Ten Entertainment : Interim results announcement 22 September 2021

Half-Year Results

22 September 2021

Results for the 26 weeks to 27 June 2021

22 September 2021

Ten Entertainment Group plc

Half-Year Results 26 weeks ended 27 June 2021

Exceptional summer performance; full year trading now anticipated to be ahead of previous management expectations.

Ten Entertainment Group plc ("Ten Entertainment" or "The Group"), a leading UK based operator of 46 bowling and family entertainment centres, today announces its half-year results for the 26 weeks to 27 June 2021. During this period, the business was closed for the first 20 weeks, reopening in full on 17 May for six weeks. In 2020 the business traded for the first 12 weeks of the year, followed by 14 weeks of enforced closures due to Covid-19 restrictions. This announcement incorporates an update on recent summer trading.

	26 weeks to	26 weeks to
	27 June 2021	28 June 2020
	(H1 21)	(H1 20)
Total sales	£10.6m	£22.5m
Trading weeks	6	12
Like-for-like sales growth vs 20191	22.5%	9.6%
EBITDA	£0.6m	£4.8m
EBITDA less property rental costs	(£5.5m)	(£1.5m)
Group adjusted loss before tax1	(£10.7m)	(£6.2m)
Reported loss after tax	(£8.8m)	(£5.6m)
(Bank net debt)1	(£10.9m)	(£6.7m)
Available debt headroom	£28.1m	£18.3m
Cash inflow/(outflow) after investments	£1.7m	(£2.6m)

Record sales since reopening, reflecting staycation boost and underlying strong customer appeal

• +22.5% like-for-like sales growth1 in the six weeks from 17 May
• Like-for-likesales in the 11 weeks since 27 June have been +42.0%
• Footfall growth drives the most successful summer trading period in the Group's history
• Engagement with customers better than ever, with 25% more contacts in the database than March 2020

Cash position secure, and continues to improve

• Over £28m of available debt headroom - more than in March 2020
• £1.7m cash inflow in the first half despite 20 weeks of closure
• Bank net debt at H1 21 reduced to 46% of 2019 EBITDA less property rental costs
• Strong cash generation over the summer has reduced bank net debt further

Returning to long-term investment for growth

• Free cash flow in the second half enables the restart of our proven high returning investment programme
• Pipeline negotiations well advanced, with four new centres expected to be opened during FY22
• Four significant refurbishments to be complete by December
• Houdini's expansion to 30 Escape Rooms across 12 locations by year end

Current Trading
		17 weeks to 12	5 weeks to 20	11 Weeks to 15	52 weeks to 29
		Sep 2021	Sep 2020	Mar 20	December 2019
		(Restart 2)3	(Restart 1)3	(Pre Covid)	(Baseline)
	Like-for-like sales growth2	+35.8%	(17.0%)	+9.6%	+8.0%
	Customer Spend per head2	£14.80	£13.57	£14.01	£14.60
	% Online bookings	65%	73%	45%	38%
	% sales from bowling	46%	42%	48%	47%

pg. 1

An excellent start of +22.5% like-for-like growth from the first six weeks of opening has accelerated over the summer holidays, increasing the total sales growth vs 2019 to +35.8% on a like-for-like basis for the 17 weeks since reopening. UK staycations have undoubtedly been beneficial, but this very strong performance shows the underlying appeal of our customer proposition.

Most of the growth, +29.3%pts, is driven by increased footfall. Our strategy has been to attract more customers and encourage return visits by maintaining pricing and promotions at 2019 levels. This has proved successful with solid demand throughout the UK showing that customers have welcomed a return to our entertainment centres for socialising and family activities. Spend has increased on ancillary activities and food and beverage, with spend per head contributing +3.6%pts of growth. There has been a modest benefit from reduced rate VAT of +3.5%pts on food and drink, lower than some leisure operators because HMRC have still not recognised bowling as a leisure activity.

There has been some supply chain disruption and staff turnover, but thanks to the hard work of our suppliers and our employees, this has been manageable. There have been no unplanned closures due to staff or product shortages.

Outlook

• Exceptional summer trading puts the full year outlook ahead of previous management expectations
• Strong demand expected to continue, but likely to moderate to high single digit in 2021 as staycation bubble subsides
• Targeting double-digit sales growth in 2022 compared to 2019 baseline
• Good cash performance to be maintained, with significant free cash flow generation by year end
• Confidence to reinvest free cash flow in a recommencement of our high-returning strategic investment programme
• Four new centres planned for 2022, with pipeline developing well
• Existing RCF banking facility extended to January 2024
• Well positioned to withstand further closures or lockdowns should they be necessary

Graham Blackwell, Chief Executive Officer, commented:

"I am extremely proud of our teams, who have worked under challenging circumstances to deliver this record-breaking period of trading and I want to express my sincere thanks to everyone who has helped deliver this remarkable performance. I'm delighted to see our centres so busy again, with happy staff and customers. It is great to see our investment in people and our centres paying off, with our most successful ever summer.

We are now 100% focused on the future, returning to our strategy of growth through acquisitions and internal investment. We will commence some new developments over the coming months, as well as transforming our customer proposition in four of our busiest family entertainment centres across the UK.

Our cash position is secure and continues to strengthen further day by day giving us much confidence for the future."

Enquiries:
Ten Entertainment Group plc	via Instinctif Partners
Graham Blackwell	Chief Executive Officer
Antony Smith	Chief Financial Officer
Instinctif Partners		Tel: [phone]
Matthew Smallwood
Penny Bainbridge

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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.

pg. 2

1. These are non-IFRS measures used by the Group in understanding its underlying earnings. Group adjusted loss 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. Like-for-like sales compare sales while the business is trading from 17 May over an equivalent six-week period in 2019 adjusted for new centres. All centres were closed for the comparable six weeks in 2020.
2. Like-for-likesales growth and spend per head growth compared to 2019 figures using only centres that were open and trading in both periods.

3 Restart 1 refers to the reopening of the business in August 2020 following the first UK Lockdown due to Covid-19. During this period the business was restricted to 50% lane capacity and other Government Covid security measures. Restart 2 refers to the reopening of the business on 17 May after the Lockdown throughout the beginning of 2021. During this trading period the business had fewer trading restrictions and was able to operate at 100% lane capacity.

pg. 3

Chief Executive's Statement and Operating Review

The first half of 2021 continued to be impacted by Covid-19 much like the majority of H1 2020. All centres were closed for the first 20 weeks of the year because of the Covid-19 Lockdown. Our primary focus remained on conserving cash, which we did successfully. Just as importantly, we continued to improve our business and prepare to welcome our customers safely back to our centres. This has resulted in the Group emerging from the pandemic with a better business.

Since restrictions were lifted on 17 May, we have reopened extremely well, consistently creating record sales growth, particularly during the summer holiday period. We are confident that we are well positioned for long-term growth.

An extremely strong and successful reopening

Total sales for the six weeks from reopening on 17 May to the 27 June were +27.4% compared to the same period in 2019. Like- for-like sales growth over these opening six weeks were a very encouraging +22.5% compared to 2019.

This momentum continued and accelerated throughout the summer, exceeding our expectations, with total sales growth since 17 May to 12 September of +39.4% compared to the same period in 2019. Like-for-like sales growth over the same period has been an extremely strong +35.8% compared to 2019.

This growth in our business has been driven by several factors, some of which are long-term structural advantages that we have built into our business, and some of which may be more short-term that we have been well positioned to take advantage of.

Short-termpent-up demand after more than a year of hospitality and leisure restrictions has no doubt contributed to the early growth seen on reopening. Our UK-focused model is principally reliant on domestic consumers rather than tourists which makes it well placed to see the benefit of foreign travel restrictions. Many of our customers have taken their summer holidays in the UK, and our centres are an ideal place for families to enjoy a range of activities on a staycation. We ensured that we could meet this increased demand with an attractive bowling and food package that was priced at the same level as in 2019. We have yet to see these short-term factors diminish but do expect that as the UK consumer starts to travel abroad again, we may see a softening in these very high levels of demand.

Additionally, some significant structural advantages have ensured that this reopening growth has been so successful. These factors are likely to contribute to an ongoing like-for-like sales growth compared to the baseline of 2019. Our business is more digitally enabled than ever. We have grown our customer contact database by 25% since March 2020 and have combined this with a much improved digitally enabled marketing strategy. Our focus has moved to emphasise customer experience and social interaction amongst friends and across the generations in families. During Lockdown we have continued to invest in and maintain our centres to offer the best possible bowling and entertainment experience. We have a much-loved range of activities, anchored on bowling but with a variety of other games such as Arcade Machines, Pool, Escape Rooms, Soft Play areas and Laser Tag Arenas. These activities are difficult to experience at home, and our customers enjoy participating with family and friends in the social environment of our centres.

Continued customer appeal

The Group continues to offer great value entertainment at a fair price. The average price per game in H1 21, including VAT, was £5.23, down from £5.30 in H1 20. Sales growth was primarily footfall driven, with a modest increase in spend per head driven by additional ancillary spend. The smartphone-based ordering for food and drink, which was introduced in FY20 continues to be successful, supporting spend per head and improving the customer experience.

As well as a good value price proposition, our customers have much flexibility on how much they spend each time they visit. The range of food, drink and entertainment we have on offer means that customers can budget for their visit based on affordability. They can choose to bowl more than once; enjoy a variety of other activities; and buy food and drink to supplement their experience. This contributes to a total spend per head of £14.80 (net of VAT) in the 17 weeks since reopening, a growth of +3.6% compared to the equivalent period in 2019. This is a good indication that customer behaviours are very similar to our long-term historic experience.

Our customer engagement through social media channels continues to develop, with regular games, competitions and offers. We remain the most followed bowling operator in the UK on both Facebook and Instagram. The fundamental shift in customer behaviour seen after the first Lockdown has continued since the reopening in May, with advanced bookings online continuing to make up the majority of our bowling sales. Better customer communications and maximising our recent investment in the digital infrastructure are helping to drive repeat visits.

pg. 4