Ten Entertainment : Full Year results announcement 20 March 2019

Full-Year Results 20 March 2019

Results for the 52 weeks to 30 December 2018

20 March 2019

Ten Entertainment Group plc

Full-Year Results

Good performance in FY18 despite challenges, excellent future growth prospects

Ten Entertainment Group plc ("The Group"), a leading UK operator of 43 family entertainment centres, today announces its full-year results for the 52 weeks to 30 December 2018.

Financial highlights:

• o Total sales up 7.5% to £76.4m

• o Like-for-like sales growth of 2.7%

• o Group adjusted EBITDA1 up 8% to £20.6m (FY17: £19.0m)

• o Group adjusted profit before tax1, up 4% to £13.5m (FY17: £13.0m)

• o Reported profit after tax up 57% to £8.1m (FY17: £5.2m).

• o Adjusted earnings per share of 16.6p per share

• o Final dividend per share of 7.7p recommended, full-year dividend of 11.0p

• o Bank net debt remains low at £4.2m (FY17: £0.4m), 0.2x FY18 adjusted EBITDA

Business highlights:

• o Four site acquisitions successfully completed and extensively refurbished, pipeline remains strong

• o Refurbishments completed at four further existing sites, including extension of Birmingham Star City

• o Business transformative 'Pins & Strings' technology extended to 13 further sites, 19 completed in total

• o Lease re-gears completed at seven sites, securing estate and improving rents

• o Good early progress with Digital development programme, online bookings up 26%

• o Net Promoter Score improved to 69% (FY17: 66%)

• o Games played per stop up significantly by 64% to 424 (FY17: 259)

Current trading and outlook:

• o Sales in the first 11 weeks of FY19 have started positively, with like-for-like sales year to date at 5.1%. (This includes the benefit of the reversal of the impact from snow in FY18 of 1.1%)

• o Whilst we remain mindful of the ongoing level of political and economic uncertainty, we are excited by the Group's growth potential

• o The Group is well positioned in a market with growing demand for experiential leisure activities

• o Strategy set, with continued focus on organic growth, growth through acquisition and growth through capital investment

Nick Basing, Chairman, commented:

"We have had another good year on all key metrics and have substantially increased the dividend.

"Our simple two-pronged strategy of investing in driving organic growth and developing scale benefits through high returning acquisitions is proving increasingly successful.

"Despite the political and economic uncertainty currently, we are well placed to enjoy the latent consumer demand for our unique brand of experiential leisure across the country.

"We anticipate further good growth and profitable progress this year."

Duncan Garrood, Chief Executive Officer, commented:

"The business is in excellent shape as reflected in the strong results reported. Following my review of the Company strategy, I am pleased to endorse that it continues to be the right way to grow our business. However, there are further opportunities to develop the existing estate through improvements in the customer experience, food andbeverage quality, innovation and the acquisition of new sites. We will also explore the potential of building new sites at available retail locations.

"I am pleased to say the new year has begun in line with our expectations."

Ten Entertainment Group plc

via Instinctif Partners

Duncan Garrood, Chief Executive Officer Mark Willis, Chief Financial Officer

Instinctif Partners

Tel: [phone]

Matthew Smallwood Tom Berger

There will be a presentation today at 9.30 a.m. 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, shareholder loan note interest 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.

CHAIRMAN'S STATEMENT

Ten Entertainment Group plc is focused on delivering family entertainment, our mission is to make families and friends happy together; to entertain and enthral profitably. Our business is positioned in the sweet-spot of a growing trend of consumer demand for leisure experiences and competitive socialising, together with an increased enthusiasm for spending more of their time and income on experiences and less on traditional product purchases. This trend is supporting sales growth across the wider leisure market, which is valued at £108bn and is forecast to grow to £126bn by 2023.

Our business model is positioned well to take advantage of these evolving consumer trends and can continue to outperform the overall market and build share. Our self-managed growth strategy is designed to maximise opportunities through the continual strengthening of our business model and by remaining focused on three simple routes to growth: incremental organic growth; growth through acquisition; and growth through ongoing investment into both our estate and into our technology support platform. The business is also increasingly able to benefit from changes in technology, both in consumer trends and through our investment in advanced scoring systems and innovative 'Pins & Strings' technology. This strategy is well understood by our stakeholders and has been consistently well executed over recent years.

FY18 was no exception, a year in which we have delivered very encouraging growth both organically, and through our programme of acquisitions. The strength in the underlying business model allowed us to deliver an excellent performance, achieving the Board's expectations by delivering total sales growth of 7.5%, adjusted EBITDA growth of 8.1% and adjusted earnings per share of 16.6p. Reported profit after tax grew by 57%. Ten Entertainment is a measures-based business, operating a balanced scorecard approach across financial, strategic and operational measures. The Group performed well against all these metrics in FY18.

The Group delivered strong like-for-like sales growth of 2.7%, the seventh successive year of growth, demonstrating strength and resilience in what was undoubtedly a challenging year, given the backdrop of the unprecedented hot summer and ongoing levels of consumer uncertainty. We continued to focus on our self-help programmes to deliver this organic growth, including driving up levels of digital engagement, investing in our core estate, increasing the Net Promoter Score through great customer experiences and offering our customers a broad range of product choices at excellent value for money.

The Board is focused on ensuring effective deployment of our capital resources, and last year supported investments in to several, well-proven, projects. We acquired, and extensively refurbished, four well located sites in FY18, investing £6.1m in total, and we are confident that these new additions to our quality estate will deliver in line with our historic returns on acquisitions of c.30%. We also continued at pace with the roll out of the transformative 'Pins & Strings' technology, investing £2.7m of capital into 13 more centres, a programme which is delivering cash returns of c.45%. As well as these new opportunities, the Group continues to invest in its existing centres and we completed four refurbishment projects in the year investing a further £1.2m of capital, where we expect returns to be at around 50%. There remains a strong pipeline of opportunities for the Group to invest capital in programmes with very attractive returns.

We have a significant opportunity to develop our levels of digital engagement with our customers, and 2018 was an important year for us in starting this journey. We have invested in strengthening our resources in this area with a new Digital Marketing Director joining us at the start of the year, and we are making good progress in our ambition to become a multi-channel business. We made improvements to the customer experience through programmes such as enhancing our website, identifying opportunities to grow our database and improving our on-site WIFI. These improvements are leading to increased numbers of web visits, higher conversion rates and improved sales. I am confident this will be an important area of focus to support our organic growth as we progress in 2019.

During the year we have undergone a transition in leadership. After almost ten years with the business, most recently as its Chief Executive Officer, Alan Hand took the decision to leave the Group for personal reasons. We are grateful to Alan for his significant contribution. We were delighted to welcome Duncan Garrood to the Group as our new Chief Executive. Duncan joined the Board in December and brings with him a wealth of relevant, consumer focused, leisure sector experience. Following his induction to the business, Duncan has reinforced the view that the Group's strategy is the right one and is committed to its continued evolution and execution. In addition, Mark Willis, the Group's Chief Financial Officer, will leave the business at the end of March 2019, again with our thanks for his contribution, and we are delighted to have appointed Antony Smith as his replacement. Antony joined the business on 18 March and we are confident he has the right balance of skills and experience to support Duncan as we move ahead. Finally, we were also delighted to welcomeAdam Bellamy to the Board as a Non-Executive Director and Chair of Audit Committee during 2018. Adam has excellent financial and multi-site leisure experience and is another strong addition to the Board. I personally look forward to working with all these individuals. I am delighted that comprehensive search processes for these roles identified a number of high calibre candidates, reinforcing the growing strength of the brand and its potential.

Operating teams across the Group, served by the senior leadership team and support centre colleagues, have the right skillset to execute the Group's strategy, deliver further growth and drive strong returns for shareholders. On behalf of the Board, I would like to personally thank all of our teams and colleagues across the Group for their commitment and hard work during 2018, delivering a strong performance while facing difficult trading conditions. The Group has a strong evolving culture of engagement, inclusivity and innovation, and our investment in our people is key to our continued success.

Good corporate governance remains a key focus and is applied through a strong, experienced and independently minded Board. Full details on our approach to corporate governance is outlined within our annual report. We continue to operate with a healthy, de-levered balance sheet, with a bank debt to adjusted EBITDA ratio at 0.2 times, to protect against any downside risk and give us scope to sensibly use free cash for dividends and acquisitions. The balance sheet also provides us with good access to capital to take advantage of current and future potential to deliver long-term value to our shareholders.

The Board is recommending a final dividend of 7.7p per share, resulting in a full-year dividend of 11.0p per share.

I would like to both thank our existing shareholders for their support of the business, and welcome new shareholders in the year to the business. I am delighted to report that the business is in strong shape, with much potential remaining to deliver strong returns. I strongly believe our business is well placed in a growing sector of the wider leisure market and is well positioned to maximise the benefit from the changing trends in consumer demand towards experiential leisure. There is much we can still do. I am confident that the Group will continue to deliver superior value for shareholders through capital growth and a very attractive dividend policy.

Nick Basing

Chairman

20 March 2019