance with the substance of the underlying agreement. Where these revenues are uncertain, they are recognised only on receipt. • Market-related revenue is predominantly turnover-related rent from restaurants in the markets and is recognised as the turnover is earned by the sub-letting restaurants. INTEREST INCOME AND EXPENSES Interest income and expenses are recognised using the effective interest method. LEASES The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases and leases of low-value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: • Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable; • Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • The amount expected to be payable by the lessee under residual value guarantees; • The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and • Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: • The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). • A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line “Other expenses” in profit or loss. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. EXCEPTIONAL ITEMS Exceptional items are disclosed separately in the financial statements where, given their nature or size, it is necessary to do so to provide further understanding of the financial performance of the Group. Exceptional items mainly relate to costs associated with a material restructuring (including termination payments and associated legal fees), costs relating to acquisitions, including legal and consultancy fees and the revaluation of minority interests. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. The key assumptions and judgements concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions, estimates and judgements on parameters available when the consolidated statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. a) Impairment of goodwill and intangibles The Group tests annually whether goodwill has suffered any impairment i.e. when the carrying value of a CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value-in-use calculation is based on a discounted cash flow model, where appropriate. The cash flows are derived from the business plan for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash-generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the long-term growth rate used. The estimation uncertainty exists here due to a number of estimation factors applied to any model used. b) Capitalisation of development costs Careful judgement by the Directors is applied when deciding whether the recognition requirements for capitalised development costs have been met under IAS 38 “Intangible Assets”. Before capitalisation commences on a specific project, a business plan is prepared and approved in order to ascertain that the project meets all criteria of the standard as well as to determine the asset’s useful life. Judgements and assumptions are made using all information known at the end of the reporting period. 82 83 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 2. ACCOUNTING POLICIES CONTINUED CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS CONTINUED c) Deferred tax The Group has £37.4m of tax losses available to offset future tax liabilities. The Group makes a judgement as to the recognition of a deferred tax asset in relation to these losses based on the expected medium-term profitability. The Group has historically been in a taxable loss position. However, with the roll-out of the Time Out Market locations, the short to medium-term profitability is reviewed at each reporting period to assess the potential recognition of a deferred tax asset. d) Capitalisation of pre-opening expenditure When investing in the expansion of new Time Out Market sites, the Group makes a judgement as to when the new site has passed feasibility and reached development stage. During feasibility, all costs associated with the new site are expensed. When a site reaches development stage, which is normally determined following the agreement of Heads of Terms for a new lease, applicable costs incurred are capitalised as an item of property, plant and equipment. Impairment reviews are performed on the pre-opening expenditure balances at least every six months. e) Impact of Covid-19 The Covid-19 pandemic has had a significant adverse impact on the Group’s trading and whilst any projection of future performance is inherently uncertain, some of the structural changes we have made to the cost base will deliver sustained benefits. Further detail is included in the Going Concern discussion on page 73. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED The following new standards and amendments to standards and interpretations are effective for accounting periods beginning after 1 January 2021 and as such have not been adopted in these financial statements. IFRS 17 Insurance Contracts IFRS 10 and IAS 28 (amended) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture IFRS 3 (amended) IAS 1 (amended) IAS 16 (amended) Reference to the Conceptual Framework Classification of Liabilities as Current or Non-current Property, Plant and Equipment: Proceeds Before Intended Use The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods. 3. EXCHANGE RATES The significant exchange rates to UK sterling for the Group are as follows: US dollar Euro Hong Kong dollar Singaporean dollar Australian dollar Canadian dollar 30 June 2021 Closing rate 18 months ended 30 June 2021 Average rate 31 December 2019 Closing rate 1.38 1.16 10.75 1.86 1.84 1.71 1.32 1.14 10.23 1.80 1.85 1.73 1.32 1.18 10.27 1.77 1.88 1.72 12 months ended 31 December 2019 Average rate 1.27 1.14 9.99 1.74 1.83 1.69 4. SEGMENTAL INFORMATION In accordance with IFRS 8, the Group’s operating segments are based on the figures reviewed by the Board, which represents the chief operating decision-maker. The Group comprises two operating segments: • Time Out Market – this includes Time Out’s share of concessionaires’ sales, revenue from Time Out operated bars and other revenue which includes retail, events and sponsorship. • Time Out Media – this includes the sale of digital and print advertising, local marketing solutions, live events tickets and sponsorship, commissions generated by e-commerce transactions, and fees from our franchise partners. 18 MONTHS ENDED 30 JUNE 2021 Gross revenue Concessionaire shares Net revenue Gross profit Administrative expenses Operating loss Operating loss Amortisation of intangible assets Depreciation of property, plant and equipment Depreciation of right-of-use assets EBITDA Property lease costs Share-based payments Exceptional items Loss on disposal of fixed assets Adjusted EBITDA loss Finance income Finance costs Share of associate's loss and fair value gain Loss before income tax Income tax credit Loss for the 18 month period Time Out Market £’000 Time Out Media £’000 Corporate costs £’000 19,327 25,570 (7,094) – 12,233 25,570 10,272 19,898 – – – – Total £’000 44,897 (7,094) 37,803 30,170 (32,821) (55,909) (1,987) (90,717) (22,549) (36,011) (1,987) (60,547) (22,549) (36,011) (1,987) (60,547) 1,767 10,038 3,548 (7,196) (6,108) – 4,401 411 1,404 – – – 6,168 10,449 4,952 (29,795) (1,987) (38,978) (1,401) 1,480 – – (7,509) 1,480 (1,257) 20,786 365 19,894 35 1 – 36 (14,526) (8,929) (1,622) (25,077) 35 (10,544) – (71,056) 507 (70,549) 84 85 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 4. SEGMENTAL INFORMATION CONTINUED 12 MONTHS ENDED 31 DECEMBER 2019 Gross revenue Concessionaire shares Net revenue Gross profit Administrative expenses Operating loss Operating loss Amortisation of intangible assets Depreciation of property, plant and equipment Depreciation of right-of-use assets EBITDA Property lease costs Share-based payments Exceptional items Adjusted EBITDA loss Finance income Finance costs Loss before income tax Income tax charge Loss for the year Revenue is analysed geographically by origin as follows: Europe Americas Rest of World Time Out Market £’000 Time Out Media £’000 Corporate costs £’000 37,086 40,054 (13,857) – 23,229 40,054 19,580 26,847 – – – – Total £’000 77,140 (13,857) 63,283 46,427 (23,859) (34,041) (1,886) (59,786) (4,279) (4,279) 825 3,308 1,792 1,646 (2,232) – (28) (7,194) (1,886) (13,359) (7,194) 3,841 367 1,158 (1,828) (1,729) 1,048 306 (1,886) (13,359) – – – (1,886) – – – 4,666 3,675 2,950 (2,068) (3,961) 1,048 278 (614) (2,203) (1,886) (4,703) 690 (7,809) (20,478) (430) (20,908) 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 20,097 19,870 4,930 44,897 36,699 36,375 4,066 77,140 The Group earns its revenues by selling both goods and services. These can be analysed as follows: Advertising sales E-commerce Franchising Time Out Media Owned operations Management fees Time Out Market 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 21,332 3,169 1,069 25,570 17,206 2,121 19,327 44,897 34,967 3,932 1,155 40,054 36,038 1,048 37,086 77,140 There are no revenues from any single customer that exceed 10% of the Group’s revenues. The Group has applied the European Securities and Markets Authority (“ESMA”) “Guidelines on Alternative Performance Measures” in these 18 month period results. In the context of these results, an alternative performance measure (“APM”) is a financial measure of historical or future financial performance, position or cash flows of the Group which is not a measure defined or specified in IFRS. The reconciliation of adjusted EBITDA loss to operating loss is contained within the segmental reporting note above. Gross revenue represents the total value of all food, beverage and retail sales transactions in relation to the North American owned and operated markets, the Group’s share of sales transactions in relation to Time Out Market Lisbon and any management agreement fees. Net revenue is calculated as gross revenue less the concessionaires’ share of revenue. IFRS 16 “Leases” materially benefitted EBITDA in the period as property lease costs of £7.5m (2019: £4.0m) are no longer included within administrative expenses and are replaced by additional depreciation costs on right-of-use assets of £4.5m (2019: £3.0m) and interest costs of £4.9m (2019: £3.0m). Adjusted EBITDA is presented including the property lease costs to aid understanding of underlying performance. 86 87 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 5. STAFF COSTS GROUP Wages and salaries Social security costs Other pension costs Share-based payments 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 22,945 3,297 647 1,480 28,369 22,075 3,249 498 1,046 26,868 6. EXCEPTIONAL ITEMS Costs/(income) are analysed as follows: Restructuring costs Time Out Market Waterloo exit costs Property lease exit costs Fundraising costs Write-off of deferred financing costs Impairment of goodwill Included in the above are amounts credited to the related costs for grants received under the Coronavirus Job Retention Scheme of £0.7m (2019: £nil). The average monthly number of employees, including Executive Directors, during the period was as follows: Gain on derecognition of right-of-use assets and related lease liabilities Revaluation of minority interest 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 1,224 306 696 163 96 54 20,000 (2,339) – 19,894 – – – – – – (28) 278 Sales and Marketing Editorial and Production Product Development Administration 18 months ended 30 June 2021 12 months ended 31 December 2019 116 111 26 140 393 146 125 33 178 482 The remuneration of the Executive Directors and Officers who are the key management personnel of the Group, is set out below in aggregate for each of the applicable categories specified in IAS 24 “Related Party Disclosures”. Key management personnel is defined as the Group Chief Executive Officer, the Chief Executive Officer, Time Out Market, and the Chief Financial Officer. Further information about the remuneration of individual Executive Directors is provided in the remuneration report on page 48. The restructuring costs in the period relate to redundancy costs from the Group’s cost management exercises as part of the response to Covid-19 (2019: £0.3m). In March 2021 it was decided not to proceed with the development of Time Out Market Waterloo due to the impact of the Covid-19 pandemic. The total capitalised costs related to the development of this market have been written off. In April 2021, following a capital fundraise, the balance of the Oakley Capital Investments Limited loan note balance was repaid in full. The related unamortised deferred financing costs were written off. The gain on derecognition of lease assets and liabilities arose on the early exit of the Time Out Media property lease in New York and an amendment to the Time Out Market Miami lease. See note 11 Intangible Assets – Goodwill regarding the impairment of goodwill. 7. OPERATING COSTS Short-term employee benefits Post-employment benefits Termination benefits Share-based payments Information regarding the highest paid Director is below: Short-term employee benefits Post-employment benefits Share-based payments 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 885 82 182 – 1,149 1,429 63 – 205 1,697 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 427 41 – 468 607 28 205 840 Concessionaire share of revenue Cost of inventories recognised as cost of sales Staff costs Depreciation of property, plant and machinery Depreciation of right-of-use asset Amortisation of intangible assets Impairment of goodwill Operating lease rentals – land and buildings Loss/(gain) on foreign exchange Other expenses Analysed as: Charged to cost of sales Operating expenses Staff costs capitalised 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 7,094 2,315 28,369 10,449 4,497 6,168 20,000 693 25 25,834 105,444 14,727 92,644 107,371 (1,927) 105,444 13,857 4,748 26,868 3,675 2,950 4,666 – 496 (48) 33,287 90,499 30,713 61,572 92,285 (1,786) 90,499 88 89 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 7. OPERATING COSTS CONTINUED An analysis of the fees paid to the Group’s auditors is provided below: Fees payable to the Company's auditors for the audit of the consolidated and parent Company financial statements Fees payable to the Company's auditors for the audit of the Company's subsidiaries Fees payable to the Company's auditors for audit-related assurance services Fees payable to the Company's auditors for non-audit services: – Tax advisory work – Other services 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 338 26 364 – – 20 384 176 70 246 – – 20 266 Audit fees of the Group and Company are borne by Time Out England Limited, a subsidiary company. Current period fees include £50,000 billed in respect of the 2019 audit. 8. FINANCE INCOME AND COSTS FINANCE INCOME Bank interest receivable Foreign exchange gain on financing items FINANCE COSTS Interest on loan stock and loan notes Interest on sponsorship loans Interest on bank loans Interest on finance leases Amortisation of deferred financing costs Interest on line of credit Foreign exchange loss on financing items Other 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 35 – 35 53 637 690 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 4,819 157 23 4,884 371 – 264 26 2,444 96 1,951 3,032 257 23 – 6 10,544 7,809 9. TAXATION ANALYSIS OF INCOME TAX Current tax Current tax charge Deferred tax Deferred tax credit 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 59 (566) (507) 878 (448) 430 FACTORS AFFECTING THE TAX EXPENSE The tax assessed for the period is higher (2019: higher) than the standard rate of corporation tax in the UK. The difference is explained below: Loss on ordinary activities before income tax 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 (71,056) (20,478) Loss on ordinary activities multiplied by the domestic tax rates applicable to profits in the respective countries (13,802) (4,202) Effects of: Expenses not deductible for tax purposes Income not taxable Unrecognised tax losses in the year Other tax adjustments, reliefs and transfers Utilisation of tax losses Deferred tax movements Total tax (income)/expense 5,657 (1,852) 9,679 408 (31) (566) (507) 1,232 (1,060) 4,702 206 – (448) 430 Potential deferred tax assets of £37.4m (2019: £27.8m) relating to timing differences on property, plant and equipment, short-term timing differences and losses carried forward have not been recognised as the Directors take an approach not to recognise any deferred tax asset until such time as there is greater visibility of profitability in the medium term. The Group has deferred tax liabilities relating to the acquired intangible assets as follows: Carrying value at beginning of year Change in rate Income statement credit Foreign exchange 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 1,749 – (566) 2 1,185 2,357 – (448) (160) 1,749 90 91 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 10. LOSS PER SHARE Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted average number of shares during the period. For diluted loss per share, the weighted average number of shares in issue is adjusted to assume conversion for all dilutive potential shares. All potential ordinary shares including options and deferred shares are anti-dilutive as they would decrease the loss per share, and are therefore not considered, diluted loss per share is equal to basic loss per share. Weighted average number of ordinary shares for the purpose of basic and diluted loss per share 239,394,965 137,989,108 18 months ended 30 June 2021 Number 12 months ended 31 December 2019 Number Loss from continuing operations for the purpose of loss per share Basic and diluted loss per share 11. INTANGIBLE ASSETS – GOODWILL GROUP Cost At 1 January 2020/2019 Impairment Exchange differences At 30 June 2021/31 December 2019 The carrying value of the goodwill is analysed by business segment as follows: Cost Time Out Media Time Out Market £’000 £’000 (66,770) (18,354) Pence (27.9) Pence (13.3) 30 June 2021 £’000 50,068 (20,000) (1,157) 28,911 30 June 2021 £’000 21,033 7,878 28,911 31 December 2019 £’000 51,703 – (1,635) 50,068 31 December 2019 £’000 42,272 7,796 50,068 Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquired. Goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”) that is expected to benefit from the synergies of the combination. This represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. The recoverable amount of each CGU has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on a detailed bottom-up budget for the initial 12-month period. A further four years are forecast using relevant growth rates and CGU-specific operation and financial assumptions. Cash flows beyond the five-year period are extrapolated into perpetuity using an estimated long-term growth rate of 2% (2019: 2%). The cash flows are then discounted using a weighted average cost of capital of 10% (2019: 10%). An impairment of £20.0m (2019: £nil) arose in the Media CGU following the significant and adverse impact of Covid-19 on the activities of the CGU and a strategic decision to discontinue print operations in most territories. If the long-term growth rate was reduced to 1% the Group would have had to recognise an impairment of £22.6m, and if the pre-tax discount rate applied to the cash flow projects for the Media CGU was 1% higher than the current estimate of 10%, the Group would have had to recognise an impairment of £24.7m. The Company has no goodwill (2019: £nil). 12. INTANGIBLE ASSETS – OTHER GROUP Cost At 1 January 2019 Reclassifications Additions Disposals Exchange differences At 31 December 2019 Additions Disposals Exchange differences At 30 June 2021 Accumulated amortisation At 1 January 2019 Charge for the year Reclassification Exchange differences At 31 December 2019 Charge for the period Exchange differences At 30 June 2021 Net book value At 30 June 2021 Trademarks and copyright £’000 Development costs £’000 Service concession arrangements £’000 Customer relationships £’000 Other intangible assets £’000 – 34 – (142) 5,464 44 – (191) 5,317 1,629 356 – (50) 1,935 523 (86) 5,572 10,155 1,390 – 1,829 – (9) 11,975 2,086 – (12) – – – (86) 1,304 – – 16 4,749 202 – – (257) 4,694 – – 56 9,031 (202) 32 18 (216) 8,663 15 (2) (288) 8,388 14,049 1,320 4,750 5,976 2,386 – (10) 8,352 3,232 (12) 229 94 – (27) 296 142 2 440 2,857 2,471 844 (806) (93) 2,802 1,191 57 4,050 986 806 (76) 4,187 1,080 (130) 5,137 2,372 11,572 Total £’000 30,897 – 1,895 18 (710) 32,100 2,145 (2) (419) 33,824 13,162 4,666 – (256) 17,572 6,168 (169) 23,571 2,945 2,477 880 700 3,251 10,253 At 31 December 2019 3,529 3,623 1,008 1,892 4,476 14,528 At 1 January 2019 3,943 4,179 1,161 1,892 6,560 17,735 The Company has no intangible assets (2019: £nil). 92 93 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 13. PROPERTY, PLANT AND EQUIPMENT GROUP Fixtures and fittings £’000 Computer equipment £’000 Leasehold improvements £’000 Total £’000 Cost At 1 January 2019 Acquisitions Additions Disposals Exchange differences At 31 December 2019 Acquisitions Additions Disposals Exchange differences At 30 June 2021 Accumulated depreciation At 1 January 2019 Charge for the year Eliminated on disposal Exchange differences At 31 December 2019 Charge for the period Eliminated on disposal Exchange differences At 30 June 2021 Net book value At 30 June 2021 At 31 December 2019 At 1 January 2019 1,718 – 8,077 174 (91) 1,683 24,656 28,057 – – – 1,058 18,372 27,507 2 (51) 8 (961) 9,878 2,692 42,075 – 751 (289) (396) – 361 (5) (67) – 1,996 (805) (1,720) 184 (1,103) 54,645 – 3,108 (1,099) (2,183) 9,944 2,981 41,546 54,471 462 1,085 179 (83) 1,643 3,092 (256) (168) 1,017 412 2 (40) 1,391 874 (5) (65) 862 2,178 9 (201) 2,848 6,483 (19) (384) 2,341 3,675 190 (324) 5,882 10,449 (280) (617) 4,311 2,195 8,928 15,434 5,633 786 32,618 39,037 8,235 1,301 39,227 48,763 1,256 666 23,794 25,716 14. RIGHT-OF-USE ASSETS GROUP Cost At 1 January 2019 Additions Disposals Exchange differences At 31 December 2019 Additions Disposals Exchange differences At 30 June 2021 Accumulated depreciation At 1 January 2019 Charge for the year Eliminated on disposal Exchange differences At 31 December 2019 Charge for the period Eliminated on disposal Exchange differences At 30 June 2021 Net book value At 30 June 2021 At 31 December 2019 At 1 January 2019 The maturity analysis of lease liabilities is presented in note 21. Amounts recognised in profit and loss Interest expense on lease liabilities Expense relating to short-term leases Expense relating to leases of low-value assets The total cash outflow for leases amounts to £6.2m (2019: £4.6m). Buildings £’000 18,152 13,737 – (545) 31,344 1,660 (10,924) (1,028) 21,052 – 2,950 – 85 3,035 4,952 (3,826) (140) 4,021 Total £’000 18,152 13,737 – (545) 31,344 1,660 (10,924) (1,028) 21,052 – 2,950 – 85 3,035 4,952 (3,826) (140) 4,021 17,031 17,031 28,309 28,309 18,152 18,152 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 4,884 693 252 3,032 496 170 94 95 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 15. INVESTMENTS COMPANY Cost and net book value At 1 January 2020/2019 Impairment At 30 June 2021/31 December 2019 Shares in Group undertakings 2021 £’000 2019 £’000 87,042 (9,546) 77,496 89,449 (2,407) 87,042 During the 18 month period ended 30 June 2021 the Company impaired the carrying value of its investments in Print & Digital Publishing Pty Ltd and Time Out New York Limited to reflect the current recoverable amount. During 2019 the Company impaired the carrying value of its investment in Yplan Inc. Yplan was acquired in October 2016 and was a platform for the Group to grow and develop its booking platform. The updated Group platform has now been successfully rolled out and the assets transferred to our existing trading entities. As at 30 June 2021, the Company held direct and indirect investments in the following undertakings; all are accounted for using the acquisition method: Suite 4A3, 410 Elizabeth Street, Surrey Hills NSW 2010 Australia Name of company Holding Nature of business Registered address Direct subsidiaries: Time Out Group MC Limited 100% Holding company Time Out New York Limited 100% Holding company Time Out Spain Media SL 100% Print & Digital Publishing Pty Ltd 100% Publishing & e-commerce Publishing & e-commerce Indirect subsidiaries: Time Out Group BC Limited 100% Holding company Time Out Digital Limited 100% Holding company Time Out Magazine Limited 100% Dormant Time Out Nominees Limited 100% Dormant 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 18 Plaça Reial, Barcelona 08002 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 172 Drury Lane, London WC2B 5QR Time Out England Limited 100% Publishing & e-commerce 1st Floor, 172 Drury Lane, London WC2B 5QR Time Out International Limited 100% Dormant Time Out Market Limited 100% Holding company 1st Floor, 172 Drury Lane, London WC2B 5QR 1st Floor, 172 Drury Lane, London WC2B 5QR Time Out Market London Limited 100% Operator of cultural market 1st Floor, 172 Drury Lane, London WC2B 5QR Leanworks Limited 100% E-commerce 1st Floor, 172 Drury Lane, London WC2B 5QR Country of registration (or incorporation) Registered number 07440310 02977606 England and Wales England and Wales Spain England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales 07440330 02250222 00959388 03210982 01782049 04666309 09550826 10359194 07934000 Name of company Holding Nature of business Registered address Country of registration (or incorporation) Registered number Indirect subsidiaries continued: Time Out New York MC LLC 100% Holding company Time Out Market US Holdings LLC 100% Holding company Time Out America LLC Time Out Market Miami LLC Time Out Market Chicago LLC Time Out Market Boston LLC 100% 100% 100% 100% Publishing & e-commerce Operator of cultural market Operator of cultural market Operator of cultural market Yplan Inc 100% Dormant Time Out Portugal, Unipessoal LDA 100% MC-Mercados da Capital, LDA 100% Time Out Market Porto, LDA 75.1% Time Out Hong Kong Company Limited 100% Time Out Media Singapore Pte Limited 100% Time Out Market Central London Limited 100% Time Out Market New York LLC 100% Publishing & e-commerce Operator of cultural market Operator of cultural market Publishing & e-commerce Publishing & e-commerce Operator of cultural market Operator of cultural market 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA Avenida de Liberdade, no 10-4, 1250-144 Lisboa Rua D. Luis, no 19-2 andar 1200-149 Lisboa Rua D. Luis, no 19-2 andar 1200-149 Lisboa United States of America United States of America United States of America United States of America United States of America United States of America United States of America Portugal Portugal Portugal 2/F, Well View Commercial Building 10 Morrison Street, Sheung Wan, Hong Kong Hong Kong 39A Amoy Street, Singapore Singapore 1st Floor, 172 Drury Lane, London WC2B 5QR England and Wales 11634050 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA United States of America Time Out Market Canada Holdings Inc 100% Holding company Concept TOM Montreal Inc Time Out Market Prague SRO Time Out Market Dubai Limited 100% 100% 100% Operator of cultural market Operator of cultural market Operator of cultural market 200-1000 rue De La Gauchetière O Montréal (Québec) H3B4W5 Canada Canada 200-1000 rue De La Gauchetière O Montréal (Québec) H3B4W5 Canada Canada Revoluční 1, 110 Prague 1, Czech Republic 1st Floor, 172 Drury Lane, London WC2B 5QR Czech Republic England and Wales 11878374 All subsidiaries’ reporting periods are consistent with the Group and all subsidiary undertakings are included in the consolidation. TONY HC Corp 100% Holding company 55 Water Street, 3rd Floor, Brooklyn, New York 11201, USA United States of America 96 97 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 15. INVESTMENTS CONTINUED COMPANY In February 2021 the remaining 15% of Time Out Market Limited was acquired for a de minimis consideration. In October 2020 Time Out Chicago LLC, a 100% owned indirect subsidiary, was dissolved. During the prior period the subsidiary Time Out Market Dubai Limited was incorporated and the option over 3.7% of MC-Mercadoes da Capital was exercised for consideration of £1.2m. All of the dormant companies listed above are exempt from preparing individual financial statements by virtue of s394A of the Companies Act 2006. These companies are also exempt from filing individual financial statements by virtue of s448A of the Companies Act 2006. The subsidiary companies listed above that are incorporated in England and Wales have claimed an exemption from audit for 2021 by virtue of s479A of the Companies Act 2006. 16. INVENTORIES GROUP Raw materials Finished goods The Company has no inventories (2019: £nil). 17. TRADE AND OTHER RECEIVABLES Current: Trade debtors (net) Other debtors Prepayment and accrued income Sales taxes Non-current: Other debtors 2021 £’000 85 910 995 2021 £’000 6,245 1,200 2,487 – 9,932 2021 £’000 3,197 3,197 2019 £’000 248 1,111 1,359 2019 £’000 10,240 2,816 2,712 33 15,801 2019 £’000 5,815 5,815 As at 30 June 2021, Group trade receivables of £2.2m (31 December 2019: £1.9m) were past due but not impaired. The past due receivables relate to a number of independent customers for whom there is no recent history of default. The ageing of these trade receivables is over three months (31 December 2019: over three months). As at 30 June 2021, Group trade receivables of £0.7m (31 December 2019: £1.3m) were impaired and provided for. The ageing analysis of these trade receivables is over three months (31 December 2019: over three months). Movements on the Group provision for the impairment of trade receivables are as follows: At 1 January 2020/2019 Provision for receivable impairment Receivables written off during the period as uncollectable Unused amounts reversed Exchange differences At 30 June 2021 and 31 December 2019 2021 £’000 1,260 668 (1,168) (14) (5) 741 2019 £’000 836 922 (465) – (33) 1,260 Amounts owed by Group undertakings Other debtors 2021 £’000 2019 £’000 121,181 137,764 51 19 121,232 137,783 All amounts due from Group companies relate to loans which are non-interest-bearing, unsecured and repayable on demand. The creation and release of any provision for impaired receivables has been included in administrative expenses in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. 18. CASH AND NET DEBT GROUP Cash Borrowings Adjusted net debt IFRS 16 lease liabilities Net debt 19. TRADE AND OTHER PAYABLES GROUP Current: Trade creditors Social security taxes Other creditors Accruals and deferred income Corporation tax creditor Value Added Tax Non-current: Other creditors Other creditors also includes liabilities for our e-commerce business as well as pension liabilities. The non-current other creditors relate to a lease concession for the Lisbon Market expiring 2031. 2021 £’000 19,070 (23,517) (4,447) (22,453) (26,900) 2021 £’000 1,850 874 1,892 6,164 – 506 2019 £’000 13,420 (43,311) (29,891) (32,422) (62,313) 2019 £’000 6,086 624 3,255 9,647 300 1,501 11,286 21,413 2021 £’000 1,158 1,158 2019 £’000 1,271 1,271 The creation and release of any provision for impaired receivables has been included in administrative expenses in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. 98 99 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 19. TRADE AND OTHER PAYABLES CONTINUED COMPANY Trade creditors Accruals and deferred income 20. BORROWINGS GROUP Current: Bank loans Non-current: Loan notes Bank loans Borrowings are repayable as follows: Between nil and one year Between one and two years Between two and five years Over five years 2021 £’000 – – – 2021 £’000 5,395 5,395 2021 £’000 – 18,122 18,122 2021 £’000 5,395 17,563 559 – 2019 £’000 116 55 171 2019 £’000 4,695 4,695 2019 £’000 23,242 15,374 38,616 2019 £’000 4,695 38,106 510 – 23,517 43,311 The fair value of all financial liabilities is not materially different from the carrying value. The loan notes in the prior year were a £20.0m term loan facility agreement with Oakley Capital Investments Limited (“OCI”). These loan notes were settled in full in June 2020. The remaining bank loans comprise: • a loan provided by a local Urban Development Fund as part of the Joint European Support for Sustainable Investment in City Areas (“JESSICA”) initiative of £0.8m (2019: £0.9m), with interest charged at a rate of the six-month EURIBOR rate plus 1.75% repayable in instalments to 2024; • a term loan facility of £19.0m (2019: £19.0m) with interest charged at a rate of 11% above EURIBOR, repayable in instalments annually through to November 2022. The facility has a covenant based on the rolling 12-month EBITDA of Time Out Market Lisbon which has been formally waived through to November 2022; • a bank loan of £0.3m with interest charged at a rate of 3%, repayable in monthly instalments to June 2025; and • the repayable portion of the Paycheck Protection Program loan (“PPP Loan”) of £0.4m with interest charged at a rate of 1% repayable in monthly instalments to April 2022. COMPANY Non-current: Loan notes Refer to the OCI loan detailed above. The fair value of all financial liabilities is not materially different from the carrying value. 21. LEASE LIABILITIES Analysed as: Current Non-current Maturity analysis: Year three After five years 2021 £’000 – – 2019 £’000 23,242 23,242 2021 £’000 985 21,468 22,453 2021 £’000 - 22,453 22,453 2019 £’000 2,636 29,786 32,422 2019 £’000 3,871 28,551 32,422 The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within Group finance. 22. FINANCIAL RISK MANAGEMENT AND POLICIES FINANCIAL RISK FACTORS AND MANAGEMENT The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. FOREIGN CURRENCY The Group is exposed to foreign exchange risk as it operates in overseas markets. The Group’s realised loss on foreign exchange for the period was £25,000 (2019: £48,000 gain). The Group does not hedge its foreign currency risk as the majority of the Group’s receivables, payables and borrowings are denominated in the functional currency of the relevant entity. Consequently, there are no material currency exposures to disclose (2019: £nil). A sensitivity analysis was conducted at the end of the 18 months ending 30 June 2021 in order to understand the exposure of the Group’s income statement to currency fluctuations. The analysis used the actual monthly average rates and appreciated/depreciated each of the rates by 10%. The main assumptions revolve around this 10% adjustment to the rates which was applied linearly across the months instead of for a specific time. The effects of the analysis showed that if the Euro and US dollar had appreciated by 10% during the period, reported revenue would be £42.5m and the adjusted EBITDA loss would be £24.5m. If, conversely, the Euro and US dollar had depreciated by 10% during the period, reported revenue would be £47.9m and adjusted EBITDA loss would be £28.1m. 100 101 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 22. FINANCIAL RISK MANAGEMENT AND POLICIES CONTINUED CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. In order to minimise this risk the Group endeavours to only deal with companies which are demonstrably creditworthy. The maximum exposure to credit risk is the value of the outstanding trade receivables. The management do not consider that there is any concentration of risk within trade receivables. The Group puts provisions in place for specific known bad debts. In addition, further provisions are made based on historical customer payment trends, current local market conditions and the normal average time taken to pay in each individual country. An analysis of the Group’s trade receivables and provision for bad debts is included in note 17. The maximum credit risk exposure of the Group is the gross carrying value of each of its financial assets. As well as credit risk on accounts receivable balances with customers, credit risk arises on cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only reputable institutions with a strong, independently rated credit rating are used. LIQUIDITY RISK Cash flow forecasting is performed by the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs whilst maintaining sufficient headroom to meet any repayment requirements. The maturity profile of the Group’s borrowings is set out in note 20. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. As at 30 June 2021 Loan notes Borrowings Lease liabilities Trade and other payables As at 31 December 2019 Loan notes Borrowings Lease liabilities Trade and other payables INTEREST RATE RISK Within one year £’000 – 5,395 5,090 11,286 21,771 Within one year £’000 – 6,924 7,793 21,413 36,130 Between one and two years £’000 – 17,563 5,450 116 23,129 Between one and two years £’000 27,647 18,335 8,063 127 54,172 Between two and five years £’000 – 559 21,369 116 22,044 Between two and five years £’000 – 510 20,090 127 20,727 Over five years £’000 – – 20,326 926 21,252 Over five years £’000 – – 32,100 1,017 33,117 Total £’000 – 23,517 52,235 12,444 88,196 Total £’000 27,647 25,769 68,046 22,684 144,146 The Group’s exposure to interest rates is low as the majority of our debt is at fixed interest rates. The Group has not completed a sensitivity analysis for this risk because the level of floating rate debt would result in an immaterial impact to the accounts. CAPITAL RISK MANAGEMENT The Group’s capital management objective is to ensure the Group’s ability to continue as a going concern so that it can provide returns for shareholders and benefits for other stakeholders. To meet this objective the Group reviews the budgets and forecasts on a regular basis to ensure there is sufficient capital to meet the needs of the Group. The capital structure of the Group consists of total parent shareholders’ equity as set out in the Consolidated Statement of Changes in Equity. All working capital requirements are financed from existing cash resources and borrowings. 23. FINANCIAL INSTRUMENTS FAIR VALUES The table below illustrates the fair values of all financial assets and liabilities held by the Group at 30 June 2021 and 31 December 2019. The Group’s financial liability for the option over the non-controlling interests of MC-Mercados da Capital, LDA, that was exercised in June 2019, was measured at fair value through profit or loss. The initial recognition, as part of the acquisition of Time Out Market Limited, was at fair value and subsequent changes in fair value were charged to the Income Statement. All other liabilities, including loans and trade and other payables are held at amortised cost. After initial fair value recognition, these instruments are measured at amortised cost using the effective interest rate method. The fair value of all financial liabilities is not materially different from the carrying value. Classification of financial instruments As at 30 June 2021 Assets Cash and bank balances Trade and other receivables Liabilities Financing Lease liabilities Trade and other payables Classification of financial instruments As at 31 December 2019 Assets Cash and bank balances Trade and other receivables Liabilities Financing Lease liabilities Trade and other payables At amortised cost £’000 At fair value through profit and loss £’000 19,070 10,642 29,712 (23,517) (22,453) (14,516) (60,486) – – – – – – – At amortised cost £’000 At fair value through profit and loss £’000 13,420 18,904 32,324 (43,311) (32,422) (22,684) (98,417) – – – – – – – Total £’000 19,070 10,642 29,712 (23,517) (22,453) (14,516) (60,486) Total £’000 13,420 18,904 32,324 (43,311) (32,422) (22,684) (98,417) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are measured at amortised cost using the effective interest rate method and the fair value is not materially different from the carrying value. The Group assesses at each year end reporting date whether a financial asset or group of financial assets is impaired. In the 18 months ended 30 June 2021 there was no objective evidence that would have necessitated the impairment of loans and receivables or available-for-sale assets except the provision for impairment of receivables (see note 17). 102 103 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 23. FINANCIAL INSTRUMENTS CONTINUED FINANCIAL LIABILITIES MEASURED AT FAIR VALUE THROUGH PROFIT AND LOSS Balance at 1 January 2019 Exercise of put option Gains and losses recognised in profit or loss Balance at 31 December 2019 Gains and losses recognised in profit or loss Balance at 30 June 2021 COMPANY Classification of financial instruments As at 30 June 2021 Assets Trade and other receivables Liabilities Financing Trade and other payables Classification of financial instruments As at 31 December 2019 Assets Trade and other receivables Liabilities Loan notes Trade and other payables Minority interest £’000 1,262 (1,234) (28) – – – At amortised cost £’000 At fair value through profit or loss £’000 121,232 121,232 – – – – – – – – At amortised cost £’000 At fair value through profit and loss £’000 137,783 137,783 (23,242) (171) (23,413) – – – – – Total £’000 1,262 (1,234) (28) – – – Total £’000 121,232 121,232 – – – Total £’000 137,783 137,783 (23,242) (171) (23,413) 24. CALLED UP SHARE CAPITAL Allotted, issued and fully paid Ordinary shares Aggregate amounts New ordinary shares Aggregate amounts Nominal value 30 June 2021 Number 31 December 2019 Number £0.001 331,960,417 148,486,076 331,960,417 148,486,076 £0.001 30 June 2021 £’000 31 December 2019 £’000 332 332 148 148 During the period 134,707,395 shares were issued as part of the share placing that took place in June 2020, and a further 48,571,947 shares were issued as part of the share placing that took place in April 2021. In the prior year, the Company issued 13,468,939 shares as part of the share placing that took place in October 2019. During the period, the Company issued 194,999 (2019: 365,246) shares to employees following the exercise of share options. The fair value of the shares issued was £81,000 (2019: £379,000). 25. NOTES TO THE CASH FLOW STATEMENT GROUP RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH USED IN OPERATIONS Loss before income tax Add back: Net finance costs Share-based payments Depreciation charges Amortisation charges Loss on disposal of property, plant and equipment Impairment of goodwill Time Out Market Waterloo exit costs Gain on derecognition of right-of-use asset and related lease liability Other non-cash movements Decrease/(Increase) in inventories Decrease/(Increase) in trade and other receivables (Increase)/Decrease in trade and other payables Cash used in operations 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 (71,056) (20,478) 10,509 1,480 15,401 6,168 36 20,000 696 (2,339) 54 325 8,302 (9,795) (20,219) 7,119 1,048 6,625 4,666 – – – – 48 (1,030) (2,456) 2,524 (1,934) 104 105 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 26. PENSION COMMITMENTS The Group operates defined contribution pension schemes on behalf of its employees. During the 18 month period ended 30 June 2021, contributions of £647,000 (12 months ended 31 December 2019: £498,000) were made on behalf of employees and at the period end £8,000 (2019: £117,000) remained outstanding. LONG TERM INCENTIVE PLAN Awards have been made to the Executive Directors as follows: Director Exercise price (p) Date of grant 1 January 2020 Exercised Granted Julio Bruno 150p* 14/06/2016 2,166,666 Pension contributions paid during the period Pension contributions outstanding at 30 June/31 December 27. SHARE-BASED PAYMENTS GROUP 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 647 8 498 117 The Group operates a discretionary long term incentive plan (“LTIP”) designed to encourage continual improvement in the Group’s performance and to align the interest of senior management with this of shareholders in the medium term. The only specific performance condition attached to these awards is of continued service. The awards vest evenly over three years on the anniversary date. There is a 12-month lock-up period following each vesting date. In December 2020, the LTIP was modified to better reflect the current and anticipated performance of the Group. This modification amended the grants with an associated exercise price whereby these grants were replaced by revised grants comprising nil cost grants and grants linked to the Group’s share price performance over 5 years. 9,719,978 options were surrendered and replacement options granted (as shown within the number granted in the table below). This was treated as a modification of the original grants and as such the fair value recognised was reduced by the calculated fair value of the surrendered options as at the date of surrender, the average of which was 0.2p. The fair value calculation for the surrendered options was performed consistently with the inputs disclosed below except as disclosed below. The charge in respect of share-based payment transactions included in the Group’s Income Statement for the period is as follows: Expense arising from share option plans Outstanding at 1 January Options exercised in the period Options lapsed in the period Options surrendered in the period Options granted in the period Outstanding at 30 June 2021/31 December 2019 Exercisable at 30 June 2021/31 December 2019 Weighted average remaining contractual life (years) 18 months ended 30 June 2021 £’000 12 months ended 31 December 2019 £’000 1,480 1,048 2021 2019 Weighted average exercise price (pence per option) 132 Nil 90 135 Nil Nil Weighted average exercise price (pence per option) 136 Nil 115 n/a 76 132 Number of options 12,860,123 (194,997) (1,844,985) (9,719,978) 25,600,000 26,700,163 850,166 9.22 Number of options 9,667,903 (365,245) (1,112,496) – 4,669,961 12,860,123 7,181,417 8.43 150p* 150p* nil 21/04/2017 129.5p 13/04/2018 02/04/2019 129.5p 129.5p nil nil 90p 90p 90p nil nil nil nil 2,166,666 2,166,667 100,000 100,000 100,000 100,000 100,000 100,000 333,333 333,333 333,333 200,000 200,000 200,000 Surrendered on modification (2,166,666) (2,166,666) (2,166,667) (100,000) (100,000) (100,000) (333,333) (333,333) (333,333) At 30 June 2021 – – – 100,000 – – – 100,000 100,000 – – – 200,000 200,000 200,000 24/12/2020 11,000,000 11,000,000 8,699,998 – 11,000,000 (7,799,998) 11,900,000 Adam Silver 129.5p 13/04/2018 129.5p 129.5p nil nil nil 90p 90p 90p nil nil nil 02/04/2019 100,000 100,000 100,000 16,666 16,666 16,666 233,333 233,333 233,333 (16,666) (16,666) 100,000 (100,000) 100,000 100,000 (100,000) (100,000) (100,000) (16,666) (233,333) (233,333) (233,333) (100,000) (100,000) 1,349,997 (133,332) – (1,216,665) – – – – – – – – – – – – – Stuart Rose nil 05/01/2021 – – 2,000,000 – 2,000,000 – – 2,000,000 2,000,000 106 107 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements 27. SHARE BASED PAYMENTS CONTINUED LONG TERM INCENTIVE PLAN CONTINUED The options which lapsed during the year relate to employees who have left the Company. The fair value of the performance based awards in the period was valued using a Monte Carlo option model and the fair value of the non-performance based awards was valued using a binomial option model (2019: a Black-Scholes model). The assumptions used in the valuation are: Risk-free interest rate Expected share price volatility Expected option life (years) Expected dividend yield Share price at grant date Exercise price at grant date Weighted average fair value of options at grant date 2021 Performance-based award 2021 Non-performance bases award 2019 Mgmt award 0.25% – 0.30% -0.13% – 0.08% 0.53% – 0.74% 50% 10 nil 35p nil 26p 50% 20.8% – 21.7% 10 nil 35p nil 35p 3 nil 90p – 122.5p nil – 122.5p 40p The weighted average fair value of options granted during the year was 29p (2019: 31p). Share options outstanding at the end of the year have the following expiry date and exercise prices: IPO award Senior managers – August 2016 Senior managers – October 2016 YPlan employees – October 2016 Senior managers – April 2017 Senior managers – October 2017 Senior managers – March 2018 Senior managers – April 2018 Senior managers – May 2018 Senior managers – March 2019 Senior managers – April 2019 Senior managers – December 2020 Senior managers – January 2021 Expiry date Exercise price (p) 2021 2019 Share options 14/06/2026 23/08/2026 21/10/2026 21/10/2026 21/04/2027 03/10/2027 28/03/2028 13/04/2028 29/04/2028 28/03/2029 02/04/2029 24/12/2030 05/01/2031 150 141 141 nil nil-135 144 nil-130 nil-195 85-110 nil-0.90 nil-0.90 nil nil – – – 16,838 100,000 – – 200,000 – 6,500,000 250,000 25,000 16,838 225,000 175,000 239,992 849,998 58,331 208,325 1,449,996 600,000 2,599,998 23,575,000 470,000 2,000,000 26,700,163 12,860,123 28. RELATED PARTY TRANSACTIONS GROUP Prior to the cash placing in April 2021 the Group was controlled by Oakley Capital Limited and Oakley Capital Private Equity. Following the placing their shareholding fell below 50%. Together they owned 44.6% of the Company’s shares as at 30 June 2021. There is a summary of ownership interests in the Directors’ report on page 50. In 2018 the Company entered into a £20m term loan facility agreement with Oakley Capital Investments Limited (“OCI”). The initial facility was for a period of 19 months expiring on 31 October 2019 and had an interest rate of between 10% to 15% depending on amounts drawn. The facility was subsequently converted into a Loan Note agreement, with an extended term to 31 October 2021. In return for granting security over certain Time Out trademarks and domain name, the previous interest rate mechanism was replaced with a flat rate of 12%. In June 2020, this facility was settled in full and the related security released. OCI is a substantial shareholder in the Company as defined by the AIM Rules and as such entering into the loan facility constituted a related party transaction pursuant to AIM Rule 13. With the exception of Peter Dubens, who is a director of OCI, the Directors of the Group consider that, having consulted with Liberum, the terms of the transaction were fair and reasonable insofar as shareholders were concerned. Management share awards Details of management share awards are contained in the Directors’ remuneration report on page 51 and in note 27. Other The Group engages with Oakley Advisory, a subsidiary of Oakley Capital Investment Limited, on a consultancy basis and paid a fee of £60,000 for the 18 months ended 30 June 2021, but did not pay a fee in the 12 months ended 31 December 2019. As part of the cash placings completed in May 2020 and April 2021, Lombard Odier purchased an aggregate of 31,034,286 shares. Lombard Odier is a related party of the Company for the purposes of the AIM Rules by virtue of their status as a substantial shareholder holding 10% or more of the existing ordinary shares. COMPANY The Company had the following balances outstanding with related parties, all of whom are companies within the Group: Time Out Group MC Limited Time Out Group BC Limited Time Out Digital Limited Time Out England Limited Time Out America LLC Time Out New York Limited 30 June 2021 £’000 30 December 2019 £’000 1,112 20,731 66,280 32,431 627 – 121,181 1,112 20,731 66,728 33,937 395 14,861 137,764 29. POST BALANCE SHEET EVENTS On 29 October 2021, Julio Bruno, Group Chief Executive stepped down with immediate effect in order to pursue other business interests. There were no other significant post balance sheet events. 108 109 Notes to the financial statements continuedwww.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements Company information REGISTERED OFFICE TIME OUT GROUP PLC ADVISERS NOMINATED ADVISER AND BROKER 1st Floor 172 Drury Lane London WC2B 5QR United Kingdom COMPANY NUMBER 07440171 COMPANY WEBSITE www.timeout.com Liberum Capital Limited Ropemaker Place 25 Ropemaker Street London EC2Y 9LY United Kingdom LEGAL ADVISERS Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA United Kingdom INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH United Kingdom REGISTRARS Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA United Kingdom 110 111 www.timeout.com // Time Out Group plc – Annual Report and Accounts 2021OverviewGovernanceStrategic ReportFinancial Statements T i m e O u t G r o u p p l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 2 1 Annual Report and Accounts 2021 for 18 months ended 30 June 2021 Time Out Group plc 1st Floor 172 Drury Lane London WC2B 5QR United Kingdom