TLA Worldwide : 2016 Prelims released

15 November 2017

TLA Worldwide plc (AIM: TLA), a leading athlete representation and sports marketing business, announces its final results for the year ended 31 December 2016.

As part of the audit for the year ended 31 December 2016, certain accounting practices and errors relating to the Group's US business were brought to the attention of the Board. This resulted in the Group's auditor undertaking additional verification work and the further appointment of an international independent accounting firm to carry out a detailed forensic review of the Group's US accounting records, internal systems and accounting practices. As a result, there was a lengthy delay to the publication of the 2016 results, whilst a full review of the Group's US accounts for the periods FY 2015, FY 2016 and the period to 30 June 2017 was completed. TLA's shares were suspended from trading on AIM on 29 June 2017, as a result of the delay in publishing the Group accounts. The review has been both extensive and exhaustive as the Group has sought to uncover and resolve all accounting issues, and implement significantly enhanced controls and procedures.

This review identified issues only within the Group's US Sports Marketing and Baseball divisions ("US business"). The main issues identified included:

• Inappropriate application of accounting policies and accounting errors;

• Revenue recognition errors;

• Cost recognition errors;

• Inappropriate treatment of certain items under aged trade and other receivables; and

• Misappropriation of funds by the former CFO Donald Malter.

  The issues above resulted in significant accounting adjustments to the 2016 results as well as the correction of prior period errors. Significant provisions were recorded against trade and other receivables and corrections were made to certain revenue and cost items.

  The US business accounted for 37% of Headline EBITDA, excluding central costs, provisions and foreign exchange charges, as set out in the Summary of EBITDA table below. No accounting issues were identified in the Group's UK, Australian and Events businesses.

  The Group's former CFO, Donald Malter, whose responsibility included overseeing the application of the Group's accounting policies in the US, resigned and Bill Armstrong was appointed as Interim Group CFO, on 19 June 2017. Bill Armstrong's focus has been assisting with the review, preparing updated accounts with detailed reconciliations, preparing a remedial plan to strengthen the Group's internal systems and accounting controls as well as strengthening the US finance team. Good progress has been made in this regard over the Summer and Autumn and now the US business has significantly enhanced controls and improved financial reporting systems and procedures.

  Forensic review

  Following the forensic review by the independent accounting firm and subsequent investigation, evidence emerged of cash misappropriation and other unauthorised transfer of funds totalling approximately $0.8 million over a three year period by the former Group CFO, as well as instances of intentional posting of erroneous accounting entries within the US business' books and records by former members of the US finance team, which was overseen by the former Group CFO. The inappropriate accounting treatments, accounting errors and recognition errors referred to above have primarily arisen as a result of these actions. The scope of the forensic review, together with investigations led by Bill Armstrong, included various procedures intended to discover instances of erroneous accounting entries.

  The Company's insurer is aware of the misappropriation and the Board is pursuing recovery of these funds under its insurance policy. A further update will be provided when appropriate.

  Remedial actions undertaken

• The appointment of a new Group CFO to be based in London with responsibility to oversee all the Group's businesses is progressing and we expect to make an announcement shortly with the new Group CFO in place by early January 2018;

• Strengthened and substantially changed the US finance team, including a revised team structure and the appointment of Matthew Craig, a sports and entertainment industry finance executive, as North American CFO who will report into the new Group CFO. Bill Armstrong will remain with the Group for a sufficient period of time to ensure an orderly hand over process;

• Brought the US division in line with the Group's invoicing and revenue recognition policies, with robust controls in place to ensure these are enforced;

• Improved outstanding receivables and aged receivable processes to ensure they are more closely monitored, collected and correctly accounted for;

• Implementing the recommendations made by the international independent accounting firm regarding the application of proper control, policies and procedures in the US business including revenue and cost recognition, appropriate segregation of duties regarding accounting system entries, contract invoicing and expense authorisation; and

• Putting in place a detailed plan, to be implemented throughout the remainder of 2017 and early 2018 which includes the roll-out of new accounting and CRM systems in the US business.

TLA have strengthened its senior team with the appointment of Matthew Craig as North American CFO who started on 31 October 2017 and the recruitment of a Group CFO is at an advanced stage and an announcement is expected shortly.

Prior to joining TLA, Mr. Craig worked for two years as the Director of Accounting and Analysis at Disney Theatrical Group, the live events division for Disney which includes theme parks, Broadway productions and cruise ships. Previously Matthew Craig was Director of Finance for ten years at the leading sports and entertainment agency, WME, (formerly International Management Group ("IMG")). In his role at IMG, Matthew Craig supervised the reporting of all North American Media properties including entertainment, archive, digital, licensing, consulting, international distribution, post production facilities and various acquisitions.

The Group's banking facilities were renewed on 3 November 2017 with SunTrust Bank, the Group's existing bankers. The facilities comprise an amortising term loan of $23.75 million and a revolving facility of $5.0 million. The facilities mature in March 2020. The interest margin varies between 3% and 5.5% over US LIBOR, depending on the Group's leverage ratio and is secured against the assets of the Group. With the revised facilities, the Group is currently in full covenant compliance and any prior covenant breaches have been remedied or waived.

The Company will shortly be publishing its annual report and accounts including a notice of AGM which will be sent to shareholders. These will be made available on the Company's investor relations website at www.tlaworldwide.com. The suspension in trading in the Company' shares will be lifted when the Company's annual report and accounts are published, expected to take place later today.

The AGM is to be held at the offices of DAC Beachcroft, at 100 Fetter Lane, EC4A 1BN at 11 am on 15 December 2017.

Review of the Group's financial performance for the year ended 31 December 2016.

* Provisions relate to irrecoverable trade and other receivables in the US business.

** The foreign exchange charge relates predominately to a loss on a forward currency contract relating to the International Champions Cup ("ICC") which had to be settled before the ICC proceeds were received.

The 2015 restatement relates to issues uncovered as part of the recent accounting review, principally incorrect revenue recognition in the US Sports Marketing business of $1.45 million and $0.5 million of understated commissions in the US Baseball business, and is set out as follows: