Ten Entertainment - Full-Year Results
29/03/2022 07:00
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RNS Number : 3078G Ten Entertainment Group PLC 29 March 2022
29 March 2022
Ten Entertainment Group plc
Full-Year Results
Record breaking sales growth, a return to profit and carrying strong
momentum into 2022
Ten Entertainment Group plc ("TEG" or "The Group"), a leading UK operator of
46 family entertainment centres, today announces its audited full-year results
for the 52 weeks to 26 December 2021.
In the first half of the year, the business laid the foundations for a
successful reopening, with significant investment in our centres, the
execution of a highly successful digital strategy, and enhanced training.
Those preparations enabled the Group to deliver an extremely successful
second half and return to profitability for the full year.
Sales momentum has continued and accelerated into the first quarter of 2022,
although this is expected to temper slightly with the return of foreign
holidays over the spring and summer period and the uncertainty created by the
ongoing crisis in Ukraine. It is still very early in the year, with
volatility in the external market, but we have demonstrated that our business
is resilient and are confident that it will continue to grow. We expect the
full year profit to be ahead of current market expectations.
FY21 Financial Summary 52 weeks ended 26th December 2021 52 weeks ended 27th December 2020 52 weeks ended 29th December 2019 Movement
vs 2019
Total sales £67.5m £36.3m £84.1m (19.7%)
Proportion of year open 62% 51% 100% (38%)
Like-for-like sales growth(1) +29.0% (17.4%) +8.0% +21.0%pts
Group adjusted EBITDA(2) £27.1m £3.3m £35.5m (23.6%)
Group adjusted profit/(loss) before tax(2) £3.1m (£19.1m) £14.2m (78.2%)
Profit / (loss) after tax £4.0m (£17.7m) £9.0m (55.7%)
Bank net (debt) / cash (£2.5m) (£12.6m) (£4.1m) 39.0%
Basic earnings / (loss) per share 5.9p (26.3)p 13.9p (8.0)p
Second Half of 2021 26 weeks ended 26th December 2021 26 weeks ended 29th Movement
December 2019 vs 2019
Total sales £56.9m £42.7m +33.3%
Like-for-like sales growth(1) +30.3% +8.6% +21.7%pts
Group adjusted EBITDA(2) £26.4m £18.4m +43.5%
Group adjusted profit before tax(2) £13.8m £7.1m +94.4%
Adjusted PBT operating margin 24.3% 16.6% +7.7%pts
Strong sales growth delivers a profitable year
· +29.0% like-for-like sales(1) growth since reopening in May
compared to 2019
· £3.1m adjusted profit before tax(2) despite being closed for
almost 40% of the year
· £26.4m of EBITDA(2) in a record-breaking second half
Sustained cash generation
· Full year free cash flow of £16.1m
· Bank net debt of (£2.5m), below pre-Covid level
· £6.2m of strategic capital investment in second half
Reaching a new level
· +41.7% like-for-like sales growth compared to 2019 in the 12
weeks to 20 March 2022
· In the 44 weeks since reopening in May 2021, 96% of the estate
has delivered a record weekly sales figure
· Like-for-like sales in 2021 school summer holidays up 57.1%
compared to 2019
Raising the Game
· Four major refurbishments completed in FY21, enhancing the
customer experience
· Customer experience broadened through karaoke, escape rooms and
laser tag developments
· Transformed digital strategy increased customer database by 89%
Building sustainable growth for 2022
· Four new centres secured for 2022, with pipeline for 2023 and
beyond looking strong
· Seven refurbishments planned in 2022, expecting to deliver over
30% ROI
· Planning to reinstate a dividend for 2022
Strong end to 2021 carrying momentum into 2022
· Highly successful competitive socialising model well positioned
to capitalise on market trends
· Despite challenging external factors, management expect growth
throughout 2022
· The Group is anticipating delivering a year of record
profitability, ahead of current market expectations
Graham Blackwell, Chief Executive Officer, commented:
"2021 has been a hugely successful year despite Covid related closures and
restrictive trading. We have raised our game in every aspect of customer
experience. Customers have embraced our highly successful competitive
socialising model.
I am very pleased with the return to profitability after such a challenging
first half with our growth principally driven by increased footfall. I am
grateful to our teams for delivering a step-change in service under difficult
circumstances. We have recognised this exceptional performance through
enhanced rewards and recognition for our people.
Since the pandemic, there has been a significant change in the market, with
customers wanting more from their time together. We have demonstrated that
we are perfectly positioned to deliver that value for money and fun leisure
experience for our customers. I am looking forward to 2022 where we will
open four new state-of-the-art centres for our customers to enjoy and we will
continue to invest in a first-class customer experience. We have started the
year with strong momentum despite the inflationary headwinds and we are set to
achieve further growth and record profitability in 2022."
Ten Entertainment Group plc via Instinctif Partners
Graham Blackwell, Chief Executive Officer
Antony Smith, Chief Financial Officer
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
Penny Bainbridge
There will be a video call today at 9:30am for analysts. For details please
contact matthew.smallwood@instinctif.com or penny.bainbridge@instinctif.com.
The supporting slides will be available on the Group's website,
www.tegplc.co.uk, later in the day.
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR. The person responsible for making this announcement is the Company
Secretary.
Forward-looking statements
This announcement contains forward-looking statements regarding the Group.
These forward-looking statements are based on current information and
expectations and are subject to risks and uncertainties, including market
conditions and other factors outside of the Group's control. Readers are
cautioned not to place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. The Group undertakes
no obligations to publicly update any forward-looking statement contained in
this release, whether as a result of new information, future developments or
otherwise, except as may be required by law and regulation.
(1)Like-for-like sales compares the sales of open centres against the same
centres during the same time period in 2019. This measure is the most
representative gauge of performance against a pre-Covid-19 baseline comparing
a 32-week trading period from 17 May 2021 to 26 December 2021 compared to 20
May 2019 to 29 December 2019.
(2)These are non-IFRS measures used by the Group in understanding its
underlying earnings. Group adjusted EBITDA consists of earnings before
interest, taxation, depreciation, amortisation costs, exceptional items and
profit or loss on disposal of assets. Group adjusted profit before tax is
defined as profit before exceptional items, profit or loss on disposal of
assets, amortisation of acquisition intangibles, and adjustments to onerous
lease and impairment provisions. Adjusted basic earnings per share
represents earnings per share based on adjusted profit after tax. Bank net
debt is the total bank borrowings, less cash and cash equivalents. It
excludes lease debt including those associated with gaming machines and
property leases. Throughout these statements, net debt is expressed as a
negative number where the Group has overall indebtedness and a positive number
where there is a net cash position.
CHAIRMAN'S STATEMENT
Reaching a new level in 2021
2021 has been an extraordinary year of transition for Ten Entertainment Group,
and the entire team have raised their game in taking the business to a new
level. We have returned the Group to profit for the full year and have
strengthened the balance sheet back to pre-pandemic levels, with significant
headroom in place to provide a strong platform for future growth and
investment.
We began 2021 in full UK Lockdown and the Board focused on ensuring that the
business was fully prepared to relaunch. We increased our digital
capabilities and reach; we prepared our teams for keeping themselves and our
customers safe; we increased our efforts on building a pipeline of exciting
new sites for 2022 and beyond; and we planned an upweighted strategic
investment programme that we are confident will propel the business to a new
level.
When the business reopened in May, our hard work was rewarded with an
excellent performance, which strengthened further in the ever-important summer
holiday period. We did see an element of one-off benefit from the Covid
enforced staycations, but the sustained strength of our sales growth,
culminating in the company's most successful ever week during the October half
term, underlined that the new level of footfall and sales was not just a
short-term phenomenon. This record sales performance has since been
surpassed during the February 2022 half term trading.
Our business is a well-established leader in competitive socialising. Our
centres offer high-quality entertainment at an affordable price and a wide
choice of activities. Fundamentally, bowling is an activity that appeals
across generations, and one where families and friends can get together to
enjoy games, food and drink in a relaxed and sociable environment.
Perhaps as a result of the difficult circumstances many people have lived
through over the last couple of years, we have seen that our customers want
more from their time together. I believe that this is one of the reasons why
our business has significantly outperformed the wider hospitality sector, with
customers prioritising a fun, social and competitive environment in which they
can also enjoy food and drink. This trend was already developing in 2019 and
has been accelerated by the lifestyle and attitude changes that were driven by
the restrictions which Covid enforced.
Our strategy has evolved to include an increasing focus on our digital
platforms, but the fundamentals remain consistent. Every action we have
taken in 2021 has been focused on four clear strategic imperatives: providing
a first-class customer experience, digitally enabled, in high-quality centres,
with increasing UK coverage. We have been rewarded with remarkable sales
growth of around 30% consistently since we reopened in May.
One of our key themes since reopening has been to make our customers feel like
Player 1 each time they visit. I have been delighted with the hard work and
dedication that I have witnessed from our people in delivering this, and I
would like to thank each and every one of them for their contribution to our
business. In 2021 we were delighted to be able to reward their loyalty with
a new recognition structure, giving our people the opportunity to share in our
business success and to be rewarded for their hard work.
We have continued to develop our sustainability programme, engaging external
experts to increase the knowledge of the Board in this key area, identifying
climate-based risks, and building a sustainable action plan. Each
refurbishment and new centre has sustainability designed in, using low energy
technologies throughout. Our electricity is from 100% renewable sources and
one of our key goals is to develop microgeneration utilising the large roof
space available on our centres. We will increase our focus in 2022 and
refine our longer-term plans for reaching net zero.
We also understand the importance of operating an ethical and sustainable
business model. We have recognised the challenges of the labour market and
have responded by enhancing our benefits and wellbeing support as well as
increasing success-related rewards for our teams. Our strategic supplier
relationships have limited our exposure to price rises and supply chain
issues. Our long-term energy contracts, focused on 100% renewable
electricity supplies, have been beneficial in mitigating much of the
inflationary pressure seen elsewhere in the market. We will continue to
focus our decision making on the long-term interests of all our stakeholders
and I am confident that this will continue to bring benefits to all of them.
We are two years on from the start of the Covid-19 pandemic and we find
ourselves facing into a new landscape. The success of the vaccine roll-out
means that lockdowns have recently been avoided and are looking increasingly
less likely in the future. Our business has adapted extremely well in
delivering for our customers in this changing environment, where demand for
great value entertainment is stronger than ever. The trend towards
experiential leisure is accelerating and we are well positioned to maximise
our growth.
I have been a member of the Board since 2018 and was honoured to be appointed
Chairman in 2021. I would like to extend my personal thanks to our Executive
team and Board, who have navigated the Group through these challenging times
with clarity of purpose and a focus on the long-term sustainable growth of the
business. We now have less bank debt than we had at the end of 2019, which
gives us confidence to accelerate our investment programme in 2022. We will
have at least four new centres by the end of the year, and a pipeline of
several more to come in 2023. We plan to refurbish a record number of
centres this year, having proven that each refurbishment creates a substantial
uplift in customer experience and profitability. Alongside this investment
programme, we expect to return to paying a dividend to our shareholders,
balancing disciplined capital investment with shareholder returns.
I am optimistic about our prospects for 2022 and am delighted to report that
we now expect full year profit to be ahead of current market expectations. I
am also very excited about our continued growth prospects into the future.
While we do expect some of the extraordinary growth seen in 2021 to be
tempered slightly as the one-off tailwinds fade, the underlying structural
growth in our business will remain. I am pleased that we have returned to
strong and consistent growth, creating value for all our stakeholders.
Adam Bellamy
Chairman
29 March 2022
CHIEF EXECUTIVE'S STATEMENT AND OPERATING REVIEW
Overview of 2021
2021 has been a year of milestones and records for the business. We have
returned to profit, delivering full year Group adjusted profit before tax of
£3.1m. We enjoyed our biggest ever summer holiday period with sales growth
of +57%. We executed our strongest ever October half term campaign, which
was surpassed in February 2022 with another record-breaking week. During
2021 we delivered seven of the top-ten trading weeks in the Group's history,
consistently raising the bar on our sales delivery. Our excellent cash
inflows in the second half have strengthened the Group's balance sheet back to
its pre-pandemic levels, with lower bank net debt than we had at the end of
2019.
Despite being closed for the first 20 weeks (38%) of the year, the Group
delivered sales of £67.5m. This is higher than the full year sales in FY16;
a mark of how far the business has come in its development. The momentum
with which we exited the year has built a sustainable platform for growth in
2022 and beyond.
Our relentless focus on great service, high-quality centres and growing our
estate remains at the core of our strategy. Our digital engagement with our
customers has strengthened enormously, with an 89% growth in our customer
database and enhanced engagement across all the major social media
platforms. The sector-leading sales growth throughout 2021 is testament to
the success of our strategy.
Sustained Sales Growth
The business reopened on 17 May, along with most other indoor hospitality
operators. Initial trade before the summer holidays delivered like-for-like
sales growth of +16.9% compared to 2019. This was an encouraging start but
was hampered by tight Government restrictions which remained in place until
"Freedom Day" (19 July 2021).
Freedom Day and the school summer holidays saw a rapid and sustained uplift in
the like-for-like performance compared to 2019. Over the full summer holiday
period, sales were +57.1% compared to 2019. The lack of foreign travel
helped, although it is difficult to disaggregate this staycation effect.
However, there is no doubt that much of this growth is an underlying
reflection of the strength of our customer proposition.
Our pricing strategy has more than offset the inflationary pressures across
the cost base. Where direct input costs have increased, we have passed this
on in the retail pricing. For our bowling, which is based on our fixed
assets and so not subject to the same inflationary increases, we have
optimised our pricing strategy to balance demand to the available capacity.
This has allowed us to retain our core focus on great value for money. The
increased footfall at peak times has created strong sales growth and we have
spread our demand further across the week by continuing to offer off-peak
incentives to fill the shoulder periods and focused deals to attract families
during the school holidays. This strategy has optimised the demand and
capacity throughout the year, and the increased footfall has generated
significant cost efficiencies which are higher than the cost of inflation in
our overheads.
We had anticipated that sales growth would soften once the school holidays had
ended, and pent-up demand had subsided. This happened to some extent, but we
were extremely encouraged to see that like-for-like sales growth remained well
over 30% from September all the way through to mid-December, only falling away
for a very short period with the uncertainty surrounding the onset of
Omicron. This was a transitory effect as customers sought to "protect" their
family Christmas and sacrificed the usual work and friends pre-Christmas
parties.
The combined effect is that in the period from reopening on 17 May to the end
of the year, total sales growth compared to the same period in 2019 was a very
strong +32.4%.
In the first 12 weeks of 2022 up to 20 March, the momentum has continued and
even accelerated. Like-for-like sales growth over this period compared to
2019 has been +41.7% and +36.2% compared to 2020. The recent February half
term has surpassed the record previously set in October 2021 half term as the
Group's largest ever week's sales. We have continued to create new records,
including our biggest ever October and February half term weeks, our largest
ever weekend and busiest ever Christmas week. 96% of our centres have
experienced their largest ever week of sales.
While this extraordinary growth has continued consistently into the first
quarter of 2022, the second and third quarters are expected to normalise back
to low double-digit levels. A combination of a late Easter, the Platinum
Jubilee celebrations, and a summer of foreign travel are all likely to
slightly suppress the relative demand. The mounting crisis in Ukraine is
putting significant inflationary pressure into the UK economy and this is
likely to further squeeze disposable incomes. However, the structural
changes in the market and our targeted investments mean that we expect that
growth compared to 2019 can continue to be delivered.
Delivering Profit and Cash
Consistently strong sales have created excellent cash generation and
ultimately a return to full year profitability. Despite the 20 weeks of
closure, the Group delivered £10.1m of cash inflow in the year to reduce the
bank net debt to (£2.5m) at the year end. This is lower than at the end of
2019 (£4.1m) and represents a very secure financial position. Our £25m RCF
facility with RBS is sufficient to maintain the business's liquidity headroom
for our future growth plans. It is our intention to repay the £14m CLBILS
term loan later in 2022 which will reduce our financing costs and allow for a
resumption of dividend payments.
Group adjusted profit before tax for the year was £3.1m, with £13.8m of
profit in the second half more than sufficient to offset the (£10.7m) loss
reported for the first half.
At the start of the year, we set ourselves the stretching goal of restoring
our financial position to pre-Covid levels and delivering a better than
breakeven profit for the year and I am delighted that we more than delivered
against these very challenging targets. The business has created momentum to
launch into a very promising next phase of growth.
A Focus on High-Returning Strategic Investment
There has been a significant shift in customer behaviours over the past 12
months. Experiential leisure has seen very strong growth as customers seek
value for their leisure time and money. The Group offers a wide range of
activities that can be combined with great food and drink to enjoy with family
and friends. This is becoming increasingly popular in comparison to a trip
to the pub or restaurant. Our like-for-like growth over the past 10 months
since May 2021 has been +32.7%, which is significantly higher than that seen
in most other hospitality venues, demonstrating the value of our competitive
social model.
The resilience and strength of the business model has reset the cash position
to allow a return to our programme of strategic investment. The strategy has
been reviewed in detail and remains fit for purpose, with an enhanced emphasis
on the digital experience for our customers.
The Group applies a disciplined approach to capital allocation, focusing on
high-returning strategic investments. Average returns have been consistently
above 30%, with a proven model of refurbishments, new centres and investments
in customer experiences. Since reopening, these returns have continued to be
delivered.
First-Class Customer Experience
Our emphasis in 2021 has been to develop the customer experience so that every
visitor can feel like Player 1. A great experience starts with our people,
where we have invested significant time in developing recruitment, training,
and reward programmes. We have targeted our pricing and promotional strategy
to ensure that our players enjoy a great value experience at every visit.
The range of games for our customers to play has been extended, and in 2021 we
saw a significant shift in participation across a wider range of activities.
We have significantly increased the range of activities on offer. We now
operate 24 escape rooms across 12 locations in the UK, with a strong pipeline
for 2022. We have 15 laser tag arenas, three soft play areas and karaoke
rooms in eight of our centres. Adding these experiences into our existing
centres generates an average return on investment of over 30%.
In addition to broadening the customer experience, we have simplified our menu
to focus on core products that our customers can enjoy together while they are
playing. We have supplemented our bar offering by introducing cocktails and
mocktails as well as introducing a quality hot drinks menu. The key focus of
each of these initiatives is to use our existing space to its maximum
potential.
As a result of all these changes, the total revenue per head (RPH) in 2021
increased by 7.9% to £15.10. This measure indicates the overall engagement
in the broad range of activities across our centres when customers visit.
Bowling sales are still 44% of our turnover, but our accelerated growth into
these other revenue streams is helping to optimise the sales density and
efficiency of our centres. During the year we saw a 3.9% increase in our
customers enjoying non-bowling activities. These additional activities are
being rolled out to the estate as part of the refurbishment programme and as
stand-alone projects where space allows.
Our recruitment and onboarding process is now fully digital, freeing up our
managers' time to focus on getting the right people and ensuring we can speed
up the onboarding process. During 2021, our recruitment and training systems
have given us an extremely flexible way to bring new people into our
business. This has allowed us to manage the challenging labour market
successfully.
We introduced revolutionary new digital training tools for our team members in
our centres. The training takes the form of a series of games in a bespoke
app that takes our staff through the basics of great service and process.
The games award points and stars so that our people are incentivised to
level-up and repeat the training where they may have fallen short. This
enhanced training has delivered three main benefits: it has speeded up the
onboarding of new staff; it has greatly enhanced customer service; and it has
helped increase our ancillary sales.
We have significantly improved our manager bonus scheme to make it directly
linked to over-delivery of targeted profit. We have aligned this development
with a targeted awards programme to recognise great customer experience
delivery. This has facilitated improved retention of key people and created
a direct link between an individual's pay, great customer service and strong
profit performance.
As well as great service, our customer experience depends on delivering good
value for money. The core bowling product is based on our fixed assets and
not subject to the same inflationary pressures as most other leisure and
hospitality operators. During 2021 we targeted our promotional pricing
strategy to optimise the yield in our centres. The average realised price
for a game of bowling in 2021 was £5.01 including VAT which is 3.7% lower
than in 2019. This approach drove a mix shift into periods and centres where
there was available capacity, maximising our yield potential and increasing
sales density across the estate over the weekly cycle. Average utilisation
has increased by 22% compared to 2019. Overall, visiting our centres
represents extremely good value for money for our customers, and that has been
demonstrated by the strong growth in footfall of over 20%.
Digitally Enabled
A key element of our progress and growth has been the seamless digitally
integrated experience. In 2021, 63% of bowling was booked online with
customers taking advantage of our enhanced website and integrated booking
system. This online booking is almost double the proportion experienced in
2019. We have significantly grown our contactable customer database by 89%
and the frequency of visit of our most valuable customer segments has also
increased.
In July 2020 we were the first in the UK bowling industry to introduce an
online ordering system for food and drink, and this has continued to perform
well throughout 2021. It has proved to be an effective driver of ancillary
sales. Food and drink sales grew by 41.3%, increasing the overall sales mix
of food and drink to 28.5% (FY19: 26.2%). By simplifying our menu, we have
improved the speed and efficiency of food service, encouraging customers to
order more often. We have also introduced several package deals, which
encourages sharing snacks while players bowl.
Through better understanding of our customers, we have step-changed our social
engagement with them. Our new TikTok channel stimulates interest,
particularly in our younger demographic. Facebook still provides a route for
more traditional targeted marketing and customer promotions and Instagram has
become a crucial tool for launching new centres and refurbishments. This
three-pillar social media strategy has helped us reach more customers in 2021
and created an aggregate following of over 224k people on social media.
We are continuing to develop the customer journey. In 2022 we will be
expanding the overall player experience of our well-established competitive
socialising model. We are investing in the latest interactive bowling
software technology across the estate which greatly enhances gameplay and
engagement.
In High-Quality Centres
Our customers come to us for the bowling experience but stay longer to enjoy
the food, drink and ancillary activities. A crucial driver of this is to
ensure that our centres are well maintained and of high quality. During 2021,
in addition to our regular maintenance capital expenditure, we have invested a
further £2.6m to improve our centres.
The refurbishments that we completed in 2020 at Acton and Birmingham Star City
have shown significant growth ahead of the estate, delivering a return on
investment of over 30%.
In 2021 we continued our refurbishment programme, investing a total of £2.4m
in four significant transformations at Nottingham, Kingston, Bristol and
Plymouth. These developments have refreshed the bar and food areas, creating
a modern look and feel. We have invested significantly in the lane lighting
to enhance the overall atmosphere in the centres. A key driver is to make
efficient use of space and we have converted some under-utilised areas into
additional social and leisure activities. We have installed karaoke rooms,
upgraded our laser tag arenas, and incorporated Houdini's escape rooms. All
these additional activities improve the sales density of the centres and drive
an uplift in food and drink sales because of the increased footfall.
In addition to these large-scale refurbishments, we have significantly
upweighted our investment in the underlying bowling product. Over the past 5
years we have successfully completed the installation of Pins & Strings
technology which has transformed the reliability of the lanes and increased
our yield. We are now turning our focus to ensuring that the rest of the
bowling product is best in class. We are replacing lanes, improving the
gutters and ball returns and enhancing the overall lighting and bowling
experience to ensure each player enjoys a modern and exciting game every time
they visit.
Our strategy of continuing to develop the atmosphere and enjoyment of our
centres continues to drive footfall. This combines with our enhanced
customer service, increased variety of games and our investment in digital to
ensure that we can continue to drive high returns on investment for each
refurbishment we carry out. We expect our refurbishment programme to
continue to deliver returns of over 30%.
An Expanding Estate
We have a winning customer formula that delivers strong footfall across the UK
in our 46 centres. We have expertise in delivering a high-quality
competitive social experience with a wide variety of activities anchored on
the core bowling product. Our aim is to continue to expand the estate with
quality new centres each year.
During 2021 we did not add any new centres to the estate due to the
uncertainty in the external environment. However, we did benefit from a
strong performance from our new centre in the heart of Manchester's vibrant
northern quarter at Printworks. This is a 12-lane centre in a high footfall
metropolitan location. Printworks has exceeded expectations, with a more
evening-focused clientele. 2021 also benefited compared to 2019 from the
annualisation of sales from Southport and Falkirk. Together these three
centres are delivering a return on the £6m investment of over 30%.
We have made excellent progress in developing the pipeline of new centres for
the future and will open four new centres in 2022. We have already started
work on a new centre in an empty retail unit in Walsall and expect this to
open in the second half of the year and we have almost finalised the
acquisition of a new centre in the Home Counties. In addition to these two
centres, we are well developed on a further five opportunities, mostly
repurposed retail space, which we are confident we will be able to open over
the course of the next 18 months.
We are maintaining our focus on good quality locations at affordable long term
rental deals. Our property cost across the estate including all service
charges is only £11.22 per square foot. This low average rent base means
that we can invest in high-quality centres as a destination entertainment
venue for our customers and continue to drive long-term returns on investment
of over 30% on our new centres.
This significant expansion programme is accelerating as a result of the recent
availability of varying sized retail space and because landlords are seeing
the benefits of TEG as an attractive partner and a long-term stable tenant
that brings significant footfall to their estate.
Sustainable Development
Our new centres and refurbishments are all being developed with sustainability
in mind. We are rolling out low energy lighting solutions across the estate
to supplement the programme already completed on the energy efficient Pins
& Strings pinsetter machines. We continue to develop our energy
reduction investments across the estate, reducing our overall carbon
consumption. In conjunction with this, we continue to source 100% of our
electricity from guaranteed renewable sources.
We have made good progress towards adoption of the Task Force on Climate
Related Financial Disclosures (TCFD) reporting in 2022 and have conducted our
readiness assessments. We have engaged with external consultants to develop
our strategy for delivery of our net zero aspirations and expect to report on
these in full during the course of 2022, incorporating a broad suite of
metrics for the business to track progress.
We continue to develop our diversity and inclusion agenda. 33% of the Board
are female and 50% of the management population of the Group is female.
We worked hard to ensure our key stakeholders suffered as little as possible
as a result of the Covid Lockdowns. All our suppliers have been paid in full
or have newly negotiated contracts in place. During the whole Covid period,
we made no enforced redundancies and paid out over £12.4m to colleagues who
were unable to work due to Covid-19. This was fortunately 71% funded by the
Government's Coronavirus job Retention scheme (CJRS). Our landlords have now
been repaid in full or have benefited from regeared leases to compensate for
any property shortfalls. The £5m additional funds from shareholders have
been reinvested into the business in 2021, generating returns in excess of
30%.
Now that the cash position is fully recovered and the bank net debt is below
pre-pandemic levels, it is our intention later in the year to make full early
repayment of the £14m CLBILS term loan. This will pave the way for the
Group to reinstate a dividend for 2022. We will provide further detail on this
at our half-year update later in the year.
Outlook
We are delighted with how strongly we have begun 2022, with sales growth over
the first 12 weeks of the year +41.7% ahead of the same period in 2019. This
maintains the momentum from the end of last year, starting the year on a
strong footing.
We are expecting the second and third quarters to be slightly more
challenging, with a late Easter, Platinum Jubilee events and a return to
foreign holidays all likely to impact on the demand for UK-based experiential
leisure. The current squeeze on cost of living from rising fuel prices, food
prices and inflation in general are all likely to have an impact on disposable
income. As a result, we expect our growth to moderate to low double digits
for the balance of the year.
Labour costs are relatively low compared to other businesses in the
hospitality industry, representing less than 20% as a proportion of total
sales. Labour costs are expected to be subject to around 7% inflation
through pay rises and an increase in National Insurance contributions.
However, our high sales growth rate means that the business has been able to
use labour efficiencies to offset these inflationary pressures, which has
enabled us to keep prices low for our customers. This creates a virtuous
circle as footfall increases due to our centres becoming comparatively even
better value for money.
Our property costs, which comprise around 20% of sales, are subject to
long-term leases where increases are generally subject to a cap and collar
mechanism and therefore not as vulnerable to short-term inflationary
pressures. Food and drink direct costs and consumables only comprise around
11% of the total cost base and have been passed through to the customer.
Electricity is fixed until 2024 and the Group has a number of other fixed term
contracts which are expected to result in relatively modest inflationary
pressures in the year ahead despite the market volatility.
Although it is still early in the year, with some uncertainty in the external
market, we are confident that our business is resilient and will continue to
grow. We have a strong strategy in place with a proven track record of
financial returns. Our cash position is fully restored with a pipeline of
investments in place for the year ahead. Demand remains robust, and we are
continuing to show significant sales growth against our 2019 baseline
comparative. As a result, we expect the full year profit to be ahead of
current market expectations.
Graham Blackwell
Chief Executive Officer
29 March 2022
FINANCIAL REVIEW
2021 marked the full recovery of the business, returning to very strong
profitability in the second half and restoring bank net debt to below 2019
levels. Even though the business was only open for 62% of the year, sales of
£67.5m delivered a full year profit before tax of £4.4m.
At the start of the year, the target was to recover the financial position
back to pre-pandemic levels. Originally this was expected to take 18-24
months. However, the consistently high sales growth and the associated
operating efficiencies has meant that this target has been achieved well ahead
of schedule by the end of 2021.
To help understanding of the business trading environment, comparisons in this
financial review are made between the 2021 figures and 2019 unless otherwise
stated. The level of disruption experienced in FY20 makes comparisons
difficult to draw any meaningful conclusions.
FINANCIAL SUMMARY
£000 52 weeks to 52 weeks to 52 weeks to Movement vs FY19
26 December 27 December 29 December
2021 2020 2019
Revenue 67,521 36,269 84,122 (16,601)
Cost of goods sold (1) (9,446) (4,854) (10,387) 941
Gross margin(1) 58,075 31,415 73,735 (15,660)
GP% 86.0% 86.6% 87.7% (1.7%)
Total operating costs (22,141) (18,051) (28,923) 6,782
Centrally allocated overheads (2,214) (4,537) (3,155) 941
Support office (6,661) (5,480) (6,157) (504)
Group adjusted EBITDA 27,059 3,347 35,500 (8,441)
Less property rent costs (12,436) (11,171) (11,932) (504)
Group adjusted EBITDA after rental costs(2) 14,623 (7,824) 23,568 (8,945)
Add back property rental costs 12,436 11,171 n/a n/a
Depreciation and interest on Right of Use Property Assets (14,495) (14,040) n/a n/a
Depreciation and amortisation (8,413) (7,986) (7,379) (1,034)
Net interest (504) (423) (788) 284
(Loss) / profit on disposal of assets (442) 99 (932) 490
Amortisation of acquisition intangibles (130) (142) (293) 163
Group adjusted profit/(loss) before tax(2) 3,075 (19,145) 14,176 (11,101)
Impairment reversal/(charge) 1,124 (2,521) - 1,124
Exceptional items 238 0 (2,381) 2,619
Profit/(loss) before tax 4,437 (21,666) 11,795 (7,358)
Taxation (432) 3,919 (2,758) 2,326
Of which: taxation attributable to Group adjusted (loss)/profit (387) 3,463 (2,836) 2,449
Profit/(loss) after tax 4,005 (17,747) 9,037 (5,032)
Earnings/(loss) per share
Basic earnings/(loss) per share 5.9p (26.3)p 13.9p (8.0p)
Adjusted basic earnings/(loss) per share 5.9p (23.2)p 19.3p (13.4p)
Full-year dividend - - 3.7p (3.7p)
1 Cost of goods sold and gross margin are presented on the basis as
analysed by management. The cost of sales as reflected in the statement of
comprehensive income consists of direct bar, food, vending, amusements, gaming
machine related costs, PDQ machine costs and staff costs. Cost of goods sold
includes a judgement whereby staff costs are excluded but security and machine
licence costs incurred by the centres are included. Deducting cost of goods
sold from revenue gives gross margin which varies to the gross profit as
reported in the Consolidated Statement of Income. This is how cost of goods
sold and gross margin are reported by the business monthly and at centre level
as labour costs are judged as material and thus reported separately with
operating costs. Please see note 2, Alternative Performance Measures which
reconciles these two measures.
2 These are non-IFRS measures used by the Group in understanding its
underlying earnings. Group adjusted EBITDA after rental costs consists of
earnings before interest, taxation, depreciation, amortisation costs, rental
costs, exceptional items, impairment reversal/(charge) and profit or loss on
disposal of assets. Group adjusted profit/(loss) before tax is defined as
profit before exceptional items, impairment reversal/(charge) and tax.
Adjusted basic earnings per share represent earnings per share based on
adjusted profit after tax. Like-for-like sales are a measure of growth of
sales adjusted for new or divested sites and adjusting for whether a centre
was forced to close due to Covid regulations over a comparable trading period.
Sales performance
Once the business reopened on 17 May, sales growth was immediate, and it
strengthened and peaked during the summer holidays before settling at around
30% for the balance of the year. Only the final two weeks of the year
leading up to Christmas showed slower growth, and this was principally a
result of the uncertainty surrounding the Omicron variant. Since Christmas
and throughout the Q1 trading period, the sales growth has accelerated.
2021 sales 2022 sales
Reopening Summer holidays Post summer Q1 peak trading
YOY % change vs 2019 17 May to 26 Jul to 6 Sept to 27 Dec to
25 Jul 5 Sept 26 Dec 20 Mar
Total Sales +21.0% +60.2% +26.6% +49.3%
Like-for-like +16.9% +57.1% +23.5% +41.7%
Gross margin
Gross margin for the year was 86.0%, a modest 1.7%pt decline compared to
2019. By its nature bowling is reliant on a fixed asset base with a low cost
of sale, so the overall margin is very high. Labour costs are not included
in this measure of gross profit, with the principal cost of goods sold being
the cost of the food and drink, as well as the supplier margin and consumable
costs for the machines.
Sales grew across all categories, but there was slightly stronger growth in
food and beverage compared to 2019. This was a function of an improved menu
and enhanced ordering systems that removed the wait and added convenience to
at lane ordering. The result of this small mix shift to food and beverage has
been a slight erosion of the gross margin, but this is to be welcomed as it
represents incremental ancillary sales.
Operating costs
Total operating costs for the year were £22.1m. This is £6.8m lower than
in 2019 as a function of cost savings made during the first 20 weeks and a
reduction in the business rates for our centres throughout the year.
In the second half of the year, the operating costs were £16.4m, (£2.0m)
more than in 2019. This 13.9% increase was driven by significantly increased
sales volumes (+33.3%) from new centres and higher footfall in existing
centres. There were inflationary pressures in labour, consumables and
services, but these were largely offset by the cost efficiencies arising from
the increased footfall. The strong operational gearing benefit from the
increased sales volume is shown in the second half where operating costs as a
% of sales fell by 4.8%pts to 28.8% (H2 19: 33.6%). Half of this fall was a
function of the reduced level of business rates which will revert to normal
levels in 2022, but the remaining 2%pt benefit is a function of that increased
model efficiency from better sales growth.
The Group expects to continue to experience cost inflation during 2022,
particularly in labour and consumables. These inflationary pressures will be
mitigated through pricing and continued optimisation of our footfall to
maximise the yield and capacity of our centres.
Central costs
Central costs comprise centrally allocated overheads and the cost of the
support office, including the PLC. Total central costs reduced by £0.4m in
2021 compared to 2019.
During the first half of the year, the business was focused on minimising
costs and preserving cash wherever possible. Many of the central staff were
on furlough, with the CJRS scheme contributing to help mitigate their costs.
Overall, the CJRS scheme paid around 71% of the total cost of retaining our
people while they were unproductive as a result of Lockdowns. The business
also significantly reduced its marketing spend and closed down a number of
activities in order to preserve cash flow. £0.7m of restart grant income
was received which was fully utilised in preparing the centres for reopening,
including enhanced cleaning, safety measures and staff retraining.
In the second half of 2021, total central and support costs were £5.9m, which
is £1.6m higher than in 2019. This is driven by three principal factors,
all related to the very strong +33.3% total sales growth in the half.
Marketing activity was upweighted by around £0.5m in the half in order to
digitally engage with our customers to drive footfall and repeat visits. We
also increased our activity in building the very strong pipeline of new sites
that we have in place for 2022 and 2023. This incurred increased
professional fees, legal costs and an upweighted internal property department
totalling an additional £0.2m. Finally, the rapid turnaround of the
business and a return to profit triggered incentive payments for management
teams which contributed an increase of £0.9m in the second half. Staff
retention was key at all levels in 2021 in an increasingly competitive and
inflationary environment. The Group implemented an improved performance
related bonus scheme that rewarded those individuals who helped to deliver
increases in profitability. This linked total remuneration to individual
performance at every level of the business. By implementing the increases in
this way, the Group has been able to focus on rewarding and retaining the key
people in the business who are driving growth.
Total central costs for the full year have been reduced compared to 2020 by
£1.1m (11.4%). Both years benefited from reduced staffing costs as a result
of furloughed employees, but one-off crisis management costs from 2020, such
as the investment in Covid protection measures and implementation of new
systems and processes have not been repeated in 2021. As the Group looks
forward to a fully trading year of investment and growth in 2022, it is
expected that central costs will remain at the run rate seen in the second
half of 2021.
Group adjusted EBITDA
The Group looks at EBITDA on a pre and post rental cost basis. Group
adjusted EBITDA after property rental costs is a measure used internally as it
takes into account the cash impact of the ongoing annual property rental costs
to ensure that centres are producing the appropriate cash flow to make an
adequate level of return. This measure is broadly equivalent to the old IAS
17 basis of recording rental costs.
In 2021, the Group returned to a significant level of EBITDA, delivering
£14.6m of EBITDA after property rent costs. This is below the £23.6m
delivered in 2019, but of course was significantly impacted by the first five
months of the year operating at a loss due to closures.
Comparing performance in the second half of the year, EBITDA after property
rental was £20.1m compared to £12.4m in 2019, a very significant 62.4%
increase. This extreme growth is principally a function of the increased
sales volume. This allows the Group to defray its fixed cost base over a
higher sales level. Typically, the margin for Group Adjusted EBITDA after
property rent costs, (EBITDA divided by sales), has been around 28%, but in H2
21 this increased significantly to 35.3%. This was a function of the ongoing
temporary cost support measures such as reduced business rates as well as the
benefit of the increased footfall. There is an expectation of an increase in
costs as a result of inflation and the reintroduction of business rates in
April 2022. Price rises and cost efficiencies have been implemented to
mitigate these increases, and the Group expects to maintain its margin at
around 28% for the medium to long term.
Depreciation, amortisation and capital expenditure
There is no suitable comparative for depreciation and amortisation in 2019 due
to the FY20 adoption of IFRS16, so this section will focus on 2020 as a
comparative measure.
Total depreciation on Right of Use (ROU) assets was £14.5m compared to
£14.0m in 2020. This increase reflects the full year impact of our
additional centre in Manchester Printworks, as well as a modest increase from
several rent regears that took place in 2021 in order to defer some of the
cash conservation measures taken during Lockdown.
Overall, the total cost of depreciation and interest on our ROU assets is £2m
higher than the cash rental costs incurred. This is a function of long
leases that are early in their tenure, creating a resultant £2m drag on PBT
but having no cash impact.
Other depreciation in the year was £8.4m, a 5.3% increase on 2020 as a
function of the Group's return to its strategic capital investment
programme. The Group expects depreciation to continue to rise over the
medium term as it invests in significant refurbishments and new centres as
part of its high-returning growth strategy.
During the year, maintenance capital was low at £0.9m, only 1.3% of sales.
This is similar to the £0.7m spent in 2020. Typically, the Group plans to
spend around 3% of sales on maintenance capital, to ensure that the site
infrastructure remains well maintained. However, due to caution during
Lockdowns, management have preserved this cash. The Group expects in the
short term to catch up some of this maintenance spend in 2022 with increased
investment before returning to the long-term target of 3% of sales.
A further £6.2m was invested in 2021 in capital programmes to drive growth.
This was principally driven by £2.6m investment in four significant centre
refurbishments and a continued roll-out of Pins & Strings. A further
£0.6m was invested in our digital strategy, improving the website, scoring
environment and customer experience. In terms of cash flow, the Group
invested a further £2.8m in deposits and forward payments for future 2022
projects in order to secure equipment and materials in order to support its
investment programme. Although a working capital movement, this has been
included in the cash flow summary to ensure transparency around the investment
programme.
The strategic investment programme will accelerate in 2022 with seven
refurbishments and four new centres planned, as well as a continued investment
in the digital infrastructure.
Finance costs and banking arrangements
£000 52 weeks 52 weeks
to 26 December to 27 December
2021 2020
Interest on bank debt (391) (330)
Amortisation of bank financing costs (124) (49)
Lease interest charges (5,481) (5,393)
Other finance income/(costs) 11 (43)
Net interest (5,986) (5,815)
Net interest showed a modest increase of £171k (2.9%) in the year. The
increased debt from CLBILS contributed to a slight increase on bank debt and
the regearing of a number of leases to secure the deferral of cash from
Lockdown has created an increase in the lease interest charges.
The Group currently has two financing facilities in place: a £25m RCF and a
£14m term loan under the Government's CLBILS scheme. Both terminate in
January 2024. The Group has now returned its balance sheet to normal levels,
with bank net debt at the end of 2021 at only (£2.5m). The original £25m
commercial RCF facility is considered more than adequate for the Group's needs
and, therefore the Group intends to make an early repayment on the CLBILS loan
later in 2022.
Group adjusted profit before tax
Despite the first 20 weeks of the year being closed, the Group has delivered a
full year adjusted profit before tax of £3.1m. In the second half of the
year, the PBT was £13.9m which is only (2.1%) lower than the Group delivered
in a full year of 2019 (FY19: £14.2m). This very strong growth is a
function of the high level of sales and is further supported by some one-off
cost savings which will moderate in 2022.
Disposal of assets
The business has continued the roll-out of the latest technology of bowling
pinsetters, referred to as Pins & Strings. When these are installed, it
results in a non-cash loss on disposal of the existing pinsetters. In 2021,
the loss of (£0.4m) was related to this. The programme is now complete.
Impairment and exceptional items
In 2020, there was a (£2.5m) impairment charge on the ROU assets because the
future cash flow did not support the asset value. This impairment review is
at the harshest possible measure because the cash inflows are discounted at
the Group's WACC whereas the assets are discounted using an Incremental
Borrowing Rate (IBR). The issue was exacerbated for year end 2020 because
the assessment was made during a Lockdown and therefore the forecasted future
cash flows were suppressed. A review of the impairment modelling has
resulted in a £1.1m write back of that impairment charge as the Group is now
able to include a stronger cash forecast for its centres.
There has also been an exceptional write back of part of a provision made in
FY19. This relates to a potential HMRC payment which following a case review
the Group now thinks is unlikely to be necessary.
Taxation
A return to profit has generated a tax charge for the year of (£0.4m). The
effective tax rate is 10%, which is significantly lower than the actual tax
rate of 19%. The principal differences arise because the impairment release
is not subject to taxation and there has been a reduction in the tax charge
resulting from a revaluation of the net deferred tax asset which has resulted
from the movement in the tax rate to 25% from 19%.
Profit after tax
The Group generated a profit after tax of £4.0m. Basic earnings per share
were 5.9p
Number of shares
The number of shares in issue is 68,367,784. Increases in issued share capital
in the year arose from the issue of 20,814 shares in May in respect of the
partial vesting of the 2018 LTIP scheme.
Dividends
The Board is not recommending a dividend for 2021, but it believes it has now
fully restored financial stability to the Group. In 2020, the Group set the
cash priorities to have sufficient headroom; reduce the debt; and return to
strategic investment. Each of these criteria have now been successfully
delivered. As a result, the Group intends to return to paying a dividend for
FY22. The quantum of the dividend payment will be reviewed as the year
progresses to ensure that the restored cash position remains in place. In
order to be able to pay a dividend, the Group must fully discharge its
obligations under the CLBILS scheme. This is now considered appropriate, and
it is expected to be repaid early during FY22.
Balance Sheet
£000 26 December 27 December Movement
2021 2020
Assets
Goodwill and other intangible assets 29,939 30,136 (197)
Property, plant and equipment 39,530 41,453 (1,923)
Deferred tax asset 4,374 4,118 256
Right-of-use assets 167,324 157,145 10,179
Inventories 1,226 508 718
Trade and other receivables 5,426 1,672 3,754
Cash and cash equivalents 11,511 7,394 4,117
259,330 242,426 16,904
Liabilities
Lease liabilities (195,662) (185,146) (10,516)
Bank borrowings (13,832) (19,908) 6,077
Trade and other payables and provisions (13,503) (5,981) (7,522)
Other liabilities (2,270) (1,582) (688)
(225,267) (212,617) (12,649)
Net assets 34,063 29,809 4,254
net debt analysis
£000 26 December 27 December Movement
2021 2020
Closing cash and cash equivalents 11,511 7,394 4,117
Bank loans (14,000) (20,000) 6,000
Bank net debt (2,489) (12,606) 10,117
Leases - machines and other (5,613) (6,945) 1,332
Leases - property (190,049) (178,201) (11,848)
Net debt (198,151) (197,752) (399)
CASH FLOW
£000 52 weeks to 52 weeks to Movement
26 December 27 December
2021 2020
Cash flows from operating activities
Group adjusted EBITDA 27,059 (7,860) 34,919
Maintenance capital 4 (910) (741) (169)
Movement in working capital 1 3,521 5,489 (1,968)
Lease and taxation payments 2 (13,579) (1,636) (11,943)
Free cash flow3 16,091 (4,748) 20,839
Dividends paid - (2,405) 2,405
Cash flow available for investment 16,091 (7,152) 23,243
Proceeds from issue of shares - 4,878 (4,878)
Strategic investments 4:
Existing estate (6,166) (3,190) (2,976)
Estate expansion (56) (3,105) 3,049
Exceptionals and share-based payments 248 25 223
Draw down/(repayment) of debt (6,000) 13,750 (19,750)
Cash flow after investment 4,117 5,206 (1,089)
Opening cash and cash equivalents 7,394 2,188 5,206
Cash and cash equivalents - end of period 11,511 7,394 4,117
1 The movement in working capital is the balance of £758k from the "Changes
in working capital" section of note 18 in the notes to the financial
statements less the £40k of amortisation of the consolidated fair value rent
free periods recognised upon acquisition, plus the £2,803k of advance
payments to suppliers of capital projects which is reflected as part of the
existing estate spend in the above table and as reconciled in note 5 in the
notes to the financial statements.
2 This is calculated from the statement of cash flows being the corporation
tax paid, finance costs paid and finance lease principal payments.
3 Free cash flow - This is cash generated from operations less measures judged
as maintenance capital, finance lease payments, taxation payments or receipts,
advance payments to suppliers of capital projects and non-cash share based
payments. Please see note 5, Alternative Performance Measures which reconciles
these two measures.
4 These 3 lines relate to the spend on capital projects and are reconciled to
cash outflows from investing activities in note 5, Alternative Performance
Measures.
Accounting standards and use of non-GAAP measures
The Group has prepared its consolidated financial statements based on
International Financial Reporting Standards as adopted by the European Union
for the 52 weeks ended 26 December 2021. The basis for preparation is outlined
in the accounting policies to the financial statements on page 72 of the 2021
annual report.
The Group uses certain measures that it believes provide additional useful
information on its underlying performance. These measures are applied
consistently, but as they are not defined under GAAP they may not be directly
comparable with other companies' adjusted measures. The non-GAAP measures are
outlined in Note 2 to the financial statements on pages 77 to 78 of the 2021
annual report.
Note on alternative performance measures
The Group uses a number of alternative performance measures ("APM"s) in the
disclosure of its results. It should be noted that due to the disrupted
nature of 2020 and 2021, the Group has used and will continue to use 2019 as a
baseline comparator for some performance measures in order to be able to
compare the business against a pre-covid trading period.
Group adjusted EBITDA This measurement is earnings before interest, taxation, depreciation,
amortisation, exceptional items, impairment reversal/(charge) and profit or
loss on disposal of assets. This has been done to show the underlying trading
performance of the Group which these other costs or income can distort. The
reconciliation to operating profit is included in Note 5 to the financial
statements.
Group adjusted EBITDA after rental costs This is earnings before interest, taxation, depreciation, amortisation,
exceptional items, impairment reversal/(charge) and profit or loss on disposal
of assets, less a deduction for the cash cost of rent. This measure is to
reflect the underlying earnings after the transition to IFRS 16 Leases. The
reconciliation to operating profit is included in Note 5.
EBITDA operating margin This is the Group adjusted EBITDA after rental costs divided by sales,
expressed as a percentage.
Cost of goods sold and gross margin The cost of sales as reflected in the statement of comprehensive income
consists of direct bar, food, vending, amusements, gaming machine related
costs, PDQ machine costs and staff costs. Cost of goods sold includes a
judgement whereby staff costs are excluded but security and machine licence
costs incurred by the centres are included. Deducting cost of goods sold from
revenue gives the gross margin. This is how cost of goods sold and gross
margin are reported by the business monthly and at centre level as labour
costs are judged as material and thus reported separately with operating
costs. The reconciliation is included in Note 5.
Operating profit/(loss) before exceptional items This is operating profit/(loss) before exceptional items and impairment
reversal/(charge).
Group adjusted profit/(loss) before tax This consists of the profit before tax adjusted for items judged as
exceptional and relating to impairment reversal/(charge).
Adjusted underlying profit after tax and adjusted earnings per share This consists of the profit after tax adjusted for exceptional items and
impairment
reversal/(charge) and is used to determine the adjusted earnings per share.
The reconciliation of this number to profit after tax is included under Note
11 to the financial statements.
Exceptional items These items are those significant cost or income items which management judges
to be one-off in nature and are not excepted to continue to be incurred as
part of the regular trading performance of the business. The separate
reporting of these per Note 8 helps to provide a better indication of
underlying performance.
Like-for-like sales These are a measure of growth of sales adjusted for new or divested sites over
a comparable trading period.
Return on Capital Employed ('ROCE') This measure is calculated as operating profit as a percentage of total
capital employed which consists of non-current assets and current assets less
current liabilities per the statement of financial position. This measure is
reflected under KPIs.
Bank net debt This is bank borrowings less cash and cash equivalents as per the statement of
financial position.
Free cash flow This is cash generated from operations less maintenance capital, advances to
suppliers for capital projects, finance lease payments, taxation payments or
receipts and non-cash share based payments. This is reconciled in note 5.
These APMs are used as they provide the user with additional information that
helps them to interpret the results using measures that the Board consider
relevant and helpful. These measures are additional and are not intended to
replace or detract from the full financial statements included herein.
It should be noted that like-for-like sales refer to sales in centres that
were open and trading in both periods. The measure excludes new centres that
were not in place in the prior year, but also excludes periods where existing
centres were in an enforced closure period in the current period due to
Covid-19 restrictions.
Antony Smith
Chief Financial Officer
29 March 2022
Consolidated statement of comprehensive income
for the 52-week period ended 26 December 2021
Note 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Revenue 4 67,521 36,269
Cost of sales (22,511) (14,095)
Gross profit 45,010 22,174
Administrative expenses (35,711) (35,504)
Impairment reversal/(charge) 1,124 (2,521)
Operating profit/(loss) 10,423 (15,851)
Finance costs 7 (5,986) (5,815)
Profit/(loss) before taxation 4,437 (21,666)
Taxation 10 (432) 3,919
Profit/(loss) and total comprehensive income/(loss) for the period 4,005 (17,747)
Earnings per share
Basic earnings/(loss) per share 11 5.86p (26.30)p
Diluted earnings/(loss) per share 11 5.84p (26.30)p
Consolidated and Company statements of financial position
as at 26 December 2021
Group Company
Note
26 December 27 December 26 December 27 December
2021 2020 2021 2020
£000 £000 £000 £000
Assets
Non-current assets
Goodwill 12 29,350 29,350 - -
Intangible assets 12 279 476 - -
Investments in joint venture 13 310 310 310 310
Investments 14 - - 38,915 38,915
Property, plant and equipment 15 39,530 41,453 - -
Right-of-use assets 16 167,324 157,145 - -
Deferred tax asset 4,374 4,118 - -
241,167 232,852 39,225 39,225
Current assets
Inventories 17 1,226 508 - -
Trade and other receivables 18 5,426 1,672 209 62
Corporation tax receivable 10 2,302 - -
Cash and cash equivalents 19 11,511 7,394 4,424 4,577
18,173 11,876 4,633 4,639
Liabilities
Current liabilities
Bank borrowings and leases 22 (16,661) (34,031) - 6
Trade and other payables (13,513) (8,282) (3,089) (1,312)
(30,174) (42,313) (3,089) (1,306)
Net current liabilities (12,001) (30,437) 1,544 3,333
Non-current liabilities
Bank borrowings and leases 22 (192,833) (171,024) - -
Deferred tax liability (2,270) (1,582) - -
(195,103) (172,606) - -
Net assets 34,063 29,809 40,769 42,558
Equity
Share capital 20 684 683 684 683
Share premium 4,844 4,844 4,844 4,844
Merger reserve 6,171 6,171 - -
Share-based payment reserve 498 250 498 250
Retained earnings 21,866 17,861 34,743 36,781
Total equity 34,063 29,809 40,769 42,558
Consolidated and Company statements of cash flows
for the 52-week period ended 26 December 2021
Group Note 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Cash flows generated from/(used in) operating activities
Cash generated from operations 21 30,827 4,480
Corporation tax received/(paid) 2,292 (715)
Finance costs paid (5,866) (5,766)
Net cash generated from/(used in) operating activities 27,251 (2,001)
Cash flows used in investing activities
Purchase of property, plant and equipment * (7,108) (6,044)
Purchase of software (24) (119)
Net cash used in investing activities (7,132) (6,163)
Cash flows (used in)/ generated from financing activities
Gross proceeds from issue of new shares - 5,038
Transaction costs from share issue - (160)
Lease principal payments (10,002) (2,853)
Dividends paid - (2,405)
Drawdown of bank borrowings 22,000 18,350
Repayment of borrowings (28,000) (4,600)
Net cash (used in)/ generated from financing activities (16,002) 13,370
Net increase in cash and cash equivalents 4,117 5,206
Cash and cash equivalents - beginning of period 7,394 2,188
Cash and cash equivalents - end of period 19 11,511 7,394
* This includes £2,803k in advances to suppliers for capital projects that
are reflected under receivables
Company Note 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Cash flows used in operating activities
Cash used in operations 21 (153) (5,358)
Net cash used in operating activities (153) (5,358)
Cash flows used in investing activities
Net cash used in investing activities - -
Cash flows generated from financing activities
Net cash received from issue of new shares - 4,878
Dividends received - 7,459
Dividends paid - (2,405)
Net cash generated from financing activities - 9,932
Net (decrease)/increase in cash and cash equivalents (153) 4,574
Cash and cash equivalents - beginning of period 4,577 3
Cash and cash equivalents - end of period 19 4,424 4,577
Consolidated and Company statements of changes in equity
for the 52-week period ended 26 December 2021
Group Share Share Share-based Merger Retained Total
capital premium payment reserve earnings equity
£000 £000 reserve £000 £000 £000
£000
Balance at 29 December 2019 (as originally reported) 650 - 275 6,171 49,815 56,911
Adjustment on initial application of IFRS 16 - - - - (14,970) (14,970)
Taxation on IFRS 16 adjustment - - - - 3,168 3,168
Balance at 30 December 2019 (adjusted) 650 - 275 6,171 38,013 45,109
Dividends paid - - - - (2,405) (2,405)
Issue of shares 33 4,844 - - - 4,877
Share-based payment credit - - (25) - - (25)
Loss for the period and total comprehensive loss - - - - (17,747) (17,747)
Balance at 28 December 2020 683 4,844 250 6,171 17,861 29,809
Share based payment charge - - 248 - - 248
Issue of share net of transaction costs 1 - - - - 1
Profit for the period and total comprehensive income - - - - 4,005 4,005
Balance at 26 December 2021 684 4,844 498 6,171 21,866 34,063
Company Share Share Share-based Merger Retained Total
capital premium payment reserve earnings equity
£000 £000 reserve £000 £000 £000
£000
Balance at 30 December 2019 650 - 275 - 33,853 34,778
Profit for the period - - - - 5,333 5,333
Issue of shares net of transaction costs 33 4,844 - - - 4,877
Share-based payment credit - - (25) - - (25)
Dividend paid - - - - (2,405) (2,405)
Balance at 27 December 2020 683 4,844 250 - 36,781 42,558
Share-based payment charge - - 248 - - 248
Issue of shares net of transaction costs 1 - - - - 1
Loss for the period - - - - (2,038) (2,038)
Balance at 26 December 2021 684 4,844 498 - 34,743 40,769
Notes to the Financial Statements
1. GENERAL INFORMATION
The Company's ordinary shares are traded on the London Stock Exchange. The
address of the registered office is Aragon House, University Way, Cranfield
Technology Park, Cranfield, Bedford MK43 0EQ. The consolidated financial
statements of the Group for the 52-week period ended 26 December 2021 comprise
the Company and its subsidiaries (together referred to as the 'Group'). The
principal activity of the Group comprises the operation of tenpin bowling
centres.
2. BASIS OF PREPARATION
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006.
In addition to complying with international accounting standards in conformity
with the requirements of the Companies Act 2006, the consolidated financial
statements also comply with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the 52 weeks ended 26 December 2021 and
have been applied consistently, to all periods presented in these consolidated
financial statements. The Group and the Company financial statements are
presented in Sterling and all values are rounded to the nearest thousand
pounds (£000) except when otherwise indicated. The financial statements are
prepared using the historical cost basis. On publishing the Company financial
statements here together with the Group financial statements, the Company is
taking advantage of the exemption in Section 408 of the Companies Act 2006 not
to present its individual statement of comprehensive income and related notes
that form a part of these approved financial statements.
3. GOING CONCERN
In assessing the going concern position of the Group and Company for the
Annual Report and the financial statements for the year ended 26 December
2021, the Group has considered a base case scenario and a plausible downside
scenario.
Base Case
The base case scenario was prepared with the following key assumptions
reflected:
· All sites are open and trading throughout the period
· There are no effects of Covid-19 reflected in the performance
· Like for Like sales are versus FY19 and reflect growth
· Labour inflation and the increases from the National Living Wage
are included
· Cost inflation is reflected in the operating and administrative
costs
· Site acquisitions and new builds are reflected in the trade and
in the cash flows
· Increased levels of capital spend are reflected in the cash flows
to maintain and refurbish the sites after the periods of closures during the
pandemic years
· The £14m CLBILS term loan will be repaid in 2022
· The Group returns to being tax paying
The scenario results in trade levels that are improved on FY19. This flows
into the cash flow performance but with the increased spend on capital, the
free cash flow is slightly lower than FY19 and results in the net debt balance
increasing slightly up on the (£2.5m) net debt reported at the end of FY21.
The Group will have significant liquidity levels with most of the £25m RCF
facility available and will pass both of its below banking covenants with
significant headroom. The leverage and fixed cost covenant return for testing
in FY2022 and are as follows:
Leverage covenant
Fixed charge covenant
March 2022 - reference level - 1.10x
March
2022 - reference level - 7.50x
June 2022 - reference level - 1.25x
June 2022 - reference level - 5.00x
September 2022 - reference level - 1.50x
September
2022 - reference level - 4.00x
December 2022 - reference level - 1.50x
December
2022 - reference level - 2.25x
Downside case
The downside case takes the base case and flexes the assumptions for plausible
impacts. These are summarised as follows:
· Total sales for FY22 are kept flat with the FY19 actual sales of
£84.1m. This scenario assumes that is there is like-for-like decline of
-2.5%, no sales from new sites opened in FY22 nor any benefit from the capital
spend on refurbishment plans.
· No mitigating actions are taken and the variable costs are not
reduced for the reduction in trade and they are kept at the base case amounts.
· All variable and fixed costs from the base case are increased by
a further 7% across the board.
All sites will remain open as it is not believed that it is plausible to
expect any Lockdowns going forward having been through a winter period without
any Lockdowns. This scenario results in a Loss Before Tax being generated and
a significant decrease in the free cash flow leading to an increase in net
debt. Mitigating actions can be taken to reduce the cash outflows as reduction
in capital spend but, the Group still has significant liquidity headroom due
to the size of its facility and does not breach its covenants, with £0.3m of
headroom. Mitigating actions could be taken by reducing spend, such as the
levels of capital investment as well as flexing the variable costs for the
decline in trade levels.
Taking the above and the principal risks faced by the Group into
consideration, the Directors are satisfied that the Group has adequate
resources to continue in operation for the foreseeable future, a period of at
least 12 months from the date of this report. Accordingly, the Group continues
to adopt the going concern basis in preparing these Financial Statements.
4. SEGMENT REPORTING
Segmental information is presented in respect of the Group's business
segments. Strategic decisions are made by the Board based on information
presented in respect of these segments. There are no differences in the
measurement of segment profit or loss, assets and liabilities for each
segment.
The Group comprises the following segments:
Tenpin Limited - Tenpin Limited (including its subsidiaries Tenpin Five
Limited and Quattroleisure Limited) is a leading tenpin bowling operator in
the UK. All revenue is derived from activities conducted in the UK.
Central - comprises central management, including company secretarial work and
the Board of Directors' and general head office assets and costs. The segment
results for the 52-week period ended 26 December 2021 and 27 December 2020 are
used by the Board for strategic decision making, and a reconciliation of those
results to the reported profit in the Consolidated Statement of Comprehensive
Income, and the segment assets are as follows:
Tenpin Central Group
Limited £000 £000
£000
For the 52-week period ended 26 December 2021
Segment revenue - external 67,521 - 67,521
Bowling 29,776 - 29,776
Food and drink 19,094 - 19,094
Machines and amusements 16,280 - 16,280
Other 2,371 - 2,371
Group adjusted EBITDA after rental costs (Note 5) 16,654 (2,031) 14,623
Segment assets as at 26 December 2021 253,612 5,728 259,340
Segment liabilities as at 26 December 2021 (221,677) (3,600) (225,277)
Reconciliation of adjusted EBITDA to reported operating profit/(loss)
Group adjusted EBITDA after rental costs (Note 5) 16,654 (2,031) 14,623
Amortisation and depreciation of intangibles, property, plant and equipment (17,426) - (17,426)
and
right-of-use assets
Loss on disposals of assets (442) - (442)
Amortisation of fair value items (130) - (130)
Impairment reversal 1,124 - 1,124
Exceptional income 238 - 238
Add back rental cost 12,436 - 12,436
Operating profit/(loss) 12,454 (2,031) 10,423
Finance costs (Note 7) (5,476) (510) (5,986)
Profit/(loss) before taxation 6,978 (2,541) 4,437
Tenpin Central Group
Limited £000 £000
£000
For the 52-week period ended 27 December 2020
Segment revenue - external 36,269 - 36,269
Bowling 16,830 - 16,830
Food and drink 9,898 - 9,898
Machines and amusements 8,298 - 8,298
Other 1,243 - 1,243
Group adjusted EBITDA after rental costs (Note 5) (5,705) (2,119) (7,824)
Segment assets as at 27 December 2020 223,200 21,528 244,728
Segment liabilities as at 27 December 2020 (193,029) (21,890) (214,919)
Reconciliation of adjusted EBITDA to reported operating (loss)/profit
Group adjusted EBITDA after rental costs (Note 5) (5,705) (2,119) (7,824)
Amortisation and depreciation of intangibles, property, plant and equipment (16,634) - (16,634)
and
right-of-use assets
Amortisation of fair value items (142) - (142)
Impairment (2,521) - (2,521)
Profit on disposals 99 - 99
Add back rental cost 11,171 - 11,171
Operating loss (13,732) (2,119) (15,851)
Finance costs (Note 7) (5,654) (161) (5,815)
Loss before taxation (19,386) (2,280) (21,666)
5. ALTERNATIVE PERFORMANCE MEASURES - NON-GAAP MEASURES
The Group has identified certain measures that it believes will assist in the
understanding of the performance of the business. The measures are not defined
under IFRS and they may not be directly comparable with other companies'
adjusted measures. The non-IFRS measures are not intended to be a substitute
for an IFRS performance measure but the business has included them as it
considers them to be important comparables and key measures used within the
business for assessing performance. These financial statements make reference
to the following non-IFRS measures:
Group adjusted EBITDA - This measurement is earnings before interest,
taxation, depreciation, amortisation, exceptional items, impairment
reversal/(charge) and profit or loss on disposal of assets. This has been done
to show the underlying trading performance of the Group which these other
costs or income can distort.
Group adjusted EBITDA after rental costs - This measurement is earnings before
interest, taxation, depreciation, amortisation, exceptional items, impairment
reversal/(charge) and profit or loss on disposal of assets, less a deduction
for the cash cost of rent.
Reconciliation of operating profit to Group adjusted EBITDA and Group adjusted 52 weeks to 52 weeks to
EBITDA after rental costs
26 December 27 December
2021 2020
£000 £000
Group adjusted EBITDA 27,059 3,347
Rental cost (12,436) (11,171)
Group adjusted EBITDA after rental costs 14,623 (7,824)
Add back rental cost 12,436 11,171
Amortisation of fair valued items on acquisition (149) (183)
Amortisation of software (131) (142)
(Loss)/profit on disposals (442) 99
Depreciation of property, plant and equipment and right-of-use assets (17,276) (16,450)
Operating profit/(loss) before exceptional items 9,061 (13,329)
Impairment reversal/(charge) 1,124 (2,522)
Exceptional items - other 238 -
Operating profit/(loss) 10,423 (15,851)
Cost of goods sold and gross margin - The cost of sales as reflected in the
statement of comprehensive income consists of direct bar, food, vending,
amusements, gaming machine related costs, PDQ machine costs and staff costs.
Cost of goods sold excludes staff costs but security and machine licence costs
incurred by the centres are included. Deducting cost of goods sold from
revenue gives the gross margin. This is how cost of goods sold and gross
margin are reported by the business monthly and at centre level as labour
costs are judged as material and thus reported separately with operating
costs.
Reconciliation of costs of sales 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Adjusted cost of sales per the financial review (9,446) (4,854)
Site labour costs (13,547) (9,519)
Machine licence and security costs in administrative expenses 482 278
Cost of sales per the statement of comprehensive income (22,511) (14,095)
Adjusted profit/(loss) before tax - This consists of the profit before tax
adjusted for items judged as exceptional and relating to impairment
reversal/(charge).
Adjusted underlying profit after tax and adjusted earnings per share - This
consists of the profit after tax adjusted for exceptional items and impairment
reversal/(charge) provisions and as used to determine the adjusted earnings
per share. A judgement has been made to reflect these measures so they are
more comparable by excluding one off items. The reconciliation of this number
to profit after tax is included under Note 11.
Exceptional costs - These items are those significant cost or income items
which management judges to be one-off in nature and are not excepted to
continue to be incurred as part of the regular trading performance of the
business. The separate reporting of these per Note 8 helps to provide a better
indication of underlying performance.
Like-for-like sales - These are a measure of growth of sales adjusted for new
or divested sites over a comparable trading period which has been determined
as FY19.
Return on Capital Employed ('ROCE') - This measure is calculated as operating
profit as a percentage of total capital employed which consists of non-current
assets and current assets less current liabilities per the statements of
financial position.
Bank net debt - This measure is made up of bank borrowings less cash and cash
equivalents as per the statement of financial position.
Free cash flow - This is cash generated from operations less maintenance
capital as reflected in the finance review, advances to suppliers for capital
projects, finance lease payments, taxation payments or receipts and non cash
share based payments. This is reconciled below:
52 weeks to 52 weeks to
26 December 27 December
2021 2020
Reconciliation of free cashflow £000 £000
Cash generated from/(used in) operations 30,827 4,480
Maintenance capital (910) (741)
Finance lease and taxation payments (13,578) (9,334)
Advance payments to supplier for capital projects - 823
Non-cash share-based payments charge (248) 25
Free cashflow per the financial review 16,091 (4,747)
Maintenance capital, existing estate and estate expansion outflow - This is
cash used in investing activities plus cash advances to suppliers for capital
projects. This is reconciled below:
52 week period ended 26 December 2021 52 week period ended 27 December 2020
Reconciliation of capital investment outflows to cash used in investing £000 £000
activities
Cash used in investing activities (7,132) (6,163)
Advance payment to supplier for capital projects - (876)
Cash outflows from capital projects (7,132) (7,039)
Analysed as follows:
Maintenance capital (910) (741)
Existing estate (6,166) (3,193)
Estate expansion (56) (3,105)
Cash outflows from capital projects (7,132) (7,039)
6. STAFF COSTS AND NUMBERS
Staff costs - Group 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Wages and salaries 16,515 11,829
Social security costs 1,267 1,088
Other pension costs 178 170
Share-based payments 248 (25)
18,208 13,062
Staff costs included within costs of sales are £13.1m (2020: £9.0m). The
balance of staff costs is recorded within administrative expenses. The staff
costs are net of CJRS which amount to £3.5m. Details of Directors'
remuneration are set out in the Directors' Remuneration Report on page 55 of
the Annual Report and Accounts. No Directors have accrued any retirement
benefits and Directors that resigned during the year received no compensation
for loss of office. The highest paid Director for the 52-week period ended 26
December 2021 received remuneration of £666,865 (2020: £267,323). The 2018
LTIP scheme vested in 2021 and 20,814 awards were exercised at a market value
of £50,687. All key management positions are held by Executive Directors of
Ten Entertainment Group plc and, accordingly, no further disclosure of key
management remuneration is deemed necessary.
The average monthly number of persons employed (including Executive Directors)
during the period, analysed by category, was as follows:
Staff numbers - Group 52 weeks to 52 weeks to
26 December 27 December
2021 2020
Number Number
Site staff 1,275 931
Administration 58 45
Unit management 157 150
1,490 1,126
Staff costs - Company 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Wages and salaries 967 1,144
Social security costs 88 123
Other pension costs 15 11
Share-based payments 248 (25)
1,318 1,253
Staff numbers - Company Number Number
Administration (including Executive Directors) 6 6
7. FINANCE COSTS
52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Interest on bank loans and overdrafts 391 330
Amortisation of debt issuance costs 124 49
Lease interest 5,481 5,393
Other (10) 43
Finance costs 5,986 5,815
8. PROFIT/(LOSS) BEFORE TAXATION
The following items have been included in arriving at profit/(loss) before
taxation:
52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Staff costs (Note 6) 18,208 13,062
Consumables charged to cost of sales 1,460 754
Depreciation of property, plant and equipment (Note 15) 6,130 5,498
Depreciation of right-of-use assets (Note 16) 11,166 10,965
Amortisation of software (Note 12) 131 171
Amortisation of fair valued intangibles on acquisition (Note 12) 90 101
Loss/(profit) on disposal of assets 442 (125)
Impairment (reversal)/charge (1,124) 2,522
Government grants received (excluding CJRS) (1,354) (148)
CJRS grants received (3,507) (5,205)
Operating lease rentals receivable/(payable) - property 61 (10)
Share-based payments 248 (25)
Repairs on property, plant and equipment 1,891 2,436
Exceptional items
Provision for updated HMRC VAT guidance 238 -
Total exceptional tems 238 -
Auditors' remuneration
Fees payable to Company's auditors for the Company and Consolidated financial 58 40
statements
Audit of Company's subsidiaries 135 95
Audit-related assurance services 37 35
230 170
9. RESULTS ATTRIBUTABLE TO TEN ENTERTAINMENT GROUP PLC
The financial statements of the Company, Ten Entertainment Group plc, were
approved by the Board of Directors on 29 March 2022. The result for the
financial year dealt with in the financial statements of Ten Entertainment
Group plc was a loss of £2.0m (2020: a profit of £5.3m). As permitted by
Section 408 of the Companies Act 2006, no separate statement of comprehensive
income is presented in respect of the Company.
10. TAXATION
Recognised in the consolidated statement of comprehensive income:
52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Current tax
Adjustment in respect of prior years - (2,494)
Deferred tax
Origination and reversal of temporary differences 1,036 (1,384)
Effect of changes in tax rates (248) -
Adjustment in respect of prior years (356) (41)
Tax charge/(credit) in statement of comprehensive income 432 (3,919)
The tax on the Group's profit/(loss) before tax differs (2020: differs) from
the theoretical amount that would arise using the standard rate of tax in the
UK of 19% (2020: 19%). The differences are explained below:
52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Profit/(Loss) before taxation 4,437 (21,666)
Tax using the UK corporation tax rate of 19% (2020: 19%) 843 (4,118)
Expenses not deductible 353 (372)
Change in tax rates on deferred tax balances (248) -
Adjustment in respect of prior years 107 (2,535)
Permanent differences (30) 605
(Use) of tax losses/loss carry back (593) 2,501
Tax charge/(credit) 432 (3,919)
On 24 May 2021, the Government confirmed that the corporation tax main rate
would remain at 19 per cent and increase to 25 per cent from 1 April 2023. As
such, the rate used to calculate the deferred tax balances as at 26 December
2021 has increased from 19 per cent to a blended rate up to 25 per cent
depending on when the deferred tax balance will be released.
11. EARNINGS PER SHARE
Basic earnings per share for each period is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted average number
of ordinary shares in issue during the period. The total shares in issue at
the end of the 52-week period were 68,367,784 (2020: 68,346,970).
The Company has 274,005 potentially issuable shares (2020: 103,673), all of
which relate to share options issued to Directors of the Company. Diluted
earnings per share amounts are calculated by dividing profit for the year and
total comprehensive income attributable to equity holders of the Company by
the weighted average number of ordinary shares outstanding during the year
together with the dilutive number of ordinary shares.
Adjusted basic earnings per share has been calculated in order to compare
earnings per share year-on-year and to aid future comparisons. Earnings has
been adjusted to exclude exceptional expenses/(income) and other one-off costs
(and any associated impact on the taxation charge). Adjusted diluted earnings
per share is calculated by applying the same adjustments to earnings as
described in relation to adjusted earnings per share divided by the weighted
average
number of ordinary shares outstanding during the year adjusted by the effect
of the outstanding share options.
Basic and diluted 52 weeks to 52 weeks to
26 December 27 December
2021 2020
Profit/(loss) after tax (£000) 4,005 (17,747)
Basic weighted average number of shares in issue 68,358,261 67,471,461
Adjustment for share awards (number) 274,005 103,673
Diluted weighted average number of shares in issue 68,632,266 67,575,134
Basic earnings/(loss) per share (pence) 5.86p (26.30)p
Diluted earnings/(loss) per share (pence)* 5.84p (26.30)p
Below is the calculation of the adjusted earnings per share:
Adjusted earnings/(loss) per share 52 weeks to 52 weeks to
26 December 27 December
2021 2020
£000 £000
Profit/(loss) after tax 4,005 (17,747)
Impairment reversal/(charge) (1,124) 2,521
Exceptional income (238) -
Tax impact on above adjustments 45 (456)
Adjusted underlying profit/(loss) after tax 2,688 (15,682)
Adjusted profit/(loss) after tax 4,051 (15,139)
Weighted average number of shares in issue 68,358,261 67,471,461
Adjusted basic earnings/(loss) per share 5.93p (23.18)p
Adjusted diluted earnings/(loss) per share* 5.90p (23.18)p
* The diluted EPS for 2020 is the same as the basic EPS as the
adjustment for the share awards would be anti-dilutive so has been excluded.
12. GOODWILL AND INTANGIBLE ASSETS
Group Fair valued Goodwill Software Total
intangibles on £000 £000 £000
acquisition
£000
Cost
At 30 December 2019 2,938 29,350 1,222 33,510
Additions - - 119 119
Adjustment on initial application of IFRS 16 - - (40) (40)
At 27 December 2020 2,938 29,350 1,301 33,589
Additions - - 24 24
At 26 December 2021 2,938 29,350 1,325 33,613
Accumulated amortisation and impairment losses
At 30 December 2019 2,576 - 931 3,507
Charge for the period - amortisation 101 - 171 272
Adjustment on initial application of IFRS 16 - - (16) (16)
At 27 December 2020 2,677 - 1,086 3,763
Charge for the period - amortisation 90 - 131 221
At 26 December 2021 2,767 - 1,217 3,984
Net book value
At 26 December 2021 171 29,350 108 29,629
At 27 December 2020 261 29,350 215 29,826
At 29 December 2019 362 29,350 291 30,003
Impairment testing is carried out at the cash-generating unit ('CGU') level on
an annual basis. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. Each individual centre is considered to be a
CGU. However, for the purposes of testing goodwill for impairment, it is
acceptable under IAS 36 to group CGUs, in order to reflect the level at which
goodwill is monitored by management. The whole Group is considered to be one
group of CGUs, for the purposes of goodwill impairment testing, on the basis
of the level at which goodwill is monitored by management and historical
allocation of goodwill upon acquisition. The overall process for testing
impairment follows the same methodology as detailed in Note 12 for property,
plant and equipment. As part of the business combination accounting for the
acquisition of Essenden Limited in 2015, the fair value of customer lists,
rebate contracts and the Tenpin Limited website was recognised and have been
fully amortised over the period for which the benefits were expected to be
recognised. The remaining value is for the lease acquired at the Worcester
centre which was significantly below market value and was fair valued and
accounted for on acquisition in 2016 and is being amortised until the end of
the lease. The amortisation charged on the above intangible assets is included
in other administrative expenses in the statement of comprehensive income.
Bank borrowings are secured on property, plant and equipment for the value of
£39.0m (2020: £25.0m).
13. INVESTMENTS IN JOINT VENTURE
Group and Company £000
At 30 December 2019 310
Acquisitions and disposals -
At 27 December 2020 310
Acquisitions and disposals -
At 26 December 2021 310
Country of Ownership Principal
Company incorporation interest % activity
Houdini's Escape Room Experience Limited (Registered address:
Aragon House, University Way, Cranfield Technology Park, MK43 0EQ) UK 50% Leisure
In December 2019, the Company entered into a Share Purchase Agreement and
acquired 50% of the share capital of Houdini's Escape Room Experience Limited
'Houdini's' for £0.3m. The Company also entered into a joint venture
agreement to determine the arrangements around the selection of Directors,
dividend policy, premises use, provision of services, put and call option
arrangements and deadlock procedures.
Tenpin Limited and Houdini's also entered into a £2.5m loan facility
agreement whereby Houdini's can borrow money from Tenpin Limited over a
three-year period to fund the building of escape rooms on their premises.
£0.6m has been borrowed as at 26 December 2021. The loans will incur a
market rate of interest and have been secured by a Debenture Agreement that
the two parties entered into. As the purpose of the joint venture is to fund
and build escape rooms there is a restriction in the agreement around the
payment of dividends by Houdini's. Houdini's financial year end has been
changed to be that of the Group. Due to the Covid-19 pandemic, Houdini's has
been closed for a significant portion of the year and no profit has been
generated of which a 50% share would be added to the investment value. The
business has not impaired the investment in Houdini's as it believes the
impact of the pandemic on the joint venture is short term, and it will return
to a profitable position once trade returns to normal.
Prior to the above agreements, in 2019, Houdini's built and operated escape
rooms at three of Tenpin's centres which were covered by a revenue share
agreement between the parties. Going forward after entering into the joint
venture arrangement, Tenpin will charge Houdini's an operating licence fee
instead. Houdini's had 21 rooms open at the end of FY21 of which seven are
operated out of five tenpin centres.
14. INVESTMENTS
Subsidiaries'
shares
Company £000
At 30 December 2019 38,915
Acquisitions and disposals -
At 27 December 2020 38,915
Acquisitions and disposals -
At 26 December 2021 38,915
The Directors believe that the carrying value of the investments is supported
by the underlying net assets of the business and the future profits that will
be generated by the Group.
Group investments
The Company has investments in the following subsidiary undertakings, which
affected the results and net assets of the Group:
Country of Percentage of
Parent registration shares held
Companies owned directly by Ten Entertainment Group plc
TEG Holdings Limited England & Wales 100%
Companies owned indirectly by Ten Entertainment Group plc
Tenpin Limited TEG Holdings Limited England & Wales 100%
Indoor Bowling Equity Limited TEG Holdings Limited England & Wales 100%
Indoor Bowling Acquisitions Limited Indoor Bowling Equity Limited England & Wales 100%
Essenden Limited Indoor Bowling Acquisitions Limited England & Wales 100%
Georgica Limited Essenden Limited England & Wales 100%
Georgica Holdings Limited Georgica Limited England & Wales 100%
Tenpin Five Limited Tenpin Limited England & Wales 100%
Tenpin One Limited Tenpin Limited England & Wales 100%
Georgica (Lewisham) Limited Georgica Holdings Limited England & Wales 100%
GNU 5 Limited Georgica Holdings Limited England & Wales 100%
Tenpin (Sunderland) Limited Tenpin Limited England & Wales 100%
Quattroleisure Limited Tenpin Limited England & Wales 100%
Tenpin (Halifax) Limited Tenpin Limited England & Wales 100%
Ten Entertainment Group plc and all its Group companies have their registered
office at Aragon House, University Way, Cranfield Technology Park, Cranfield,
Bedford MK43 0EQ.
Tenpin Five Limited and Tenpin One Limited are claiming exemption from the
audit and the preparation of financial statements in accordance with S479A of
the Companies Act 2006. A parent guarantee will be issued for the liabilities
of these companies which only consist of intercompany loans with the parent
company and thus the guarantee is not expected to be called upon.
15. PROPERTY, PLANT AND EQUIPMENT
Fixtures,
Fixed Amusement fittings and
furnishings machines equipment Total
Group £000 £000 £000 £000
Cost
At 30 December 2019 11,691 11,571 43,020 66,282
Adjustment on initial application of IFRS 16 - (10,217) (469) (10,686)
Additions - 47 6,548 6,595
Disposals (323) - - (323)
At 27 December 2020 11,368 1,401 49,099 61,868
Additions - 35 4,270 4,305
Disposals (263) - (1,282) (1,545)
At 26 December 2021 11,105 1,436 52,087 64,628
Accumulated depreciation and impairment
At 30 December 2019 2,951 5,404 10,679 19,034
Adjustment on initial application of IFRS 16 - (4,378) (22) (4,400)
Charge for the period 1,022 133 4,343 5,498
Impairment charge - - 450 450
Disposals - depreciation (167) - - (167)
At 27 December 2020 3,806 1,159 15,450 20,415
Charge for the period 1,016 101 5,013 6,130
Impairment reversal - - (264) (264)
Disposals - depreciation (114) - (1,069) (1,183)
At 26 December 2021 4,708 1,260 19,130 25,098
Net book value
At 26 December 2021 6,397 176 32,957 39,530
At 27 December 2020 7,562 242 33,649 41,453
At 29 December 2019 8,740 6,167 32,341 47,248
Property, plant and equipment and right-of-use assets are reviewed for
impairment on an annual basis. The recoverable amount of each CGU (each of the
46 (2020: 46) centres open as at the period end has been treated as a CGU) and
has been calculated as the higher of its value in use and its fair value less
cost to sell. The calculation of value in use is based on pre-tax cash flow
projections from the financial forecasts approved by the Board covering a
three-year period. Cash flows beyond this three-year period are extrapolated
over the life of the lease relating to that centre.
The key assumptions of the value in use calculation are:
26 December 27 December
2021 2020
Period on which management-approved forecasts are based 3 years 3 years
Long term growth rate applied beyond approved forecast period 2% 2%
Pre-tax discount rate 12.01% 10.78%
The pre-tax discount rate applied to the cash flow projections approximates
the Group's weighted average cost of capital ('WACC'), adjusted only to
reflect the way in which the market would assess the specific risks associated
with the estimated cash flows of the bowling businesses and to exclude any
risks that are not relevant to estimated cash flows of the bowling businesses,
or for which they have already been adjusted. This pre-tax discount rate has
been benchmarked against the discount rates applied by other companies in the
leisure sector. The impairment review this year has resulted in an impairment
reversal of £1.1m against the £2.5m of impairment charged in 2020. The
reversal has been allocated as £0.9m to Right of Use assets and £0.2m for
property, plant and equipment in the same proportions that the impairments
arose. The reversal has arisen due to the improved performance of the sites
since re-opening and thus the improvement of the short term forecasts in the
review compared to prior year, when the impairment resulted.
The key assumptions to which the calculation is sensitive remain the future
trading performance, the growth rate that is expected of each centre and the
pre-tax discount rate. If the discount rate applied in the calculations is
increased by 1%, the impairment release reduces by £0.5m and an impairment
charge of £1.3m (2020: £3.5m) arises. If the long term growth rate applied
is changed to 1%, then the impairment release reduces by £0.5m and an
impairment charge of £0.7m (2020: £5.3m) arises. If the trading performance
were to significantly reduce in-line with the downside case in the going
concern section, then the impairment reversal will reduce by £0.7m and an
impairment charge of £4.2m arises.
For the calculation of fair value less cost to sell, management has assumed
that each Tenpin Limited business could be sold for a multiple of 5x EBITDA
(2020: 5x EBITDA).
The depreciation and impairment reversal/(charge) are recognised in
administrative expenses in the statement of comprehensive income. Bank
borrowings are secured on property, plant and equipment for the value of
£39.0m (2020: £25.0m).
16. RIGHT-OF-USE ASSETS
Amusement
machines
Property and other Total
Group £000 £000 £000
Cost
At transition on 30 December 2019 164,920 10,727 175,647
Impairment of assets on transition (16,275) - (16,275)
Lease additions - 444 444
Disposals - (348) (348)
Modification of leases 14,869 - 14,869
Lease surrenders - - -
At 27 December 2020 163,514 10,823 174,337
Lease additions - 442 442
Disposals - (166) (166)
Modification of leases 20,067 - 20,067
At 26 December 2021 183,581 11,099 194,680
Accumulated depreciation and impairment
At transition on 30 December 2019 - 4,416 4,416
Charge for the period 8,648 2,317 10,965
Impairment charge 2,072 - 2,072
Disposals - Depreciation - (261) (261)
At 27 December 2020 10,720 6,472 17,192
Charge for the period 9,013 2,153 11,166
Impairment reversal (860) - (860)
Disposals - depreciation - (142) (142)
At 26 December 2021 18,873 8,483 27,356
Net book value
At 26 December 2021 164,708 2,616 167,324
At 27 December 2020 152,794 4,351 157,145
17. INVENTORIES
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
£000 £000 £000 £000
Goods held for resale 1,226 508 - -
The cost of inventories recognised as an expense and included in cost of sales
amounted to £5.8m (2020: £3.6m). There is a provision of £0.1m (2020:
£1.0m) for obsolete shoes in FY21 and then spares, food and drink stocks in
FY20, due to the impact of centre closures around the year end, due to the
Covid-19 pandemic. These are included in the figures above. Bank borrowings
for the value of £39.0m (2020: £25.0m) are secured on all assets of the
Group including inventory.
18. TRADE AND OTHER RECEIVABLES
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
Current receivables £000 £000 £000 £000
Trade receivables 374 58 - -
Amounts owed by subsidiary undertakings - - 205 60
Accrued income 114 - - -
Advance payments to supplier 2,803 - - -
Other receivables 844 1,063 - 2
Prepayments 1,291 551 4 -
5,426 1,672 209 62
There is a provision of £0.3m (2020: £0.1m) for trade receivables that are
beyond their due date and a provision of £0.1m (2020: £0.1m) against other
receivables for a deposit paid to a landlord that may not be recoverable.
Included in other receivables is a loan to Houdini's for £0.6m, (2020:
£0.2m) which is charged interest at the effective interest rate agreed at the
time of the loan. The loans mature at the end of 2022 and will be extended
until the end of 2024.
19. CASH AND CASH EQUIVALENTS
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
£000 £000 £000 £000
Cash and cash equivalents 11,511 7,394 4,424 4,577
20. SHARE CAPITAL
2021 2020
Group and Company Shares £000 Shares £000
68,346,970 (2020: 65,000,000) ordinary shares of £0.01 each at the beginning 68,346,970 683 65,000,000 650
of the year
Issue of share capital during the period 20,814 1 3,346,970 33
Ordinary shares of £0.01 each at the end of the year 68,367,784 684 68,346,970 683
As at 26 December 2021, the Company's authorised share capital was £683,678
(2020: £663,470) divided into a single class of 68,367,784 (2020: 68,346,970)
ordinary shares of 1p each. All issued ordinary shares are fully paid up. The
share capital of the Group is represented by the share capital of the Company,
Ten Entertainment Group plc, which was incorporated on 15 March 2017. The
shares confer on each holder the right to attend, speak and vote at all the
meetings of the Company with one vote per ordinary share on a poll or written
resolution.
21. CASH GENERATED FROM OPERATIONS
Group Company
52 weeks to 52 weeks to 52 weeks to 52 weeks to
26 December 27 December 26 December 27 December
2021 2020 2021 2020
Cash flows from operating activities £000 £000 £000 £000
Profit/(loss) for the period 4,005 (17,747) (2,038) (2,126)
Adjustments for:
Tax 432 (3,919) - -
Finance costs 5,986 5,815 6 -
Non-cash one-off income (238) - - -
Non-cash share-based payments charge/(credit) 248 (25) 248 (25)
Loss/(profit) on disposal of assets 442 (125) - -
Amortisation of intangible assets 221 272 - -
Depreciation of property, plant and equipment 6,130 5,498 - -
Depreciation of right to use assets 11,166 10,965 - -
Impairment (reversal)/charge (1,124) 2,521 - -
Changes in working capital:
(Increase)/decrease in inventories (720) 789 - -
(Increase)/decrease in trade and other receivables* (955) 3,257 (146) 2,350
Increase/(decrease) in trade and other payables 5,234 (2,821) 1,777 (5,557)
Cash generated from/(used in) operations 30,827 4,480 (153) (5,358)
* Cashflows from advances to suppliers of capital projects
are reflected under investing activities
22. BANK BORROWINGS AND LEASE LIABILITIES
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
Current liabilities £000 £000 £000 £000
Bank loans 4,666 20,000 - -
Leases - Machines/other 3,223 3,201 - -
Leases - Properties 8,941 10,922 - -
Capitalised financing costs (169) (92) - (6)
16,661 34,031 - (6)
In September 2019, the Group entered into a £25.0m facility with the Royal
Bank of Scotland plc ('RBS') for three years. This facility consists of a
committed £25.0m facility split into a £23.0m revolving credit facility and
a £2.0m overdraft facility. In January 2021, the Group entered into a £14.0m
CLBILS term loan facility with RBS for three years until January 2024. During
the year, the Group aligned the expiry date of the £25.0 facility with the
CLBILS facility. The interest rates for the facilities are tabled further on.
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
Non-current liabilities £000 £000 £000 £000
Bank loans 9,334 - - -
Leases - Machines/other 2,390 3,744 - -
Leases - Property 181,108 167,280 - -
192,832 171,024 - -
Bank borrowings are repayable as follows:
Group Company
26 December 27 December 26 December 27 December
2021 2020 2021 2020
Bank loans £000 £000 £000 £000
Within one year 4,666 20,000 - -
Between one and two years 4,667 - - -
Between two and five years 4,667 - - -
14,000 20,000 - -
The RCF and overdraft have not been drawn down at the end of FY21, with the
£14.0m outstanding balance being the CLBILS term loan facility which is
repayable over the next three years as reflected before.
Available borrowings are as follows for 2021:
Total available Total drawn
Group Currency Interest rates Maturity £000 £000
Revolving credit facility GBP LIBOR + 1.40% Jan-2024 23,000 -
CLBILS facility GBP LIBOR + 1.70% Jan-2024 14,000 14,000
Bank overdraft GBP LIBOR + 1.40% Jan-2024 2,000 -
Total borrowings 39,000 14,000
The payment profile of minimum lease payments under Leases is as follows:
Property leases Machines and other leases Total
26 December 27 December 26 December 27 December 26 December 27 December
2021 2020 2021 2020 2021 2020
Net Group £000 £000 £000 £000 £000 £000
Within one year 8,941 10,922 3,223 3,201 12,164 14,123
Between one and two years 7,126 6,168 1,956 2,667 9,082 8,835
Between two and five years 23,552 20,971 434 1,077 23,986 22,048
After five years 150,430 140,140 - - 150,430 140,140
190,049 178,201 5,613 6,945 195,662 185,146
Property leases Machines and other leases Total
26 December 27 December 27 December 29 December 26 December 27 December
2021 2020 2021 2020 2021 2020
Gross £000 £000 £000 £000 £000 £000
Within one year 15,169 17,522 3,241 3,402 18,410 20,924
Between one and two years 13,069 12,348 1,967 2,768 15,036 15,116
Between two and five years 39,842 38,039 440 1,111 40,282 39,150
After five years 197,236 180,932 - - 197,236 180,932
265,316 248,841 5,648 7,281 270,964 256,122
Future finance charges on leases (75,267) (70,640) (35) (336) (75,302) (70,976)
Present value of lease liabilities 190,049 178,201 5,613 6,945 195,662 185,146
Leases are in place for all 46 centres (2020: 46) at a value of £190.0m
(2020: 178.2m), amusement machines from Bandai Namco Europe Limited with a
value of £5.3m (2020: £6.4m), Wi-Fi equipment with a value of £nil (2020:
£0.1m) and coffee machines acquired in 2019, with a value of £0.3m (2020:
£0.4m).
Analysis of statutory net debt
Net (debt)/cash as analysed by the Group consists of cash and cash equivalents
less bank loans and amounts to (£2.5m) (2020: (£12.6m)). Statutory net debt
as analysed below includes leases.
Net cash
Cash Bank excluding
and cash loans and notes and Statutory
equivalents overdrafts leases Leases net debt
£000 £000 £000 £000 £000
Balance at 30 December 2019 2,188 (6,250) (4,062) (171,955) (176,017)
Changes from financing cash flows 5,206 (13,750) (8,544) 2,853 (5,691)
Lease modifications in the year - - - (14,962) (14,962)
Lease acquisitions - - - (1,082) (1,082)
Balance at 27 December 2020 7,394 (20,000) (12,606) (185,146) (197,752)
Changes from financing cash flows 4,117 6,000 10,117 10,006 20,123
Lease modifications in the year - - (20,067) (20,067)
Lease acquisitions - - - (455) (455)
Balance at 26 December 2021 11,511 (14,000) (2,489) (195,662) (198,151)
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