Ten Entertainment - Half Year Results
21/09/2022 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:20220921:nRSU0615Aa&default-theme=true
RNS Number : 0615A Ten Entertainment Group PLC 21 September 2022
21 September 2022
Ten Entertainment Group plc
Half-Year Results 26 weeks ended 26 June 2022
Value for money entertainment driving sustainable growth in sales and profit
Ten Entertainment Group plc ("Ten Entertainment" or "The Group"), a leading UK
based operator of 48 bowling and family entertainment centres, today announces
its half-year results for the 26 weeks to 26 June 2022. H1 19 has been used
in some selected comparisons because it is the last H1 that traded for a full
26-week period.
26 weeks to 26 June 2022 26 weeks to 27 June 2021 26 weeks to 30 June 2019 (H1 19)
(H1 22) (H1 21)
Total sales £63.2m £10.6m £41.4m
Trading weeks 26 6 26
Like-for-like sales growth vs 2019(1) 46.0% 22.5% n/a
Group adjusted EBITDA(2) £28.8m £0.6m £17.1m
Group adjusted EBITDA less property rental costs(3) £22.5m (£5.5m) £11.2m
Group adjusted profit / (loss) before tax(1) £15.7m (£10.8m) £7.1m
Group Adjusted PBT margin 24.8% (101.9%) 17.1%
Profit/ (loss) after tax £18.3m (£8.8m) £4.7m
Cash inflow after investments £3.2m £1.7m £1.0m
Bank net cash /(debt) £0.7m (£10.9m) (£3.2m)
Value for money and customer service resets the baseline to a new and
sustainable high level
· +52.6% total sales growth compared to 2019
· +36.0% like-for-like footfall growth compared to 2019
· Bowling prices frozen at 2019 levels to maintain value for money
and drive footfall
· +0.5% like-for-like sales growth compared to 2021 in the 11 weeks
since 27 June
Excellent progress in strategic investment programme
· £3.1m invested in four refurbishments expected to drive over 30%
ROI; three further refurbishments planned in H2
· New centre in Harlow acquired and refurbished; new-build centre
in Walsall opens next week
· Three more new centres to come over the next six months with
strong pipeline in place
· £1.9m invested in renewing the bowling product creating
significant improvements to customer experience
Business model continues to generate sustainable growth even in challenging
economic landscape
· PBT operating margins extended to a record 24.8% benefiting from
the operational gearing of footfall growth
· CLBILS fully repaid and Group returned to a net cash position
with an interim dividend of 3p per share to be paid
· Over 90% of energy needs are fixed to September 2024 at 2020
prices
· Launch of carbon neutral menu and investment in zero carbon
energy schemes
Consistent sales growth resets the baseline
6 weeks to 27 June 2021 26 weeks to 26 weeks to 11 weeks to
26 Dec 2021 26 June 2022 11 Sept 2022
Like-for-like growth vs 2019(4) 22.5% 30.3% 46.0% 42.1%
Like-for-like growth vs 2021(5) n/a n/a 19.0% 0.5%
Sales growth in the first half of FY22 has been extremely strong compared to
H1 19, the last full H1 of undisrupted trading, accelerating the trend already
shown in H2 21. Like-for-like sales compared to 2019 were +46.0%. This was
principally driven by footfall growth of 36.0% and boosted further by
increased revenue per head (RPH) of 7.4%. All the RPH increase resulted from
additional customer spend on food, drink, and other games, with bowling
revenue per head remaining flat to 2019, demonstrating the successful strategy
of holding prices at 2019 levels and maximising the customer value
proposition.
The first half benefited from record breaking February and May half-term
trading as well as an exceptional Easter. However, the underlying trend of
sales growth compared to 2019 has been broadly consistent throughout the
half. It is clear that our great value competitive socialising model
resonates with our customers in a post-pandemic leisure landscape. We believe
that a new sustainable baseline has been set. This baseline is around 30%
higher than that seen in 2019, with our ongoing programme of capital
investment, digital marketing and customer service delivery generating
incremental growth over and above that new base.
This positive sales trend has continued since the end of the first half
despite the very dry and hot summer which traditionally does not favour
bowling and other indoor activities. We are delighted to report modest
growth in the 11 weeks since 27 June compared to 2021 because we know that
last year benefited significantly from exceptional sales as a function of UK
Staycations and the initial pent-up demand from the release of Covid
restrictions. Total sales for the 11 weeks since 27 June are +46.7% compared
to 2019 and +1.1% higher than 2021. On a like-for-like basis sales are
+42.1% vs 2019 and +0.5% compared to last year. This is clear evidence that
the new baseline established post Covid has now been embedded in the
underlying business.
Outlook
· The sales baseline puts the Group on trajectory for a strong full
year performance in line with expectations
· The Group is mindful of the impacts of the macro-economic climate,
but confident that the model is resilient
o Low entry price point
o Market leading value for money offering well-placed to maintain footfall
o Multi activity centres and off-peak promotions allow customers to
carefully manage their spend
· Inflationary pressures are manageable without compromising value or
quality of experience
o Operating efficiencies from volume growth sufficient to offset cost rises
o Over 90% of energy needs are fixed to September 2024 at 2020 prices
o Management and staff salaries supplemented with self-funding performance
related bonuses
o Expect 2023 inflation to be managed through footfall growth with limited
need for price increases
· Net cash position at the end of H1 with CLBILS now repaid in full
in July 2022
· Interim dividend of 3p to be paid in October balancing shareholder
returns with strategic investments
· Cash generation remains strong, with continued investment in
high-returning strategic initiatives
· 3 further centres in development, with strong pipeline of future
sites
Graham Blackwell, Chief Executive Officer, commented:
"Our teams have once again raised the bar in the first half of this year and
have worked even harder to deliver this impressive result. We have
accelerated our growth and redefined the baseline, putting the business in the
best possible shape to support our people and our customers through the
challenges of the next 12 months.
Our sales growth is, and remains, very strong against 2019 and we have
consolidated and built upon the gains we made last year. We now have net
cash and have resumed our dividend payments while maintaining our focus on
investing in the customer experience to continue our growth. We have bucked
the trend of many other businesses in hospitality and leisure and our value
for money customer proposition is well positioned to continue to deliver
strong returns for our shareholders."
Enquiries:
Ten Entertainment Group via Instinctif Partners
plc
Graham Blackwell, Chief Executive Officer
Antony Smith, Chief Financial Officer and Company Secretary
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
Penny Bainbridge
There will be a presentation today at 9.30 am to analysts via a Webcast. The
supporting slides and audio will also be available on the Group's website,
www.tegplc.co.uk, later in the day.
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. These are non-IFRS measures used by the Group in
understanding its underlying earnings. Group adjusted profit before tax is
defined as profit before tax adjusted for exceptional items and impairment
reversals. Like-for-like sales compare sales while the business is trading
and adjusted for new centres.
2. Group adjusted EBITDA consists of earnings before
interest, taxation, depreciation, amortisation costs, exceptional items,
impairment reversal, loss on joint venture and profit or loss on disposal of
assets
3. EBITDA less property rental costs for FY22 and FY21 is
the Group adjusted EBITDA less the cash rent paid for rental of the long-term
leasehold properties which are held on the balance sheet as Right of Use
Property assets. For 2019 this measure is the IAS17 EBITDA as reported in
FY19 when the Group was not reporting on an IFRS16 basis.
4. Like-for-like sales growth and spend per head growth
compared to 2019 figures using only centres that were open and trading in both
periods.
5. Like-for-like sales growth and spend per head growth
compared to 2021 figures using only centres that were open and trading in both
periods.
Chief Executive's Statement and Operating Review
The first half of 2022 has seen accelerated growth vs 2019 over and above the
high benchmark set in H2 21. Like-for-like sales growth of 46.0% is a record
for a 6-month period. Group Adjusted PBT of £15.7m for H1 is not only +12.9%
higher than the second half of last year but is also higher than any other
full year PBT delivered in the Group's history. The record sales have helped
the business benefit from operational efficiencies in the cost base which have
been more than sufficient to offset the impact of cost inflation and have
allowed the business to grow without raising prices.
We remain mindful of the wider economic environment but are confident that by
continuing to invest in the customer experience; maintaining our
value-for-money approach in the experiential leisure and hospitality space;
and rewarding our people for delivering great customer service; we are well
set to continue to achieve strong results and generate high investment returns
for our shareholders.
It's all about that base
It has now been 70 weeks since 17(th) May 2021 when businesses reopened from
the last Covid Lockdown. We have remained cautious that some of the
exceptional growth experienced since that date may have been of a temporary
nature and would start to temper. However, the table below shows that not
only has sales growth against a 2019 baseline remained robust, but we have
also been able to grow against our 2021 comparative too.
Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 11 weeks to 11 Sep 22
Sales growth vs FY19 27.4% 43.9% 23.8% 52.8% 52.3% 46.7%
Sales growth vs FY21 19.5% 1.1%
Over the past 12 months we have invested in and refurbished 8 centres,
significantly upweighted our digital footprint, augmented our bowling product
and enhanced the customer experience. We have maintained the price of our
games and activities at 2019 levels which means that relative to other
hospitality and leisure activities we are now better value for money than ever
before. These improvements have helped cement our sales at a renewed base
level that is over 30% higher than pre Covid.
We continue to invest in making the customer experience better than ever. In
the short to medium term, we anticipate that this will result in single-digit
like-for-like growth above our new baseline in addition to the benefits from
the pipeline of new centres that we are building.
First Class Customer Experience
At the heart of our customer offer is great entertainment at excellent value
for money. The average realised price of a game of bowling in the first half
of 2022 was £5.19 including VAT which is 2.1% lower than in the first half of
2019. Our strategy to hold our bowling prices has been rewarded with
customers spending more with us on each visit. Our average revenue per head
in H1 22 has increased by 7.4% to £15.98. This inflation-busting approach
means that against the trend of most other hospitality and leisure operators,
we have been able to bring down our relative prices and significantly increase
the value of the experience for our customers at every visit. We are
continually monitoring our value proposition to ensure that we cover our
costs, drive underlying growth, and maximise our yield.
We have invested over £2m in H1 in ensuring that our bowling experience
remains sector-leading. By the end of 2022, all our centres will be on the
state-of-the-art multimedia scoring platforms. Our Pins & Strings
pinsetter roll out is complete and we are now focusing on improving the
quality and reliability of our other bowling equipment such as ball returns
and lane surfaces. This ensures that our customers have a great bowling
experience. We will continue to ensure that bowling at Tenpin remains the
best in the UK.
Digitally Enabled
Our contactable customer database continues to grow, and we have been able to
target our customers with the best deals and promotions to suit their
lifestyle and budget.
Online bookings remain at 62%, which is significantly higher than the
pre-covid levels of 38% in H1 19. We believe this reflects a permanent shift
in customer behaviour since Covid and has been enabled by ongoing investment
in our website to optimise conversion. Bowling bookings are rarely made more
than a few days in advance, and often on the day, therefore mobile
optimisation, and introduction of widely used payment methods such as ApplePay
and GooglePay has helped customers book their lanes with ease. We have
widened the range of activities that can be booked online driving
like-for-like sales of laser tag by over 66% compared to 2019 as well as
raising awareness and participation of our new karaoke and escape rooms.
Digitalisation will continue, and our ongoing investment programme will
consistently raise the bar to give our customers a seamless digital
experience.
High Quality Centres
£3.1m has been invested in the first half of the year on 4 major
refurbishments. Each of these refurbishments has had a transformational impact
on the centres, providing the next generation of customer experience. We are
delighted to already be benefiting from significant sales uplifts.
Our focus on these major refurbishments is to refresh and modernise the centre
to ensure it continues to be well-invested and add new activities and revenue
streams to enhance the sales density. Since 2019 we have reconfigured our
layouts and added additional customer trading space equivalent to a new
entertainment centre. This has allowed the introduction of 16 extra bowling
lanes, 21 karaoke rooms; 19 new escape rooms; and two additional laser tag
arenas all within the existing estate. The new activities have contributed
over £2m of additional annual sales without any ongoing increase in rent or
property costs. Overall, we have grown our sales density from £64 per
square foot in 2019 to an annualised run rate of over £90 per square foot, an
increase of 41%.
Coventry and Northampton are large destination entertainment centres in
out-of-town mixed leisure and retail parks serving a significant local
population. Our refurbishments of these centres have focused on expanding
the variety of activities on offer and increasing the sales density. We have
added karaoke and escape rooms by repurposing some redundant space and we have
significantly improved the laser tag arena. These enhancements have been
combined with a modernised bar, high quality atmospheric LED lighting and
improvements to the bowling experience. The combination of these changes has
delivered strong sales uplifts already.
Our Bexleyheath and Croydon entertainment centres are busy London locations
that benefit from high footfall from the local area. Both needed investment
to modernise and refresh the bar, dining and machines areas and to update the
bowling experience to ensure our customers continue to enjoy the best in
bowling and entertainment with better equipment and enhanced LED lighting and
sound systems. Although there is less scope in these centres to add
additional ancillary activities, we have been pleased to see significant sales
growth since the refurbishments have been completed.
Our refurbishment strategy will continue to optimise sales density and
modernise the estate to ensure that we maintain our strong sales performance.
In addition to the major refurbishments, we have concentrated on ensuring that
the infrastructure across the estate is modern and well maintained. In the
first half of this year, we have invested £1.9m in the bowling equipment to
ensure that our bowling experience remains the best available in the UK today.
Global supply chains have been challenged in recent times and in order to
maintain our momentum of continuous improvement across the estate, we have
invested a further £2.1m in the first half to forward purchase assets and
equipment which will be utilised in our refurbishments and maintenance in the
second half of the year.
Increasing UK Coverage
We were delighted to have opened a new bowling centre in Harlow in May. This
was a well-established bowl in the town centre that needed reinvestment.
Since the acquisition we have enhanced the bowling, introduced new lighting,
bar and seating areas and have transformed the customer experience. We have
already seen the benefits of increased footfall and sales as a result. Our
Harlow entertainment centre is located in the town centre and offers 14 lanes
of bowling, karaoke and our usual mix of machines, pool and great value food
and drink. It has now been redeveloped into a great place to go out and have
fun in the town.
We are about to open a brand-new centre in Walsall at the Crown Wharf retail
and leisure park. This 20-lane centre features state-of-the-art lighting and
bowling equipment as well as karaoke, laser tag, escape rooms and much more.
The centre occupies two units previously occupied by Mothercare and Peacocks
and demonstrates how our growing experiential leisure offering adds value to a
landlord's development by replacing unsuccessful large-box retailers.
We have three further agreements for new centres in Crewe, Dundee and Milton
Keynes which are all in the process of planning or licensing applications.
As soon as the appropriate licensing has been granted, we will begin
construction. We expect to open these in H1 2023.
Our total cash investment in new centres in H1 22 was £8.7m. This included
forward purchase of essential equipment for new developments, a deposit for
the acquisition of the freehold of one of our existing centres, the
acquisition and refurbishment cost of Harlow and a proportion of the work in
Progress for the development in Walsall.
We continue to explore further opportunities for development across the UK and
have a strong pipeline of exciting new centres that we expect to be able to
open in 2023 and beyond.
Engaged People
We employ almost 1,500 people who work hard to ensure that our customers have
a great experience each time that they visit. Our strong team of experienced
managers have been instrumental in delivering this remarkable period of sales
growth. We continue to recognise our management teams through a quarterly
bonus structure that rewards sales and profit performance and customer
service. These bonuses are essential for management continuity and ensure
that our teams are focused on looking after our people and our customers.
We also rely on a large team of hourly paid colleagues. We use the latest
digital tools to ensure that our teams are recruited, onboarded and trained in
the best way possible so that they can give high quality customer service from
the moment that they join the business. The current labour market has been
challenging, but we have maintained our staffing levels throughout 2022. We
are a fun place to work and we give our teams access to great benefits as well
as opportunities for development and promotion.
We are bringing forward by 6 months the planned Living Wage increase for our
hourly paid colleagues. This means that we are increasing pay rates in
October to ensure that our teams are better equipped to manage the cost of
living pressures over the winter period. We are funding this increase in
costs through the efficiency gains made through staff retention, which reduces
training and onboarding costs, and through the incremental footfall and volume
that the business enjoys. Overall, our labour as a % of sales remains at 18%
which is flat to 2019.
Sustainable delivery
During the first half of the year, we have continued to develop our
sustainability strategy, building our plan to reach Net Zero. Our three
principal priorities to reduce our footprint are energy management; food and
drink sourcing; and waste reduction.
We continue to source our electricity from 100% renewable supplies. Gas
represents only 4% of our energy and we are actively updating our
infrastructure to remove gas consumption from our business altogether. We
are replacing gas boilers with more carbon efficient electrical heating
systems and using electrical rather than gas appliances in our kitchens. We
have started the planning process to install micro generation solar facilities
on the roofs of some of our buildings to as part of our commitment to truly
renewable and zero carbon energy.
We are actively engaged with our suppliers to reduce the carbon footprint of
the food and drink we serve to our customers. However, we recognise that as
a relatively small buyer in the UK hospitality market, we are not always in
direct control of the entire carbon chain and it may take some time for change
to happen. As a short-term measure while we address the route to Net Zero,
we have moved our entire food and drink menu onto a Carbon Neutral basis in
line with guidance developed by the United Nations Framework Convention on
Climate Change (UNFCCC).
We have been working with our suppliers to reduce the waste in our business
and to increase our levels of recycling. All of our food packaging is now
100% recyclable and we are improving waste segregation with an aim to
significantly increase the level of recycling. Our used cooking oil is now
recycled for use in bio-fuels and we are working with our suppliers to manage
our food waste for use in power generation.
Outlook
We are encouraged that we have established a new baseline for our business.
This higher level of sales creates operational gearing benefits that mean that
the business is more profitable from an operating margin basis even though
there has been some significant cost inflation.
We are mindful of the impact that increases in the cost of living may have on
our customers and welcome the assistance the Government is giving consumers
and business. However, bowling and entertainment at our centres is an
affordable treat and offers excellent value for money. We will continue to
focus on offering great value for money, and our pricing strategy will focus
on maintaining that value and maximising our yield. Our ongoing investment
programme continues to make the customer experience better, with a wider range
of activities to enjoy and with packages and deals to suit every budget. As a
result, we are targeting some like-for-like growth from this new baseline and
are confident that the excellent business model economics will continue to
generate strong cashflows.
We believe our business is well set and positioned to match current
expectations for this year. We will continue to monitor and scrutinise the
fluctuations of the broader economic environment. Our focus on great
customer service, value-for-money, and our efficient business model means that
modest sales growth in 2023, combined with our pipeline of new centres will
continue to deliver profitable growth.
Graham Blackwell
Chief Executive Officer
21 September 2022
Financial Review
£000 26 weeks to 26 June 2022 26 weeks to 27 June 2021 Change 26 weeks to 29 June 2019
2022 vs 2021
Revenue 63,238 10,610 52,628 41,444
Cost of goods sold (8,865) (1,234) (7,631) (4,999)
Gross Margin 54,373 9,376 44,997 36,445
GP% 86.0% 88.4% (2.4%) 87.9%
Total operating costs (18,982) (5,544) (13,438) (14,332)
Central and support overheads (6,616) (3,201) (3,415) (4,984)
Group adjusted EBITDA 28,775 631 28,144 17,129
Less property rent costs (6,269) (6,117) (152) (5,909)
Group adjusted EBITDA after rental costs(2) 22,506 (5,486) 27,992 11,220
Add back property rental costs 6,269 6,117 152 n/a
Depreciation and interest on Right of Use Property Assets (8,109) (7,945) (164) n/a
Depreciation and amortisation (4,368) (3,165) (1,203) (3,520)
Loss on Joint Venture (310) - (310) -
Net interest (274) (222) (52) (401)
Profit/(loss) on disposal of assets 15 - 15 (57)
Amortisation of acquisition intangibles (62) (68) 6 (151)
Group adjusted profit/(loss) before tax(2) 15,667 (10,769) 26,436 7,091
Reversal of impairment 747 - 747 12
Exceptional items 4,601 - 4,601 (1,169)
Profit/(loss) before tax 21,015 (10,769) 31,784 5,934
Taxation (2,721) 1,970 (4,691) (1,261)
Of which: taxation attributable to Group adjusted (loss)/profit (1,847) 1,970 (3,817) (1,443)
Profit/(loss) after tax 18,294 (8,799) 27,093 4,673
Earnings/(loss) per share
Basic earnings/(loss) per share 26.8p (12.9)p 39.7p 7.19p
Adjusted basic earnings/(loss) per share 20.2p (12.9)p 33.1p 9.01p
Sales and Gross Margin
Total sales were £63.2m which was +£52.6m ahead of HY 21 due to the business
being closed for 20 of the 26 weeks in HY 21. Compared to the last full
trading period of H1 19 sales were £21.8m higher, which is a growth of
+52.6%. This significant sales growth represents a reset in the business
trading post Covid. Increased customer demand for family based experiential
leisure, combined with a more effective digital strategy and a significantly
improved customer experience have all helped reset the trading base to a new
level.
Gross Margin of £54.4m is at 86.0% of sales. This is a function of the
nature of our business model. Bowling, which represents 44.7% of sales,
carries no Cost of Goods sold because it relies solely on the fixed asset base
of the business. Machine sales, which are 22.2% of the business are a blend
of owned machines, which have zero Cost of Sales, and machines which operate
on a finance lease from our suppliers which do have and associated a cost of
sales. The remaining sales from food and beverage also attract direct costs
from the supply of the products sold. The result of this significant
proportion of sales from fixed assets is a very high blended average margin of
86.0%. Gross margin is (1.9%pts) lower than the 87.9% in HY19 principally a
function of a shifting sales mix as a result of better cross sell of ancillary
products. Bowling represented 48.0% of sales in H1 19. This 3.3%pt shift
in bowling mix, while margin dilutive at a GP% level is cash positive at a
Gross margin level as we have successfully increased the revenue per head from
our customers without increasing prices. LFL revenue per head in HY 19 was
£14.88 and this has increased by 7.4% to £15.98. All this revenue per head
increase is from additional sales of food, drink and machines, with a static
spend per head on bowling.
Costs and overheads
Total Operating costs of £19.0m. This is a significant increase compared to
H1 21 which was £5.5m of cost. However, during this period the business was
closed for 20 weeks with associated benefits in reduced staffing and other
variable costs and so the numbers are not truly comparable. Compared to a
full 26 weeks of trading in HY19, where total costs were £14.3m, there has
been an increase of £4.7m +32.4% and has been subject to three years of
inflationary pressures. The operational gearing of the variable cost base
means that this inflationary and volume impact has been absorbed by labour and
fixed cost efficiencies. H1 19 costs as a % of sales were 34.6% and this
ratio has fallen to 30.0% for H1 22. Had costs stayed at the H1 19 ratio,
operating costs would have been £21.9m which demonstrates an implied cost
saving of £2.9m as a function of these efficiencies.
Central and support overheads in H1 22 were £6.6m, (£3.4m) higher than in H1
21. H1 19 is a more suitable trading comparative due to the Covid disruption
in H1 21. Since 2019 these central costs have grown by 32.7% or £1.6m.
There are three principal drivers of this increase: inflationary pressures in
the central fixed cost base; an increased level of marketing and digital
investment to drive sales growth; and an investment in specific strategic
programmes to deliver long term sustainable growth. In terms of inflation,
the central costs have seen around 9% wage inflation. In addition, there has
been significant inflation in certain professional fees; the audit fee has
more than doubled since 2019. The Group has increased its digital and
marketing expenditure to maintain and extend its customer engagement. This
has been rewarded with doubling of the customer database and a sustained
improvement in click-through and conversion rates on our customer
communications. Finally, we have been very active in increasing our pipeline
of new centres. We have acquired one centre in H1 22; almost completed the
new build at Walsall and have three further centres pending licensing or
planning as well as more than five other centres nearing legal completion.
This not only increases the professional fees but has also resulted in a
growth in our property and operational teams as we plan and execute these new
centre builds. We expect our central and support costs to remain at this new
higher level as the business continues its strong growth agenda.
EBITDA
We continue to highlight our total property rent costs even though this is no
longer an IFRS16 measure. This Alternative Performance Measure (APM) helps
with a comparison of costs against 2019 when the business was reporting on an
IAS17 basis. These costs in H1 22 were £6.3m which is (£0.4m) 6.1% higher
than in H1 19. The principal reason for the growth is the addition of four
new centres. Absent this, the long-term nature of our lease deals has proven
very effective at mitigating any inflationary pressures, and we expect it to
continue to be so.
EBITDA after property rental costs is another APM that helps illustrate the
long-term trends in the performance of our business and its cash generation
potential. In H1 22 the profit was £22.5m which is just over double that
generated in the last unaffected trading period of H1 19. This exceptionally
high growth in profit illustrates the impact of strong sales growth in a
relatively fixed cost high margin operating model.
Depreciation, Amortisation, interest and other costs
Depreciation and interest on the Right of Use property assets in H1 22 is
£8.1m, which is £1.8m higher (29.4%) than the cost of the rent in the
period. Partly this is due to the compression on PBT that results from having
leases that are early in their tenure which attract a higher cost of
interest. In addition, some properties may benefit from a rent-free period
on inception of a new lease, which is amortised for the full lease period when
calculating interest and depreciation but is omitted from the property rental
cost.
Other depreciation and amortisation was £4.4m in H1 22. This was £1.2m
higher than in H1 21 where the depreciation was only £3.2m. That lower
figure was a function of the halting of the capital investment programme from
March 2020 until it was restarted in the second half of 2021. This
temporarily reduced the depreciation charge as assets came to the end of their
useful economic life and new replacement assets were not added. Over the 12
months to 26 June 2022, since the capital investment programme was restarted,
the business has invested £22.0m of capital expenditure. This investment
has increased the depreciation charge.
Loss on Joint Venture
At the end of FY19, the Group invested £310k in a 50:50 Joint Venture with
Houdini's Escape Room Experience limited. Since that date, as a result of
Covid-19 closures and a rapid expansion programme, the company has made a
trading loss. This loss of £0.3m represents TEG's 50% share of that loss on
Joint Venture and brings the investment value to zero.
The Group remains committed to continuing to expand this successful
experiential leisure concept. Escape rooms typically have a 12-month
maturity curve and as expansion accelerates there is an inevitable delay in
translating that growth into the profit. However, the underlying model is
strong and delivering some excellent results and strong customer feedback.
TEG has an option to purchase the remaining 50% of share capital at the end of
2024 and we remain confident that the business will be earnings enhancing in
the medium term.
Exceptional items
The Group confirmed with HMRC in April that the Reduced Rate of VAT
implemented by the Government in July 2020 to support hospitality business
should apply to sales of Tenpin bowling. This resulted in a backdated claim
for overpaid output tax of £4.4m relating to 2020 and 2021. This cash has
now been received in full and the £4.4m of income has been treated as an
exceptional item as it relates to sales that were made in previous years. A
further £0.2m is the release of an historic VAT provision which is deemed no
longer necessary based on current VAT guidance.
Reversal of impairment
The strong sales and profit performance in the first half of the year has
created a trigger event to review the impairment modelling for our sites and
in particular the right of use property assets. Stronger cashflows have led
management to revise their future models and have resulted in a £0.7m release
of the 2020 impairment charge.
Financing
£000 26 weeks to 26 weeks to
26 June 2022 27 June 2021
Interest on bank debt (216) (207)
Amortisation of bank financing costs (40) (15)
Finance lease interest charges (3,276) (2,444)
Net interest excluding shareholder loan note interest (3,532) (2,666)
Finance costs increased to £3.5m in H1 22 (H1 21: £2.7m) comprising the
implied interest relating to the lease liability under IFRS 16 of £3.3m (H1
21: £2.4m) and £0.2m (H1 21: £0.2m) associated with our bank borrowing
facilities. The finance lease interest charges have increased by £0.9m due to
the lease regears completed in the second half of 2021 and the recognition of
the Walsall and Harlow leases in 2022.
The interest on the bank debt is flat year on year and relates to interest on
the CLBILS term loan facility and a commitment fee for the £25m RCF. £7.0m
of the CLBILS term loan facility was repaid in April 2022 the balancing £7.0m
repaid in July 2022. This has fully repaid the CLBILS and means the Group no
longer has any constraints on declaring a dividend. The £25m RCF remains in
place until 2024 and is currently undrawn.
Taxation
A tax charge of £2.7m has been recognised for H1 22 (H1 21: £2.0m credit)
arising on the profit before tax generated in the period. The effective tax
rate of 12.9% is lower than the actual tax rate of 19% arising from the
benefit of the super deduction of 130% on capital allowances.
Net debt
As at 26 June 26 December Movement 27 June
£000 2022 2021 2021
Closing cash and cash equivalents 7,734 11,511 (3,777) 17,103
Bank loans (7,000) (14,000) 7,000 (28,000)
Bank net debt 734 (2,489) 3,223 (10,897)
Finance leases - Machines and other (4,556) (5,613) 1,057 (5,781)
Finance leases - Property (196,523) (190,049) (6,474) (181,339)
Total net debt (200,345) (198,151) (2,194) (198,017)
The Group ended the first half with a net cash position of £0.7m, with £7.0m
drawn on the CLBILS term facility and £7.7m of cash and cash equivalents.
This represents a very significant recovery in the financial indebtedness as a
result of the strong profit generation over the past 12 months.
The bank loans consist of the £14.0m CLBILs facility which was drawn in 2021
and the £25.0m RCF of which none was drawn at the period end. £7.0m of the
CLBILs facility was repaid in April 2022 leaving the balance as £7.0m at H1
22. This remaining £7m CLBILS has since been repaid during July 2022.
The £1.1m decrease in machines finance leases is from capital repayments made
to the supplier, net of additions and accrued interest in the interim period.
The £6.5m increase in the property leases arose from the addition of two new
leases and modification of one lease totalling £10.1m, accrued interest less
repayments to landlords.
Cash flow
£000 26 weeks to 26 June 2022 26 weeks to 27 June 2021 Movement
Cash flows from operating activities
Group adjusted EBITDA 28,775 631 28,144
Maintenance capital (1,291) (205) (1,086)
Movement in working capital 2,812 7,962 (5,150)
Lease and taxation payments (11,528) (6,785) (4,743)
Free cash flow 18,768 1,603 17,165
Strategic investments:
Existing estate (7,044) - (7,044)
Estate expansion (8,749) - (8,749)
Exceptionals and share-based payments 248 106 142
Cash flow after investment 3,223 1,709 1,514
(Repayment)/draw down of debt (7,000) 8000 (15,000)
Opening cash and cash equivalents 11,511 7,394 4,117
Cash and cash equivalents - end of period 7,734 17,103 (9,369)
The Group generated significant free cash flow of £18.8m in the first half of
the year. The strategic investment programme was paused in March 2020 and
only resumed in the second half of 2021
In H1 22 £7.0m has been invested in the existing estate through
refurbishments and enhancements to the bowling equipment. This includes £2.1m
of advance payments to suppliers for forward orders of critical equipment that
have long lead times.
£8.7m was invested in invested in estate expansion, with the acquisition and
refurbishment of Harlow and the building of Walsall, which will open at the
end of September. £7.6m of this expansion capital is in respect of advance
purchases of equipment needed for our development pipeline and includes a
payment in respect of monies held in escrow for a freehold acquisition that
completed in July. This is the purchase of the freehold of an existing highly
profitable centre which was at risk of redevelopment.
The advance payments for deposits to suppliers and the monies for the freehold
acquisition have contributed to a significantly higher Trade Receivables value
on the balance sheet, which has increased from £5.4m at the end of FY 21 to
£14.8m at the end of H1 22.
Cash flow after investment costs were £3.2m which gives the board confidence
to declare an interim dividend of 3p, a payment of £2.1m which will be paid
in the second half of the year.
Dividends
The Board have declared an interim dividend of 3.0p per share (HY21 interim:
nil). The interim ex-dividend date is 06 October 2022, the record date 07
October 2022 and the interim dividend payment date is 28 October 2022.
Accounting standards and use of non-GAAP measures
The Group has prepared its consolidated financial statements based on
International Financial Reporting Standards for the 26 weeks ended 26 June
2022. The basis for preparation is outlined in note 2 to the financial
statements.
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 4 to the financial statements.
Although the effects of Covid-19 are no longer affecting the current trading,
there remains a significant impact on the prior year comparatives. The Group
will continue to provide transparency of reporting across a range of
comparative periods, using equivalent open centres where appropriate to get a
like-for-like comparative.
The trading periods for 2020 and 2021 were significantly disrupted due to
Covid restrictions and Lockdowns. 2019 remains a useful baseline when
comparing sales performance, because this is the last time the business traded
a full first half of the year. We are now also able to compare FY22 results
against FY21 results but on a more restricted basis. For the first half,
there are six weeks of comparator in relation to the reopening trading from 17
May 2021 and the business has been fully trading since that date. The
trading periods are set out in the table below:
26 weeks to 26 June 2022 26 weeks to 27 June 2021 26 weeks to 28 June 2020 26 weeks to 29 June 2019
Number of centres 47 46 45 44
All centres open Weeks 1-26 Weeks 21-26 Weeks 1-12 Weeks 1-26
All centres closed n/a Weeks 1-20 Weeks 13 - 26 n/a
% open 100% 23% 49% 100%
Going Concern
Having assessed the Group's going concern position and taking 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 these statements.
Accordingly, the Group continues to adopt the going concern basis in preparing
these condensed consolidated interim financial statements.
Antony Smith
Chief Financial Officer
21 September 2022
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 26 week period ended 26 June 2022
26 weeks to 26 June 2022 Unaudited 52 weeks to 26 December 2021
Audited
26 weeks to 27 June 2021 Unaudited
Notes £000 £000 £000
Revenue 5 63,238 10,610 67,521
Cost of sales (19,707) (4,154) (22,511)
Gross profit 43,531 6,456 45,010
Administrative expenses (24,022) (14,559) (35,711)
Loss on Joint Venture (310) - -
Reversal of impairment 747 - 1,124
Exceptional income 4,601 - -
Operating profit 24,547 (8,103) 10,423
Finance costs (3,532) (2,666) (5,986)
Profit/(loss) before taxation 21,015 (10,769) 4,437
Taxation (2,721) 1,970 (432)
Profit/(loss) for the period and total comprehensive profit/(loss) 18,294 (8,799) 4,005
attributable to owners of the parent
Earnings per share
Basic earnings per share 6 26.75p (12.87p) 5.86p
Diluted earnings per share 6 26.62p (12.87p) 8.84p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 26 June 2022
26 weeks to 26 June 2022 26 weeks to 52 weeks to
27 June 2021
26 December 2021
Unaudited Unaudited Audited
Notes £000 £000 £000
Assets
Non-current assets
Goodwill 7 29,740 29,350 29,350
Intangible assets 7 195 355 279
Investments in joint venture - 310 310
Property, plant and equipment 8 42,151 38,566 39,530
Right of use assets 9 173,009 156,559 167,324
Deferred tax asset 4,232 6,088 4,374
249,327 231,228 241,167
Current assets
Inventories 1,250 1,050 1,226
Trade and other receivables 14,777 1,194 5,426
Cash and cash equivalents 7,734 17,103 11,511
Corporation tax receivable 314 10 10
24,075 19,357 18,173
Liabilities
Current liabilities
Bank borrowings and lease liabilities 11 (17,964) (43,871) (16,661)
Trade and other payables (10,568) (12,833) (13,513)
(28,532) (56,704) (30,174)
Net current liabilities (4,457) (37,347) (12,001)
Non-current liabilities
Bank borrowings and lease liabilities 11 (189,987) (171,182) (192,833)
Deferred tax liabilities (2,274) (1,582) (2,270)
(192,261) (172,764) (195,103)
Net assets 52,609 21,117 34,063
Equity
Share capital 685 684 684
Share premium 4,844 4,844 4,844
Share based payments reserve 749 356 498
Merger reserve 6,171 6,171 6,171
Retained earnings 40,160 9,062 21,866
Total equity 52,609 21,117 34,063
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the 26 week period ended 26 June 2022
Notes 26 weeks to 26 June 2022 Unaudited 26 weeks to 27 June 2021 Unaudited 52 weeks to 26 December 2021 Audited
£000 £000 £000
Cash flows generated from operating activities
Cash generated from operations 10 31,851 5,208 30,827
Corporation tax (paid)/received (2,878) 2,292 2,292
Finance costs paid (3,474) (2,651) (5,868)
Net cash generated from operating activities 25,499 4,849 27,251
Cash flows used in investing activities
Acquisitions of sites by Tenpin Limited (454) - -
Purchase of property, plant and equipment (16,632) (205) (7,108)
Purchase of software (13) - (24)
Net cash used in investing activities (17,099) (205) (7,132)
Cash flows (used in)/ from financing activities
Lease principal payments (5,177) (2,935) (10,002)
Drawdown of bank borrowings - 18,000 22,000
Repayment of borrowings (7,000) (10,000) (28,000)
Net cash (used in)/from financing activities (12,177) 5,065 (16,002)
Net (decrease)/increase in cash and cash equivalents (3,777) 9,709 4,117
Cash and cash equivalents - beginning of period 11,511 7,394 7,394
Cash and cash equivalents - end of period 7,734 17,103 11,511
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 26 June 2022
Share capital Share premium Share based payment reserve Merger reserve Retained earnings
Total equity
£000 £000 £000 £000 £000 £000
Unaudited 26 weeks to 26 June 2022
Balance at 26 December 2021 684 4,844 498 6,171 21,866 34,063
Share based payment charge - - 251 - - 251
Issue of shares 1 - - - - 1
Profit for the period and total comprehensive income attributable to owners of - - - - 18,294 18,294
the parent
Balance at 26 June 2022 685 4,844 749 6,171 40,160 52,609
Unaudited 26 weeks to 27 June 2021
Balance at 27 December 2020 683 4,844 250 6,171 17,861 29,809
Share based payment charge - - 106 - - 106
Issue of shares 1 - - - - 1
Loss for the period and total comprehensive loss attributable to owners of the - - - - (8,799) (8,799)
parent
Balance at 27 June 2021 684 4,844 356 6,171 9,062 21,117
52 weeks to 26 December 2021
Balance at 28 December 2020 683 4,844 250 6,171 17,861 29,809
Share based payment charge - - 248 - - 248
Issue of shares 1 - - - - 1
Profit for the period and total comprehensive income attributable to owners of - - - - 4,005 4,005
the parent
Balance at 26 December 2021 684 4,844 498 6,171 21,866 34,063
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the 26 week period ended 26 June 2022
1 General information
Ten Entertainment Group plc (the "Company") is a public limited company
incorporated and domiciled in England, United Kingdom under company
registration number 10672501. The address of the registered office is Aragon
House, University Way, Cranfield Technology Park, Cranfield, MK43 0EQ.
The condensed consolidated interim financial statements for the 26 week period
ended 26 June 2022 ("interim financial statements") 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.
The financial information for the 26 week period ended 26 June 2022 has been
reviewed by the Company's auditors. Their report is included within this
announcement.
The financial information does not constitute statutory financial statements
within the meaning of Section 434 of the Companies Act 2006. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements of the Group for the 52 week period to 26
December 2021 which were approved by the board of directors on 29 March 2022
and have been filed with the Registrar of Companies. The report of the
auditors on those financial statements was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.
The interim financial statements were approved by the directors on 21
September 2022.
2 Basis of preparation
The condensed consolidated interim financial statements have been prepared in
accordance with IAS 34 "Interim financial reporting" as endorsed by the
European Union and the Disclosures and Transparency Rules of the United
Kingdom's Financial Conduct Authority, and incorporate the consolidated
results of the Company and all its subsidiaries for the 26 week period ended
26 June 2022. They do not include all of the information required for a
complete set of IFRS financial statements. However, selected explanatory notes
are included to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and performance
since the last financial statements. The comparative financial information is
for the 26 week period ended 27 June 2021.
The interim financial statements are presented in Pounds Sterling, rounded to
the nearest thousand pounds, except where otherwise indicated; and under the
historical cost convention as modified by the recognition of certain financial
assets/liabilities at fair value through profit or loss.
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those applied in the presentation of the
Group's consolidated financial statements for the year ended 26 December 2021.
A number of other amendments to existing standards are also effective for
periods beginning on or after 27 December 2021.
At the date of authorisation of this financial information, certain new
standards, amendments and interpretations to existing standards applicable to
the Group have been published but are not yet effective and have not been
adopted early by the Group. The impact of these standards is not expected to
be material.
Going Concern
Having assessed the Group's going concern position and taking 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 these statements.
Accordingly, the Group continues to adopt the going concern basis in preparing
these condensed consolidated interim financial statements.
3 Accounting estimates, judgements and non GAAP measures
The preparation of condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for
the 52 week period ended 26 December 2021.
The Company 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 comparators and key measures used within
the business for assessing performance. These condensed interim 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 and profit or loss
on disposal of assets. This has been done to show the underlying trading
performance of the Group which these other costs or income can distort.
Group adjusted EBITDA after rental costs - This measurement is earnings before
interest, taxation, depreciation, amortisation, exceptional items, impairment
and profit or loss on disposal of assets, less a deduction for the cash cost
of rent.
26 weeks to 26 weeks to
26 June 27 June
2022 2021
Reconciliation of operating profit to Group adjusted EBITDA and Group adjusted £000 £000
EBITDA after rental costs
Group adjusted EBITDA 28,775 631
Rental cost (6,269) (6,117)
Group adjusted EBITDA after rental costs 22,506 (5,486)
Add back rental cost 6,269 6,117
Amortisation of fair valued items on acquisition (62) (68)
Amortisation of software (55) (76)
Loss on Joint Venture (310) -
(Loss)/profit on disposals 15 -
Depreciation of property, plant and equipment and right-of-use assets (9,164) (8,590)
Operating profit/(loss) before exceptional items 19,199 (8,103)
Impairment reversal 747 -
Exceptional items - other 4,601 -
Operating profit/(loss) 24,547 (8,103)
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.
26 weeks to 26 weeks to
26 June 27 June
2022 2021
Reconciliation of costs of sales £000 £000
Cost of goods sold per the financial review (8,865) (1,234)
Site labour costs (11,313) (3,111)
Machine licence and security costs in administrative expenses 471 191
Costs of sales per the statement of comprehensive income (19,707) (4,154)
Group adjusted profit/(loss) before tax - This consists of the profit before
tax adjusted for items judged as exceptional and relating to impairment
reversals and VAT claims from prior periods.
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 reversals and is used to determine the adjusted earnings per
share. The reconciliation of this number to profit after tax is included under
Note 6.
Exceptional items - These items are those significant cost or income items
which management judges to be one-off in nature and are not excepted to
continue to be incurred as part of the regular trading performance of the
business. The separate reporting of these items helps to provide a better
indication of underlying performance.
26 weeks to 26 weeks to
26 June 27 June
2022 2021
Exceptional income £000 £000
Claim for reduced rate of VAT on bowling 4,375 -
Release of provision for updated HMRC VAT guidance 226 -
Total exceptional income 4,601 -
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 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 financial review, advances to suppliers for
capital projects, finance lease payments, taxation payments or receipts and
non-cash share based payments.
26 weeks to 26 weeks to
26 June 27 June
2022 2021
Reconciliation of free cash flow £000 £000
Cash generated from operations 31,851 5,208
Maintenance capital (1,307) (205)
Finance lease and taxation payments (11,528) (3,294)
Non-cash share-based payments charge (248) (106)
Free cash flow per the financial review 18,768 1,603
Maintenance capital, existing estate and estate expansion outflow - This is
cash used in investing activities plus cash advances to suppliers for capital
projects. This is reconciled below:
26 weeks to 26 weeks to
26 June 27 June
2022 2021
Reconciliation of capital investment outflows to cash used in investing £000 £000
activities
Cash used in investing activities (17,100) (205)
Analysed as follows:
Maintenance capital (1,307) (205)
Existing estate (9,562) -
Estate expansion (6,231) -
Cash outflows for capital projects (17,100) (205)
4 Performance share plan awards
The Company operates a Performance Share Plan (PSP) for its executive
directors. In accordance with IFRS 2 Share Based Payments, the value of the
awards is measured at fair value at the date of the grant. The fair value is
written off on a straight-line basis over the vesting period, based on
management's estimate of the number of shares that will eventually vest. The
Company currently has four active schemes in place that arose in prior years
as detailed as follows:
· 2019 Share Scheme - This scheme was announced on 20 May 2019
and vested on 18 May 2022 when Graham Blackwell and Antony Smith exercised
their options and were awarded 123,333 and 133,333 shares respectively. The
Earnings Per Share ("EPS") performance condition which contributed to 50% of
the award was not met but the full 50% of the Total Shareholder Return ("TSR")
condition was met with the Company's performance being in the upper quartile.
· 2020 Share Scheme - This scheme was announced on 30 November
2020 when 428,572 awards were granted to the two executive directors. The
vesting of these awards is conditional upon the achievement of two performance
conditions and a share price underpin which will be measured following the
announcement of results for the year to 1 January 2023 ("FY2022"). The first
performance condition applying to the awards will be based on EPS of the
Company and will apply to 50 per cent. of the total number of Share Awards
granted. The second performance condition will be based on TSR of the Company
over the period from the date of grant to the announcement of results for
FY2022 relative to a comparator group of companies and will apply to the
remaining 50 per cent. of Share Awards granted. No award or part of an award
may vest unless the average share price of the Company calculated over a
three-month period ending on the vesting date exceeds the share price on the
date of grant. During the 26 week period ended 26 June 2022 the Group
recognised a net charge of £64k (27 June 2021: £64k, 26 December 2021:
£126k) to administration costs related to these awards.
· 2021 Share Scheme - This scheme was announced on 14 October
2021 when 317,843awards were granted to the two executive directors. The
vesting of these awards is conditional upon the achievement of two performance
conditions which will be measured following the announcement of results for
the year to 31 December 2023 ("FY2023"). The first performance condition
applying to the awards will be based on EPS of the Company and will apply to
50 per cent. of the total number of Share Awards granted. The second
performance condition will be based on TSR of the Company over the period from
the date of grant to the announcement of results for FY2023 relative to a
comparator group of companies and will apply to the remaining 50 per cent.
of Share Awards granted. During the 26 week period ended 26 June 2022 the
Group recognised a net charge of £113k (27 June 2021: £nil, 26 December
2021: £45k) to administration costs related to these awards.
· 2022 Share Scheme - This scheme was announced on 30 March 2022
when 327,586 awards were granted to the two executive directors. The vesting
of these awards is conditional upon the achievement of two performance
conditions which will be measured following the announcement of results for
the year to 29 December 2024 ("FY2024"). The first performance condition
applying to the awards will be based on EPS of the Company and will apply to
50 per cent. of the total number of Share Awards granted. The second
performance condition will be based on TSR of the Company over the period from
the date of grant to the announcement of results for FY2024 relative to a
comparator group of companies and will apply to the remaining 50 per cent.
of Share Awards granted. During the 26 week period ended 26 June 2022 the
Group recognised a net charge of £51k to administration costs related to
these awards.
5 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. The Group comprises the following
segments:
Tenpin (Bowls) - Tenpin 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, the
board of directors and general head office assets and costs. The segment
results are used by the Board for strategic decision making, and a
reconciliation of those results to the reported profit/(loss) in the
consolidated statement of comprehensive income, and the segment assets are as
follows:
Tenpin Central Group
£000 £000 £000
For the 26 week period ended 26 June 2022:
Segment revenue - external 63,238 - 63,238
Adjusted EBITDA 23,648 (1,142) 22,506
Segment total assets as at 26 June 2022 269,566 3,836 273,402
Segment total liabilities as at 26 June 2022 (217,605) (3,188) (220,793)
Reconciliation of adjusted EBITDA to reported operating profit:
Group adjusted EBITDA after rental costs 23,648 (1,142) 22,506
Amortisation and depreciation of intangibles, property, plant and equipment (9,262) - (9,262)
and right of use assets
Loss on Joint Venture - (310) (310)
Profit on disposals 15 - 15
Amortisation of fair valued intangibles (19) - (19)
Impairment reversal 747 - 747
Exceptional income 4,601 - 4,601
Add back rental costs 6,269 - 6,269
Operating profit/(loss) 25,999 (1,452) 24,547
Finance (costs)/income (3,277) (255) (3,532)
Profit/(loss) before taxation 22,722 (1,707) 21,015
Tenpin Central Group
£000 £000 £000
For the 26 week period ended 27 June 2021:
Segment revenue - external 10,610 - 10,610
Adjusted EBITDA 1,648 (1,017) 631
Segment total assets as at 27 June 2021 235,100 15,485 250,585
Segment total liabilities as at 27 June 2021 (216,519) (12,949) (229,468)
Reconciliation of adjusted EBITDA to reported operating profit:
Adjusted EBITDA 1,648 (1,017) 631
Amortisation and depreciation of intangibles and property, plant and equipment (8,666) - (8,666)
Amortisation of fair valued intangibles (48) (20) (68)
Operating loss (7,066) (1,037) (8,103)
Finance (costs)/income (2,438) (228) (2,666)
Loss before taxation (9,504) (1,265) (10,769)
Disaggregation of revenue
In addition to the breakdown of revenue into the above segments we have
analysed revenue further as following:
26 week period ended 26 June 2022 26 week period ended 27 June 2021 52 week period ended 26 December 2021
Unaudited Unaudited Audited
£000 £000 £000
Bowling 28,267 4,833 29,776
Food and drink 17,276 2,875 19,094
Machines and amusements 15,143 2,579 16,280
Other 2,552 323 2,371
63,328 10,610 67,521
6 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. Earnings per share is based on
the capital structure of the Company and includes the weighted average of the
68,381,496 ordinary shares in issue. The total shares in issue at the end of
the 26 weeks to 26 June 2022 was 68,496,118.
The Company has 326,632 potentially issuable shares (H1 21: 199,553) 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 parent
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 have been calculated in order to compare
earnings per share year on year and to aid future comparisons. Earnings have
been adjusted to exclude impairment, exceptional income and other one-off
costs (and any associated impact on the taxation charge). Adjusted diluted
earnings per share is calculated by applying the same adjustments to earnings
as described in relation to adjusted earnings per share divided by the
weighted average number of ordinary shares outstanding during the year
adjusted by the effect of the outstanding share options.
Basic and diluted 26 weeks to 26 June 2022 Unaudited 26 weeks to 27 June 2021 Unaudited 52 weeks to 26 December 2021 Audited
£000 £000 £000
Profit/(loss) after tax 18,294 (8,799) 4,005
Weighted average number of shares in issue 68,381,496 68,348,800 68,358,261
Adjustment for share awards 326,632 199,553 274,005
Diluted weighted average number of shares in issue 68,708,128 68,548,353 68,632,266
Basic earnings per share (pence) 26.75p (12.87p) 5.86p
Diluted earnings per share (pence) 26.62p (12.87p) 5.84p
Below is the calculation of the adjusted earnings per share.
Adjusted earnings per share 26 weeks to 26 June 2022 26 weeks to 27 June 2021 Unaudited 52 weeks to 26 December 2021 Audited
Unaudited
£000 £000 £000
Profit/(loss) after tax 18,294 (8,799) 4,005
Exceptional Income (4,601) (238)
Impairment reversal (747) - (1,124)
Tax impact on above adjustments 874 - 45
Adjusted underlying earnings after tax 13,820 (8,799) 2,688
Adjusted profit/(loss) after tax 13,820 (8,799) 2,688
Weighted average number of shares in issue 68,381,496 68,348,800 68,358,261
Adjusted basic earnings per share 20.21p (12.87p) 3.93p
Adjusted diluted earnings per share 20.11p (12.87p) 3.92p
7 Goodwill and intangible assets
Fair valued intangibles on acquisition Goodwill Software Total
£000 £000 £000 £000
Cost
At 27 December 2020 2,938 29,350 1,301 33,589
Disposal - - (9) (9)
At 27 June 2021 2,938 29,350 1,292 33,580
Additions - - 33 33
At 26 December 2021 2,938 29,350 1,325 33,613
Additions - 390 13 403
At 26 June 2022 2,938 29,740 1,338 34,016
Accumulated amortisation and impairment losses
At 27 December 2020 2,677 - 1,086 3,763
Charge for the period - amortisation 48 - 64 112
At 27 June 2021 2,725 - 1,150 3,875
Charge for the period - amortisation 42 67 109
At 26 December 2021 2,767 - 1,217 3,984
Charge for the period - amortisation 42 - 55 97
At 26 June 2022 2,809 - 1,272 4,081
Net book value
At 26 June 2022 129 29,740 66 29,935
At 27 June 2021 213 29,350 142 29,705
At 27 December 2020 261 29,350 215 29,826
8 Property, plant and equipment
Fixed Fixtures, fittings and equipment
furnishings
Amusement
machines Total
£000 £000 £000 £000
Cost
At 27 December 2020 11,368 1,401 49,099 61,868
Additions - - 205 205
At 27 June 2021 11,368 1,401 49,304 62,073
Additions - 35 4,065 4,100
Disposals (263) - (1,282) (1,545)
At 26 December 2021 11,105 1,436 52,087 64,628
Additions - 235 5,933 6,168
Disposals - - (74) (74)
At 26 June 2022 11,105 1,671 57,946 70,722
Accumulated depreciation and impairment
At 27 December 2020 3,806 1,159 15,450 20,415
Charge for the period 508 54 2,530 3,092
At 27 June 2021 4,314 1,213 17,980 23,507
Charge for the period 508 47 2,483 3,038
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 502 358 2,765 3625
Impairment reversal - - (149) (149)
Disposals - Depreciation - - (3) (3)
At 26 June 2022 5,210 1,618 21,743 28,571
Net book value
At 26 June 2022 5,895 53 36,203 42,151
At 27 June 2021 7,054 188 31,324 38,566
At 27 December 2020 7,562 242 33,649 41,453
9 Right of use assets
Amusement machines & other
Total
£000 £000 £000
Cost
At 27 December 2020 163,514 10,823 174,337
Lease additions - 15 15
Modification of leases 4,906 - 4,906
Lease disposals - (8) (8)
At 27 June 2021 168,420 10,830 179,250
Lease additions - 427 427
Modification of leases 15,161 - 15,161
Lease disposals - (158) (158)
At 26 December 2021 183,581 11,099 194,680
Lease additions 6,308 569 6,877
Modification of leases 3,793 - 3,793
Lease disposals - (100) (100)
At 26 June 2022 193,682 11,568 205,250
Accumulated depreciation and impairment
At transition on 27 December 2020 10,720 6,472 17,192
Charge for the period 4,410 1,091 5,501
Disposals - Depreciation - (2) (2)
At 27 June 2021 15,130 7,561 22,691
Charge for the period 4,603 1,062 5,665
Disposals - depreciation - (140) (140)
Impairment reversal (860) - (860)
At 26 December 2021 18,873 8,483 27,356
Charge for the period 4,851 730 5,581
Impairment reversal (598) - (598)
Impairment charge - (98) (98)
At 26 June 2022 23,126 9,115 32,241
Net book value
At 26 June 2022 170,556 2,453 173,009
At 27 June 2021 153,290 3,269 156,559
At 27 December 2020 152,794 4,351 157,145
The lease modification relates to the regear of one site where the term of the
lease has been extended. The lease additions are from the entering of two new
leases, with the first for the new build at Walsall and the second for the
Harlow site that was acquired as explained further in note 12.
10 Cashflow from operations
26 weeks to 26 June 2022 Unaudited 26 weeks to 27 June 2021 Unaudited 52 weeks to 26 December 2021 Audited
Cash flows from operating activities £000 £000 £000
Profit/(loss) for the period 18,294 (8,799) 4,005
Adjustments for:
Tax 2,721 (1,970) 432
Finance costs, net 3,532 2,666 5986
Non-cash exceptionals (4,601) - (238)
Non-cash share based payments charge 248 106 248
Loss on Joint Venture 310 - -
Profit on disposal of assets (15) - 442
Amortisation of intangible assets 97 121 221
Depreciation of property, plant and equipment 3,625 3,092 6,130
Depreciation of right to use assets 5,581 5,501 11,166
Impairment reversal (747) - (1,124)
Changes in working capital:
Increase in inventories (24) (542) (720)
Decrease/(increase) in trade and other receivables 1,173 478 (955)
Increase in trade and other payables 1,657 4,555 5,234
Cash generated from operations 31,851 5,208 30,827
11 Bank borrowings and leases
26 weeks to 26 June 2022 Unaudited 26 weeks to 27 June 2021 Unaudited 52 weeks to 26 December 2021 Audited
Current liabilities £000 £000 £000
Bank loans 7,000 28,000 4,666
Leases - Machines/other 2,792 2,730 3,223
Leases - Property 8,300 13,208 8,941
Capitalised financing costs (128) (67) (169)
17,964 43,871 16,661
Non - current liabilities
Bank loans - - 9,334
Leases - Machines/other 1,764 3,051 2,390
Leases - Property 188,223 168,131 181,108
189,987 171,182 192,832
The bank loans with the Royal Bank of Scotland plc consist of a £25.0m
committed Revolving Credit Facility (RCF) and £14.0m CLBILS term loan
facility. The loans incur interest at SONIA plus a margin of 1.80%. The Group
drew £14.0m of the CLBILS facility and repaid £7.0m in April 2022, with
another £7.0m repaid in July 2022 to fully repay this facility. This leaves
just the £25m RCF facility available to the Group
The increase in property leases arose from the modification to one lease and
the entering into of two further leases.
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 £0.1m have been charged to administrative
expenses in the consolidated statement of comprehensive income for the interim
period ended 26 June 2022.
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 £58k of sales and made EBITDA of
£nil 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 Financial risk management
Cash flow and fair value interest rate risk
Cash flow interest rate risk derives from the Group's floating rate financial
liabilities, being its bank debt and overdraft facility, which are linked to
LIBOR plus a margin of 1.8%. The Group has no fair value interest rate risk.
In managing interest rate risk the Group aims to reduce the impact of
short-term fluctuations on the Group's earnings. Over the longer term,
however, sustained changes in interest rates would have an impact on the
Group's earnings.
Credit risk
As almost all of the Group's sales are for cash, the Group is exposed to
minimal credit risk.
Liquidity risk
The Group's cash position and cash flow forecasts are reviewed by management
on a daily basis. The current bank facilities consist of a £25.0m RCF and a
£14.0m CLBILS term loan facility. Due to the strong cash position of the
Group, the decision was made to fully repay the CLBILS facility, with the
£7.0m balance being repaid in July 2022.
14 Principal risks and uncertainties
Ultimate responsibility for the Group's risk management framework sits with
the Board who review the Group's risk appetite on an annual basis. The Group's
principal risks and uncertainties are assessed in detail as set out in the
full Annual Report for the 52 weeks ended 26 December 2021.
The growing uncertainty around the economic climate including the possible
impacts of a recession on consumers disposal income and inflation on the
Groups cost base, has increased since the risk assessed at year end. The risk
presented by the Covid-19 pandemic around business closures and disruption to
trade however, has further decreased since the risk assessed at the year end.
The Group does not believe there have been any other significant changes to
its principal risks that will impact on the Group in the remaining half of the
year which in summary include:
· Operational - ageing of estate, deterioration of assets and loss
of key personnel
· Operational - allergens related to food and bar services provided
· Regulatory changes - new laws, re-interpreted laws and updates
from case law
· Business interruption - risk of cyber-attacks, terrorism, failure
or unavailability of IT infrastructure
15 Related Parties
Related party Income from transactions with related party Expenses from transactions with related party Loans to related party Amounts outstanding with related party
27 December 2020 166 237
- 12
Houdini's Escape Room Experience Limited - - 102 339
Source Bioscience - 1 - -
At 27 June 2021 - 1 102 339
Houdini's Escape Room Experience Limited 240 - 319 -
Source Bioscience - 1 - -
At 26 December 2021 240 1 319 899
Houdini's Escape Room Experience Limited 164 - 511 1,574
At 26 June 2022 164 - 511 1,574
All intercompany transactions and balances have been eliminated on
consolidation. Other related party transactions consist of compensation of key
management personnel which was disclosed in the Group's Annual Report and
Accounts for the year ending 26 December 2021.
DIRECTORS' RESPONSIBILTY STATEMENT
The directors confirm that these condensed interim financial statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months and
· their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· material related-party transactions in the first 26 weeks and any
material changes in the related-party transactions described in the last
annual report.
The directors confirm to the best of their knowledge that the condensed
interim financial statements have been prepared in accordance with the
Accounting Standards Board 2007 statement on half yearly financial reports.
The
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitText?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EntityIsPremiumOrStandardListed&returndest=eXC_Paragraph_670&tag=-121716828)
directors
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitQ?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EngagementResponsiblePartyLower&returndest=eXC_Paragraph_670&tag=-1793452695)
are
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitText?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EngagementResponsiblePartyEndsWithS-True&returndest=eXC_Paragraph_670&tag=1488662375)
responsible for the maintenance and integrity of the
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitText?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EntityIsPremiumOrStandardListed&returndest=eXC_Paragraph_670&tag=1826462488)
company
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitQ?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EntityParentTypeShortName&returndest=eXC_Paragraph_670&tag=-1090692852)
's website. Legislation in the United Kingdom governing the preparation and
dissemination of
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitText?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EntityIsPremiumOrStandardListed&returndest=eXC_Paragraph_670&tag=1161740262)
interim financial statements may differ from legislation in other
jurisdictions.
(http://exari.uk.ema.pwcinternal.com/exari/control/SmartPrecedent/revisitText?id=0%40%2Ffiles%2Flogic%2FPwC_UKAss_1.lgc%23EntityIsPremiumOrStandardListed&returndest=eXC_Paragraph_670&tag=-1790718460)
The responsibility statement was approved by the Board on 21 September 2022
and signed on its behalf by:
Graham Blackwell Antony Smith
CEO CFO
21 September 2022 21 September 2022
Independent review report to Ten Entertainment Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Ten Entertainment Group plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Half-Year
Results of Ten Entertainment Group plc for the 26 week period ended
26 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the condensed consolidated statement of financial position as at
26 June 2022;
· the condensed consolidated statement of comprehensive income for the
period then ended;
· the condensed consolidated statement of cash flows for the period
then ended;
· the condensed consolidated statement of changes in equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-Year Results of Ten
Entertainment Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half-Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half-Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half-Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half-Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half-Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 September 2022
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 IR FLFSAADIIFIF