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

(H1 22)

26 weeks to 27 June 2021

(H1 21)

26 weeks to 30 June 2019 (H1 19)

Total sales

£63.2m

£10.6m

£41.4m

Trading weeks

26

6

26

Like-for-like sales growth vs 20191

46.0%

22.5%

n/a

Group adjusted EBITDA2

£28.8m

£0.6m

£17.1m

Group adjusted EBITDA less property rental costs3

£22.5m

(£5.5m)

£11.2m

Group adjusted profit / (loss) before tax1

£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 Dec 2021

26 weeks to

26 June 2022

11 weeks to

11 Sept 2022

Like-for-like growth vs 20194

22.5%

30.3%

46.0%

42.1%

Like-for-like growth vs 20215

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

Low entry price point

Market leading value for money offering well-placed to maintain footfall

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

Operating efficiencies from volume growth sufficient to offset cost rises

Over 90% of energy needs are fixed to September 2024 at 2020 prices

Management and staff salaries supplemented with self-funding performance related bonuses

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 plc                                           

Graham Blackwell, Chief Executive Officer

Antony Smith,   Chief Financial Officer and Company Secretary

 

 

via Instinctif Partners

Instinctif Partners                                                

Matthew Smallwood

Penny Bainbridge

Tel: 020 7457 2020




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 17th 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

2022 vs 2021

26 weeks to 29 June 2019

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 costs2

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 tax2

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 June 2022

26 weeks to

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

£000

26 June

2022

26 December

2021

Movement

27 June

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) attributable to owners of the parent


18,294

(8,799)

4,005



 





 



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
27 June 2021

52 weeks to
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 the parent

-

-

-

-

18,294

18,294

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 parent

-

-

-

-

(8,799)

(8,799)

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 the parent

-

-

-

-

4,005

4,005

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 EBITDA after rental costs

£000

£000

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 activities

£000

£000

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 and right of use assets

(9,262)

-

(9,262)

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

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

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

furnishings


Fixtures, fittings and equipment


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

                                            -  

                                            12

166

237

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 directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of interim financial statements may differ from legislation in other jurisdictions.

 

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

 

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