TIDMTEG
RNS Number : 3624N
Ten Entertainment Group PLC
24 September 2019
24(th) September 2019
Ten Entertainment Group plc
Half-Year Results 26 weeks ended 30(th) June 2019
"REVENUE AND PROFITS AT RECORD LEVELS; STRATEGICALLY,
FINANCIALLY AND OPERATIONALLY WELL SET"
Ten Entertainment Group plc, a leading UK operator of family
entertainment centres, today announces its half year results for
the 26 weeks to 30 June 2019.
26 weeks 26 weeks Change
to 30 June to 1 July
2019 2018
(H1 19) (H1 18)
Total sales GBP41.4m GBP37.8m +9.6%
------------ ----------- -------
Like-for-like sales growth 7.4% 3.1%
------------ ----------- -------
Group adjusted EBITDA(1) GBP11.2m GBP9.8m +14.2%
------------ ----------- -------
Group adjusted profit before
tax(1) GBP7.3m GBP6.4m +14.2%
------------ ----------- -------
Reported profit after tax GBP4.7m GBP3.8m +22.1%
------------ ----------- -------
Earnings per share 7.19p 5.89p +22.1%
------------ ----------- -------
Interim dividend per share 3.7p 3.3p +12.1%
------------ ----------- -------
-- The Group has performed well during the first half of FY19,
with strong sales growth and good progress on improving the
customer experience
-- Like-for-like sales growth increased to 7.4%. Around 2%
benefit arose from more typical weather patterns in May and
June
-- Group adjusted profit before tax was up 14.2% and reported
profit after tax increased to GBP4.7m
Our growth strategy continues to deliver:
Inward investment: refurbishment completed at Edinburgh, with
two further refurbishments planned for H2. Pins & Strings
continues to be rolled out and is on target for 70% of sites
converted by year end.
Transforming customer experience: We are encouraged by early
performance of HyperBowl and have reached agreement for a joint
venture with Houdini's to roll out Escape Rooms nationally. A
concept site is under development to trial further customer
innovations.
Expanding the estate: Southport and Falkirk were acquired in the
first half. In H2 we have secured a new site for development in
Manchester Printworks with heads of terms agreed on three
additional development sites as part of our 2020 pipeline.
Outlook:
-- The Company anticipates long term average growth in like-for-like of 4-6%
-- We continue to expand our estate and improve our customer
experience through inward investment and product innovation
-- Highly cash generative, self-financed growth, strong balance
sheet with even better banking terms agreed to grow the
business
Nick Basing, Chairman, commented:
Our growth strategy continues to generate record sales, profits
and earnings for shareholders. Our new, strong management team have
made a confident start and have accelerated the execution of our
core strategy. We look forward to further tapping into the
potential of our strengthening position in the rapidly growing
experiential leisure market.
Duncan Garrood, Chief Executive Officer, commented:
We have had a strong first half delivering to our expectations.
Operationally, we continue to make progress building an even better
business and providing customers with an excellent experience. We
are excited about our plans to unlock the potential inherent in the
business.
Enquiries:
Ten Entertainment Group plc via Instinctif Partners
Duncan Garrood Chief Executive Officer
Antony Smith Chief Financial Officer and Company
Secretary
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood
Jack Devoy
There will be a presentation today at 9.00 am to analysts and
investors at Instinctif Partners (65 Gresham Street, London, EC2V
7NQ). The supporting slides 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 EBITDA consists of earnings
before interest, taxation, depreciation, amortisation costs,
exceptional items, profit or loss on disposal of assets and
adjustments to onerous lease and impairment provisions. Group
adjusted profit before tax is defined as profit before exceptional
items, profit or loss on disposal of assets, amortisation of
acquisition intangibles and adjustments to onerous lease and
impairment provisions. Adjusted basic earnings per share represents
earnings per share based on adjusted profit after tax.
Like-for-like sales are a measure of growth of sales adjusted for
new or divested sites over a comparable trading period.
CHIEF EXECUTIVE'S STATEMENT
The business has performed well in the first half of the year
and we are pleased with the progress made both financially and in
the execution of our strategy for the longer term. Strong sales
growth of 9.6% has been converted into growth in EBITDA of 14.2%
resulting in a 14.2% increase in group adjusted PBT to GBP7.3m for
the first half.
Good progress has been made across the three main areas of our
strategy: investing in improving our existing estate; transforming
the customer experience through innovation; and expanding our
estate.
We continue to invest in our high-quality estate to ensure that
our customers have a great experience. We have over the past few
years been consistently improving, refurbishing and modernising
those sites that require it.
We have continued to make our sites more efficient with the
proven successful roll-out of Pins & Strings, completing five
further sites in the first half which takes the total to 24. By the
end of the year we expect to have more than two thirds of our sites
operating with this more reliable and efficient technology,
assisting in driving utilisation and returns.
We have also made good progress in pursuing innovation and are
encouraged by the early results from HyperBowl and Escape Rooms. We
are in advanced negotiations with Houdini's Escape Rooms to build a
long term joint venture to roll out this industry leading customer
experience nationally.
We have stated that in each year we intend to acquire and
operate between two to four additional new sites. We continue to
deliver that goal. We acquired bowling centres in Falkirk and
Southport in the first half. We are pleased to also announce today
that we have secured a lease in Manchester city centre to build a
new bowling centre, which we expect to open by the end of the year.
We are in negotiations on three further sites which will bring the
2019 new sites to the upper end of guidance and establish a good
pipeline for 2020 to continue the expansion of the estate.
Sales growth - continued strong underlying momentum
We are pleased to report another half of strong sales growth,
with total sales of GBP41.4m in the first half, an increase of 9.6%
compared to 2018. Like-for-like sales were strong at 7.4% with the
majority of the growth driven by increased footfall and enhanced by
a modest increase in spend per head ("SPH"). Growth was seen in all
categories, with particularly strong performance from the refresh
of the machine offering in partnership with our key suppliers. The
balanced growth across all categories demonstrates the underlying
strength of the customer proposition and it remains a core focus to
continue to deliver sales growth across the business.
The first half benefited from extreme weather comparatives which
we estimate accounts for around 2%pts of the half year growth.
Absent this weather impact, we are experiencing a consistent
underlying 4-6% of like-for-like growth providing an excellent base
for continued strong profit growth.
Sales have continued to be strong since the end of June, and the
YTD sales to 22(nd) September are +9.6% in total and +7.5% on a
like-for-like basis reflecting the ongoing comparative against last
year's summer. We are encouraged by this performance; however, it
should be noted that 2019 has also seen some extreme climatic
conditions that have made trading variable particularly over the
summer period.
Inward investment - ongoing improvements for our customers
Our ongoing investment in the existing estate has continued. The
extension at Star City in Birmingham last year has started to
deliver in 2019, with strong double-digit sales growth achieved as
a result of the improved customer environment and increased
capacity from the new lanes. A similar project has now been
completed in Edinburgh's Fountain Park in H1, and although these
benefits will not be seen until the second half of this year, the
initial results have been encouraging.
Two further site refurbishments have begun which will refresh
the bar and reception and improve the gaming area to improve the
customer experience and increase dwell time and spend per head.
Our programme of installing Pins & Strings continues to
deliver strong returns. We have already installed Pins &
Strings at five sites in H1 and will have completed installation in
more than two thirds of the total estate by the end of the year,
with an estimated completion of the full estate by mid-2021. The
continued roll-out has delivered further substantial improvement in
games played per stop, up by 53%.
Transforming customer experience - developing new products and
games
Work has accelerated in H1 2019 in developing the next stage of
customer innovation to ensure that we remain relevant and have a
competitive advantage. This has been combined with the continued
roll-out of established investments to ensure sales growth remains
robust with tightly controlled costs.
We have made targeted investments developing the customer
experience. A new menu to better suit our customers' preferences
has been rolled out and we have secured a much-improved drinks
contract with a new supplier enabling greater localisation of
product offering and on improved terms. Food and beverage sales
remain an important ancillary income stream to the bowling
experience and whilst we will not target becoming a destination for
food sales, we do believe that our improved menu and wider range of
snacking choices, combined with better "at lane" service, will
contribute to giving customers a more memorable experience and
increase dwell time.
We are very pleased with the early signs seen from the
introduction of the innovative Escape Rooms and HyperBowl concepts
which has delivered positive customer feedback and encouraged us to
move both of these into a broader trial phase. We have reached
agreement on a joint venture with Houdini's Escape Rooms, subject
to contract. This will combine their industry expertise with our
national footprint and leisure infrastructure to enable a national
roll-out.
In addition, one site is being refurbished as a concept site to
showcase a range of customer innovations and concepts and to trial
these prior to rolling them out. This concept site will, by its
nature, have a higher capital spend on the initial development work
than a standard refurbishment and as a result will deliver a lower
return on investment. The insights gained will be invaluable for
continuing to develop a leading edge customer experience.
2019 has been a year of infrastructure work on the website and
CRM programme, and progress on enhancing these has been slower than
originally anticipated. The new website will go live by the end of
the year as will an improved CRM proposition. These remain critical
for engaging with our customers and driving new footfall into our
centres, and we expect that the cost investments made in 2019 will
drive benefits in 2020.
Expanding the estate - progress on acquisitions and development
of new centres
In the first half of the year we have successfully acquired and
integrated two existing bowling sites at Southport and Falkirk into
the Tenpin estate.
Southport is already performing well and progress is advanced in
our Tenpinisation process, with a modest capital investment needed
to bring the site up to our operating standards. Sales are already
encouraging and showing good progress compared to the previous
ownership. Falkirk was a different proposition requiring more
investment and this was reflected in the consideration paid.
Consequently, it is expected that this site will take longer to
contribute profit than would ordinarily be expected. Nevertheless,
the Tenpinisation and refurbishment programme has begun and we are
confident that by 2020 the site will generate good returns.
We are pleased to announce today our first success in securing
leases on existing properties to build new bowling centres. We have
agreed a new lease in the Printworks in Manchester city centre on
the site of a casino. This is an exciting opportunity to develop
our city centre proposition in a vibrant and popular part of a
major metropolitan area and we anticipate opening it early in
2020.
The costs of this new centre approximately match the cost of
acquiring existing operations, albeit with the capital focused on
build rather than acquisition cost, and as such we are confident we
can generate continued strong returns from this site. There will be
a development cost in H2, and the site is expected to contribute
from 2020.
We are in advanced negotiations on three other opportunities and
are confident of developing at least one of these in 2019, with
work beginning on the others in 2020. Expanding the remit to
include existing retail and leisure space, as well as acquisition
of existing bowling centres has opened up the pipeline and gives
the business a clearer runway for growth going forwards. We remain
returns focused and will continue to acquire sites that deliver a
consistent profit delivery.
Acquisitions cost, including the new lease in 2019, will be at
the higher end of guidance with the split of new build and
acquisition expected to be typical of the approach we will take in
future. Therefore it is anticipated that the income and profit from
new sites in 2019 is likely to be lower than previously guided as a
result of the longer lead time required to develop and build rather
than acquire a site. Medium term guidance is unchanged.
Work is continuing to secure further sites for ongoing
development in 2020 and beyond, and we are confident that there
remains a good pipeline of opportunity for both acquisition and new
leases for the foreseeable future.
Cost control - tight operational controls and targeted
investment in the centre
Operating costs have remained tightly controlled, with 9.6%
sales growth achieved whilst containing cost growth to only 3.3%.
We have continued our programme of re-gearing leases to reduce
costs and secure tenure at key sites. We have also continued to
benefit from the cost savings as a result of Pins &
Strings.
Central overheads and support costs have grown, reflecting a
desire to accelerate the development of the customer proposition in
three key areas. The investment has focused upon: improving our
marketing and CRM; developing an improved food and beverage
(F&B) offering; and developing customer innovations and
technologies. These are long term projects that should show returns
towards the end of this year and into 2020. Overall, these costs
increased GBP0.7m above inflation.
Much of the development and investment work has now taken place,
and we are in the process of reviewing our central management
structure to ensure it is fully aligned to the way we want to
support the business going forwards.
Outlook
We are pleased with our consistent underlying like-for-like
sales growth and although the unusual weather conditions, both in
2018 and 2019, do make it difficult to read accurately the
short-term sales delivery, we have met our targets for the year to
date. We also remain confident that our strategy will continue to
drive profitable growth.
Looking forward, on an underlying basis, we expect to continue
to deliver like-for-like growth of 4-6% in the medium term. We have
a business with much potential in a segment of the leisure sector
that will continue to grow. We have a strong pipeline of new sites
and a capable management team to deliver continued strong
profitable progress.
Duncan Garrood
Chief Executive Officer
24 September 2019
FINANCIAL REVIEW
26 weeks 26 weeks
to to
30 June 1 July
GBP000 2019 2018
-------------------------------------------- --------- ---------
Revenue 41,444 37,804
Cost of sales (4,999) (4,246)
Gross margin 36,445 33,558
Total operating costs (20,241) (19,595)
Central and support overheads (4,984) (4,142)
Group adjusted EBITDA 11,220 9,821
Depreciation and amortisation (3,520) (3,098)
Net interest (401) (329)
Group adjusted profit before tax(2) 7,299 6,394
Exceptional items (1,169) (809)
(Loss)/profit on disposal of assets (57) (439)
Amortisation of acquisition intangibles (151) (233)
Adjustments in respect of onerous lease
& impairment provisions 12 13
Profit before tax 5,934 4,926
Taxation (1,261) (1,100)
Of which: taxation attributable to Group
Adjusted Profit (1,443) (1,227)
Profit after tax 4,673 3,826
Earnings per share
Basic earnings per share 7.19p 5.89p
Adjusted basic earnings per share 9.01p 7.95p
Interim dividend 3.7p 3.3p
The first half has delivered strong sales growth of 9.6% which
has converted strongly into growth in adjusted EBITDA of GBP1.4m
(+14.2%). The continued investment in the customer experience has
increased the depreciation and amortisation charge in line with
expectations which gives an increase in group adjusted PBT of
GBP0.9m to GBP7.3m, an increase of 14.2%. Free cash flow conversion
has been strong at 66% of group adjusted EBITDA, with the business
generating GBP5.3m of cash available for investment after dividend
payment.
Investment spend has been lower in the first half of 2019 as
there have been fewer sites acquired and a rephased approach to
some of the transformation investment.
The resultant 13.3% growth in adjusted EPS to 9.01p demonstrates
the continued momentum in the business and the success of the
strategy of investing in the customer experience.
Drivers of growth
Revenue
26 weeks to 26 weeks to
30 June 2019 1 July 2018
---------------------------- -------------- -------------
Revenue (GBP000) 41,444 37,804
Number of bowling centres 45 44
Like-for-like sales growth 7.4% 3.1%
Net new space sales growth 2.2% 4.6%
Total sales growth 9.6% 7.7%
Total sales were up 9.6% at GBP41.4m (HY18: GBP37.8m).
Like-for-like sales were up 7.4%. Net new space contributed 2.2% in
the half. The impact of lapping the hot weather from 2018 has
supported the number by around 2%pts leaving an underlying strong
LFL delivery of around 5%.
Sales growth has been principally driven by a growth in footfall
of 5.8%, with a modest increase in SPH to GBP14.89. It is pleasing
to see growth in all areas of spend, with the anchor product
remaining very robust. Machines have performed particularly
strongly as a result of an injection of new machines into the
estate.
Sustainable longer term growth drivers remain the focus of the
business, with investments made in H1 in developing a new menu,
building a new drinks contract and introducing more variety of
competitive socialising into our centres. These developments will
start to contribute towards the end of the year and set the
business up well to continue to deliver underlying like-for-like
growth.
Gross margin
The reported gross margin rate was down 83 basis points year on
year at 87.9% (HY18: 88.8%). The reduction is principally a result
of an enhanced machines performance, where sales growth was
stronger than bowling. Given that machine revenue is typically
ancillary to the bowling activity, management consider a slight
reduction in the margin rate to be a sign of healthy growth in
ancillary products. The gross margin rate, combined with the growth
in reported sales, resulted in gross margin being up 8.6% to
GBP36.4m (HY18: GBP33.6m).
Operating costs
Total operating costs increased by 3.3% to GBP20.2m (HY18:
GBP19.6m), principally driven by costs associated with the net
additional sites opened during the period, offset by a continued
benefit from rent reductions as a result of re-gearing leases.
Underlying operating costs excluding net new space were up 0.9%,
well below inflation, with strong operations management and cost
control offsetting the impact of wage increases and commodity cost
inflation.
Central costs
Central costs grew from GBP4.1m in H1 FY18 to GBP5.0m, an
increase of 20.3% driven by the decision to invest in resource to
improve the customer experience. This GBP0.8m increase was invested
in more targeted marketing, developing F&B offering and
building customer innovations for the future. This push for future
developments will continue with the benefits from these investments
coming late in FY19 and into FY20.
It is expected that in the second half the rate of growth will
continue as we maintain focus on improving the customer experience.
This is important to ensure momentum is maintained in the
underlying sales growth.
Profitability
Management use a number of measures to understand the underlying
profitability of the business.
Group adjusted EBITDA reflects the underlying cash generation
potential of the business and remains a principal measure of
business profitability. Delivery of GBP11.2m in the first half is
14.2% ahead of prior year (HY18: GBP9.8m) as a result of the strong
sales growth being converted at a rate of 38% to EBITDA.
Group adjusted PBT, which takes into account costs of financing
the assets and the depreciation on historic investments has
increased by GBP0.9m to GBP7.3m in the first half. This is an
increase of 14.2% in line with the growth in EBITDA. The increase
in the interest costs and depreciation reflect the ongoing
investments in the customer experience and these continue to
generate strong returns.
Profit after tax has increased by GBP0.8m to GBP4.7m, an
improvement of 22.1%.
Exceptional items
There has been a charge of GBP1.2m in H1 (2018: GBP0.8m) to
exceptional items, which are one-off non recurring adjusting items
which we believe aid interpretation of the accounts.
There are three principal activities to which these items
relate.
GBP0.2m is in relation to a 2019 business restructuring
programme instigated by the new CEO. This is the reorganisation of
the central senior management team to be better placed to deliver
long term sustainable sales growth through customer innovation. The
review is under way and further costs to the programme are expected
in the second half.
A further GBP0.2m is in relation to the restructuring of the
estate. This is the final work on reviewing the lease portfolio to
reduce costs and secure strategically important sites which should
be complete by the end of 2019. These costs also include the legal
fees for the acquisition of new sites.
Recent case law in 2019 based on a company in a somewhat similar
industry has led the business to review how that ruling may apply
to the bowling sector. The Group has proactively engaged with HMRC
in this matter. Whilst there is a range of possible outcomes, until
a final position has been agreed, a provision of GBP0.8m has been
made to cover any potential tax settlement and associated fees.
The total effect of these one-off items will generate a benefit
in 2020 from an improved cost base as a result of the restructuring
activity.
Cash flow
26 weeks 26 weeks 52 weeks
to 30 June to 1 July to 30 December
2019 2018 2018
GBP000 GBP000 Movement GBP000
------------------------------------------- ------------ ----------- --------- ----------------
Cash flows from operating activities
Group adjusted EBITDA 11,220 9,821 1,399 20,552
Maintenance capital (1,430) (1,121) (309) (2,417)
Movement in working capital 192 1,034 (842) 1,947
Finance lease and taxation payments (2,522) (2,511) (11) (5,313)
Free cash flow 7,460 7,223 237 14,769
Dividends paid (2,145) (1,950) (195) (6,500)
------------ ----------- --------- ----------------
Cash flow available for investment 5,315 5,273 42 8,269
Existing estate refurbishments (1,202) (2,682) 1,480 (4,109)
Transformative investment (478) (117) (361) (250)
Site acquisitions including Tenpinisation (1,536) (4,498) 2,962 (6,031)
Exceptionals & share based payments (1,070) (330) (740) (1,652)
------------ ----------- --------- ----------------
Cash flow after investment 1,029 (2,354) 3,383 (3,773)
(Repayment)/Draw down of debt (3,300) 4,000 (7,300) 3,500
Opening cash and cash equivalents 5,298 5,571 (273) 5,571
Cash and cash equivalents - end
of period 3,027 7,217 (4,190) 5,298
============ =========== ========= ================
Free cash flow generated in the period was GBP7.5m, GBP0.2m
better than last year. Last year's working capital benefited from
timing of payments which was not repeated in 2019. Acquisition
spend and refurbishment is GBP4.4m lower than last year as a result
of the timing of acquisitions. Two sites have been acquired and are
in the process of Tenpinisation compared to 4 sites in 2018.
Overall the business maintains its ambition to use free cash
flow to pay dividend and drive investment in the existing estate,
transforming the customer proposition and expanding the estate.
Investment will accelerate in the second half with development work
of the two new sites and ongoing refurbishment and investment in
the proposition.
Financing
26 weeks 26 weeks
to to
GBP000 30 June 2019 1 July 2018
-------------------------------------- -------------- -------------
Interest on bank debt (136) (84)
Amortisation of bank financing costs (33) (32)
Finance lease interest charges (145) (122)
Other finance costs (87) (91)
-------------- -------------
Net interest excluding shareholder
loan note interest (401) (329)
-------------- -------------
As at 30 June 30 December Movement 1 July
2019 2018 2018
Closing cash and cash equivalents 3,027 5,298 (2,271) 7,217
Bank loans (6,200) (9,500) 3,300 (10,000)
Bank net debt (3,173) (4,202) 1,029 (2,783)
Finance leases (7,273) (6,467) (806) (5,254)
Statutory net debt (10,446) (10,669) 223 (8,037)
Net interest (excluding shareholder loan note interest)
increased by 21.9% to GBP0.4m (HY18: GBP0.3m) as a result of
ongoing investment in acquisitions and capital investment.
The level of bank net debt remains low and has been reduced by
GBP1.0m since the year end as a result of the positive cash inflow.
Statutory net debt has increased by GBP2.4m since the end of H1
2018 principally as a result of the increased finance lease cost of
the new tranche of gaming machines, although it should be noted
that the cash flow impact of these is minimal.
We are pleased to announce that in September a new financing
deal has been agreed with the incumbent bank that secures a larger
GBP25.0m facility for the next three years at a reduced cost. On a
like-for-like basis the new deal represents a 13% cost saving and
gives the Group access to increased funds when opportunities arise
to accelerate the investment programme.
Dividends
The continued growth in sales and profit mean that the Board
have declared an interim dividend of 3.7p per share (HY18 interim:
3.3p), a growth of 12.1%. The interim ex-dividend date is 21
November 2019, the record date 22 November 2019 and the interim
dividend payment date is 3 January 2020.
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 30 June 2019. 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.
In accordance with IFRS 16 Finance Leases, the Group expects to
recognise right-of-use assets and finance lease liabilities of
approximately GBP160m-GBP180m on 30 December 2019. Adjusted EBITDA
is expected to increase by GBP12m-GBP13m, as the operating lease
payments were included in EBITDA, but the depreciation of the
right-of-use assets and interest on the finance lease liability are
excluded from this measure but included in net profit before tax
which will decrease by approximately GBP2m-GBP3m for 2020 as a
result of adopting the new rules. Operating cash flows will
increase and financing cash flows decrease by approximately
GBP12m-GBP13m as repayment of the principal portion of the lease
liabilities will be classified as cash flows from financing
activities.
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 30 December 2018. The Group does not believe there
have been any 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
-- 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
-- major supplier failure - sudden failure or loss of key suppliers
The risks around the economic climate are constantly evolving
especially with the unstable political environment and potential
impacts of Brexit. The Group's bowling business is based
exclusively in the UK and so is exposed to UK economic and consumer
confidence. The business has not been significantly impacted in the
first half of the year by the uncertainty of Brexit and does not
expect to be impacted in the short term as the situation
develops.
The Group continues to adopt the going concern basis as set out
in note 3 to the financial statements.
Antony Smith
Chief Financial Officer
24 September 2019
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 26 week period ended 30 June 2019
26 weeks 26 weeks 52 weeks to
to 30 June to 1 July 30 December
Notes 2019 Unaudited 2018 Unaudited 2018 Audited
GBP000 GBP000 GBP000
----------------------------------------- ------ ---------------- ---------------- --------------
Revenue 8 41,444 37,804 76,350
Cost of sales (12,081) (11,140) (22,423)
Gross profit 29,363 26,664 53,927
Administrative expenses (23,028) (21,409) (42,565)
Operating profit 6,335 5,255 11,362
Analysed as:
----------------------------------------- ------ ---------------- ---------------- --------------
Group adjusted EBITDA 11,220 9,821 20,552
Exceptional administrative costs 6 (1,169) (809) (1,726)
Onerous lease provision released 12 13 25
Amortisation of acquisition intangibles (151) (233) (459)
Depreciation and amortisation (3,520) (3,098) (6,396)
(Loss) / profit on disposal of
assets (57) (439) (634)
----------------------------------------- ------ ---------------- ---------------- --------------
Operating profit 6,335 5,255 11,362
----------------------------------------- ------ ---------------- ---------------- --------------
Finance costs (401) (329) (693)
Profit before taxation 5,934 4,926 10,669
Taxation (1,261) (1,100) (2,527)
Profit for the period and total
comprehensive income attributable
to owners of the parent 4,673 3,826 8,142
----------------------------------------- ------ ---------------- ---------------- --------------
Earnings per share
Basic earnings per share 7 7.19p 5.89p 12.53p
Diluted earnings per share 7 7.17p 5.87p 12.50p
Adjusted basic earnings per share 7 9.01p 7.95p 16.61p
Adjusted diluted earnings per
share 7 8.98p 7.92p 16.58p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2019
26 weeks to 26 weeks to 52 weeks to
30 June 2019 1 July 2018 30 December
Unaudited Unaudited 2018 Audited
Notes GBP000 GBP000 GBP000
------------------------------ ----- ------------- ------------ -------------
Assets
Non-current assets
Goodwill 9 29,350 28,045 28,045
Intangible assets 9 776 1,212 969
Property, plant and equipment 10 43,250 38,675 41,717
73,376 67,932 70,731
Current assets
Inventories 1,449 1,323 1,505
Trade and other receivables 4,957 3,933 4,307
Cash and cash equivalents 3,027 7,217 5,298
------------- ------------ -------------
9,433 12,473 11,110
Liabilities
Current liabilities
Bank borrowings and finance
leases 13 (8,802) (11,936) (11,476)
Trade and other payables (12,456) (11,189) (7,354)
Corporation tax payable (930) (1,124) (719)
Provisions (63) (70) (63)
------------- ------------
(22,251) (24,319) (19,612)
------------- ------------ -------------
Net current liabilities (12,818) (11,846) (8,502)
Non-current liabilities
Bank borrowings and finance
leases 13 (4,616) (3,195) (4,403)
Other non-current liabilities (959) (234) (481)
Deferred tax liabilities (2,113) (1,707) (2,087)
Provisions (341) (352) (350)
(8,029) (5,488) (7,321)
Net assets 52,529 50,598 54,908
Equity
Share capital 650 650 650
Share based payments reserve 257 166 159
Merger reserves 6,171 6,171 6,171
Retained earnings 45,451 43,611 47,928
Total equity 52,529 50,598 54,908
------------------------------ ----- ------------- ------------ -------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the 26 week period ended 30 June 2019
26 weeks 26 weeks 52 weeks
to 30 June to 1 July to 30 December
Notes 2019 Unaudited 2018 Unaudited 2018 Audited
GBP000 GBP000 GBP000
----------------------------------------- ------ ---------------- ---------------- ----------------
Cash flows generated from operating
activities
Cash generated from operations 12 10,342 10,526 20,846
Corporation tax paid (1,022) (1,023) (2,472)
Finance costs paid (365) (293) (619)
---------------- ---------------- ----------------
Net cash generated from operating
activities 8,955 9,210 17,555
Cash flows used in investing activities
Acquisition of sites by Tenpin
Limited (1,456) (3,908) (3,908)
Purchase of property, plant and
equipment (3,109) (4,425) (8,708)
Purchase of software (81) (86) (190)
Net cash used in investing activities (4,646) (8,419) (12,806)
Cash flows (used in)/ from financing
activities
Finance lease principal payments (1,135) (1,195) (2,222)
Dividends paid (2,145) (1,950) (6,500)
Drawdown of bank borrowings 6,200 4,000 8,500
Repayment of borrowings (9,500) - (5,000)
Net cash (used in)/from financing
activities (6,580) 855 (5,222)
Net (decrease)/increase in cash
and cash equivalents (2,271) 1,646 (273)
Cash and cash equivalents - beginning
of period 5,298 5,571 5,571
Cash and cash equivalents - end
of period 3,027 7,217 5,298
----------------------------------------- ---------------- ---------------- ----------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 30 June 2019
Share
based
Share payment Merger Retained Total
capital reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- --------- --------- ---------- ---------
Unaudited 26 weeks to 30 June
2019
Balance at 30 December 2018 650 159 6,171 47,928 54,908
Share based payment charge - 98 - - 98
Dividends paid - - - (7,150) (7,150)
Profit for the period and total
comprehensive income attributable
to owners of the parent - - - 4,673 4,673
Balance at 30 June 2019 650 257 6,171 45,451 52,529
Unaudited 26 weeks to 1 July
2018
Balance at 1 January 2018 650 87 6,171 46,285 53,193
Share based payment charge - 79 - - 79
Dividends paid - - - (6,500) (6,500)
Profit for the period and total
comprehensive income attributable
to owners of the parent - - - 3,826 3,826
Balance at 1 July 2018 650 166 6,171 43,611 50,598
52 weeks to 30 December 2018
Balance at 1 January 2018 650 86 6,171 46,286 53,193
Dividends paid - - - (6,500) (6,500)
Share based payment charge - 73 - 73
Profit for the period and total
comprehensive income attributable
to owners of the parent - - - 8,142 8,142
Balance at 30 December 2018 650 159 6,171 47,928 54,908
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the 26 week period ended 30 June 2019
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 30 June 2019 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 30 June
2019 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 30 December 2018
which were approved by the board of directors on 20 March 2019 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 434 of the Companies Act 2006.
This report was approved by the directors on 24 September
2019.
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 30 June 2019.
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 1 July 2018.
The accounting policies applied by the Company in this report
are consistent with those of the annual financial statements of the
Company for the 52 week period to 30 December 2018, as described in
those financial statements except for income taxes. Income tax in
the interim period is accrued using the tax rate that would be
applicable to expected total annual profit.
IFRS 16 Leases sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties
to a contract, i.e. the customer (lessee) and the supplier
(lessor). The effective date applicable is for financial years
beginning on or after 1 January 2019. The Group's financial year
commences on 31 December 2018 and thus the standard will not be
adopted early. The standard will affect the accounting for the
Group's operating leases and will result in a material decrease in
operating lease rental costs; material increases in depreciation
and finance costs; a decrease in profit before and after tax; a
decrease in net assets; and recognition of lease assets and
liabilities. The Group has reviewed its contracts in place for
right-of-use assets and has identified that the site property
operating leases are the main contracts that are impacted by the
standard. Any leases with break clauses that render the lease as
short term (i.e. less than one year) will be excluded. These
contracts are expected to be recognised as right-of-use assets
capitalised under property, plant and equipment and the liability
under finance leases in borrowings. There are two options for the
first time adoption of the standard:
-- Full retrospective approach - The comparatives will be fully
restated as if the standard had always been implemented.
-- Modified retrospective approach - The comparatives do not
need to be restated with the transitional adjustment to the new
approach being reflected in the current financial year. The Group
intends to adopt this approach.
As at the reporting date, the Group has non-cancellable
operating lease commitments of GBP188.1m. The Group will take the
modified retrospective approach and thus comparative lease
liability information will not restated. Using this approach, the
Group expects to recognise right-of-use assets and finance lease
liabilities of approximately GBP160m-GBP180m on 30 December 2019
compared to the expected operating lease commitments of GBP182.4m.
The Group uses adjusted EBITDA as an Alternative Performance
Measure and this adoption is expected to increase adjusted EBITDA
by approximately GBP12m-GBP13m, as the operating lease payments
were included in EBITDA. Depreciation of the right-of-use assets
and interest on the finance lease liability are excluded from this
measure but included in net profit before tax which will decrease
by approximately GBP2m-GBP3m for 2020 as a result of adopting the
new rules. Operating cash flows will increase and financing cash
flows decrease by approximately GBP12m-GBP13m as repayment of the
principal portion of the lease liabilities will be classified as
cash flows from financing activities.
In applying IFRS 16 for the first time, the Group expects to use
the following expedients permitted by the standard:
-- The use of a single discount rate for its portfolio of property leases
-- Operating leases with a remaining term of less than 12 months
as at 1 January 2019 will remain as short term leases
-- The exclusion of initial direct costs for the measurement of the right-of-use assets
3 Going concern
The Group meets its day-to-day working capital requirements with
the assistance of its bank facilities. The Group entered into a new
three year banking agreement with its Bank for GBP25.0m, an
increase of GBP10.0m from its prior facilities, to assist with
future growth and capital plans. The Group's forecasts and
projections take account of reasonably possible changes in trading
performance and show that the Group should be able to operate
within the level of its current facilities, meet future debt
repayments and will continue to comply with its banking covenants
for at least the foreseeable future. At 30 June 2019 the Group has
net current liabilities which is mainly due to timing with the
drawdown of GBP6.2m of the bank debt and GBP5.0m accrual of the
final dividend which was paid on 5 July 2019. The directors have
not identified any material uncertainties that would prevent the
Group from operating for at least the following 12 months from the
date of approving these condensed consolidated interim financial
statements. The Group therefore continues to adopt the going
concern basis in preparing its condensed consolidated interim
financial statements.
4 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 30 December 2018.
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 comparables 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 consists of earnings before
interest, taxation, depreciation, amortisation costs, exceptional
items, profit or loss on disposal of assets and adjustments to
onerous lease and impairment provisions. The reconciliation to
operating profit is included on the condensed consolidated
statement of comprehensive income.
Adjusted underlying profit after tax - This consists of the
profit after tax adjusted for exceptional items, profit or loss on
disposal of assets, amortisation of acquisition intangibles and
adjustments to onerous lease and impairment provisions. The
reconciliation of this number to profit after tax is included under
note 7.
Exceptional costs - Exceptional items are those significant
items which management consider to be one-off and non-recurring.
The separate reporting of these per note 6 helps to provide a
better indication of underlying performance.
Like-for-like sales - are a measure of growth of sales adjusted
for new or divested sites over a comparable trading period.
5 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 three schemes in place.
-- 2017 Share Scheme - This scheme was announced on 22 May 2017
when 739,393 awards were granted. The vesting of the 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 2019 ("FY2019"). The first performance
condition applying to the awards will be based on Earnings per
Share of the Company ("EPS") and will apply to 50 per cent. of the
total number of Share Awards granted. The second performance
condition will be based on Total Shareholder Return ("TSR") of the
Company over the period from the date of grant to the announcement
of results for FY2019 relative to a comparator group of companies
and will apply to the remaining 50 per cent. of Share Awards
granted. Upon the resignation of the Chief Executive Officer, Alan
Hand, on 5 June 2018 and the Chief Financial officer, Mark Willis
on 29 October 2018, 545,454 of these awards are now not expected to
vest.
-- 2018 Share Scheme - This scheme was announced on 14 June 2018
when 207,089 awards were granted to the Chief Financial Officer,
Mark Willis and Chief Commercial Officer, Graham Blackwell and
updated on 11 December 2018 when the new Chief Executive Officer,
Duncan Garrood was issued 111,940 awards on the same terms. 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 27 December 2020
("FY2020"). 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 FY2020
relative to a comparator group of companies and will apply to the
remaining 50 per cent. of Share Awards granted. Upon the
resignation of the Chief Financial officer, Mark Willis on 29
October 2018, 111,940 of these awards are now not expected to
vest.
-- 2019 Share Scheme - This scheme was announced on 20 May 2019
when 456,666 awards were granted to the three 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 2 January 2022 ("FY2021").
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 FY2021
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 30 June 2019 the Group
recognised a net charge of GBP98,424 (1 July 2018: GBP78,936, 30
December 2018: GBP73,547) to administration costs related to these
awards.
6 Exceptional administrative costs
26 weeks 26 weeks 52 weeks
to 30 June to 1 July to 30 December
2019 2018 2018
GBP000 GBP000 GBP000
-------------------------------------------- ------------ ----------- ----------------
Provision for updated HMRC guidance 800 - -
Staff redundancy costs and CEO recruitment
fees 182 - 385
Professional fees, taxes and other costs
in acquisition of sites 143 508 515
Professional fees, costs and taxes from
property re-gears 27 197 722
Professional fees and other one off
property costs 17 104 104
Total exceptional items 1,169 809 1,726
Recent case law in 2019 based on a company in a somewhat similar
industry has led the business to review how that ruling may apply
to the bowling sector. The Group has proactively engaged with HMRC
in this matter. Whilst there is a range of possible outcomes, until
a final position has been agreed, a provision of GBP0.8m has been
made to cover any potential tax settlement and associated fees.
Staff redundancy costs incurred in the 26 weeks to 30 June 2019
mainly relate to a restructuring exercise carried out. The
professional fees, taxes and other costs in acquisition of sites
consisted of legal fees around the due diligence and drafting of
the Business Purchase Agreements entered into with the sellers and
professional fees from property agents incurred in reviewing the
property leases and negotiating the assignment of these leases from
the sellers to Tenpin Limited.
7 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 65,000,000
ordinary shares in issue. The total shares in issue at the end of
the 26 weeks to 30 June 2019 was 65,000,000.
The Company has 857,693 potentially issuable shares (2018:
613,149) 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 IPO expenses,
share based payments 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 weeks to 52 weeks to
30 June 2019 1 July 2018 30 December
Unaudited Unaudited 2018 Audited
GBP000 GBP000 GBP000
------------- ------------ -------------------
Profit after tax 4,673 3,826 8,142
Weighted average number of shares
in issue 65,000,000 65,000,000 65,000,000
Adjustment for share awards 191,908 236,843 126,617
Diluted weighted average number of
shares in issue 65,191,908 65,236,843 65,126,617
Basic earnings per share (pence) 7.19p 5.89p 12.53p
Diluted earnings per share (pence) 7.17p 5.87p 12.50p
Below is the calculation of the adjusted earnings per share.
Adjusted earnings per share 26 weeks to 26 weeks to 52 weeks to
30 June 2019 1 July 2018 30 December
Unaudited Unaudited 2018 Audited
GBP000 GBP000 GBP000
--------------- --------------- ----------------
Profit after tax 4,673 3,826 8,142
Amortisation of fair valued items
on acquisition 151 233 459
Loss/(profit) on disposals 57 439 634
Exceptional costs 1,169 809 1,726
Onerous lease releases (12) (13) (25)
Tax impact on above adjustments (182) (127) (138)
Adjusted underlying earnings after
tax 5,856 5,167 10,798
Adjusted profit after tax 5,856 5,167 10,798
Weighted average number of shares
in issue 65,000,000 65,000,000 65,000,000
Adjusted basic earnings per share 9.01p 7.95p 16.61p
Adjusted diluted earnings per share 8.98p 7.92p 16.58p
8 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
GBP000 GBP000 GBP000
For the 26 week period ended 30 June 2019:
Segment revenue - external 41,444 - 41,444
Adjusted EBITDA 12,287 (1,067) 11,220
Segment net assets/(liabilities)
as at 30 June 2019 83,109 (300) 82,809
Reconciliation of adjusted EBITDA to reported
operating profit:
Adjusted EBITDA 12,287 (1,067) 11,220
Amortisation and depreciation
of intangibles and property,
plant and equipment (3,520) - (3,520)
Amortisation of fair valued
intangibles (61) (90) (151)
Loss on disposals (57) - (57)
Exceptional costs (note 6) (1,169) - (1,169)
Onerous lease provision movement 12 - 12
-------- ------------ --------
Operating profit/(loss) 7,492 (1,157) 6,335
Finance (costs)/income (437) 36 (401)
-------- ------------ --------
Profit/(loss) before taxation 7,055 (1,121) 5,934
Tenpin Central Group
GBP000 GBP000 GBP000
For the 52-week period ended 30 December
2018:
Segment revenue - external 76,350 - 76,350
Adjusted EBITDA 22,393 (1,841) 20,552
Net segment assets/(liabilities)
as at 30 December 2018 77,880 3,961 81,841
Reconciliation of adjusted EBITDA
to reported operating profit:
Adjusted EBITDA 22,393 (1,841) 20,552
Amortisation and depreciation
of intangibles and property,
plant and equipment (6,396) - (6,396)
Loss on disposals (634) - (634)
Amortisation of fair valued
intangibles (129) (330) (459)
Exceptionals (1,562) (164) (1,726)
Onerous lease provision movement 25 - 25
-------- ------------ --------
Operating profit/(loss) 13,697 (2,335) 11,362
Finance costs (827) 134 (693)
-------- ------------ --------
Profit/(loss) before taxation 12,870 (2,201) 10,669
Tenpin Central Group
GBP000 GBP000 GBP000
For the 26 week period ended 1 July 2018:
Segment revenue - external 37,804 - 37,804
Adjusted EBITDA 10,736 (915) 9,821
Segment net assets/(liabilities)
as at 1 July 2018 70,226 10,179 80,405
Reconciliation of adjusted EBITDA to reported
operating profit:
Adjusted EBITDA 10,736 (915) 9,821
Amortisation and depreciation
of intangibles and property,
plant and equipment (3,098) - (3,098)
Amortisation of fair valued
intangibles (68) (165) (233)
Loss on disposals (439) - (439)
Exceptional costs (note 6) (752) (57) (809)
Onerous lease provision movement 13 - 13
-------- ------------ --------
Operating profit/(loss) 6,392 (1,137) 5,255
Finance (costs)/income (412) 83 (329)
-------- ------------ --------
Profit/(loss) before taxation 5,980 (1,054) 4,926
All assets have been allocated to segments.
Disaggregation of revenue
In addition to the breakdown of revenue into the above segments
we have analysed revenue further as following:
52 week
26 week period 26 week period period ended
ended 30 ended 1 July 30 December
June 2019 2018 2018
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
--------------- --------------- --------------
Bowling 20,218 18,083 36,209
Food and drink 10,119 9,923 20,180
Machines and amusements 9,503 8,287 16,987
Other 1,604 1,511 2,974
41,444 37,804 76,350
9 Goodwill and intangible assets
Fair valued
intangibles
on acquisition Goodwill Software Total
GBP000 GBP000 GBP000 GBP000
-------------------------------------- ---------------- --------- --------- -------
Cost
At 31 December 2017 2,938 25,171 820 28,929
Additions 14 2,874 85 2,973
At 1 July 2018 2,952 28,045 905 31,902
Disposals (14) - - (14)
Additions - - 105 105
At 30 December 2018 2,938 28,045 1,010 31,993
Additions - 1,305 81 1,386
At 30 June 2019 2,938 29,350 1,091 33,379
Accumulated amortisation
and impairment losses
At 31 December 2017 1,906 - 362 2,268
Charge for the period - amortisation 233 - 144 377
At 1 July 2018 2,139 - 506 2,645
Charge for the period - amortisation 192 - 142 334
At 30 December 2018 2,331 - 648 2,979
Charge for the period - amortisation 130 - 144 274
At 30 June 2019 2,461 - 792 3,253
Net book value
At 30 June 2019 477 29,350 299 30,126
At 30 December 2018 607 28,045 362 29,014
At 1 July 2018 813 28,045 399 29,257
10 Property, plant and equipment
Amusement
Short machines
Long leasehold leasehold Fixtures, fittings
premises premises and equipment Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------------- ----------- ------------ ------------------- ----------
Cost
At 31 December 2017 2,122 9,569 6,827 25,374 43,892
Additions - - 2,314 4,330 6,644
Acquisition of new
sites - - - 1,129 1,129
Disposals - - (1,033) (782) (1,815)
At 1 July 2018 2,122 9,569 8,108 30,051 49,850
Additions - - 2,211 4,471 6,682
Disposals - - (858) (621) (1,479)
At 30 December 2018 2,122 9,569 9,461 33,901 55,053
Additions - - 1,940 3,109 5,049
Acquisition of new
sites - - - 111 111
Disposals - - (890) (79) (969)
At 30 June 2019 2,122 9,569 10,511 37,042 59,244
Accumulated depreciation
and impairment
At 31 December 2017 131 837 3,447 4,586 9,001
Charge for the period 27 421 1,101 1,405 2,954
Disposals - Depreciation - - (622) (158) (780)
At 1 July 2018 158 1,258 3,926 5,833 11,175
Charge for the period 27 485 1,082 1,562 3,156
Disposals - Depreciation - - (617) (378) (995)
At 30 December 2018 185 1,743 4,391 7,017 13,336
Charge for the period 27 484 1,029 1,838 3,378
Disposals - Depreciation (706) (14) (720)
At 30 June 2019 212 2,227 4,714 8,841 15,994
Net book value
At 30 June 2019 1,910 7,342 5,797 28,201 43,250
At 30 December 2018 1,937 7,826 5,070 26,884 41,717
At 1 July 2018 1,964 8,311 4,182 24,218 38,675
A high level review was carried out to assess the performance
and assets of the sites and the Group as a whole to determine
whether there was any evidence of impairment. There were no
indications of impairment from this review.
11 Business combinations
As part of the Group's strategy to grow and expand, the
following two sites were acquired as part of a business
combination.
Business combination - Southport
On 1 April 2019, the Group acquired the assets and trade of a
bowling site in Southport. The Group entered into a Business
Purchase Agreement with the seller and acquired control of the
assets for GBP1.5m as summarised below:
Consideration as at 1 April 2019 GBP000
---------------------------------------------- -------
Cash consideration paid 1,456
Identifiable assets acquired and liabilities
assumed
Property, plant and equipment 111
Deferred tax liabilities (16)
Other assets and liabilities, net 56
Total identifiable net assets 151
Goodwill 1,305
Total 1,456
Acquisition-related costs of GBP0.1m have been charged to
administrative expenses and included in exceptional items.
Property, plant and equipment fair values were determined
internally looking at the market prices for the acquired assets and
for similarly aged assets elsewhere in the Company's business which
resulted in a step up from the assets' book values of GBP0.1m which
will be depreciated over 20 years. Deferred tax liabilities were
recognised on the fair values of assets acquired and their tax
bases which will be released as the related fair value measurement
differences are recognised in the statement of comprehensive
income. As part of the due diligence, the sales and profit numbers
prior to acquisition from the seller's management accounts were
reviewed including the period from 31 December 2018 to the date of
acquisition. As they have not been audited they are not disclosed
here to provide a guide to potential full year performance. The
sales and profit generated by the site since acquisition are
impacted by the uncertainty of the business combination and thus
are not a true reflection of the sites performance. This will be
disclosed in the full year end financial statements after the site
has traded for a longer period. 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.
Business combination - Falkirk
On 3 June 2019, the Group acquired the assets and trade of a
bowling site in Falkirk. The Group entered into a purchase
agreement and a new 25 year lease. The business was acquired for a
nil value with no purchase price paid in exchange for the Group
entering into the 25 year lease for the property and the bowling
equipment.
Property, plant and equipment fair values were determined
internally as nil as well since most of the value of the assets
would be in the bowling equipment which were not acquired. The
majority of the other assets were ageing and a significant
refurbishment plan has also started on the site to bring it in line
with the rest of the Group's estate.
As part of the due diligence, the sales and profit numbers prior
to acquisition from the seller's management accounts were reviewed
including the period from 31 December 2018 to the date of
acquisition. As they have not been audited they are not disclosed
here to provide a guide to potential full year performance. The
sales and profit generated by the site since acquisition are
impacted by the uncertainty of the business combination and thus
are not a true reflection of the sites performance. This will be
disclosed in the full year end financial statements after the site
has traded for a longer period.
12 Cashflow from operations
26 weeks 26 weeks 52 weeks
to 30 June to 1 July to 30 December
2019 Unaudited 2018 Unaudited 2018 Audited
Cash flows from operating activities GBP000 GBP000 GBP000
----------------------------------------- ---------------- ---------------- ----------------
Profit for the period 4,673 3,826 8,142
Adjustments for:
Tax 1,261 1,100 2,527
Finance costs, net 401 329 693
Non-cash exceptionals - 400 -
Non-cash share based payments charge 98 79 73
Loss on disposal of assets 57 439 634
Amortisation of intangible assets 274 377 711
Depreciation of property, plant and
equipment 3,378 2,954 6,110
Changes in working capital:
Decrease/(increase) in inventories 56 32 (149)
Increase in trade and other receivables (613) (413) (678)
Increase in trade and other payables 769 1,412 2,808
Decrease in provisions (12) (9) (25)
Cash generated from operations 10,342 10,526 20,846
13 Bank borrowings and finance leases
26 weeks 26 weeks 52 weeks
to 30 June to 1 July to 30 December
2019 Unaudited 2018 Unaudited 2018 Audited
Current liabilities GBP000 GBP000 GBP000
----------------------------- ---------------- ---------------- ----------------
Bank loans 6,200 10,000 9,500
Finance leases 2,658 2,059 2,064
Capitalised financing costs (56) (123) (88)
8,802 11,936 11,476
Non - current liabilities
----------------------------- ---------------- ---------------- ----------------
Finance leases 4,616 3,195 4,403
4,616 3,195 4,403
----------------------------- ---------------- ---------------- ----------------
The bank loans with the Royal Bank of Scotland plc consist of a
GBP25.0m committed Revolving Credit Facility (RCF). The loans incur
interest at LIBOR plus a margin of 1.40%. The Group has drawn
GBP6.2m of the RCF as at the half year end.
14 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 1.4%. The
Group has no fair value interest rate risk. The average period to
the expected maturity date of the interest-free financial
liabilities, being the onerous lease provision, is 8 years.
Sensitivity analysis: 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 GBP25.0m RCF.
15 Principal risks and uncertainties
The Group recognises that the effective management of risk is
key in achieving its strategic objectives. Ultimate responsibility
for the Group's risk management framework sits with the Board. The
Group has focused on introducing a risk management process, to
identify, evaluate and monitor the risks it faces. Each risk has
been assessed to determine the likelihood of occurrence together
with the potential impact on the Group. Please refer to the Annual
Report of the Group for the 52 week period to 30 December 2018
which were approved by the board of directors on 20 March 2019 and
have been filed with the Registrar of Companies for the full
analysis of the risks assessed for the Group.
16 Related Parties
There are no related party transactions nor any related party
balances receivable or payable that are not intercompany related.
All intercompany transactions and balances have been eliminated on
consolidation. There were no material related party transactions
requiring disclosure, other than compensation of key management
personnel which was disclosed in the Group's Annual Report and
Accounts for the year ending 30 December 2018.
17 Post balance sheet events
The Group has agreed a new tenpin bowling site at Printworks
Manchester. A 15 year lease which is under the provision of the
Landlord and Tenants Act has been signed and is now undergoing
construction.
The Group has renewed and extended a GBP25.0m Revolving Credit
Facility with its Bank, Royal Bank of Scotland plc, in September
2019, on improved terms.
18 Dividends
The Board have declared an interim dividend of 3.7p per share
(FY18 interim: 3.3p). The interim ex-dividend date is 21 November
2019, the record date 22 November 2019 and the interim dividend
payment date is 3 January 2020.
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 24
September 2019 and signed on its behalf by:
Duncan Garrood Antony Smith
CEO CFO
24 September 2019 24 September 2019
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Ten Entertainment Group Plc's condensed
consolidated financial statements (the 'interim financial
statements') in the Half-Year Results of Ten Entertainment Group
Plc for the 26 week period ended 30 June 2019. 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 International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 30 June 2019;
-- 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 have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
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.
Our responsibility is to express a conclusion on the interim
financial statements in the Half-Year Results based on our review.
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.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
24 September 2019
a) The maintenance and integrity of the Ten Entertainment Group
Plc website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the interim financial
statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
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 or visit www.rns.com.
END
IR LLFFRAVIVFIA
(END) Dow Jones Newswires
September 24, 2019 02:00 ET (06:00 GMT)
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