Ten Entertainment - Full-Year Results
22/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230322:nRSV7786Ta&default-theme=true
RNS Number : 7786T Ten Entertainment Group PLC 22 March 2023
22 March 2023
Ten Entertainment Group plc
Full-Year Results
Value-for-money social entertainment delivering record sales and profit
Ten Entertainment Group plc ("TEG" or "the Group"), a leading UK operator of
49 social entertainment centres, today announces its audited full-year results
for the 53 weeks to 1 January 2023.
In the first full financial year of trading since FY19, the Group has
delivered its highest ever sales and profit in its history and has ended the
year with no bank debt and over £10m of cash. Our strategy is focused on
delivering high quality social entertainment to friends and families at
affordable prices. We have accelerated our investment in the existing estate
and in growing our UK footprint, delivering a fantastic customer experience to
over 8 million people in 2022.
FY22 Financial Summary 53 weeks ended 1st January 2023 52 weeks ended 26th December 2021 52 weeks ended 29th December 2019 Movement vs 2019
Total sales £126.7m £67.5m £84.1m +50.6%
Proportion of year open 100% 62% 100%
Like-for-like sales growth(1) 5.5% 29.0% 8.0%
Group adjusted EBITDA after rental costs(2) £39.6m £14.6m £23.6m +68.2%
Group adjusted profit before tax(2) £26.1m £3.1m £14.2m +84.1%
Profit before tax £34.0m £4.4m £11.8m +188.2%
Profit after tax £26.6m £4.0m £9.0m +194.3%
Bank net (debt) / cash £10.1m (£2.5m) (£4.1m) +£14.2m
Basic earnings per share 38.9p 5.9p 13.9p +179.5%
Adjusted earnings per share 29.3p 5.9p 19.3p +52.0%
Value for money customer experience driving continued and consistent growth
· +39.8% like-for-like sales(1) growth compared to 2019
· Continued momentum in 2022 with +5.5% like-for-like sales
growth compared to 2021
· Sales growth converting into profit growth with Group Adjusted
PBT of £26.1m +84.1% compared to 2019
· Profit Before Tax of £34.0m including £7.9m of one-off
benefit from impairment reversals and VAT rebate
Strong balance sheet supporting our investment programme
· Full year free cash flow of £27.2m
· Move from net debt to £10.1m of net cash at year end
· £20.3m of strategic capital invested in developing the
business
· Final dividend of 7p per share recommended; 3p interim paid in
October 2022
Focused customer proposition delivering to more customers than ever before
· Over 8 million customers enjoyed wide variety of entertainment,
food and drink
· Exceptional value for money with average realised price per
game only £5.13 inc VAT
· Ancillary spend and food and drink up 58% since 2019
Focused on the future
· Six major refurbishments and five bowling upgrades creating
best-in-class bowling centres
· World's first bowling loyalty and reward app launched
· Two new centres opened in 2022 with one more opened in February
2023. Expect to open four in 2023
Responsible stewardship sharing the rewards of success
· Over £2m of bonuses paid to team members to reward performance
· Wage increases brought forward to October 2022 to assist
employees manage cost of living crisis
· Route map to Net Zero focused on energy and waste management to
reduce our carbon footprint
An encouraging start to 2023
· Like-for-like sales growth vs 2022 in first 10 weeks of 2023 is
an encouraging +2.7%
· Bowling prices maintained to continue to deliver value for
money and maintain sales
· Utility costs 90% fixed until September 2024
· Operationally focused to minimise the impact of cost pressures
and maximise revenues to maintain profitability
Graham Blackwell, Chief Executive Officer, commented:
"2022 has built on the success of 2021 and we have taken the customer
experience another step forwards. Our teams work tirelessly to deliver
high-quality social entertainment and it is great to see those efforts
rewarded by this record financial performance.
We now have 49 centres across the UK and are in the process of building two
more, with scope to continue rolling out our winning model to more customers
over the coming years. Our model has broad appeal across the generations and
for a wide range of customers, and our value-for-money proposition makes a
visit to Tenpin an affordable treat.
We continue to be mindful of the macro-economic climate and its effects.
However, we remain confident that our investment strategy to deliver state of
the art social entertainment together with our value proposition will continue
to be very attractive to customers."
Enquiries:
Ten Entertainment Group plc
via Instinctif Partners
Graham Blackwell, Chief Executive Officer
Antony Smith, Chief Financial Officer and Company Secretary
Instinctif Partners
Tel: 020 7457 2020
Matthew Smallwood
Olga Bate
There will be a video call today at 9:30am for analysts. For details, please
contact matthew.smallwood@instinctif.com or olga.bate@instinctif.com.
Supporting slides will be available on the Group's website, www.tegplc.co.uk,
later today.
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 have been disclosed against both 2021 and 2019.
Like-for-like sales versus 2019 compares the sales of open centres against the
same centres during the same time period in 2019. This measure represents
performance against a pre-Covid-19 baseline. Like-for-like sales versus 2021
compares the sales of open centres against the same centres during a 33-week
trading period from 16 May 2022 to 1 January 2023 compared to 17 May 2021 to 2
January 2022.
(2)These are non-IFRS measures used by the Group in understanding its
performance. Group adjusted EBITDA consists of earnings before interest,
taxation, depreciation, amortisation costs, exceptional items, loss on Joint
venture, impairment reversal/(charge) and profit or loss on disposal of
assets. Group adjusted profit before tax is defined as profit before
exceptional items and impairment reversal/(charge). 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.
CHAIRMAN'S STATEMENT
Progress in all areas
2022 has been a remarkable year of growth for Ten Entertainment Group,
establishing a new benchmark for what we can achieve. We started this year
with optimism, aiming to consolidate and build upon the gains made in 2021,
but the outcome this year surpassed even our initial best expectations with a
business that is more profitable than ever.
I have been very encouraged by how well the business has navigated the
challenges of cost price inflation. We were determined to minimise the impact
of rising prices, and I am pleased that we have not passed on inflation to our
customers in our bowling prices. We have worked hard to reduce our costs and
deliver operational efficiencies.
We are focused on providing great value-for-money social entertainment for
groups of all ages to get together and enjoy each other's company. This is a
consumer need that is perhaps more relevant today than ever before and we have
been delighted to welcome a record number of customers this year.
While the macro-economic landscape looks challenging for the year ahead, I am
confident that we have a business model, customer proposition and pricing
strategy that is well suited to the environment. We offer affordable
entertainment that people of all ages can enjoy together, and we have a
pricing structure and range of activities to suit every family budget. That is
why we see our Group growing faster than almost any other business in leisure
and hospitality.
Our strategy is proving highly successful at delivering growth in sales and
profit. Our Executive team's focus on disciplined capital allocation generates
strong returns. We focus on the key drivers of growth and have continued to
invest in the customer proposition with a significant refurbishment programme
and new centre openings.
We welcomed two new centres to the Group in 2022 and have already opened a new
centre in Crewe in February 2023 bringing our total to 49 UK centres. We have
a solid pipeline for growth and expect to open at least four new centres this
year. Despite this significant investment programme, we ended the year without
any bank debt and the Board recommends a final dividend of 7p per share which
together with the interim dividend paid in October 2022, will total 10p for
the year as a whole.
Our people are the most critical part of delivering great service to our
customers. Our excellent performance has enabled us to share the rewards of
success with our teams. More importantly, we acted decisively in October to
bring forward our hourly paid colleagues' annual pay increase by six months.
This meant that our lowest paid team members received an average of 9% pay
increase to help them manage the winter period.
2022 has been a year of significant development in our corporate governance.
The Board has dedicated considerable time to evaluating the risks that we all
face due to climate change and we have developed our strategy to minimise our
impact on the climate and to insulate the business from future risks. We have
established an ESG Committee to oversee the implementation of our
sustainability strategy. This Committee is chaired by Sangita Shah who joined
the Board as an independent Non-Executive Director in the second half of 2022
bringing a wealth of experience in governance and sustainability. Our Board
team has great diversity of talent and knowledge, allowing it to navigate the
complexity of delivering consistent growth in a challenging market. Our Board
is 57% independent (50% excluding the Chair) with our Executive Directors
having over 50 years of combined experience in leisure and retail.
Our business has transformed over the past three years. We are better
invested, with higher quality centres. We have a wholly redesigned digital
ecosystem that combines targeted CRM tools, a bespoke loyalty and rewards app
and the latest in digital bowling technology. Our value-for-money proposition
is better than ever before. This transformation is reflected in the scale and
profitability of the Group. Since 2019 we have grown our sales by over 50% and
nearly doubled our profits. We ended the year with a healthy net cash
position. Whatever the future holds in 2023, we are in a stronger position
than ever to navigate the challenges ahead.
2023 has started well, with demand remaining robust in the first ten weeks of
the year. We have clear plans in place to mitigate the impact of inflation and
are determined to continue to offer our customers great value for money. While
it is difficult to predict what will happen for the balance of the year, I am
confident that the strength of the Group is such that it will be able to
continue to deliver excellent returns for its shareholders.
Adam Bellamy
Chairman
21 March 2023
CHIEF EXECUTIVE'S STATEMENT AND OPERATING REVIEW
A record-breaking year
2022 has consolidated TEG's position as a leading business in the UK leisure
and hospitality sector. In our first undisrupted financial year since FY19 we
have increased our sales by 50.6% and our Group adjusted profit before tax by
84.1%. This is a business that is bigger, better, stronger, and more resilient
than it was prior to the pandemic.
During FY22 we built upon the sales growth that we experienced in H2 FY21 and
have delivered a year of record sales at £126.7m. Our like-for-like sales
were +39.8% higher than in FY19. More importantly, we continued to grow in
FY22 compared to the post-Covid-19 boom in sales of FY21. For the 33 weeks
comparative against reopening on 17 May 2021, our like-for-like sales for FY22
were a further +5.5% up. This growth was principally driven by additional
footfall and an increase in ancillary sales, with little reliance on price
increases. In fact, we have reduced our average realised price for bowling
since FY19, focusing on leveraging our value-for-money proposition to grow
footfall.
Cost pressures in FY22 have been well documented in the media and the Group
was not immune to these. However, with our energy prices over 90% fixed until
September 2024, long-term rental agreements with our landlords in place, and a
business model that is reliant on our underlying fixed asset base, we have
been impacted less than many. Where we have seen inflationary pressures, in
wages, consumables, and food and drink, we have worked hard to generate
operational cost efficiencies to offset those pressures and have chosen not to
pass those rises on to our customers.
FY22 has also been a remarkable year of delivery for our strategy. We have
invested over £20m in our business to continue to give our customers the best
possible social entertainment experience. During the year, we have undertaken
six major refurbishments; completed the roll out of Pins & Strings and our
scoring systems; refreshed the lanes and bowling experience in five centres;
brought two new centres into the Group; and developed the pipeline of sites
to add at least four further new centres in FY23.
A highly profitable year of growth is a great achievement, but it must be
delivered in a sustainable way. During FY22 we have paid particular focus
to supporting our amazing colleagues as well as developing a new climate
strategy which targets delivering Net Zero on scopes 1 & 2 emissions by
2030. We have paid over £2m in bonuses to ensure that our management and
site-based teams can share in our success. We have also kept a close eye on
base wages and salaries to ensure that our people are well equipped to deal
with the challenges of the current high levels of inflation. Our strategy has
been developed to ensure that not only do we minimise our impact on the
climate but also that we are well prepared to deal with some of the
consequences of changes in weather patterns in the UK.
FY22 has been a year of significant turmoil and change in the broader
political and economic landscape. TEG has focused on the elements that we can
control: great customer service; a fun and social environment for all ages;
unrivalled value for money; exciting games and activities; and a friendly
welcome. We have been rewarded with over eight million visitors this year,
trusting us to give all an amazing venue to have fun, be entertained and
reconnect socially with each other.
Another step forward in sales
FY22 is the first full financial year of trading since FY19. We knew that the
pent-up demand after reopening in the summer of 2021 and the benefit of UK
staycations was going to make FY21 a tough act to follow. However, we knew
that we had evolved and refocused our operation, to create a more attractive
customer proposition than ever before.
Total sales of £126.7m in FY22 is a Group record and is 50.6% higher than
FY19. Like-for-like sales growth compared to FY19 is +39.8% with a further
3.5% growth from the 53rd week of trading and 7.3% growth from the new centres
built since 2019. Compared to FY21, like-for like growth is +5.5%. We were
pleased to continue the sales momentum and take a further step forward in
FY22.
The +50.6% sales growth was principally delivered through higher footfall of
+41.7%, a combination of more new customers and existing customers visiting
more frequently and a 53rd trading week in the year. 8.9%pts of the growth
derived from an increase in revenue per head ('RPH'). Our strategy
to increase the number of activities as well as improving our food and
beverage offering has meant that customers tend to spend longer with us when
they visit and participate in more activities. Average realised price per game
for bowling reduced to £5.13 in FY22 compared to £5.21 in FY19. This modest
reduction of (1.5%) is a function of holding our headline prices at 2019
levels, with increased participation in deals and promotions. This strategic
choice was targeted at maintaining our excellent value-for-money proposition
in order to maintain momentum in footfall growth. This means that on average a
family of four bowled at Tenpin for just over £20; excellent value in
comparison to the majority of alternative entertainment options.
In the first 10 weeks of FY23 sales have continued to grow. Although we
are lapping an exceptional performance in FY22 we have still delivered
total sales growth of 7.6%. On a like-for-like basis the growth is 2.7%. We
have been encouraged by this performance in these first weeks of the year, but
it is still early in the year and we remain focused on ensuring we continue to
deliver an excellent experience for our customers.
We are confident in our strategy and our broad customer appeal and believe
that sales will remain resilient despite the economic conditions. We expect
the year to deliver modest sales growth in FY23 and are confident that we can
manage our cost base to ensure that sales at this level will deliver
profitable growth.
A leap forward in profit
A sustained level of sales growth delivered across the whole UK estate has led
to a significant step forward in profit. Only around 50% of the total cost
base is directly variable with volume. This means that with such pronounced
footfall growth we have been able to generate operational efficiencies to
offset the impact of cost inflation. The result is that Group adjusted profit
before tax has taken a significant leap forward to £26.1m, +84.1% compared to
FY19.
Using Group Adjusted EBITDA after rental costs, a measure which is broadly
equivalent to the old IAS 17 EBITDA measure, the business delivered £39.6m in
FY22 which is 68.2% better than in FY19 and is a ratio of 31% of sales. Pre
Covid-19 the Group was operating at an EBITDA to sales ratio of c.28% which
shows a significant progression despite the impact of inflation.
A strong and stable cash position
Our profit delivery has enabled us to focus on our strategic priorities,
building new centres and investing in our existing estate to drive growth. We
reinstated dividend payments in 2022 with an interim dividend in October of 3p
per share and we are recommending a final dividend of 7p per share to be paid
at the end of May. Our cash priorities have always been clear. We aim to
balance our self-funded investment programme with returning money to our
shareholders through a progressive dividend policy.
We are pleased that even with our accelerated strategic investment programme,
we have turned a modest net debt of (£2.5m) at the end of FY21 into a net
cash balance of +£10.1m at the end of FY22. This means that we now have a
secure cash position to insulate the business against potential risk or allow
us to act swiftly and decisively should major opportunities arise.
First-class customer experience
2022 has been a year where we have continued to focus on delivering the very
best customer experience in leisure and hospitality in the UK. Our priorities
have been on value for money, variety of games, high-quality ancillary
products, and great customer service.
Our customers depend on us to deliver great-value entertainment. That is why
we held our prices at 2019 levels, which has meant that our relative value
against other leisure and hospitality offerings is better than ever. During
the summer of 2022 we were invited to Downing Street as part of a government
task force focused on helping hard-pressed families make their money go
further in the summer holidays. In support of this initiative, our summer deal
for kids, available during the summer holidays, was just £5 for children for
a game of bowling and a burger meal. We think that this was probably one of
the most attractive leisure propositions available anywhere in the UK. We will
continue to offer our customers great priced deals that suit them.
Each of our 49 UK centres has bowling at its heart, ranging from 14 to
32 lanes. Bowling is a well-established pastime and has been drawing
customers for decades. Our fresh and modern centres broaden the appeal to
customers of all ages. 44% of our total sales in FY22 were from bowling, down
from 47% in FY19 as we continue to diversify our portfolio of activities.
Laser tag revenue has almost doubled in FY22 compared to FY19 thanks to
adding additional arena space and upgrading the experience in our existing
arenas. We now have 32 escape rooms across 12 Tenpin centres and the Houdini's
Escape joint venture has more than doubled in size compared to FY21.
We serve traditional bowling food that suits the social aspects of eating on
the lanes and we have broadened our range to now include vegan options and
pizzas, making our food offer even more attractive. We serve cocktails in many
of our higher footfall centres and have introduced high-quality coffee
throughout the estate. Our food and drink is competitively priced which means
that a typical visit to Tenpin, with bowling, food, drink and some additional
games on the arcade or pool will cost a customer less than they would expect
to pay for just a meal at a typical casual dining restaurant. Our focus on
great value for money has created price stability for our customers in a
market beset by significant inflation.
Digitally enabled
Our fully integrated digital systems have enabled us to deliver a first-class
enhanced customer experience in 2022. The use of technology starts at
the point that we first engage with customers online and extends right
through to providing best-in-class experience on the bowling lanes.
Our customer database now includes over one million contactable customers.
Digital marketing based on careful customer segmentation has allowed us to be
more targeted with our deals and customer communications. As a result, we have
seen a welcome balance of new and returning customers in FY22, helping build
like-for-like footfall growth of over 30% compared to FY19.
Once in our centres, we have used technology to help enhance the customer
experience. Customers continue to use our web-based food and drink ordering to
help them enjoy uninterrupted bowling and games. Each of our centres now has
the latest scoring technology allowing customers to personalise their scoring
screens and interface with our brand-new bespoke loyalty and rewards app.
The introduction of the app takes the customers' experience to another level.
They can now maintain a record of their scores as well as earn rewards and
treats from purchases they make. The app incorporates augmented reality games
in centre as well as fully integrating with our food and drink ordering and
our booking engine.
In high-quality centres
A core part of delivering a great customer experience is to ensure that
customers have warm, welcoming and high-quality centres in which to enjoy
their time together. Continued investment and improvement in our estate is a
fundamental part of delivering sales and footfall growth and to ensure that
our customers return again and again.
During FY22 we fully recovered our cash position and have fully paid all our
obligations from the Covid-19 closures. As a result, we were able to
accelerate the investment in refurbishing our centres. In the year we invested
almost £5m in six full-scale centre refurbishments, transforming the customer
proposition to drive growth. We invested over £1.0m in refurbishing the
bowling product in a further five centres. Bowling is our core product, and it
is essential that we maintain the quality of the lane surface, ball returns
and gutters to give the best possible bowling experience.
The two years of uncertainty as a result of Covid-19 meant that we were
focused on cash conservation in 2020 and 2021. As a result, we did create a
backlog of essential maintenance which we have been able to address in FY22.
During the year we invested over £4.9m in maintenance capital projects. This
included a complete overhaul of the heating and ventilation in 12 centres,
ensuring that our customers and colleagues benefited from a better environment
throughout the year.
Our centre refurbishment programmes are bespoke for each centre depending on
the availability of space and local customer needs. Each transformation
focuses on three key strategic objectives: increasing sales density; enhancing
customer experience; and improving the cost profile and sustainability of
profit delivery. For example, in FY22 in Dudley we were able to add six
additional lanes to expand the capacity of the centre while upgrading the
high-performing soft play area through use of a mezzanine floor construction.
In total during FY22 we have added 10 karaoke rooms, 10 escape rooms, and 10
new bowling lanes all within the existing footprint of the centres. Since FY19
the business has released 12k square foot of additional trading floor space,
all of which increases the overall sales density of our centres.
An expanding estate
We have an estate of 49 social entertainment centres across the UK ranging
from 14.7k square feet to 52.9k square feet, providing a broad array of social
entertainment activities to over eight million customers. We are confident
that there is significant opportunity for growth within the UK either by
taking on space in towns that have no bowling presence such as Crewe or by
adding bowling lane capacity to towns and cities that already have bowling
offering but not at sufficient capacity to serve the population such as in
Milton Keynes. Our target is to add around four new centres per year to our
estate and we believe there is sufficient runway for growth.
In FY22 we added two new centres to the estate through an acquisition
in Harlow in May and through a brand-new centre in Walsall which made use of
repurposed retail space. In addition, we commenced work on a new centre in
Crewe, which opened in February 2023. Work is under way at Milton Keynes and
in Dundee, with both centres expected to open by the end of H1 FY23.
Harlow was already trading as an existing bowling centre but had suffered from
a significant lack of investment over many years. Harlow is a town with a
population of around 90,000 but also with a catchment from several close-by
Hertfordshire and Essex villages. It is well located in the town centre and is
one of the few local leisure destinations in the area. By investing in a
significant refurbishment, we turned a tired and unwelcoming centre into a
state-of-the-art bowling and social entertainment venue which is welcoming to
families and young adults. We have been delighted to have already more than
doubled the sales and footfall from this centre and are confident that it will
continue to make significant returns well above 30% ROI.
Walsall was an opportunity to take on redundant retail space at an attractive
rent on a thriving retail park in the town centre. Our site was previously
occupied by Mothercare and Peacocks and was vacated as a result of those
retailers' demise. The landlord saw an opportunity to secure the long-term
future of their property by partnering with the Group. We can provide
significant footfall and growth for their retail park and our covenant gives
them a long-term reliable income stream. We are delighted with the initial
trading, which has exceeded our expectations and is providing excellent
investment returns.
We have several more properties where we are close to finalising legal
agreements and fully expect to strengthen the pipeline as we progress through
the year.
Sustainable development
Our business has grown significantly during FY22, building on a highly
successful FY21 where we emerged from the pandemic with great strength. During
the year we have developed our sustainability strategy and have focused on
supporting our key stakeholders as they navigate the difficulties in the
broader economic landscape.
We formed a Board ESG Committee in 2022 which has helped to bring together the
many positive steps being taken across the Group. We have identified that
although the Group is a relatively low carbon intensity, with only 1,740g of
CO2 per customer visit, there is still much we can do to reduce our footprint
and move to Net Zero on scope 1 & 2 emissions by 2030. The four principal
areas of focus in terms of our carbon footprint are our site energy usage;
our food and drink supply chain; our waste; and our new building and
refurbishment programme.
We continue to focus on energy reduction across our centres. We have now
completed the roll out of our modern and efficient pinsetters which has
resulted in an 8% reduction in energy usage per site. We are now focusing on
low-energy LED lighting throughout our centres. We are planning to utilise the
roofs of our centres for micro generation from solar arrays which should
provide up to 30% of the energy usage of a site. We plan to install at least
six solar arrays during FY23. We have combined these significant actions with
a policy to purchase 100% renewable energy supplies.
Our food and drink supply chain is an area where we have made good progress in
FY22. We have introduced more plant-based options to give our customers
choice but we expect in the short to medium term that this will remain a
minority of the food consumed in our centres. We are actively working with our
suppliers to select the products that balance cost, waste and carbon, and have
made it clear that future purchasing decisions will balance all three needs.
We are confident that our suppliers can reduce their carbon impact but in the
meantime we have made our entire menu carbon neutral through the purchase of
REDD++ carbon credits. This investment in long-term carbon sequestration will
offset our food and drink in the short term while we consider ways to reduce
the overall impact.
Waste in our centres will be a core focus during FY23. Although we utilise
100% recyclable packaging for our food, we know that we can do better
to improve our recycling rates. We are targeting a minimum 50% increase
in recycling rates in FY23 through site-based incentives and customer
communications as well as making it easier than ever for our customers
to recycle.
We have focused on our teams' wellbeing and financial security during 2022. In
difficult times it is important to provide the right support to our
colleagues. The successful financial results means that we have paid over £2m
in bonuses to our people to reward excellent service and performance. These
bonuses have rewarded colleagues throughout the organisation and not just the
senior management teams. We also decided to bring forward the April 2023 wage
increase by six months for our hourly paid team members to ensure that our
people were supported during the difficult cost of living pressures of the
winter.
Outlook
FY23 has started well, with like-for-like sales in the 10 weeks to 12 March
being +2.7% compared to FY22. We are pleased with this continued sales growth,
and are cautiously optimistic for the year ahead. We are confident that we
have a fantastic customer proposition and will continue to focus on providing
the best value-for-money social experience in the market. However, we are
mindful of the strain on our customers' finances and will not be complacent in
assuming that the success of the past two years will automatically continue.
Our target is to maintain modest like-for-like growth, supplemented with our
pipeline of new centres throughout 2023. We have already opened Crewe in
February and are under construction in Milton Keynes and in Dundee. We fully
expect to add more centres to our estate as the year progresses.
We expect cost pressures to persist, but we are confident that we are
operationally well set up to mitigate them where we can without compromising
the value for money that we offer our customers.
Our strategy is delivering great results and we will continue to invest in our
priorities of maintaining the quality of our product, growing our estate, and
developing our digital footprint. We will manage our cash spend to ensure that
we allocate capital to these high-returning projects while returning a
dividend to our shareholders and maintaining a cash surplus.
Our record performance in FY22 will be a very tough act to follow, but
we deliver a great experience and value for our customers and have the right
teams in place to maximise the potential of the business. We will continue to
focus on value to drive growth and to invest in the experience to ensure that
our customers continue to visit us throughout 2023.
Graham Blackwell
Chief Executive Officer
21 March 2023
FINANCIAL REVIEW
Following the Group's return to profitability after the pandemic, TEG has
delivered its best ever financial year with record-breaking sales, profit and
cash and an adjusted earnings per share of 29.3p which is 52.0% higher than in
FY19. The Group is in rude financial health and is well placed to continue to
invest to deliver profitable sales growth.
Since reopening in May 2021, we have consistently delivered sales and profit
growth ahead of expectations and have built on these foundations to drive
sales growth throughout FY22. Our focus on value for money for customers and
making operating efficiencies as we increase our footfall has ensured that
this sales growth has been profitable. Despite inflationary pressures, sales
growth of 50.6% compared to FY19 has delivered growth in Group adjusted PBT of
84.1%.
This profit performance has meant that the Group has been highly cash
generative in the year. We have a clear capital allocation strategy that
prioritises financial security; investment in growth; and generating
shareholder returns. As a result, for the first time in the Group's history we
have ended the financial year with a net cash position with no drawings on
our banking facility. This has been delivered while still investing
over £20m in our strategic growth programme and reinstating dividend
payments to our shareholders.
Finding the right comparative for the Group's performance is challenging
because of the disruption in FY20 and FY21 as a result of the Covid-19
closures. Our last full and uninterrupted financial year was FY19. Therefore,
we will continue to use FY19 as a comparative for our FY22 results in this
review. However, there have been significant changes to our business, our
market and the economic landscape since FY19 and as such we will also use FY21
comparatives to help the reader understand our financial performance as fully
as possible. Throughout this Financial Review we will indicate which
comparison we are using, and will include FY22, FY21 and FY19 in our data
tables.
FY22 FY21 FY19
53 weeks to 52 weeks to 52 weeks to
01 January 26 December 29 December Movement vs
£000 2023 2021 2019 FY19
Revenue 126,673 67,521 84,122 42,551
Cost of goods sold(1) (18,145) (9,446) (10,387) (7,758)
Gross Margin(1) 108,528 58,075 73,735 34,793
GP% 85.7% 86.0% 87.7% (2.0%pts)
Total operating costs (41,207) (22,141) (28,923) (12,284)
Centrally allocated overheads (6,109) (2,214) (3,155) (2,954)
Support office (8,477) (6,661) (6,157) (2,320)
Group adjusted EBITDA 52,735 27,059 35,500 17,235
Less property rent costs (13,105) (12,436) (11,932) (1,173)
Group adjusted EBITDA after rental costs(2) 39,630 14,623 23,568 16,062
Add back property rental costs 13,105 12,436 n/a n/a
Depreciation and interest on Right of Use Property Assets (16,468) (14,495) n/a n/a
Depreciation and amortisation (8,941) (8,413) (7,379) (1,562)
Net interest (524) (504) (788) 264
Loss on disposal of assets (271) (442) (932) 661
Loss on Joint Venture (310) - - (310)
Amortisation of acquisition intangibles (120) (130) (293) 173
Group adjusted profit before tax(2) 26,101 3,075 14,176 11,925
Impairment reversal 631 1,124 - 631
Exceptional items 7,263 238 (2,381) 9,644
Profit before tax 33,995 4,437 11,795 22,200
Taxation (7,399) (432) (2,758) (4,641)
Of which: taxation attributable to Group adjusted profit (6,019) (387) (2,836) (3,183)
Profit after tax 26,596 4,005 9,037 17,559
Earnings per share
Basic earnings per share 38.9p 5.9p 13.9p 25.0p
Adjusted basic earnings per share(2) 29.3p 5.9p 19.3p 10.0p
Full-year dividend 10.0p - 3.7p 5.3p
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 excludes staff costs 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 5, 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, loss
on Joint Venture and profit or loss on disposal of assets. Group adjusted
profit before tax is defined as profit before exceptional items, impairment
reversal 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 a
comparable time period particularly in relation to whether a centre was forced
to close due to Covid regulations.
SALES PERFORMANCE
Like-for-like sales 2021 sales 2022 Sales
H1 (6 weeks) H2 FY H1 H2 FY
Growth vs 2019 22.5% 30.3% 29.0% 46.0% 34.2% 39.8%
Growth vs 2021 N/A N/A N/A 19.0% 3.2% 5.5%
Compared to FY21: Sales growth has been the principal driver of profit growth
in FY22. We were very pleased to deliver continued sales progression in FY22
compared to our exceptional FY21. We ended the year with total sales growth of
+87.6%, but over a 53-week period rather than the 32 traded in FY21.
Like-for-like sales growth was +5.5% reflecting continued progression from a
very strong FY21. There was a modest slowdown in growth over the third quarter
of 2022 which was a combination of the extreme heatwave during 2022 and the
unique circumstances of the post-Covid-19 bounce during the summer of 2021 in
the comparative.
Compared to FY19: Total sales of £126.7m were +50.6% higher than in FY19, the
last full year of comparable trading. On a like-for-like basis sales were
39.8% ahead of FY19. Since FY19 the Group has added three new centres to the
estate in Manchester Printworks, Harlow and Walsall and these are all trading
well.
We attribute our sector-leading growth trend to three principal factors:
1. We have seen a fundamental consumer shift in favour social
entertainment and leisure
2. We have invested significantly in providing a sector-leading customer
experience
3. We have made a significant shift in our value-for-money proposition
As an example of our excellent value-for-money proposition, the average
realised price of a game of bowling in 2022 was £5.13 including VAT which is
1.5% lower than in 2019 despite the compound rate of inflation being in excess
of 20% over this time. While many retailers and leisure operators have been
passing on inflation, we have been making our business model more efficient to
keep our prices low. The result is that our relative value position in the
sector has significantly improved.
GROSS MARGIN
Compared to FY21: Gross Margin, which is total sales less Cost of Goods Sold
but excluding labour costs, was 85.7% compared to 86.0% in FY21. This modest
decline of (0.3%pts) reflects inflationary pressures in food and drink that we
have chosen to not fully pass on to our customers in order to maintain our
value-for-money proposition.
Compared to FY19: Gross Margin is (2.0%pts) lower than in FY19. We have
continued to add to the customer experience during FY22. Activities such as
karaoke and laser tag have more than doubled in size since FY19, albeit from a
small base, and the growth in our machine income has been stronger than the
underlying bowling growth. We have also been highly successful at increasing
the participation in food and drink while customers play. The result is that
bowling now represents 44% of sales compared to 47% of sales in FY19.
The (2.0%pts) margin reduction is a function of that shift in sales mix,
where growth in food and drink and other amusements has outpaced growth in
bowling. We are happy with this trend because typically the growth in
these areas is a function of customers participating in additional activities
and is incremental and cash positive even though it is slightly margin
dilutive.
We will continue to develop the success of our non-bowling product offering
and are confident that the underlying business growth will ensure that gross
profit in absolute terms will remain healthy as the Group continues to expand.
OPERATING COSTS
Compared to FY21: Total operating costs in FY22 were £41.2m. This is £19.1m
more than in FY21 but much of that is a function of the Group being closed for
the first 20 weeks of 2021 until mid May.
Compared to FY19: A more appropriate comparison is the operating costs in FY19
which were £28.9m. This means that FY22 saw a £12.3m increase in costs, a
growth of 42.5%. This level of growth is significant but must be considered in
the context of three years' inflationary pressures, three new centres open,
and footfall growth of 41.7%.
At a constant ratio assuming a linear relationship, the footfall growth of
41.7% applied to FY19 operating costs would be expected to grow from £28.9m
to a theoretical £41.0m. Over the same period, the underlying rate of
inflation has been around 20%. Applying that inflation rate to the volume
adjusted theoretical cost of £41.0m takes the expected operating costs to
£49.2m. Actual operating costs for FY22 were £41.2m representing
an £8.0m efficiency saving against the theoretical expected operating cost.
Efficiency savings have been achieved with a clear focus on three main areas:
1. Volume efficiencies mean that not all costs are variable with volume
and so increases can be maintained at a lower rate than footfall growth.
2. Supplier relationships mean that we can work in partnership to reduce
the level of inflation in our cost base as our suppliers also take the benefit
of our growth and success.
3. Operational effectiveness means that we are consistently improving our
operating procedures to reduce waste and help serve our customers more
efficiently.
The combination of these factors has kept our costs under control and allowed
the sales growth to be translated into even stronger growth in profit.
CENTRAL COSTS
Compared to FY21: Central costs in FY22 were £14.6m comprising the PLC costs,
support office and centrally allocated functions providing essential services
to the business such as marketing, IT, property management, and regional
support teams. Due to the closures in FY21, last year's cost was £8.9m.
However, the Covid-19 closures and government support measures makes a
year-on-year comparison difficult.
Compared to FY19: This is the last full year of trading and is a more
representative comparative of Central costs. Central Costs in FY19 were
£9.3m. The increase over 3 years is £5.3m and can be attributed to three
years worth of inflationary pressures across wages, services and materials,
estimated to be £1.9m based on approximately 20% inflation over the period,
as well as an increased level of strategic investment and Group growth.
During FY22 the Group has recognised colleagues across the Group with
significant success bonuses totalling over £2.0m. In addition, the Executive
team have delivered results far in excess of their maximum targets and the
Remuneration Committee has allocated a bonus provision accordingly.
The Group has increased its activity in marketing, IT, property, operations
and ESG. During FY22 the Group has developed the world's first bespoke loyalty
app, has fully rolled out the latest bowling scoring technology and has
continued to grow its customer database and reach on social media. We have
delivered 11 refurbishments, developed three new bowling centres and
significantly increased our customer experience. We invested in developing our
sustainability strategy and continue to work to lower our carbon footprint.
These developments have all been made possible thanks to larger and more
specialised teams.
Finally, the significant inflationary pressures are particularly prevalent in
the labour and services that comprise the central costs. Professional fees are
rising at a faster rate than the base level of inflation in many areas, and
the ability to attract and retain talent is crucial to a thriving business.
Despite these pressures, we have worked hard to ensure these central costs
have delivered value for money, and this cost base as a ratio to sales remains
at just above 11%, as it was in FY19.
GROUP ADJUSTED EBITDA AFTER RENTAL COSTS
Group adjusted EBITDA after rental costs is a measure used internally as it
considers the cash impact of the rent paid to landlords 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.
Compared to FY21: The Group was only open for 32 of the 52 weeks of trading in
FY21 and therefore the £14.6m of EBITDA delivered is not fully
representative of a full year's trading period. Because of the costs
experienced during the closure period it is not possible to produce an
accurate reflection of like-for-like EBITDA and therefore the Group considers
FY19 to be the most appropriate comparative.
Compared to FY19: FY22 saw record levels of Group Adjusted EBITDA delivered at
£39.6m. This is 68.2% higher than in FY19. The growth in Group Adjusted
EBITDA is a function of the operational gearing generated from the increased
sales volume. As described above, costs are growing, but not as fast as sales
due to the efficiencies of scale more than offsetting the inflationary
pressures. Property rent for example was £11.9m in FY19 and has grown to
£13.1m in FY22, an increase of only 10%. This is despite an increase of three
additional bowling centres and the impact of inflation.
DEPRECIATION, AMORTISATION AND CAPITAL EXPENDITURE
Compared to FY19: There is no suitable comparative for depreciation and
amortisation in FY19 due to the FY20 adoption of IFRS 16.
Compared to FY21: This section will focus on FY21 as the comparative measure.
Because Covid-19 closures had no impact on depreciation policy, the
comparative will remain a helpful one. Total depreciation on Right of Use
('ROU') increased to £16.5m compared to £14.5m in FY21. This increase
reflects the addition of Harlow and Walsall as full trading centres but also
the addition of Crewe in the final quarter of the year as the centre was under
construction thereby attracting depreciation and lease costs under IFRS 16
even though the centre didn't open until February 2023.
As we have described in previous years, the relatively early tenure of the
average weighted lease expiry means that IFRS 16 creates a profit compression
because the leases are less than halfway through. As a result, the total cost
of depreciation and interest on our ROU assets is £3.4m higher than the cash
rental costs incurred.
Other depreciation in the year was £8.9m, a 6.3% increase on FY21 as the
Group continues to invest in its high returning strategic programme.
Maintenance capital spend in FY22 increased significantly to £4.9m from
£0.9m in FY21. Strong cash flow has provided the headroom to recommence
investment in the estate. A further £8.5m was spent in FY22 on the existing
estate on strategic refurbishments, taking the total existing estate
investment to £13.4m. In the medium term we expect to spend the annual
depreciation charge (FY22: £8.9m) on existing estate investments in the form
of maintenance and refurbishments. In FY22 existing estate investment was
£13.4m. During FY22 we invested an additional £4.5m in the estate as
catch-up spend from the Covid-19 period where we were focused on cash
conservation. Over the past three financial years, FY20 - FY22 the total
existing estate investment has been £3.9m, £7.1m and £13.4m respectively.
This total investment of £24.4m over that period is consistent with £25.3m
depreciation charge over the same period.
£6.9m was invested in new centres in FY22 with the acquisition and
refurbishment of Harlow, the build and opening of Walsall and a significant
amount of the investment in Crewe which opened in February 2023. In addition,
the Group invested £5.0m in the purchase of the freehold of a property where
an existing leased centre which was very profitable was vulnerable to
redevelopment at the expiry of the lease. While the Group's strategy
principally remains to take long leaseholds, we will continue to view freehold
opportunities as they arise and assess them on an appropriate returns basis.
FINANCE COSTS AND BANKING ARRANGEMENTS
53 weeks to 52 weeks to
1 January 26 December
£000 2023 2021
Interest on bank debt (334) (391)
Amortisation of bank financing costs (168) (124)
Lease interest charges (6,682) (5,481)
Other finance income/(costs) (22) 10
Net interest (7,206) (5,986)
Net interest increased to £7.2m in the year, with the cost of the bank
financing remaining flat but with an increase in the lease interest charges
from the three additional property leases.
The Group has a £25m RCF in place with its long-term banking partner RBS.
This facility expires in April 2024 and is currently undrawn. The Group will
be considering its financing needs in due course when the facility comes up
for renewal but given that the Group is in a net cash position, an early
renewal is not a business priority.
In 2022 the Group repaid its £14m CLBILS term loan facility as it was no
longer considered necessary for the Group's needs. Other than an acceleration
of financing cost amortisation, there was no early repayment penalty for doing
so.
GROUP ADJUSTED PROFIT BEFORE TAX
Compared to FY21: Group adjusted PBT was £26.1m for FY22, a £23.0m increase
from FY21. However, in FY21 we were only open for 62% of the year and were
very pleased to have still exited the year with a profit. Given that FY22 was
open for 100% of the year, we consider FY19 to be a better comparative.
Compared to FY19: Group adjusted PBT was 84.1% higher than in FY19. PBT as a %
of sales is 20.6% and the additional sales of £42.6m compared to FY19 have
translated to an additional PBT of £11.9m. This drop through rate of sales
to profit of 28.0% is testament to the tight cost control and relentless focus
on profitable sales growth that has characterised FY22.
IMPAIRMENT AND EXCEPTIONAL ITEMS
Analysis of the Group's assets, including the Right of Use Property Assets,
resulted in a recognition of a net reversal of £0.6m in FY22. This has
principally arisen as a result of reassessing the individual site cashflows
now that the pandemic has passed.
More significantly, the Group has recognised exceptional profit of £7.3m.
This relates to recoveries of monies from HMRC in respect of VAT. The majority
of this was in relation to the recognition by HMRC that bowling was subject
to the reduced rate of VAT introduced by the Treasury to support the
hospitality and leisure sector. The balance of VAT recoveries related to an
historic claim.
These elements have been removed from the Group adjusted PBT to show a truer
representation of the in-year profit generated from trading in the current
year.
PROFIT AFTER TAX
The Group generated a profit after tax of £26.6m. Basic earnings per share
were 38.9p and adjusted earnings per share were 29.3p which is 52.0% higher
than in FY19.
DIVIDENDS
The Board recommenced the dividend in FY22 having fully discharged its
obligations under the CLBILS facility which was fully repaid in July. An
interim dividend of 3p per share was paid in October 2022 following the
announcement of the half year results.
The Group is now recommending a final dividend in respect of FY22 of a further
7p per share taking the total dividend to 10p per share. Should this be
approved by shareholders at the AGM it is expected to be paid in June 2023.
The Group is confident of its financial security. We ended FY22 with net cash
of £10.1m and no drawings on the available £25m RCF facility. We have
delivered this restored financial stability while continuing to invest in
expanding and developing our business with over £20m of strategic capital
deployed in the year.
BALANCE SHEET
1 January 26 December
£000 2023 2021 Movement
Assets
Goodwill and other intangible assets 29,875 29,939 (64)
Property, plant and equipment 57,198 39,530 17,668
Deferred tax asset - 4,374 (4,374)
Right-of-use assets 171,651 167,324 4,327
Inventories 1,493 1,226 267
Trade and other receivables 4,667 5,426 (759)
Cash and cash equivalents 10,086 11,511 (1,425)
274,970 259,330 15,640
Liabilities
Lease liabilities (200,402) (195,662) (4,740)
Bank borrowings - (13,832) 13,832
Trade and other payables and provisions (14,142) (13,503) (639)
Other liabilities (1,282) (2,270) 988
(215,826) (225,267) 9,441
Net assets 59,144 34,063 25,081
NET DEBT ANALYSIS
1 January 26 December
£000 2023 2021 Movement
Closing cash and cash equivalents 10,086 11,511 (1,425)
Bank loans - (14,000) 14,000
Bank net cash / (debt) 10,086 (2,489) 12,575
Leases - machines and other (4,291) (5,613) 1,322
Leases - property (196,111) (190,049) (6,062)
Total net debt (190,316) (198,151) 7,835
TRADING CASH FLOW
53 weeks to 52 weeks to
£000 1 January 2023 26 December 2021 Movement
Cash flows from operating activities
Group adjusted EBITDA 52,735 27,059 25,676
Maintenance capital(4) (4,943) (910) (4,033)
Movement in working capital(1) 1,688 718 970
Lease and taxation payments(2) (22,305) (13,579) (8,726)
Free cash flow(3) 27,175 13,288 13,887
Dividends paid (2,055) - (2,055)
Cash flow available for investment and financing activities 25,120 13,288 11,832
Strategic investments(4):
Existing estate (8,465) (3,363) (5,102)
Estate expansion (6,882) (56) (6,826)
Freehold purchase (5,000) - (5,000)
Exceptionals and share-based payments 7,802 248 7,554
Repayment of debt (14,000) (6,000) (8,000)
Cash (outflow)/inflow after investment and financing activities (1,425) 4,117 (5,542)
Opening cash and cash equivalents 11,511 7,394 4,117
Cash and cash equivalents - end of period 10,086 11,511 (1,425)
1 The movement in working capital is the balance from the
"Changes in working capital" section of Note 22 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 and finance costs
payments, taxation payments or receipts, advance payments to capital
suppliers, loans to Joint ventures 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
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006, for the 53 weeks ended 1(st) January 2023 (FY22). The
basis for preparation is outlined in the accounting policies to the financial
statements on page 72.
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 5 to the financial statements on page 77.
NOTE ON ALTERNATIVE PERFORMANCE MEASURES
The Group uses a number of alternative profit 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 2019 as a baseline comparator for some
performance measures in order to be able to compare the business against a
pre-Covid trading period.
NOTE ON ALTERNATIVE PROFIT MEASURES
Adjusted Gross Margin This measurement is the total sales less directly attributable costs of sales
such as cost of goods sold, transaction costs and licence costs for leased
amusement machines. Management do not consider it helpful to include labour
costs in the gross margin because although these costs do vary to some extent
with volume, the relationship is not linear and as such, any swings in volume
are likely to create artificial fluctuations in the margin rate. Site labour
costs are therefore included in operating expenses. The reconciliation to
gross margin is included in Note 5 to the financial statements.
Group adjusted EBITDA This measurement is earnings before interest, taxation, depreciation,
amortisation, exceptional items, loss on Joint venture, impairment 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, loss on Joint venture, impairment 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 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. 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 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 5 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.
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, advance payments to capital suppliers, loans to Joint ventures 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 comparative 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.
The Strategic Report was approved by the Board and signed on its behalf by:
GRAHAM BLACKWELL ANTONY SMITH
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
21 March 2023
21 March 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 53-WEEK PERIOD ENDED 1 JANUARY 2023
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Note £000 £000
Revenue 4 126,673 67,521
Cost of sales (40,915) (22,511)
Gross profit 85,758 45,010
Administrative expenses (52,141) (35,949)
Exceptional income 7,263 238
Reversal of impairment 631 1,124
Operating profit 41,511 10,423
Loss on share of Joint Venture (310) -
Finance costs 7 (7,206) (5,986)
Profit before taxation 33,995 4,437
Taxation 10 (7,399) (432)
Profit and total comprehensive income for the period 26,596 4,005
Earnings per share
Basic earnings per share 11 38.86 5.86p
Diluted earnings per share 11 38.57 5.84p
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 1 JANUARY 2023
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Note £000 £000 £000 £000
Assets
Non-current assets
Goodwill 13 29,740 29,350 - -
Intangible assets 13 135 279 - -
Investments in joint venture 14 - 310 - 310
Investments 15 - - 38,915 38,915
Property, plant and equipment 16 57,198 39,530 - -
Right-of-use assets 17 171,651 167,324 - -
Deferred tax asset - 4,374 - -
258,724 241,167 38,915 39,225
Current assets
Inventories 18 1,493 1,226 - -
Trade and other receivables 19 4,667 5,426 620 209
Corporation tax receivable 1,022 10 - -
Cash and cash equivalents 20 10,086 11,511 298 4,424
17,268 18,173 918 4,633
Liabilities
Current liabilities
Bank borrowings and leases 23 (10,448) (16,661) - -
Trade and other payables (15,164) (13,513) (1,221) (3,089)
(25,612) (30,174) (1,221) (3,089)
Net current liabilities (8,344) (12,001) (303) 1,544
Non-current liabilities
Bank borrowings and leases 23 (189,954) (192,833) - -
Deferred tax liability (1,282) (2,270) - -
(191,236) (195,103) - -
Net assets 59,144 34,063 38,612 40,769
Equity
Share capital 21 685 684 685 684
Share premium 4,844 4,844 4,844 4,844
Merger reserve 6,171 6,171 - -
Share-based payment reserve 1,037 498 1,037 498
Retained earnings 46,407 21,866 32,046 34,743
Total equity 59,144 34,063 38,612 40,769
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE 53-WEEK PERIOD ENDED 1 JANUARY 2023
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Group Note £000 £000
Cash flows generated from operating activities
Cash generated from operations 22 61,963 30,827
Corporation tax (paid)/ received (5,024) 2,292
Finance costs paid (7,013) (5,868)
Net cash generated from operating activities 49,926 27,251
Cash flows used in investing activities
Purchase of property, plant and equipment (23,366) (7,108)
Purchase of site by Tenpin Limited (454) -
Purchase of software (40) (24)
Loan to Joint venture (1,203) -
Net cash used in investing activities (25,063) (7,132)
Cash flows used in financing activities
Gross proceeds from issue of new shares - -
Transaction costs from share issue - -
Lease principal payments (10,233) (10,002)
Dividends paid (2,055) -
Drawdown of bank borrowings - 22,000
Repayment of bank borrowings (14,000) (28,000)
Net cash used in financing activities (26,288) (16,002)
Net (decrease)/increase in cash and cash equivalents (1,425) 4,117
Cash and cash equivalents - beginning of period 11,511 7,394
Cash and cash equivalents - end of period 20 10,086 11,511
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Company Note £000 £000
Cash flows used in operating activities
Cash used in operations 22 (4,126) (153)
Net cash used in operating activities (4,126) (153)
Cash flows generated from financing activities
Dividends received 2,055 -
Dividends paid (2,055) -
Net cash generated from financing activities - -
Net decrease in cash and cash equivalents (4,126) (153)
Cash and cash equivalents - beginning of period 4,424 4,577
Cash and cash equivalents - end of period 20 298 4,424
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE 53-WEEK PERIOD ENDED 1 JANUARY 2023
Share-based
Share Share payment Merger Retained Total
capital premium reserve reserve earnings equity
Group £000 £000 £000 £000 £000 £000
Balance at 27 December 2020 683 4,844 250 6,171 17,861 29,809
Share based payment charge - - 248 - - 248
Issue of shares 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
Share-based payment charge - - 539 - - 539
Issue of shares net of transaction costs 1 - - - - 1
Dividends paid - - - - (2,055) (2,055)
Profit for the period and total comprehensive income - - - - 26,596 26,596
Balance at 1 January 2023 685 4,844 1,037 6,171 46,407 59,144
Share-based
Share Share payment Merger Retained Total
capital premium reserve reserve earnings equity
Company £000 £000 £000 £000 £000 £000
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
Share-based payment charge - - 539 - - 539
Issue of shares net of transaction costs 1 - - - - 1
Dividends paid - - - - (2,055) (2,055)
Loss for the period - - - - (642) (642)
Balance at 1 January 2023 685 4,844 1,037 - 32,046 38,612
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 53-week period ended 1 January 2023 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 consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the 53 weeks ended 1 January 2023 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 1 January 2023,
the Group has considered a base case scenario and a severe but plausible
downside scenario. In modelling these scenarios, the Group has considered its
liquidity, cash balances, refinancing position, business activities and its
principal risks.
Base Case
The Groups bank financing facility expires in April 2024 and the intention is
to renew this in 2023. As the renewal has not happened at the time of the
signing of this Annual Report, the performance beyond the current expiry date
in 2024 has been reflected in the base case. The Group is cash positive, the
RCF remains undrawn throughout the period with all covenants being passed. The
base case is the Groups FY23 budget plus the 2024 forecast from its Strategic
Plan. This case was prepared with the following key assumptions reflected:
· Like for Like sales growth versus FY22
· 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 cashflows
· Increased levels of capital spend are reflected in the cashflows
to maintain and refurbish the sites
· The Group pays out a final and interim dividend
Downside case
The downside case takes the base case and flexes the assumptions for severe
but plausible impacts. These are summarised as follows:
· 2023 revenues are reduced by 10% on a like for like basis against
FY22. 2024 revenues are reduced by a further 10% against the 2023 downside.
Returns from refurbishments in 2023 and 2024 and returns from one new site in
2024, are removed.
· All variable and fixed costs from the base case are increased by
a further inflationary 10% across the board.
· Mitigation on variable costs as cost of sales, labour and
operating costs are included as these can be controlled by the Group.
Going Concern Continued
The scenario reflects the payment of a final and interim dividend but this has
been reduced versus the base case as these are at Group discretion. The
investment in new centres remains with the removal of just one in 2024. The
refurbishment program spend is also halted in 2023 and 2024. Investments in
new centres and refurbishments are under the Group's control and could be used
for further mitigating action if needed. All the mitigating actions taken,
allow the Group to remain cash positive and the RCF undrawn, throughout the
period. The Group remains profitable and all covenants are passed with
significant headroom.
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 53-week period ended 1 January 2023 and 52 week period ended
26 December 2021 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
Limited Central Group
£000 £000 £000
For the 53-week period ended 1 January 2023
Segment revenue - external 126,673 - 126,673
Bowling 55,729 - 55,729
Food and drink 35,327 - 35,327
Machines and amusements 30,475 - 30,475
Other 5,142 - 5,142
Group Adjusted EBITDA after rental costs (Note 5) 42,024 (2,394) 39,630
Segment assets as at 1 January 2023 271,213 4,779 275,992
Segment liabilities as at 1 January 2023 (211,485) (5,363) (216,848)
Reconciliation of adjusted EBITDA to reported operating profit
Group adjusted EBITDA after rental costs (Note 5) 42,024 (2,394) 39,630
Amortisation and depreciation of intangibles, property, plant and equipment
and
right-of-use assets (18,727) - (18,727)
Loss on disposals of assets (271) - (271)
Amortisation of fair value items (120) - (120)
Net impairment reversal 631 - 631
Exceptional income 7,263 - 7,263
Add back rental cost 13,105 - 13,105
Operating profit 43,905 (2,394) 41,511
Loss on Joint Venture - (310) (310)
Finance costs (Note 7) (6,709) (497) (7,206)
Profit before taxation 37,196 (3,201) 33,995
Tenpin
Limited Central Group
£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
Group adjusted EBITDA after rental costs (Note 5) 16,654 (2,031) 14,623
Amortisation and depreciation of intangibles, property, plant and equipment
and
right-of-use assets (17,426) - (17,426)
Loss on disposals of assets (442) - (442)
Amortisation of fair value items (130) - (130)
Net impairment reversal 1,124 - 1,124
Exceptional income 238 - 238
Add back rental cost 12,436 - 12,436
Operating profit 12,454 (2,031) 10,423
Finance costs (Note 7) (5,476) (510) (5,986)
Profit before taxation 6,978 (2,541) 4,437
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, loss on
Joint Venture and profit or loss on disposal of assets.
Group adjusted EBITDA after rental costs - This measurement is earnings before
interest, taxation, depreciation, amortisation, exceptional items,
impairment loss on Joint Venture and profit or loss on disposal of assets,
less a deduction for the cash cost of rent. This has been done to show the
underlying trading performance of the Group which these other costs or income
can distort.
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Reconciliation of operating profit to Group adjusted EBITDA and Group adjusted £000 £000
EBITDA after rental costs
Group adjusted EBITDA 52,735 27,059
Rental cost (13,105) (12,436)
Group adjusted EBITDA after rental costs 39,630 14,623
Add back rental cost 13,105 12,436
Amortisation of fair valued items on acquisition (113) (149)
Amortisation of software (105) (131)
Loss on disposals (271) (442)
Depreciation of property, plant and equipment and right-of-use assets (18,629) (17,276)
Operating profit before exceptional items 33,617 9,061
Net impairment reversal 631 1,124
Exceptional items - other 7,263 238
Operating profit 41,511 10,423
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.
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Reconciliation of costs of sales £000 £000
Cost of goods sold per the financial review (18,145) (9,446)
Site labour costs (23,739) (13,547)
Machine licence and security costs in administrative expenses 969 482
Costs of sales per the statement of comprehensive income (40,915) (22,511)
Adjusted profit before tax - This consists of the profit before tax adjusted
for items judged as exceptional and relating to impairment.
Adjusted underlying profit after tax and adjusted earnings per share - This
consists of the profit after tax adjusted for exceptional items and impairment
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.
Bank net cash/(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, finance costs, finance lease
payments, taxation payments or receipts, advance payments to capital
suppliers, loans to Joint ventures and non cash share based payments. This is
reconciled below:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Reconciliation of free cash flow £000 £000
Cash generated from operations 61,963 30,827
Maintenance capital (4,943) (910)
Finance lease, finance costs and taxation payments (22,270) (13,578)
Exceptional income & non-cash share-based payments charge (7,802) (248)
Movement in advance payments to capital suppliers 1,431 (2,803)
Loan to Joint venture (1,204) -
Free cash flow per the financial review 27,175 13,288
Maintenance capital, existing estate, estate expansion and freehold purchase
outflow - This is cash used in investing activities as reconciled below:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Reconciliation of capital investment outflows to cash used in investing £000 £000
activities
Cash used in investing activities (25,063) (7,132)
Analysed as follows:
Maintenance capital (4,943) (910)
Existing estate (8,465) (3,363)
Estate expansion (6,882) (56)
Freehold purchase (5,000) -
Movement in advance payments to capital suppliers 1,431 (2,803)
Loan to Joint venture (1,204) -
Cash outflows for capital projects (25,063) (7,132)
6. STAFF COSTS AND NUMBERS
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Staff costs - Group £000 £000
Wages and salaries 25,821 16,515
Social security costs 1,906 1,267
Other pension costs 322 178
Share-based payments 539 248
28,588 18,208
Staff costs included within costs of sales are £22,761k (2021: £13,072k).
The balance of staff costs is recorded within administrative expenses. The
2021 staff costs are net of CJRS which amount to £3,507k with nil in 2022.
Details of Directors' remuneration are set out in the Directors' Remuneration
Report. 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 53-week period ended 1 January 2023 received
remuneration of £1,197k (2021: £667k). The 2019 LTIP scheme vested in 2022
and 128,334 awards were exercised at a market value of £327k. 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:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Staff numbers - Group Number Number
Site staff 1,449 1,275
Administration 65 58
Unit management 159 157
1,673 1,490
53 weeks to 53 weeks to
1 January 26 December
2023 2021
Staff costs - Company £000 £000
Wages and salaries 913 967
Social security costs 98 88
Other pension costs 14 15
Share-based payments 539 248
1,564 1,318
Staff numbers - Company Number Number
Administration (including Executive Directors) 7 6
7. FINANCE COSTS
53 weeks to 52 weeks to
1 January 26 December
2023 2021
£000 £000
Interest on bank loans and overdrafts 334 391
Amortisation of debt issuance costs 168 124
Lease interest 6,682 5,481
Other 22 (10)
Finance costs 7,206 5,986
8. PROFIT BEFORE TAXATION
The following items have been included in arriving at profit before taxation:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
£000 £000
Staff costs (Note 6) 28,588 18,208
Consumables charged to cost of sales 3,086 1,460
Depreciation of property, plant and equipment (Note 16) 6,945 6,130
Depreciation of right-of-use assets (Note 17) 11,685 11,166
Amortisation of software (Note 13) 105 131
Amortisation of fair valued intangibles on acquisition (Note 13) 79 90
Loss on disposal of assets 271 442
Net impairment reversal (631) (1,124)
Government grants received (excluding CJRS) - (1,354)
CJRS grants received - (3,507)
Loss on Joint Venture (Note 14) 310 -
Variable lease rentals payable - property 298 61
Share-based payments 539 248
Repairs on property, plant and equipment 3,289 1,891
Exceptional items
HMRC VAT claims received and provision for updated HMRC VAT guidance (7,263) (238)
Auditors' remuneration
Fees payable to Company's auditors for the Company and Consolidated financial 70 58
statements
Audit of Company's subsidiaries 240 135
Audit-related assurance services 40 37
350 230
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 21 March 2023. The result for the
financial year dealt with in the financial statements of Ten Entertainment
Group plc was a loss of £642k (2021: £2,038k). 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:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
£000 £000
Current tax
Tax on profits for the year 4,013 -
Deferred tax
Origination and reversal of temporary differences 3,386 1,036
Effect of changes in tax rates - (248)
Adjustment in respect of prior years - (356)
Tax charge in statement of comprehensive income 7,399 432
The tax on the Group's profit before tax differs (2021: differs) from the
theoretical amount that would arise using the standard rate of tax in the UK
of 19% (2021: 19%). The differences are explained below:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
£000 £000
Profit before taxation 33,995 4,437
Tax using the UK corporation tax rate of 19% (2021: 19%) 6,459 843
Expenses not deductible 943 353
Change in tax rates on deferred tax balances - (248)
Adjustment in respect of prior years (52) 107
Permanent differences 211 (30)
(Use) of tax losses/loss carry back (162) (593)
Tax charge 7,399 432
On 24 May 2021, the Government confirmed that the corporation tax main rate
would remain at 19% and increase to 25% from 1 April 2023. As such, the rate
used to calculate the deferred tax balances as at 1 January 2023 is 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 53-week period were 68,496,118 (2021: 68,367,784).
The Company has 509,325 potentially issuable shares (2021: 274,005), 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), impairment reversal
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.
53 weeks to 52 weeks to
1 January 26 December
Basic and diluted 2023 2021
Profit after tax (£000) 26,596 4,005
Basic weighted average number of shares in issue 68,447,949 68,358,261
Adjustment for share awards (number) 509,325 274,005
Diluted weighted average number of shares in issue 68,957,274 68,632,266
Basic earnings per share (pence) 38.86p 5.86p
Diluted earnings per share (pence)* 38.57p 5.84p
Below is the calculation of the adjusted earnings per share:
53 weeks to 52 weeks to
1 January 26 December
2023 2021
Adjusted earnings per share £000 £000
Profit after tax 26,596 4,005
Net impairment reversal (631) (1,124)
Exceptional income (7,263) (238)
Tax impact on above adjustments 1,380 45
Adjusted underlying profit after tax 20,082 2,688
Adjusted profit after tax 20,082 2,688
Basic weighted average number of shares in issue 68,447,949 68,358,261
Adjusted basic earnings per share (pence) 29.34p 5.93p
Adjusted diluted earnings per share (pence) 29.12p 5.90p
12. BUSINESS COMBINATION - HARLOW
On the 15 May 2022, Tenpin Limited entered an Asset Purchase Agreement and
acquired the assets and trade of the Harlow bowling site from Harlow Bowl
Limited for £454k.
The table below summarises the consideration paid for the acquisition, the
fair value of the assets acquired and the liabilities assumed on the date of
the acquisition:
The following analyses the purchase consideration
Consideration as at 15 May 2022 £000
Cash consideration paid 454
Identifiable assets acquired and liabilities assumed
Inventory 6
Property, plant and equipment 59
Intangible assets -
Cash and cash equivalents -
Deferred tax asset 1
Other assets and liabilities, net (2)
Total identifiable net assets 64
Goodwill 390
Total 454
Acquisition related costs of £88k have been charged to administrative
expenses in the consolidated statement of comprehensive income for the 53 week
period ended 1 January 2023.
Property, plant and equipment acquired did not include the bowling lanes and
equipment which is retained by the landlord, which would normally make up the
bulk of the cost of a site. The acquired equipment, furniture and fittings on
site is bespoke, without a market place to easily attain fair values from. The
fair value of the acquired property, plant and equipment has thus been based
on the net book value of these assets at the time of sale to the Group, being
their cost when acquired less accumulated depreciation up to the date of sale.
A deferred tax asset of £1k was recognised on the fair values of assets
acquired versus their tax basis. As part of the due diligence, the sales and
profit numbers prior to acquisition from the seller's management accounts were
reviewed. As not all of the information was provided they are not disclosed
here to provide a guide to potential full-year performance. Since the date of
the business combination the site generated £620k of sales and made EBITDA of
£82k which has been included in the statement of comprehensive income. The
goodwill is made up of the expected benefits to arise from Tenpinisation of
the site's operations and processes under the management of the Tenpin brand.
None of the goodwill is expected to be deductible for tax purposes.
13. GOODWILL AND INTANGIBLE ASSETS
Fair valued
intangibles on
acquisition Goodwill Software Total
Group £000 £000 £000 £000
Cost
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
Additions - 390 40 430
Disposals - - (34) (34)
At 1 January 2023 2,938 29,740 1,331 34,009
Accumulated amortisation and impairment losses
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
Charge for the period - amortisation 79 - 105 184
Disposals - - (34) (34)
At 1 January 2023 2,846 - 1,288 4,134
Net book value
At 1 January 2023 92 29,740 43 29,875
At 26 December 2021 171 29,350 108 29,629
At 27 December 2020 261 29,350 215 29,826
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 16 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
£25,000k (2021: £39,000k).
14. INVESTMENTS IN JOINT VENTURE
Group and Company £000
At 27 December 2020 310
Acquisitions and disposals -
At 26 December 2021 310
Share of post-tax losses in Joint Venture (310)
At 1 January 2023 -
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 £300k. 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 £2,500k 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.
£1,801k has been borrowed as at 1 January 2023. 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 had 35 rooms open at the end of FY22 of
which 25 are operated out of nine tenpin centres.
15. INVESTMENTS
Subsidiaries'
shares
Company £000
At 27 December 2020 38,915
Acquisitions and disposals -
At 26 December 2021 38,915
Acquisitions and disposals -
At 1 January 2023 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 Section
479A 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.
16. PROPERTY, PLANT AND EQUIPMENT
Fixtures,
fittings and
equipment
Fixed Amusement
furnishings machines
Land & buildings Total
Group £000 £000 £000 £000 £000
Cost
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
Additions 5,000 1,142 459 18,259 24,860
Disposals - - - (2,186) (2,186)
At 1 January 2023 5,000 12,247 1,895 68,160 87,302
Accumulated depreciation and impairment
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
Charge for the period - 994 141 5,810 6,945
Impairment reversal - - - (175) (175)
Disposals - - - (1,764) (1,764)
At 1 January 2023 - 5,702 1,401 23,001 30,104
Net book value
At 1 January 2023 5,000 6,545 494 45,159 57,198
At 26 December 2021 - 6,397 176 32,957 39,530
At 27 December 2020 - 7,562 242 33,649 41,453
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
48 (2021: 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:
1 January 26 December
2023 2021
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 13.25% 12.01%
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 future cash flows have also been adjusted to account for
the climate related risks, with outflows factored in for the purchase of solar
panels to go up at sites to help achieve Net Zero targets. The impairment
review this year has resulted in an impairment reversal of £1,087k against
the £2,522k of impairment charged in 2020. The reversal has been allocated as
£912k to Right of Use assets and £175k 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 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%, there is no
change to the impairment release but there would be an impairment charge of
£116k (2021: £1,297k). If the long term growth rate applied is changed to
1%, there is no change to the impairment release but there would be an
impairment charge of £48k (2021: £701k). If the trading performance were to
significantly reduce inline with the downside case in the going concern
section for 2023, the impairment reversal would reduce by £747k and the
impairment charge of £3,669k 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
(2021: 5x EBITDA).
The depreciation and impairment charges and reversal are recognised in
administrative expenses in the statement of comprehensive income. Bank
borrowings are secured on all assets of the Group for the value of £25,000k
(2021: £39,000k) including property, plant and equipment.
17. RIGHT-OF-USE ASSETS
Amusement
machines
Property and other Total
Group £000 £000 £000
Cost
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
Lease additions 9,547 1,768 11,315
Disposals - (383) (383)
Modification of leases 3,793 - 3,793
At 1 January 2023 196,921 12,484 209,405
Accumulated depreciation and impairment
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
Charge for the period 9,786 1,899 11,685
Impairment reversal (912) - (912)
Disposals - depreciation - (375) (375)
At 1 January 2023 27,747 10,007 37,754
Net book value
At 1 January 2023 169,174 2,477 171,651
At 26 December 2021 164,708 2,616 167,324
At 27 December 2020 152,794 4,351 157,145
18. INVENTORIES
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
£000 £000 £000 £000
Goods held for resale 1,493 1,226 - -
The cost of inventories recognised as an expense and included in cost of sales
amounted to £11,548k (2021: £5,758k). There is a provision of £61k (2021:
£80k) for obsolete shoes. These are included in the figures above. Bank
borrowings for the value of £25,000k (2021: £39,000k) are secured on all
assets of the Group including inventory.
19. TRADE AND OTHER RECEIVABLES
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Current receivables £000 £000 £000 £000
Trade receivables 118 374 - -
Amounts owed by subsidiary undertakings - - 611 205
Accrued income 107 114 - -
Advance payments to supplier 1,372 2,803 - -
Other receivables 1,453 844 - -
Prepayments 1,617 1,291 9 4
4,667 5,426 620 209
There is a provision of £300k (2021: £300k) for trade receivables that are
beyond their due date and a provision of £135k (2021: £135k) against other
receivables that may not be recoverable. Included in other receivables is a
loan to Houdini's for £1,801k, (2021: £600k) which is charged interest at
the effective interest rate agreed at the time of the loan. The loans mature
at the end of 2024.
20. CASH AND CASH EQUIVALENTS
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
£000 £000 £000 £000
Cash and cash equivalents 10,086 11,511 298 4,424
21. SHARE CAPITAL
2023 2021
Group and Company Shares £000 Shares £000
68,367,784 (2021: 68,346,970) ordinary shares of £0.01 each at the beginning 68,367,784 684 68,346,970 683
of the year
Issue of share capital during the period 128,334 1 20,814 1
Ordinary shares of £0.01 each at the end of the year 68,496,118 685 68,367,784 684
As at 1 January 2023, the Company's authorised share capital was £684,961
(2021: £683,678) divided into a single class of 68,496,118 (2021: 68,367,784)
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.
22. CASH GENERATED FROM OPERATIONS
Group Company
53 weeks to 52 weeks to 53 weeks to 52 weeks to
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Cash flows from operating activities £000 £000 £000 £000
Profit/(loss) for the period 26,596 4,005 (2,696) (2,038)
Adjustments for:
Tax 7,399 432 - -
Finance costs 7,206 5,986 - 6
Non-cash one-off income (239) (238) - -
Non-cash share-based payments charge/(credit) 539 248 539 248
Loss on disposal of assets 271 442 - -
Share of loss in Joint Venture 310 - 310 -
Amortisation of intangible assets 184 221 - -
Depreciation of property, plant and equipment 6,945 6,130 - -
Depreciation of right to use assets 11,685 11,166 - -
Impairment reversal (631) (1,124) - -
Changes in working capital:
Increase in inventories (267) (720) - -
(Increase) / decrease in trade and other receivables 77 (955) (411) (146)
Increase / (decrease) in trade and other payables 1,888 5,234 (1,868) 1,777
Cash generated from/(used in) operations 61,963 30,827 (4,126) (153)
23. BANK BORROWINGS AND LEASE LIABILITIES
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Current liabilities £000 £000 £000 £000
Bank loans - 4,666 - -
Leases - Machines/other 2,728 3,223 - -
Leases - Properties 7,720 8,941 - -
Capitalised financing costs - (169) - -
10,448 16,661 - -
In September 2019, the Group entered into a £25,000k facility with the Royal
Bank of Scotland plc ('RBS') for three years. This facility consists of a
committed £25,000k facility split into a £23,000k revolving credit facility
and a £2,000k overdraft facility. In January 2021, the Group entered into a
£14,000k CLBILS term loan facility with RBS for three years until January
2024. The CLBILS facility was fully repaid during 2022. During the year, the
Group extended the expiry date of the £25,000k facility until April 2024. The
interest rates for the facilities are tabled further on.
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Non-current liabilities £000 £000 £000 £000
Bank loans - 9,334 - -
Leases - Machines/other 1,560 2,390 - -
Leases - Property 188,394 181,108 - -
189,954 192,832 - -
Bank borrowings are repayable as follows:
Group Company
1 January 26 December 1 January 26 December
2023 2021 2023 2021
Bank loans £000 £000 £000 £000
Within one year - 4,666 - -
Between one and two years - 4,667 - -
Between two and five years - 4,667 - -
- 14,000 - -
The RCF and overdraft have not been drawn down at the end of FY22, with the
£14,000k CLBILS term loan facility being fully repaid during the year and
cannot be re-borrowed.
Available borrowings are as follows:
Total available Total drawn
Group Currency Interest rates Maturity £000 £000
Revolving credit facility GBP LIBOR + 1.80% Apr-2024 23,000 -
Bank overdraft GBP LIBOR + 1.80% Apr-2024 2,000 -
Total borrowings 25,000 -
The payment profile of minimum lease payments under Leases is as follows:
Property leases Machines and other leases Total
1 January 26 December 1 January 26 December 1 January 26 December
2023 2021 2023 2021 2023 2021
Net Group £000 £000 £000 £000 £000 £000
Within one year 7,720 8,941 2,728 3,223 10,448 12,164
Between one and two years 7,349 7,126 764 1,956 8,113 9,082
Between two and five years 24,015 23,552 799 434 24,814 23,986
After five years 157,027 150,430 - - 157,027 150,430
196,111 190,049 4,291 5,613 200,402 195,662
Property leases Machines and other leases Total
1 January 26 December 1 January 26 December 1 January 26 December
2023 2021 2023 2021 2023 2021
Gross £000 £000 £000 £000 £000 £000
Within one year 14,388 15,169 2,779 3,241 17,167 18,410
Between one and two years 13,799 13,069 794 1,967 14,593 15,036
Between two and five years 41,757 39,842 815 440 42,572 40,282
After five years 205,936 197,236 - - 205,936 197,236
275,880 265,316 4,388 5,648 280,268 270,964
Future finance charges on leases (79,769) (75,267) (97) (35) (79,866) (75,302)
Present value of lease liabilities 196,111 190,049 4,291 5,613 200,402 195,662
Leases are in place for all 48 centres (2021: 46) at a value of £196,060k
(2021: 190,049k), amusement machines from Bandai Namco Europe Limited with a
value of £4,089km (2021: £5,297k) and coffee machines acquired with a value
of £202k (2021: £316k).
Analysis of statutory net debt
Net cash/(debt) as analysed by the Group consists of cash and cash equivalents
less bank loans and amounts to £10,086k (2021: (£2,489k)). 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 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)
Changes from financing cash flows (1,425) 14,000 12,575 10,388 22,963
Lease modifications in the year - - - (3,793) (3,793)
Lease acquisitions - - - (11,335) (11,335)
Balance at 1 January 2023 10,086 - 10,086 (200,402) (190,316)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFEAVFILFIV