Company Announcements

Preliminary Results 2020

Source: RNS
RNS Number : 2505G
Ten Lifestyle Group PLC
24 November 2020
 

                                                                                                                                                                      

24 November 2020

                                                                                                                                                                      

Ten Lifestyle Group plc

("Ten", the "Company" or the "Group")

 

Preliminary results for the year ended 31 August 2020

 

Ten Lifestyle Group plc (AIM: TENG), a leading technology-enabled, global concierge platform for the world's wealthy and mass affluent, announces its preliminary results for the year ended 31 August 2020.

 

Financial

·      Net Revenue1 down 3.5% to £44.2m (2019: £45.8m)

Corporate revenue increase of 1.6% to £40.9m (2019: £40.3m) supported by growing member engagement

Supplier revenue decrease of 40.3% to £3.3m (2019: £5.5m) due largely to impact of COVID-19 on travel

·      EMEA2 region growth partly offset declines in APAC3 and Americas regions

7% Net Revenue growth in EMEA

13% Net Revenue decline in the Americas

11% Net Revenue decline in APAC

·     Adjusted EBITDA4 of £4.8m (pre-IFRS 165: £0.9m; 2019: pre-IFRS 16 loss £(3.3)m); improved margin6 10.8% (2019: pre-IFRS 16 loss (7.2)%)

This reflects improved efficiencies and prudent cost reduction actions taken in H2

Maintained a high level of investment in technology of £12.2m (2019: £12.2m)

·      Reduced loss before tax of £(5.9)m (2019: £(7.3)m)

·      Net cash at £10m (2019: £12.3m)

Decrease in net cash of £2.3m: (H2 increase of £0.4m; H1 decrease of £2.7m (unaudited))

£1m long-term debt (USA)

·      Total operating expenses £39.4m, £9.8m lower than 2019, as a result of improved efficiency and cost reduction in the second half of the year, together with £3.8m reclassification due to IFRS 16

 

Operational

·      Year-on-year record member satisfaction7

·      Expanded an existing contract in the Americas into an Extra Large contract8

·      Won a Medium contract8 in Australia, launched in September 2020

·      Ten Digital Platform live with 22 client brands (2019: 14)

·    £12.2m (2019: £12.2m) invested in proprietary digital platforms, communications and technologies to enhance member experience and create competitive advantage

·      Delivered a number of key milestones in the Group's digital transformation

·      Improved efficiencies and proposition from greater digital capabilities, operational maturity and stronger supplier partnerships

 

Key COVID-19 operational measures

·      Migration to home working with no service interruption and continued PCI DSS Level 1 compliance

·      Continuing to successfully flex member proposition to adapt to members' changing lives and needs

·      Leveraged improved content and member communications to engage members

·      Prudent cost management delivered over £5m of cost savings compared to prior year

 

Alex Cheatle, CEO of Ten Lifestyle Group, said;

 

"The growth engine within the Ten model helped us to achieve EBITDA profitability and record service levels in the year. We maintained revenue from corporate clients by continuing to provide value to members, including during the pandemic. Our improving proposition, along with our strong pipeline of new contract opportunities, means we are well positioned to continue our momentum as the impact of the COVID-19 pandemic eases."

 

Post-balance sheet contract events

Since the year end, the Group has won contracts with new and existing corporate clients, including:

·      a multiple-year renewal of a master services agreement, which includes an Extra Large contract in the Americas;

·     commission from an existing client to launch Ten's digitally-enabled concierge services into a new EMEA territory, further expanding an existing Extra Large contract;

·    a multiple-year contract with a global financial services firm to initially launch Ten's digitally-enabled concierge service to customers in Africa, replacing an incumbent supplier of similar services;

·    a three-year contract, including a contractual minimum, with a bank in APAC to launch Ten's digitally-enabled concierge service;

·      a contract with a bank in APAC to provide Ten's high-touch concierge services to private banking clients; and

·      a second contract with an existing banking client in China to provide Ten's high-touch concierge services to a new cohort of banking clients.

 

Although the individual new contract wins are Small, we will have opportunities to develop them as the pandemic eases and as we prove a return on the corporate client's investment The Board does not expect the contracts summarised here to have a material impact on their expectations for the 2021 financial year.  

1 Net Revenue excludes the direct cost of sales relating to certain member transactions managed by the Group.

2 The Europe, Middle East and Africa region.

3 The Asia-Pacific region.

4 Adjusted EBITDA is post-IFRS16 and is operating profit/(loss)/ before interest, taxation, amortisation, share-based payments and exceptional costs.

6 pre-IFRS 16 means the adoption of IFRS 16 using the modified retrospective approach, comparative information has not been restated.

6 Adjusted EBITDA margin is post-IFRS16 and is Adjusted EBITDA as a percentage of Net Revenue.

Ten measures member satisfaction using the Net Promoter Score management tool, which gauges the loyalty of a firm's customer relationships (https://en.wikipedia.org/wiki/Net_Promoter).

8 Ten categorises its corporate client contracts based on the annualised value paid, or expected to be paid, by the corporate client for the provision of concierge and related services by Ten as: Small contracts (below £0.25m); Medium contracts (between £0.25m and £2m); Large contracts (over £2m); and Extra Large contracts (over £5m). This does not include the revenue generated from suppliers through the provision of concierge services.

Analyst Presentation

An online analyst presentation will be held by video link at 9:00am on 24 November 2020. To attend, please email investorrelations@tengroup.com 

 

Dial-in details for the presentation are also available:

Dial-in number: +44 203 051 2874

Meeting ID: 882 3347 3834

 

The Group will also be presenting an Investor Webinar for current and prospective investors at 5:30pm on 3 December 2020. If you would like to attend, please email investorrelations@tengroup.com.

 

For further information please visit www.tenlifestylegroup.com/ or call:

 

Ten Lifestyle Group plc

Alex Cheatle, Chief Executive Officer

Alan Donald, Chief Financial Officer

 

+44 (0)20 7850 2796

 

Peel Hunt LLP, Nominated Advisor and Broker

Edward Knight

Paul Gillam

Nick Prowting

+44 (0) 20 7418 8900

 

Notes to Editors:

About Ten Lifestyle Group Plc

Ten Lifestyle Group Plc is a leading technology-enabled, global concierge platform, helping wealthy and mass affluent individuals and their families to discover, organise, and enjoy dining, live entertainment, travel and premium retail (and other relevant services) with better results and quicker than they could themselves.

 

Underpinned by industry-first technology, Ten provides its trusted concierge services to its more than 2 million members, 24/7, 365 days a year, wherever they are in the world. Founded in 1998, the business listed on the AIM market of the London Stock Exchange in November 2017 (AIM: TENG). Ten Lifestyle Group's objective is to become the most trusted service platform in the world.

For further information about Ten Lifestyle Group Plc, please go to: www.tenlifestylegroup.com 

 

Chairman's Statement

Overview

I am pleased to update our stakeholders on the Group's progress towards becoming the world's most trusted service. In the first half of the year, we made very good headway towards our goals of revenue growth, cash generation and profitability. In the second half of the year, and in the face of significant challenges posed by the COVID-19 pandemic, the Group took appropriate action to generate revenue and manage costs to improve EBITDA profitability in the year.

 

The Group's agile and highly-effective response to the COVID-19 pandemic has demonstrated the resilience and flexibility of our team and our tech-enabled service proposition and the strength of the underlying business model, which, with scale and time in market, builds efficiency, service quality as well as value to our members and corporate clients. At the heart of Ten's business lies a growth engine that has allowed Ten to improve its cash position through the second half of the year and EBITDA profitability across the full year. It has also enabled us to develop a stronger member and client proposition, helping us to retain existing contracts and develop new ones; although the impacts of COVID-19 on relevant markets and the wider economy has slowed the winning of new contracts and growth of existing contracts.           

 

We maintained investment in our proprietary technology throughout the year. Our technology underpins the Group's competitive position as a leading technology-enabled, global lifestyle and travel service platform for individuals and their families.

 

Strategy

The Group continues to develop strong partnerships with corporate clients, primarily in the financial services sectors, that seek to improve the engagement, retention and acquisition of their most valuable customers by offering access to our technology-enabled travel and lifestyle services. The Group also offers individuals the opportunity to access its services through a private membership proposition.

 

Members get access to a wide range of propositions across key consumer markets, including dining, travel, entertainment and premium retail. By combining the buying power of its membership, the Group secures attractive offers and discounts, meaning members often achieve better and more cost effective outcomes, more conveniently than they could on their own. Ten's services are made available to members to search and book online though Ten's market-leading lifestyle and travel proprietary digital platform, the "Ten Digital Platform", or by submitting a request to our expert Lifestyle Managers via phone, email, live chat and WhatsApp.

 

The Group adapted and enhanced its proposition in response to the effects of COVID-19 on these consumer markets and to the lives of our members. In doing so, Ten has demonstrated the extraordinary flexibility of its service model to deliver relevant and valued services to our members, value to our corporate clients, as well as continuing to generate revenue and profit. This was made possible by the Group's continued investment in technology and content which drives digital transformation, improving service speed and efficiency, as well as increased cash generation and margins.

 

Ten's mission remains to become the world's most trusted service. Our strategic goals to achieve this are to drive our growth engine by building an ever-stronger member proposition, continuing to invest in technology and content and securing greater corporate client impact and investment.

 

Results

The Group has continued to make good progress towards each of these strategic objectives, resulting in Adjusted EBITDA of £4.8m (pre-IFRS 16: £0.9m; 2019: pre-IFRS 16 loss £(3.3)m) and a healthy net cash position of £10.0m (H1 2020: £9.6m (unaudited)) (FY 2019: £12.3m). Returning to EBITDA profitability and an improved cash position through the second half of the year are key milestones in the Group's strategy after a period of investment. 

 

Group Net Revenue declined by 3.5% in the year to £44.2m. However, this was predominantly a result of decreased supplier revenue from reduced member travel due to the COVID-19 pandemic. Overall in the year, corporate revenue grew by 1.6% and supplier revenue decreased by 40.3%. Revenue from our supplier base, such as hotels, airlines, and event promoters which sometimes pay commission, has been very low since March 2020.

 

The resulting decline of Net Revenue in the second half was, in part, mitigated by a smaller decrease in revenue from our corporate clients. This was achieved by the Group's agile response to our members' changing needs throughout the COVID-19 crisis, allowing us to remain relevant to our corporate clients and members.

 

The Group has secured some strategic new contract wins, including a new client in Australia, as well as important, multi-year contract extensions and significant expansions of contracts with our existing corporate clients. We have not lost any clients to competitors. We have been well supported by contractual minimums. However, growth from new contracts and development of existing corporate programmes contracted in the second half due to wider economic uncertainty. Our continued investment in technology and content during the year has allowed us to maintain a strong sales pipeline, remain differentiated from our competitors and develop our proven ability to help clients engage, retain and acquire their most valuable customers.

 

Whilst maintaining record levels of member satisfaction, the Group has achieved a significant digital transformation of the business by increasing automation in the servicing of member requests. Over the last two years, the number of requests serviced using automation rose by 75% and fully automated requests increased fourfold over the last year. Increased automation drives the speed and efficiency of our service, which contributes to increased cash generation and the improved margin9 of 10.8% (2019: (7.2)%).

 

The Group ended the year with a strong net cash position of £10.0m (2019: £12.3m) resulting from the Group improving its cash position through the second half of the year. This has been achieved by the increasing efficiency of the business model as well as prudent cash management, including the implementation of a salary sacrifice for options scheme and participation in government funded coronavirus initiatives. 

 

People

The Group continues to benefit from a stable, founder-led management team who have shown strong leadership, innovation and resilience in all regions to overcome the challenges posed as a result of COVID-19. The Group reduced its levels of full-time equivalent (FTE) employees in the year in response to regional growth rates, improved efficiencies and regional cost optimisation. 

 

On behalf of the Board I would like to thank the whole Ten team for demonstrating adaptability, professionalism, and steadfast commitment throughout the year, for which we are extremely grateful and proud.

 

Summary

I am very pleased to report that the Group has delivered on some of the Board's key strategic goals, including achieving Adjusted EBITDA profitability in the full year, improved cashflow in the second half of the year and our ongoing digital transformation in how the service is delivered. This has been achieved through the growth engine that lies at the heart of Ten's business, which is more fully explained on our website at www.tenlifestylegroup.com/investors.

 

The Group has also achieved critical mass, our business model is strong and competitively robust and we have a healthy net cash position, leaving us well placed to continue to grow and secure profitability as we come out of the COVID-19 crisis. We are confident in the strength of our relationships with our existing clients and we have proved our value in helping corporate clients engage, retain and acquire their most valuable customers, which bodes well for the future.

 

Bruce Weatherill

Chairman

23 November 2020

 

 

9 Adjusted EBITDA as a percentage of Net Revenue.

 

 

Chief Executive's statement

 

Overview

I am proud of how the Group has continued to deliver on our mission to become the world's most trusted service and create value for our corporate clients during a highly challenging year, whilst delivering Adjusted EBITDA of £4.8m and improved net cash in the second half of the year.

 

The Group's strategy of continued investment in technology, content and supplier partnerships has given the business the resilience to respond to the changing needs of our members throughout the COVID-19 crisis. By leveraging our members' combined buying power and our relationships with new and existing supplier partners, we adapted our service and improved the ways we personalise, target and communicate with our members. By doing so, we have remained relevant to our members. The resulting record levels of satisfaction and engagement support the value of our proposition with corporate clients.

 

Additional personalisation and localisation capability has further enhanced our market-leading, multichannel, transactional proprietary platform (the "Ten Digital Platform"), where members can enjoy superior access, offers, benefits and discounts across dining, travel and tourism, entertainment and premium brand markets; all supported by our expert Lifestyle Managers. By delivering a global "one stop shop" personalised to the individual, our service can flex to meet the needs of the member. 

 

Before COVID-19, 85-90% of our Net Revenue came from service or subscription fees, paid by our corporate clients or private members. In contrast, almost all other providers of similar services (e.g. travel agents or ticket portals) rely on commission or mark-ups on bookings. This differentiation allows us to prioritise an attractive member proposition and continue to provide market-leading value for our members, even when key markets are disrupted. 

 

The COVID-19 pandemic since February 2020, has resulted in reduced Net Revenue in the second half of the year. Despite this, we made good progress towards achieving our strategic aims, including a positive Adjusted EBITDA of £4.8m (pre-IFRS 16: £0.9m; 2019: pre-IFRS 16 loss £(3.3)m) in addition to improving the Group's cash position through the second half of the year.

 

We maintained high levels of investment in our technology, communications and content by spending £12.2m in the year (2019: £12.2m). It is largely because of this that the growth engine which lies at the heart of our business has gained momentum in key areas, delivering a stronger member proposition, engagement and ultimately increasing value for our corporate clients to encourage them to invest more in our business. 

 

Engagement with our corporate clients has remained strong throughout the year. We believe that the way in which we have adapted and innovated to meet their needs as well as the needs of their most valued customers, without compromising on our digital commitments, has grown our reputation and credibility in the market.

 

Ten's international footprint, including offices in over 20 countries, enabled the Group to build valuable best practices and experience as the pandemic progressed across our three regions from APAC to EMEA and the Americas and is enabling us to develop a robust strategy for recovery.

 

APAC - the first region affected by COVID-19

The rapid response by our teams in Singapore, Hong Kong, Shanghai, Japan and Melbourne to the early effects of COVID-19 on the lives of our clients, members and colleagues mitigated the impact on the business. It also helped shape the Group's global response, meaning the rest of the Group was well prepared by the time the pandemic disrupted EMEA and the Americas.

 

The APAC region adapted well to the changing local requirements and restrictions, supporting safe home-working for our staff and offering tailored support to our members. As opportunities to travel domestically and dine-out returned across the region, our members took advantage of our services, which we appropriately promoted through our improved targeted communication capabilities.

 

We believe our sensitive and tailored approach to serving our members' needs contributed towards another record year for Net Promotor Scores (NPS) in the region. In a demanding economic environment, achieving this key metric helps our clients in the region to support the provision of Ten's services to their most valued customers. 

 

Although the effects of COVID-19 dampened the growth of new and existing client contracts in the region, we achieved sufficient growth of existing contracts to partly offset the loss of a Large contract in the prior year, resulting in Net Revenue of £8.5m (2019: £9.5m). During the period, we agreed a three-year extension of a Large contract with a client in the region. This contract is now expected to grow into an Extra Large contract during the extended term.

 

We won a multiple-year contract with a new client in Australia, signed in July and launched post year end in September 2020, which now delivers Ten's concierge services to premium credit card customers primarily from our Melbourne office and includes access to the customised Ten Digital Platform. The contract is expected to be our first Medium contract in Australia and brings us to five Material Contracts10 in the APAC region, in addition to a number of Small contracts. Many of these have the potential to grow as the wider economic environment improves.

 

Improved operational efficiencies in the region, primarily driven by our continued digital transformation, as well as significant cost saving measures, including a reduction in the number of full-time equivalent (FTE) employees in H2, and our participation in relevant government funded COVID-19 initiatives, resulted in an improved Adjusted EBITDA pre-IFRS 16 loss of £0.3m (2019: £1.3m loss).

 

EMEA

EMEA is our most mature global region, with significant efficiencies achieved in the year, underpinned by our continued digital transformation and mature scale within our high-touch operations as well as our strong and increasingly integrated supplier partnerships across the region.

 

Building on our early experiences in APAC, EMEA prepared well for the impact of COVID-19 by establishing compliant home working practices and renegotiating supplier and lease agreements to achieve prudent cost savings. By working innovatively with our established clients and supplier partners in the region, we developed and tested a range of new member services, including virtual cooking and cocktail masterclasses with top chefs, a virtual book club with leading authors, and editorial staycation guides. The most successful initiatives were rolled-out in other regions.

 

By remaining relevant to our members and clients throughout the year, we achieved a 7% growth in Net Revenue in the region, despite a significant reduction in supplier revenue in the second half of the year due to widespread travel restrictions limiting commission-generating bookings since March 2020. As local restrictions eased, we were able to proactively support our members to make the most of travel, dining and live entertainment opportunities, as well as continuing to support them through periods of lockdown. 

 

Our strong competitive position, underpinned by the continued improvements to the Ten Digital Platform and our well-developed member proposition in EMEA, was instrumental in securing important corporate client contract renewals in the year. This included a five-year extension of an existing Extra Large contract for which we launched the customised Ten Digital Platform and the extension of two Large contracts and a Medium contract.

 

Against a background of intense economic uncertainty, we are pleased to have retained all of our Material Contracts in the region, although the effects of COVID-19 have delayed some key client developments and from September 2020 a Large corporate-pay model contract was replaced with an affiliate model contract, which we anticipate to be Small in size.    

 

Due to these challenges, we took prudent cost saving actions across the region in the second half of the year, including reduced office costs and a reduction in the number of full-time equivalent (FTE) employees. We also participated in available government funded COVID-19 initiatives. These actions along with the continued operational efficiencies in the region has delivered this significant improved regional Adjusted EBITDA pre-IFRS 16 margin of 32% (2019: 11%).

 

Americas

Our key markets in the region: Latin America, the USA and Canada were all significantly impacted by the effects of COVID-19 from March 2020. By leveraging what we had learnt in the APAC and EMEA regions, we took precautionary measures to protect the business, including implementing safe home working for our staff and prudent cost savings. We also developed member propositions tailored to our members' changing lifestyles in the region, including staycation guides paired with experiences and offers available with local supplier partners.

 

In January 2020, we expanded an existing contract in the region, incurring significant set-up costs in the first half of the year. Although the contract is now categorised as an Extra Large contract, its growth was impacted in the second half of the year by the effects of COVID-19 in the region.

 

By strengthening the member proposition including improvements to the Ten Digital Platform, we achieved a higher Net Promoter Score (NPS) in the region than last year. This is a key metric for our clients looking to retain and engage their most valuable customers in the Americas and supports our continued discussions to develop the existing client contracts.    

Despite the measures taken in the Americas, widespread travel restrictions throughout the second half of the year suppressed supplier revenue earned on travel bookings as well as overall service request volumes. This resulted in a 13% reduction in Net Revenue, despite additional revenue from the contract expansion in January 2020. The cost of the contract expansion contributed to a £1.5m increase in the Adjusted EBITDA pre-IFRS 16 loss for the region.

 

Our investment in technology and content continues to drive our market-leading digital capability

As outlined in our strategy at IPO, we continued to undertake a transformation of our digital capability by maintaining a high-level of investment into technology and related areas, with £12.2m in 2020 (2019: £12.2m) spent in the year and a total of £34.9m spent since IPO on the Ten Digital Platform, TenMAID, content, communications, and other technologies.

 

We believe our market-leading digital capabilities are at the core of the Group's resilience, as demonstrated in the year and underpins our long-term strategy to become the world's most trusted service.

 

In the year, we delivered a number of key milestones in our digital transformation, including; increased automation, improved features on the Ten Digital Platform, enhanced communication and use of content with members.

 

Stronger member proposition, satisfaction and engagement

Building a valued service and strong member proposition is the key objective of the growth engine that underpins the Ten business model. This delivers member engagement, which is a key objective for our corporate clients, who invest in our service to acquire, engage and retain their most valued customers.

 

In the year we have both strengthened our core propositions and developed them to suit the changing needs of our members throughout the COVID-19 pandemic, across all regions.

 

The more attractive and accessible our proposition is to new and existing members, the more members engage, use and advocate for our service. Member engagement and satisfaction is the key to building value for corporate partners, aiming to improve the engagement, retention and acquisition of their most valued customers. This justifies their spending with us - and encourages new corporate partners and new suppliers to work with us.

 

In the first half of the year, the number of unique users of the service increased by 14% compared with the same period in the previous year. In the second half of the year, the number of unique users of the service increased by 18% compared with the same period in the previous year, despite the effects of COVID-19. We have also seen a 6% increase in repeat usage by members in the year, demonstrating improving engagement and satisfaction with the service.

 

We are delighted to have achieved another year-on-year record level of member satisfaction, measured by Net Promoter Score (NPS).

 

We believe that our strengthened member proposition and member satisfaction levels have resulted in an increase in repeat usage of our service and an increase in the number of unique service users in the first and second halves of the year, when compared with the same periods in the previous year.

 

We have received positive feedback from existing and prospective corporate clients on our strengthened member proposition and member engagement metrics. We believe our ability to respond to changing member needs throughout the pandemic has helped to enhance our reputation and credibility in the market.

 

Summary

We believe our competitive position is stronger than ever, backed by a market-leading member proposition. This proposition is valued by our members, whose engagement delivered a strong return on the investment for our corporate clients. This has been achieved by continuing to invest in our technology, content, market expertise and better pricing, access, benefits and integration with our supplier partners. 

 

Although the effects of COVID-19 have constrained some of our prospective clients from signing contracts, our pipeline is robust and we have secured some important new mandates and contract extensions. By maintaining the relevance of our service to our members and in turn our corporate clients, we have achieved 1.6% increase in Net Revenue from corporate clients during the year and retained all but one of our Material Contracts in the year.

 

Despite prudent cost controls we have maintained investments in technology, content and supplier partnerships, which has enhanced the service to clients and is crucial for our future success. Greater efficiencies and cost control along with careful cash management, has helped us to maintain a strong net cash position of £10.0m (2019: £12.3m). We have delivered an Adjusted EBITDA of £4.8m (2019: pre-IFRS 16 loss of £(3.3)m).

 

Our record service levels, strong technology platform, EBITDA profitability, a healthy cash position and a strong robust pipeline all combine to create confidence in a strong future for our business as we emerge from the pandemic.

 

Outlook

Until the effects of COVID-19 ease globally, we expect that Net Revenue will continue to be reduced due to lower demand for our core services in dining, travel and live entertainment in each of the regions. The timing of this recovery is uncertain and continues to face delays, as demonstrated by the second wave of infection across the globe.

 

Net Revenue is partially protected by minimum fee agreements with some corporate clients and the flexibility and adaptiveness of the service proposition. This proposition typically generates revenue on the delivery of relevant services to members rather than on the conversion of specific types of bookings. This differentiates Ten from traditional agency business models in travel or entertainment which rely predominantly on commission from bookings.

 

We expect Supplier revenue to remain at the current very low levels until global travel substantially recovers.

 

We continue to develop our pipeline of opportunities and it is possible that some new Small and Medium contracts could be launched in the first half of 2021. We do not expect to launch any new larger contracts until the effects of COVID-19 on the wider economy have eased due to the conservative planning that is characteristic of our larger target clients.

 

We are focused on continuing to generate EBITDA profitability and maintaining a healthy cash position by delivering services relevant to our members, together with driving improved efficiencies and ongoing cost savings, whilst maintaining investment in technology. As a result of this continued investment we expect some reduction in net cash.

 

Despite the COVID-19 pandemic adversely affecting our business, we benefit from loyal corporate clients, a healthy revenue pipeline and continued investment in our technology, which leaves us well positioned for recovery as the pandemic eases.

 

Alex Cheatle

Group Chief Executive Officer

23 November 2020

 

10 Ten categorises its corporate client contracts based on the annualised value paid, or expected to be paid, by the corporate client for the provision of concierge and related services by Ten as: Small contracts (below £0.25m); Medium contracts (between £0.25m and £2m); Large contracts (over £2m); and Extra Large contracts (over £5m). This does not include the revenue generated from suppliers through the provision of concierge services. Medium, Large and Extra Large contracts are collectively Ten's "Material Contracts".
 

Financial review

 

Despite the challenging trading conditions in the second half of the year due to the COVID-19 pandemic, our Net Revenue was only 3.5% down on prior year. Combining this with continued efficiencies in our business model, as well as appropriate cost actions taken to conserve cash, we achieved an Adjusted EBITDA profit for the first time since IPO in 2017 and maintained a strong balance sheet position at the year end.

 

 

2020

£m

2019

£m

Revenue

46.4

49.1

Net Revenue

44.2

45.8

Operating expenses and Other Income

(39.4)

(49.1)

Adjusted EBITDA

4.8

(3.3)

Adjusted EBITDA %

10.8%

(7.2%)

Depreciation

(4.4)

(1.0)

Amortisation

(3.4)

(3.0)

Share-based payments & exceptional items

(1.9)

(0.5)

Operating loss before interest and tax

(4.9)

(7.8)

Net finance (expense)/income

(1.0)

0.5

Loss before taxation

(5.9)

(7.3)

Taxation

(1.0)

(1.0)

Loss for the year

(6.9)

(8.3)

Net cash at 31 August

10.0

12.3

 

Adjusted EBITDA

Whilst Adjusted EBITDA is not a statutory measure, the Board believes it is necessary to include this as an additional metric as it is one of the main measures of performance used by the Board. It reflects the underlying profitability of our business operations, excluding amortisation of investment in platform infrastructures, exceptional costs and share-based payment expenses.

 

Implementation of IFRS 16 "Leases" accounting standard

We implemented IFRS 16 "Leases" accounting standard in this accounting period. The transition method used was the Modified Retrospective method therefore comparatives have not been restated. Adjusted EBITDA as reported was £4.8m in the year, which includes a credit of £3.9m in respect of the implementation of IFRS 16. The following table provides a breakdown of Adjusted EBITDA pre and post-implementation of IFRS 16 for the Group and by region.

 

 

Group

EMEA

Americas

APAC

 

 

 

 

 

Reported Adjusted EBITDA post-IFRS 16

4.8

8.2

(3.9)

0.4

IFRS 16 adjustment

(3.9)

(1.2)

(1.9)

(0.7)

Adjusted EBITDA (pre-IFRS 16)

0.9

7.0

(5.8)

(0.3)

 

As comparatives have not been restated, regional year on year comparisons below use Adjusted EBITDA pre-IFRS 16.

 

Revenue and Net Revenue

Net Revenue11 for the twelve months to 31 August 2020 was £44.2m, down 3.5% compared to the prior year. Revenue for the twelve months to 31 August 2020 was £46.4m, down 5.5% on the twelve months to 31 August 2019. Net Revenue, which excludes the direct cost of sales relating to member transactions managed by the Group, is Ten's preferred measure of operating revenue as it excludes the cost of member transactions where we are the principal service provider (i.e. cost of airline tickets sold under the Group's ATOL licences).

 

The reduction in Net Revenue of 3.5% was principally due to the impact of the COVID-19 pandemic which started to impact our business from February 2020 onwards. The biggest impact to our Net Revenue has been the reduction in supplier commissions principally due to the reduction in international travel across the world. The following table sets out a comparison between H1 and H2 of this financial year, compared to prior year, of our supplier commissions as a percentage of Net Revenue.

 

 

2020

H1 (unaudited)

2020

H2(unaudited)

2020

FY(audited)

2019

H1(unaudited)

2019

H2(unaudited)

2019

FY(audited)

Percentage of Net Revenue

10.7%

3.4%

7.4%

11.7%

12.3%

12.0%

 

Our Corporate Revenue (paid by our corporate clients to service their customers) increased year on year by 1.6% as we adjusted our offering to corporate clients and members to meet their changing requirements during the pandemic crisis.

 

11Net Revenue excludes the direct cost of sales relating to certain member transactions managed by the Group.

 

Contract analysis

The following tables set out an analysis of our contracts by size and by region. We have analysed only our Material contracts. Note, the contract size is based on the annualised value paid or expected to be paid by the corporate client for the provision of concierge and related services by Ten. This does not include the revenue generated from suppliers through the provision of these concierge services

 

Contracts by size

2020

2019

change

 

Contract by region

2020

2019

change

Extra Large

3

2

+1

 

EMEA

8

8

-

Large

6

5

+1

 

Americas

10

11

-1

Medium

14

17

-3

 

APAC

4

4

-

 

 

 

 

 

Global

1

1

-

 

23

24

-1

 

 

23

24

-1

 

At the start of the financial year a new Large contract was launched and in January 2020, we expanded a contract in the Americas to become an Extra Large contract. In addition, we consolidated two Medium contracts into existing Material Contracts, with no contract losses.

 

Since the year end an additional multiple year contract has been signed in APAC. We expect that this contract will grow to a Medium contract within 12 months of launch.

 

Regional analysis

While there is a clear overlap between the geographic location of our clients and their members' requests, members use our concierge services across all the regions. Net revenue by region reflects our servicing location rather than the location of our corporate clients. This allows us to track the efficiency and profitability of our operations around the world, and is therefore presented on this basis.

 

Net Revenue

2020

£m

2019

£m

% change

EMEA

22.0

20.5

7%

Americas

13.8

15.8

-13%

APAC

8.5

9.5

-11%

 

44.2

45.8

-3.5%

 

EMEA Net Revenue increased by 7% with growth from our existing clients as well as the impact of the new Large contract which launched at the start of the year being partially offset by a significant reduction in supplier commissions in H2 due to the pandemic.

 

In the Americas, Net Revenue reduced by 13% primarily due to the impact of the pandemic on both concierge revenue and supplier commissions in the region partly offset by the expansion of a contract to Extra Large in January.

 

In APAC, Net Revenue reduced by 11% principally due to the pandemic and the annualised impact of a Large contract lost in the last quarter of the prior year partly offset by growth from existing clients during the year.

 

Operating expenses and other income

Operating expenses and other income reduced by £9.8m to £39.4m (2019: £49.1m). As already stated, on the implementation of IFRS 16 the transition method used was the Modified Retrospective method. Therefore, 2019 comparatives have not been restated. The impact of IFRS 16 implementation in 2020 was to reclassify £3.8m of lease costs to depreciation and interest. Therefore, the underlying operating expenses of the business on a like-for-like basis compared to prior year were £42.9m, a reduction of £5.9m. The majority of this reduction was due to cost savings in the second half of the year in response to lower revenue as a result of the pandemic.

 

These cost reduction actions included, but were not limited to:

 

·      successful renegotiation with suppliers and landlords

·    a review of projects to focus on the most strategic core investments (including development of our core technology platform, where we continue to invest)

·      a freeze on employee bonuses and salary increases as well as some redundancies

·      voluntary salary sacrifice scheme in exchange for share options

·      use of various countries government support schemes (e.g. Furlough, Kurzarbeit).

 

Average headcount in the year has increased to 970 (2019: 837), primarily due to additional resourcing for the expansion of a contract to an Extra Large contract in the Americas during the first half of the year. However, our working full time equivalent (FTE) employees have decreased due the use of Furlough and Kurzarbeit across various countries, accounted for in compliance with respective rules and regulations with no ongoing liabilities, as well as redundancies in the second half of the year. We finished the year with fewer FTE than the end of prior year.

 

All Group property leases are short to medium-term or have appropriate break clauses incorporated, allowing flexibility when assessing space requirements across the world, especially in the current working environment.

 

Regional Adjusted EBITDA

Adjusted EBITDA is after expenses, other than deprecation £4.4m (2019: £1.0m), amortisation £3.4m (2019: £3.0m), share-based payment and exceptional items expenses £1.9m (2019: £0.5m). On this basis, Adjusted EBITDA was £4.8m (pre-IFRS 16: £0.9m; 2019: pre-IFRS 16 loss £(3.3)m).

 

Adjusted EBITDA pre-IFRS16 increased to a profit of £0.9m from a loss of £3.3m in 2019. The overall improvement has been driven by continued operational efficiencies together with cost savings as described above in the second half of the year.

 

After allocating the costs of central IT infrastructure, software development, property, senior management and other central costs, the Adjusted EBITDA pre-IFRS 16 for each region is set out below:

 

Adjusted EBITDA pre-IFRS 16

2020

£m

2019

£m

EMEA

7.0

2.3

Americas

(5.8)

(4.3)

APAC

(0.3)

(1.3)

Total

0.9

(3.3)

Adjusted EBITDA pre-IFRS 16 %

2.0%

(7.2)%

 

EMEA

Adjusted EBITDA pre-IFRS 16 margin in EMEA, defined as Adjusted EBITDA pre-IFRS 16 as a percentage of Net Revenue, has increased to 32% from 11% in the prior year. Continued operational efficiencies in the region and cost saving actions offset by lower supplier revenue has delivered this significant improvement in margin.

 

Americas

The Americas region Adjusted EBITDA loss pre-IFRS 16 has increased to £(5.8)m (2019:£(4.3)m)). This decline is, in part, because of a reduction in Net Revenue due to the pandemic together with one off set up costs (unconnected to acquiring or fulfilling the contract) on the expansion of an existing contract to an Extra Large contract. This decline was partly mitigated by improved operational efficiencies in the period as the region matures as well as cost reduction in the second half of the year.

 

APAC

The APAC region Adjusted EBITDA pre-IFRS 16 loss has improved in the year by £1.0m to a loss of £0.3m. The improved performance has also been driven by operational efficiencies as well as cost saving measures in the second half of the year.

 

Amortisation

Amortisation costs, relating to the internal platform (TenMAID) and the customer-facing platforms, were £3.4m in 2020 (2019: £3.0m) reflecting continued investment in technology to drive improvements in service levels, efficiency and competitive advantage.

 

Net finance (expense)/income

Net finance expense in the year was £1.0m (2019: income of £0.5m); the expense of £1.0m included IFRS 16 lease interest expense as well as foreign exchange losses on the translation of inter-company balances in the year.

 

Share-based payments and exceptional items expense 

The share-based payments and exceptional items expense in the year was £1.9m (2019: £0.5m). Of this, £1.5m (2019: £0.5m) related to share based payments expense reflecting share grants made under management incentive plans established after listing on AIM and also two salary sacrifice share option schemes implemented during the year. The exceptional items expense of £0.4m (2019: £0.0m) was an impairment expense following a review of a database previously capitalised were a specific portion of this was less likely to generate future economic benefits due to the fall out of the COVID-19 pandemic.

 

Loss before tax

The loss before tax improved to £(5.9)m from £(7.3)m in 2019.

 

Taxation

The taxation expense for the year was £1.0m (2019: £1.0m) which related to tax liabilities and payments due in profitable overseas entities. Approximately £0.3m related to the crystallisation of non-UK legacy taxation positions in the current year.

 

Loss per share

The total comprehensive loss for the year was £(6.9)m (2019: £(8.3)m), resulting in a loss per share (excluding treasury shares) of 8.6p (2019: loss per share of 10.3p). The Board does not recommend the payment of a dividend.

 

Group cash flow

 

 

£m

2020

£m

2019

Loss before tax

 

(5.9)

(7.3)

Net finance expense

 

0.5

-

Working capital changes

 

2.9

0.7

Non-cash items (depreciation and amortisation, share-based payments and exceptional items expenses)

 

9.7

4.5

Operating cash flow

 

7.2

(2.1)

Capital expenditure

 

(0.2)

(1.2)

Investment in intangibles

 

(5.3)

(4.3)

Taxation

 

(0.2)

(0.5)

Cash inflow/(outflow)

 

1.5

(8.1)

Cash flows from financing activities

 

 

 

Purchase of treasury shares

 

-

(0.1)

Loan receipts

 

1.0

 -

Repayment of leases and net interest

 

(3.6)

(0.1)

Net cash used by financing activities

 

(2.6)

(0.2)

Foreign currency movements

 

(0.3)

-

Net decrease in cash and cash equivalents

 

(1.4)

(8.3)

Cash and cash equivalents

 

11.0

12.3

 

 

Cash generated by operations was £7.2m (2019: cash used £2.1m). The cash generated in the year has been achieved by continuing operational efficiencies across the business, cost savings primarily in H2 and a reduction in working capital, predominately driven by lower revenue in the second half of the year. In addition, non-cash items in the year increased versus prior year reflecting implementation of IFRS 16 (increasing depreciation and finance expenses), an increase in share-based payment expenses due to implementation of two salary sacrifice for share options schemes and exceptional item expenses (impairment write down). The expenditure that was capitalised on IT infrastructure, the Ten Digital Platform and TenMAID totalled £5.5m as we continue to invest in our technology. Net cash used by financing activities is primarily due to lease payments and interest of £3.6m again reflecting implementation of IFRS 16 offset by long-term loan receipts of £1m. This has led to an overall cash decrease of £1.4m significantly lower than prior year of £8.3m. Note, cash decreased in H1 by £2.7m (unaudited) but improved in H2 due to operational net cash inflow of £1.4m (unaudited) including the loan receipts of £1.0m.

 

Group balance sheet

 

2020

£m

2019

£m

Intangible assets

10.5

9.0

Property, plant and equipment

1.1

1.8

Right of Use Assets

5.1

-

Cash

11.0

12.3

Other current assets

7.0

11.1

Lease liabilities

(3.3)

-

Other current liabilities

(12.5)

(13.3)

Long-term borrowings

(1.0)

-

Non-current lease liabilities

(2.7)

-

Net assets

15.2

20.9

Share capital/share premium

28.6

28.6

Reserves

(13.4)

(7.7)

Total equity

15.2

20.9

 

Net assets were £15.2m (2019: £20.9m). The reduction in the year is due to reductions in trade and other receivables and a reduction in cash. Right-of-use Assets and lease liabilities (current and non-current) arose as a result of the implementation of IFRS 16. The Group's long-term borrowings of £1.0m consists of a loan from the US government's Small Business Administration (SBA) assisting businesses to keep their workforce employed during the COVID-19 pandemic crisis.

 

Alan Donald

Chief Financial Officer

23 November 2020
 

Consolidated Statement of Comprehensive Income for the year ended 31 August 2020

 

Note

2020

2019

 

 

£'000

£'000

Revenue

3

46,369

49,080

Cost of sales on principal member transactions

 

(2,145)

(3,248)

Net Revenue

3

44,224

45,832

Other cost of sales

 

(828)

(1,327)

Gross profit

 

43,396

44,505

Administrative expenses

 

(48,943)

(52,489)

Other income

 

620

157

 

 

 

 

Operating profit/(loss) before amortisation, depreciation, interest, share based payments, exceptional items and taxation ("Adjusted EBITDA")

 

4,778

(3,322)

Depreciation

 

(4,395)

(993)

Amortisation

5

(3,380)

(3,011)

Share-based payment expense

 

(1,525)

(501)

Exceptional items

4

(405)

-

 

 

 

 

Operating loss

 

(4,927)

(7,827)

Finance income

 

2

554

Finance expense

 

(966)

(15)

Loss before taxation

 

(5,891)

(7,288)

Taxation expense

 

(1,005)

(973)

Loss for the year

 

(6,896)

(8,261)

 

 

 

 

Other comprehensive (expense)/income:

 

 

 

 Foreign currency translation differences

 

(60)

153

Total comprehensive loss for the year

 

(6,956)

(8,108)

 

 

 

 

 

 

 

 

Basic and diluted loss per ordinary share

 

(8.6)p

(10.3)p

 

 

The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.

 

Consolidated Statement of Financial Position as at 31 August 2020

 

 

Note

2020

2019

 

 

£'000

Non-current assets

 

 

 

 

 

 

 

Intangible assets

5

10,532

9,009

Property, plant and equipment

 

1,126

1,843

Right-of-use assets

6

5,116

-

Total non-current assets

 

16,774

10,852

 

 

 

 

Current assets

 

 

 

 

 

 

 

Inventories

 

66

56

Trade and other receivables

 

6,941

11,069

Cash and cash equivalents

 

10,957

12,341

Total current assets

 

17,964

23,466

 

 

 

 

Total assets

 

34,738

34,318

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

(11,906)

(12,745)

Obligations under finance leases

 

-

(30)

Provisions

 

(596)

(596)

Lease liabilities

6

(3,335)

-

Total current liabilities

 

(15,837)

(13,371)

 

 

 

 

Net current assets

 

2,127

10,095

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

 

(1,000)

-

Obligations under finance leases

 

-

(2)

Lease liabilities

6

(2,668)

-

Total non-current liabilities

 

(3,668)

(2)

 

 

 

 

Total liabilities

 

(19,505)

(13,373)

 

 

 

 

Net assets

 

15,233

20,945

 

 

 

 

Equity

 

 

 

 

 

 

 

Called up share capital

 

81

81

Share premium account

 

28,480

28,480

Merger relief reserve

 

1,993

1,993

Treasury reserve

 

15

(30)

Foreign exchange reserve

 

(405)

(345)

Retained deficit

 

(14,931)

(9,234)

Total equity

 

15,233

20,945

 

 Consolidated Statement of Changes in Equity for the year ended 31 August 2020

 

 

Note

Share capital

Share premium account

Merger relief reserve

Foreign exchange reserve

Treasury reserve

Retained deficit

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 September 2018

 

81

28,480

1,993

(498)

77

(1,474)

28,659

 

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

-

(8,261)

(8,261)

Foreign exchange

 

-

-

-

153

-

-

153

Total comprehensive income for the year

 

 

-

-

153

-

(8,261)

(8,108)

 

 

 

 

 

 

 

 

 

Shares sold by Employee Benefit Trust (EBT)

 

-

-

-

-

(107)

-

(107)

Equity-settled share-based payments charge

 

-

-

-

-

-

501

501

Balance at 31 August 2019

 

81

28,480

1,993

(345)

(30)

(9,234)

20,945

Change in accounting policy

 

-

-

-

-

-

(326)

(326)

Balance at 31 August 2019 (as restated)

 

81

28,480

1,993

(345)

(30)

(9,560)

20,619

 

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

-

(6,896)

(6,896)

Foreign exchange

 

-

-

-

(60)

-

-

(60)

Total comprehensive income for the year

 

-

-

-

(60)

-

(6,896)

(6,956)

 

 

 

 

 

 

 

 

 

Shares purchased by Employee Benefit Trust (EBT)

-

-

-

-

45

-

45

Equity-settled share-based payments charge

 

-

-

-

-

-

1,525

1,525

Balance at 31 August 2020

 

81

28,480

1,993

(405)

15

(14,931)

15,233

 

 

 Consolidated Statement of Cash Flows for the year ended 31 August 2020

£'000

Note

2020

2019

 

 

£'000

£'000

 

 

 

 

Cash flows from operating activities

 

 

 

Loss for the year, after tax

 

(6,896)

(8,261)

 

 

 

 

Adjustments for:

 

 

 

Taxation expense

 

1,005

973

Finance expense

 

455

15

Investment income

 

(2)

(60)

Amortisation of intangible assets

5

3,380

3,011

Depreciation of property, plant and equipment

 

913

993

Depreciation of right-of-use asset

6

3,482

              -  

Equity-settled share based payment expense

 

1,525

501

Exceptional Items

4

405

-

 

 

 

 

Movement in working capital

 

 

 

(Increase)/decrease in inventories

 

(9)

30

Decrease/(increase) in trade and other receivables

 

4,128

(2,055)

(Increase) /decrease in trade and other payables

 

(1,190)

2,710

Cash from/(used in) operations

 

7,196

(2,143)

Tax paid

 

(150)

(547)

Net cash from/(used in) operating activities

 

7,046

(2,690)

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase of intangible assets

5

(5,308)

(4,305)

Purchase of property, plant and equipment

 

(217)

(1,187)

Finance income

 

2

60

Net cash used in investing activities

 

(5,523)

(5,432)

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Lease liability repayments

 

(3,162)

-

Purchase of treasury shares

 

(45)

(100)

Payment of finance lease obligations

 

-

(73)

Loan receipts

 

1,000

-

Interest received / (paid)

 

5

(15)

Finance lease interest paid

 

-

(8)

Interest paid on lease liabilities

 

(448)

-

Net cash used in financing activities

 

(2,650)

(196)

 

 

 

 

Foreign currency movements

 

(257)

-

 

 

 

 

Net decrease in cash and cash equivalents

 

(1,384)

(8,318)

 

 

 

 

Cash and cash equivalents at beginning of period

 

12,341

20,659

 

 

 

 

Cash and cash equivalents at end of period

 

 

 

Cash at bank and in hand

 

10,957

12,341

Cash and cash equivalents

 

10,957

12,341

 

Notes to the financial information

The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 August 2019 or 2020. Statutory accounts for the years ended 31 August 2019 and 31 August 2020, which were approved by the directors on 23 November 2020, have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for each of 2019 and 2020 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 August 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 August 2020 will be delivered to the Registrar in due course, and are available from the Company's registered office at Floor 2, 355 Euston Road, London, England, NW1 3AL and are available from the Company's website: https://www.tenlifestylegroup.com/investors.

The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 August 2019, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019. The new standard impacting the Group that has been adopted in the annual financial statements for the year ended 31 August 2020 is IFRS 16: Leases, further details of which appear in Note 6 below. Other new standards, amendments and interpretations to existing standards, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements. 

2. Going Concern

The consolidated financial statements have been prepared on a going concern basis. The ability of the Company to continue as a going concern is contingent on the ongoing viability of the Group. The Group meets its day-to-day working capital requirements through its cash balances and wider working capital management. The current economic conditions continue to create uncertainty, particularly over (a) corporate members' engagement; and (b) supplier revenue volumes. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group expects to be able to operate within the level of its current cash resources. Having assessed the principal risks and the other matters discussed in connection with the going concern statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated financial statements.

 

Various sensitivity analyses have been performed to reflect a variety of possible cash flow scenarios, taking into account the COVID-19 pandemic, where the Group achieves significantly reduced revenue for the twelve months following the date of this annual report. Overall, the Directors have prepared cash flow forecasts covering a period of at least twelve months from the date of approval of the financial statements, which foresee that the Group will be able to operate within its existing working capital facilities.

 

The COVID-19 pandemic has had an impact on our business, noting the Company has managed costs firmly to ensure operating performances align with pre-COVID-19 levels and the Board believes that the business is able to navigate through the impact of COVID-19 due to the strength of its customer proposition, its balance sheet and the net cash position of the Group.

 

However, the rapid emergence of the coronavirus pandemic has caused significant disruption to many businesses where the implementation of social distancing measures is not practical or is deemed ineffective and this, had an implication for the wider global economy and specifically for the supply chain within which we reside - primarily our customer's willingness or ability to use our services in the volumes planned prior to the pandemic. The selection of assistance services available to our customers has been increased in the year, which has encouraged their engagement. There is, however, a risk that the Group will be further impacted by continued social distancing restrictions impacting the volumes of engages and by prospective customers delaying launches. If Net revenue is not in line with cash flow forecasts, the Directors have identified cost savings associated with the reduction in revenue and have the ability to identify further cost savings if necessary.

 

3. Segment reporting

The total revenue for the Group has been derived from its principal activity, the provision of concierge services. This has been disaggregated appropriately into operational segment and geographical location.

The Group has three reportable segments: Europe, the Middle East and Africa (EMEA), North and South America ("The Americas") and Asia-Pacific (APAC). Each segment is a strategic business unit and includes businesses with similar operating characteristics. They are managed separately in similar time zones to reflect the geographical management structure.

 

2020

2019

 

£'000

£'000

EMEA

21,975

20,494

Americas

13,784

15,795

APAC

8,465

9,543

Net Revenue

44,224

45,832

 

 

 

Add back: cost of sales on principal transactions

2,145

     3,248

Revenue

46,369

49,080

 

 

 

EMEA

8,205

2,259

Americas

(3,862)

(4,264)

APAC

435

(1,317)

Adjusted EBITDA

4,778

(3,322)

 

 

 

Amortisation

(3,380)

(3,011)

Depreciation

(4,395)

(993)

Share-based payment expense

(1,525)

(501)

Exceptional items

(405)

-

Operating loss

(4,927)

(7,827)

 

 

 

Foreign exchange (loss)/gain

(511)

554

Other net finance expense

(453)

(15)

Loss before taxation

(5,891)

(7,288)

Taxation expense

(1,005)

(973)

Loss for the year

(6,896)

(8,261)

 

Net Revenue is a non-GAAP company measure that excludes the direct cost of sales relating to member transactions managed by the Group, such as the cost of airline tickets sold under the Group's ATOL licences. Net Revenue is the measure of the Group's income on which segmental performance is measured.

Adjusted EBITDA is a company non-GAAP specific measure excluding interest, taxation, amortisation, depreciation, share-based payment and exceptional costs.

Adjusted EBITDA is the main measure of performance used by the Group's Chief Executive Officer, who is considered to be the chief operating decision maker. Adjusted EBITDA is the principal operating metric for a segment.

The statement of financial position is not analysed between reporting segments. Management and the chief operating decision maker consider the statement of financial position at Group level.

 

4. Exceptional Items

 

2020

2019

 

£'000

£'000

Impairment of intangible asset

(405)

           -  

 

(405)

           -  

 

The impairment charge in the year related to specific know-how, enabling more cost-efficient servicing of concierge requests. An assessment of the database capitalised determined that a specific portion of this was less likely to generate future economic benefits due to the fall-out of the COVID-19 pandemic. Such impairment is considered to be one-off in nature and therefore presented as an exceptional item.

 

5. Intangible assets

 

Capitalised development costs

Website

Trademarks

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 31 August 2018

20,817

1,909

55

22,781

Additions

4,305

-

-

4,305

Disposals

-

-

-

-

At 31 August 2019

25,122

1,909

55

27,086

 

 

 

 

 

Additions

5,308

-

-

5,308

Impairment

(405)

-

-

(405)

At 31 August 2020

30,025

1,909

55

31,989

 

 

 

 

 

Accumulated amortisation

 

 

 

 

At 31 August 2018

13,363

1,648

55

15,066

Charge for the year

2,780

231

-

3,011

At 31 August 2019

16,143

1,879

55

18,077

 

 

 

 

 

Charge for the year

3,350

30

-

3,380

At 31 August 2020

19,493

1,909

55

21,457

 

 

 

 

 

Carrying amount

 

 

 

 

At 31 August 2019

8,979

30

-

9,009

 

 

 

 

 

At 31 August 2020

10,532

-

-

10,532

 

All additions related to internal expenditure. The useful economic lives of the capitalised development platforms and website are assessed to be five years and three years respectively. The impairment charge in the year related to specific know-how, enabling more cost-efficient servicing of concierge requests. An assessment of the database capitalised determined that a specific portion of this was less likely to generate future economic benefits due to the fall-out of the COVID-19 pandemic.

6. IFRS 16 "Leases" 

IFRS 16 will primarily impact the accounting by lessees and will result in the recognition of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases as previously required under IAS 17 and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. The Group will take advantage of the optional exemptions which exist for low-value leases. The income statement is impacted due to the differences between straight line accounting and using an incremental borrowing rate, with operating expense replaced with interest and depreciation, so key metrics such as EBITDA will change.

The Group has elected to apply IFRS 16, 'Leases', in accordance with the transition provisions contained in IFRS 16. The new rules will be adopted from 1 September 2019, with the cumulative effect of initially applying the new standard recognised on that date. Comparatives for the 31 August 2019 financial year will therefore not be restated. In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

·      the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

·      the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and

·      the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has not applied the expedient, to not recognise all classes of operating leases with a remaining lease term of less than 12 months as at 1 September 2019 as short-term leases. The policy applied has been applied consistently to leases of underlying assets in the same class whereas the transitional expedient can be applied on a lease-by-lease basis. The Group has also elected not to apply IFRS 16 to contracts that were not identified as containing a lease under IAS 17 and IFRIC 4, "Determining whether an Arrangement contains a Lease".

The Group leases various properties for office space. Rental contracts are typically made for rolling periods of 1 month to 5 years but might have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

·      fixed payments (including in-substance fixed payments), less any lease incentives receivable;

·      amounts expected to be payable by the lessee under residual value guarantees; and

·      payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate. Right-of-use assets are measured at cost comprising the following:

·      the amount of the initial measurement of lease liability;

·      any lease payments made at or before the commencement date less any lease incentives received;

·      any initial direct costs; and

·      restoration costs.

IFRS 16 "Leases" (continued)

Payments associated with leases of low-value assets are recognised on a straight-line basis as an expense in the income statement. Low-value assets comprise IT equipment. On 1 September 2019, the Group will recognise lease liabilities in relation to leases which had previously been classified as "operating leases" under the principles of IAS 17. These liabilities will be measured at the present value of the remaining lease payments, discounted using the Group's assumed incremental borrowing rate as of 1 September 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 September 2019 was 6%. The lease liability to be recognised at 1 September 2019 is expected to be £7.5m and a right-of-use asset of £6.9m.

The Group has applied IFRS 16 using the modified retrospective approach and comparative information has not been restated. The Group has:

·      Recognised the lease liabilities as the present value of the remaining lease payments, discounted using the borrowing rate at the date of initial application;

·      Elected to measure its right-of-use assets using the approach set out in IFRS 16.C8(b)(i) calculating the carrying value as if IFRS 16 had applied at the lease commencement date but discounted using the borrowing rate at the date of initial application; and

·      Recognised the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings at the date of initial application.

The following table sets out the impact of adopting IFRS 16 on the statement financial position as at 1 September 2019:

 

 

As at
31 August 2019

Impact of IFRS 16

As at
1 September 2019

 

 

£'000

£'000

£'000

Assets

 

 

 

Property, plant and equipment

          1,843

               -  

          1,843

Intangible assets

          9,009

               -  

          9,009

Right-of-use assets12

                 -  

        6,931

          6,931

Total non-current assets

10,852

6,931

17,783

Total current assets

23,466

               -  

       23,466

Total assets

       34,318

        6,931

       41,249

Liabilities

 

 

 

Total current liabilities13

(13,371)

            275

(13,096)

Lease liabilities14

                 -  

(7,532)

(7,532)

Other liabilities

                (2)

               -  

(2)

Total liabilities

      (13,373)

(7,257)

(20,630)

Net assets

       20,945

(326)

       20,619

Total equity15

       20,945

(326)

       20,619

 

12The adjustment to right-of-use assets is related to all operating type lease assets.

13 The table above removes the opening rent accrual disclosed in the Groups 31 August 2019 annual financial statements.

14 The table above reconciles the minimum lease commitments disclosed in the Group's 31 August 2019 annual financial statements to the amount of lease liabilities recognised on 1 September 2019.

15 Retained earnings were adjusted to record the net effect of all other adjustments noted.

 

 

IFRS 16 "Leases" (continued)

Reconciliation of operating lease commitments

At 31 August 2019 and 1 September 2019

 

 

Operating lease commitments at 31 August 2019

Incremental borrowing rate at 1 September 2019

Discounted lease commitment at 1 September 2019

Lease liability recognised at 1 September 2019

Difference at 1 September 2019

 

£000

 

£000

£000

£000

Land and Buildings

7,548

6%

6,965

7,532

567

 

The difference of £567k on land and buildings includes non-lease components which were previously included within operating lease commitments at 31 August 2019 and not included in lease liabilities.

In May 2020, the IASB issued an amendment to IFRS 16 (COVID-19-Related Rent Concessions). It was endorsed by the EU on 9 October 2020. It is effective for annual periods beginning on or after 1 June 2020, but earlier application is permitted, including in financial statements not authorised for issue at 28 May 2020. The amendment provides relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the COVID-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. While the company was, amongst other limited and discrete lease term changes to existing leases, granted rent rebates related as a direct consequence of the COVID-19 pandemic, it has not applied this practical expedient meaning that rent rebates and other lease changes to existing leases were accounted as modifications to the lease liability and Right-of-use asset only.

Lease Liabilities

 

 

2020

 

 

£'000

In one year or less

 

2,952

Between one and five years

 

3,254

Total undiscounted lease liabilities at 31 August 2020

 

6,206

 

 

 

Lease liabilities included in the statement of financial position at 31 August 2020

 

 

Current

 

3,335

Non-current

 

2,668

 

 

6,003

Amounts recognised in the comprehensive income statement

 

 

Interest expense on lease liabilities

 

448

       

 

IFRS 16 "Leases" (continued)

Right-of-use Assets

 

Land and buildings

Total

 

£'000

£'000

At 1 September 2019

6,931

6,931

Additions

6,315

6,315

Lease Modifications

(4,444)

(4,444)

Translation differences

(204)

(204)

At 31 August 2020

8,598

8,598

 

 

 

Accumulated depreciation

 

 

At 1 September 2019

                       -

             -             

Charge for the year

3,482

3,482

At 31 August 2020

3,482

3,482

 

 

 

Carrying amount

 

 

At 31 August 2020

5,116

5,116

 

Lease modifications relate to renegotiations on leases, agreed part way through the original lease term. Additions reflect the renegotiated position and further new office leases.

 

7. Cautionary Statement

This document contains certain forward-looking statements relating to Ten Lifestyle plc (the "Group"). The Group considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the Directors in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

 

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