3 June 2019

TLA Worldwide plc

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

 

2018 Final Results

 

 

TLA Worldwide plc (AIM: TLA) is pleased to announce its final results for the year ended 31 December 2018. The results reflect the Group's disposal of its US businesses and the intention to dispose of its Australian business.

 

The Group accounts, due to the sale of our US businesses and the intended sale of our Australian business, are unaudited. The Company accounts (Continuing operations) have been audited. More detail is set out in the Principal Accounting Policies.

 

HEADLINE RESULTS	Continuing operations	Discontinued operations	Year ended 31 December 2018	Year ended 31 December 2017	%
			$000	$000	Change
Revenue	-	50,737	50,737	51,100	(0.7)
Gross profit	-	31,676	31,676	34,800	(9.0)
Headline EBITDA	(3,824)	2,726	(1,098)	4,673	(123.5)
Headline profit/(loss) before tax1	(3,824)	663	(3,161)	2,999	(205.4)
Sports Marketing Headline EBITDA			1,577	5,862	(73.1)
Baseball Headline EBITDA			1,149	3,351	(65.7)
STATUTORY FIGURES			Year ended 31 December 2018	Year ended 31 December 2017	%
			$000	$000	Change
Operating loss - continuing			(4,504)	(5,095)	11.6
Loss before tax - continuing			(4,504)	(5,095)	11.6
Loss from discontinued operations			(23,736)	(2,726)	(770.7)
Loss after tax			(28,242)	(7,786)	(262.7)
Loss per share (cents) - continuing			(3.14)	(3.53)	11.0
Loss per share (cents) - discontinued			(16.55)	(1.90)	(771.1)
Loss per share (cents) - total			(19.69)	(5.42)	(263.3)
Net debt at 31 December			(19,430)	(16,495)	(17.8)

 

 

 

 

¹Headline EBITDA after bank interest and depreciation

²Headline EBITDA over gross profit

³Headline earnings defined as profit or loss for the year adjusted to add back amortisation of acquired intangible assets and any other acquisition/disposal related charges, share based payment charges, fair value movement on financial derivatives, unwinding of discount on contingent consideration and other exceptional items. 

 

 

 

BALANCE SHEET
	Continuing Operations	Discontinued Operations	Group Balance Sheet
Non-current assets
Goodwill	-	-	-
Intangible assets	-	-	-
Property, plant and equipment	-	-	-
Derivative financial instruments	-	-	-
Investments	-	-	-
Loans to subsidiary undertakings	-	-	-
Current assets
Trade and other receivables	234	1,916	2,150
Cash and cash equivalents	814	23	837
	1,048	1,939	2,987
Assets of disposal group classified as held for sale	-	25,292	25,292
Total current assets	1,048	27,231	28,279
Current liabilities
Trade and other payables	(424)	(1,200)	(1,624)
Borrowings	-	(22,465)	(22,465)
Contingent consideration	-	-	-
	(424)	(23,665)	(24,089)
Liabilities directly associated with assets classified as held for sale	-	(15,229)	(15,229)
Total current liabilities	(424)	(38,894)	(39,318)
Net current (liabilities)/assets	624	(11,663)	(11,039)
Non-current liabilities
Borrowings	-	-	-
Contingent consideration	-	-	-
Total liabilities	(424)	(38,894)	(39,318)
Net (liabilities)/assets	624	(11,663)	(11,039)

 

 

 

Keith Sadler, Interim Non-Executive Chairman, said: "In the first half of the year, despite solid operating performance in parts of the business, the weaker performance in others, including the reduction in the number of events organised and cost pressures in Baseball, resulted in lower income and profitability. With a similar outlook in the second half, and a potential breach of banking covenants, a strategic review was conducted by the Board and after due consideration a decision was taken that a sale of the US and Australian businesses was necessary in order for the Company to pay off its bank debt held at a subsidiary level and comply within the timeframes provided by SunTrust's Forbearance Agreement. The sale of the US business completed in December 2018 and the Group has made solid progress on the sale of the Australian business. 

 

"Looking ahead, should the sale of the Australian business proceed, then the Group will become an 'AIM Rule 15 cash shell'. After the full discharge of the bank debt held at subsidiary level, there is expected to be a modest cash balance in TLA. The Group's strategy is to acquire a business that is seeking an AIM quoted platform via a Reverse Takeover. The Directors are considering opportunities in a number of sectors but will focus on an acquisition that can create significant value for shareholders in the form of capital growth and/or dividends."

 

 

 

Enquiries:

 

TLA Worldwide plc
Keith Sadler, Interim Non-Executive Chairman	+44 20 7618 9100
Beaumont Cornish Limited (Nomad and Broker)
Roland Cornish, James Biddle	+44 20 7628 3396
Luther Pendragon
Harry Chathli, Alexis Gore	+44 20 7618 9100

           

 

 

Overview

The Company's results for 2018 reflect the issues that it has faced during the period and is summarised below:

·   on 4 September 2018, the Company issued a trading and business update to the market. The Company announced that it had organised fewer events in 2018 than expected due to certain anticipated events not being successfully contracted and others failing to secure venues or teams, which meant they were unable to proceed. Additionally, the Company announced that its baseball representation business was expected to generate lower profits than previously forecasted which was primarily as a result of higher ongoing operating costs. As a result, the Company stated that it expects its results for the year ending 31 December 2018 to be significantly below market expectations. The update also stated that the Company anticipated that its net debt for the 2018 full year would be significantly higher than previously expected and, consequently, the Company was likely to breach its banking covenants with SunTrust;

·   on the 17 September, the Company initiated a strategic review lead by Ian Gray; and

·   on 10 October 2018, the Company entered into a Forbearance Agreement with SunTrust pursuant to which SunTrust agreed to forbear from exercising remedies under the Credit Agreement with respect to certain defaults by the Company, including the Company's obligation to make certain payments of principal and interest that were due in September 2018. The Forbearance Agreement provided the Company with working capital headroom as a result of the deferment of these past due principal and interest payments, and it required the Company to pursue a sale of assets that would result in a substantial repayment of the loan by 31 December 2018;

 

The sale of the Group's US businesses was completed on 28 December 2018 for proceeds of $5.9 million, which included the purchaser assuming the US businesses earn-out liabilities of $2.6 million. The proceeds were used to reduce the Group's bank debt. 

 

In order to reduce its debt, and as part of SunTrust's continued support, TLA took the decision to dispose of the Group's Australian businesses, as announced on 28 November 2018, and have categorised the Australian business as held for sale, in line with the conditions of an extended Forbearance Agreement with SunTrust.  TLA continues to progress this disposal with a preferred buyer and will update shareholders at the appropriate time. 

 

It is intended that the entire net sales proceeds from the proposed sale of the Australian business will be used to discharge all of the Group's obligations, including the remaining indebtedness to SunTrust in full. This would leave a modest cash balance in TLA.

  

If the proposed sale of our Australian businesses completes, the Company will become an AIM Cash Shell under AIM Rule 15 and intends to pursue a reverse takeover transaction, subject to shareholder approval, with the aim of delivering shareholder value. The board intends to target a business with the prospects of being profitable and cash generative and has started the process of identifying such a business.

 

The Company will update shareholders when it is able about any such future corporate development. The Company has 12 months from the date of the sale of its Australian businesses to complete a reverse takeover.

 

The financial results of the US businesses; Australian businesses; and the Events business, have been classified as discontinued operations and presented separately in the Group Income statement for both 2018 and 2017. A reconciliation to the Group Income statement is set out in the Finance Review.

 

Operating Overview

 

Sports Marketing - discontinued

 

The division performance in 2018 saw revenue of $38.0 million (2017: $35.6 million) and Headline EBITDA of $1.6 million (2017: $5.9 million). This reflects the positive performance of Australia, offset by the weak performance of the US Sports Marketing and the Events business, which did not have any soccer events as a result of the Soccer World Cup.

 

Baseball Representation - discontinued

 

Revenue in Baseball Representation was $12.8 million (2017: $15.5 million) and Headline EBITDA of $1.1 million (2017: $3.4 million). The decline in performance reflects the loss of key personnel and clients in the second half of the year, after the announcement that the US businesses had been put up for sale.

 

Board Changes

 

In August 2018, Bart Campbell resigned as Executive Chairman and stepped down from the Board of Directors for personal reasons. In addition, Richard Shamsi resigned as a board director, also for personal reasons.

 

Following completion of the sale of its US Businesses, announced on 28 December 2018, Michael Principe resigned on 28 December and Greg Genske resigned on 29 December 2018 as directors of TLA and other members of the Group (as applicable) with immediate effect.

 

In September 2018, the Company announced the appointment of Ian Gray to lead the strategic review of the business as detailed above. Ian Gray was not appointed to the board of directors of the Company on the basis that the conclusion of the strategic review was to sell the US Businesses and the Australian Business. As Ian Gray has not been appointed to the Board and no longer has a role in the Company, Keith Sadler remains the Interim Non-Executive Chairman of the Company.

 

 

Outlook and AIM Rule 15

 

TLA is in advanced discussions to divest its Australian business. Should the sale of the Australian business proceed, the Group would become an 'AIM Rule 15 cash shell'. At such a time the Group's strategy is to acquire a business that is seeking an AIM quoted platform via a Reverse Takeover. The Directors are considering opportunities in a number of sectors but will focus on an acquisition that can create significant value for shareholders in the form of capital growth and/or dividends.

 

As a AIM Rule 15 cash shell, the Group will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 on or before the date falling six months from the completion of the sale of the Australian business or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million of new equity funding) failing which, the Group's New Ordinary Shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM of the Company's shares would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified.

 

Annual Report and Accounts

 

The Company will shortly be publishing its annual report and accounts including a notice of AGM. These will be made available on the Company's investor relations website at www.tlaworldwide.com. The AGM is to be held at the offices of DAC Beachcroft, at 25 Walbrook, London, EC4N 8AF at 10am on 27 June 2019.

 

 

FINANCE REVIEW

 

Review of the Group's financial performance for the year ended 31 December 2018. 

 

 

Summary of RESULTS

 

	Discontinued operations   Baseball $000	Discontinued operations Sports Marketing $000	Discontinued operations   Total $000	Continuing operations   Central $000	Total 2018 $000	Total 2017 $000
Headline EBITDA	1,149	1,577	2,726	(3,824)	(1,098)	4,673
Amortisation of intangibles	(347)	(355)	(702)	-	(702)	(3,596)
Depreciation	(108)	(162)	(270)	-	(270)	(248)
Exceptional and acquisition related (costs)/income	886	188	1,074	(680)	394	(5,913)
Share based payments	-	-	-	-	-	(1,066)
Add back: operating loss from discontinued operations						1,055
Statutory operating loss - continuing				(4,504)		(5,095)
Operating profit/(loss) - discontinued	1,580	1,248	2,828			(1,055)
Loss on sale of discontinued operations			(25,345)		(25,345)	-
Headline operating loss			(22,517)	(4,504)	(27,021)	(6,150)
Finance costs					(1,719)	(2,307)
Taxation					498	671
Loss after taxation					(28,242)	(7,786)

 

2018 AND 2017 Headline ebitda

 

	Year ended 31 December 2018	Year ended 31 December 2017	%
Baseball	1,149	3,351	(65.7)
Sports Marketing	1,577	5,862	(73.1)
Central	(3,824)	(4,540)	15.8
Headline EBITDA	(1,098)	4,673	(123.5)

 

 

 

 

STATUTORY LOSS AFTER TAX

 

For the period ended 31 December 2018, the Group reported a statutory loss after tax of $28.2 million (2017: $7.8 million). This loss includes the impact of:

 

·   $1.0 million amortisation and depreciation

·   $2.3 million of positive fair value movement in respect of deferred consideration; and

·   $25.3 million loss on sale of the US businesses

 

Performance at the operating level, before interest, tax, depreciation, amortisation and exceptional charges showed a Group Headline EBITDA loss of $1.1 million (2017: profit of $4.7 million). Group Headline EBITDA margin was (3.5)% (2017: 13.4%).  2017 was materially impacted by provisions that relate to a final cleaning up of historical issues relating to irrecoverable trade debtors and other receivables within the US business. 

 

Headline diluted loss per share using Headline profit attributable to owners of the Company was 2.27 cents (2017: earnings 1.03 cents).

 

Statutory diluted loss per share attributable to owners of the Company from continuing operations was 3.14 cents (2017: loss 3.53 cents).

 

Statutory diluted loss per share attributable to owners of the Company from discontinued operations was 16.55 cents (2017: loss 1.9 cents).

 

 

 

STATUTORY RESULTS	Year ended 31 December 2018	Year ended 31 December 2017	%
	$000	$000	Change
Operating loss	(4,504)	(5,095)	11.6
Statutory loss before tax	(4,504)	(5,095)	11.6
Statutory diluted loss per share (cents) from continuing operations	(3.14)	(3.53)	11.1
Statutory diluted loss per share (cents) from discontinued operations	(16.55)	(1.9)	(771.1)
Statutory diluted loss per share (cents) from total operations	(19.69)	(5.42)	(263.3)

 

 

HEADLINE RESULTS	Year ended 31 December 2018	Year ended 31 December 2017	%
	$000	$000	Change
Revenue - discontinued	50,737	51,100	(0.7)
Gross profit - discontinued	31,676	34,800	(9.0)
Headline EBITDA	(1,098)	4,673	(123.5)
Headline EBITDA margin 1	(3.5)%	13.4%	(126.1)
Headline (loss)/profit before tax 2	(3,161)	2,999	(205.4)
Headline diluted earnings per share (cents)	(2.27)	1.03	(320.4)

 

¹Headline EBITDA over gross profit

²Headline EBITDA after bank interest and depreciation
 

 

TLA segments its operations into Sports Marketing and Baseball Representation as follows:

 

Year ended 31 December 2018

	Discontinued operations   Baseball Representation	Discontinued operations   Sports Marketing	Discontinued operations   Total	Continuing operations   Central	Total
	$000	$000	$000	$000	$000
Revenue - discontinued	12,778	37,959	50,737	-	50,737
Cost of sales - discontinued	(1,020)	(18,041)	(19,061)	-	(19,061)
Gross profit - discontinued	11,758	19,918	31,676	-	31,676
Operating expenses excluding depreciation, amortisation, acquisition related costs and exceptional items	(10,609)	(18,341)	(28,950)	(3,824)	(32,774)
Headline EBITDA	1,149	1,577	2,726	(3,824)	(1,098)
Amortisation and impairment of intangibles	(347)	(355)	(702)	-	(702)
Depreciation	(108)	(162)	(270)	-	(270)
Exceptional items and acquisition related costs	886	188	394	(680)	394
Statutory operating loss				(4,504)
Discontinued operating profit	1,580	1,248	2,828
Loss on sale of discontinued operations			(25,345)		(25,345)
Headline operating loss			(22,517)	(4,504)	(27,021)
Finance costs					(1,719)
Taxation					498
Loss for the year					(28,242)

 

 

 

 

Year ended 31 December 2017

 

The following segmental disclosures for 31 December 2017 are stated prior to any adjustment for operations subsequently discontinued:

 

	Baseball Representation	Sports Marketing	Central	Total
	$000	$000	$000	$000
Revenue	15,476	35,624	-	51,100
Cost of sales	(499)	(15,801)	-	(16,300)
Gross profit	14,977	19,823	-	34,800
Operating expenses excluding depreciation, amortisation, share based payments, acquisition related costs and exceptional items	(11,626)	(13,961)	(4,540)	(30,127)
Headline EBITDA	3,351	5,862	(4,540)	4,673
Amortisation of intangibles	(2,431)	(1,165)	-	(3,596)
Depreciation	-	(81)	(167)	(248)
Exceptional items and acquisition related costs	(2,503)	(433)	(2,977)	(5,913)
Share based payments	-	-	(1,066)	(1,066)
Operating profit/(loss)	(1,583)	4,183	(8,750)	(6,150)
Finance costs				(2,307)
Taxation				671
Loss for the year				(7,786)

 

DIVISIONAL PERFORMANCE

 

Sports Marketing - discontinued		2018	2017	%
		$000	$000	Change
Revenues		37,959	35,624	6.6%
Gross profit		19,918	19,823	0.5%
Headline EBITDA		1,577	5,862	-73.1%
Headline EBITDA Margin		7.9%	29.5%	-21.6 pp
Operating profit		1,248	4,183	(70.2)

 

Sports Marketing operations discontinued in the year ending 31 December 2018 delivered revenue of $38.0 million, Headline EBITDA of $1.6 million and an operating profit of $1.2 million. The division's reported revenues grew by 6.6%. However, gross profit, the KPI that management use to monitor performance, was flat. This reflects the lower performance of Events as the Soccer World Cup restricted our ability to stage soccer games during the June to August period. Following the strategic review, no further events were staged, beyond those that were already in progress and the sale of tickets announced. It was decided to close this business in November 2018. US Sports Marketing broke even for the year, compared to a positive contribution in 2017.

 

Headline EBITDA margin was 7.9% (2017: 29.5%).

 

 

Baseball Representation - discontinued	2018	2017	%
	$000	$000	Change
Revenue	12,778	15,476	-17.4%
Gross profit	11,758	14,977	-21.5%
Headline EBITDA	1,149	3,351	-65.7%
Headline EBITDA Margin	9.8%	22.4%	-12.6pp
Operating (loss)/profit	1,580	(1,583)	199.8%

 

Baseball representation operations discontinued in the year ended 31 December 2018 saw revenue of $12.8 million, Headline EBITDA of $1.1 million and gross profit of $11.8 million. The operating profit was $1.6 million. The decline in revenue reflects the loss of key personnel and clients in the second half of the year, following the strategic review and the announcement that the US business had been put up for sale. This impacted the ability of the business to sign any material free agency contracts and secure signing bonus fees.           

 

CASH FLOW AND BANKING ARRANGEMENTS

 

Cash balances as at 31 December 2018 were $3.0 million (31 December 2017: $11.6 million), with net debt of $19.2 million (31 December 2017: $16.5 million).  Cash includes $2.2 million within the disposal group held for sale.

 

The Group's banking facilities are being operated under a Forbearance Agreement with the Company's Bank. The Forbearance Agreement requires the Group to dispose of its Australian businesses to reduce its bank debt.

 

$4.8 million of earn-out remained payable for 2017 and 2018. These earn-outs relate to TLA's Australian sports marketing business. $1.2 million of TLA shares would be issued as part of the earn out payment. It is expected that any sale of TLA's Australian business would include the transfer of these liabilities

 

As part of the disposal of the US businesses all the earn-out liabilities of the US businesses where assumed by the purchaser.

 

BALANCE SHEET POSITION

 

The Group has net liabilities at the end of December 2018 of $11.0 million (31 December 2017: $18.6 million). This reflects the loss on sale of the US business.  Furthermore, current assets at 31 December 2018 were $28.3 million (31 December 2017: $24.8 million), with total liabilities (current and non-current) of $39.3 million (31 December 2017: $58.0 million).

 

FUTURE DEVELOPMENTS

 

On the disposal of the Australian business, the Company will become an AIM Cash Shell and it is the board's intention to seek a new business to reverse into the Company.  During this transition the board intends to keep costs to a minimum and to preserve cash.

 

DIVIDENDS

 

The board does not propose a final dividend for the year.

 

PRINCIPAL RISKS AND UNCERTAINIES

 

The management of the Group and the execution of the Group's strategies are subject to several risks. The key business risks affecting the Group are shown below.

 

Risk management  
The significant risks that the Group faces have been considered and policies have been implemented to best deal with each risk. The three most significant risks are liquidity, interest rate and credit risks.

 

Liquidity risk 
The year-end net debt was $19.4 million (2017: $16.5 million) which included cash of $3.0 million (2017: $11.6 million) and bank borrowings of $22.5 million (2017: $28.1 million). Cash includes $2.2 million within the disposal group held for sale.

 

The Group's future liquidity will be secured following the sale of the Australian business, after which surplus funds subsequent to settlement of the Group's borrowings will allow the Company to become an AIM Cash Shell under AIM Rule 15. The board intends to complete a reverse takeover 12 months from the date of the sale of the Australian businesses, during which period the board will keep costs to a minimum in order to preserve cash. The non-executive directors have therefore waived their fees from 1 January 2019.

 

Interest rate risk       
The Group finances its activities through a mixture of retained cash, operating cash flow, bank debt and equity finance. The Group monitors its exposure to interest rate risk in association with the bank debt and when investing its cash resources and during the year had an interest rate swap contract in place to fix 50% of its outstanding term loan facility at 1.9%. In view of the Forbearance Agreement in place, during which time no interest is accruing, interest rate fluctuations are not currently sensitive.

 

Credit risk     
The Group's customers included athletes, talent and large corporations. The Group has structures in place to mitigate the risk of non-payment and it is a focus of the Board to closely monitor receivables as part of its KPIs.

 

Key Performance Indicators ("KPI's")

 

The Group manages its operational performance using a number of KPIs. Performance against these KPIs was as follows:

 

 

KPI	Year ended 31  December 2018	Year ended 31  December 2017
Headline EBITDA	$(1.1)million	$4.7 million
Headline EBITDA Margin	(3.5)%	13.4%
Loss before tax	$(4.5)million	$(5.1) million
Off-season contracts negotiated	N/A	$186 million
Debtor collection days	120 days	70 days

 

 

 

 

TLA Worldwide plc

Group Income Statement

For the year ended 31 December 2018

 

   

	Note	Year ended 31 December 2018 $000	Year ended 31 December 2017 $000
Continuing operations
Administrative expenses		(4,504)	(5,095)
Operating loss		(4,504)	(5,095)
Headline EBITDA (continuing and discontinued operations)		(1,098)	4,673
Amortisation and impairment of intangibles		(702)	(3,596)
Depreciation		(270)	(248)
Exceptional and acquisition related costs (continuing)	3	(680)	(2,046)
Exceptional and acquisition related income/(costs) (discontinued)	3	1,074	(3,867)
Share based payments		-	(1,066)
Loss on sale of subsidiaries	5	(25,345)	-
Add back: operating loss from discontinued operations	1	22,517	1,055
Operating loss from continuing operations		(4,504)	(5,095)
Loss before taxation	1	(4,504)	(5,095)
Taxation	4	(2)	35
Loss after taxation from continuing operations    Loss after taxation from discontinued operations	5	(4,506)   (23,736)	(5,060)   (2,726)
		_______________	_______________
Loss after taxation for the year		(28,242)	(7,786)

 

Loss for the financial year is entirely attributable to the owners of the parent company.

 

 

Loss per share from continuing operations attributable to the owners of the parent company:
Basic (cents)	2	(3.14)	(3.53)
Diluted (cents)	2	(3.14)	(3.53)

 

Loss per share from discontinued operations attributable to the owners of the parent company:
Basic (cents)	2	(16.55)	(1.90)
Diluted (cents)	2	(16.55)	(1.90)

 

 

Loss per share from total operations attributable to the owners of the parent company:
Basic (cents)	2	(19.69)	(5.42)
Diluted (cents)	2	(19.69)	(5.42)

 

 

TLA Worldwide plc

Group Statement of Comprehensive Income

For the year ended 31 December 2018

 

 

		Year ended 31 December 2018 $000	Year ended 31 December 2017 $000
Loss for the year		(28,242)	(7,786)
Exchange differences on translation of overseas operations		(1,384)	624
Total comprehensive expense		(29,626)	(7,162)

 

 

 

Continuing operations		(5,675)	(4,618)
Discontinued operations		(23,951)	(2,544)
Total comprehensive expense		(29,626)	(7,162)

 

 

Total comprehensive expense for the financial year is entirely attributable to the owners of the parent company