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ANNUAL REPORT & ACCOUNTS 2020
contents
Strategic report
01 Our Family Entertainment Proposition
03 Highlights 2020
04 Why Invest in Ten Entertainment Group?
06 At a Glance
08 Chairman’s Statement
10 A Year in Review Q&A
12 Considering our Stakeholders
18 Market Overview
20 Business Model
22 Our Strategy
26 Key Performance Indicators ('KPIs')
28 Chief Executive’s Statement and Operating
Review
32 Environmental, Social and Governance ('ESG')
39 Section 172
44 Risk Management
46 Principal Risks and Uncertainties
49 Long-Term Viability Statement
51 Financial Review
Corporate governance
58 Chairman’s Introduction to Governance
60 Board of Directors and Executive Committee
62 Corporate Governance Report
70 Nomination Committee Report
72 Audit Committee Report
76 Directors’ Remuneration Report
80 Remuneration – At a Glance
81 Directors' Remuneration Policy
86 Annual Report on Remuneration
94 Directors' Report
97 Statement of Directors’ Responsibilities in
respect of the Financial Statements
Financial statements
98 Report on the Audit of the Financial
Statements
106 Consolidated Statement of Comprehensive
Income
107 Consolidated and Company Statements of
Financial Position
108 Consolidated and Company Statements of
Cash Flows
109 Consolidated and Company Statements of
Changes in Equity
110 Statement of Accounting Policies
120 Notes to the Financial Statements
140 Directors, Company Secretary and Advisers
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
entertaining
“THE STRENGTH AND
SUPPORT I RECEIVE FROM
EVERY LEVEL FROM THIS
AMAZING COMPANY KEEPS
ME GOING BACK FOR
MORE.”
TEAM EXETER
OUR PURPOSE
To make friends and families happy;
we entertain and enthral profitably.
WHO WE ARE
We are a family entertainment
business offering a wide range of
competitive social activities all
under one roof, with bowling at the
heart of what we do.
OUR CULTURE
We believe in providing fun and
entertainment as a source of good
health and wellbeing. We are active
in our local communities and take
pleasure in bringing together
families and friends to socialise
and have fun together across
the generations.
Ten Entertainment Group plc Annual Report and Accounts 2020
1
“ALL SET TO
ROCK'N'BOWL”
TEAM YORK
“WE’LL BE BACK IN NO TIME
AND MORE AWESOME
THAN EVER’”
REGIONAL TEAM
2
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
HIGHLIGHTS 2020
FINANCIAL HIGHLIGHTS
● Pre-Covid trading delivered +12.7% sales growth
● Bank debt well controlled to (£12.6m); growing
only £8.5m in year
● New financing facility adds £14m liquidity
BUSINESS HIGHLIGHTS
Strong controls maintained the business in excellent shape
● Swift and decisive action taken to secure financial security
for over 18 months of closure
● Over £18m of liquidity headroom still remains in place
as at 26 March
● 75% reduction in non-property related cash spend
during Lockdown
An underlying strong business that continued to develop
● Good progress in developing our digital platform
● Next generation development in Manchester exceeded
expectations
● Underlying model still offers significant cash on cash
returns to investors
● Long-standing eight-year track record of organic growth
and >30% returns on acquisition investment
Well positioned for growth and expansion post Covid
● Strong demand in the summer when the business
reopened after first Lockdown
● The business is operationally fit for purpose; all local
management and teams remain in place
● Well placed to benefit long-term from reducing capacity
in UK leisure and hospitality
Ten Entertainment Group plc Annual Report and Accounts 2020
3
INVESTMENT CASE
WHY INVEST IN
Proven customer proposition
£4.59
VALUE FOR MONEY
The average spend per head of
£13.99 provides an entertainment
experience accessible to all
Strong internal fundamentals
8
PROVEN ORGANIC GROWTH
A strong track record of like-for-like sales
and profit growth pre-Covid
OPERATING MODEL
A proven model across site acquisitions
and refurbishments while maintaining and
improving operating margins
DIGITALLY FOCUSED
Continually improving integration with
embedded online booking system for all
activities, integrated food and drink
ordering technology, and significant
investment in enhanced customer
communications
EXPERIENCED LEADERSHIP
Wide range of leisure and retail
knowledge and skills amongst our
Board and executive team
ROBUST BALANCE SHEET
Long-term liquidity protected through
robust cost control, strong supplier and
landlord relationships and support from
financing partners
YEARS OF
CONSECUTIVE LIKE-
FOR-LIKE GROWTH
36%
RETURN ON
INVESTMENT
34%
OF OUR CUSTOMER
DATABASE BOWL
EVERY 2 MONTHS
>60
COMBINED 60+ YEARS
OF EXPERIENTIAL
LEISURE
>£18m
LIQUIDITY HEADROOM
MARCH 2021
CUSTOMER DEMAND
A leader in experiential leisure
with a fun and social environment
for friends and families across the
generations
CAPTIVATING INVESTMENT
We focus on strategic investments
in our current estate to enhance the
environment, atmosphere and
experience
NATIONAL FOOTPRINT
Large, accessible centres across
the UK offer a wide range of
entertainment under one roof
COVID SECURITY
Our centres are safe, welcoming
and can optimise the requirement
to conform to social distancing
AVERAGE PRICE
PER GAME1
36%
OF UK CONSUMERS
WENT TENPIN
BOWLING IN 20192
£10.5m
INVESTED OVER THE
PAST FIVE YEARS
46
LOCATIONS
THROUGHOUT
THE UK
£1.2m
INVESTMENT MADE
IN CUSTOMER
SAFETY
1 Price per game is inclusive of VAT. Spend per head excludes VAT.
2 Source: Mintel Leisure Review UK, December 2019.
4
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Attractive Market
GROWTH
Our business sits in the sweetspot of
the highly attractive experiential leisure
category and the Group is well positioned
to take advantage of short-term
opportunities and long-term growth trends
FRAGMENTED COMPETITION
The two leading operators run a third of
the UK centres but generate two thirds
of the sales, at significantly higher
operating margins
PENT-UP DEMAND
We anticipate an increasing demand and a
reduced supply for experiential leisure as
Lockdown ends. We are well positioned to
meet the demand for social entertainment
£320m
UK TENPIN BOWLING
GREW 26% IN THE 5 YEARS
TO 20192
>100
INDEPENDENT
OPERATORS IN THE
UK MARKET
Top 4
GROWTH SEGMENT IN
THE £111BN UK LEISURE
MARKET. 4.8% CAGR IN
5 YEARS TO 20192.
“THANKS FOR
HELPING ME BELIEVE
IN MYSELF’’
TEAM MANCHESTER
Ten Entertainment Group plc Annual Report and Accounts 2020
5
AT A GLANCE
LEADING THE WAY
Ten Entertainment Group plc is a
leading UK operator of family
entertainment centres with a total of
46 centres across the UK. We have
1,100 bowling lanes across our estate
and a wide range of complementary
entertainment options including
amusement machines, table tennis,
pool tables, Houdini’s Escape
Rooms, soft play and laser games.
We have a great range of food and
drink that customers can enjoy while
they play.
We operate best-in-class technology,
including the latest bowling scoring
systems and a fully integrated
website and real-time booking
engine for all our activities.
46
ENTERTAINMENT
CENTRES
£13.99
AVERAGE SPEND PER HEAD
1.3m sqft
OF FAMILY ENTERTAINMENT
SPACE
13
ESCAPE ROOMS
IN OPERATION
ACROSS 6 UK
LOCATIONS
6
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
MARKET-LEADING INNOVATION
2021
46% of the estate already using latest BESX scoring systems
ApplePay and GooglePay accepted online
Online employee wellbeing platform
2020
iServe replaced with at table F&B ordering app
Pins & Strings live in 87% of estate
Fully upgraded web and CRM platform
2019
HyperBowl trials installed
Cheshire Oaks development site launched
Escape Room joint venture with Houdini’s
Yapster launched for employee communications
2018
Full Pins & Strings roll-out commenced
Virtual Reality trialled
2017
TEG plc IPO
Fully integrated real-time
booking engine to drive yield
2016
Pins & Strings introduced to UK by TEG
Commenced roll out of BESX scoring system
2014
Investors in People Gold award
iServe at lane ordering service introduced
2013
Paypal introduced
2012
Mobile booking engine launched
Free in-site WiFi across whole estate
2007
Online booking and
centralised customer database
Dynamic pricing trialled
2003
Indoor golf trialled
2000
Qubica partnership began
“I’M LOOKING
FORWARD TO WHAT
2021 BRINGS FOR
TENPIN”
SUPPORT TEAM
THE GROUP’S REVENUE MIX IN 2020
26%
ENTERTAINMENT
46%
BOWLING
28%
FOOD AND
BEVERAGE
Ten Entertainment Group plc Annual Report and Accounts 2020
7
CHAIRMAN’S STATEMENT
Focusing on our
long-term future
Keeping the business fit
for purpose, ready to
recommence growth
NICK BASING CHAIRMAN
When I wrote this report in May last year, our business had already
been closed for seven weeks as the global pandemic had begun
to take effect. The scale of the challenge has been far greater than
any of us could have imagined. This period has truly tested the
resolve of all of us connected with the leisure and hospitality
industry and of course Ten Entertainment Group.
We achieved much in 2020, despite the enormous degree of
disruption, and I am delighted that all of us came together and
worked tirelessly to secure the Company’s future prosperity. Not
only that, but I believe that our core business is now poised to
benefit from a return to a new normal pattern of trading.
We have safeguarded our liquidity to ensure that we emerge
from Lockdown with a secure cash position. We have used the
time to further develop our business so that it remains modern,
relevant, safe and fun when our customers return. We have
demonstrated effective decision-making across a newly
developed Board structure.
From the earliest days as the Covid-19 crisis emerged, the Board
acted at pace to secure long-term stability and maintain
confidence across all key stakeholders. The Group was the fourth
UK-listed PLC to come to market with an equity placing which
was extremely well supported, including the management team
who all invested. I am extremely grateful for the confidence our
investors showed in us. Our continued prudent approach to debt
management and a high performing first quarter meant that
despite being closed for 26 weeks, we ended the year with just
£12.6m of bank debt. Since the year-end we have consolidated our
position further with support from our bank under the
Government’s Coronavirus Large Business Interruption Loan
Scheme (‘CLBILS’). We currently have liquidity headroom of over
£18m, more than sufficient to protect our business well into 2022.
We took the opportunity in the year to strengthen our business
wherever possible. We enhanced our estate with the completion
of our brand-new centre in Manchester (Printworks) and two
major refurbishments at our flagship centres, Acton and
Birmingham (Star City). We concentrated our focus towards our
digital strategy in 2020. This had the dual effect of facilitating our
“WE ACHIEVED
MUCH IN 2020, DESPITE
THE ENORMOUS DEGREE
OF DISRUPTION”
8
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
business to begin its next exciting phase. I
look forward to watching with great interest in
its next chapter.
We are primed and ready to reopen and there
is real cause for optimism; 30 million people
have now received their first dose of the
vaccination and there is a clear Government
roadmap back to normality, with our centres
due to reopen on 17 May. Although the leisure
and hospitality landscape will have changed
significantly, our customers will more than
ever be seeking out our great value, well-
invested family entertainment centres to
reconnect with friends and family. Ten
Entertainment’s fundamental purpose is to
make friends and families happy; we entertain
and enthral profitably. I remain confident that
the underlying strength of our business and
the stellar work of the leadership team that
has ensured that the business remains on a
strong footing for the future.
NICK BASING
CHAIRMAN
29 MARCH 2021
SIGNIFICANT REMAINING
HEADROOM
>£18m
STRONG EMPLOYEE
ENGAGEMENT
89%
response to the operational challenges of
Covid-19, but more importantly it positions us
as best-in-class for the coming years. We
were the first bowling operator in the UK to
enable all of our centres with contact-free
food and drink ordering. Our customer
engagement through social media channels
grew significantly during Lockdown, and we
are now the most followed bowling business
in the UK on Facebook and Instagram. Our
operational leadership played an active and
impactful role in taking the lead for the
industry’s negotiations with the Government
in setting and agreeing the safe operating
protocols under Covid restrictions, and all our
centres now have fixed lane dividers that
allow us to operate all lanes safely.
a very strong wellbeing programme to ensure
people’s welfare, in every respect, is
considered and cared for. Tenpin is
characterised by an incredible esprit de corps.
The Board has done everything in its power to
recognise and continue to support this crucial
strength of our business. As a result, there
have been no enforced redundancies as a
consequence of Covid-19. I cannot express in
words my true gratitude to each and every
one of our team for their support to the
business, each other and me, and I am
incredibly excited to anticipate seeing
everyone return back to their places of work
and to provide the warmest welcome to our
customers back into our centres up and down
the country.
Duncan Garrood’s decision early in the crisis
to leave the hospitality sector to take up an
external position gave us the opportunity to
redefine the appropriate leadership skills for
this next phase of our journey. Graham
Blackwell was appointed interim CEO, most
ably supported by Antony Smith, our Chief
Financial Officer, who has taken on additional
leadership responsibilities. Graham’s 30 years’
experience in hospitality and bowling and his
deep-rooted operational and commercial
acumen make him ideally placed to lead the
business back to achieving consistent growth
and profitability as it has delivered previously
over the past eight years prior to the
pandemic. This arrangement has proved
highly effective in navigating the choppiest
waters the industry has ever faced and it was
unanimously agreed by the Board to appoint
Graham as Chief Executive Officer in January
this year.
Our continuous track record of profitable
growth for the past eight years has been
temporarily paused for 2020. However, we
have put everything in place to ensure that
we are well positioned to make a strong return
to growth. In fact, we believe that pent-up
demand for families to enjoy the experience
of socialising will lead to a rapid recovery.
The headlines of 2020 have been dominated
by the drama of Covid-19 with some tragic
and traumatic outcomes for society and
individuals. As a business focused on family
entertainment, we truly hope that this
pandemic can be put behind us and
important lessons learned to avoid a repeat
for future generations. For TEG we would
wish the year to be defined as maintaining
clarity of purpose, taking decisive action, and
working closely with all our stakeholders to
prosper on return.
Financial support from the Government has
been welcome. We have utilised the
Coronavirus Job Retention Scheme
responsibly which has protected the
livelihoods of over 1,000 of our team. The
business rates relief has also alleviated the
financial burden on the business and its
extension through to 2022 will help us as we
reopen. A reduced rate of VAT for hospitality
and leisure has been a sensible measure
overall, although inexplicably it does not
extend to bowling; a situation that we and the
industry continue to pursue with the Treasury
working with expert advisers.
Most importantly to highlight, my colleagues
across the country, in all our centres, have
been extraordinarily supportive throughout
these challenging times. We have developed
I have announced my decision to step down
from the Board in September. When I joined
in 2009, I inherited a business that was
underinvested and had lost touch with its
customers. With a necessary and innovative
restructuring, a relentless new focus that put
our customers back at the heart of everything
we do, and a new team of highly talented
people with energy and commitment, we
delivered eight consecutive years of like-for-
like growth. We successfully brought the
business to a main listing on the London
Stock Exchange with an IPO in April 2017 and
have continued to deliver strong profit growth
and investment returns since. The final
chapter of my love affair with Ten
Entertainment will be welcoming back our
customers and colleagues in May and
restarting our proven growth strategy for the
Ten Entertainment Group plc Annual Report and Accounts 2020
9
A YEAR IN REVIEW Q&A
Protecting
Preserving
Preparing
In conversation with
Graham Blackwell and Antony Smith
GRAHAM BLACKWELL CHIEF EXECUTIVE OFFICER
ANTONY SMITH CHIEF FINANCIAL OFFICER
CONSIDERING OUR STAKEHOLDERS
PEOPLE
CUSTOMERS
SUPPLIERS
Protecting our people has
been a priority for 2020.
A relaunched wellbeing
strategy; enhanced employee
communications; and a
commitment to ensure that
nobody fell through the gaps
in respect of furlough.
Our digital integration
has accelerated, helping
us to be closer to our
customers than ever.
We are now the most
popular UK bowling
company on Facebook
and Instagram.
Our strong relationships
with our suppliers has
meant that we were able
to manage our cashflow
through bilateral
agreements that don’t
create a cash pressure
on reopening.
Go to page 12
Go to page 14
Go to page 41
10
Ten Entertainment Group plc Annual Report and Accounts 2020
How did you feel when you closed
the business for the first time in
March?
It was a real shock, never have we closed the entire
business for more than Christmas day before. Of
course it was an enormous disappointment to all of
us because of the strong momentum we had built in
the first few weeks of the year and we were looking
for another fantastic year following our excellent
performance in 2019. Nobody had ever seen
anything like this before, so it was all new territory
for everyone. However operational head takes
over and you move to practical mode of securing
the centres, closing down safely and protecting
our people and business as best we could.
Yes I agree it was a real disappointment. Within
a week though we had secured £5m of equity
funding; agreed initial deals with all of our
landlords and major suppliers; put over 95% of
our staff on furlough; and reduced our cost base
by nearly 70%. In ordinary times you wouldn’t
dream of doing even one of those things in
such a short timescale let alone all of them.
What was the most difficult thing
you had to do in the early days?
Our business has a real family feel to it, we have
worked hard to grow our relationships with our
customers, staff and suppliers and all of a sudden
it was like we had lost our momentum. It was hard
to think of how those people would be feeling with
so much uncertainty hanging over the business.
So we focused on communication and wellbeing,
we worked really hard on doing everything within
our power to ensure all of our colleagues were well
looked after and understood what was happening.
We have a family of 1,100 wonderful people relying
on us to make the right decisions and to protect
their security and future. Our aim was to ensure
we treated our colleagues how we wanted to be
treated. We have learned a lot of things throughout
the last year in terms of the business, however we
knew from the outset that relationships were key
to surviving and we acted quickly. Our relationships
are still very strong and we continue to work hard
on those relationships whatever the circumstance.
What impact has the Covid crisis
had on your underlying business?
It was really disappointing to lose a year of
momentum, and clearly the cash outflow has
given us a bigger debt than we ordinarily tend
to run with. However, I’m confident that we can
bounce back quickly. The business is very strong,
and bowling remains a popular activity, so there
is no reason to think that 2020 will have a lasting
effect on the underlying profitability, and we
fully expect to return to our growth trajectory.
Does your strategy change now?
No, not really. I was part of the team that brought the
business to IPO in 2017 and we did so with a very clear
strategy. We provide great value family entertainment by
investing in modern bowling centres and introducing the
latest in family entertainment technology such as Escape
Rooms, Virtual Reality, video and gaming technology.
To grow our estate we look at various opportunities to
sweat the asset that we already have. One example is
the rollout of our Houdini Escape Rooms which increases
our one stop shop approach to entertainment whilst
utilising every square foot of property we have.
We will continue to always evaluate our current demise to ensure
we direct capital in the best way to grow our business. We
continue to closely monitor the bowling market and look to seek
out great opportunities to acquire existing businesses, whilst
carefully selecting preferred sites for building new bowling centres
to add to our group at Tenpin. Those things are as relevant now as
they were pre Covid, and we fully expect to continue that strategy.
Can you afford to continue that strategy?
Yes, we can. We have always taken a prudent approach to
debt, and when the crisis struck we had no bank debt. We do
now need to prioritise reducing that debt a little, but we still
have good liquidity headroom and a cash-generative model.
We are likely to initially prioritise the less capital intensive
programmes to grow our business in the short term, but
longer term we are confident that we can reduce our debt
and continue our self-funded investment programme.
Did you make any strategic progress in 2020,
or was it just all about Covid?
Yes, we did. We completed and launched our new site in
Manchester and two fantastic refurbishments in Acton and Star
City and I am delighted with the results. We also completed
eight further Pins & Strings sites leaving just six to complete
our estate and we utilised the time to install Escape Rooms
into our sites in Acton, Star City and Southampton bringing our
current total to 13 and expect to have 15 by the end of June.
We completed the rollout of our F&B app and continue to
develop this internally as part of our digital enhancements.
However, probably the greatest progress came with our
developments in online and digital. It’s nice to be the
UK’s best loved bowling operator on social media!
How does your expansion pipeline look?
We had acquisitions and new builds ready to execute in line with
our forecasts for 2020 which we had to put on hold in March
due to Covid. We have continued to ensure those opportunities
did not fall away. They remain options for us but we have not
yet made any financial commitments, although we could action
very quickly if we chose. I think having flexibility to be agile in
our approach to estate expansion will work well for us in 2021.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
To be honest, I’m quite pleased that we don’t have
commitments made in a pre-Covid era as the economics
are likely to have changed. It is good not to have a high
forward capital commitment in the current circumstances.
I think better and more interesting deals are likely to become
available with significant availability of new retail and leisure
units as well as potentially some acquisition opportunities.
Early targets will be low capital intensity, but we will remain
vigilant for some great new sites in our future pipeline.
Do you think there will be consolidation in
the bowling industry in 2021?
Unfortunately I think that’s inevitable. Not all operators are
fortunate enough to have the financial support that we have
nor access to the sorts of reserves we can call upon. There are
lots of small groups and independently run operations out
there and I do really feel for them in these difficult times.
I have worked closely with them during Lockdown, supporting
and advising where possible through the Tenpin Bowling
Proprietors Association. I’ve worked within the industry for
many years and know many of these operators well.
It is highly likely there will be some consolidation and TEG
is in a strong position to help keep some of these centres
open for their communities. We have a strong track record
in acquiring these types of businesses, investing in them,
delivering growth and achieving excellent returns.
Will you be paying a dividend in 2021?
The CLBILS loan we secured in January does need to be fully
repaid before we pay a dividend and our first priority is to return
to cash generation and ensure the debt is at an appropriate level.
We do also have a very strong track record for investing capital
and generating significant returns, and any dividend policy needs
to be balanced against that growth agenda. So I think it is highly
unlikely that we will immediately return to a dividend in 2021,
but I am committed in the medium term to a well disciplined
capital allocation strategy that maximises shareholder returns.
What are your priorities for 2021?
We just can’t wait to get the doors open and welcome back our
customers! We have excellent Covid protocols and a spacious
environment packed full of fun activities that families and friends
are just desperate to get back to. Everything is in place and we are
ready to go, our teams are chomping at the bit to get back into
our centres, we look forward to returning the business to growth.
Likewise I want to get us open and trading. Our first target is to get
the business back to 2019 levels and then I think we can start to
push beyond that. We generate cash quickly and that will help us
to bring the debt down and refocus our investment programme.
When do you think you will return to pre-
Covid levels?
Our business remains as strong as ever, so there is no reason
to think that we can’t do so fairly quickly once the markets
open up a little more. We need to be agile and adapt our
business to understand any potential changes in customer
behaviour, but I am confident that by continuing to offer great
value entertainment our customers will be keen to return.
Ten Entertainment Group plc Annual Report and Accounts 2020
11
CONSIDERING OUR STAKEHOLDERS
OUR PEOPLE
communicating within our community by using
a fully integrated mobile communications platform
to keep our people and systems connected
Over the last 12 months, Yapster, our Company-wide mobile
communication platform, has been of paramount importance for
colleague engagement.
The Yapster app, which is used by both the support centre and
site-based employees, facilitates instant messaging as either private
messages or group conversations allowing employees to send text,
photo and video messages in a private, secure workspace. There is
also a Company-wide newsfeed feature which allows management
and team members to keep in touch and share key achievements,
milestones and important information in an interactive and social
manner. The app is accessible on smartphones and via a browser,
making it easy for site-based employees to access on their own
devices and be connected in a way that could be difficult otherwise.
During the Covid-19 pandemic, when Government announcements
were made at short notice during non-working hours for the majority,
the app enabled the leadership team to communicate promptly and
efficiently with the wider team; this helped ease any uncertainty and
gave employees an instant forum to ask any pressing questions or
share concerns. It also allowed the Executive team to share regular
video content to keep everyone informed and get important
messages across during periods of closure.
Throughout the first national Lockdown, a time when a large
proportion of the team were furloughed, Yapster provided a vital way
for team members to stay in touch with each other. There was a high
level of engagement with team members feeling empowered to share
anything they deemed worth sharing; from volunteering stories or
relevant training they were completing, to amateur photography they
had been practising or motivational quotes. It also enabled the
internal communications team to share relevant and supportive
content such as mental health matters and #MondayMotivation
quotes. All these interactions helped to build a sense of togetherness
at a time when face-to-face interactions were limited.
One of the Company highlights during Lockdown was the Team
Tenpin Relay. This event, which was organised via Yapster, saw over
140 team members taking part in a relay from the north to the south
of the country with each member walking, running, cycling or rowing
5km to raise money for MIND, the charity for better mental health.
The event took place over four days in June with over 700km travelled
and more than £3,000 raised for the charity. This was just one of many
charitable efforts which was shared and promoted via Yapster.
The engagement on Yapster continued in the lead up to reopening,
with many sharing their preparations to ensure they were Covid
secure, tips to improve the customer experience as well as any initial
customer feedback. When opening and closures became regional and
site-specific the sense of comradery continued with posts of
encouragement for centres opening and commiserative positive
posts for those facing closure.
We have linked Yapster to all of our online platforms so that the app is
now a one stop shop for a range of essential digital tools including our
online learning and development resources; our highly popular Tenpin
Treats reward gateway; our confidential feedback forum; and our
whistleblowing hotline. This means that every member of the team
has ready access through a single sign on with their phone.
In the latter part of the year, a number of initiatives helped to maintain
the high level of engagement and participation in a fun and light-
hearted way. This included #StepintoSeptember challenge which saw
13 teams across the support centre and centres competing to clock
up more steps than their colleagues with weekly league tables being
shared via the app and #Tenpinpaws which saw employees posting
pictures of their pets throughout November in the hope of their pet
being crowned the most popular furry friend.
At a time that has been anything but normal, Yapster has enabled the team
to come closer together whilst staying apart, and many have returned to
their centres with an even greater sense of belonging and unity.
12
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
NEWSFEED POSTS
4,000
GENERATED
LIKES AND COMMENTS
80,000
YAPS SENT
100,000
ACTIVE USERS
1,017
Ten Entertainment Group plc Annual Report and Accounts 2020
13
CONSIDERING OUR STAKEHOLDERS CONTINUED
PEACE OF MIND
When reopening our centres, we adhered to
strict safety protocols while providing the
same outstanding customer experience
The Group has been instrumental in developing
the operating protocols for the industry as it exits
Lockdown. Our operational expertise has ensured
that we can implement these protocols to the
highest standards in order to ensure our
employees and customers can enjoy a safe
environment and an enjoyable experience.
Our centres have been modified to protect our
customers with clear signage, one-way systems
and protective screens. Our gaming areas have
been reflowed to enable customers to continue to
enjoy our activities at a safe distance.
When we opened after the first national Lockdown
we limited capacity by only operating alternate
bowling lanes in order to comply with guidelines on
social distancing, and this capacity limited sales
growth. During the year we worked closely with the
Department for Digital, Culture, Media and Sport
(‘DCMS’) to agree safe protocols for opening all our
estate’s lane capacity, and further investments have
now been made in lane dividers at all centres which
means that our business can now safely operate
100% of available lanes.
We have invested in ensuring all our teams
undertook a specially designed Covid training
programme before they returned to work, as well as
a refresher course to remind them of how we help
our customers have fun in a safe environment. We
have increased staffing to meet and greet our
customers to help navigate our rules around masks
and distancing, and ensuring all visitors are
completing Track and Trace details. We have also
added specific roles responsible for cleaning and
sanitising the lanes and machine areas and ensuring
a fast turnaround such that we can keep our
customers safely moving to a clean and discrete
area within their groups. These roles are performing
well in ensuring we have great customer feedback
on our Covid security measures as well as helping us
to increase customer spend per head. The additional
costs are manageable, and savings have been
identified elsewhere to partially mitigate
the impact.
We have launched a smartphone-based ordering
system for food and drink which proved highly
successful and helped us maintain spend per head.
Customers can now use their phones to order and
pay in a completely contact-free environment and
to have their meals and drinks delivered directly to
their lane or table. This not only helps social
distancing but allows us to increase ancillary spend
and give customers a better service.
Customer feedback has been positive. People
understand the restrictions in place and have been
complimentary about the way our centres have been
set up to help keep them safe. Structurally our centres
benefit from being large and open spaces with discrete
places for customers to enjoy their game away from
other groups. The ‘Rule of Six’ when in place, is well
suited to the bowling environment where games
are already limited to six people per lane.
These preparations, combined with excellent initial
customer feedback give us confidence that when
we reopen, we can give customers the great value
family fun they are used to, with the added peace of
mind that they are in a safe environment.
14
Ten Entertainment Group plc Annual Report and Accounts 2020
“LANE DIVIDERS ALL
COMPLETE, KEEPING OUR
STAFF AND CUSTOMERS
SAFE! GREAT JOB!”
TEAM BEXLEYHEATH
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
100%
OF SITE-BASED EMPLOYEES
COMPLETED COVID SECURITY
TRAINING
COVID SECURITY
INVESTMENT
£1.2m
Ten Entertainment Group plc Annual Report and Accounts 2020
15
CONSIDERING OUR STAKEHOLDERS CONTINUED
BOWLING SALES
BOOKED ONLINE
70%
FOOD AND
DRINK ORDERING
ONLINE IN
every
CENTRE
“FANTASTIC AND
REASSURING TO HEAR
THE PLANS FOR NEXT
YEAR”
TEAM GLASGOW
16
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
INNOVATION
We made huge strides in 2020 in enhancing
and integrating our digital systems to
improve the customer experience
We were the first UK bowling operator to
integrate a web-based food and drink
ordering app in every centre.
Post Lockdown, customers could use their
smartphones to order and pay in a completely
contact-free environment and to have their meals
and drinks delivered directly to their lane or table.
This not only helps social distancing but allows us
to increase ancillary spend and give customers a
better service.
Our online booking system and in-site Wi-Fi was
enormously effective at capturing customer data
for Track and Trace, and we saw a surge in online
bookings to around 70% of total bowling sales from
our more typical 30%. This helped us to plan and
manage capacities carefully and would not have
been possible without the website platform
development we completed in January 2020.
throughout 2020. During Lockdown we also
increased our social media presence and
engagement with our customers was strong, with
games, competitions and offers. Facebook
engagement doubled and we increased our
presence on Instagram to broaden the customer
reach. The Group now has over 130,000 Facebook
followers, making us the most followed Tenpin
bowling operator in the UK.
SEO optimisation was a key focus in the latter part
of 2020 to ensure our website was accessible for
customers looking for great value family fun. As a
result, the website now ranks higher on Google for
key search terms such as ‘bowling’ and appears in a
wider number of search terms including
‘entertainment centres’, allowing us to gain position
on competitors and appear higher up in a wider
number of searches.
We continually cleanse and refresh our online
customer database and have c.430,000 contactable
customers who we were able to communicate with
In addition to the significant website improvements
made in the early part of 2020, we are now leading
the way again in the sector with the introduction of
ApplePay and GooglePay now live on our website.
Ten Entertainment Group plc Annual Report and Accounts 2020
17
"I HAVE THE BEST
WORK FAMILY AND
TOGETHER WE’LL GET
THROUGH”
TEAM DONCASTER
MARKET IMPACT SPECTRUM
THE GOVERNMENT HAS SET OUT A
CLEAR ROADMAP FOR A RETURN TO
NORMALITY, WITH EACH STEP REDUCING
THE IMPACT ON CONSUMER BEHAVIOURS.
Greatest
Impact
Fully closed
Ban on households mixing
‘Rule of Six’
‘Curfews’
F&B constraints
Consumer confidence
Back to FY19 levels
Return to growth
Least Impact
29 MARCH 2021
Some restrictions start to
ease, but hospitality
remains closed.
12 APRIL 2021
Indoor hospitality remains
closed, but more relaxation of
retail and outdoor attractions
and events.
17 MAY 2021
Earliest expected date of
reopening our centres in
the UK, with social distancing
in place.
21 JUNE 2021
Removal of limits on
social contact and a return
to normality.
+26%
ESTIMATED TENPIN
BOWLING GROWTH
MARKET OVERVIEW
THE GROUP OPERATES IN THE UK LEISURE
MARKET, WHICH WAS ESTIMATED TO BE
WORTH APPROXIMATELY £111BN1 IN
2019 AND PRE COVID WAS EXPECTED TO
GROW TO £125BN1 BY 2024.
2020 has been a difficult year as Covid-19 and the
resulting Government Lockdowns and restrictions have
hit the leisure and hospitality industry extremely hard.
Some of the ways the market was restricted in
2020 included:
● The enforced Government closure of all leisure and
hospitality venues ('Lockdown') from 20 March 2020.
Our Welsh centres reopened first at the beginning of
August, with the majority of our centres opening in
England on 15 August, followed by our Scottish centres
towards the end of the month.
● The ‘Rule of Six’ which came into effect on 14
September.
● The 10pm curfew which came into effect on 24
September until the beginning of December.
● Second Lockdown from 5 November to 2 December.
● The enforced closure of centres in Tier 3 areas from
3 December.
The restrictions resulted in TEG’s centres being open for
trade for only 51% of the year; with 21% taking place prior
to Covid-19 restrictions and 30% taking place after the
first Lockdown with varying levels of restrictions enforced.
Although this impact was significant in 2020 and has
continued in the early part of 2021, we remain confident
that the long-term growth in the market will continue
once a there has been a successful vaccine rollout and a
sense of normality is restored. The Government now has
a clear roadmap for the lifting of restrictions in the UK
which will enable the Group to recover and return to cash
generation in the second half of 2021.
£111bn
UK LEISURE MARKET VALUE
IN 2019
18
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
COVID-19 IMPACT
At this stage it is difficult to predict how the
market and consumer behaviours may change
over the coming months and years, but our
business model is robust and its financial
footing sound, making it likely to emerge as a
long-term winner.
The uncertain economic climate and increased
unemployment may impact disposable income
and in turn leisure spend. However, tenpin
bowling is a competitively priced and highly
accessible form of family entertainment with
the cost to a family of a visit being often lower
than other leisure activities which gives bowling
more resilience to any future challenges from
the economy. The average customer in 2020
played 1.7 games of bowling and spent £7.57 on
ancillaries. Our broad offering allows customers
the flexibility to adjust their spend by either
amending the number of games they play;
flexing their spend on ancillaries; or choosing off
peak times to play; all while maintaining an
enjoyable experience.
Conversely, those who have remained
employed throughout the pandemic and
benefited from disposable income have had
few opportunities for leisure spend in the last 12
months. The Centre for Economics & Business
Research (‘CEBR’) estimates that Britons saved
£200bn in 2020 as a result of Government
restrictions limiting most, if not all, of their
normal activities, which could lead to a
spending boost and GDP growth of c.8% in
2021 and in turn increased demand for
leisure activities.
In the current climate, mental health is more
important than ever and we believe that tenpin
bowling is a fun activity that can boost
wellbeing and bring people together through
competitive socialising. Bowling is a highly
inclusive game and is one of the few leisure
activities that can be enjoyed across
generations with participation from virtually any
age. We are sure that when socialising in person
becomes commonplace again that Tenpin will
continue to be a venue of choice.
UNDERLYING MARKET
FAST-GROWING SECTOR
Pre Covid-19, tenpin bowling was a fast-growing
sector of the leisure market and part of the
wider range of entertainment and competitive
socialising activities available. Tenpin bowling
was estimated by Mintel to have grown by 26%
between 2014 and 2019 to a total size of
approximately £320m. Growth in the bowling
market has outgrown many other leisure
sectors, with the total leisure market estimated
to have grown 18% over this same time period.
Bowling represents a very small part of the
wider market at just 0.29% and has significant
opportunity to continue to outperform
as the competitive socialising market
gains momentum.
THE RISE OF EXPERIENTIAL LEISURE
In recent years consumers have transferred
expenditure of their disposable income from
possessions and goods to experiences with
friends and family, and broad entertainment
offerings like our own are outpacing more
passive activities. The Group is focused on
MARKET SUPPLY
OPPORTUNITIES FOR TEG
• Likely reduction in overall market capacity
• Knock-on effect of less casual dining
• Low-cost acquisitions may arise
• Availability of low-cost retail space
• Best-in-town leisure offering
THREATS
• Continuing Government restrictions
• Potential ‘phoenix’ operator entrants
• Attractive market brings new operators
CUSTOMER DEMAND
OPPORTUNITIES FOR TEG
• Migration to lower cost activities
• Pent-up demand for socialising
• Large centres conducive to social
distancing
• Demise of high street retail
increases spend on leisure
• Lockdown has increased
individual savings
• Highly inclusive fun and social
activity to enjoy together
THREATS
• Economic climate reduces
disposable income
• Ongoing concern over Covid-19
maximising its participation in this growth by
innovating its broad family entertainment
experience to offer consumers a range of great
value entertainment all under one roof.
Our well invested estate offers a high-quality
bowling experience and the latest in video
games combined with more traditional physical
games such as pool and air hockey. We have a
range of market-leading innovations that
broaden our appeal including Houdini’s Escape
Rooms, HyperBowl, Electronic Darts, Virtual
Reality, BatFast cricket batting cages, and
shuffle boards.
Bowling remains a relatively low-frequency
activity, with 36% of UK adults participating in
tenpin bowling in the 12 months to September
2019 compared to cinemas, which had 68%
participation. There is a significant opportunity
to continue to grow participation and
engagement levels by targeting infrequent
bowlers through our Customer Relationship
Management (‘CRM’) programme and by
developing our broader entertainment offering
to attract a wider demographic group to
our centres.
COMPETITIVE LANDSCAPE
Tenpin is currently the second largest operator
in the UK, with 46 centres. We have proven
success in both out-of-town and city-centre
locations. We are positioned well in the market,
with a broad appeal to families, students, work
colleagues and friends. Our promotional
strategy allows us to target different groups at
different times of the week, keeping the
environment relevant to our customers to
ensure they get maximum enjoyment from
their visit.
There is a significant gap between the two
leading players in the market and smaller
multiples and independent operators. Average
sales per centre in the two leading players is
estimated to be more than double that of the
average of the rest of the market. This reflects a
higher level of investment as well as providing
customers with a wider range of entertainment
activities and a much better overall customer
experience. We believe this gap shows the
importance of continuing to invest in our estate
and ensure that we maintain our centres to a
high standard.
Due to the structure of the market, we believe
that there are further opportunities to acquire
additional centres, either individually from
independents or small groups of sites from
multiples seeking to divest through portfolio
rationalisation.
In addition, in the medium term we have
identified a target list of approximately 60
locations which may be suitable for
development, taking into account a range of
criteria including the local demographic,
competition, recent trading history, type of
location and accessibility. With the ongoing
decline of the physical retail landscape, new
opportunities at competitive prices are arising
as landlords are diverting space to experiential
leisure or competitive socialising concepts
which are helping to drive footfall.
The Group has taken steps to enter available
retail space and during the year opened its first
new centre in Manchester Printworks, a high
footfall metropolitan location. Expanding the
remit to include existing retail and leisure space,
as well as acquisition of existing bowling
centres, has widened the range of opportunities
to explore and gives the business a clearer
runway for growth going forwards. When we
return to profitable and stable trading
conditions, we will continue to actively work
with landlords to explore opportunities for
brownfield development of these sites.
OUTLOOK
Prior to the outbreak of the Covid-19 pandemic,
growth in the tenpin bowling market looked set
to continue over the coming years, supported by
the expectation of further market consolidation
and investment from the leading players.
It is not yet clear what impact Covid-19 will have
in the longer term. While the bowling market is
subject to changes in trends in consumer
leisure spend, it is anticipated that the real
potential for growth in the sector is
underpinned by underlying strength of the
model. Our centres are well invested, offer
great value for money and a wide range of
activities for the whole family to enjoy. Tenpin
bowling is a competitively priced and highly
accessible form of family entertainment with
the cost to a family of a visit being often lower
than other leisure activities which gives bowling
more resilience to any future challenges from
the economy. The Group is well positioned to
return to growth when the situation allows, to
take advantage of the trend towards leisure
time, and in particular the rise of both experiential
leisure and competitive socialising.
1 Mintel Leisure Review, December 2019.
2 Mintel Competitive Socialising report,
September 2019.
Ten Entertainment Group plc Annual Report and Accounts 2020
19
BUSINESS MODEL
HOW WE
DO IT
We have a differentiated,
balanced, sustainable and
flexible business model that
creates value from our
three-pillar strategy.
The business model uses the cash generated and
the talent and assets within the business along
with its suppliers, landlords and other parties to
deliver strong return on capital employed, with
good growth opportunities and sustainable
returns for our investors.
20
Ten Entertainment Group plc Annual Report and Accounts 2020
We leverage our resources,
relationships and sources
of competitive advantage...
An established brand
The Tenpin brand is known and trusted in the
market, with a broad appeal to families, students,
work colleagues and groups of friends.
National UK coverage
Our well invested estate includes 46 centres
across the UK, each offering a wide range of
entertainment and a high-quality experience.
Modern technology
From the most modern pinsetters to the latest
video games and a modern website, technology
helps drive growth.
Dedicated people
Our talented colleagues create the fun and
entertaining environments that ensure our
customers have a great time and that our
business thrives.
Strategic partnerships
Our strategic partners help us provide an
all-round experience, including the latest in
bowling and gaming technology and a developing
food and drink offering.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
... to deliver our customer
proposition and supporting
activities...
... and create value for
our stakeholders
What we do
Ten Entertainment Group specialises
in operating large, high-quality family
entertainment centres throughout the UK.
Our core bowling proposition is supplemented
by a wide range of complementary family-
focused entertainment options.
FOCUSED ON:
Operational
efficiency
● Benefits of increasing scale
● Highly attractive landlord
model results in low rent
● High-margin economics
STRONG CASH
GENERATION
● Highly cash-generative model
● Consistent growth in sales
● Operational gearing
strengthens profit growth
Estate
management
● Our model is proven
across a large number
of site acquisitions and
refurbishments creating
high investment returns
Underpinned by:
Our culture and values
See more on page 1
Robust risk management
See more on page 44
Sustainability focus
See more on page 32
High standards of corporate governance
See more on page 62
Customers
We offer our customers a broad range of
entertainment options at great value,
creating a memorable and enjoyable
experience every time they visit one of
our centres.
People
We invest in training and support for our
employees in order to reach their
potential and enable them to serve our
customers well.
Investors
The Board governs the business in the
best interests of investors by delivering
consistent returns through a proven
strategy for growth.
Suppliers
& partners
We have strong, mutually beneficial
relationships with our suppliers and
partners allowing us to deliver a great
service to our customers at a great value
for money.
Communities
The Group believes in giving back to the
community, and encourages employees
to support charities they care about both
nationally and locally in the form of
events and fundraising.
Ten Entertainment Group plc Annual Report and Accounts 2020
21
OUR STRATEGY
DRIVERS OF
GROWTH
Ten Entertainment Group plc is
a leading UK operator of family
entertainment centres.
We operate with a scale advantage against the majority
of the bowling sector allowing us to offer a safe, friendly
and fun environment with a wide variety of
entertainment options.
Our strategy has been developed to take advantage of
the growing experiential leisure market and the trend
for families and friends to spend time together enjoying
competitive social activities. The business creates
long-term value for our stakeholders through self-funded
investment-led growth. The Group is supported by a
strong balance sheet and generates funds through its
activities, which allows us to continue to invest in growth
and offer an attractive dividend yield to our shareholders.
22
Ten Entertainment Group plc Annual Report and Accounts 2020
GOAL
We love to make friends
and families happy; we
entertain and enthral
profitably
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
growth
drivers
strategic
priorities
supported by
internal
External
MORE CUSTOMERS
Broaden the appeal to a
wider customer base
and open more centres
TRANSFORMING
CUSTOMER
EXPERIENCE
MORE FREQUENT
VISITS
Give customers more
reasons to visit more
often with new and
innovative games
HIGHER
PARTICIPATION
Offer a wider range of
games, entertainment,
food and drink to enjoy
while they visit
INWARD
INVESTMENT
EXPANDING
THE ESTATE
SELF-FUNDED
INVESTMENT THROUGH
INCREASING CASH
FLOWS
GREAT SERVICE
DELIVERED THROUGH
AN ENGAGED AND
TALENTED TEAM
A GROWING MARKET
IN EXPERIENTIAL LEISURE
AND COMPETITIVE
SOCIALISING
A FRAGMENTED
AND UNDERINVESTED
UK BOWLING MARKET
AN INCREASING TREND
FOR FAMILIES AND FRIENDS
TO SPEND THEIR TIME
TOGETHER AWAY
FROM SCREENS
Ten Entertainment Group plc Annual Report and Accounts 2020
23
OUR STRATEGY CONTINUED
strategic priorities
TRANSFORMING
CUSTOMER
EXPERIENCE
INWARD
INVESTMENT
Our investment has been targeted to deliver a
memorable customer experience from every visit:
Our capital investment programme in our existing
estate is focused on the following key areas:
Escape Rooms – 13 Escape Rooms across the UK maximising
use of space and broadening the customer offer.
Digitally enabled – Modern bowling technology integrated
to new web platform. Newly developed CRM system
enabling targeted deals. Significantly strengthened social
media engagement.
Refurbishing our centres – an ongoing cycle of
investment to keep the centres modern, relevant and
offering the best-in-class entertainment experience
Pins & Strings – the latest bowling technology is being
rolled out across the entire estate to give a lower cost
base and an improved experience for our customers
HyperBowl – a new engaging, interactive style of bowling
rolled out at three centres with great customer feedback
Product innovation – our Cheshire Oaks centre has been
completely refurbished as a new concept centre where a
variety of product innovation is being tested, including
virtual reality and one of our Houdini’s Escape Rooms
why it is important
Focus on this pillar will:
● Generate growth from new customers
● Improve engagement with customers and
encourage them to visit more often
New machines and amusements – our strong
relationship with Bandai Namco provides access to
the latest technology and allows us to keep the offering
fresh and appealing across all age ranges
why it is important
Focus on this pillar of the strategy delivers:
● Growth in like-for-like sales
● Cost-saving improvements and efficiencies
● A modern and contemporary environment
● Improve online bookings and opportunities
in our bowling centres
to sell additional experiences
● Keep individual centres closer to the community
with more targeted locally relevant offers
Achievements in the year
We have delivered customer benefits with:
● First UK bowling operator to offer contact-free
on-site food and drink
● Five new Houdini’s Escape Rooms installed
● Locally-based pricing helping centre profitability
● Rollout of lane dividers across the whole estate
● A relevant and attractive offering focused
on the growing market in competitive socialising
Achievements in the year
Despite the significant disruption:
● 9.6% like-for-like growth pre Covid
● Refurbished two flagship centres in Acton and
Birmingham Star City
● Seven lease regears to preserve cash flow
● Pins & Strings now 87% complete with only six
centres remaining
24
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
EXPANDING
THE ESTATE
Our pipeline is being developed with a combination
of existing bowling centre acquisitions and new
build opportunities:
Acquire bowling centres – acquiring going concerns,
refurbishing and aligning them with our processes
Develop new centres – entering leases for brownfield
sites and building new bowling centres
Grow the pipeline – identifying new opportunities
in existing leisure or retail sites
Self-funded investment through
increasing cash flows
● A high return on capital and strong operating
margins generate reliable cash flows
● Maximising the use of existing space to drive
incremental returns and enhanced profitability
● A disciplined approach to capital deployment that
focuses on high yield for investors
● A strong track record of delivery on high-returning
projects
● Disciplined cash management maintains significant
liquidity headroom should it be required
why it is important
This strategic priority delivers:
● Growth in total sales and profit
● Opportunity to reach more customers
● Significant performance uplift from Tenpin systems,
processes and customer offer
● Better efficiency of the model by spreading
central costs over more bowling centres
Achievements in the year
Development in this area has led to:
● Next generation development in Manchester city
centre opened with strong initial sales
● Pipeline paused due to Covid; but
ready to be re-engaged
Culture, people and systems
● We have delivered a step change in employee
wellbeing in 2020 in response to the challenges of
the pandemic
● We provide development for employees to help
them provide a safe environment and memorable
experiences for our customers
● We have acted responsibly to protect our
employees' jobs throughout the uncertainties of
2020
● We believe all employees and customers have a
right to work in a safe environment free from injury
and harassment and regularly review our policies to
ensure we maintain the highest standards
Ten Entertainment Group plc Annual Report and Accounts 2020
25
KEY PERFORMANCE INDICATORS ('KPIS')
MEASURING OUR
PERFORMANCE
The Group’s performance and results during the period can
be seen across many metrics and KPIs that are reviewed by the
Group to understand our operational and financial performance.
financial
ADJUSTED EBITDA
LIKE-FOR-LIKE SALES
BANK NET DEBT
£3.3m
(17.4%)
£12.6m
RETURN ON CAPITAL
EMPLOYED ('ROCE')
(28.7%)
2020
2019
2018
£3.3m
2020
(17.4%)
£23.6m
£20.6m
2019
2018
8.0%
2.7%
2020
2019
2018
£4.1m
£4.2m
£12.6m
2020
(28.7%)
2019
2018
19.1%
18.3%
Definition and how we performed
Definition and how we performed
Definition and how we performed
Definition and how we performed
The Group’s underlying
operational performance is
measured using this metric,
calculated as operating profit
before depreciation, amortisation,
exceptional items and other
income. Adjusted EBITDA for the
period of £3.3m is on an IFRS 16
basis and so excludes £11.2m
(2019: £12.5m) of rent. The
significant decrease in this KPI is
due to the Covid-19 pandemic.
This is a critical measure of
growth in the underlying
business. The Group reported a
(17.4%) (2019: +8.0%) full-year
decrease in like-for-like sales while
total sales decreased by (56.9%).
This has been due to the impact
of the Covid-19 pandemic with
the centres closed for 49% of
the year.
The Group’s bank net debt is
(£12.6m) (2019: (£4.1m)) an
increase of £8.5m. Bank net debt
was made up of gross bank
borrowings of (£20.0m) (2019:
(£6.3m)) less cash and cash
equivalents of £7.4m
(2019: £2.2m).
The Group's ROCE is operating
profit as a percentage of total
capital employed which consists
of non-current assets and current
assets less current liabilities
excluding IFRS 16. The decrease
in the year has been driven by the
impact of Covid-19.
1 2 3
1 2
1 2 3
1 2 3
Target and link to strategy:
Target and link to strategy:
Target and link to strategy:
Target and link to strategy:
Adjusted EBITDA is driven by the
delivery of all three of our
strategic pillars but these have all
been impacted by the enforced
business closures in response to
the Covid-19 pandemic.
Like-for-like sales is driven by
investing in new products in the
estate and ensuring that the core
bowling product is well invested
across all of our centres. Focus on
the first two pillars of the strategy
will generate like-for-like sales
growth. The year has been
heavily impacted by the
Covid-19 pandemic.
During the Covid-19 pandemic,
the Group has prioritised
managing cash, both by trying to
conserve what was spent but also
by raising cash. This has helped
limit the growth of net debt by
only £8.5m when EBITDA has
reduced by £31.4m.
Rigorous discipline on capital
allocation is a critical part of the
TEG strategy, deploying
investments in high-returning
projects to drive shareholder
return. All three pillars of the
strategy will drive revenue growth
and profitability which will
increase the Group's ROCE
once trade returns to more
normal levels.
26
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Strategic objectives
1
2
3
TRANSFORMING
CUSTOMER
EXPERIENCE
INWARD
INVESTMENT
EXPANDING
THE ESTATE
operational
SPEND PER HEAD ('SPH')
FOOTFALL
GAMES PLAYED PER STOP
('GPS')
WEBSITE VISITS
£13.99
2.6m
882
3.6m
2020
2019
2018
£13.99
2020
2.6m
£14.60
2019
£14.36
2018
5.8m
5.3m
2020
2019
2018
882
2020
3.6m
662
424
2019
2018
4.9m
4.0m
Definition and how we performed
Definition and how we performed
Definition and how we performed
Definition and how we performed
SPH is the average spend by
customer per visit, based on the
number of customers bowling.
The SPH has decreased by 4.2%
since last year which has been
driven by Covid-19 as the dwell
time by customers has reduced,
as well as Government
restrictions on alcohol sales.
Footfall is the measure of the
number of unique bowling
sessions bought. The decrease in
footfall in the year is a direct result
of the centres being closed for
nearly half the year due to the
Covid-19 pandemic.
GPS looks at the number of
games played that are not
interrupted by a breakdown. This
improved by 33.2% to 882 (2019:
662) for the period as the Group
benefited from the ongoing Pins
& Strings investment as well as
the Covid-19 closures giving the
opportunity for more proactive
preventive maintenance
scheduling.
The Group recognises digital
media and the customer digital
experience as a critical growth
area in booking activities. Though
the centres have been closed for
nearly half the year, there were
over 3.6m visits to the website
which is only 26.5% down on
last year.
2
1 2 3
1
1 2
Target and link to strategy:
Target and link to strategy:
Target and link to strategy:
Target and link to strategy:
Investment in transforming the
customer experience is aimed at
increasing the dwell time and
offering more products to
customers to encourage them to
spend more.
The Group targets a footfall
increase as a critical driver of
growth, with more customers
bowling, reflecting the underlying
health of the business. Site
acquisitions and investment in
existing centres will provide
additional footfall to grow total
sales when trade returns to
normal levels.
Investment in Pins & Strings
technology is aimed at
transforming the customer
experience with less interruption
from breakdowns.
The new operational website
went live in 2020 and is expected
to continue to drive the increase
in visits and conversion to
bookings when trade returns to
more normal levels.
Ten Entertainment Group plc Annual Report and Accounts 2020
27
CHIEF EXECUTIVE’S STATEMENT AND OPERATING REVIEW
A PROVEN STRATEGY
THAT REMAINS
RELEVANT
OVERVIEW OF 2020
2020 has been extremely challenging dealing with the Covid-19
pandemic, but it has also been a year that we can be proud of.
We have protected the long-term future of the business. All our
centres currently remain closed, almost exactly a year after the
first Government Lockdown on 20 March. We are in good health
and look forward to welcoming back our customers on 17 May
as the Government Lockdown eases.
Our Covid actions can be characterised into four distinct phases,
each with very clear priorities to secure the best possible
outcome for our stakeholders.
● Pre Covid
•
Accelerating like-for-like growth at 9.6% with record-breaking
February half-term sales
• Strategic investment in refurbishing two flagship centres and
new centre in Manchester
• Significant progress on digital integration
● Lockdown
• Decisive action to secure long-term liquidity against over 18
months of potential closure
• Supporting all major stakeholder groups equitably reducing
cash outflow by over 70%
• Responsibly utilising available Government support
● Reopening
• Taking the initiative with the Government in agreeing safe
operating protocols with DCMS
• Digitally enabled from the outset with food ordering and
•
Track and Trace technology
Industry-leading initial sales at 82% of prior year despite
restrictions on lane capacity
● Retightening
• Looking after the health and wellbeing of customers
and employees
• Re-engaging cash conservation measures
• Securing additional funding in preparation for further
Lockdowns
“WE CAN BE PROUD OF
THE WAY WE HAVE
PROTECTED THE LONG-
TERM FUTURE OF THE
BUSINESS”
28
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
CENTRES ACROSS THE UK
46
SPEND PER HEAD
£13.99
“WE TOOK THE LEAD IN
DEVELOPING SAFETY STANDARDS
FOR THE INDUSTRY”
I am proud of the way our team delivered the
long-term security of the business during
2020. We treated our colleagues with dignity
and respect and have worked hard to support
their wellbeing as they cope with a year of
uncertainty. We worked together with
suppliers to find solutions that were to our
mutual benefit, helping us conserve cash and
long-term future relationships. When we did
reopen, we deployed industry-leading safety
standards having worked closely with the
Department for Culture, Media and Sport
(‘DCMS’) and Public Health England to
develop those standards.
We used the time that we were closed wisely
and did our utmost to turn adversity into
advantage. Our digital integration moved at
pace and was a critical part of ensuring that we
could reopen safely, with a brand-new food and
beverage ordering app that allowed contact-
free ordering direct to lane or table. Online
bookings reached record levels of 70% which
helped deliver our Track and Trace requirements
quickly and effectively. We completed
high-quality refurbishments of two of our
flagship centres and completed our city centre
new-build site in Manchester Printworks. We
have designed and built five new Escape Rooms
taking our total to 13. We have now installed
high-quality lane dividers across all our centres
that mean we can operate 100% lane capacity
in a Covid secure environment.
As a result of our focus on liquidity
management, we exited 2020 with our bank
debt at £12.6m, only £8.5m higher than at the
beginning of the year. With the addition of a
new financing facility we currently still have
over £18m of remaining liquidity headroom
and are well positioned to reopen strongly.
Our strategy remains unchanged. We will
continue to develop our customer offering to
deliver strong like-for-like sales growth; we
will use the cash we generate to invest in
existing infrastructure to ensure our centres
remain modern; and we will take the
opportunity of selecting the best quality
available sites to expand our estate.
PRE COVID
The first 11 weeks of the year were very
strong for the Group. Total sales grew by
12.7% and like-for-like sales grew by 9.6%, a
culmination of the accelerating sales growth
seen in the second half of 2019. Capital
investment programmes from the new
centres at Falkirk and Southport as well as the
2019 refurbishment sites all delivered good
growth. Trading remained brisk right up until
the first Lockdown was implemented.
LOCKDOWN
Lockdown came swiftly and presented a
unique set of circumstances for most boards
throughout the UK. The initial focus was clear:
to conserve cash and maximise the length of
time that the business could remain closed.
We closed all our centres on 20 March, and by
25 March we had successfully delivered an
equity placing from our shareholders to provide
an extra £5m of liquidity headroom and
reduced our cash costs by over 70%, all of
which ensured the business had sufficient
funds to weather even an 18-month Lockdown.
Cost savings were delivered through three
key mechanisms: Government support;
supplier support; and self-help cost savings.
We applaud the Government on its swift
action with the introduction of the
Coronavirus Job Retention Scheme (‘CJRS’).
This measure enabled us to furlough over
95% of our employees in order to save costs
and preserve the jobs of our entire workforce.
I am pleased to note that we have not
enacted any site-based redundancies as a
result of Covid-19. The one-year relief on
business rates was also helpful. We were
pleased to see this extended in the
Chancellor’s March 2021 Budget. We have
fully utilised applicable Government grant
schemes and HMRC Time to Pay schemes.
We are mindful of our duty to act responsibly
in respect of this level of support and are
confident that we have done so.
Our suppliers have been extremely supportive
throughout the periods of Lockdown. Many
contracts have been paused while we are
closed. We have regeared seven leases,
benefiting from rent holidays in exchange for
an extension to lease terms, as well as
agreeing short-term deferrals and waiver
periods on many other properties. The
long-term nature of our leases, which is
reflected in our very low average rent cost,
gives the opportunity to defer payments over
a considerable time, and as a result, the
burden of deferred rents is not onerous in
2021 when we reopen.
Self-help cost savings have been essential to
minimising the cash outflow from the
business. The Board cancelled its plans for
the final 2019 dividend and paused its
expansion pipeline. The latter was not only a
prudent cash-saving measure but also reflects
our belief that the leisure landscape will look
very different once we emerge from the
crisis. We expect that there will be a variety of
possible leisure space in the coming months
and are confident that we can rapidly increase
our estate expansion pipeline when the time
is right.
REOPENING
Once the financial security of the business
was secured, the focus turned to preparing to
reopen the business. Our operational
expertise, and close long-term involvement
with the Tenpin Bowling Proprietors’
Association (‘TBPA’) meant that we took the
lead in dealing with the Government and the
Department for Digital, Culture, Media and
Sport (‘DCMS’) in designing and
implementing safe operating protocols for
the industry.
Bowling centres are large, well-ventilated
spaces and can be readily adapted to social
distancing. On average customers in our
centres have four times the space that one
would expect when visiting a bar or
restaurant. A wide variety of measures were
introduced to give customers peace of mind.
Ten Entertainment Group plc Annual Report and Accounts 2020
29
CHIEF EXECUTIVE’S STATEMENT AND OPERATING REVIEW CONTINUED
We were the first UK bowling operator to
integrate a web-based ordering app to allow
food and drink to be ordered directly to lane
or table. Our online booking system and
in-site Wi-Fi was enormously effective at
capturing customer data, and we saw a surge
in online bookings to around 70% of total
bowling sales.
Initially we were required to close alternate
lanes, limiting our capacity by 50%. We have
subsequently installed sturdy steel and glass
lane divider screens that we have agreed with
the DCMS will allow us to deploy all of our
lane capacity.
The wait to reopen was disappointingly longer
than we had hoped. While bars and
restaurants opened on 4 July, and gyms at the
beginning of August, the majority of our
bowling centres had to wait until 15 August.
Once open, the initial results were very
encouraging. In August, we delivered 82% of
the previous year’s sales on a like-for-like basis,
despite the 50% reduction in lane capacity. In
September, as the children returned to school,
demand was concentrated more to the
weekends. This exacerbated the impact of
capacity constraints and increased the clipping
of demand. Nonetheless, September delivered
like-for-like sales at 74% of the prior year levels,
a creditable performance that demonstrated
that our customers were keen to return.
This level of performance enabled the
business to return to cash generation in the
second half of August and during September.
However, by the end of September the Covid
infection rates had started to increase and the
Government started to move to a regime of
tightening restrictions.
RETIGHTENING
October saw an almost weekly change in
rules, as well as the added complexity of
regionally-based tiers and local closures.
As restrictions tightened there was a
demonstrable effect on sales. This was
caused in part by the restrictions themselves
and in part by a fearfulness of venturing
out from the public in response to
Government messaging.
The 10pm curfew had an unwelcome 5-10%
impact on sales performance. Complex rules
governing alcohol sales with meals had a
further 5% impact on sales and the overall
level of consumer confidence was waning,
restricting demand further. The most
significant impact came with the introduction
of rules forbidding household mixing in many
regions. This is a cornerstone of a business
that brings friends and families together and it
is difficult to operate under these constraints.
By the end of October an inevitable second
Lockdown was enforced, and in reality,
December broadly remained in Lockdown,
with only a few of our centres allowed to
open, and those that were open were highly
compromised.
In total for 2020 our business was closed for
49% of the time and was significantly
disrupted for more than half of the remainder.
OUR STRATEGY AND PLAN
Our immediate focus is to reopen the
business on 17 May on a firm footing and
return it to consistent cash generation. From
there, our strategy is clear and remains
unchanged for the medium term. Continued
profit growth generates strong cash flow
which is used to fund our three strategic
pillars for growth:
● Transforming the customer experience –
keeping the customer offer innovative
and fresh
● Inward investment – modernising and
developing the existing estate
● Expanding the estate – acquisition of
existing bowling centres and redeveloping
retail and leisure units
The strategy is underpinned by an investment
in our people. Well trained, motivated and
rewarded employees provide better customer
experiences, focused on service.
2020 has been a year of adversity in many
ways. However, we have sought to use the
time in Lockdown wisely to create a stronger
and more sustainable business for the future.
We have made great strides in our digital
integration, our sustainability agenda and in
focusing on the wellbeing of our people.
DIGITAL INTEGRATION
We invested in a completely new platform for
our website in 2019 which was launched in
early 2020. This proved pivotal in ensuring
that the business was well placed to deliver
on the challenges of operating under
Covid-19 restrictions. The website is fully
integrated across all parts of the business.
This gave us the flexibility to introduce our
table ordering app for food and drink, offer
the Eat Out to Help Out scheme, implement
Track and Trace, and most importantly to
scale up to 70% online bookings.
Our fully integrated systems are in place
across the entire estate using the latest
technology from the industry-leading
supplier. All of our centres have the latest
generation of scoring technology and are in
the process of upgrading the last 50% of the
estates software to BESX, Qubica's latest
enhanced software package which includes
multi-media software. The seamless real-time
integration of our EPOS system to our
website and booking engine enables
best-in-class yield and capacity management
and we are consistently upgrading our
systems to maximise the use of the
technology that we have deployed.
The enhanced digital integration also gave us
the opportunity to engage with and listen to
our customers better. We significantly
increased our following on social media and
Tenpin is now the most followed bowling
company in the UK on Facebook and
Instagram. This has helped us to cleanse and
develop our customer database; analyse our
critical customer demographics; and launch
more targeted digital campaigns for when we
reopen. I am really pleased with the progress
we have made and look forward to continuing
to enhance our digital engagement
with customers.
30
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“Our primary focus is to return
the business to growth”
The Government’s roadmap means that we
expect to reopen on 17 May with much of the
rest of UK hospitality. We anticipate that at
this time there will be significant pent-up
demand for leisure, and we believe that our
business will continue to be highly attractive
to families and friends who want to get
together once again for a fun and social
experience. We are well placed to capitalise
on that demand as well as the inevitable
contraction in supply from those businesses
whose balance sheets were not as strong
as ours.
At this stage, due to the continued
uncertainty, it is not possible to provide
financial guidance. However, we do know that
we have a strong business that can return
rapidly to its previous levels and then grow
further from there. We have a proven strategy
and a strong track record that will stand us in
good stead as we reopen and rebuild.
Finally, I’d like to take the opportunity to thank
Nick Basing for his unwavering support and
guidance over the past 12 years. Nick has
created something truly special in Ten
Entertainment, and I am committed to
ensuring that we continue his legacy. We will
continue to deliver the passion, energy and
edge that Nick brought to the team. Nick’s
core values that he instilled into the Group will
always be at the forefront in everything we
do. Over the coming months as we reopen,
I have no doubt that Nick will continue to
contribute ideas, energy and experience
to the business as he passes on the baton
to take the business into the next stage of
its growth.
GRAHAM BLACKWELL
CHIEF EXECUTIVE OFFICER
29 MARCH 2021
PEOPLE AND WELLBEING
Looking after our people during 2020 was a
key business priority. 98% of our employees
were furloughed at least at some point during
the year, and it was critical to preserve their
income as far as possible. There were times
where some people fell between the gaps in
the CJRS scheme, and the Company
supported those team members throughout.
We are proud to say that we did not make a
single site-based employee redundant as a
result of Covid-19.
Communication is key in times of crisis, and
we kept people fully engaged and informed
using Yapster, our digital communication tool.
This not only helped people understand the
actions we were taking to secure the
business’s future, but also kept people in
touch with friends and colleagues.
We introduced a comprehensive wellbeing
strategy that cared for people’s physical,
mental and financial health. Over 80% of our
employees accessed our extensive wellbeing
online resources, gaining access to discount
schemes to help with grocery bills and
investment in technology to help with
home-schooling as well as online support for
mental wellbeing and mindfulness. We also
launched a comprehensive set of voluntary
skills toolkits and development aids to help
people keep mentally active while on furlough.
Overall engagement levels remained high,
and 95% of our people felt that they had been
well treated and communicated with
during 2020.
OUTLOOK
The year ended with all our centres closed,
and this remains the case today. It is
encouraging that during the pre-Covid and
Reopening phases of 2020 the business
traded well, and there is every reason to
expect it to do so again. Almost 30 million
people in the UK have now been vaccinated,
creating a genuine prospect of a return to
more normal trading conditions.
We have appointed a new Digital
Communications Director, Lisa Johnson, who
has a strong background in digital strategy
and experiential leisure having worked with
Legoland, The Restaurant Group, Bounce and
Amazon. Her strategic review has confirmed
that our investment in developing our CRM
system and website platform was well
targeted and creates an excellent foundation
for growth. She is now developing an exciting
new focus for our customer engagement as
we reopen, and we are looking forward to this
coming to fruition during 2021.
SUSTAINABILITY
The importance of community in a year like
2020 cannot be overemphasised. I have been
delighted to see the way our people worked
together to support each other and their
wider local communities. Many of our team
members volunteered at local charities or
within their local community, helping those
less able to get out and about for food and
essentials. We were able to donate food and
drink to local food banks, charities and
schools providing much needed Lockdown
treats for families struggling in Lockdown.
During 2020 we partnered with Rays of
Sunshine as our chosen national charity. Rays
of Sunshine helps brighten the lives of
seriously ill young people by granting wishes
and providing ongoing support in hospital and
within the community. We have engaged in
fundraising activities and are looking forward
when we are open to using our centres to
help this fantastic good cause.
We have made good progress in reducing our
energy consumption and have continued to
invest in Pins & Strings which makes a
substantial energy saving. 87% of the estate
now benefits from this low-energy
technology which means we have reduced
our overall energy consumption by 8%.
Low-energy screens and LED lighting
installations have further contributed to our
energy savings initiatives as we act to reduce
our overall carbon footprint. In addition to
these energy reductions we now purchase all
our electricity from 100% renewable sources.
We will continue to engage with investors on
ESG and sustainability issues and ensure that
the Board and management team continually
review ways to make further improvements in
becoming a sustainable business.
Ten Entertainment Group plc Annual Report and Accounts 2020
31
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ('ESG')
PRIORITISING
OUR STAKEHOLDERS
KEY SUSTAINABLE DEVELOPMENT GOALS
We fully endorse the UN Sustainable Development Goals (‘SDGs’)
and use its framework to guide our policy and decision-making. We
consider the following goals to be where the Group can have most
impact and have highlighted in this section where relevant.
Our approach
The Group is committed to understanding and balancing
our environmental, social and governance impacts to
help demonstrate our responsible business approach
and establish trust and goodwill amongst our
stakeholders.
OUR THREE FOCUS AREAS
ESG reporting structure within this section:
1
2
3
Environmental
Streamlined energy and carbon reporting,
Energy efficiency action, Waste usage
and recycling
Social
Employee engagement and wellbeing,
Diversity and inclusion, Customer
engagement, Community engagement
and charitable activities
Governance
Board decision making, Protecting human
rights, Fair tax policy, Other governance
disclosures
“GREAT TO HEAR WE
ARE SUCCESSFULLY
PUTTING OUR MORE
VULNERABLE
CUSTOMERS AT EASE’ ”
TEAM NORTHAMPTON
32
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
1
environmental
The Group is committed to operating its business in such a way as to minimise the
impact on the environment as a result of its activities and will always aim to meet and,
where practicable, improve upon relevant environmental legislative requirements and
codes of practice.
In addition, the Group continues to demonstrate environmental care by carrying out
professional surveys in order to identify where reasonable steps can be taken to
reduce energy usage, promoting the purchase and use of materials within the
business in a manner that minimises potential adverse environmental effects such as
climate change and developing waste minimisation initiatives in order to recycle, reuse
and reduce waste in a responsible way.
44.7 Co2
INTENSITY RATIO
PER CENTRE
STREAMLINED ENERGY AND CARBON
REPORTING
The Group discloses all the measured
emissions sources for FY20 as required under
The Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018. The
methodology has been based on the
principles of the Greenhouse Gas Protocol,
taking account of the 2015 amendment
which sets out a ‘dual reporting’ methodology
for the reporting of Scope 2 emissions.
In the ‘Total Footprint’ summary,
purchased electricity is reported on
a location-based method.
kWh
CO2e tonnes (location-based)
Emission type
FY19
FY20
Var %
Scope 1: combustion
2,690,195
1,497,913
(44.3%)
FY19
557.9
FY20
Var %
275.4
(50.6%)
Scope 2: purchased energy
12,456,984
7,277,697
(41.6%)
3,256.3
1,696.7
(47.9%)
Scope 3: indirect energy use
–
356,357
100.0%
–
84.1
100.0%
Total
15,147,179
9,131,967
(39.7%)
3,814.2
2,056.2
(46.1%)
GREENHOUSE GAS EMISSIONS INTENSITY RATIO:
Total Footprint (Scope 1, Scope 2 and Scope 3) - CO2e tonnes
No of centres
Intensity ratio (tCO2e per centre)
FY19
45
84.8
FY20
46
44.7
Var %
2.2%
(46.1%)
CO2E TONNES (DUAL REPORTING METHODOLOGY)
Emission type
Scope 1: combustion
Scope 2: purchased energy
Scope 3: indirect energy use
Total
Location-
based
Market-based
(supplier
specific)
275.4
1,696.7
84.1
2,056.2
275.4
58.2
84.1
417.7
Var %
0.0%
(96.6%)
0.0%
(79.7%)
Methodology notes:
• This includes limited emissions under Scope 1 and 2 (gas & fuel used in transport; purchased electricity), except
where stated, and limited emissions under Scope 3 (fuel used in personal/hire cars for business purposes).
In the prior year comparatives, all fuel (including fuel used in personal/hire cars for business purposes) was
categorised under Scope 1.
Energy use and emissions figures relate to our wholly UK-based operation.
•
• Conversion factors for UK electricity (location-based methodology), gas and other emissions are those
•
published by the Department for Environment, Food and Rural Affairs for 2020.
• Conversion factors for UK electricity (market-based methodology) are published as provided by the relevant
supplier, Haven Power.
Electricity and gas data for landlord centres has been estimated based on available information.
•
• Gas data for direct supplied centres includes some supplier estimates.
•
Some supplier billed electricity and gas data has been pro-rated to match the financial year due to monthly
availability of data.
Statement of exclusions:
• All emissions data has been included based on either actual or estimated data, no exclusions.
Both usage and intensity ratios were impacted by Covid-19 in FY20.
Ten Entertainment Group plc Annual Report and Accounts 2020
33
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ('ESG') CONTINUED
1
environmental continued
ENERGY EFFICIENCY ACTION
During 2020 there was a continued focus on energy efficiency. Given the estate was closed for 49% of the
year with capacity restrictions for much of the opening period, it is difficult to assess any underlying
efficiency in the year, but this continues to be a priority in FY21. As part of our commitment to
environmental responsibility and addressing the impact of climate change, 100% of our directly purchased
electricity was renewable in 2020 via our contract with Haven Power.
During the year various energy-saving measures were implemented such as upgrading to energy-efficient
LCD screens in four centres with calculated energy savings of 7,200 kWh per centre and the installation of
new colour-changing LED systems for overhead lane lighting at our Acton and Manchester Printworks
centres, with annual calculated energy saving of 10,000 kWh per centre. The Pins & Strings installation
programme has also continued in a further eight centres bringing the total to 40 of 46 centres. This latest
technology in pinsetter machines offers a far more reliable bowling experience for customers and
increased efficiency.
Energy-efficient installations will continue to be considered as part of the ongoing centre refurbishment
cycle across all centres. When acquiring and developing new centres, energy-efficient options will always
be taken into consideration.
WASTE USAGE AND RECYCLING
As a Group we strive to minimise the level of waste we generate and believe that the amount we generate
for our business size is an acceptable level. Waste volumes and recycling rates were impacted by Covid-19
in FY20. An area of focus for the Group in FY21 and beyond is to increase the proportion of waste that
is recycled.
Total waste
Non-recyclable waste
Recycled waste
% recycled
2018
2019
2020
800
574
226
788
589
199
428
329
99
28.3%
25.3%
23.1%
All waste data is supplied by Suez, measured in tonnes. This excludes data from centres where the landlord
manages the waste.
“FEELS GOOD
TO BE GIVING
SOMETHING BACK!”
TEAM STOKE
34
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
2
Social
44%
OF GROUP MANAGEMENT
ARE FEMALE
ENGAGEMENT AND WELLBEING
The Group has policies in place which demonstrate its commitment to a high level of
integrity and standards and the welfare of its employees. This includes a ‘Health and
Wellbeing Strategy’ for the Group’s employees and providing a comprehensive but
flexible benefits and reward scheme for all employees as well as support with health and
wellness through a third-party provider. The Group strives to provide a happy and safe
environment for employees and is always seeking to understand what improvements can
be made in employees’ experiences at work. During the year, employee absence due to
Covid-19 cases or isolation amounted to 1,439 days. Thankfully there were no fatalities.
The People team helps the Group keep focused on work-life balance initiatives and
provides opportunities for employees to connect and network with each other. Centre
Managers are key to the success of the Company. We give them the autonomy to
run their own business and share their centre’s success via a bonus scheme. All
employees are provided with an excellent benefits package which includes access to the
Group’s reward scheme ‘Tenpin Treats’, the use of which is continuing to increase as
employees understand the benefits of the scheme. The Group maintained its Investors In
People Gold status for a sixth consecutive year.
“IT'S AMAZING TO
BE GIFTED THE
OPPORTUNITY TO SHARE
OUR STOCK WITH A
LOCAL CHARITY”
TEAM FELTHAM
The Group has a strong focus on
communication which was demonstrated
throughout the year; in January 2020, the
Executive team hosted a strategy day
followed by the annual Company awards
event to recognise top performers. The
monthly ‘town hall’ meetings with clear
cascades of key messages continued and
became fully virtual when Lockdown
occurred. Our mobile communications app
has been particularly useful during the year.
See the Yapster case study on page 12.
The Group’s strategy is underpinned by
investment in people, so learning and
development remains high priority. During
the year four new e-learning courses were
made available to the support centre
teams including a course covering
personal resilience which was considered
particularly helpful given the challenging
year faced by all. We used a combination
of in-house and third-party designed
e-learning courses to support the training
of Covid standards and procedures prior to
reopening post Lockdown. Completion
rates of overall training remain strong,
averaging over 90% across centres and the
support centre.
During the current uncertainty in relation
to Covid-19 the Group has paid particular
attention to employees’ wellbeing. The
Government’s Coronavirus Job Retention
Scheme (‘CJRS’) has meant that 98% of
employees were furloughed at some point
during the year due to Lockdowns and
periods of closure. We maintained
employees’ pay at 100% until the end of
April. In May we moved to the Government
supported 80% and in so doing have
avoided making any redundancies to date.
Ten Entertainment Group plc Annual Report and Accounts 2020
35
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ('ESG') CONTINUED
2
Social continued
DIVERSITY AND INCLUSION
The Group’s policy on diversity is that no individual should be discriminated against on the grounds of race,
colour, ethnicity, nationality, religious belief, political affiliation, sexual orientation, gender, gender identity,
age or disability, and this extends to Board appointments.
The Board recognises the benefits of diversity, including gender diversity, on the Board, although it
believes that all appointments should be made on merit, whilst ensuring that there is an appropriate
balance of skills and experience within the Board. The Board currently consists of 16.7% (one) female and
83.3% (five) male Board members while the total Group headcount is split as below:
Board
Board + Executive Committee
Managers
Staff
Total
Female
1
2
86
572
660
Male
5
6
107
359
472
Total
6
8
193
931
1,132
The Group is passionate about fairness, equality and inclusion and is committed to reducing the gender
pay gap. The latest Gender Pay Gap report can be found on the Company’s website.
The Group recognises the importance of transparency when it comes to diversity and has disclosed splits
in relation to employee ethnicity and age.
Ethnicity
17.3%
0.1%
2.7%
2.9%
3.7%
Age
0%
1%
5%
9%
16%
37%
73.2
%
32%
White
Mixed or Multiple ethnic
groups
Black, African, Caribbean
or Black British
Other ethnic group
Asian or Asian British
Undisclosed
16-21
22-30
31-40
41-50
51-60
61-65
66+
36
Ten Entertainment Group plc Annual Report and Accounts 2020
CUSTOMERS
Bowling is a fun, family-oriented activity that encourages people to be
active and promotes enjoyable social time together. Our centres
provide drink and food as part of the experience and we understand
the focus on diet and wellbeing. We are passionate about our food
and strive to always provide the best quality food to our customers.
We are focused on making progressive changes going forward to
meet changing customer expectations. We continue to work with our
suppliers to reduce the amount of sugar and salt in the products we
use and ensure all our products are from sustainable sources and that
we have a range of healthier options available. We communicate
regularly with regulatory bodies, local councils and our suppliers to
ensure that we have an appropriate mix of gaming machines in terms
of content and quality and age appropriateness.
We engage with our customers in several ways, with social media
considered particularly important during periods of closure when
face-to-face interactions were restricted. The Group currently has a
market-leading social media presence with over 130,000 Facebook
followers.
COMMUNITIES
The Group encourages employees to support charities they care
about both nationally and locally in the form of events and fundraising
at site level. The Group also reactivated its relationship with a
Company-wide nominated charity, Rays of Sunshine, during 2020.
Campaigns in aid of Rays of Sunshine in 2020 included the National
Teddy Bear Day appeal whereby employees donated money to
provide teddy bears to children in hospitals across the country; and
the Alternative Secret Santa campaign which offered support centre
employees the opportunity to donate to Rays of Sunshine through
their #SunshineForChristmas appeal instead of taking part in team
Secret Santa gift exchanges; this was our biggest campaign of the
year, raising over £800.
The Group encourages employees to give back to the community by
allowing employees to be able to work fully paid for one day a year for
a charitable organisation. This encouragement has also led to ‘VIP
days’ for terminally ill children and participation in national fundraising
campaigns such as Children in Need and Macmillan events. We are
extremely proud of our employees and their support for their local
communities during the Covid-19 pandemic. We have seen wonderful
examples of our employees using their time while we are closed to
support local charities, volunteer for the NHS, shop for vulnerable
neighbours and bake cakes and treats for local hospital staff.
As a thank you to the NHS we offered their staff free bowling for them and
their families and friends in our centres across the UK, with over 6,000 NHS
staff signing up to the offer.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“I’VE DECIDED TO LEARN
A NEW LANGUAGE, SIGN
LANGUAGE! AS WE DO
GET A LOT OF DEAF AND
HARD OF HEARING
PEOPLE IN WORK”
TEAM EXETER
Ten Entertainment Group plc Annual Report and Accounts 2020
37
220
SUPPLIERS ENGAGED WITH
ETHICAL TRADING POLICY
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ('ESG') CONTINUED
3
Governance
BOARD DECISION MAKING
In compliance with Section 172 of the Companies Act 2006 ('s.172') the Board of
Directors, both individually and together, act in a way that they consider, in good
faith, would be most likely to promote the success of the Company for the benefit
of its stakeholders. The Board have designated Julie Sneddon, Independent
non-executive director as a key point of engagement with the workforce.
See stakeholder engagement on pages 39 to 43.
MODERN SLAVERY AND HUMAN TRAFFICKING
The Modern Slavery Act, which came into force in October 2015, requires the Group
to publish an annual slavery and human trafficking statement. The latest statement
reviewed and approved by the Board can be found on the Ten Entertainment Group
plc website. Neither the Group nor any of its subsidiaries permit, condone or
otherwise accept any form of human trafficking or slavery in its business and the
Group is committed to doing what it can to combat these practices.
PROTECTING HUMAN RIGHTS
The Group respects and supports the dignity, wellbeing and human rights of our
employees, customers, supply chain and communities in which we operate.
Although the primary duty to protect human rights sits with national governments,
and as a solely UK-based business we believe the risk of breaching human rights
is low, we fully recognise our responsibility as a company to respect human rights
throughout our business. The Group’s Human Rights policy is available on the
Ten Entertainment Group plc website.
FAIR TAX POLICY
The Group is committed to fair and transparent tax practices and compliance with all
applicable tax laws, rules and regulations, without exception. The Group aims to achieve
an optimal tax position for the Group, which does not mean the lowest tax result possible
in the short term, but rather the optimal tax result, considering sustainability and
continuity of the positions taken over the longer term. The Group does not (and will not)
enter into artificial arrangements in order to avoid taxation or to defeat the stated
purpose of the tax legislation, nor does it (nor will it) undertake aggressive tax planning.
The Group’s tax policy is available on the Ten Entertainment Group plc website.
NON-FINANCIAL INFORMATION STATEMENT
We aim to comply with the new Non-Financial Reporting requirements contained in
sections 414C (11) of the Companies Act 2006. The below table, and information it refers
to, is intended to help stakeholders understand our position on key non-financial matters.
For more information on our
policies please visit our website
www.tegplc.co.uk
Requirement
Environment
Employees
Human rights
Policies
Additional information
Environment statement and Health
and Safety policy
Environmental and greenhouse gas emission disclosures on
page 33 and health & safety on page 74
Diversity, gender pay gap, Health &
Wellbeing Strategy
See Stakeholder engagement on pages 39 to 43 and pages
35 and 36 of Environmental, Social and Governance
Slavery and Human Trafficking
statement, Whistleblowing policy,
Data Protection policy
Slavery and Human Trafficking statement on page 38,
whistleblowing on page 74, Data Protection policy on page 75
Principal risks
Risk Register
Business model
Non-financial
key performance indicators
Risk Management and Internal Control statement on page
44, Principal risks on pages 46 to 48
Our business model and strategy are described on pages 20 and
22
Our non-financial KPIs are explained on page 26
Anti-corruption and
anti-bribery
Bribery Act policy and
audit services
Page 75 for Internal and External Audit services and Bribery
and Anti-Corruption policy
38
Ten Entertainment Group plc Annual Report and Accounts 2020
SECTION 172
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“THANK YOU
TENPIN, FOR
EVERYTHING”
TEAM CAMBERLEY
BOARD DECISION MAKING
Section 172 of the Companies Act 2006 (‘s.172’) imposes
a general duty on Directors to act in the way they
consider, in good faith, would be most likely to promote
the success of the Company for the benefit of its
stakeholders. Our goal is to drive value for investors,
employees, customers, and business partners alike. The
Board believes that balancing the interests of
stakeholders with our corporate purpose and the desire
to maintain high standards of ethical conduct is
embedded in the way we do business. The below sets out
who we consider to be our key stakeholders, what their
interests are, some key engagement areas in 2020, and
examples of how our stakeholders’ interests influence the
way we do business. For more information on Board
decision making, see pages 62 and 65.
OUR INVESTORS
OUR PEOPLE
OUR CUSTOMERS
OUR SUPPLIERS
& PARTNERS
OUR
ENVIRONMENT
Details of our approach for driving value for key stakeholders can be found on the next page.
As required by section 172 of the UK Companies Act 2006, the Directors have acted to promote
the success of the Group for the benefit of its stakeholders. In meeting this responsibility during
the year, the Directors have had regard, amongst other matters, to:
•
•
•
•
•
•
the likely consequences of any decisions in the long-term
the interests of the Group’s employees
the need to foster the Group’s business relationships with suppliers, customers and others
the impact of the Group’s operations on the community and environment
the Group’s reputation for high standards of business conduct
the need to act fairly as between members of the Group
Ten Entertainment Group plc Annual Report and Accounts 2020
39
SECTION 172 CONTINUED
OUR INVESTORS
OUR PEOPLE
OUR CUSTOMERS
Our investors are the shareholders who have
invested their capital into a business that
delivers consistent returns through a proven
strategy for growth.
Our employees are the dedicated people
who create the fun, entertaining
environments to ensure our customers have
a great time and that our business thrives.
Our customers are the people who visit our
centres looking for a range of entertainment
at great value for money in a safe family
environment.
Why stakeholder engagement is important
We meet regularly with current and
prospective shareholders to assist them in
understanding the business so they can make
informed decisions and so that we can
understand what they expect from us.
Great customer experiences start with great
employees. We engage regularly with our team to
understand their opinions and to train and develop
their skills. We aim to provide a consistent and
open culture across the Group to attract and
retain great talent, aligning these with the
purpose, values and strategy set by the Board.
We listen to our customers’ feedback so we can
continually improve their experiences in our
centres. We are continually developing our
products to remain relevant and to appeal to
more customers.
HOW WE ENGAGE
The global pandemic meant that the way in which we engaged with our stakeholders had to adapt;
however engagement with our stakeholders remained as important as ever.
We communicate with our shareholders by:
● Annual General Meeting; held virtually for the
first time in 2020 given Covid-19 restrictions
● Investor roadshows adapted to take place via
video conference
● Video content of shareholder updates made
available on website
● Regular shareholder engagement on ESG issues,
including Board structure, remuneration and
sustainability agenda
We engaged with our employees through:
● Company-wide electronic communication
platform – Yapster. See case study on page 12
● Developing a best-in-class wellbeing strategy
● Access to discounts through Tenpin Treats
● 'Talent Talk' appraisals and succession planning
● Engagement surveys and check-ins during
Lockdown, with review of results by the board
● Julie Sneddon as designated non-executive
oversight for workforce engagement
● Payment support and top-ups where CJRS
We connected with our customers through:
● Social media and CRM
● Free bowling for key workers
● Deployment of robust safety protocols to
protect against the spread of Covid-19
● Regular feedback to ensure safety standards
were being met
£4.9m
didn’t offer protection
>80%
130,000+
EQUITY RAISED WITHIN A WEEK OF THE
FIRST NATIONAL LOCKDOWN
OF EMPLOYEES REGULARLY ENGAGED IN
YAPSTER COMMUNICATIONS
FACEBOOK FOLLOWERS – THE MOST
FOLLOWED UK TENPIN BOWLING OPERATOR
Link to strategy:
Link to strategy:
Link to strategy:
1
3
1
INWARD
INVESTMENT
EXPANDING
THE ESTATE
INWARD
INVESTMENT
TRANSFORMING
CUSTOMER
EXPERIENCE
TRANSFORMING
CUSTOMER
EXPERIENCE
40
Ten Entertainment Group plc Annual Report and Accounts 2020
HOW WE ENGAGE
The global pandemic meant that the way in which we engaged with our stakeholders had to adapt;
however engagement with our stakeholders remained as important as ever.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
OUR SUPPLIERS
& PARTNERS
OUR
ENVIRONMENT
Our strategic partners help us provide the
latest in bowling and gaming technology as
well as developing our food and drink offering
to keep our entertainment experience
enjoyable for all of our customers.
The wider community and environment are
impacted by the business decisions we take.
We have strong relationships with our suppliers to
ensure that our objectives are aligned in delivering
a great service to our customers at great value
for money.
We acknowledge that our business can have a
wider impact beyond our direct stakeholders and
want to ensure that we are having a positive
impact on local communities and minimising any
environmental impacts.
We liaise with suppliers, landlords and other
parties for:
● Clear and fair conversations with contracted
suppliers to agree Lockdown payment plans
● Prioritised at-risk suppliers to ensure stability
● Mutual support during Lockdown to minimise
cash burn
We are conscious of our local community and wider
environment in the decisions we take:
● Responsible deployment of Government
support
● Moving to 100% renewable electricity supply
● Investment in energy-saving technologies
● Developed a new charity partnership with Rays
● Contract and lease renegotiations to recognise
of Sunshine
changed circumstances
£8.7m
● Minimised waste and supported local
communities with food and drink donations to
schools and charities
8%
OVER £8.7M OF PAYMENTS WAIVED OR
DEFERRED TO ENSURE LIQUIDITY
LONGEVITY
ENERGY SAVING PER CENTRE BY
INTRODUCING PINS & STRINGS WHICH IS
NOW 87% COMPLETE ACROSS THE UK
Link to strategy:
Link to strategy:
1
3
1
3
INWARD
INVESTMENT
TRANSFORMING
CUSTOMER
EXPERIENCE
EXPANDING
THE ESTATE
INWARD
INVESTMENT
TRANSFORMING
CUSTOMER
EXPERIENCE
EXPANDING
THE ESTATE
“I HAVE GROWN
FROM A PARTY HOST
TO A DEPUTY
MANAGER”
TEAM DERBY
Ten Entertainment Group plc Annual Report and Accounts 2020
41
SECTION 172 CONTINUED
BOARD
PRINCIPAL
DECISIONS
The Board considered the interests of and the
impact on all stakeholders when making a number
of key decisions during the year, as demonstrated
by the following examples.
Responsibly accessing Government support
THE IMPACT ON THE LONG-TERM
SUSTAINABLE SUCCESS
OF THE COMPANY
STAKEHOLDER CONSIDERATIONS
When the Covid-19 pandemic resulted in the enforced closure of all our centres on
Friday 20 March the Board acted quickly and decisively to reduce our costs in the
business and have taken full advantage of the Government support available,
which includes a one-year business rates holiday, a Time to Pay scheme with
HMRC and placing 98% of our employees on furlough under the Coronavirus Job
Retention Scheme (‘CJRS’).
This support combined with other actions has helped secure the future of the
business and means that the business could continue to run closed for a
sustained period while meeting is contractual obligations. We believe this puts us
in a strong position, not only to ensure our long-term success but to enable us to
open our doors to customers on a positive footing when the time comes.
Employees
The Group’s priority was to ensure that all of its employees have been kept safe
and treated fairly during the Covid-19 pandemic and furloughing process. We
helped our employees with the transition to furlough with additional financial
support. We maintained their wages at 100% throughout April to ensure families
could manage their existing financial commitments. In addition, we supported
those employees unfortunate enough to miss the transition date of the end of
February and have paid their furlough costs throughout Lockdown.
From May 2020 we then moved to the Government-supported 80% of wages for
the balance of remaining periods of enforced closure. Up until the end of October
2020 we also elected to top up salaries to a full 80% for those individuals who
earn more than the CJRS £2,500 monthly threshold. Utilising the Government
support in this way allowed the Group to avoid any site-level redundancies and to
retain its high quality and talented workforce.
Investors
Given the substantial impact of Covid-19 which ultimately resulted in the enforced
closure of our centres for 49% of the year, the Board was focused on long-term
liquidity and the impact on our ability to deliver for our investors. The board took
the decision to maximise the support available from the Government with the
goal of ensuring our longevity and restoring returns for our investors at the
earliest opportunity.
OUTCOME
By maximising the Government support the Group has been able to conserve
cash and protect the liquidity of the business to ensure that the business is in a
robust position and ready to return to growth when able to reopen.
42
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“NEXT PHASE OF MY
VOLUNTEERING JOURNEY.
PROUD TO BE HELPING ST
JOHN’S AMBULANCE IN
DELIVERING THE VACCINE”
SUPPORT TEAM
Issuing a 5% equity Placing to raise £4.9m of additional funds
THE IMPACT ON THE LONG-TERM
SUSTAINABLE SUCCESS
OF THE COMPANY
STAKEHOLDER CONSIDERATIONS
OUTCOME
In response to the Covid-19 pandemic, the Board has focused on delivering the
long-term liquidity of the business. The Board has prioritised cash management
and conservation. As part of this, the Board acted swiftly and approved the
placement of 3,250,000 ordinary shares on 25 March 2020, less than a week after
the enforced closure of the estate.
The placement was undertaken through an accelerated book build to certain
existing shareholders and institutional and other investors, including Directors of
the Company.
The placement shares were subscribed at a price of 155 pence per share, raising
£4.9m gross proceeds. The net proceeds of the placing will be utilised to provide
additional liquidity headroom during this unknown period of uncertainty relating
to Covid-19.
Directors of the Company participated in the placing, subscribing for 199,900
Placing Shares in aggregate.
Investors
At the time of the placing the situation remained uncertain, and it was impossible
to be clear on when the crisis would conclude, but the Board agreed that the
placing was a prudent precaution to strengthen its balance sheet further to
provide additional flexibility and ensure the ongoing health of the business for
investors and wider stakeholders. The additional liquidity and security provided by
the placing was deemed to outweigh any share dilution impact.
Employees
Securing additional liquidity early in the Covid-19 pandemic allowed the Board to
provide security to employees. The additional cash mitigated the need to take
short-term decisions such as headcount reductions through redundancies and
allowed the Group to provide additional financial support to employees who had
been placed on furlough. For further details see principal decision 1.
The placing, combined with our £25m revolving credit facility with the Royal Bank
of Scotland, meant that we began the Covid-19 pandemic with almost £30m of
liquidity headroom, which provided reassurance to our stakeholders that we had
sufficient liquidity to run closed and ensure our longevity. Given the continued
impact of Covid-19 and sustained periods of closure during the year the Board is
confident that the equity placing was the correct measure to take at the time.
Ten Entertainment Group plc Annual Report and Accounts 2020
43
RISK MANAGEMENT
Our approach to risk management
The Group recognises that the effective
management of risk is key in achieving its
strategic objectives and has continued to
identify and assess risks that could impact
sustainable growth in the year under review.
Ultimate responsibility for the Group’s risk
management framework sits with our Board
which determines the risk appetite of the
Group in undertaking its strategic objectives.
The Board is responsible for the Company’s
risk management and internal control
systems which have been in place for the
year under review and up to the date of
approval of the Annual Report and
Financial Statements.
Current and emerging risks are identified by
business area, with each area responsible for
managing that risk, implementing appropriate
controls and mitigating actions in the short
term and monitoring the longer-term impacts
and reporting on it to the management team
and senior Executives. Each risk has been rated
on a multiplier basis assessed by the likelihood
of occurrence, the potential financial impact
and the control environment in place to
mitigate the risk. Principal risks are recorded in
the Group’s risk register and regularly reviewed,
evaluated and reported on to the Board.
As illustrated below, the approach to
understanding the risk exposure of the
Group involves reviewing each area of the
business annually and using the methodology
to assist in measuring, documenting
and monitoring its risks within all areas
of its operations. This approach to risk
management helps facilitate a top-down
and bottom-up perspective across the
business areas within the Group.
The environment in which we operate is
constantly evolving; new risks arise and
the potential likelihood and impact of known
risks may change. These risks therefore
represent a snapshot of what the Board
believes are the principal risks and not
an exhaustive list of all risks the Group faces.
BUSINESS
AREA
SENIOR
EXECUTIVES
MANAGEMENT
TEAM
IDENTIFY
RISK
>
>
REGULARLY
REVIEW &
EVALUATE
>
BOARD
ASSESS RISK
& IMPACT
>
UPDATE
RISK
FRAMEWORK
>
CREATE
MITIGATION
STRATEGY
44
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
The full annual review process of the
effectiveness of the Company’s risk
management and internal control systems
captures changes in these risks and also
changes in the direction of travel of any
given risk. The Directors have carried out a
robust assessment of the principal and
emerging risks facing the Company, including
those that would threaten its business model
and future strategy including emerging risks
as recently identified relating to Covid-19, as
reflected in the following tables. Thus the
Board confirms that:
● There is an ongoing process for
identifying, evaluating and managing the
principal risks faced by the Group,
including identifying emerging risks.
● The systems have been in place for the
year under review and up to the date of
approval of the Annual Report and financial
statements.
● They are regularly reviewed by the Board.
● The systems accord with the guidance to
audit committees issued by the Financial
Reporting Council dated April 2016.
INTERNAL CONTROL
The Board is responsible for the Group’s
system of internal control and for reviewing
its effectiveness. The below summarises the
Group’s system:
BOARD
● Collective responsibility for internal
control.
● Approval of key policies and procedures.
● Control framework setting out
responsibilities.
● Monitors performance.
SENIOR MANAGEMENT TEAM
● Responsible for operating within the
control framework.
CONTROLS AND PROCESS IN PREPARING THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Group has established internal control and risk management systems in relation to
the process for preparing the Group’s consolidated financial statements of which the key
features are:
● Management regularly monitors and considers developments in accounting regulations
and best practice in financial reporting and, where appropriate, reflects developments in
the consolidated financial statements. The external auditor also keeps the Audit
Committee appraised of these developments.
● The Audit Committee and the Board review the draft consolidated financial statements.
The Audit Committee receives reports from management and the external auditor on
significant judgements, changes in accounting policies, changes in accounting estimates
and other pertinent matters relating to the consolidated financial statements, and provides
robust and independent challenge to management where appropriate.
● The full-year financial statements are subject to external audit and the half-year financial
statements are reviewed by the external auditor.
RISK HEAT MAP
Each of the risks described in the following section has been
scaled into the risk heat map as reflected below:
H
G
H
I
t
c
a
p
m
i
D
E
M
1
2
4
7
8
5
6
3
● Reviews and monitors compliance with
policies and procedures.
● Recommends changes to controls/policies
W
O
L
where needed.
● Monitors performance.
LOW
MED
HIGH
AUDIT COMMITTEE
● Oversees effectiveness of internal control
process.
● Receives reports from external auditor.
● Approves independent internal audit
programme.
● Receives reports generated through the
internal audit programme.
INTERNAL AUDITOR
● Provides assurance to the Audit
Committee through independent reviews
of agreed risk areas.
likelihood
Risks
Impact compared to 2019
1 Economic climate
2 Operational
3 Regulatory changes
4 Covid-19
5 Business interruption
6 Major supplier failure
7 Operational – allergens
8 Covenant breach
Ten Entertainment Group plc Annual Report and Accounts 2020
45
PRINCIPAL RISKS AND UNCERTAINTIES
The business faces a number
of risks on an ongoing basis
The Board confirms that it has carried out a robust assessment of the principal risks facing the Group, including emerging risks, and those that
would threaten its business model, future performance, solvency or liquidity.
THE IMPACT OF THE COVID-19 CRISIS
The Covid-19 crisis has impacted all aspects of the Group's performance, strategy and governance in the year and so has been looked at and
addressed through all areas including our strategy and risk management processes. The Board members have brought their learnings on this
crisis not only from their role within the business but also from their roles on other boards to help the Group make decisions with agility and
pragmatism, while engaging with all key stakeholders to keep the business on solid ground. The following principal risks, which include
Covid-19 as its own specific risk, have also been updated to reflect the impact Covid-19 has had on these specific risks.
Strategic drivers:
1
Organic growth
2
3
Transforming customer experience
Expanding the estate
economic climate
Link to strategy:
1 2 3
Nature of risk
● Change in economic conditions, in
particular the recession, due to Covid-19
● Increases in interest rates/inflation
● A decrease in consumer disposable
income
● A prolonged period of uncertainty due to
the Covid-19 pandemic
● A downturn in consumer spend
> Impact on sales and ability to deliver our
growth plans thus affecting all four
financial and four non-financial KPIs
operational
Link to strategy:
Nature of risk
● Deterioration of assets over time
● Ageing of the estate
● Loss of key personnel
> Impact on sales, costs and customer
experience
Risk key:
High
Medium
Low
Risk key:
Increased risk
No change
Decreased risk
Likelihood:
Potential impact:
Change:
Strategic context
Mitigation
TEG’s Tenpin bowling business is based
exclusively in the UK and so is exposed to
UK economic conditions and consumer
confidence.
The Board believes that, as a relatively low
frequency and low ticket activity, bowling
should withstand the economic downturn as
long as our centres are able to open.
As a leisure activity, bowling may be
affected by the general level of consumer
spending on leisure and the potential
impacts of Brexit as well as the impact
Covid-19 has had on the economy,
consumer disposable income and customer
confidence to meet in social settings.
The Group continually reviews its product
offer, its value proposition, and the quality of
its estate to improve the customer
experience.
A wide framework of changes were
implemented across the centres to make
them Covid secure and to provide a safe
environment for all stakeholders.
During the Covid-19 periods of closure the
business utilised numerous levers to
preserve cash as well as to bring cash in
through the placement, CLBILs or CJRS.
Likelihood:
Potential impact:
Change:
Strategic context
Mitigation
The Group's centres have high footfall and
high usage, in particular at peak times.
There is a risk that without the right level of
ongoing investment the quality of the
customer experience declines, impacting
the customer experience and likelihood of
return visits.
The Group generates cash from its
operating activities and ensures enough
cash is prioritised for an ongoing
maintenance and refurbishment
programme. The Group has a management
development programme in place to
provide a pipeline of future Centre
Managers, familiar with the Tenpin
business model.
46
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Regulatory changes
Link to strategy:
1 2 3
Likelihood:
Potential impact:
Change:
Nature of risk
Strategic context
Mitigation
New, changed or reinterpreted laws and
regulations adversely impact the business, or
we fail to obtain required regulatory
approvals or licences.
> Impact on sales, costs and reputation
Covid-19
Link to strategy:
Nature of risk
1 2 3
There has been the introduction of GDPR,
changes to sentencing tariffs and
calculations and constant updates to
legislation around competition, bribery,
carbon reporting and sustainability, modern
slavery, money laundering, consumer
protection and taxation. All these impact our
strategic objectives and could result in brand
and reputational loss, along with litigation,
revocation of licences, inability to acquire
sites or build sites and fines leading to
financial loss.
Health & Safety meetings are held by senior
management monthly to understand
incidents and to ensure compliance with or to
update policies. GDPR policies and
procedures were drafted and implemented
with training carried out Group-wide. Where
required we obtain external specialist advice
to assess, scope and plan our responses to
changes in legislation or in changes or
developments to our business that are
touched by legislation.
Likelihood:
Potential impact:
Change:
Strategic context
Mitigation
The increased profile of the Covid-19 virus in
the last year has raised the impact that a
pandemic could have on the Group by
impacting its staff and customer base,
restricting its ability to trade, decreasing
customer demand to increased costs to
make the centres safe and secure.
A pandemic that has a national impact could
have an effect on the business if centres
were put into quarantine, centres had to be
closed as part of a government instruction or
the reputational impact if any of the centres
were specifically associated with the spread
of a pandemic.
> Impact on sales, costs and reputation
Over the last year since the Group first closed
all the centres on 20 March 2020, the
business has opened and closed the centres a
number of times depending on the guidance
or instructions from the Government related
to our sector. During times of closure,
management has focused on conserving
cash through negotiations with landlords and
suppliers for savings, applying for CJRS and
Government Lockdown grants through to
applying for a CLBILs loan and raising cash
from shareholders through a placement. In
preparation for and during periods when the
centres were allowed to open, the business
has acquired PPE equipment to be set up and
used around the centres, trained staff to
ensure the centres were Covid secure,
introduced software to allow on-lane
ordering, and set up barriers between every
lane to promote social distancing.
Business interruption
1 2 3
Link to strategy:
Nature of risk
● Risk of cyber-attack/terrorism
● Failure or unavailability of operational
and/or IT infrastructure
● GDPR risk
> Impact on sales, costs and reputation
Likelihood:
Potential impact:
Change:
Strategic context
Mitigation
A major incident could impact the Group’s
ability to keep trading. It manages this risk by
maintaining and testing business continuity
plans and establishing remote IT disaster
recovery capabilities. More bookings are
being taken online increasing risk and there
has been an increase in the level of high-
profile cyber-attacks in recent years,
including on providers of IT services which
increases the risk that business information
could be accessed via these providers
without ever breaching the Group’s servers.
Cyber-security is of great importance to the
Group given the level of customer data it
holds. The Group adopts a multi-faceted
approach to protection through internal and
external sources that regularly review the
level of monitoring and threat protection
systems that are in place.
The providers of IT solutions are vetted and
reviewed regularly.
Ten Entertainment Group plc Annual Report and Accounts 2020
47
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Major supplier failure
Link to strategy:
1 2 3
Nature of risk
Sudden failure of key supplier.
> Impact on sales, costs and customer
experience
Operational – allergens
Link to strategy:
1
Likelihood:
Potential impact:
Change:
Strategic context
Mitigation
The Group has a number of key suppliers
that provide its bowling equipment, its
gaming machines and its food and beverage
products. Sudden failure of these suppliers
could impact the Group’s ability to offer its
customers the level of experience they
expect.
Regular meetings are held between the Chief
Executive Officer and the Group’s key
suppliers to discuss both operational issues
and future growth plans. The Group works
with market-leading suppliers in these fields.
The Group maintains Service Level
Agreements ('SLAs') with its food and
beverage suppliers and, whilst failure may
lead to short-term disruption, alternative
suppliers could be introduced at short notice.
Likelihood:
Potential impact:
Change:
Nature of risk
Strategic context
Mitigation
Incidents related to allergies to food products
offered, especially when there are changes
to the menu.
> Impact on sales, costs and reputation
There have been a number of high-profile
incidents in the leisure industry related to
allergens in food products. The incidents
have arisen due to inadequate awareness,
communication and display of allergen items
included in menus.
The Health & Safety adviser reviews all menus
and menu changes for allergen-related
products and wording included on the menus
to reflect these items before they are
released.
Allergen awareness is part of the training
programme and online allergen lists and
information are provided for public access on
all centres’ websites.
Covenant breach
Link to strategy:
1 2 3
Likelihood:
Potential impact:
Change:
Nature of risk
Strategic context
Mitigation
The RBS financing facilities have covenants
which are to be reported on and met
quarterly. A decrease in performance
adversely affecting these could jeopardise
future loan renewals while current covenant
breaches could result in the withdrawal of
funds or a review of the facilities which could
cause potential liquidity issues.
> Impact on liquidity, going concern and
reputation
The availability of liquidity supports the
Group's strategy to grow through expansion,
refurbish its centres and to transform its
processes which highlights the importance
that the facilities with RBS are secured in
these key times.
RBS provided a waiver of the covenants until
the end of June 2021. However, as the
pandemic has continued this had to be
reviewed further and this was done as part of
the negotiation with RBS of a new CLBILs
term loan facility with rewritten covenants. As
is explained in more detail under the Going
Concern section and Viability statement, the
Group has a Minimum Liquidity and Minimum
EBITDA covenant test to meet during 2021
after which the traditional Leverage and Fixed
Cost covenant will return in 2022 but with
new reference levels.
48
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
LONG-TERM VIABILITY
STATEMENT
STRATEGIC PLANNING PROCESS
As explained on page 20 in the business model
and on pages 22 to 25, the strategy revolves
around the three key pillars, being inward
investment, transforming the customer
experience and expanding the estate. The
successful delivery of these pillars will drive the
business forward and ensure it is a viable entity
going forward. The development and review of
the strategic plan is thus an important process
and a key task of the Board.
The Board meets annually to discuss the
strategy of the Group and this year met in
October to discuss and agree the plan for the
next three years. The strategy day included:
● an industry and business overview from
our brokers, Peel Hunt LLP;
● a review of the three key pillars and the
drivers of growth in each of the pillars;
● a review of the people in the team to
deliver the strategy;
● a presentation of new expansionary
opportunities available to the Group by an
external consultant; and
● a review of the three-year financials driven
by the planned developments and growth
opportunities discussed in the above.
After the approval of the Strategic Plan, this
then formed the base for the detailed review of
FY21 and the development of the FY21 budget
that was approved by the Board in November.
GOING CONCERN
In assessing the going concern position of the
Group and Company for the Annual Report and
the financial statements for the year ended
27 December 2020, the Directors have
considered its business activities in light of the
uncertainty caused by the Covid-19 outbreak
and the impact on the Group’s profit, cash flow,
liquidity and covenants. All the Group’s centres
were closed for trade from 20 March 2020 with
a phased reopening from 4 August 2020 when
it reopened the three Welsh centres, with the
majority of the English centres then reopening
from 15 August 2020. All English centres were
closed again during the November Lockdown
and though the majority of centres reopened in
December, the bulk closed again during the
month as local Lockdowns and tiered
restrictions were imposed, leaving only six
centres open as at 27 December 2020. These
centres then closed when the national
Lockdown resumed in January 2021 and all
centres have remained closed until the date of
this Annual Report.
As part of the review of the potential impact of
the Covid-19 outbreak on the Group’s cash
flows and liquidity over the next 12 months, a
base case and a downside case were prepared.
Critical to both cases was the availability of cash
from the bank facilities with RBS and amended
covenants that could be met in both cases.
In January 2021, the Group negotiated a new £14m CLBILS term loan facility agreement with RBS,
with a term of three years. This, along with the current £25m revolving credit facility with RBS,
provides the Group with a £39m available debt facility.
In May 2020, RBS agreed to the waiver of the leverage and fixed charge covenants that were in
place, until the end of June 2021. As part of the negotiation of the CLBILS facility in January 2021,
the covenants were renegotiated and amended to the following:
CURRENT COVENANTS:
Leverage covenant (Ratio of total net debt to
adjusted EBITDA)
Fixed charge covenant (Adjusted EBITDA plus
rent to rent adjusted finance costs)
Testing for 2021 waived, replaced by new
covenants
Testing for 2021 waived, replaced by new
covenants
March 2022 – reference level – 1.10x
March 2022 – reference level – 7.50x
June 2022 – reference level – 1.25x
June 2022 – reference level – 5.00x
September 2022 – reference level – 1.50x
September 2022 – reference level – 4.00x
December 2022 – reference level – 1.50x
December 2022 – reference level – 2.25x
NEW COVENANTS:
Introduced for January 2021 to December 2021:
Minimum EBITDA
Minimum liquidity
Quarter 1 – £5,550,000 EBITDA loss
Quarter 1 – £4,750,000 in cash and cash equivalents
Quarter 2 – £10,550,000 cumulative EBITDA loss
Quarter 2 – £4,000,000 in cash and cash equivalents
Quarter 3 – £10,550,000 cumulative EBITDA loss
Quarter 3 – £1,500,000 in cash and cash equivalents
Quarter 4 – £12,550,000 cumulative EBITDA loss
Quarter 4 – £1,500,000 in cash and cash equivalents
The base case was prepared using the
following key assumptions:
● centres forced to close with no revenue
for January to May 2021;
● during closure, CJRS is still being provided
and a significant portion of employees are
on furlough, variable operating and
central costs are kept to a minimum, the
business rates holiday is still being
provided, but fixed costs as rent and
service charges are maintained as normal;
● centres reopen from May, with levels of
trade starting at -65% of the equivalent
periods in FY19, moving up to -30%, with
trade by the latter quarter of the year and
the first quarter of FY22 expected to be at
similar levels to FY19;
● the -65% and -30% trading options reflect
disruption from local Lockdowns and
reflects the similar effects of social
distancing restrictions such as the ‘Rule of
Six’, household mixing and curfews, as
was felt in 2020, had on revenue. Variable
operating and administrative costs
● are reflective of the level of trade with
fixed costs as rent, business rates and
support centre costs maintained as
normal as the centres are open;
● reduced maintenance and marketing
spend, as well as reducing all non-
essential and non-committed capital
expenditure in FY21 and the first quarter
of FY22; and
● no dividend payments in FY21 or FY22.
Under this base case scenario in FY21, the
Group is not expected to be profitable but
will have sufficient liquidity and no covenant
breaches are forecast within the next 12
months from the signing of the Annual
Report and Accounts.
The downside case was prepared using the
following key assumptions:
● revenue is assumed at 37% down on the
base case for FY21 and 9% down on the
base case for FY22;
● where the base case expected trade to
return to FY19 levels for the last quarter of
FY21 and into the first quarter of FY22,
the downside case reflects these at -65%
and -30% of FY19 levels;
● in line with the revenue reduction, there is
a reflective reduction in variable operating
costs including employee costs. Where
centres are forced to close, it is assumed
CJRS is available and is taken up until
September but after that no claim is
assumed;
● reduced maintenance and marketing
spend, as well as reducing all non-
essential and non-committed capital
expenditure in FY21 and FY22 as in the
base case; and
● no dividend payments in FY21 or FY22.
The downside case modelled is severe but
plausible and would still leave the Group with
£5m of liquidity at the end of FY21 and in 12
months from now and the Group would pass
the minimum liquidity tests but would breach
the EBITDA test for September and December
2021 as there would be no CJRS claimed after
September when it is currently expected to
end. The fixed cost and leverage covenants
commencing from quarter one of FY22 pass.
In the event of a full lockdown in any of the
months in quarter one of FY22, there would
be a breach of the first quarters covenants. In
the event that a covenant is breached, an
extension of this covenant would need to be
negotiated with RBS.
Ten Entertainment Group plc Annual Report and Accounts 2020
49
LONG-TERM VIABILITY
STATEMENT continued
The Directors believe this would likely be
given as the Group would still have £5m of
liquidity available, has a strong relationship
with RBS and has successfully obtained
covenant waivers recently.
Nevertheless, in the event of extended
Lockdown measures impacting the Group’s
operations, the possibility of a covenant
breach at the end of December 2021 cannot
be discounted, and as such represents a
material uncertainty that may cast significant
doubt on the Group and Company’s ability to
continue as a going concern.
Taking the above and the principal risks faced
by the Group and Company into
consideration, and the Directors expectation
that they could negotiate an extension to the
covenant should the need arise, the Directors
are satisfied that the Group and Company
have adequate resources to continue in
operation for the foreseeable future, a period
of at least 12 months from the date of this
report. Accordingly, the Group and Company
continue to adopt the going concern basis in
preparing these financial statements.
The Financial Statements do not include the
adjustments that would result if the Group
and Company were unable to continue as a
going concern.
VIABILITY STATEMENT
In accordance with the 2018 UK Corporate
Governance Code, the Directors have
assessed the prospects of the Group over a
three-year period to 31 December 2023. The
Directors believe this period to be appropriate
as the Group’s strategic planning encompasses
this period, and because it is typically a
reasonable period over which the impact of
key risks can be assessed for a business of this
size and in the leisure sector. The heightened
uncertainty driven by the Covid-19 pandemic
has meant that forecasting across such a time
frame is now materially more challenging and
therefore the Directors’ focus is on
understanding the level of headroom available
before the Group reaches a position of
financial stress.
In making this viability statement, the Directors
have reviewed the strength and resilience of
the Group and have specifically considered a
robust assessment of the impact, likelihood
and management of principal and emerging
risks facing the Group, including consideration
of those risks that could threaten its business
model, future performance, solvency, liquidity
or sustainability. The assessment of viability
has specifically considered risks that could
threaten the Group’s day-to-day operations
and longer-term existence. The assessment
considered how risks could affect the business
now and how they may develop with the
financial analysis and forecasts showing
financial position, performance, cash flow and
covenant requirements, over the
three-year period.
In light of the current economic uncertainty
caused by Covid-19, the Group performed a
robust analysis of the going concern of the
business and created a new base case for
FY21, where the short-term volatility from
Lockdowns, social distancing measures and
other disruptive measures to trade were
reflected and as expected, had an adverse
effect on the results compared to a pre-
Covid-19 year as FY19.
The Group expanded on the base case model
to determine the financial performance over a
three-year 'viability assessment period' upon
which the Board has made its assessment of
the Group’s ongoing viability, and which
reflects prudent expectations of future
customer demand and the successful
execution of the Group’s strategic plans.
VIABILITY ASSUMPTIONS
The Directors made a robust consideration of
the principal and emerging risks and
uncertainties that could impact the future
performance of the Group and the
achievement of its strategic objectives, as
discussed on pages 46 to 48 of this Annual
Report. Particular regard was paid to the
potential impacts of Covid-19, while
acknowledging that the significant
uncertainties surrounding the future trajectory
of the pandemic and the related Government
response present an additional source of
variability. The base case viability scenario
takes into account all of the principal risks and
uncertainties facing the Group across the
three-year period in order to assess the Group’s
ability to withstand multiple challenges. The
impacts of Covid-19 have been built into the
scenario, but the impact of further one-off
events that cannot be reasonably anticipated
have not been included.
The base case forecast starts with the FY21
period that is the same as that built for the
going concern analysis as described on page
49, where annual revenues when compared
with FY19 reflect double-digit decline. The
forecast expands into FY22 and FY23, with
FY22 seeing a recovery to FY19 levels, with low
single-digit growth thereafter, plus growth in
FY23 for the acquisition of sites. The process
undertaken considers the Group’s adjusted
EBITDA, capital spend, cash flows and other
key financial metrics over the projected period.
The base case assumes no significant change
in gross margin percentage, employee,
maintenance and other operating costs, which
are discretionary in nature, are reduced on a
linear basis with revenue declines and fixed
costs, in particular rent and support centre
costs, are kept at normal levels. Maintenance
capital expenditure levels follow the trajectory
of revenue while investment and expansionary
capital levels are discretionary and follow the
levels of cash generation. No dividend
payments are expected.
Mitigating actions have been taken in year one,
as reflected in the going concern base case, to
preserve cash which include, but are not
limited to, reducing planned capital
50
Ten Entertainment Group plc Annual Report and Accounts 2020
expenditure, employee costs, discretionary
marketing, maintenance and other operating
costs as well as suspension of the dividend
payments. External mitigations include the
utilisation of the Government business rates
holiday and CJRS when centres are forced to
close. The forecasts for FY22 and FY23
assume revenues and costs follow the same
pattern as those generated in FY19. The Board
considers this scenario to be reasonable.
Revenues to date, in FY21, are in line with the
base case.
VIABILITY ASSESSMENT
Although the base case viability scenario
reflects the Board’s best estimate of the future
prospects of the Group, the Board has also
tested the potential impact of a range of
downside scenarios, by quantifying the
financial impact and overlaying this on the
detailed financial forecasts in place. These
downside scenarios are most sensitive to
changes in the length of the Covid-19
impacting period and the depth of the impact
and a prudent approach has been taken to
stress test the base case with a severe
downside case which is made up from the
following assumptions and has the following
impact:
● Significant disruption to trade in the
three-year period which results in the
severe downside case revenue declining
by -19% for FY21, -14% for FY22 and
-24% for FY23 compared to the base
case;
● As explained in the downside case in the
going concern assessment, there are
covenant breaches that will arise;
● Mitigation includes the flexing of variable
costs in line with sales and all investment
and expansionary capital spend being
halted;
● Fixed property costs and support centre
costs remain the same as the base case.
While the assumptions we have applied in this
scenario are plausible, it does not represent
our view of the likely outturn. However, the
results of this scenario help to inform the
Directors’ assessment of the viability of
the Group.
VIABILITY STATEMENT
The Board has a reasonable expectation that
the Group will be able to continue in operation
and meet its liabilities as they fall due, retain
sufficient available cash, and not breach any
covenants under any drawn facilities over the
remaining term of the current facilities.
The viability statement was approved by the
Board and signed on its behalf by:
ANTONY SMITH
CHIEF FINANCIAL OFFICER
29 MARCH 2021
FINANCIAL REVIEW
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
LONG-TERM RESILIENCE
WITH SIGNIFICANT
LIQUIDITY HEADROOM
Swift and decisive action to
secure funding and reduce costs
has secured the future
ANTONY SMITH CHIEF FINANCIAL OFFICER
Ten Entertainment Group plc Annual Report and Accounts 2020
51
FINANCIAL REVIEW CONTINUED
ADDITIONAL
FINANCING FROM
EQUITY AND CLBILS
£19m
COST SAVINGS
DELIVERED
£12m
INVESTMENT IN
COVID SECURITY
£1.2m
“TIGHT CONTROLS
HELPED LIMITED THE
CASH OUTFLOW TO ONLY
£8.5M DESPITE THE
TEMPORARY CLOSURES.”
2020 was a year of significant disruption as a result of the Covid-19 pandemic. The business was fully closed for 49% of the year and severely
disrupted for a further 30% of the time. Consequently, sales fell by (56.9%) in the year and the Group generated a loss after tax of (£12.2m)
(FY19: +£9.0m).
Our business operates out of 46 centres that are held on a long leasehold basis. The nature of the disruption was such that while no income
was generated for half the year, a significant proportion of the fixed costs of the business, particularly the leasehold property costs, could not
be removed during the temporary closure periods. As a result, the (£47.9m) reduction in sales resulted in a (£21.3m) reduction in profit after tax
on an IAS 17 basis.
The principal focus for the year was cash management and liquidity conservation. The Group made an equity placing of 3,250,000 ordinary
shares, 5% of the issued share capital, which raised £5.0m. We fully utilised the available Government support to protect the livelihoods of our
employees and we took a highly disciplined approach to cash management with many contractual commitments waived or deferred with the
support of our strong supplier base.
As a result of the robust cash conservation measures, the bank net debt grew by only £8.5m in the year to (£12.6m), which left a further
£12.4m of available liquidity headroom. The headroom has subsequently been further supplemented with a £14m three-year term loan raised
through our existing banking partner under the Coronavirus Large Business Interruption Loan Scheme (‘CLBILS’). As at 26 March, the Group has
remaining liquidity headroom in excess of £18m.
FINANCIAL SUMMARY
£000
Revenue
Cost of sales1
Gross margin
GP%
Total operating costs
Centrally allocated overheads
Support office
Group adjusted EBITDA2
Profit on share of joint venture
Depreciation and amortisation
Net interest
Group adjusted (loss)/profit before tax2
Exceptional items
Profit/(loss) on disposal of assets
Impairment
Amortisation of acquisition intangibles
(Loss)/profit before tax
Taxation
Of which: taxation attributable to Group adjusted (loss)/profit
(Loss)/profit after tax
(Loss)/earnings per share
Basic (loss)/earnings per share
Adjusted basic (loss)/earnings per share
Full-year dividend
52 weeks to
27 December
2020
IFRS 16
52 weeks to
27 December
2020
IAS 17
52 weeks to
29 December
2019
IAS 17
Movement
36,269
(4,854)
31,415
86.6%
(18,051)
(4,537)
(5,480)
3,347
—
(16,634)
(5,815)
(19,102)
—
(99)
(2,521)
—
(21,666)
3,919
3,463
36,269
(4,854)
31,415
86.6%
(29,177)
(4,537)
(5,561)
(7,860)
—
(7,986)
(457)
(16,303)
—
123
—
(142)
(16,322)
4,101
4,097
(17,747)
(12,221)
(26.3)p
(23.2)p
—
(18.1)p
(17.9)p
—
84,122
(10,387)
73,735
87.7%
(40,855)
(3,155)
(6,157)
23,568
10
(7,379)
(788)
15,411
(2,391)
(932)
—
(293)
11,795
(2,758)
(2,836)
9,037
13.9p
19.3p
3.7p
(47,853)
5,533
(42,320)
(1.1%)
11,678
(1,382)
596
(31,428)
(10)
(607)
331
(31,714)
2,391
1,055
—
151
(28,117)
6,959
6,933
(21,259)
1 Cost of sales and operating expenses are presented on the basis as analysed by management. Cost of sales in the financial summary are determined by management as
consisting of the direct bar, food, vending, amusements and gaming machine related costs. Statutory costs of sales reflected in the statement of comprehensive income
also include the staff costs but excludes security and machine licence costs incurred by the centres. Operating expenses are split into more detail in the financial summary
to obtain statutory operating profit, with overheads, support office, amortisation, depreciation and exceptional costs reflected separately.
2 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 and profit or loss on disposal of assets. Group adjusted profit before tax is defined as profit before exceptional items,
profit or loss on disposal of assets and amortisation of acquisition intangibles. Adjusted basic earnings per share represent 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 and adjusting for whether a centre was forced to close due to Covid regulations
over a comparable trading period.
52
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
REVENUE
YOY % change
Total Sales
Like-for-like
Pre Covid
Full Lockdown
Reopening
Retightening
Jan
+10.6
+7.5
Feb
Mar
Apr – Jul
Aug
Sep
Oct
Nov
Dec
Total
+20.3
(40.1)
(100.0)
(64.1)
(26.4)
(41.0)
(89.7)
(85.7)
(56.9)
+16.7
(24.9)
n/a
(18.0)
(26.0)
(39.5)
(62.1)
(64.3)
(17.4)
Pre Covid trading was strong, delivering +12.7% total sales growth and +9.6% like-for-like sales growth in the first 11 weeks of the year before
the Lockdown, continuing the business’s strong momentum of eight consecutive years of like-for-like growth. A particularly strong February
with well executed half-term plans delivered like-for-like sales growth of +16.7%.
Over the course of the year, our centres were closed for 49% of the available time, with a full national Lockdown from late March until mid-
August and a further English and Scottish Lockdown in November.
Reopening in mid-August was encouraging, with August and September delivering 77% of last year’s sales despite operating at only 50%
capacity. Initial consumer appeal as the country exited Lockdown demonstrated good pent-up demand for our family entertainment centres.
Our market-leading Covid security measures, including a rigorous cleaning regime and a food and drink ordering app for table service, ensured
that our customers felt safe to return. Further investments have now been made in fixed lane dividers at all centres which means that we can
now safely operate 100% of available lanes.
The regulatory landscape continued to evolve, and as it tightened in the autumn and winter there was a significant impact on consumer
demand. The introduction of curfews; the 'Rule of Six'; complex constraints governing alcohol sales; and most significantly a ban on household
mixing all contributed to considerable consumer confusion. This impacted on our ability to run our centres profitably in the final quarter
of the year.
Total sales for FY20 were £36.3m which is (56.9%) down on FY19 and (17.4%) down on a like-for-like basis adjusting for enforced centre closure
periods. Unsurprisingly, with the significant disruption which has impacted all but three months of 2020, the Group is reporting a loss
for FY20.
The Board is satisfied that consumer demand for family entertainment remains strong and the underlying fundamentals of the business model
remain in place. This is a highly cash-generative model that typically generates 75% of EBITDA into free cash flow. We are confident that as
restrictions are eased, growth will return as consumers emerge from more than a year of Lockdowns and restrictions.
GROSS MARGIN
Gross margin has reduced slightly in 2020 but remains high at 86.6% (FY19: 87.7%) reflecting the margin rich nature of our business model.
Overall, the pattern of consumer behaviours has been slightly impacted by Covid-19 restrictions which has resulted in a small erosion of the
business margin. Bowling sales, when open, remained resilient and still represented 46% of sales, all of which were delivered at high margin.
However, a number of Covid-19 restrictions had an adverse impact on margin. The introduction of the curfew reduced high-margin alcohol
sales, and the restrictions that required customers to purchase food with alcoholic beverages further eroded the average margin. Social
distancing measures led to the restriction of capacity on pool tables and table tennis tables as well as our very popular traditional children’s
arcade machines. These are all asset-based high-margin activities and thus the slight product mix shift had a small adverse effect.
As well as impacting margin, these restrictions slightly reduced the average spend per head, which declined slightly in the year by 4.2% to
£13.99 (FY19: £14.60). We anticipate that as trading in our centres normalises, our margins and average spend will return to previous levels.
OPERATING COSTS
Total operating costs have been a significant focus in 2020 as the business has strived to reduce its cash commitments. On an IAS 17 basis,
including property rent, operating costs were £29.2m, a £11.7m reduction compared to 2019. This represented a 28.6% reduction in costs for
the year. During Lockdown, non-property related costs were reduced by over 75% in order to conserve cash.
Principal sources of the savings were a £3.6m reduction as a result of the Government business rates holiday; a £5.9m reduction in labour
costs, supported by CJRS as the business was closed; a £2.1m reduction in site operating costs such as utilities and contracts; and a £1.3m
reduction as a result of other cost-saving initiatives deployed.
The business was only trading for 51% of the year, and during this time costs were higher than would be expected at the suppressed volume
levels. An increased cost of labour resulted as a function of the stringent safety and cleaning regime in place to ensure our customers and
employees could enjoy their bowling experience safely. This meant that the operating cost of our centres while they were open was broadly flat
year-on-year, with the volume based savings offset by the incremental labour for Covid security.
Ten Entertainment Group plc Annual Report and Accounts 2020
53
FINANCIAL REVIEW CONTINUED
CENTRAL COSTS
Central costs comprise centrally allocated overheads and the cost of the support office, including the PLC. Total central costs grew by £0.8m in
2020 compared to 2019. A 9.7% saving in support office costs was offset by an increased cost of 43.8% in the centrally allocated site costs.
Centrally allocated costs grew by £1.4m in the year which included a £1.2m Covid security investment. This included the purchase of personal
protective equipment (‘PPE’) for centre staff; sanitising stations; customer information and point of sale materials; and the design and
construction of steel and glass lane dividers that now mean that the business can operate 100% of lanes. Given the Covid-19 specific nature of
these modifications, the business was unable to estimate the useful economic life of these investments and has expensed the items in the
year rather than assigning them as a capital investment. In addition, the business invested in increased communication and research with
customers to ensure that we clearly understood and met expectations on reopening.
Over 98% of central and support centre staff were furloughed under CJRS or took a wage reduction at some point during the year. The Board
took the decision to support the wages of all employees to the 80% level which meant topping up those employees who missed cut-off dates
or were earning above the threshold. There was a £0.5m cost to that decision in the year, but the Board deemed this a responsible approach
that would assure the financial and mental wellbeing of our teams. There was no bonus payable in respect of 2020, and there was a release in
respect of both the 2018 and 2019 Executive LTIP scheme in the expectation that the EPS target will not be met. In order to secure liquidity
longevity, the business incurred professional fees in respect of lease regears, the equity placing in March, preparation and application for the
CLBILS and advice in respect of Government lobbying for reopening and securing the appropriate support measures such as the reduced rate
of VAT. Overall net savings of £0.6m were delivered in the support office costs.
GROUP ADJUSTED EBITDA (ON AN IAS 17 BASIS)
Group adjusted EBITDA has declined to a (£7.9m) loss compared to the £23.6m profit in 2019. This swing of (£31.4m) is directly attributable to
the (£47.9m) of lost revenue offset in part by the significant cost savings noted above.
Management estimate that the fixed cost of the business, particularly the property related costs, is such that, with the increased Covid security
measures, it can be expected that the Group breaks even at roughly 60% of 2019 sales. During 2020, only January, February and during the
Reopening phase of the business in the second half of August and September exceeded this threshold.
The leasehold nature of the business and the physical customer experience means that during Lockdown, with no source of income and fixed
cost base of 93% of the standard run rate, it is not possible to avoid losses. However, the experience of 2020 has shown that once customers
are allowed to return, so long as restrictions are not too onerous, the business can rapidly return to profit and cash generation.
DEPRECIATION, AMORTISATION AND CAPITAL EXPENDITURE
Depreciation and amortisation in 2020, on an IAS 17 basis, was 8.2% higher than last year at £8.0m (FY19: £7.4m). This resulted from the
rollover effect of investments made in 2019 as well as a further £7.0m of capital investment made in 2020. Maintenance capital spend, on items
that are direct replacements and not specifically enhancement investments, was £0.7m, which is a significant reduction on last year’s £2.4m.
This was a function of the Board’s decision to reduce discretionary spend to an absolute minimum.
Commencement of new strategic capital expenditure was placed on hold at the announcement of Lockdown, but the Board decided to
complete the projects that were already in progress. As a result, total spend in 2020 was £6.3m compared to £9.0m in 2019. This represents a
30% saving, reflecting the long-term planned nature of these investments as well as the decision at the end of 2019 to front-end load the
strategic developments for 2020 to maximise the in-year benefits.
Inward Investment of £2.7m focused on eight further Pins & Strings implementations, taking the total completed estate to 87%, and two
significant refurbishments at Acton and Birmingham Star City. These projects had little opportunity to deliver returns in 2020 but are fully
expected to reduce costs and drive incremental returns on reopening.
Estate expansion was principally the investment in Manchester Printworks at £3.1m. Unfortunately, construction delays and complexities due
to Covid-19 added around 20% to the total cost of the project. However, we are delighted with the result and even though the centre opened
under significant restrictions in September, the initial trading exceeded expectations. We are confident that this next generation centre will be
one of the strongest in our estate.
Finally, £0.5m was invested in the customer experience enhancement. This was a combination of ongoing investment in digital enablement,
for example being first to market with a web-based food and drink ordering platform, as well as developing our CRM platform and enhancing
our website to enable us to be the first UK bowling operator to offer ApplePay and GooglePay.
These additions to the asset base have all strengthened the underlying business model and we are confident that they remain relevant
and additive to our customer proposition post Covid-19. We fully expect these projects to deliver strong double-digit returns once the
business reopens.
Depreciation and amortisation on an IFRS 16 basis was £16.6m. The additional £8.6m compared to IAS 17 described above all relates to the
depreciation of our right-of-use property assets.
54
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCE COSTS AND BANKING ARRANGEMENTS
£000
Interest on bank debt
Amortisation of bank financing costs
Lease interest charges
Other finance costs
Net interest
52 weeks to
27 December
2020
IFRS 16
52 weeks to
27 December
2020
IAS 17
52 weeks to
29 December
2019
IAS 17
(330)
(49)
(5,393)
(43)
(5,815)
(330)
(49)
(27)
(51)
(457)
(277)
(56)
(282)
(173)
(788)
Net interest has reduced year-on-year on an IAS 17 basis despite the increased burden of debt. Bank interest increased by 19.1% to £0.3m
reflecting the increased drawings on the Group’s RCF facility. However, other finance costs and leases both reduced by a larger amount as a
result of support from our key suppliers who allowed us to pause our leases in exchange for a commensurate increase in term at the end of the
lease.
Lease charges as a result of the liability on the right-of-use property assets was an additional £5.4m. This is larger than anticipated last year as
the Group agreed seven lease regears in 2020 in order to help reduce the cash burden of leases in 2020.
Since the year end, the Group has secured an additional £14m term loan with our current banking partner under the Government’s Coronavirus
Large Business Interruption Loan Scheme (‘CLBILS’). This facility increases the Group’s available headroom significantly, and is sufficient to
provide liquidity longevity well into 2022 even if the business should remain closed. As part of the process of securing the CLBILS, the Group
agreed with the bank a new set of financial covenants on the existing RCF and the new CLBILS which recognise the impact of the pandemic.
GROUP ADJUSTED LOSS BEFORE TAX
The Group delivered an adjusted loss before tax of (£16.3m) on an IAS 17 basis. On an IFRS 16 basis this loss was (£21.7m). The difference is a
result of the profit compression effect of the standard on businesses like ours that are at the early stages of their lease tenure. The differential
is larger than anticipated in last year’s report as a result of the lease regears in 2020 which have extended the weighted average lease expiry by
three years to 19 years. This differential does not impact cash flow and in fact in 2020 and 2021 have benefited from improved cash positions as
a result of the lease regears by exchanging short-term rent payments for a longer lease tenure.
DISPOSAL OF ASSETS
The business has continued the roll-out of the latest technology of bowling pinsetters, referred to as Pins & Strings. When these are installed, it
results in a non-cash loss on disposal of the existing pinsetters. In 2020 the profit of £0.1m arose on the disposal of gaming machines which
was significantly lower than in 2019 when the loss from pinsetters was (£0.9m). The eight centres benefiting from Pins & Strings in 2020 had
somewhat older pinsetters that had been almost fully depreciated.
Although the programme does result in this non-cash loss, the technology generates a significant return on investment from reduced costs
and an improved customer experience. The business has now almost completed the programme, with only six centres remaining, and has
temporarily placed it on hold in order to conserve cashflow.
AMORTISATION OF ACQUISITION INTANGIBLES
The amortisation of acquisition intangibles charge was £0.1m (FY19: £0.3m) with the decline arising from the amortisation of customer lists to nil
in the prior year.
TAXATION
There is no tax due for 2020 as a result of the loss, and the Group has generated a tax credit of £3.9m. This credit is split between:
● a £2.5m corporation tax credit being a prior year adjustment; and
● a £1.4m deferred tax credit mainly arising from the recognition of a deferred tax asset on the remaining FY20 tax losses.
The Group has submitted an early loss carry back claim to HMRC in respect of £2.3m of 2019 tax paid and this is included as a receivable on the
balance sheet. The claim is still under consideration by HMRC and a tax refund has not yet been received.
(LOSS)/PROFIT AFTER TAX
The Group generated a loss after tax of (£17.7m). On an IAS 17 basis the loss after tax was (£12.3m) (FY19: +9.0m). The year-on-year change of
(£21.3m) is a function of the lost revenue and enforced closures as a result of the Covid-19 pandemic.
NUMBER OF SHARES AND (LOSS)/EARNINGS PER SHARE
The number of shares in issue is 68,346,970. Increases in issued share capital in the year arose from a 5% equity placing of 3,250,000 additional
shares in March and the issue of 96,970 shares in May in respect of the partial vesting of the 2017 LTIP scheme.
(Loss)/earnings per share were a loss of (26.3p). On an IAS17 basis the loss per share was (18.1p) (FY19: +13.9p). The EPS compression of (4.2p)
as a result of two major elements: the front-end loaded nature of the lease portfolio, which charges a higher interest charge in the early years
than the cash equivalent of the rent; exacerbated by the £1.4m savings to IAS 17 EBITDA in respect of lease regears which are not recognised
under IFRS 16. The in-year savings to EBITDA as a result of savings in rent contribute 2.0p to the EPS compression, which is a one-off for 2020.
Ten Entertainment Group plc Annual Report and Accounts 2020
55
FINANCIAL REVIEW CONTINUED
DIVIDENDS
The Board is not recommending a dividend for 2020 in order to conserve liquidity headroom. The Board’s priority is to reopen the business
safely and return trading to a steady and consistent position of cash generation. The Group has a track record of high-returning strategic
investments, and the capital deployment policy will be reviewed together with the dividend policy and debt strategy once the Group resumes
normal trading and has sufficient cash resources. The Group must first discharge its obligations under the CLBILS term loan in order for a
dividend to be paid.
BALANCE SHEET
£000
Assets
Goodwill and other intangible assets
Property, plant and equipment
Deferred tax asset
Right-of-use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Lease liabilities
Bank borrowings
Trade and other payables and provisions
Other liabilities
Net assets
NET DEBT ANALYSIS
£000
Closing cash and cash equivalents
Bank loans
Bank net debt
Leases – machines and other
Leases – property
Statutory net debt
CASH FLOW
£000
Cash flows from operating activities
Group adjusted EBITDA
Maintenance capital
Movement in working capital
Lease and taxation payments
Free cash flow
Dividends paid
Cash flow available for investment
Proceeds from issue of shares
Inward investment
Transforming customer experience
Expanding the estate
Exceptionals and share-based payments
Cash flow after investment
Draw down/(repayment) of debt
Opening cash and cash equivalents
Cash and cash equivalents – end of period
56
Ten Entertainment Group plc Annual Report and Accounts 2020
27 December
2020
IFRS 16
27 December
2020
IAS 17
29 December
2019
IAS 17
Movement
30,136
41,453
4,118
157,145
508
1,672
7,394
242,426
(185,146)
(19,908)
(5,981)
(1,582)
30,136
46,410
1,131
—
508
1,785
7,394
87,364
(7,224)
(19,908)
(11,115)
(1,579)
(212,617)
(39,826)
29,809
47,538
30,314
47,248
—
—
1,297
4,929
2,188
85,976
(8,109)
(6,109)
(11,505)
(3,342)
(29,065)
56,911
(178)
(838)
1,131
—
(789)
(3,144)
5,206
1,388
885
(13,799)
390
1,763
(10,761)
(9,373)
27 December
2020
IFRS 16
27 December
2020
IAS 17
29 December
2019
IAS 17
7,394
(20,000)
(12,606)
(6,945)
(178,201)
(197,752)
7,394
(20,000)
(12,606)
(7,224)
—
(19,830)
2,188
(6,250)
(4,062)
(8,109)
—
(12,171)
Movement
5,206
(13,750)
(8,544)
885
—
(7,659)
52 weeks to
27 December
2020
52 weeks to
29 December
2019
Movement
(7,860)
(741)
5,489
(1,636)
(4,747)
(2,405)
(7,152)
4,878
(2,710)
(483)
(3,105)
25
(8,544)
13,750
2,188
7,394
23,568
(2,369)
1,829
(5,325)
17,703
(7,150)
10,553
—
(4,183)
(2,198)
(2,618)
(1,414)
140
(3,250)
5,298
2,188
(31,113)
1,628
3,749
3,305
(22,431)
4,745
(17,686)
4,878
1,473
1,715
(503)
1,439
(8,684)
17,000
(3,110)
5,206
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
IFRS 16
The Group adopted IFRS 16, using the modified retrospective method, on 30 December 2019, the first day of the accounting period. On
adoption, the group recognised £164.9m of Right-of-Use (‘ROU’) property assets in respect of its leasehold properties. These assets were then
immediately impaired, with the impairment charge of (£16.3m) going to reserves. This was a result of testing the expected cashflows against
the assets. The discount rate to apply in determining the ROU asset is the Group’s incremental borrowing rate, which ranged from 2.1% to
3.8%. The discount rate to apply to the expected cash flows is the Group’s WACC of 11.6%
The future liabilities for the property assets on adoption were (£151.5m) with an average lease expiry of 19 years, a function of the recent
property deals to secure long-term tenure at our centres.
During the year, a further impairment test was triggered because of the Covid-19 pandemic. Since this occurred after the 30 December 2019
adoption, the cashflows needed to be modified to include a reduced cashflow for 2020 and 2021 due to the enforced closures and reduced
trading. This impairment test resulted in a further impairment charge in the 2020 P&L of £2.5m.
ACCOUNTING STANDARDS AND USE OF NON-GAAP MEASURES
The Group has prepared its consolidated financial statements based on International Financial Reporting Standards as adopted by the
European Union for the 52 weeks ended 27 December 2020. The basis for preparation is outlined in the accounting policies to the financial
statements on page 110.
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 2 to the financial statements on page 121.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s principal risks and uncertainties are set out on pages 46 to 48 of the Annual Report.
Attention is drawn in particular to the risk associated with Covid-19. At the time of signing all centres in the Group are closed due to the
ongoing international pandemic after operating only 51% of the year in 2020 and not open at all during 2021. The business has taken significant
actions to conserve cash, raise financing and work with the banks to ensure liquidity is available and covenants are reset to recognise the
pandemic. These actions, described in the CEO’s Operating Review, mean that the Directors are confident that the business has sufficient
liquidity to continue closed for well over 12 months. Therefore these financial statements have been prepared on a going concern basis.
NOTE ON ALTERNATIVE PROFIT MEASURES
The group uses a number of alternative profit measures (“APM”s) in the disclosure of its results. In particular for 2020, with the transition to IFRS 16,
the Group has presented its results for the year on an IAS 17 and IFRS 16 basis. The use of IAS 17 basis for 2020 aids year-on-year comparison as it is
not possible to restate 2019 on an IFRS 16 basis. Therefore, where year-on-year movements are discussed, these are on an IAS 17 basis.
Other APMs are also used, such as EBITDA and Free Cash Flow, where they provide the user with additional information that helps them
to interpret the results using measures that the Board consider relevant and helpful. It should be noted that like-for-like sales refer to sales
in centres that were open and trading in both periods. The measure excludes new centres that were not in place in the prior year, but also
excludes periods where existing centres were in an enforced closure period in the current period due to Covid-19 restrictions.
The Strategic Report was approved by the Board and signed on its behalf by:
GRAHAM BLACKWELL
CHIEF EXECUTIVE OFFICER
29 March 2021
ANTONY SMITH
CHIEF FINANCIAL OFFICER
29 March 2021
Ten Entertainment Group plc Annual Report and Accounts 2020
57
DeDioDe
CHAIRMAN’S INTRODUCTION TO GOVERNANCE
DEAR SHAREHOLDERS
The Board has worked tirelessly to assure
the future of the business and has been
extremely active throughout 2020 in taking
swift and decisive action to meet the
challenges of Covid-19 as they have
unfolded. More than ever, good governance
has been essential in preserving shareholder
value and protecting the long-term interests
of all stakeholders.
2020 was a year of change for the TEG Board,
and I am confident that we have the strongest
possible Board in place to lead the Group
back to growth. In June our CEO Duncan
Garrood made the decision to leave the
hospitality sector, and he resigned from the
Board on 8 September. Thanks to the wealth
of experience of our Board we were able to
make a seamless transition to our new CEO,
Graham Blackwell, who has served the
business since IPO as Chief Commercial
Officer and latterly Chief Operating Officer.
The Board is confident that the Executive
partnership of our CEO and CFO is sufficiently
strong and experienced that there is no
requirement to replace the Chief Operating
Officer role.
David Wild stepped down in June as Senior
Independent Director at the same time as he
stepped away from his executive position at
Domino’s Pizza. I am pleased to say that our
continuity planning worked equally well with
our non-executive positions and we were
fortunate to have such high-calibre
independent non-executives that allowed
Adam Bellamy to again seamlessly make the
transition. Due to the Board’s focus on
ensuring long-term liquidity and conserve
cash, the appointment of a replacement
Non-Executive Director was put on hold. It is
our intention to appoint a further
independent Non-Executive Director to the
Board in 2021.
During a year of
adversity, the experience
of our Board has been a
great advantage
NICK BASING
CHAIRMAN
KEY GOVERNANCE DEVELOPMENTS
DURING THE REPORTING PERIOD
The Board is committed to reporting against
the UK Corporate Governance Code 2018 (the
‘Code’) of the Financial Reporting Council and
the Board intends to comply with the
requirements of the Code as it applies to
smaller companies (i.e. those below the FTSE
350). The principal steps we have taken this
year to address other elements of the 2018
Code and other corporate governance
developments include:
● A comprehensive review of the Group's
remuneration policy, with the support of
an independent adviser.
● Improving our reporting on how we focus on
our sustainability goals
● Implementation of a Fair Tax Policy
● Designating Julie Sneddon as Non-
Executive Director responsible for
engagement with the workforce .
OTHER ACTIVITIES IN 2020
The restrictive nature of the Covid-19 pandemic
on travel has meant that the Board has adapted
to the new remote working environment. I am
pleased with the effectiveness and I am also
confident that some elements of these working
practices will remain in the future. The Board
has met via video conference call throughout
2020. This has meant that it has been able to do
so more frequently, with more than twice the
number of Board meetings held in 2020
compared to the previous year. Principal focus
areas have been:
Culture, values and ethics – The challenges
posed by the pandemic have emphasised the
need to behave responsibly and fairly with
those we do business with. The Board is very
aware of the importance of aligning business
strategy with the Company’s culture, values
and ethics and on ensuring that good
standards of behaviour permeate all levels of
the organisation to support our long-term
success. For more information on
engagement with employees and other key
stakeholders – see pages 39 to 43.
Meeting our investors – The Company
maintains a comprehensive investor relations
programme, designed to ensure that our
Executive Directors meet with investors and
analysts regularly. While physical meetings
have not been possible, the use of video
conferencing platforms has ensured that
our investors have been kept informed of
developments, and we have engaged with
the majority of our shareholder register in
ensuring we meet their expectations in the
context of the ESG agenda – see pages 39
to 43.
Board balance – The Board has worked
extremely effectively throughout 2020.
The transition to a new CEO has afforded
the opportunity to reduce the Executive
Board members to two (the CEO and CFO),
who are ably supported by a strong Executive
Committee. This has streamlined the
decision-making process and facilitates an
even balance between executive, independent
non-executive and non-independent
non-executive. The names, roles and
responsibilities of the Directors and our
Executive Committee are detailed on
pages 60 and 61 and the recruitment process
is explained on page 70.
Independence of Directors – The Board
reviewed the independence of all
Non-Executive Directors (excluding the
Chairman and Christopher Mills) and
determined that they all continue to be
independent. The Chairman is not considered
to be independent because he has previously
held the position of CEO, albeit before the
58
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
COMPLIANCE WITH THE 2018 UK
CORPORATE GOVERNANCE CODE ('THE CODE’)
The UK Corporate Governance Code 2018 applies to companies with accounting periods
commencing on or after 1 January 2019. As the Company’s period began on 30 December 2019
the Code has applied to the Company for the first time in FY20. The Company has complied
with all the main principles and provisions of the Code as they apply to it as a ‘smaller company’
(defined in the Code as being a company below the FTSE 350) except as indicated below:
PROVISION EXPLANATION
Provision 9 and 19
The Chairman was not independent on appointment due to his previous role as CEO of the
Group and his 11 years' tenure in the business. This experience has been invaluable to the
business during 2020. The Chair has now made the decision to step down in September when a
successor is in place. The board will ensure that the new Chair is independent on appointment.
Provision 11
At least half of the Board should be Non-Executive Directors whom the Board considers to be
independent. As reflected on pages 60 and 61 the Board consists of two Executive Directors, two
independent Non-Executive Directors and two Non-Executive Directors. The two Non-Executive
Directors, though not independent, consist of a Chairman with a wealth of experience in the
industry; and a Director who represents the largest shareholder and thus ensures the Board is
always aware of the interests of its investors. We believe that this is a well-balanced Board with a
strong combination of Executive skills; independent challenge and industry knowledge and this
balance provides effective control of the business. During the first half of 2020, the Board did
have three independent Non-Executive Directors before David Wild left the business. The
Nomination Committee intends to appoint a replacement independent Non-Executive Director
during the course of 2021 which will bring the Board independence level back to 50%.
Provision 17
The majority of the members of the Nomination Committee should be independent Non-
Executive Directors. After the departure of David Wild from the Board, this committee has had
two independent Non-Executive Directors and two Non-Executive Directors. The Nomination
Committee intends to appoint a replacement independent Non-Executive Director during the
course of 2021 which will bring the majority requirement level back.
Company was listed. However, the Board
considers this depth of experience has been
extremely useful in navigating the challenges
of 2020 and has contributed to securing the
long-term future. Christopher is also
considered non-independent due to his
shareholding as part of Harwood Capital.
However, the Board considers that his very
broad experience and expertise helps
ensure that the interests of the shareholders
are considered appropriately in all
decision making.
Succession pipeline – The Board reviewed
and discussed the formal plan put forward
around succession planning for the Executive
team which was topical after the recent
change in the CEO and CFO. The fact that the
Board was able to appoint an internal
successor to the role of CEO, as part of an
independent external process, is testament
to the strong succession pipeline in
the business.
BOARD ACTIVITY IN 2021
In 2021, the Board has already met three
times with the focus on preparing for
reopening. The CLBILS loan has been
completed and the new digital strategy has
been signed off which, among other things,
means that TEG is the first bowling operator
in the UK to enable ApplePay and GooglePay
on its website. The Board has also agreed an
agile budgeting approach for FY21 whereby
scenario-based cost and sales budgets have
been set for the business which are
dependent on the prevailing Government
regulations.
The Board has dealt with the challenges
posed by Covid-19 through careful
consideration of all the stakeholder groups. I
am confident that as we emerge from the
crisis we have treated our employees,
suppliers, customers and investors fairly and
appropriately in making prudent decisions
that have protected the interests of the
business for the long-term future.
NICK BASING
CHAIRMAN
29 March 2021
Ten Entertainment Group plc Annual Report and Accounts 2020
59
BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE
NICK BASING
INTERIM EXECUTIVE CHAIRMAN
GRAHAM BLACKWELL
CHIEF EXECUTIVE OFFICER
Appointed to the Board
Nick was appointed as Non-Executive
Chairman of the Company on 15 March
2017 and Interim Executive Chairman on
26 June 2020 until 1 April 2021.
Appointed to the Board
Graham was appointed to the Board on
15 March 2017 as Chief Commercial Officer
and was appointed as Chief Executive
Officer on 8 September 2020.
ANTONY SMITH
CHIEF FINANCIAL OFFICER
Appointed to the Board
Antony was appointed as Chief
Financial Officer on 1 April 2019.
Committee membership:
N
Experience, skills and qualifications
Nick is an experienced industry leader in public and
private equity with over 30 years in the consumer
and leisure industry. Nick oversaw the turnaround
and rapid expansion of Paramount Restaurants plc
(subsequently Paramount Holdings) where he was
chief executive officer for over six years, before its
private sale. Prior to that he held a number of senior
management positions with leading companies
such as Rank, First Leisure, Granada and Unilever.
He was appointed to the Board of Essenden plc,
the early forerunner to TEG plc, as chief executive
officer on 18 August 2009, then became chairman
of IB Equity in 2015, whilst it was majority owned by
Harwood Capital. In recent years, he has also served
as a non-executive director on the boards of the
following companies: Brakes Brothers Holdings Ltd,
Elegant Hotels Group plc and ‘The Championships,
Wimbledon’.
Graham has over 30 years’ experience in the
bowling industry following his roles at Granada,
Allied, Georgica and Essenden Limited and has
served on the Ten Entertainment Board since the
IPO in 2017. He was appointed permanent Chief
Executive Officer on 21 January 2021, following a
successful period as interim Chief Executive Officer
since September 2020. Graham had previously
been Chief Commercial Officer of the Group since
2013 following his nine-year period as Operations
Director of the Group’s bowling business. Graham’s
experience in the sector and operational expertise
is second to none and has been extremely valuable
during a challenging 2020. Graham’s expertise in
his previous role as Chief Commercial Officer was
instrumental in gaining the support of the supplier
base and minimising cash burn through 2020.
Antony is a member of the Chartered Institute of
Management Accountants ('CIMA'). He qualified in
industry working across a variety of sectors in roles
spanning Financial Control, Strategic Management
and Reporting and Planning. He most recently
served as Finance Director of Wickes, the retail
division of Travis Perkins PLC, overseeing a strategic
transformation programme to refurbish the retail
estate and grow the online performance to create
a truly omnichannel business. This resulted in
23% growth in sales and a significant increase in
operating profit. Prior to his six years at Wickes,
Antony spent ten years at RHM plc and Premier
Foods plc as Director of Finance for Hovis and
latterly in a central role overseeing a refinancing
programme and finance transformation. Antony
holds a Masters in Natural Sciences from the
University of Cambridge.
The Executive Committee
The Executive Committee comprises the Executive Directors Graham Blackwell and Antony Smith as well as the following Executive Committee Members:
BRET ASTLE
OPERATIONS DIRECTOR
LISA JOHNSON
DIGITAL COMMUNICATIONS DIRECTOR
Bret has over 20 years of leisure experience and 16 years of operational
and commercial experience with the Group. Bret was appointed to the
role of Operations Director in July 2020, having previously been on the
Executive Committee since September 2019. Bret joined the Group as a
site General Manager in 2005, progressing to both Regional Manager and
Regional Director. Bret’s in-depth understanding of the business and each
of the centres in the estate makes him best placed to drive the success
of the operation. Prior to joining the Group Bret had roles at other leisure
companies including First Leisure plc and Luminar Leisure plc.
Lisa has over 25 years of marketing experience across the leisure, hospitality
and travel sectors, as well as working for retail giant amazon.co.uk in its first few
years of launching in the UK. Brand, customer and product development for
Hilton Hotels, National Rail, Amazon and Yellow Pages as well as several creative
agencies. Marketing director roles for Wagamama, Legoland and most recently
Casual Dining Group, leading new concept development for the Concessions
and Franchise division, tendering for new sites within airports, train stations and
holiday parks, and franchising the core restaurant brands overseas. Strategic
consulting positions include The Restaurant Group and Bounce Ping Pong bars.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ADAM BELLAMY
NON-EXECUTIVE DIRECTOR
CHRISTOPHER MILLS
NON-EXECUTIVE DIRECTOR
JULIE SNEDDON
NON-EXECUTIVE DIRECTOR
Appointed to the Board
Adam was appointed as Non-Executive
Director on 1 November 2018 and Senior
Independent Non-Executive Director
on 17 July 2020.
Appointed to the Board
Christopher was appointed as
Non-Executive Director of the
Company on 15 March 2017.
Appointed to the Board
Julie was appointed as
Non-Executive Director
on 22 March 2017.
Committee membership:
A N R
N
A
N
R
Experience, skills and qualifications
Adam is a highly experienced finance professional
who has worked in a wide range of consumer facing
growth businesses. He is currently a non-executive
director at Loungers plc, In The Style Group plc and
Gymfinity Kids Limited. He is also chair of the audit
committee at Loungers and In The Style. Adam
was previously chief financial officer and then a
non-executive director at Pure Gym Limited, prior
to which he was finance director at Atmosphere
Bars & Clubs Limited and finance director at D&D
London Limited. Earlier in his career he held various
finance positions at Whitbread, House of Fraser and
Granada Group.
Christopher is a director and the sole shareholder
of Harwood Capital Management Limited which is a
designated corporate member and the controller of
Harwood. Harwood Capital Management Group was
formed in 2011 by Christopher on his acquisition of
Harwood from J O Hambro Capital Management
Group Limited. He is also the chief executive officer
and director of NASCIT (a UK-listed investment
trust) and a director and investment manager of
Oryx. He has a long and successful investing track
record and is a non-executive director of a number
of both public and private companies, Christopher
was appointed as a Non-Executive Director of the
Company on 15 March 2017.
Committee membership key:
Julie has over 20 years’ experience in senior
executive roles with the Walt Disney Company,
including most recently as executive vice president
of Disney Stores Worldwide which carried
responsibility for over 330 stores across North
America, Europe and Japan. Julie has led multiple
strategic business development and organisation
transformation change initiatives for Disney
with a focus on retail, brand development and
digital transformation.
Audit Committee
Nomination Committee
Remuneration Committee
Chair
Board knowledge matrix
Ten Entertainment Group plc Annual Report and Accounts 2020
61
KnowledgeN BasingA BellamyC MillsJ SneddonG BlackwellA SmithB AstleL JohnsonLeisure and Hospitality●●–●●–●●Digital/Omnichannel●––●●––●Consumer Relationship●––●●–●●Supplier/Partner Management●––●●●●–Operating Finance/Accounting–●●––●––Corporate Strategy●●●●●●––M & A●●●–●●––Quoted Market Governance●●●––●––Risk and Control–●●–●●●–Technology and Systems––––●–––Shareholder Management●●●––●––Employee Engagement●––●●●●–Multi Geographic Jurisdictions●–●●–––– CORPORATE GOVERNANCE REPORT
board governance
GOVERNANCE STRUCTURE
The Company’s governance structure is designed such that the Board focuses on providing experienced leadership to the Group, sets the
Group’s strategy, monitors performance and ensures that appropriate financial and human resources are in place for the Company to meet its
objectives. The Board is also responsible for taking the lead in setting and embedding the Company’s culture, value and standards, and for
ensuring that appropriate systems, procedures and controls are in place to support the effective assessment and management of risk and the
safeguarding of shareholder interests.
The Board operates in accordance with the Company’s Articles of Association ('Articles') and has established Audit, Remuneration and
Nomination Committees to assist it in discharging its responsibilities. Each Committee has its own written terms of reference (available on the
Company’s website). Certain matters are specifically reserved for decision by the Board and documented in a written schedule.
BOARD DECISION MAKING
As part of its decision making, the Board has regard to a variety of matters including the interests of various stakeholders, the consequences of
its decisions in the long term and its long-term reputation in the marketplace. Each year, the Board holds a strategy session which considers
future plans and initiatives for beyond the next 12 months. The Directors also review the Business Plan and Budget for the forthcoming year in
detail. The Executive Committee attends these sessions and presents to the Board on each of its respective departments to ensure the Board
has all relevant information on behalf of stakeholder groups, such as environmental impact, community assessment via site appraisals,
employee and member feedback, and any necessary communications, and to ensure that the Board’s strategy is clearly communicated ahead
of execution. To help reduce risk as part of decision making, the Audit and Risk Committee reviews all risks that the Company faces, which are
not limited to those disclosed as principal risks in this report.
The schedule of matters reserved for the Board includes:
Strategy and management
● Leadership of the Company, setting
values and standards
● Developing, approving and overseeing
the strategic aims and objectives
● Oversight of Group operations and
performance
Structure and capital
● Major changes to corporate structure,
including acquisitions and disposals
● Major changes to capital structure,
including approval of Group treasury
policy and arrangements
Financial reporting and controls
● Approval of annual and half-year financial
statements
● Approval of dividend policy, including
recommendation of final dividend
● Approval of significant changes in
accounting policy
Internal controls
● Ensuring maintenance of sound internal
control and risk management systems,
and assessing their effectiveness
Corporate governance
● Review of the Group’s overall governance
arrangements
● Determining the independence of
● Approving Group risk appetite statements
Directors
● Considering the views of shareholders
● Authorising any conflicts of interest
Other
● Approval and monitoring of the Share
Dealing Code
● Approval of political donations
Board membership
● Changes to the structure, size and
composition of the Board
● Ensuring adequate succession planning
Remuneration
● Determining the policy for the Executive
Directors
● Determining Non-Executive Director fees
● Introduction of new share plans or
changes to existing plans to be put to
shareholders
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Key Board roles, responsibilities and committees
BOARD MEMBERSHIP
The Board currently comprises the Chairman, the Chief Executive Officer, the Chief Financial Officer, a Senior Independent Director and two
Non-Executive Directors. The names and biographical details of the serving Directors and the offices held by them can be found on pages 60
to 61. We believe that the Board is of sufficient size that the requirements of the business and good governance can be met and normal
succession challenges managed, but is not so large as to be unwieldy.
CHAIRMAN
THE ROLE OF THE CHAIRMAN IS:
● providing leadership to and ensuring
the effectiveness of the Board;
● ensuring that agendas emphasise
strategic, rather than routine, issues and
that the Directors receive accurate and
clear information well ahead of the time
when a decision is required;
● promoting a culture of openness and
constructive debate, and facilitating an
effective contribution by the
Non-Executive Directors;
● arranging informal meetings of the
Directors, including meetings of the
Non-Executive Directors;
● ensuring effective communication by the
Group with its shareholders;
● arranging for the Chairs of the
Committees to be available to answer
questions at the AGM and for all
Directors to attend; and
● taking the lead in providing a properly
constructed, full, formal and tailored
induction programme and ongoing
development for new Directors.
CHIEF EXECUTIVE OFFICER
THE ROLE OF THE CHIEF EXECUTIVE
OFFICER IS:
● leading the development of the Group’s
strategic direction and objectives;
● identifying and executing acquisitions
and disposals and leading geographic
diversification initiatives;
CHIEF FINANCIAL OFFICER AND
COMPANY SECRETARY
THE ROLE OF THE CHIEF FINANCIAL
OFFICER IS:
● overseeing the strategic planning cycle
to plan capital allocation and investment
decision making
● ensuring the business is adequately
● reviewing the Group’s organisational
funded to meet its needs and obligations
structure and recommending changes as
appropriate;
● identifying and executing new business
opportunities;
● overseeing risk management and
internal control;
● managing the Group’s risk profile,
including the health and safety
performance of the Group;
● implementing the decisions of the Board
and its Committees;
● building and maintaining an effective
Group leadership team; and
● ensuring the Chairman and the Board are
alerted to forthcoming complex,
contentious or sensitive issues affecting
the Group.
● communicating with current and
potential investors
● providing business information, KPIs and
insight into running and improving the
business
● key relationship management with
critical professional partners
● keeping accurate financial records and
controls
● providing HR operational support to the
business
THE ROLE OF THE COMPANY SECRETARY IS:
● keeping accurate records of board
meetings and decisions
● providing legal and compliance expertise
● ensuring compliance with relevant
regulations and codes
SENIOR INDEPENDENT DIRECTOR
NON-EXECUTIVE DIRECTORS
('SID')
THE ROLE OF THE SID IS:
● meeting regularly with the
independent Non-Executive Directors;
● providing a sounding board for the
Chairman and acting as an
intermediary for other Directors;
● being available to shareholders if they
have concerns which contact through
the normal channels of Chairman or
Chief Executive Officer has failed to
address or would be inappropriate; and
● holding annual meetings with
Non-Executive Directors without
the Chairman present.
THE ROLE OF A NON-EXECUTIVE
DIRECTOR IS:
● providing creative contribution to the
Board by way of constructive
criticism;
● bringing independence, impartiality,
experience, specialist knowledge and
a different perspective to the Board;
● providing guidance on matters of
concern and strategy;
● overseeing risk management and
internal control;
● protecting shareholder and
stakeholder interests;
● constructively challenging the Executive
Directors and monitoring Executive
performance;
● supporting the Executive team in shaping
and delivering the strategic goals of the
business;
● optimising shareholder return and
protection of shareholder assets; and
● ensuring the Board is able to work together
effectively and make maximum use of its
time.
Ten Entertainment Group plc Annual Report and Accounts 2020
63
CORPORATE GOVERNANCE REPORT CONTINUED
Key Board roles, responsibilities and committees continued
Board independence
The Board has considered the
independence of the current Directors
as below:
AUDIT COMMITTEE
Chair
Adam Bellamy
Members
Invitees
Julie Sneddon;
David Wild (to 26 June)
Nick Basing; Christopher Mills
NOMINATION COMMITTEE
Chair
Julie Sneddon
Members
Adam Bellamy; Nick Basing;
Christopher Mills;
David Wild (to 26 June)
EXECUTIVE DIRECTORS
GRAHAM BLACKWELL
CHIEF EXECUTIVE OFFICER
ANTONY SMITH
CHIEF FINANCIAL OFFICER
The Audit Committee assists the Board in
discharging its responsibilities for the integrity
of the financial statements, reviewing the
internal control environment and risk
management systems, managing the
relationship with the external auditors and
monitoring the effectiveness and objectivity of
the external and internal auditors.
The Nomination Committee oversees the
recruitment of the Directors and senior
management and advises on matters relating
to the Board’s membership and Committee
appointments, including reviewing succession
plans. The Nomination Committee also
regularly reviews and monitors the overall skills
and experience of the Board.
The Audit Committee met four times during
the year and will normally meet not fewer than
three times a year at the appropriate reporting
and audit cycle.
The Nomination Committee met twice during
the year, with further ad hoc meetings to
finalise recruitment decisions, and will normally
meet at least twice annually.
2020 SUMMARY
The principal focus of the Committee during
the year was to ensure the smooth transition
to a new CEO following the resignation of
Duncan Garrood. The Committee decided to
appoint Nick Basing as Executive Chairman on
an interim basis from July 2020 until March
2021 to ensure that there was adequate
continuity in place. The Committee then
instigated a rigorous process of benchmarking
an internal candidate against the external
market. This resulted in the promotion of
Graham Blackwell from Chief Operating Officer
to Chief Executive Officer on 8 September
2020.
The Committee fully reviewed the Board
structure and concluded that the Board was
appropriate with two Executive Directors, the
CEO and CFO, and that no replacement
Executive Director was needed.
The Committee placed on hold the
replacement of David Wild, who resigned as
Senior Independent Director on 26 June, until
there was more long-term cashflow certainty
and the business reopened. A replacement
Independent Non-Executive Director will be
appointed in 2021 and Adam Bellamy has been
appointed Senior Independent Director.
INDEPENDENT DIRECTORS
ADAM BELLAMY
SENIOR INDEPENDENT
DIRECTOR
JULIE SNEDDON
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
2020 SUMMARY
The Committee spent considerable time and
focus on the liquidity longevity of the business,
particularly in relation to the long-term viability
statement and testing scenarios in relation to
Covid-19 risks. The Committee also reviewed
the business modelling in relation to
discussions with RBS for application for the
CLBILS loan.
With the business substantially closed, the
internal audit focus was on ensuring that the
applications for Government funding were
appropriately claimed and documented.
NON-EXECUTIVE DIRECTORS
NICK BASING
CHAIRMAN1
CHRISTOPHER MILLS
1 Nick Basing was temporarily made Interim
Executive Chairman from 1 July 2020 until
31 March 2021 in order to oversee the
transition to a new CEO and will revert to
Non-Executive Chairman on 1 April 2021.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
REMUNERATION COMMITTEE
Chair
Adam Bellamy
Members
Invitees
Julie Sneddon*;
David Wild (Chair until 26 June)
Nick Basing; Christopher Mills
The Remuneration Committee determines the
terms and conditions of employment,
remuneration and rewards of the Executive
Directors, the Chairman and the leadership
teams. The Remuneration Committee aims to
offer an appropriate balance of fixed and
performance-related, immediate and deferred
remuneration, but without overpaying or
creating the risk of rewards for failure. The
Remuneration Committee met four times
during the year and will normally meet at least
twice annually.
2020 SUMMARY
The principal focus of the Committee for 2020
was to ensure that investor feedback from the
AGM was fully taken on board and the
Remuneration Policy fully updated to address
any concerns raised.
The Committee conducted a full review of the
Remuneration Policy and remuneration levels
for the Executive Directors, including taking
into account the new Board structure and
promotion of the Chief Operating Officer to
Chief Executive Officer. This approach was
supported by external remuneration
consultants to ensure that the balanced
changes implemented were better aligned to
shareholder requirements as well as sufficient
to retain the services of its strong Executive
leadership team.
Also in 2020 the Committee adapted to the
cash conservation needs of the Covid-19
pandemic, which included a 20% pay
reduction during the first Lockdown; a delay in
issuing 2020 LTIP awards; and an introduction
of a share price underpin into the 2020 awards.
The Committee considered the performance
of the Executive during 2020 to have been
strong but nonetheless concluded that it
would not be appropriate to exercise discretion
over any of the bonus targets and therefore no
bonus was awarded in respect of the
performance in FY20.
FY20 meeting attendance
Director
Independence
Graham Blackwell1 Exec
Antony Smith
Exec
Adam Bellamy (SID) I
I
Julie Sneddon
Nick Basing (Chair) Exec
Christopher Mills
NI
Duncan Garrood1
Retired Exec
David Wild2
Retired I
Main
Board
13/13
13/13
12/13
12/13
13/13
13/13
8/8
6/6
Audit
Committee
Nomination
Committee
Remuneration
Committee
4/4
4/4
2/2
2/2
2/2
2/2
4/4
3/4
2/2
1/1
3/3
1 On 8 September 2020 Duncan Garrood resigned as CEO and existing Board member Graham Blackwell replaced
him having previously been CCO.
2 David Wild resigned as Senior Independent Director on 26 June 2020.
Key: NI – Non-Independent
I – Independent Exec – Executive Director
BOARD MEETINGS AND PROCESS
The Board formally met on 13 occasions
during the financial year with further ad hoc
meetings to update on urgent matters. This is
more than ordinarily expected as the Board
guided the business through the Covid-19
pandemic. Key matters discussed included
financial security and liquidity longevity;
accessing Government support; preparing
the business to safely reopen; our employees’
financial and mental wellbeing; trading
performance as the business reopened; and
planning for rebuilding the business in 2021.
All meetings except February’s were
conducted by video conference call. In the
rare event that Board members were unable
to attend meetings this was because the
meetings were new to the 2020 calendar and
clashed with long-standing commitments.
On those occasions the Board members were
provided with the Board documents, and the
Company Secretary sought their input and
feedback in advance of the meeting to ensure
their views were represented.
The Board has met on a further three
occasions to date in FY21, with key matters
discussed including the approval of the 2020
Annual Report and Financial Statements; the
planning for reopening in 2021; the
Sustainability agenda for 2021; budget setting
for 2021; and the progression of the digital
enablement strategy.
The Board intends to meet formally at least
six times a year, with ad hoc meetings called
as and when circumstances require it to meet
at short notice. The Board has approved an
annual calendar of agenda items, with
relevant matters scheduled for consideration
at the appropriate point in the regulatory and
financial cycle. In addition, the Board will
meet at least once a year to discuss strategy,
including a full strategic review of the
business operations and the development of
the Group’s strategic plan. All Directors are
expected to attend all meetings of the Board
and any Committees of which they are
members, and to devote sufficient time to
fulfil their duties as Directors.
Each Non-Executive Director has committed to
the Company that they are able to allocate
sufficient time to the Company to discharge
their responsibilities effectively. This has been
put to the test in 2020, where the
commitment has been significantly more than
usual, and the commitment of all Board
members has been very strong. Any additional
board appointments Non-Executive Directors
are contemplating are discussed with the
Chairman in advance, including the likely time
commitment and whether these could in any
way constitute a conflict of interest. These
matters are formally reviewed by the Board on
an annual basis.
As stated in the Articles of Association and
per the Code, all members of the Board will
be offering themselves for re-election at the
Company’s Annual General Meeting ('AGM')
on 5 May 2021.
Ten Entertainment Group plc Annual Report and Accounts 2020
65
CORPORATE GOVERNANCE REPORT CONTINUED
board EFFECTIVENESS
The Chairman, with the support of the
Company Secretary, reviews the formal and
tailored induction programme developed for
any new Directors joining the Board and that
the development and ongoing training needs
of individual Directors and the Board as a
whole are reviewed and agreed at least
annually. The Company Secretary will ensure
that the Board is briefed on forthcoming legal
and regulatory developments, as well as
developments in corporate governance
best practice.
The Board will focus on the following key
areas to ensure its effectiveness:
● Recruitment: A formal, rigorous and
transparent procedure for the
appointment of new Directors to the
Board, overseen by the Nomination
Committee. For each appointment, the
Board will develop an objective brief
summarising the role and the skills and
experience required and use an
appropriate executive search firm with
proven expertise in the relevant field.
Before confirming an appointment, the
Board will check whether the preferred
individual can commit to the time
expected by the appointment.
● Tools and training: All newly appointed
Directors will have a tailored, formal
induction process on joining the Board,
including the opportunity to meet major
shareholders. The aim is to ensure that
they understand the Company and its
business model, strategy, drivers of value
in the business and key risks, and that they
understand the legal and regulatory
environment in which the Company
operates. Directors are expected to update
and refresh their skills and knowledge on
an ongoing basis, and to continue to build
their familiarity with the Company and its
business throughout their tenure.
The Company will provide the necessary
resources for developing and updating its
Directors’ knowledge and capabilities. All
Directors have access to the services of
the Company Secretary, and the
opportunity to seek independent
professional advice at the Company’s
expense where they judge it necessary to
discharge their responsibilities as Directors
or as members of Board Committees. If
Directors have concerns which cannot be
resolved about the running of the
Company or a proposed action, they can
require that their concerns are recorded in
the Board minutes, or provide a written
statement to the Chairman, for circulation
to the Board. The Board is supplied with
information in a form and of a quality
appropriate to enable it to discharge its
duties effectively. This is provided in good
time ahead of all meetings and decisions,
and Non-Executive Directors are
encouraged to seek clarification from
management whenever they
feel appropriate.
● Conflicts of interest: Directors have a
statutory duty to avoid actual or potential
conflicts of interest. Any Director who
becomes aware that he or she is in a
situation which does or could create a
conflict of interest, or has an interest in an
existing or proposed transaction in which
the Company also has an interest, is
required to notify the Board in writing as
soon as possible. The interests of new
Directors are reviewed during the
recruitment process and authorised (if
appropriate) by the Board at the time of
their appointment. No Director had a
material interest in any contract of
significance in relation to the Company’s
business at any time during the year or to
the date of this report.
RELATIONSHIP WITH SHAREHOLDERS
We maintain a dialogue with shareholders
throughout the year as part of an ongoing
investor relations programme. The Chairman,
the Chief Executive Officer and the Chief
Financial Officer all variously and routinely
engage with analysts, institutional and retail
shareholders and potential investors. Our aim
is to ensure that there are strong
relationships, through which we can
understand those parties’ views on material
issues. Feedback is provided to the Board,
particularly where there are issues of concern,
and the Company’s brokers also provide
independent feedback from investors. All
brokers’ notes are circulated to the entire
Board in order that the Board maintains an
understanding of market perceptions of the
Company. The Non-Executive Directors are
available to discuss any matter shareholders
might wish to raise.
The AGM is treated as an opportunity to
communicate with all shareholders. The
Chairs of all Board Committees attend the
AGM and are available to answer questions.
An explanatory circular containing the notice
of meeting is sent to shareholders at least 23
days beforehand, with separate votes being
offered on each substantive issue. To
encourage shareholders to participate in the
AGM process, the Company will offer
electronic proxy voting through both our
registrar’s website and, for CREST members,
the CREST service. Voting will be conducted
by way of a poll and the results will be
announced through the Regulatory News
Service and made available on the
Company’s website.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“HERE’S TO A MUCH
BETTER 2021’”
TEAM FOUNTAIN
PARK
Ten Entertainment Group plc Annual Report and Accounts 2020
67
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD RESPONSE TO COVID-19
RESILIENCE
In response to the Government’s Lockdown
measures and the growing Covid-19 crisis, the
Board set out clear priorities: To protect our
people and their jobs; to preserve the long-term
future; and to prepare for reopening.
PREPARING FOR A PANDEMIC
The Board reacted quickly as the pandemic
started to emerge. At the beginning of March,
the Board instigated weekly updates to
ensure the safety of its employees and
customers and the financial security of the
business. Meetings moved to online video
conference calls and the Executive
Committee put in place contingency plans for
preparing to safely close down the business
and protect its people and key assets.
SETTING NEW PRIORITIES
Despite a very strong start to 2020, it was
immediately clear that the priorities for 2020
would need rapid re-evaluation. The Board set
three core principles of governance in order
to protect the long-term future and to
insulate the business against the worst
impacts of the Covid-19 pandemic. These
were to protect our business and our people;
to preserve our cash and liquidity headroom;
and to prepare for reopening.
PROTECT
Within a week of the Government’s enforced
closure of all TEG centres on 20 March, the
Board had delivered the following:
● All centres closed and fully cleaned and
sanitised
● All cash collected and key assets secured
and insurance provision updated
● All landlords communicated with and over
£3m of rent concessions secured
● All essential services and contracts
shut down
● £5.0m equity placing delivered to add to
the £25m debt headroom
● Over 95% of staff placed on furlough, even
those not eligible for Government support
● All staff briefed through Yapster to provide
security
● Customer refunds 80% completed
The primary Board objective was to ensure the
business had been safely closed down for an
indefinite period and was ready to reopen at
short notice.
PRESERVE
Once the liquidity headroom of almost £30m
had been secured, the Executive team
focused on reducing the cash outflow in the
business. This included a review of all
contracts in place and discussions with all
suppliers to pause, cancel or defer key
contract payments.
The Board also made full use of the
Government support available, including the
Business Rates holiday, staff furlough support
from the Coronavirus Job Retention Scheme
('CJRS') and HMRC Time to Pay schemes. The
Board reviewed the projected tax position
and reclaimed corporation tax payments on
accounts, as well as securing grant payments
and discussing utilisation of the Coronavirus
Large Business Interruption Loan Scheme
('CLBILS').
The Board was very well aware of its
responsibility to utilise Government funds
responsibly. Each decision to utilise
Government funding was accompanied by a
review of the implications for the business
and its people to ensure it was appropriate to
preserve the long-term stability. The Board
decided to pay furlough support to 87
employees who were not eligible for CJRS to
ensure their jobs were protected and was able
to ensure that throughout 2020 there was not
a single site-based redundancy as a result of
Covid-19. In addition the Directors chose to
give up 20% of their salary during the closed
months of May and June. The Board also
conducted an external review of the CJRS
claims to ensure that these were
appropriately claimed and administered.
PREPARE
The CEO was instrumental in working with
the Government and the DCMS to develop
protocols for the safe reopening of bowling in
the UK. The Chairman was active in the media
in ensuring that the public understood that
our large bowling centres were well suited to
social distancing on reopening.
68
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
“we are confident that we will
return the business to growth”
BOARD DECISION MAKING
The Board received weekly updates during
Lockdown to ensure that it had all risks
appropriately covered. 13 formal Board
meetings were held, almost double that for a
normal year, and these focused on the three
critical business priorities. Decision making
was informed by industry experience, clear
data, and close scrutiny of the Government
advice. Where appropriate the Board took
suitable professional advice, particularly in
relation to tax and legal matters and those
relating to working with Government
departments.
The Board critically evaluated all in-flight
capital programmes at the time of closure
with a view to cancelling or deferring the
spend. As a result, only the critical
developments of a new centre at Manchester
Printworks; refurbishments of Acton and Star
City; and eight Pins & Strings implementations
were completed in the year.
The Board reviewed the business’s digital
capabilities and made rapid progress in
becoming the only UK bowling business on
reopening to be able to offer all customers
at all centres the ability to order food and
drink direct to lane or table through a
contact-free app.
The Board also invested £1.2m in critical
Covid security measures to ensure that it
could reopen safely, including lane dividers,
safety screens and additional cleaning
facilities, which facilitated a strong sales
delivery on reopening.
Board meetings
Board meetings all took place by
video conference which was not
only effective but enables more
frequent updates
£25m
HEADROOM
ENTERING
LOCKDOWN
Ten Entertainment Group plc Annual Report and Accounts 2020
69
NOMINATION COMMITTEE REPORT
JULIE SNEDDON
CHAIR OF THE NOMINATION COMMITTEE
ANNUAL STATEMENT BY THE
NOMINATION COMMITTEE CHAIR
As Chair of the Nomination Committee, I am
pleased to present the report of the
Committee covering the activity carried out
during the year which consisted of
appointments after two of our Directors
resigned, and reviews of Board succession,
effectiveness, diversity, culture and values.
COMMITTEE ACTIVITY
During the year, Duncan Garrood resigned as
Chief Executive Officer on 8 September 2020
and David Wild resigned as a Non-Executive
Director on 26 June 2020, both to pursue
other opportunities. We as a Board thank
them for their dedication to the Group and
wish them well.
The Committee reviewed several options and
carried out a rigorous search for a new CEO
using external benchmarking expertise, after
which the Board was pleased to appoint
Graham Blackwell as Interim CEO on
8 September 2020 and the appointment was
made permanent in January 2021. Graham
was the Group's Chief Operating Officer prior
to his appointment as CEO, has over 30 years'
experience within this industry and has
served on the Ten Entertainment Board since
the IPO in 2017. His unique experience and
outstanding execution skills make him ideally
placed to lead the business through its
next phase.
The Committee recommended to the Board
that the position of Chief Operating Officer
need not be filled with the promotion of
Graham Blackwell to CEO. The responsibilities
of the Executive Board members were
realigned to accommodate this change with
the CFO taking on responsibility for the
People and Talent function.
Although the Board has not formally replaced
the position left by David Wild, his role as SID
and Chair of the Remuneration Committee
has been taken on by fellow independent
Non-Executive Director, Adam Bellamy. The
Board intends to begin the search for a further
independent Non-Executive Director in the
second quarter of 2021.
BOARD SUCCESSION
We actively manage our Board succession
plan, to ensure that our Board has an
appropriate and diverse range of skills to
enable us to deliver our strategy for the
benefit of all of our stakeholders. We are a
small and cohesive Board, and take care to
ensure that all new members of our Board are
aligned to our culture and share our values,
whatever their skills and background. Our
Board induction process, undertaken by all
new members upon appointment, is an
important way to get our new Board
members up to speed and valued by our new
CHAIR
JULIE SNEDDON
COMMITTEE MEMBERS
ADAM BELLAMY,
NICK BASING, CHRISTOPHER MILLS,
DAVID WILD (RETIRED 26 JUNE)
NUMBER OF MEETINGS
HELD IN THE YEAR
2
COMMITTEE ACTIVITIES
SUCCESSION
PLANNING
30%
APPOINTMENTS
20%
50%
BOARD
EFFECTIVENESS
MEETING ATTENDANCE
Member
Meetings
Attendance
2
2
1
2
2
● ●
● ●
●
● ●
● ●
Julie Sneddon
Adam Bellamy
David Wild (retired)
Nick Basing
Christopher Mills
Key
Attended
Did not attend
70
Ten Entertainment Group plc Annual Report and Accounts 2020
Nomination Committee activities at the meetingsheld during the year ending 27 December 2020FebruaryInterim reviewNovemberAppointmentsInterviews and appointment of CEO●Board effectiveness reviewReview of the effectiveness of the full Board●●●Review of reporting requirements for the year●Succession planningExecutive and senior management talent mapping●●Succession planning● ● STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Non-Executive Directors. We have a formal
plan for how Board membership should
develop which aims to balance continuity of
service with a regular refreshment of skills
and experience needed to deliver our evolving
strategy. We regularly review the balance of
skills on the Board as a whole, taking account
of the future needs of the business, and the
knowledge, experience, length of service and
performance of the Directors. We are very
satisfied with the plan which has resulted in
the internal replacement of Duncan’s and
David’s roles.
DIVERSITY
We fully support diversity as an important
contribution to good quality decision making
and innovative thinking. Diversity has many
dimensions and we particularly value diversity
of thought, which in turn is assisted by
diversity of background and experience, as
well as of gender and ethnicity. We already have on our Board a diversity of gender, skills,
experience, personality, and cognitive approach. Site-based teams are diverse with an even
split of males and females in management positions. However, our senior leadership
population does not currently reflect the broader ethnic mix of our employees and our
customers. We continue to review how we can further broaden our approach, encouraging
diversity and inclusion throughout the Board and the business.
BOARD AND DIRECTOR EFFECTIVENESS
Each Director receives a formal evaluation of
their performance during the year, which is
conducted by the Chairman. In addition, the
CEO discusses with the Non-Executive
Directors the performance of individuals of
the Executive team and any changes that he
proposes to make to this team. Whilst this
activity does not take place formally within
the meetings of the Nomination Committee,
it does form part of its work in overseeing
Executive team development and succession
process, and the pipeline of talent available
for succession to the Board.
The performance of our Board and the
Committees is evaluated by the Chair of the
Nomination Committee in conjunction with
the Chairman and they have concluded that
the Board is functioning well, is dynamic, has
a breadth and depth of complementary skills
and experience and that there is a strong trust
between the Non-Executive Directors and
the Executive Directors in the running of the
Group, especially in these turbulent times.
A key action to the effectiveness of the
Board will be the decision on filling the
Non-Executive Director position left after
the resignation of David Wild.
CULTURE AND VALUES
Preservation of our culture as a family entertainment business has always been a priority,
which stems from the values instilled by the Board. Our culture is brought to life through our
shared values and business principles which the Board monitors through Board reports and
agenda items, engagement with employees, and visits to centres. Our culture and values are
an important part of what we look for in new candidates to join our Board, so that they may
promote and engage with the development of these aspects throughout the business. It is
important that they are aligned with our values so that they can be role models for all our
employees and stakeholders.
TENURE AND RE-ELECTION OF DIRECTORS
The Nomination Committee considers the length of service of Board members at least
annually. The tenure of the Directors is set out below:
Member
Appointment
Current term Next renewal
Board role
Nick Basing*
15 March 2017
Graham Blackwell
15 March 2017
Antony Smith
1 April 2019
Julie Sneddon
22 March 2017
4 years
4 years
2 years
4 years
Annually at AGM
Chairman
Annually at AGM
CEO
Annually at AGM
CFO and Secretary
Annually at AGM
Nomination Chair
Adam Bellamy
1 November 2018
3 years
Annually at AGM
Audit and Remuneration
Chair and Senior
Independent Director
Christopher Mills*
15 March 2017
4 years
Annually at AGM
Non-Executive Director
* Nick Basing has been an Executive Director within the Group in the last 10 years, though this was before the IPO
in 2017. He has been a Director within the Group for more than 10 years. Christopher Mills has been a
Non-Executive Director within the Group for more than 10 years.
In accordance with the UK Corporate Governance Code, all continuing Directors will seek
re-election at the 2021 AGM, and as now required by the Listing Rules, the Non-Executives will
be subject to an additional vote by shareholders independent of Harwood Capital LLP.
Approved by the Board on 29 March 2021
JULIE SNEDDON
CHAIR OF THE NOMINATION COMMITTEE
29 MARCH 2021
Ten Entertainment Group plc Annual Report and Accounts 2020
71
ADAM BELLAMY
CHAIR OF THE AUDIT COMMITTEE
ANNUAL STATEMENT BY THE AUDIT
COMMITTEE CHAIR
2020 has been a challenging year for the
Group due to the Covid-19 crisis and this
uncertainty has continued into the first
quarter of 2021. The crisis has required us to
balance the need for ongoing and continuous
improvements with recovery and replanning
around the substantial disruption that
everyone has felt from the pandemic.
The Committee met four times during this
financial year and has met once since the year
end. The Committee has played an important
role in the governance of the Group with its
primary purpose to assist the Board with the
discharge of its responsibilities in relation to
internal and external audits, controls and risks
(including those related to Covid-19). This
includes overseeing the integrity of the
Group’s annual financial statements and
public statements related to performance,
considering the scope of the annual external
audit and its fee and the extent of the
non-audit work undertaken by external
auditors, overseeing the appointment of
external and internal auditors, reviewing the
Group’s risk profile and reviewing the
effectiveness of the internal control systems
and the processes to identify and manage
risks in place within the Group.
No review of risk can now ignore the Covid-19
crisis which is discussed later in this report.
Covid-19 was identified as an emerging risk in
February 2020 and was upgraded to a
principal risk at the Audit Committee meeting
in March 2020 due to its impact on whether
our centres could remain open for trade. The
risk was included and discussed in detail in
the Annual Report for the year ended 29
December 2019 and remains a principal risk in
this year’s Annual Report.
During the year the Committee completed
key tasks on behalf of the Board including
reviewing the Group‘s going concern position
and long-term viability statement in light of
the impact of Covid-19 on the Group‘s results
and thus its ability to meet its financial
covenants, reviewing the Company’s Annual
Report for the period ended 27 December
2020, reviewing its 2020 interim results
published in September, and reviewing the
internal audit report for the furlough audit
completed during the year. The below is a
summary of the key matters reviewed by the
Committee during the period:
AUDIT COMMITTEE REPORT
CHAIR
ADAM BELLAMY
COMMITTEE MEMBERS
JULIE SNEDDON
DAVID WILD (RETIRED 26 JUNE 2020)
INVITATION
NICK BASING
CHRISTOPHER MILLS
NUMBER OF MEETINGS
HELD IN THE YEAR
4
COMMITTEE ACTIVITIES
RISK
MANAGEMENT
30%
EXTERNAL
AUDITORS
20%
50%
FINANCIAL
STATEMENTS
MEETING ATTENDANCE
Member
Meetings
Attendance
4
4
2
4
4
● ● ● ●
● ● ● ●
● ●
● ● ● ●
● ● ● ●
Julie Sneddon
Adam Bellamy
David Wild
Nick Basing
Christopher Mills
Key
Attended
Did not attend
72
Ten Entertainment Group plc Annual Report and Accounts 2020
Audit Committee activities at the meetings held during the year ending 27 December 2020MarchMaySeptemberNovemberFinancial statements and new accounting standardsReview of the 2020 interim announcement and the Financial Statements and Annual Report for 2019●●●Review of significant accounting policies and estimates in the year●●●Covid-19, going concern and viability statement assessment●Fair, balanced and understandable assessment●●Annual review of the tax strategy and policy●Risk management and internal controlRisk register and principal risks and uncertainties assessment●●Review of internal audit function, requirements and internal audit reports●Annual evaluation of the Committee’s effectiveness●External auditorsExternal audit engagement, plan, budget and independence review●Review of interim and full-year audit reports and findings●●●Assessment of external audit effectiveness●● STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
AUDIT COMMITTEE MEMBERSHIP
The Chief Executive Officer, Chief Financial
Officer, the Chairman and Christopher Mills as
a non-independent Non-Executive Director of
the Board usually attend meetings by
invitation. In addition, representatives of PwC
for external audit matters attend by invitation.
The Board considers that I have recent and
relevant financial experience to chair the
Committee, by virtue of my professional
qualification and my previous executive role
as chief financial officer of PureGym.
Members of the Committee can also
demonstrate a breadth of experience across
the retail and leisure sector through their
current and previous roles – please see the
Directors’ biographies on pages 60 to 61
for full details.
SIGNIFICANT ACCOUNTING ISSUES AND
JUDGEMENTS RELATING TO THE
FINANCIAL STATEMENTS
Within its terms of reference, the Committee
monitors the integrity of the annual and
interim reports, including a review of the
significant financial reporting issues and
judgements contained in them. The Audit
Committee’s review of the Annual Report for
the period ended 27 December 2020 and the
2020 interim financial statements focused on
the following areas of significance:
● Reviewing the appropriate use of
alternative performance measures,
including adjusted financial results to
exclude one-off expenses, to
communicate the Company's
performance to its shareholders. An
explanation of the alternative performance
measures employed can be found in
Note 2 to the financial statements.
● Reviewing the impairment assessments of
the values of property, plant and
equipment, right-of-use assets and
goodwill for the Group including the
factors considered in determining the cash
flows and the rate used to discount those
cash flows. Further detail of the
impairment assessments can be found in
Notes 9 and 12 to the financial statements.
● The Group adopted IFRS 16 this year and
made its first disclosures of the impact of
this standard in the interim statement. The
Committee considered the approach
taken, the impact on external and internal
reporting, and the implications for bank
covenants and measurement of
performance under remuneration
schemes.
● The Committee also considered a paper
prepared by the external auditor, which
included significant reporting and
accounting matters.
The Audit Committee, following
confirmations from management and the
external auditors, satisfied itself as to the
reasonableness and consistency of these
assumptions when compared to prior years.
GOING CONCERN, VIABILITY STATEMENT
AND COVID-19
In May and September 2020, the Committee
considered the potential impact of the
Covid-19 pandemic on the cash flows and
liquidity of the Group, particularly in relation
to the preparation of the Company’s financial
statements and interim statements on a
going concern basis and the assessment of
the Group’s viability.
On behalf of the Board, for the financial
statements for the year ended 27 December
2020, the Audit Committee reviewed the
Group’s projected cash flows, facilities and
covenants as well as reviewing the
assumptions underlying the viability
statement and concluded that it could
recommend to the Board that it should be
able to make the relevant statements.
Appropriate financial modelling has been
undertaken to support the assessment of the
business as a going concern with the material
uncertainty from Covid-19 and in support of
viability. The Company’s Going Concern and
Viability Statements are set out on pages
49 to 50, and these show the approach taken
and the conclusions made.
REVIEW OF NARRATIVE REPORTING
The narrative sections of this Annual Report
have been updated to comply with a number
of new reporting requirements, including the
2018 Corporate Governance Code, a
statement of how the Board has complied
with s172 of the Companies Act, and
executive pay. The Committee has also
reviewed the Environmental, Social and
Governance ('ESG') reporting and associated
KPIs, which are set out in the Annual Report.
FAIR, BALANCED, UNDERSTANDABLE AND
COMPREHENSIVE REPORTING
At the request of the Board, the Committee
also considered whether the Annual Report
and financial statements as a whole are ‘fair,
balanced and understandable’. Factors
considered included:
● Does the narrative of the Business Review
and Financial Review fairly reflect the
performance of the Group over the period
reported on?
● Are the narrative sections consistent with
each other, and with the financial
statements?
● Is the connection between strategy and
remuneration clearly described?
● Can readers easily identify key events that
happened during the year?
● Is the language and tone of voice used
commensurate with the spirit of ‘fair,
balanced and understandable’?
Committee members received the draft
Annual Report and Accounts in advance and
had the opportunity to make comments in
advance of the formal meeting at which the
report was tabled for approval.
Ten Entertainment Group plc Annual Report and Accounts 2020
73
AUDIT COMMITTEE REPORT CONTINUED
Following its review, the Committee
confirmed to the Board that in its view the
2020 Annual Report was ‘fair, balanced and
understandable’ and provided the
information necessary for our shareholders
to assess the Company’s position,
performance, business model and strategy.
RISK MANAGEMENT AND INTERNAL
CONTROL
The Board has overall responsibility for
setting the Group’s risk appetite and ensuring
that there is an effective risk management
framework to maintain appropriate levels of
risk. The Board has, however, delegated
responsibility for review of the risk
management methodology and
effectiveness of internal control to
the Audit Committee.
The Group’s system of internal control
comprises entity-wide, high-level controls,
controls over business processes and
individual site-level controls. Policies and
procedures, including clearly defined levels of
delegated authority, have been
communicated across the Group. Internal
controls have been implemented in respect
of the key operational and financial processes
which exist within the business. These
policies are designed to ensure the accuracy
and reliability of financial reporting and
govern the preparation of the financial
statements. The Board is ultimately
responsible for the Group’s system of internal
controls and risk management and
discharges its duties in this area by:
● holding regular Board meetings to
consider the matters reserved for its
consideration;
● receiving regular management reports
which provide an assessment of key risks
and controls;
● scheduling annual Board reviews of
strategy;
● ensuring there is a clear organisational
structure with defined responsibilities and
levels of authority;
● ensuring there are documented policies
and procedures in place; and
● reviewing regular reports containing
detailed information regarding financial
performance, rolling forecasts, actual and
forecast covenant compliance and
financial and non-financial KPIs.
The process by which the Audit Committee
has monitored and reviewed the
effectiveness of the system of internal
controls and risk management during the
year has included:
● reviews of the Group’s risk register;
● reviewing emerging risks which in this
year included the impact of the Covid-19
pandemic;
● reviewing the system of financial and
accounting controls, and considering the
view of the external auditor in relation to
the effectiveness of such controls;
● receiving regular reports and updates on
incidents and risks throughout the
Company; and
● reporting to the Board on the risk and
control culture within the Group.
The Audit Committee has not identified, nor
been made aware of, any significant failings
or weaknesses in the risk management and
internal control systems and is satisfied that
the systems continue to work effectively.
With the emerging risk from the Covid-19
pandemic the Committee and full Board held
regular discussions regarding how resilient
the Group was to withstand the impact of an
event or combination of events that could
significantly disrupt all or a substantial part
of the Group’s sales or operations and
reviewed what, if any, mitigation could be
implemented with the outcome fed into
the risk process.
The Audit Committee also confirms that it
has complied with the provisions of the
Competition and Markets Authority’s Order
for the financial year under review and that it
will continue to challenge management to
further improve risk identification, evaluation
and management processes across
the Group.
INTERNAL AUDITORS
BDO UK LLP ('BDO') were appointed to the
role as internal auditors at the end of FY17,
when they commenced their first review.
Their audit reviews are supplementary to the
loss prevention and process audits, which are
completed by two internal team members
with each centre visited to perform process
audits at least once per annum. The
Committee has discussed and concluded
that the best option for the Group is
to continue to outsource this internal
audit function.
The results from these audits are discussed
with the Chief Financial Officer and
presented to the Audit Committee. The
Committee will review the effectiveness of
the outsourced resource on an ongoing basis
and has concluded that the internal audit
function has been effective during the year.
During FY20, which was significantly
disrupted with the business being shut for
large periods of the year, only one internal
audit review was carried out, with the second
being deferred into 2021 when it would
provide more value. The review specifically
chosen by the Committee covered the
Group’s approach to the Coronavirus Job
Retention Scheme (‘CJRS’, furlough) at both
site and support centre level. As the business
was closed for large portions of the year, the
furlough scheme was used extensively and
due to the material value and complex nature
of the regulations and calculations involved,
a review was carried out to give comfort that
these were being carried out in the spirit of
the law. The Committee was presented with
the findings and recommendations were
identified and these improvements have
been implemented. The Committee receives
regular updates from management
on progress.
HEALTH & SAFETY AND INCIDENT
MANAGEMENT
The Company operates an incident
management policy at site level, recording
incidents relating to health & safety,
accidents, criminal activity, food standards,
pest control and others. These incidents are
sent out to senior management for review
and the Chief Financial Officer escalates any
significant incidents to the Audit Committee
as necessary. Health & Safety meetings are
held by senior management monthly to
understand incidents and to ensure
compliance with or to update policies. These
are attended by a risk adviser from our
insurance brokers to provide the Company
with a professional level of advice. There has
been increased focus in this area to ensure
that our centres are ‘Covid secure’ and as
explained in detail in the Chief Executive’s
statement, the business has implemented a
number of measures from constructing lane
dividers to promote social distancing, to
releasing an online ordering app so that
customers can order from the comfort of
their lane, cutting out queues at the bars.
WHISTLEBLOWING
The Company has established procedures for
employees to raise concerns, in confidence,
relating to matters of financial reporting,
financial control or other matters. The
whistleblowing policy is applicable for all
employees, who are made aware of the
policy on joining the Company and are
reminded of its availability through online
portals and posters. A whistleblowing hotline
is operated by an independent outsourced
specialist, who provides direct escalation of
incidents through the HR department and up
to the Chair of the Audit Committee. In
addition, the Group extended the
74
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Whistleblowing facility to Yapster, where
employees can raise concerns confidentially
using our dedicated communications app,
offering people more access to reporting
incidents of concern. No incidents were
reported during FY20.
PwC continues to possess the skills and
experience required to fulfil their duties
effectively and efficiently. The Audit
Committee’s review of the effectiveness
of PwC as the external auditors is based on:
● discussions with the senior finance team
BRIBERY, FRAUD AND ANTI-CORRUPTION
The Group has procedures in place to ensure
compliance with the Bribery Act 2011 and
other relevant legislation including a bribery
policy that has been reviewed and signed up
to by all employees. Executive Board
members with authority to place significant
contract orders have received anti-bribery
training and all Board Directors acknowledge
any conflicts of interest as part of each Board
meeting held. The Group also reviews
supplier terms and conditions for Bribery Act
and tax evasion clauses and all payments to
third parties must be supported by a valid
invoice and segregated duties are in place in
the finance team for approval and payment.
Formal procedures are implemented for
signing off gifts and hospitality accepted
by employees.
CYBER SECURITY AND DATA PROTECTION
Cyber and data security remains one of the
most important risk areas, being one of
the Board’s principal risks, as outlined in the
‘Risks and Uncertainties’ section on page 46
of this Annual Report. The resource and
capability of the Information Security
function was increased during the year, and
the programme to improve our controls and
practices in this area has continued. This has
included improved network segmentation
and a thorough review and reinforcement of
our IT business continuity plans. Given the
continuing external risks, this area will be the
subject of an internal audit review in 2021,
and cyber security remains a standing
agenda item at all Committee meetings.
The Committee was satisfied that there
is an acceptable level of risk management
in place.
EXTERNAL AUDITORS
The report and financial statements were
audited by PricewaterhouseCoopers LLP
('PwC') who were appointed in 2017 after the
IPO, since then no audit tender has been
carried out. As reported last year, our audit
partner from the 2019 audit onwards is Craig
Skelton. Craig attended the Committee
meetings in March, May, September and
November 2020. The Committee also met
privately with the auditors during each
meeting and, as Chair of the Committee, I
had regular dialogue with Craig.
The Audit Committee has reviewed the
independence, objectivity and effectiveness
of the external auditors and considers that
around the level of understanding
demonstrated by the audit team;
● the robustness of the audit around
challenge to management and findings
on areas that required judgement;
● the quality of audit work, reporting and
advice given to the Audit Committee; and
● reports published by the FRC.
The conclusion was that the audit had been
effective and carried out with the necessary
objectivity and challenges to
demonstrate independence and that no
significant issues had been highlighted; this
was endorsed by the Committee.
It is the Committee’s responsibility to make
recommendations to the Board in relation to
the appointment, reappointment and
removal of the external auditor, and to agree
the audit fee. In November 2020, the
external auditor presented their strategy for
the 2020 audit to the Committee. The
Committee reviewed and agreed with the
external auditor’s assessment of risk. The
Committee also reviewed and agreed the
audit approach and the approach to
assessing materiality for the Group. The fee
proposed by PwC for the statutory audit of
the Group and Company financial
statements and the audit of Group
subsidiaries pursuant to legislation was
reviewed and agreed.
Considering the review of the 2020 audit and
the proposed plan and fee, the Committee
agreed that PwC be reappointed as auditor
for the 2020 audit for the fee proposed. A
resolution by the Directors to agree their
remuneration will be put to shareholders at
the AGM and a resolution to reappoint PwC
as auditor for the 2021 audit will be reviewed
after the completion of the 2020 audit.
The Committee is aware that the use of
audit firms for non-audit work is a sensitive
issue for investors and corporate governance
analysts, as it could potentially give rise to a
conflict of interest and jeopardise the
independence of the audit process.
Following the issue of the EU Audit Directive
in June 2016, we review any non-audit work
to ensure fees for non-audit services
provided by the statutory auditor in any year
do not exceed 70% of the average fees for
the Group statutory audit in the years and
that they do not perform any non-audit
services, including the majority of tax work,
internal audit, corporate finance,
involvement in management activities or the
provision of financial information. The
external auditor may not be engaged to
provide any non-audit services without the
agreement of the Audit Committee Chair
either. We believe that this approach is still
relevant and safeguards auditor
independence and objectivity effectively.
PwC have confirmed that in their
professional judgement they are
independent within the meaning of
regulatory and professional requirements
and that the objectivity of the audit
engagement partner and audit staff is not
impaired.
During the period we paid
PricewaterhouseCoopers LLP £35,000 for
their review of the interim financial
statements (considered to be a non-audit
service). No other non-audit services were
provided by the external auditor. Fees paid to
PricewaterhouseCoopers LLP for audit work
were £135,000.
Our auditor rotation policy is that we will
tender the audit at least once every ten years
and we will change auditor at
least every 20 years. We will invite at least
one firm outside the ‘Big Four’ to participate
in any audit tender process. This is in line
with the current EU Audit Directive. The
latest date for the next tender will therefore
be for the 2027 audit, but may occur sooner
at the committee's discretion. The
Committee concurs that a competitive
tender is in the best interests of
shareholders.
ANNUAL EVALUATION
The Committee has made good progress
during the year in strengthening governance
and control infrastructures and will continue
to work with the management team and the
Board to ensure processes operate
effectively to support the delivery of the
Group’s strategy. There has been one change
to the composition of the Committee after
the resignation of David Wild, whose
position has yet to be filled. As a whole the
Board has confirmed it believes the
members have the competence that is
relevant to the sector in which the Group
operates, and the Chair of the Committee
has the relevant financial experience to run
the Audit Committee.
ADAM BELLAMY
CHAIR OF THE AUDIT COMMITTEE
29 MARCH 2021
Ten Entertainment Group plc Annual Report and Accounts 2020
75
DIRECTORS’ REMUNERATION REPORT
ADAM BELLAMY
CHAIR OF THE REMUNERATION COMMITTEE
ANNUAL STATEMENT BY THE
REMUNERATION COMMITTEE CHAIR
I have taken on the Chair of the Remuneration
Committee role following the departure from
the Board of David Wild, whom I would like to
thank for his time and dedication to the Group.
I am pleased to present the Remuneration
Report of the Board and would like to start by
reiterating that we are very proud of how our
team have responded during the pandemic and
of what we have achieved together. Protecting
our employees, customers, suppliers and
shareholders during this most unprecedented
environment has been, and continues to be,
our clear priority.
On 20 March last year we closed all of our
centres in the UK as required by the
Government and took quick and decisive
action to manage our cash position and reduce
our costs. We made significant operational
cost savings and effectively put our centres
into hibernation, utilising the Government’s
Job Retention Scheme precisely as it was
intended, to preserve jobs which, with the
significant drop in revenue, we might
otherwise have had to cut. The Board also
took a 20% pay reduction for the two months
to the end of June.
At our 2020 AGM there was a binding
shareholder vote on our Directors’
Remuneration Policy and an advisory vote on
the Chair’s Annual Statement and our Annual
Report on Remuneration. There were no
changes to our Remuneration Policy except
for the introduction of a share price underpin
to our 2020 LTIP awards which our legal
consultants had advised required a change to
our shareholder approved policy.
The shareholder vote to approve the Policy
was 76.26% and for the Chair’s Annual
Statement and Annual Report on
Remuneration 79.84%. The Committee’s
understanding is that a small number of
investors and the proxy voting agencies had
concerns that certain best practice and
Corporate Governance Code remuneration
structural features were missing from
our Remuneration Policy and that our
remuneration reporting could be enhanced
to provide shareholders with a clearer
understanding of the remuneration
decisions made in the year as well
as remuneration outcomes.
CHAIR
ADAM BELLAMY
COMMITTEE MEMBERS
JULIE SNEDDON
DAVID WILD (CHAIRMAN UNTIL
RETIREMENT 26 JUNE)
INVITATION
NICK BASING
CHRISTOPHER MILLS
NUMBER OF MEETINGS
HELD IN THE YEAR
4
COMMITTEE ACTIVITIES
BONUSES,
AWARDS &
VESTING
REVIEW 25%
GOVERNANCE
25%
The Remuneration Committee met on four occasions in FY20 and has met once since the year
end. The activities completed by the Committee in 2020 were as follows:
50%
REMUNERATION
POLICY
MEETING ATTENDANCE
Remuneration Committee activities at the meetings
held during the year ending 27 December 2020
Bonuses, awards and vesting review
Review of FY19 performance and bonus outturn and
approval of Directors’ bonuses for FY19
Approval of Directors’ bonus KPIs/targets for FY20 and
FY20 pay
Proposed 2020 LTIP performance targets
Member
Adam Bellamy
Julie Sneddon
David Wild
Nick Basing
Christopher Mills
Key
Attended
Did not attend
Meetings
Attendance
Share plan awards and vestings
4
4
3
4
4
● ● ● ●
● ● ●
● ● ●
● ● ● ●
● ● ● ●
Remuneration policy review
Review of policy, Directors’ pay and share schemes
Review of Directors’ Remuneration Report (including
to ensure compliance with the Remuneration
Reporting Regulations)
Governance
Review of 2019 AGM and Proxy Advisory comments
Updates on Corporate Governance developments
Review of the Committee’s Terms of Reference
76
Ten Entertainment Group plc Annual Report and Accounts 2020
February
March
May
October
●
●
●
●
●
●
●
●
●
●
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Following the AGM vote, we engaged an
external consultant, Korn Ferry, to work with the
Committee to carry out a full review of the
Policy and our remuneration reporting.
The Committee has reviewed the current
Remuneration Policy and has concluded that it
remains fit for purpose, continues to support
the Group’s business strategy and that no
changes are required to incentive quantum.
However it proposes to incorporate UK
Corporate Governance Code and best practice
features into the Policy in line with investor
expectations and introduce standard market
practice flexibility for the Committee to select
the most appropriate performance measures
for the annual bonus and LTIP each year. We
have also taken this opportunity to clarify those
parts of our policy that were not previously
detailed. This updated Policy will be brought to
investors for approval at our 2021 AGM.
Set out below are the substantive changes that
are being made to the Policy. The Policy on
pages 81 to 85 sets out these changes as well
as those elements that were not previously
detailed in our published Policy:
Pension: Our policy for new appointments and
incumbent Directors is to align them with the
workforce, currently at 3% of base salary.
Annual bonus shares and holding period:
25% of any bonus paid in excess of target
performance will be paid in shares to the
Executive Directors who will be required to hold
the shares for a two-year period which will
continue to apply post cessation of
employment. There is no increase in annual
bonus quantum and the Committee considers
that this is therefore a reasonable approach to
‘deferral’ at this time but will keep this matter
under review, noting investors' preference
for a percentage of bonus actually paid to
be deferred.
Long-term incentive two-year post-vesting
holding period: Commencing with the FY21
LTIP awards, Executive Directors will be required
to retain the shares they acquire from vesting of
LTIP awards for a further two years, except for
sales to meet taxes arising on vesting. The
holding period will continue to apply post
cessation of employment.
In-service shareholding requirement: The
Executive Directors will be required to build and
maintain a shareholding in Ten Entertainment of
200% of salary with the expectation that this
will be built up over a five-year period. The
Committee will have the discretion to adjust the
requirement in exceptional circumstances.
Post-employment shareholding policy: The
Executive Directors will be required to hold
shares acquired with FY21 and future annual
bonus and LTIP awards equal to 100% of salary
for one year post cessation of employment,
subject to the Committee amending this
requirement in exceptional circumstances.
Holding periods on bonus shares and LTIP
awards also continue to apply post employment.
Ability to select performance measures for
annual bonus and LTIP: Our current policy sets
out the specific measures that will be used for
incentives and does not give the Committee
the usual market standard flexibility to select the
most appropriate performance measures to
support the business strategy. An amendment
is therefore being made to provide this flexibility
going forward.
Discretion and clawback and malus: The
Committee will have the discretion to adjust
formulaic variable pay and vesting level outcomes
in line with the Corporate Governance Code and
the circumstances for clawback and malus will be
widened to cover error, misstatement, gross
misconduct, reputational damage, corporate
failure and failure of risk management. Because
the Committee will have discretion to adjust the
formulaic bonus outcome, the specific strategic
objective underpin (that requires a threshold level
of EBITDA to be achieved before this element
pays out) is no longer required and will be
removed from the Policy. This wider discretion
provides the Committee with a broader and
more effective discretion to review and adjust the
overall incentive outcome.
The Committee is comfortable that there is
sufficient mechanism for the operation of
clawback and malus, given the changes to the
policy noted above.
Change of control and cessation: Our policy is
that on a change of control, performance for
variable pay awards will be measured to the
change of control date and vesting pro-rated
with discretion for the Committee to reduce
pro-rating. On a termination, salary plus
benefits and pension will be payable for the
notice period in monthly instalments with a
duty to mitigate. Annual bonus is payable at the
Committee’s discretion for good leavers only,
subject to testing of the performance metrics,
paid at the normal time and pro-rated for the
period of service. LTIP awards will continue for
good leavers with pro-rating for service. There is
a discretion to pay outplacement costs,
contribute to reasonable legal fees and settle
potential legal disputes.
REMUNERATION REPORTING
The Committee has reviewed the 2019
Remuneration Report disclosures including the
policy wording. The 2020 Remuneration Report
addresses the concerns raised by investors and
proxy agencies and includes additional
disclosures where necessary to ensure
transparent and clear reporting of our
remuneration outcomes in line with applicable
regulation, best practice and investor
expectation for a SmallCap company. The
wording of our policy has been enhanced to
include those matters which are not currently
included in our published shareholder
approved policy.
Ten Entertainment Group plc Annual Report and Accounts 2020
77
DIRECTORS’ REMUNERATION REPORT CONTINUED
OPERATION OF POLICY FOR FY20
BOARD CHANGES, BASE SALARIES AND
OVERALL PACKAGES
As we announced on 26 June 2020, our former
CEO Duncan Garrood resigned and left the
business on 8 September 2020. As an interim
measure, our Non-Executive Chairman took on
an interim Executive Chairman role and our CFO
and Chief Commercial Officer took on
significant additional responsibilities. To
recognise the increased workload and
responsibilities both the Chief Commercial
Officer and CFO were awarded a £50,000 p.a.
salary allowance and our Executive Chairman’s
fee was temporarily increased to £350,000 for
the interim period.
Following a comprehensive search process the
Board were pleased to appoint our Chief
Commercial Officer Graham Blackwell to the
CEO role effective on 8 September 2020.
Nick Basing remains as Executive Chairman
until the end of March 2021, at which point he
will revert to Non-Executive Chairman.
As part of the changes in executive leadership,
the Remuneration Committee has reviewed the
base salaries of the CEO and CFO. Our new
CEO was appointed on a base salary of
£310,000 with a pension allowance of 3% of
salary aligned to the workforce. Our previous
CEO’s salary was £300,000 and the
appointment of our new CEO on £310,000 is
considered appropriate taking into account his
increased responsibilities and normal
workforce-aligned annual increases.
The salary of Antony Smith, our CFO, was
increased, effective 8 September 2020, to
£260,000 and his pension has been reduced to
align to the workforce at 3% of salary. The
increase in salary reflects significantly increased
responsibilities as we move forward with a
reduced Executive Board. Our CFO has taken
on direct responsibility for Human Resources,
Health & Safety and other commercial aspects
around reporting and strategy.
The Committee understands investor concerns
regarding increases in fixed pay, including the
resulting increase to variable pay. In making
these increases the Committee has taken into
account the fact that the Chief Commercial
Officer (Executive Director) role will not be
replaced and therefore the CEO and CFO have
significantly increased roles and responsibilities.
The Committee and Board as a whole are
committed to ensuring the Directors receive a
fair and appropriate level of remuneration for
their role, reflecting their skills and
responsibilities. Total Executive Director salaries
(ignoring the temporary Executive Chairman
additional fee) are now £570,000 instead of
£685,000 when there were three Executive
Directors and the overall cost of annual bonus
and LTIP awards was also reduced. The
Committee is satisfied, having carried out a
benchmarking exercise against companies of a
comparable size by market capitalisation, that
both the CEO and CFO’s salaries remain below
the median for companies of a similar size. The
Committee also notes the increased focus on
executive remuneration levels and the
alignment to workforce rewards and investor
experience resulting from the pandemic. Our
Executive Directors will not receive a bonus for
2020, and as mentioned, received reduced
salaries for a period during 2020.
The Committee strongly believes their
remuneration is aligned to both employee
reward and investor returns for 2020 but wishes
to ensure that they are fairly and appropriately
remunerated for their roles, experience and
commitment as they work to drive business
performance going forward.
Annual bonus maximum opportunity and LTIP
award levels remain unchanged at 100% of
salary for the annual bonus and 150% of salary
for the LTIP award.
2020 long-term incentive awards
Long-term incentive grants for FY20 were
delayed due to the difficulty in forecasting and
setting targets and granted much later in the
year than would be usual:
● Award levels were unchanged from FY19
at 150% of salary. No scaleback was
considered necessary because our share
price was within 20% of the grant price for
the prior year’s award.
● The award is based 50% on EPS and 50% on
relative TSR with a share price underpin such
that awards will only vest if the average
share price over a three-month period prior
to vesting exceeds the share price at the
date of grant.
● The Committee reviewed and updated the
TSR peer group and targets, further detail is
set out on page 88.
● Threshold vesting for the EPS element
occurs for achieving EPS of 17 pence and
maximum vesting occurs at 23 pence.
● The Committee carefully reviewed the
business outlook and believes the EPS
targets set for the 2020 award are at least as
stretching as the target ranges set in prior
years, particularly given the current market
uncertainty. The Committee has the overall
discretion to scale back vesting if in all the
circumstances it considers the formulaic
outcome not to be appropriate, taking into
account, amongst other matters, the
assumptions made in determining the
target range.
78
Ten Entertainment Group plc Annual Report and Accounts 2020
Investor consultation
Following the AGM votes, I wrote to investors,
who collectively represented 82% of our base
and had a number of follow-up discussions
regarding the changes noted above. The
feedback from our investors was welcomed by
the Committee, following which we made
some further refinements to our proposals, I am
pleased to report that those investors who
responded were supportive of the vast majority
our proposals.
FY20 Remuneration outcomes
As a Committee we recognise the need for
remuneration to reflect the shareholder
experience and, accordingly, no adjustments
were made to the performance targets for any
of our performance-based awards (annual
bonus and LTIP awards). Consequently, as a
result of the impact of Covid-19 there will be no
pay-out in respect of the 70% EBITDA financial
element of the annual bonus for the year to
December 2020.
The Committee has noted the very strong
performance of the Executive Directors against
their personal and strategic objectives, however
given the EBITDA performance, recourse to
Government support, non-payment of dividend
and furlough of employees, there is no payment
for this element.
The 2018 LTIP award is based on EPS targets
(50%) and relative TSR (50%). The threshold
EPS target has not been reached and this part of
the award will lapse. The TSR element is not
tested until the third anniversary of grant in June
2021. Based on our current analysis it is
anticipated that some of this award may vest
and actual vesting will be disclosed in the 2021
Remuneration Report. It should be noted that
only our CEO holds a 2018 award.
The Committee is comfortable that the
remuneration outcomes are aligned to the
financial performance of the Company and
shareholder experience and that the policy has
operated effectively, noting that exercise of
discretion has not been necessary. The
Committee would like to note the exceptionally
strong performance of Graham and Antony
during a very challenging year.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
CONCLUSION
On behalf of the Board, I would like to thank
our shareholders for their support for the
Company and the engagement I have had
with them this year on remuneration matters.
I hope that, following the substantial work
carried out during the year, investors are
supportive of our remuneration arrangements
and will equally support the shareholder
resolutions on our new Directors’
Remuneration Policy and 2020 Remuneration
Report. I am always happy to hear from
shareholders, and I can be contacted via the
Company Secretary should you have any
questions on either this report, or more
generally in relation to our remuneration
arrangements.
ADAM BELLAMY
CHAIR OF THE REMUNERATION
COMMITTEE
29 MARCH 2021
Operation of policy for FY21
● Given the new salaries for the CEO and CFO
in FY20, no increases to their salaries will be
made for FY21.
● Maximum bonus opportunity and long-term
incentive award levels will remain at 100%
and 150% of salary respectively, subject to
consideration of LTIP award levels taking into
account the share price at the time awards
are made.
● The annual bonus will continue to be based
70% on financial metrics and 30% on
strategic objectives. The business has not
yet reopened from the current Lockdown
and the Committee has therefore delayed
target setting for the financial metrics
element of the bonus until it has more clarity
on the outlook for the current year. While
profit is a key metric, the Committee is
considering whether other financial metrics
critical to the current year should be
included. More detail about the areas of
focus for the strategic measures is included
in the Annual Report on Remuneration.
Targets and performance against them will
be disclosed retrospectively in the 2021
Remuneration Report.
● The Committee’s current thinking is that the
vesting of the 2021 long-term incentive will
again be based 50% on relative TSR and
50% on EPS targets. However, given the
current uncertainty about when the
business is able to reopen and resume
normal trading levels, the Committee will
review the measures and set targets at the
time of grant. These will be fully disclosed at
the time the awards are made.
NON-EXECUTIVE DIRECTORS’
REMUNERATION
The Non-Executive Director fees are set by the
Chairman of the Board, CEO and CFO. With the
departure of one of the Non-Executive Directors
in FY20 the responsibilities, time commitment
and fees of the Non-Executive Directors were
reviewed. A fee of £5,000 has been set for the
role of SID and a fee of £5,000 where a
Non-Executive Director holds more than one
Committee Chair role. These fees are in
addition to the base Non-Executive Director
Board fee which has not changed.
Ten Entertainment Group plc Annual Report and Accounts 2020
79
300
250
200
150
100
50
0
REMUNERATION – AT A GLANCE
Remuneration for FY20
2020 Annual bonus outcome
£300k
£250k
£200k
£150k
£100k
£50k
0
£268k
85%
£222k
100%
Metric
EBITDA
Strategic objectives
Weighting Outcome (of element) Payout
70%
30%
0%
0%
30% 0%*
* No payment of annual bonus given financial outturn and recourse to Government
support, furlough and non-payment of dividend.
2018 LTIP outcome
Metric
EPS
Relative TSR
Weighting Outcome (of element) Payout
50%
50%
0%
0%
25% estimated vesting*
Actual FY20 - CEO
Actual FY20 - CFO
* Performance period runs from date of grant for TSR and ends 11 June 2021.
■ Fixed pay
85%
■ LTIP
85%
Remuneration for FY21
Policy element
Base salary for FY21
Pension
G Blackwell (CEO)
£310,000
3% of base salary
Annual bonus maximum opportunity
100% of base salary
Annual bonus metrics
70% financial metrics, 30% strategic objectives.
A Smith (CFO)
£260,000
3% of base salary
100% of base salary
The Committee has delayed target setting for the financial metrics element of the bonus
until it has more clarity on the outlook for the current year. While profit is a key metric, the
Committee is considering whether other financial metrics critical to the current year should
be included.
The Committee retains discretion to adjust the bonus that is payable if it considers the
formulaic outcome (for both the financial and non-financial element) is not appropriate in
the context of the underlying performance of the Company, investor experience or
employee reward outcome.
Amount paid for threshold performance
0%
0%
Amount paid for target performance
50% of salary (50% of maximum annual bonus)
Payment of bonus in shares
25% of annual bonus in excess of target (after tax) is paid in Company shares that are held
for two years and remain subject to clawback.
LTIP Award
LTIP metrics
150% of base salary
150% of base salary
Expected to be 50% relative TSR and 50% EPS targets. However, given the current
uncertainty about when the business is able to reopen and the priorities at that time the
Committee will review the measures and set targets at the time of grant. Measures and
targets will be fully disclosed at the time the awards are made.
The Committee retains discretion to adjust the LTIP vesting if it considers the formulaic
outcome is considered to be not appropriate.
Payment for threshold performance
25% of maximum
Performance & post-vesting holding periods
3 years and 2 years respectively
Shareholding requirement
200% of base salary to be met within five years. Post employment 100% of salary for 1 year.
Shareholding as % of salary at FY20 year-end
101%
31%
80
Ten Entertainment Group plc Annual Report and Accounts 2020
DIRECTORS’ REMUNERATION POLICY
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
● Risk – our Remuneration Policy is
designed to ensure that inappropriate risk-
taking is discouraged through the use of
long-term performance measurement,
holding periods, shareholding
requirements and malus and clawback
provisions;
● Predictability – our incentive plans are
subject to individual caps on maximum
bonus opportunity and LTIP award levels
and include discretion if incentive
outcomes are not appropriate;
● Proportionality – there is a clear link
between individual awards, delivery of
strategy and our long-term performance.
In addition, the significant role played by
incentive/’at-risk’ pay and the presence of
malus and clawback provisions ensures
that poor performance is not rewarded;
and
● Alignment to culture – our executive pay
policies and operation of policy are fully
aligned to Ten Entertainment’s culture
including through the use of metrics in
the incentive plans which align to the
Company strategy.
ENGAGING WITH SHAREHOLDERS
The Committee welcomes dialogue with
shareholders and seeks the views of its major
investors and investor bodies
when considering significant changes to the
Directors’ Remuneration Policy and its
operation. Any views and feedback from our
shareholders is considered by the
Committee as part of its annual review of
Policy and operation. The Committee also
considers shareholder feedback received in
relation to the Directors’ Remuneration
Report each year following the AGM. Detail
about specific engagement with
shareholders in determining the Policy and
its operation from year to year is set out in
the Annual Statement and the Annual Report
on Remuneration.
This part of the Directors’ Remuneration
Report sets out the Remuneration Policy for
the Company Directors and has been
prepared in accordance with Schedule 8 of
The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008, the Large and Medium-sized
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013,
the Companies (Miscellaneous Reporting)
Regulations 2018 and the Companies
(Directors’ Remuneration Policy and
Directors’ Remuneration Report) Regulations
2019 (the ‘Regulations’).
The Policy set out below will be brought to
shareholders for approval at the Company’s
AGM on 5 May 2021. It incorporates the 2020
Policy elements except for the removal of
those parts noted below. The rest of the
Policy is either (1) new elements included in
the Policy and which are detailed in the
Chairman’s Annual Statement and
incorporated here by reference or (2)
clarification of those parts of the Policy that
were not previously detailed in our published
Policy. The parts of our 2020 Policy that have
been removed are the detailed performance
measures for the annual bonus and LTIP.
These have been replaced with a provision
that is market standard and enables the
Committee to select the most appropriate
performance measures from time to time.
An EBITDA underpin for annual bonus
strategic measures has also been removed
and replaced with the wider discretion to
adjust the formulaic outcome of both the
annual bonus and LTIP.
POLICY SUMMARY
The Remuneration Committee determines
the Policy for the Executive Directors and the
Chairman for the current and future years.
The Committee considers that a successful
policy needs to be sufficiently flexible to take
account of changes in both the business
environment and remuneration best
practice. The policy is designed to provide
remuneration packages that will:
● align the interests of the Executive
Directors and senior management with
those of shareholders;
● provide competitive remuneration that
will both motivate and retain the Group’s
current key employees and attract
high-quality individuals to join the Group;
● encourage and support a high-
performance culture;
● reward delivery of the Group’s business
plan and key strategic goals;
● set appropriate performance conditions in
line with the agreed risk profile of the
business; and
● whilst the Committee does not consult
directly with employees on Executive
Directors’ remuneration, the Committee
does receive updates regarding
remuneration for employees across
the Group. This is considered when
determining the remuneration for
the Directors.
Consistent with the remuneration strategy,
the Remuneration Committee agreed a
remuneration policy for the Executive
Directors and Senior Managers whereby:
● salaries will be set at competitive, but not
excessive, levels compared to peers and
other companies of an equivalent size and
complexity, and are commensurate to the
individual’s performance and
responsibility;
● performance-related pay, based on
stretching targets, forms a significant part
of remuneration packages and offers the
potential for competitive levels of total
pay if targets are delivered; and
● there is an appropriate balance between
short and longer-term performance
targets linked to delivery of the Group’s
strategic plan.
The Remuneration Committee oversees the
implementation of this policy and seeks to
ensure that the Executive Directors are fairly
rewarded for the Group’s performance over
both the short and long term and that it
continues to support and reward the
Executive Directors to achieve the business
strategy both operationally and over the
longer term. The Policy is reviewed annually
by the Committee to ensure that changes
are not required prior to the triennial
shareholder vote. When the Committee
determines that changes are required it will
formulate proposals as appropriate and
depending on the change required to consult
with its shareholders about the
amendments. Shareholder feedback is then
taken into consideration in finalising the
Policy changes.
The Policy and its implementation are
consistent with the six factors set out in
Provision 40 of the Code:
● Clarity – our Policy is well understood
by Management and has been clearly
explained to our shareholders;
● Simplicity – the Committee is mindful
of the need to avoid overly complex
remuneration structures which can be
misunderstood and deliver unintended
outcomes. Our policy is set out clearly
and we have avoided the use of complex
incentive structures, and pension policy
is aligned throughout the organisation;
Ten Entertainment Group plc Annual Report and Accounts 2020
81
DIRECTORS’ REMUNERATION POLICY CONTINUED
REMUNERATION OF EXECUTIVE DIRECTORS
The following table summarises each element of the Executive Directors’ remuneration package, the Policy for how these are operated and
their link to the Company’s strategy.
Element of pay Purpose and link to strategy Operation
Maximum opportunity
Performance metrics
Base salary
Annual
bonus plan
Reflects the value of the
individual and their role.
Takes account of
experience, skills and
personal contribution to
Group strategy. Set at a
level to facilitate
recruitment and retention
of suitably experienced
executives.
Base salaries will be reviewed annually.
The Remuneration Committee will
consider the performance of the Group
and the individual, the Executive
Director’s experience and changes in
responsibility or scope of the role, as
well as pay practices in relevant
comparators of a broadly similar size and
complexity (with due account taken of
both market capitalisation and turnover).
There is no prescribed annual
increase. The Committee is
guided by the wider workforce
increases, but may also need to
recognise increases in certain
circumstances such as assumed
additional responsibility, or an
increase in the scope or size of
the role.
Takes into account the
performance and personal
contribution of the individual
and performance of the
Company.
Rewards performance
against specific near-term
goals which are consistent
with the strategic direction
of the business.
Acquisition of shares with
bonus facilitates share
ownership and aligns the
interests of executives and
shareholders.
Clawback and acquisition
of shares discourage
excessive risk-taking
and encourage a
long-term view.
Performance is assessed by the
Committee over a one-year period
against the audited results of the
Company, where relevant.
A bonus of up to a maximum of
100% of salary can be awarded
depending on the achievement
of financial and strategic targets.
The Committee will select the
most appropriate metrics for
the annual bonus to support
the business strategy.
With effect from the FY21 annual bonus,
25% of any bonus in excess of target is
paid in the Company’s shares and has a
two-year holding period which
continues post cessation of
employment (with Committee
discretion in exceptional circumstances
to vary).
The Committee retains discretion to
adjust the bonus that is payable if it
considers the formulaic outcome (for
both the financial and non-financial
element) is not appropriate in the
context of the underlying performance
of the Company, investor experience or
employee reward outcome.
Clawback and malus may be applied to
all of the bonus (cash and share
element), in the event of: (i) material
misstatement of the Company’s
financial statements; (ii) an error in the
computation of a bonus amount; (iii)
termination of service for gross
misconduct; (iv) reputational damage;
(v) corporate failure; or (vi) failure of
risk management.
Not more than 20% of the
maximum bonus opportunity will
be paid for threshold
performance and 50% of
maximum for target
performance.
The majority of the annual
bonus will be based on
financial metrics.
Financial metrics are scaled
with a threshold and
maximum target achievement
which is set by the Committee
at the beginning of the year,
taking into account the
Group’s budget, economic
environment and business
outlook.
In relation to non-financial
individual/strategic targets,
the structure of the target will
vary based on the nature of
the target set and it will not
always be practicable to set
targets using a graduated
scale. Vesting may therefore
take place in full if specific
criteria are met in full.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Element of pay Purpose and link to strategy Operation
Maximum opportunity
Performance metrics
Long-term
incentive
awards
Aims to incentivise and
reward long-term,
sustainable growth and
returns to shareholders.
Facilitates share
ownership thereby
providing alignment with
shareholders.
Benefits
To remain competitive in
the marketplace, and to
ensure minimal disruption
to the business.
The LTIP awards are structured as
nil-cost options, granted annually with
awards vesting on the third anniversary
of award subject to achievement of
performance conditions measured over
three years.
The normal award level is 150%
of base salary but a maximum
opportunity of 200% of salary
can be approved by the
Committee in exceptional
circumstances.
The Committee will select the
most appropriate financial
metrics to support the
Company’s medium to
long-term strategy.
Vested awards granted from 2021 are
subject to a holding period of two years
(subject to the right to sell sufficient
shares to cover tax charges arising on
vesting) which continues post cessation
of employment (the Committee has
discretion to vary this in exceptional
circumstances).
The Committee retains discretion to
adjust the level of vesting under the LTIP
if it considers the formulaic outcome is
not appropriate in the context of the
underlying performance of the
Company, investor experience or
employee reward outcome.
Clawback may be applied, in the event
of: (i) material misstatement of the
Company’s accounts; (ii) an error in the
computation of a bonus amount; (iii)
termination of service for gross
misconduct; (iv) reputational damage;
(v) corporate failure; or (vi) failure of risk
management.
The Executive Directors are entitled to
receive benefits which include, but are
not limited to, family private health
cover, death in service life assurance and
reimbursement of travel expenses for
any business-related travel including any
tax thereon grossed up, where
appropriate.
25% of the award vests for
threshold performance.
There is no prescribed maximum.
The value of the benefit is
determined by the cost to the
Company.
Not performance-related.
Pension
To facilitate retirement
planning.
Payment is made either into a pension
scheme, or paid as cash to the individual
in lieu.
Maximum contribution is the
same as the workforce, currently
3% of salary per annum.
Not performance-related.
Policy for Chairman and Non-Executive Directors’ fees
Chairman
and
Non-Executive
Directors'
fees
To pay appropriately for
high-quality and
experienced Chairman
and Directors.
The Chairman and Non-Executive
Directors are paid a basic annual fee.
Supplemental fees may be paid for
additional responsibilities and activities,
including but not limited to, a
multi-Committee Chairman and the
Senior Independent Director.
The Chairman’s fee is inclusive of all of
his responsibilities.
Not performance-related.
There is no prescribed maximum
fee or maximum increase. Fees
are set at a level to reflect the
amount of time and level of
involvement required in order to
carry out their duties as members
of the Board and its Committees.
There may be a need to
recognise increases in certain
circumstances such as assumed
additional responsibility (for
example, taking on the
Chairmanship of a Committee or
a temporary role or increase in
time commitment or
responsibility) or an increase in
the scope or size of the role.
Reasonable expenses incurred by
the Non-Executive Directors in
carrying out their duties will be
reimbursed, including any tax
thereon grossed up, where
appropriate.
Ten Entertainment Group plc Annual Report and Accounts 2020
83
DIRECTORS’ REMUNERATION POLICY CONTINUED
PERFORMANCE METRICS
Performance metrics for the annual bonus
and LTIP are reviewed and set annually by the
Committee and are aligned to the Group’s
strategy. Stretching targets are set taking into
account internal plan and external market
expectations for the Company, economic and
business outlook. Achievement of the
threshold target results in lower levels of
rewards and the maximum target reflects
significant out performance.
The Committee also retains the discretion
within the Policy to adjust targets and/or set
different measures and alter weightings for
the Annual Bonus Plan and for the LTIP if
events happen that cause it to determine that
the metrics are unable to fulfil their originally
intended purpose, provided the new metrics
are not materially less difficult to satisfy. Any
adjustments will be fully disclosed in the
following year’s Annual Report on
Remuneration.
POLICY ON REMUNERATION FOR
EMPLOYEES
The remuneration policy for all employees is
determined in line with best practice and aims
to ensure that the Company is able to attract
and retain the best people. This principle is
followed in the development of our Directors’
Remuneration Policy. The key difference
between the Policy and the wider Group’s
policy is that the Executive Directors’
packages (and the senior management team
to a lesser extent) are weighted more to
variable pay for those employees identified as
having the greatest potential to influence
Group-level performance.
COMMITTEE DISCRETIONS IN RESPECT OF
ANNUAL BONUS PLAN AND LTIP POLICY
The Committee will operate the Annual
Bonus Plan and LTIP according to the rules of
each respective plan and consistent with
normal market practice and the Listing Rules
of the London Stock Exchange, including
flexibility in a number of aspects as detailed
below but always within the shareholder
approved Policy (albeit with quantum and
performance targets restricted to the
descriptions detailed above):
● When to make awards and payments.
● How to determine the size of an award, a
payment, or when and how much of an
award should vest.
● How to deal with a change of control or
restructuring of the Group.
● Whether a Director is a 'good' or a 'bad'
leaver for incentive plan purposes and
whether and what proportion of awards
vest at the time of leaving or at the original
vesting date(s).
● How and whether an award may be
adjusted in certain circumstances (e.g. for
a rights issue, a corporate restructuring or
for special dividends).
● What the weighting, measures and targets
should be for the Annual Bonus Plan and
LTIP from year-to-year.
The Committee also has the discretion to
amend the Policy for minor or administrative
matters where it would, in the opinion of the
Committee, be disproportionate to seek
shareholder approval.
All historic awards that were granted under
any current or previous share schemes
operated by the Company, but remain
outstanding, detailed on page 89, remain
eligible to vest based on their original
award terms.
SHAREHOLDING REQUIREMENTS
To provide alignment between shareholders
and Directors, the Executive Directors are
required to build up a holding of shares in the
Company of 200% over a period of five years.
The post-cessation of employment
shareholding policy requires the Executive
Directors to retain shares from FY21 and
future annual bonus and LTIP awards equal to
100% of salary for one year post cessation.
Annual bonus and LTIP holding periods also
continue post cessation of employment. In
exceptional circumstances the Committee
has the discretion to adjust these
requirements.
SERVICE AGREEMENTS AND PAYMENTS
FOR LOSS OF OFFICE OF
EXECUTIVE DIRECTORS
Each of the Executive Directors has entered
into a service agreement with the Company.
The policy is that each Executive Director’s
service agreement should be of indefinite
duration, subject to termination by the
Company or the individual on six months’
notice. The service agreements of all
Executive Directors comply with this policy.
The contracts contain a payment in lieu of
notice clause which is limited to base salary
only and there is no loss of office payment
due. These service contracts are available for
inspection at the Group’s registered office.
Any share-based entitlements granted to an
Executive Director under the Company’s share
plans will be determined based on the
relevant plan rules. The default treatment
under the LTIP is that any outstanding
awards lapse on cessation of employment.
However, in certain prescribed
circumstances, such as death, ill-health,
disability, redundancy, retirement or other
circumstances, at the discretion of the
Committee ‘good leaver’ status may be
applied. For good leavers, awards from 2021
will normally vest on the original vesting
date, subject to the satisfaction of the
relevant performance conditions tested at
the end of the performance period and
reduced pro-rata to reflect the proportion of
the three-year period actually served (and
awards granted prior to 2021 will normally
vest on cessation with Committee discretion
to vest at the normal time). However, the
Committee has discretion in exceptional
circumstances to determine that awards vest
at an earlier date and/or to disapply time
pro-rating. Except in exceptional
circumstances, the post-vesting holding
period continues to apply post cessation of
employment. On a change of control, LTIP
awards will vest with performance being
determined at that time and awards will be
pro-rated to the date of the change of
control. The Committee retains discretion to
reduce the proration including to zero.
Pro-rata bonus may be paid to ‘good leavers’
for the period of active service based on
performance tested at the usual time. In all
cases performance targets would apply.
Annual bonus shares are owned from the
day of acquisition, and are not forfeit on
cessation of employment. The holding
period (except in exceptional circumstances)
continues post cessation and
clawback applies.
Legal fees, or a contribution towards them,
in connection with any settlement
agreement and other reasonable relevant
costs associated with termination including
outplacement consultancy fees may be paid
if this is considered appropriate. The
Company may also make a statutory
payment and a payment to settle any claim
or potential claim in relation to the
termination of employment.
RECRUITMENT POLICY
The remuneration package for a new
Executive Director (including those
promoted internally) would be set in
accordance with the terms of the Company’s
prevailing approved Remuneration Policy at
the time of appointment with annual bonus
maximum opportunity of 100% of salary and
LTIP award level maximum 200% of salary.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
STATEMENT OF CONDITIONS ELSEWHERE
IN THE GROUP
The Committee considers pay and
employment conditions across the Company
when reviewing the remuneration of the
Executive Directors and other senior
employees. In particular, the Committee
considers the range of base pay increases
across the Group when reviewing Executive
Director salary increases.
The Committee supports the Board’s initiative
to implement a robust framework for
employee engagement and regular
communication, and is building its
understanding of pay and benefits at all team
member levels in the Group. During 2020
engagement with our employees has been
focused on their health and wellbeing and
managing the exceptional circumstances of
the pandemic. The Committee does not
currently engage with employees to explain
the alignment of Executive remuneration to
the wider workforce but is considering how
this might be achieved during 2021. The
Committee did not consult with employees in
determining this Policy, although the CFO
attends meetings by invitation and provides
additional perspective on Group HR policies
and practices including from an employee
perspective. The Company does not use
remuneration comparison measurements
except to refer to market pay data
where relevant.
The Committee may, in exceptional
circumstances, grant an award under a
different structure in order to facilitate the
buyout of outstanding awards held by an
individual on recruitment. Any buyout award
would be limited to what the Committee
considers to be a fair estimate of the value of
awards foregone when leaving the former
employer and will be structured, to the extent
possible, to take into account other key terms
(such as vesting schedule, delivery vehicle
and performance targets) of the awards which
are being replaced.
For an internal Executive Director
appointment, any variable pay element
awarded in respect of the prior role may be
allowed to pay out according to its terms,
adjusted as relevant to take into account the
appointment. In addition, any other ongoing
remuneration obligations existing prior to
appointment may continue. For external and
internal appointments, the Committee may
agree that the Company will meet certain
relocation and other incidental expenses as
appropriate.
EXTERNAL BOARD APPOINTMENTS
Where Board approval is given for an
Executive Director to accept an outside
non-executive directorship, the individual is
entitled to retain any fees received.
CHAIRMAN AND
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors are engaged for
fixed terms. The Chairman has a notice period
of three months and the Non-Executive
Directors have a notice period of one month.
These appointments are subject to the
Company’s Articles of Association. All
Directors submit themselves for re-election at
the Annual General Meeting in accordance
with the UK Corporate Governance Code.
Ten Entertainment Group plc Annual Report and Accounts 2020
85
ANNUAL REPORT ON REMUNERATION
STATEMENT OF SHAREHOLDER VOTING AT THE AGM
The following table shows the results of the votes cast by proxy on the Directors’ Remuneration Report and the Directors’ Remuneration Policy
at the Annual General Meeting held on 18 June 2020:
Approval of Directors’
Remuneration Report
Approval of Directors’
Remuneration Policy
Company
For
Against
Total votes cast
Withheld
Total number
of votes
% of
votes cast
Total number
of votes
% of
votes cast
48,411,360
12,222,431
60,633,791
1,050,000
79.84
47,038,961
20.16
14,644,830
76.26
23.74
61,683,791
—
ENGAGEMENT BY THE REMUNERATION COMMITTEE
As a result of the shareholder voting reflected before, set out below are those areas the Committee focused on during the period.
ENGAGEMENT WITH SHAREHOLDERS
During 2020, the Committee engaged the services of Korn Ferry, to support the Committee in its review of the Group’s Remuneration Policy
and Remuneration Reporting. This was to address investor concerns raised through the AGM voting. The Committee’s focus has been to
ensure that the Policy going forward includes the UK Corporate Governance Code and best practice elements that have not previously been
included and to ensure clear and transparent remuneration reporting. The Committee also reviewed its operation of Policy, taking into account
Board changes that occurred during the year. The Committee Chairman wrote to over 80% of shareholders of the Company to explain the
changes proposed to the Directors’ Remuneration Policy, decisions made by the Committee in FY20, including the changes to the Board and
related changes to the remuneration packages, and the operation of Policy for FY21. Feedback from investors has overall been supportive.
DETERMINING EXECUTIVE DIRECTOR REMUNERATION
The Committee considers the appropriateness of the Executive Directors’ remuneration, not only in the context of overall business
performance and environmental, governance and social matters, but also in the context of wider workforce pay conditions (taking into account
workforce policies and practices as well as the ratio of CEO pay to all-employee pay) and the external market to ensure that it is fair and
appropriate for the role, experience of the individual, responsibilities and performance delivered.
Further the Committee is comfortable, in reviewing the remuneration for 2020 against the turbulent period the Group has gone through, that
there has been an appropriate link between reward and performance and that the Policy has operated as intended. The changes the
Committee is proposing to the Policy are to include UK Corporate Governance Code and best practice remuneration structure features and to
provide the Committee with the flexibility to select performance measures for the annual bonus and LTIP each year that support the business
strategy and long-term performance and shareholder return.
SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
The table below sets out the single total figure of remuneration and breakdown for each Director in respect of FY20 and FY19. All Directors took
a 20% pay cut over May and June 2020 due to the impact of Covid-19 on the business and this is reflected in the salary/fee shown below.
Salary/Fees
Benefits
Pension
Total fixed pay
LTIP5
Bonus
Total
variable pay
Total
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
Director
Graham Blackwell1
Antony Smith
Nick Basing
Christopher Mills
Julie Sneddon
Adam Bellamy
219
213
213
48
48
51
181
158
135
50
50
50
Duncan Garrood2
196
300
David Wild3
Mark Willis*
Total
23
—
50
60
1,011 1,034
6
—
6
—
—
—
19
—
—
31
—
(4)
6
—
—
—
(3)
—
1
—
3
9
—
—
—
—
—
—
—
—
8
—
—
—
—
—
—
3
228
222
219
48
48
51
181
162
141
50
50
50
215
297
23
—
50
64
40
134
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12
11 1,054 1,045
40
134
—
—
—
—
—
—
—
—
—
—
32
34
—
—
—
—
52
—
—
40
—
—
—
—
—
—
—
—
166
34
—
—
—
—
52
—
—
268
222
219
48
48
51
347
196
141
50
50
50
215
349
23
—
50
64
118
40
252 1,094 1,297
1 Graham Blackwell was promoted to the role of CEO effective 8 September 2020.
2 Duncan Garrood stepped down from the Board and role of CEO on 8 September 2020.
3 David Wild resigned on 26 June 2020.
4 Mark Willis resigned from the business in March 2019 and was replaced as CFO by Antony Smith.
5 The value of the LTIP for 2019 has been restated using the actual value on vesting based on a share price of £1.38 as at 22 May 2020 multiplied by the number of shares
vesting of 96,970.
The share price on the date of grant of the 2018 LTIP award that will vest in 2021 and that is shown as remuneration for 2020 was £2.68 compared to a share price assumed for
the vesting value of £1.67. There is no increase in value of the award based on share price appreciation. This is an estimate of the vesting value, with actual performance being
determined in June 2021. There is no exercise of discretion, this award has not yet reached the end of its performance period.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
STRATEGIC REPORT
GOVERNANCE
GOVERNANCE
FINANCIAL STATEMENTS
Neither of the two Executive Directors serve on the Board as Executive or Non-Executive Directors of listed or non-listed external companies
not related to the Group, nor have they received remuneration for work from other companies not related to the Group.
ANNUAL BONUS FY20
The FY20 maximum bonus opportunity was 100% of salary for each Director and the targets and performance against them is set out below:
CEO and CFO EBITDA target
Strategic objectives
CEO
Implement capital programmes
Integrate Houdini’s
Secure long-term liquidity
CFO
Enhance Board reporting
Enhance external reporting
Secure long-term liquidity
Weighting
Threshold
Maximum
70%
£26.5m
£27.3m
Actual
£(7.5)m
Weighting
30%
30%
Achieved
Yes
Yes
Yes
Yes
Yes
Yes
% maximum
opportunity
payable
0%
% maximum
opportunity
payable
30%
30%
The strategic objectives are summarised below:
CEO
● Deliver capital programmes of refurbishments and completion of the Manchester Printworks new build
● Integrate the Houdini’s joint venture within the Group and deliver on new customer innovation
● Secure the long-term liquidity of the Group through cost savings
CFO
● Develop Board reporting to be clearer and internal reporting to be more focused on business needs
● Develop investor relations and enhance external reporting
● Secure the long-term liquidity of the Group securing additional equity and/or debt facilities
Due to the significant impact of Covid-19 on the Group's results, the minimum EBITDA threshold was not met. The Committee determined full
achievement of the strategic objectives as noted above, but given the EBITDA performance and recourse to Government support, non-
payment of dividend and furlough of employees, the strategic element will not pay out.
Ten Entertainment Group plc Annual Report and Accounts 2020
Ten Entertainment Group plc Annual Report and Accounts 2020
87
ANNUAL REPORT ON REMUNERATION CONTINUED
LTIPS GRANTED IN 2020
Awards of 150% of salary were granted to the Executive Directors on 30 November 2020:
Director
Position
Number of
shares subject
to award
Share price on
date of grant
Face value of
awards granted
Graham Blackwell
Chief Executive Officer
233,083
199p
£463,835
Antony Smith
Chief Financial Officer
195,489
199p
£389,023
Percentage
vesting at
threshold
performance
Performance
period
25%
3 years to
FY22 for EPS
25% 3 years from
date of grant
for TSR
Total awards granted
428,572
The Committee considered whether a scale back of award level was necessary and taking into account the share price compared to that when
awards were made in 2019 determined that no scale back was necessary.
The vesting of awards is determined as to 50% by earnings per share targets and 50% by total shareholder return with a share price underpin as
set out below.
(1) EPS CONDITION
The earnings per share ('EPS') condition will be calculated on the results for the year to 1 January 2023 ('FY22') and will apply to 50% of the total
number of share awards granted. The proportion of the awards vesting for the EPS proportion will be based on the following adjusted EPS
targets in FY22:
FY22 EPS
Less than 17.0p
17.0p
17.0p–23.0p
More than 23.0p
Percentage of
award that
vests
0%
12.5%
12.5%–50%
50%
Straight-line vesting in between threshold and maximum.
(2) TSR CONDITION
The total shareholder return ('TSR') of the Company will be measured over the period from the date of grant to the third anniversary of the date
of grant relative to a comparator group of companies (set out in the following table) and this will apply to the remaining 50% of the award.
Young & Co.'s Brewery
Marston's
Fuller Smith & Turner
The Fulham Shore
Restaurant Group
Hollywood Bowl
The Gym Group
Loungers
Everyman Media
City Pub Group
The extent to which the award will vest in accordance with the TSR condition is tabled as follows:
TSR performance against Comparator Group Companies
Percentage of award that vests
Below Median
Median
0%
12.5%
Between Median and Median plus 10% per annum
Between 12.5% and 50% on a straight-line basis
Median plus 10% per annum and above
50%
Straight-line vesting in between threshold and maximum.
SHARE PRICE UNDERPIN
No award or part of an award may vest unless the average share price of the Company calculated over a three-month period ending on the
vesting date exceeds the share price on the date of grant.
The EPS target range is lower than the range set for the LTIP awards last year. Taking into account the difficult economic and market outlook
and the uncertainty brought by the pandemic, the Committee is comfortable that the target range is no less stretching that the EPS ranges set
in prior years. To the extent that any performance condition is not met, the relevant part of the award will lapse. There is no retesting of
performance. Further there is a share price underpin for awards to vest and the Committee has the discretion to adjust the level of vesting if in
all the circumstances it does not consider it to be appropriate.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
STRATEGIC REPORT
GOVERNANCE
GOVERNANCE
FINANCIAL STATEMENTS
PERFORMANCE SHARE PLAN (‘PSP’) (AUDITED)
The Group issued Long-Term Incentive awards ('LTIPs') in 2017, 2018, 2019 and 2020. The awards are granted as nil-cost options. The below
table reflects the outstanding Executive Directors’ interests in LTIPs.
Duncan Garrood
Antony Smith
Graham Blackwell
Date of award
Vesting date
11/12/2018
20/05/2019
11/06/2021
20/05/2022
20/05/2019
30/11/2020
20/05/2022
30/11/2023
22/05/2017
11/06/2018
20/05/2019
30/11/2020
22/05/2020
11/06/2021
20/05/2022
30/11/2023
Awards as at
29 December
2019
Awarded
Exercised
Lapsed in
year*
Awards
as at
27 December
2020 Grant price
111,940
200,000
133,333
—
193,939
95,149
123,333
—
—
—
—
195,489
—
—
—
233,083
— (111,940)
— (200,000)
—
—
—
—
(96,970)
—
—
—
(96,969)
—
—
—
—
—
133,333
195,489
—
95,149
123,333
233,083
—
—
£2.25
£1.99
—
£2.68
£2.25
£1.99
Face value
of 2020
awards
—
—
£389,023
£463,835
* These awards lapsed following review of the relevant performance conditions by the Committee in 2020 or upon resignation from the Board.
LTIPS GRANTED IN 2018 WITH PERFORMANCE PERIOD ENDING IN FY20
On 11 June 2018, 207,089 awards were granted to Mark Willis and Graham Blackwell, with a further 111,940 awards granted to Duncan Garrood
on 10 December 2018. The awards were all granted at a face value of 200% of salary based on a share price of £2.68. The vesting of awards is
conditional upon the achievement of two performance conditions, being EPS which applies to 50% of the award and is measured over three
financial years to FY20 and TSR which applies to the other 50% measured to the third anniversary of the date of grant. The LTIP awards to
Duncan Garrood and Mark Willis have lapsed on their leaving the business.
(1) EPS CONDITION
The proportion of the awards vesting for the EPS proportion are based on the following adjusted EPS targets in FY20:
2018 scheme EPS target in FY20
Less than 24.5p
24.5p
24.51p–26.7p
More than 26.7p
Percentage of
award that
vests
0%
12.5%
12.5%–50%
50%
The minimum target for adjusted EPS was set at 24.50 pence. The actual performance was an adjusted EPS loss of (23.2) pence (audited);
therefore the EPS part of the award did not vest and lapsed.
(2) TSR CONDITION
The TSR will be calculated against the following comparator group of companies over the last 30 days of the performance period to determine
if the performance condition has been met.
Britvic
Cineworld
Easy Hotels
Fuller Smith & Turner
Goals Soccer
Hollywood Bowl Group
Pendragon
The Gym Group
Pets at Home
Photo-me
Revolution Bars
STV Group
The extent to which the award would vest in accordance with the TSR condition is tabled as follows:
TSR performance against Comparator Group Companies
Below Median
Median
Between Median and Upper Quartile
Upper Quartile and above
Percentage of award that vests
0%
12.5%
Between 12.5% and 50% on a straight-line basis
50%
Based on an assessment of the Company TSR performance against the comparator group to 31 January 2021, 25% of the award will vest.
Actual vesting will be determined at the end of the performance period and set out in the 2021 Remuneration Report.
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89
ANNUAL REPORT ON REMUNERATION CONTINUED
The below table summarises the 2018 scheme awards, performance measures, targets and performance and the expected value of the awards
as explained before.
Director
Date of award
Vesting date
Performance
measure
Awards as at
27 December
2020
Performance
targets
Actual
performance
Graham Blackwell
11/06/2018 11/06/2021
EPS
47,574
TSR
47,575
As per
above
As per
above
Number of
awards
vesting
No
vesting
Three-
month
average
share price
Value of
award
–
–
(23.2)p
25%
23,787
£1.67
£39,785
PERFORMANCE CONDITIONS FOR FY19 LTIP AWARD
The performance conditions for the PSP awards granted on 17 May 2019 are set out below.
EPS CONDITIONS
The award is based on 50% of adjusted earnings per share (‘EPS’) targets as set out below and measured in FY21:
2019 scheme
Less than 25.7p
25.7p
25.7p–27.3p
More than 27.3p
Percentage of
award
that vests
0%
12.5%
12.5%–50%
50%
TSR CONDITION
The other 50% of the award is based on relative TSR which will be calculated against the same comparator group set out above for the 2018
award for the one month ending on the third anniversary of the date of grant. The extent to which the award would vest in accordance with the
TSR condition is tabled as follows:
TSR performance against Comparator Group Companies
Below Median
Median
Between Median and Upper Quartile
Upper Quartile and above
OPERATION OF REMUNERATION POLICY IN 2021
EXECUTIVE DIRECTORS’ SALARIES
Chief Executive Officer:
Chief Financial Officer:
£310,000
£260,000
Percentage of
award
that vests
0%
12.5%
Between 12.5% and 50% on a straight-line basis
50%
The CEO’s salary was set on his appointment and the CFO’s salary adjusted at the same time to take account of increases to his role and
responsibilities as noted in the Chairman’s Annual Statement. No increases will be made in 2021.
NON-EXECUTIVE DIRECTORS’ FEES
The fees for Executive Chairman and Non-Executive Directors for 2021 have not been increased from 2017 and are set out as below:
Executive Chairman:
Non-Executive Chairman
Non-Executive Directors:
SID allowance:
Dual Chair allowance:
£350,000
£135,000
£50,000
£5,000
£5,000
The Chairman has taken on a more active role in the Group since the resignation of Duncan Garrood during the year, to help support the
remaining two executives through a turbulent year, taking on media engagements, investor meetings and chairing a significantly greater
number of Board meetings. His Chairman fee has thus been temporarily increased to £350,000 for the short term until 31 March 2021
whereupon he will revert back to a Non-Executive Chairman and his previous fee of £135,000.
BENEFITS AND PENSION
Benefits remain in line with those provided in FY20. As part of the overall review of operation of policy, both Directors receive a contribution
towards pension arrangements of 3% of salary in line with all other employees.
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STRATEGIC REPORT
STRATEGIC REPORT
GOVERNANCE
GOVERNANCE
FINANCIAL STATEMENTS
ANNUAL BONUS PLAN
The Executive Directors’ maximum annual bonus opportunity remains at 100% of salary and continues to be based 70% on financial metrics
and 30% on strategic objectives. The Committee has delayed target setting for the financial metrics element of the bonus until it has more
clarity on the outlook for the current year. While profit is a key metric, the Committee is considering whether other financial metrics critical to
the current year should be included. The areas of focus for the strategic objectives have been determined. The strategic objectives have been
set but are commercially sensitive (including the areas of focus). Full disclosure will be made in next year’s remuneration report.
PERFORMANCE SHARE AWARDS
It is the Committee’s intention to grant the Executive Directors performance share awards at the same level as FY20, 150% of salary, although
award levels will be confirmed at the time of grant taking into account the prevailing share price. It is the Committee’s intention that awards
will continue to be based as to 50% on EPS and 50% TSR with a share price underpin although given the current uncertainty about when
the business is able to reopen and when trading will return to normal levels, the Committee will review measures and set targets at the time of
grant. Full disclosure will be made at the time of grant.
PAYMENT UNDER DIFFERENT PERFORMANCE SCENARIOS
Under the Regulations, we are required to show a bar-chart indicating the level of remuneration which would be received by the Executive
Directors in 2021 under different scenarios. The charts provide an illustration of the proportion of total remuneration made up of each
component of remuneration and the value of each component. The assumptions noted for target performance and maximum in the graphs
following are provided for illustration purposes only. Three scenarios have been illustrated for each Executive Director:
CEO – £000
Fixed pay
£319
100%
Target pay
£577
55%
27% 18%
Maximum pay (excl share price growth)
£835
Maximum pay (incl share price growth)
£938
38%
34%
37%
33%
25%
22% 11%
CFO – £000
Fixed pay
£270
100%
Target pay
£511
53%
25% 22%
Maximum pay (excl share price growth)
£753
Maximum pay (incl share price growth)
£864
36%
31%
35%
30%
30%
26% 13% 11%
Fixed
Short-term incentives (annual bonus)
LTIPs
LTIPs with 50% share price growth
● Fixed pay – consists of salary, benefits and pension contributions
● Target pay – is fixed pay plus 50% of annual bonus (50% of salary) and 50% of LTIP award
● Maximum pay – is fixed remuneration, 100% annual bonus (100% of salary) and 100% of the LTIP award (150% of salary for the CEO and
CFO) with 50% of share price growth for the LTIP award also illustrated
COMPARISON OF OVERALL PERFORMANCE
The below table reflects the performance of an investment in £100 in the Group against the same investment in the FTSE All Share on a
monthly basis since the date of listing in April 2017 until the financial year ended on 27 December 2020. The FTSE All Share has been chosen as
the comparator index as the Company has been a constituent of the index since listing.
250
250
200
200
150
150
100
100
50
50
TEG.L
TEG.L
ASX.L
ASX.L
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91
ANNUAL REPORT ON REMUNERATION CONTINUED
CHIEF EXECUTIVE OFFICER HISTORIC REMUNERATION
The table below sets out the total remuneration delivered to the Chief Executive Officer since the Company listed. The 2020 figures for the
Chief Executive Officer’s remuneration are a combination of Duncan Garrood’s remuneration until 8 September 2020 plus Graham Blackwell’s
remuneration from 8 September 2020 when he took over the position as Chief Executive Officer.
Year
2020
2019
2018
2017
Chief Executive Officer
single figure of total
remuneration
£000
Annual bonus payout
against maximum
opportunity
%
Long-term incentive vesting
rates against maximum
opportunity
%
360
349
330
206
0
9%
0
0
25%
N/A
N/A
N/A
2020 LTIP vesting is based on assumptions on likely vesting of TSR element. Actual vesting percentage will be set out in the 2021 Remuneration Report.
CHIEF EXECUTIVE OFFICER TO EMPLOYEE RATIO
Year
2020
25th percentile
50th percentile
75th percentile
58
31
20
Total UK employee pay and benefits figures used to calculate the CEO pay ratio is set out in the table below:
£000
Salary
Total pay
CEO
297
360
25th
percentile
50th
percentile
75th
percentile
6
6
11
11
17
18
The table above sets out the CEO pay ratio for 2020. The ratios have been calculated in accordance with Option A, as this is the most accurate
method of calculation. The CEO pay is per the single total figure of remuneration for 2020 and comprises remuneration for Duncan Garrood
until 8 September 2020 plus Graham Blackwell’s remuneration from 8 September 2020 when he took over the position as Chief Executive
Officer. The pay for the CEO is compared to the pay of our UK employees at the 25th, 50th and 75th percentile, calculated based on full-time
equivalent base pay data as at 27 December 2020. As ratios could be unduly impacted by joiners and leavers who may not participate in all
remuneration arrangements in the year of joining and leaving, the Committee has excluded any employee not employed throughout the whole
financial year. Employees on maternity are included pro-rata for their FTE salary, benefits and short-term incentives. No other calculation
adjustments or assumptions have been made. The Remuneration Committee is satisfied the median pay ratio is consistent with the pay,
reward and progression policies of the Company’s employees.
The relative importance of remuneration in relation to other significant uses of the Group’s cash is set out below:
Total staff costs*
Dividends paid
* CJRS amounts claimed during the period are excluded from this figure.
PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION
%
change
(7.8%)
(66.4)
27 December
2020
£000
29 December
2019
£000
18,286
2,405
19,003
7,150
Salary
Benefits
Bonus
2019
£000 % change
2020
£000
2019
£000 % change
2020
£000
2019
£000 % change
Duncan Garrood 1
Antony Smith
Graham Blackwell
Nick Basing
Christopher Mills
David Wild
Julie Sneddon
Adam Bellamy
2020
£000
196
213
219
213
48
23
48
51
300
158
181
135
50
50
50
50
(34.8%)
34.9%
20.9%
57.8%
(3.3%)
(53.3%)
(3.3%)
1.7%
19
0
6
6
—
—
—
—
(3)
(4)
0
6
—
—
—
—
721.3%
111.7%
100.0%
6.0%
0.0%
0.0%
0.0%
0.0%
—
—
—
—
—
—
—
—
—
52
34
32
—
—
—
—
—
(100.0%)
(100.0%)
(100.0%)
0%
0%
0%
0%
0%
320
(100.0%)
Average employees2
16,291
17,233
(5.5%)
1,233
1,450
(15.0%)
1 Duncan Garrood stepped down from the Board on 8 September 2020.
2 CJRS amounts claimed during the period are excluded from the salary figure.
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STRATEGIC REPORT
STRATEGIC REPORT
GOVERNANCE
GOVERNANCE
FINANCIAL STATEMENTS
PAYMENTS TO PAST DIRECTORS/PAYMENTS FOR LOSS OF OFFICE
Duncan Garrood gave notice of his intention to leave the business on 26 June 2020 and officially left the Board on 8 September 2020. He was
paid his normal salary, pension and benefits up to that date as is reflected in the single figure of remuneration table and received no further
remuneration after his leaving date. He has been paid no bonus and his LTIP awards have lapsed. There have been no payments to past
Directors or for loss of office.
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS AS AT 27 DECEMBER 2020 (AUDITED)
The number of shares of the Company in which Directors, and their connected persons, had a beneficial interest and details of long-term
incentive interests as at 27 December 2020 are set out in the table below:
Director
Graham Blackwell
Antony Smith
Nick Basing
Christopher Mills1
Julie Sneddon
Adam Bellamy
Duncan Garrood2
David Wild2
Shares held at
27 December
2020
Unvested LTIP
interests with
performance
conditions
153,554
39,938
1,102,500
10,616,727
50,000
30,000
—
—
451,565
328,822
—
—
—
—
311,940
—
1 The number of ordinary shares shown as held by Christopher Mills includes ordinary shares held by certain funds of which Harwood Capital LLP is the discretionary
fund manager.
2 This was the Directors’ LTIP interest up to the time they stepped down from the Board.
There have been no changes in these holdings since the year end date until the date this report has been approved.
SHAREHOLDING REQUIREMENT
The Executive Directors are required to build up a shareholding equivalent to 200% of base salary over five years from the later of date of
appointment and the approval of the new policy. The shareholding requirement has not yet been met by either Executive Director.
Director
Graham Blackwell
Antony Smith
Number
of shares
held as at
27 December
2020
153,554
39,938
Shares
held as a
% of salary
101
31
ADVISERS TO THE REMUNERATION COMMITTEE
Korn Ferry was engaged during the period to support the Committee with its review of the Group’s Remuneration Policy, Remuneration Report
and the Directors’ remuneration and to provide independent advice to the Remuneration Committee on the necessary changes to ensure
compliance and transparency in its reporting and decision making. Korn Ferry does not provide any other services to the Company and the
Committee is comfortable that its advice is independent and objective. Fees incurred in respect of advice provided to the Committee by Korn
Ferry during the year amounted to £10,000.
The Remuneration Report was approved by the Board and signed on its behalf by:
ADAM BELLAMY
CHAIR OF THE REMUNERATION COMMITTEE
29 MARCH 2021
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93
DIRECTORS’ REPORT
The Directors have pleasure in presenting
their report and the audited financial
statements for the Group for the 52 weeks
ended 27 December 2020. Ten Entertainment
Group plc (the ‘Company’ or the ‘parent
company’) is a public limited company. The
consolidated financial statements of the
Company for the 52-week period ended 27
December 2020 comprise the Company and
its subsidiaries (together referred to as the
‘Group’).
Additional information which is incorporated
by reference into this Directors’ Report,
including information required in accordance
with the Companies Act 2006 and the Listing
Rule 9.8.4R of the UK Financial Conduct
Authority’s Listing Rules, and which includes
information on future business
developments, can be located as follows:
● the Group’s Strategic Report is set out on
pages 1 to 57;
● future business developments on pages
8 to 9 and 28 to 31;
● the Chairman’s statement on pages 8
and 9;
● the Chief Executive Officer’s statement on
pages 28 to 31;
● a description of the business structure,
model and strategy on pages 20 to 25;
● the key performance indicators on pages
26 and 27;
● the discussion of risk management,
uncertainties and the longer-term viability
statement on pages 44 to 50;
● the Financial Review on pages 51 to 57;
● the Corporate Social Responsibility Report
on pages 32 to 38, including details of
greenhouse gas emissions;
● details of long-term incentive schemes
included in the Remuneration Report on
pages 76 to 93; and
● the Statement of Directors’
Responsibilities on page 97.
Together, this information is intended to
provide a fair, balanced and understandable
analysis of the development and performance
of the Group’s business during the year, and
its position at the end of the year, its strategy,
likely developments and any principal risks
and uncertainties associated with the Group’s
business.
Details of the Group’s policy on addressing
financial risks and details about financial
instruments are shown in Note 23 to the
Group financial statements on pages 134 to
136. The sections of the Annual Report
dealing with corporate governance,
the reports of the Nomination Committee
and Audit Committee and the Directors’
Remuneration Report set out on pages 58 to
93 inclusive are hereby incorporated by
reference into this Directors’ Report. The
Directors’ remuneration is tabled by Director
by category on page 92. For the purposes of
compliance with the Disclosure Guidance
and Transparency Rules ('DTR') 4.1.5R(2) and
DTR 4.1.8R, the required content of the
‘Management Report’ can be found in the
Strategic Report and Directors’ Report
including the sections of the financial
statements and Annual Report incorporated
by reference.
STAKEHOLDER ENGAGEMENT
Details of how the Directors have engaged
with employees and other stakeholders, and
had regard to the interests of employees and
the need to foster the Company’s business
relationships with suppliers, customers and
others and the effect of that regard,
including on the principal decisions taken by
the Company during the financial year, are
set out in the statement under s172(1)
Companies Act 2006 on pages 39 to 43.
DIRECTORS
The Directors of the Company who held
office during the year and up to the date of
signing the Directors' report are:
Duncan Garrood Resigned 8 September 2020
Graham Blackwell
Antony Smith
Nick Basing
David Wild
Resigned 26 June 2020
Adam Bellamy
Christopher Mills
Julie Sneddon
The roles and biographies of the Directors as
at the date of this report are set out on pages
60 to 61. The appointment and replacement
of Directors is governed by the Articles of the
Company, the UK Corporate Governance
Code, the Companies Act 2006 and related
legislation. Subject to the Articles of
Association, the Companies Act 2006 and
any directions given by special resolution,
the business of the Company is managed by
the Board, which may exercise all the powers
of the Company.
DIRECTORS’ INTERESTS
The number of ordinary shares of the
Company in which the Directors were
beneficially interested as at 27 December
2020 are set out in the Directors’
Remuneration Report on page 93.
Other than these ordinary shares acquired,
there have not been any changes in the
interests of the Directors, including share
options and awards, in the share capital of
the Company between the year end and
29 March 2021. None of the Directors have
a beneficial interest in the shares of any
subsidiary. In line with the Companies Act
2006, the Board has clear procedures for
Directors to formally disclose any actual or
potential conflicts to the whole Board for
authorisation as necessary. All new conflicts
are required to be disclosed as and when
they arise. There is an annual review of
conflicts disclosed and authorisations given.
The register of Directors’ conflicts is
maintained by the Company Secretary.
DIRECTORS’ INDEMNITIES
The Company’s Articles provide, subject to
the provisions of UK legislation, an indemnity
for Directors and officers of the Company
and the Group in respect of liabilities they
may incur in the discharge of their duties or
in the exercise of their powers.
The Directors are all covered by a Directors’
and Officers’ liability insurance policy
maintained by the Company with a qualifying
third-party insurance company which was in
force during the financial year and also at the
date of approval of the financial statements.
RESULTS AND DIVIDEND
The results for the year are set out in the
consolidated statement of comprehensive
income on page 106 and discussed in
greater detail in the Financial Review on
pages 51 to 57. The Directors do not
recommend the payment of a final ordinary
dividend (2019: Do not recommend).
SHARE CAPITAL
As at 27 December 2020, the Company’s
authorised share capital was £683,470 (2019:
£650,000) divided into a single class of
68,346,970 (2019: 65,000,000) ordinary
shares of 1p each. Details of the Company’s
share capital, including changes during the
year after the share placement in March 2020
and the allotment of shares after the exercise
of share options in May 2020, are set out in
note 17 to the financial statements.
All issued ordinary shares are fully paid up.
The ordinary shares are listed on the London
Stock Exchange and can be held in
certificated or uncertificated form. Holders of
ordinary shares are entitled to attend and
speak at general meetings of the Company,
to appoint one or more proxies and, if they
are corporations, corporate representatives
who are entitled to attend general meetings
and to exercise voting rights. On a show of
hands at a general meeting of the Company
every holder of ordinary shares present in
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
person or by proxy and entitled to vote shall
have one vote, unless the proxy is appointed
by more than one shareholder and has been
instructed by one or more shareholders to
vote for the resolution and by one or more
shareholders to vote against the resolution, in
which case the proxy has one vote for and
one vote against. This reflects the position in
the Shareholders’ Rights Regulations 2009
which amended the Companies Act 2006. On
a poll, every member present in person or by
proxy and entitled to vote shall have one vote
for every ordinary share held. None of the
ordinary shares carry any special voting rights
with regard to control of the Company.
The Articles specify deadlines for exercising
voting rights and appointing a proxy or
proxies to vote in relation to resolutions to be
passed at the AGM. The relevant proxy votes
are counted and the number for, against or
withheld in relation to each resolution are
announced at the AGM and published on the
Company’s website after the meeting.
There are no restrictions on the transfer of
ordinary shares in the Company other than
certain restrictions that may be imposed from
time to time by the Articles, law or regulation
and pursuant to the Listing Rules whereby
certain Directors, officers and employees
require approval to deal in ordinary shares of
the Company. The Group is not aware of any
other agreements between holders of
securities that may result in restrictions on
the transfer of ordinary shares.
AUTHORITY FOR THE COMPANY TO
PURCHASE ITS OWN SHARES
Subject to authorisation by shareholder
resolution, the Company may purchase its
own shares in accordance with the Act. Any
shares which have been bought back may be
held as treasury shares or cancelled
immediately upon completion of the
purchase.
Immediately prior to, but conditional upon
Admission, the Company was generally and
unconditionally authorised to make market
purchases (within the meaning of Section
693(4) of the Companies Act) of its shares
provided that in doing so it could not
purchase more than 6,500,000 shares in
aggregate, pays not less than 1p (excluding
expenses) per share and pays a price per
share that is not more (excluding expenses)
per share than the higher of:
● 105% of the average of the middle market
quotations for a share as derived from the
London Stock Exchange Daily Official List
for the five business days immediately
before the day on which it purchases that
share; and
● the amount equal to the higher of the
price of the last independent trade of an
ordinary share and the highest current
independent bid for an ordinary share as
derived from the London Stock Exchange
trading services SETS.
This authority shall expire at the conclusion of
the next AGM of the Company or within 15
months from the date of passing of the
resolution (whichever is the earlier), but the
Company may, if it agrees to purchase shares
under this authority before it expires,
complete the purchase wholly or partly after
this authority expires. The Company has not
repurchased any of its ordinary shares under
this authority.
EMPLOYMENT POLICIES
The Group is committed to the principle of
equal opportunity in employment. The Group
recruits and selects applicants for
employment based solely on a person’s
qualifications and suitability for the position,
whilst bearing in mind equality and diversity. It
is the Group’s policy to recruit the most
capable person available for each position.
The Group recognises the need to treat all
employees honestly and fairly. The Group is
committed to ensuring that its employees
feel respected and valued and are able to fulfil
their potential and recognises that the
success of the business relies on their skill
and dedication.
Applications for employment by disabled
persons are always fully considered bearing in
mind the aptitudes of the applicant
concerned. In the event of members of staff
becoming disabled, efforts are made to
ensure that their employment with the
Group continues and that appropriate
training is arranged. It is the policy of the
Group that the training, career development
and promotion of disabled persons should
as far as possible be identical with that of
other employees.
The Group attaches importance to good
communications and relations with
employees. Information that is or may be
relevant to employees in the performance of
their duties is circulated to them on a regular
basis, or immediately if it requires their
immediate attention. There is regular
consultation with employees through
meetings or other lines of communication,
so that their views are known and can be
taken into account in making decisions on
matters that will or may affect them.
Employee participation in their bowling
venue’s performance is encouraged through
various bonus and incentive schemes and
there is regular communication with all
employees on the performance of their
bowling venue or central function and on the
financial and economic factors affecting the
overall performance of the Group.
For more information on the Company’s
employment practices please see page 35
and for the policy on remuneration and
loss of office payments, please see pages
81 to 85.
SUBSTANTIAL SHAREHOLDINGS
As at 27 December 2020, the Company had been notified, in accordance with the FCA’s
Disclosure Guidance and Transparency Rules, of the following holdings of voting rights
attaching to the Company’s shares:
Shareholder
North Atlantic Smaller Companies Investment Trust plc*
Slater Investments
Fidelity Management & Research
Janus Henderson Investors
BlackRock, Inc.
Gresham House Asset Management
Canaccord Genuity Wealth Management
Otus Capital Management L.P
* These are funds managed by Harwood Capital LLP.
% of total
voting rights
as at
27 December
2020
14.63%
10.12%
10.00%
9.60%
9.18%
8.33%
5.00%
5.04%
Number of
shares
10,000,000
6,914,926
6,834,697
6,238,271
5,969,035
5,691,184
3,415,524
3,446,234
There have been no further notifications of any changes to these interests between
27 December 2020 and 29 March 2021 except for Gresham House Asset Management
that now holds 6,469,184 ordinary shares which is 9.47% of the total voting rights.
Ten Entertainment Group plc Annual Report and Accounts 2020
95
DIRECTORS’ REPORT CONTINUED
AGM
The notice convening the AGM to be held on
5 May 2021 at Aragon House, University Way,
Cranfield Technology Park, Cranfield, Bedford
MK43 0EQ is contained in a separate
shareholder circular. Full details of all
resolutions to be proposed are provided in
that document. The Directors consider that
all of the resolutions set out in the Notice of
AGM are in the best interests of the Company
and its shareholders as a whole. The Directors
will be voting in favour of them and
unanimously recommend that shareholders
vote in favour of each of them. It is currently
expected that there will be a physical meeting
at the venue specified above, but this may be
subject to change in the light of Covid-19.
Shareholders should regularly check the
Company’s website for updates.
SIGNIFICANT AGREEMENTS AND CHANGE
OF CONTROL PROVISIONS
The Group judges that the only significant
agreements in relation to its business are its
Group banking arrangements with the Royal
Bank of Scotland plc and gaming machines
contracts with Bandai Namco Europe Limited.
The Group’s gaming machines contracts do
not terminate on a change of control. The
Group does not have agreements with any
Director or employee that would provide
compensation for loss of office or
employment resulting from a takeover except
that provisions of the Group’s Performance
Share Plan may cause options and awards
granted to Directors to vest on a change
of control.
The Group’s banking arrangements do
contain change of control provisions which, if
triggered, could limit future utilisations,
require the repayment of existing utilisations
or lead to a renegotiation of terms.
RELATIONSHIP AGREEMENT
In accordance with the disclosures required
by LR 9.8.4 sub-paragraph (14), the Group is
required to make a statement about any
agreements entered in accordance with LR
9.2.2A. On 12 April 2017, the Company, the
Harwood Shareholders, Harwood (as the
discretionary investment manager of the
Harwood Shareholders), and Numis (as Sole
Sponsor and Financial Adviser) entered into a
relationship agreement, the principal purpose
of which is to ensure that the Company is
capable of carrying on business
independently at all times.
Under the terms of the relationship
agreement the Harwood Shareholders each
undertake (and undertake to procure that
each of their associates shall procure insofar
as they are able to do so) that:
● any transaction, arrangement or contract
entered into between the Harwood
Shareholders (or any of the Harwood
Shareholders' associates or their
nominees) and the Company will be
conducted on an arm’s length basis and
normal commercial terms; and
● amongst other things, neither the
Harwood Shareholders nor any of their
associates or nominees (i) will take any
action that would have the effect of
preventing the Company from complying
with its obligations under the Listing
Rules; or (ii) will propose or procure the
proposal of a shareholder resolution
which is intended or appears to be
intended to circumvent the proper
application of the Listing Rules.
Harwood, as the discretionary investment
manager of Oryx and Harwood Capital
Nominees, has also undertaken to procure
that Oryx and Harwood Capital Nominees
will comply with the undertakings
listed above.
The relationship agreement will continue in
effect until the earlier of the aggregate voting
rights of the Harwood Shareholders (whether
held directly or indirectly through the
Harwood Shareholders’ associates and/or
their nominees) are less than 10% or the
shares are no longer admitted to the
premium listing segment of the Official List
and to trading on the Main Market of the
London Stock Exchange.
The Company confirms that it has complied
with its obligations under the Relationship
Agreement during the financial year under
review, and that so far as it is aware, all other
parties to that agreement have complied
with it.
ARTICLES OF ASSOCIATION
The Articles of Association were amended by
special resolution at the Annual General
Meeting of the shareholders on 18 June 2020
to allow for general meetings to be held in
both physical or electronic form or a hybrid
of both.
POLITICAL DONATIONS
The Company made no political donations in
the year.
KEY PERFORMANCE INDICATORS (‘KPIS‘)
Details of the Group’s KPIs can be found on
pages 26 to 27.
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Ten Entertainment Group plc Annual Report and Accounts 2020
INDEPENDENT AUDITORS
PwC have signified their willingness to
continue in office as auditors to the
Company and the Group is satisfied that
PwC are independent and there are
adequate safeguards in place to safeguard
their objectivity.
DIRECTORS’ STATEMENT OF DISCLOSURE
OF INFORMATION TO AUDITORS
Having made the requisite enquiries, the
Directors in office at the date of these
financial statements and Annual Report have
each confirmed that, so far as they are
aware, there is no relevant audit information
of which the Group’s and Company’s auditors
are unaware and each Director has taken all
the steps he/she ought to have taken as a
Director to make himself/herself aware of
any relevant audit information and to
establish that the Group’s and Company’s
auditors are aware of that information.
GOING CONCERN
The financial statements are prepared on a
going concern basis, which the Directors
believe to be appropriate based on the
review carried out and explained in the
Viability Statement on pages 49 to 50.
CAUTIONARY STATEMENT
These financial statements and Annual
Report contain forward-looking statements.
These forward-looking statements are not
guarantees of future performance; rather,
they are based on current views and
assumptions as at the date of these financial
statements and Annual Report and are made
by the Directors in good faith based on the
information available to them at the time of
their approval of this report. These
statements should be treated with caution
due to the inherent risks and uncertainties
underlying any such forward-looking
information. The Group undertakes no
obligation to update these forward-looking
statements.
By order of the Board
ANTONY SMITH
COMPANY SECRETARY
29 MARCH 2021
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
In the case of each Director in office at the
date the Directors’ Report is approved:
● so far as the Director is aware, there is no
relevant audit information of which the
Group and Company’s auditors are
unaware; and
● they have taken all the steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that the
Group and Company’s auditors are aware
of that information.
By order of the Board
GRAHAM BLACKWELL
CHIEF EXECUTIVE OFFICER
29 MARCH 2021
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable law
and regulation.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group and Company
financial statements in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006. Additionally, the
Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules require
the directors to prepare the Group financial
statements in accordance with international
financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and the
directors have also prepared the company
financial statements in accordance with
this framework.
Under company law Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
Company and of the profit or loss of the
Group and Company for that period. In
preparing the financial statements, the
Directors are required to:
● select suitable accounting policies and
then apply them consistently;
● state whether, for the group and company
financial statements, international
accounting standards in conformity with
the requirements of the Companies Act
2006 and international financial reporting
standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the
European Union have been followed,
subject to any material departures
disclosed and explained in the financial
statements;
● make judgements and accounting
estimates that are reasonable and
prudent; and
● prepare the financial statements on the
going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are also responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and
Company and enable them to ensure that
the financial statements and the Directors’
Remuneration Report comply with the
Companies Act 2006.
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 financial statements may differ from
legislation in other jurisdictions.
DIRECTORS' CONFIRMATIONS
Each of the Directors, whose names and
functions are listed in the Corporate
Governance Report confirm that, to the best
of their knowledge:
● the Group and Company financial
statements, which have been prepared in
accordance with international accounting
standards in conformity with the
requirements of the Companies Act 2006
and international financial reporting
standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the
European Union, give a true and fair view
of the assets, liabilities, financial position
and loss of the Group and profit of the
Company; and
● the Directors’ Report includes a fair review
of the development and performance of
the business and the position of the
Group and Company, together with a
description of the principal risks and
uncertainties that it faces.
Ten Entertainment Group plc Annual Report and Accounts 2020
97
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
In our opinion, Ten Entertainment Group plc’s Group financial statements and Company financial statements (the “financial statements”):
● give a true and fair view of the state of the Group’s and of the Company’s affairs as at 27 December 2020 and of the Group’s loss and the
Group’s and Company’s cash flows for the 52 week period then ended;
● have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies
Act 2006; and
● have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts 2020 (the “Annual Report”), which comprise: the
Consolidated and Company statements of financial position as at 27 December 2020; the Consolidated statement of comprehensive income,
the Consolidated and Company statements of cash flows, and the Consolidated and Company statements of changes in equity for the period
then ended; the Statement of accounting policies; and the notes to the financial statements.
Our opinion is consistent with our reporting to the Audit Committee.
SEPARATE OPINION IN RELATION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED PURSUANT TO
REGULATION (EC) NO 1606/2002 AS IT APPLIES IN THE EUROPEAN UNION
As explained in the Statement of accounting policies, the Group, in addition to applying international accounting standards in conformity with
the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
INDEPENDENCE
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in the audit committee report, we have provided no non-audit services to the Company in the period under audit.
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in the
Statement of accounting policies concerning the Group’s and the Company’s ability to continue as a going concern. The Covid-19 global
pandemic has had, and continues to have, a significant impact on the level of trade of the business. During FY20, the Group obtained a waiver
on the Group’s financial covenants to the end of June 2021. Subsequent to year end the Group negotiated a £14m three-year term loan under
the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and amended its existing facility agreements, adding two new covenants
(minimum EBITDA and minimum liquidity) for 2021 and amending the reference levels for the adjusted leverage and fixed charge covenants
which come into effect from March 2022. As part of their review of the potential impact of the Covid-19 pandemic on the Group’s cash flows
and liquidity over the next 12 months, the Directors prepared a base case and a severe but plausible downside case. Critical to both cases is the
availability of cash from the bank facilities with RBS and amended covenants that could be met in both cases. Under the severe but plausible
downside forecast, the Group is forecasted to breach its loan covenants in September 2021, December 2021 and March 2022, which would
require a waiver to be negotiated with RBS in order for the Group and Company to continue operating. These conditions, along with the other
matters explained in the Statement of accounting policies, indicate the existence of a material uncertainty which may cast significant doubt
about the Group’s and the Company’s ability to continue as a going concern. The financial statements do not include the adjustments that
would result if the Group and the Company were unable to continue as a going concern.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of
accounting included:
● Obtaining and reviewing the banking agreements setting out the Group’s revised covenants to understand the facilities and financing
arrangements in place and identify and confirm the applicable covenants.
● Obtaining evidence of the Group’s available levels of finance including CLBILS.
● Obtaining management’s detailed base case and severe but plausible downside case scenario models for the period of the going concern
assessment and checking the mathematical accuracy and integrity of the model.
● Ensuring the model reflects the current government timetable for exiting lockdown.
● Comparing monthly forecasts to recent actual results for the period of full closure to May 2021.
● Challenging management’s base and severe but plausible downside case assumptions for trading in the remainder of 2021 and 2022 by
comparing these assumptions to UK economic outlook data and a range of industry analysis that considered the potential for further
lockdowns and the speed of recovery post Covid-19. We applied a sceptical mindset to and where differences existed, we challenged
management and understood the reasons for these differences. We have compared the forecast cash flows and trends to actuals for the
periods immediately after lockdown in 2020. We considered overall whether management’s forecasts were reasonable given the level of
uncertainty over future restrictions and the UK economy in the short term.
● Checking management’s planned use of key support schemes including the Coronavirus Job Retention Scheme and business rates relief to
current legislation.
● Evaluating management’s cost and margin assumptions for reasonableness and completeness by comparing with actual margins from
recent years and understanding and testing, where possible, any adjustments made.
● Evaluating management’s cost and margin assumptions for reasonableness and completeness by comparing with actual margins from
recent years and understanding and testing, where possible, any adjustments made.
● Assessing sufficiency and consistency of disclosures.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, other than the material uncertainty
identified in the Statement of accounting policies, we have nothing material to add or draw attention to in relation to the directors’ statement in
the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting, or in respect of
the directors’ identification in the financial statements of any other material uncertainties to the Group’s and the Company’s ability to continue
to do so over a period of at least twelve months from the date of approval of the financial statements.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
OUR AUDIT APPROACH
CONTEXT
Ten Entertainment Group plc operates under one main component, Tenpin Limited, which is a UK company. There are eight other UK based
subsidiaries.
OVERVIEW
Audit scope
● We performed a full scope audit over Tenpin Limited and the Company, whilst performing specific procedures over balances within the
other statutory entities based on their overall size and values of their specific financial statement line items. Our audit scoping gave us
coverage of 95% of revenue and 97% of profit before tax.
Key audit matters
● Material uncertainty related to going concern
● IFRS 16 transition (group)
● Goodwill and site asset impairment (group)
● Consideration of the impact of Covid-19 (group)
Materiality
● Overall group materiality: £709,000 (2019: £709,000) based on 5% of of the three-year average absolute adjusted profit before tax.
● Overall company materiality: £438,000 (2019: £415,000) based on 1% of total assets.
● Performance materiality: £531,750 (group) and £328,500 (company).
THE SCOPE OF OUR AUDIT
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
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99
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
CAPABILITY OF THE AUDIT IN DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to employment law, health and safety regulations and GDPR, and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the
financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation
of the financial statements (including the risk of override of controls), and determined that the principal risks were related to to manipulate
financial results and potential management bias in accounting estimates . Audit procedures performed by the engagement team included:
● Discussions with the Chief Financial Officer, Financial Controller, and the Audit Committee including consideration of known or suspected
instances of non-compliance with laws and regulations and fraud;
● Reviewing correspondence with legal advisors;
● Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual account combinations and by
unexpected users;
● Challenging assumptions made by management in its significant accounting estimates, in particular in relation to the assessment of going
concern, the impairment of goodwill and site assets, and the adoption of IFRS 16 ‘leases’ (see related key audit matters below); and.
● Reviewing disclosures for accounting estimates.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters
described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit.
IFRS 16 transition is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
IFRS 16 transition (group)
Refer to the Statement of accounting policies.
On 30 December 2019 the Group adopted IFRS 16 and recognised
a right of use asset and a lease liability of £148.6m and £163.9m
respectively.
We have focused our procedures on the adoption of IFRS 16 for
those leases accounted for as operating leases under IAS17 due to
the judgement applied by management in the application of the
standard and the estimates associated with the valuation of right of
use assets. The significant assumption made by management is the
incremental borrowing rate (IBR) applied to the Group’s property
leases. Management performed sensitivity analysis on the IBR in the
Statement of accounting policies.
The recoverability of right of use assets is contingent on future
cashflows. Management assessed the right of use assets for
impairment on adoption of IFRS 16 and identified a £16.3m
impairment. The significant assumptions made by management are
the growth rates and the weighted average cost of capital used to
discount the cash flows. Management performed sensitivity analysis
on the discount rate and growth rate in the Statement of accounting
policies..The impairment assessment at 27 December 2020 is
considered in the following Key Audit Matter.
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We obtained management’s models for determining the value of the
right of use asset and lease liability and checked the mathematical
accuracy and integrity. We checked the completeness of leases by
ensuring that there was a lease for each site. We agreed key inputs to
contracts for a sample of leases. We agreed CPI and RPI to the respective
indexes at the date of transition. We reperformed management’s
computation of the IBR and traced inputs to supporting documentation.
We also used our independent experts to help determine a range of IBRs
for the Group and concluded that the IBRs determined by management
were within a reasonable range. We reviewed the disclosures given in the
Statement of accounting policies for completeness and consistency. We
reperformed the sensitivity analysis.
We obtained management’s impairment models as at 30 December
2019 and checked the mathematical accuracy and integrity. We
checked that the forecasts used were consistent with those audited as
part of the audit of the period ended 29 December 2019. We used our
internal experts to determine a weighted average cost of capital for the
Group and concluded that the cost of capital determined by
management was within a reasonable range. We performed sensitivity
analysis. We reviewed the disclosures given in the Statement of
accounting policies for completeness and consistency. We reperformed
the sensitivity analysis presented.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Key audit matter
How our audit addressed the key audit matter
Goodwill and site asset impairment (group)
Refer to notes 9, 12 and 13 of the Financial Statements.
At 27 December 2020 the Group had goodwill of £29.3m and site
assets comprising right of use assets of £157.1m and property, plant
and equipment of £41.5m million. As set out in the Material
uncertainty related to going concern above, Covid-19 has had a
significant impact on the operations of the Group. The Group operates
in the leisure market and is exposed to fluctuations in consumer
discretionary spending as well as the wider economy. Management
performed an impairment assessment for the goodwill and site assets
at 27 December 2020. No impairment was identified in goodwill. An
impairment of £2.5m was recorded against site assets.
Management considers each site to be a cash-generating unit (CGU)
and performed the impairment assessment using discounted cash
flows.We focussed on this area as the determination of whether an
impairment charge was necessary involved significant estimates
about the future results of each site and the speed of recovery from
Covid-19 as well as the weighted average cost of capital used to
discount these forecasts. Goodwill is not allocated to individual
CGUs as management considers that the synergies arising from
each acquisition benefit the Group as a whole rather than individual
sites and management monitors goodwill in aggregate for internal
purposes. Therefore, for goodwill impairment testing, the CGUs are
aggregated into a single group.
Management’s assessment of the site portfolio as detailed above is
used to form the basis of the goodwill impairment review and is
therefore subject to the same assumptions as the site impairment
review above.
Management identified a £2.5m impairment of site assets. This was
prorated across right of use assets and property plant and
equipment other than where it would have reduced the value of an
asset below its fair value.
Consideration of the impact of Covid-19 (group and company)
Covid-19 has resulted in the Group’s sites being closed for a
significant proportion of 2020 and almost fully closed to date in
2021. The Group has furloughed over 95% of employees and taken
advantage of business rates relief and government grants. The key
areas Covid-19 has had the most impact on are:
1. The inability of the Group to generate revenue during lockdowns
has created a material uncertainty over going concern;
2. The Group has site assets and goodwill of £227.9m as at 27
December 2020. Given the impact of the pandemic on the
Group’s trading results there is heightened risk of impairment;
3. The Group took advantage of HMRC’s Coronavirus Job Retention
Scheme (‘CJRS’), claiming compensation in respect of UK
employee wages over the period from March to December 2020.
This has been disclosed in note 3 in accordance with IAS 20,
‘Accounting for government grants and disclosure of government
assistance’.
We obtained management’s impairment models as at 30 December
2020 and checked the mathematical accuracy and integrity. We agreed
management’s forecast to the latest Board approved strategic plan. We
considered a number of external market forecasts and analysts reports
assessing the likely speed of economic recovery from Covid-19 and
subsequent economic growth as this is a key driver of revenue and
EBITDA growth. Where management’s growth assumptions varied from
these forecasts, we evaluated the rationale, primarily due to the specific
nature of the bowling industry. Due to the significant and unpredicted
effect of Covid-19, we were not able to update our assessment of
management’s forecasting ability. However, we considered the
evaluation undertaken as part of the audit of the Group’s financial
statements as at 30 December 2019 where we concluded
management’s ability to forecast was appropriate. We used our internal
experts to determine a weighted average cost of capital for the Group
and concluded that the cost of capital determined by management was
within a reasonable range. We checked that the long term growth rate is
in line with current expectations for UK long term growth. We reviewed
the disclosures given in notes 9, 12 and 13 for completeness and
consistency. We reperformed the sensitivity analysis.
We evaluated the appropriateness of allocating goodwill to a single
group of CGUs. We considered the rationale for the acquisitions, level
of integration with the rest of the Group and the nature of synergies
derived. We also confirmed this is the way in which management
monitors goodwill by reviewing management’s internal reporting. We
were satisfied that synergies benefited the Group as a whole and
therefore the allocation of goodwill to a single group of CGUs was
appropriate.We considered the net asset value of the Group’s assets
compared to its market capitalisation which gives an indication of the
overall value of the Group. The market capitalisation was in excess of
the net asset value.
In response to the these risks we performed the following procedures:
● Refer to our Key Audit Matter above for procedures over impairment
of goodwill and site assets;
● Refer to the material uncertainty related to going concern above;
● We tested a sample of HMRC claims and associated cash receipts
for accuracy and compliance in respect of the CJRS. We assessed
management’s accounting treatment and disclosures to confirm
they were appropriate. We also considered the appropriateness of
management disclosures in the financial statements in respect of
the impact of the current environment and the increased
uncertainty around certain accounting estimates outlined above
and consider these to be appropriate.
We conducted our year end work remotely but we did not encounter
any difficulties in performing our audit testing or in obtaining the
required evidence to support our audit conclusions.
We considered the appropriateness of management disclosures in the
financial statements in respect of the impact of the current working
environment and the increased uncertainty around certain accounting
estimates outlined above and consider these to be appropriate.
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REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
HOW WE TAILORED THE AUDIT SCOPE
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they
operate.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they
operate. The Ten Entertainment Group plc operates under one main component, Tenpin Limited, which is a UK company. There are eight other
UK based subsidiaries. We performed a full scope audit over Tenpin Limited and the Company, whilst performing specific procedures over
balances within the other statutory entities based on their overall size and values of their specific financial statement line items. Our audit
scoping gave us coverage of 97% profit before tax.
MATERIALITY
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£709,000 (2019: £709,000).
Financial statements - group
How we determined it
5% of the three- year average absolute adjusted profit
before tax
Financial statements - company
£438,000 (2019: £415,000).
1% of total assets.
Total assets is deemed an appropriate benchmark
given this is a non-trading entity which
predominantly holds investments in subsidiaries.
Rationale for benchmark
applied
Profit before tax is a primary measure used by
shareholders in assessing the performance of the Group
and is a generally accepted auditing benchmark. By
adjusting the profit before tax for non-recurring
exceptional items, this provides us with a consistent year
on year basis in line with a measure which users rely on for
determining materiality based on trading performance.
Due to the impact of COVID-19 on the market, a 3 year
average absolute adjusted PBT is considered to be the
most appropriate benchmark as the underlying operations
of the business has not changed and it is expected that
the decrease in adjusted profit before tax is a short term
result. In the context of the current years performance we
capped overall materiality at the level of the prior year
materiality.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was £1,000 and £631,000 . Certain components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature
and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our
performance materiality was 75% of overall materiality, amounting to £531,750 for the Group financial statements and £328,500 for the
Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £35,000 (group audit)
(2019: £35,000) and £21,900 (company audit) (2019: £20,700) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
STRATEGIC REPORT AND DIRECTORS’ REPORT
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for
the period ended 27 December 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors' report.
DIRECTORS’ REMUNERATION
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting
on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and, except for the matters
reported in the section headed ‘Material uncertainty related to going concern’, we have nothing material to add or draw attention to in relation
to:
● The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
● The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
● The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements;
● The directors’ explanation as to their assessment of the Group's and company’s prospects, the period this assessment covers and why the
period is appropriate; and
● The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group and company and their environment obtained in the course of the audit.
Ten Entertainment Group plc Annual Report and Accounts 2020
103
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
● The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and company's position, performance, business model and strategy;
● The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
● The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance with
the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the
auditors.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the Statement of directors' responsibilities in respect of the financial statements, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
USE OF THIS REPORT
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
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Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
OTHER REQUIRED REPORTING
COMPANIES ACT 2006 EXCEPTION REPORTING
Under the Companies Act 2006 we are required to report to you if, in our opinion:
● we have not obtained all the information and explanations we require for our audit; or
● adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches
not visited by us; or
● certain disclosures of directors’ remuneration specified by law are not made; or
● the Company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Audit Committee, we were appointed by the members on 12 April 2017 to audit the financial statements
for the year ended 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement is 4 years, covering the
years ended 31 December 2017 to 27 December 2020.
CRAIG SKELTON (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
29 March 2021
Ten Entertainment Group plc Annual Report and Accounts 2020
105
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating (loss)/profit
Analysed as:
Group adjusted EBITDA
Exceptional administrative costs
Amortisation of acquisition intangibles
Depreciation and amortisation
Impairment
Profit on share of joint venture
Profit/(loss) on disposal of assets
Operating (loss)/profit
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit and total comprehensive (loss)/income for the period attributable to owners of
the parent
Earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
36,269
(14,095)
22,174
(38,025)
(15,851)
3,347
—
(142)
(16,634)
(2,521)
—
99
(15,851)
(5,815)
(21,666)
3,919
84,122
(24,930)
59,192
(46,609)
12,583
23,568
(2,391)
(293)
(7,379)
—
10
(932)
12,583
(788)
11,795
(2,758)
(17,747)
9,037
(26.30)p
(26.30)p
13.90p
13.87p
Note
1
5
4
7
8
8
The accompanying statements of accounting policies and notes on pages 110 to 139 are an integral part of these financial statements.
106
Ten Entertainment Group plc Annual Report and Accounts 2020
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 27 DECEMBER 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Assets
Non–current assets
Goodwill
Intangible assets
Investments in joint venture
Investments
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Liabilities
Current liabilities
Bank borrowings and leases
Trade and other payables
Corporation tax payable
Provisions
Net current liabilities
Non-current liabilities
Bank borrowings and leases
Other non-current liabilities
Deferred tax liability
Provisions
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Retained earnings
Total equity
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
Note
9
9
10
11
12
13
22
14
15
16
19
20
21
19
20
22
21
17
29,350
476
310
—
41,453
157,145
4,118
232,852
508
1,672
2,302
7,394
11,876
(34,031)
(8,282)
—
—
(42,313)
(30,437)
(171,024)
—
(1,582)
—
(172,606)
29,809
683
4,844
6,171
250
17,861
29,809
29,350
653
310
—
47,248
—
—
77,561
1,297
4,929
—
2,188
8,414
(9,227)
(9,819)
(907)
(91)
(20,044)
(11,630)
(4,991)
(1,284)
(2,057)
(688)
(9,020)
56,911
650
—
6,171
275
49,815
56,911
—
—
310
38,915
—
—
—
39,225
—
62
—
4,577
4,639
6
(1,312)
—
—
(1,306)
3,333
—
—
—
—
—
—
—
310
38,915
—
—
—
39,225
—
2,412
—
3
2,415
9
(6,871)
—
(6,862)
(4,447)
—
—
—
—
—
42,558
34,778
683
4,844
—
250
36,781
42,558
650
—
—
275
33,853
34,778
The accompanying statement of accounting policies and notes on pages 110 to 139 are an integral part of these financial statements. The
Group has taken the s408 exemption to not show the company income statement separately. The company has reported a profit of £5.3m for
the period. The financial statements on pages 106 to 109 were authorised for issue by the Board of Directors on 29 March 2021 and were
signed on its behalf by:
GRAHAM BLACKWELL
Company number: 10672501
ANTONY SMITH
Ten Entertainment Group plc Annual Report and Accounts 2020
107
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
Group
Cash flows (used in)/generated from operating activities
Cash generated from operations
Corporation tax paid
Finance costs paid
Net cash (used in)/generated from operating activities
Cash flows used in investing activities
Investment in joint venture
Acquisition of sites by Tenpin Limited
Purchase of property, plant and equipment
Purchase of software
Net cash used in investing activities
Cash flows generated from/(used in) financing activities
Cash costs capitalised from new borrowings
Gross proceeds from issue of new shares
Transaction costs from share issue
Lease principal payments
Dividends paid
Drawdown of bank borrowings
Repayment of borrowings
Net cash generated from/(used) in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
Company
Cash flows used in operating activities
Cash used in operations
Net cash used in operating activities
Cash flows used in investing activities
Investment in joint venture
Net cash used in investing activities
Cash flows generated from financing activities
Net cash received from issue of new shares
Dividends received
Dividends paid
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
4,480
(715)
(5,766)
(2,001)
—
—
(6,044)
(119)
(6,163)
—
5,038
(160)
(2,853)
(2,405)
18,350
(4,600)
13,370
5,206
2,188
7,394
23,917
(2,616)
(681)
20,620
(300)
(1,400)
(8,556)
(212)
(10,468)
(153)
—
—
(2,709)
(7,150)
17,000
(20,250)
(13,262)
(3,110)
5,298
2,188
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(5,358)
(5,358)
—
—
4,878
7,459
(2,405)
9,932
4,574
3
4,577
(2,104)
(2,104)
(300)
(300)
—
7,410
(7,150)
260
(2,144)
2,147
3
Note
18
16
Note
18
16
The accompanying statement of accounting policies and notes on pages 110 to 139 are an integral part of these financial statements.
108
Ten Entertainment Group plc Annual Report and Accounts 2020
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Group
Balance at 30 December 2018
Dividends paid
Share-based payment charge (Note 25)
Profit for the period and total comprehensive income attributable to
owners of the parent
Balance at 29 December 2019 (as previously reported)
Adjustment on initial application of IFRS 16
Taxation on IFRS 16 transition adjustment
Adjusted balance at 30 December 2019
Share-based payment charge (Note 25)
Issue of shares
Dividends paid
Loss for the period and total comprehensive loss attributable to owners
of the parent
Balance at 27 December 2020
Company
Balance at 30 December 2018
Profit for the period
Share-based payment charge (Note 25)
Dividend paid
Balance at 29 December 2019
Share-based payment charge (Note 25)
Issue of shares net of transaction costs
Dividend paid
Profit for the period1
Balance at 27 December 2020
Share
capital
£000
Share
premium
£000
Share-
based
payment
reserve
£000
650
—
—
—
650
—
—
650
—
33
—
—
—
—
—
—
—
—
—
—
—
4,844
—
—
683
4,844
159
—
116
—
275
—
—
275
(25)
—
—
—
250
Merger
reserve
£000
6,171
—
—
Retained
earnings
£000
47,928
(7,150)
—
Total
equity
£000
54,908
(7,150)
116
—
9,037
9,037
6,171
—
—
6,171
—
—
—
—
49,815
56,911
(14,970)
3,168
38,013
—
—
(2,405)
(14,970)
3,168
45,109
(25)
4,877
(2,405)
(17,747)
(17,747)
6,171
17,861
29,809
Share
capital
£000
Share
premium
£000
Share-
based
payment
reserve
£000
Merger
reserve
£000
650
—
—
—
650
—
33
—
—
—
—
—
—
—
—
4,844
—
—
159
—
116
—
275
(25)
—
—
—
683
4,844
250
—
—
—
—
—
—
—
—
—
—
Retained
earnings
£000
35,583
5,420
—
(7,150)
Total
equity
£000
36,392
5,420
116
(7,150)
33,853
34,778
—
—
(2,405)
5,333
(25)
4,877
(2,405)
5,333
36,781
42,558
1 The profit for the period in the Company is made up of the dividend income received of £7,459k and the underlying loss after tax of £2,126k.
The accompanying statement of accounting policies and notes on pages 110 to 139 are an integral part of these financial statements.
Ten Entertainment Group plc Annual Report and Accounts 2020
109
STATEMENT OF ACCOUNTING POLICIES
AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS
The financial statements for Ten Entertainment Group plc (the 'Company') for the year ended 27 December 2020 were authorised for issue by
the Board of Directors on 29 March 2021, and the balance sheet was signed on the Board’s behalf by Graham Blackwell and Antony Smith.
The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the 'Group'). The Company is a public
limited company, limited by shares, incorporated and domiciled in the United Kingdom and registered in England and Wales. Both the Company
financial statements and the Group financial statements have been prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies to the European Union. The principal accounting policies adopted by the Group and Company are set out below.
GENERAL INFORMATION
The Company’s ordinary shares are traded on the London Stock Exchange. The address of the registered office is Aragon House, University
Way, Cranfield Technology Park, Cranfield, Bedford MK43 0EQ. The consolidated financial statements of the Group for the 52-week period
ended 27 December 2020 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.
BASIS OF PREPARATION
These financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of
the Companies Act 2006 (‘IFRS’) and the applicable legal requirements of the Companies Act 2006. In addition to complying with international
accounting standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The
accounting policies which follow set out those policies which apply in preparing the financial statements for the 52 weeks ended
27 December 2020 and have been applied consistently, to all periods presented in these consolidated financial statements, other than the
adoption of IFRS 16 Leases which became effective for the Group from 30 December 2019. IFRS 16 is a replacement for IAS 17 Leases. There
has been a significant impact on the Group’s accounting for leases as a result of IFRS 16, the effect of which is set out further down this report.
The Group and the Company financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000)
except when otherwise indicated. The financial statements are prepared using the historical cost basis. On publishing the Company financial
statements here together with the Group financial statements, the Company is taking advantage of the exemption in Section 408 of the
Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these approved
financial statements.
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
During the year, the Group adopted IFRS 16 for the first time. The nature and effect of the impact of this are outlined in the leases section
under these statements of accounting policies.
At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards applicable
to the Group have been published but are not yet effective, and have not been adopted early by the Group. These are explained below:
Standard/interpretation
Content
IAS 1 Classification of
liabilities as current or
non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify
the requirements for classifying liabilities as current or non-current. The amendments are
not expected to have a material impact on the Group.
IAS 16 Property, plant and
equipment: Proceeds before
intended use
IFRS 17 Insurance contracts
In May 2020, the IASB issued Property, Plant and Equipment: Proceeds before Intended
Use, which prohibits entities deducting from the cost of an item of property, plant and
equipment any proceeds from selling items produced while bringing that asset to the
location and condition necessary for it to be capable of operating in the manner intended
by management. The amendment is not expected to have a material impact on the Group.
In May 2017, the IASB issued IFRS 17 Insurance Contracts ('IFRS 17'), a comprehensive new
accounting standard for insurance contracts covering recognition and measurement,
presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts
('IFRS 4') that was issued in 2005. The amendment is not expected to have a material
impact on the Group.
Date applicable
1 January 2022
1 January 2022
1 January 2023
IFRS 3 Reference to the
conceptual framework
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations – Reference to
the Conceptual Framework. The amendment is not expected to have a material impact on
the Group.
1 January 2022
IAS 37 Onerous contracts
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs
to include when assessing whether a contract is onerous or loss-making. The amendment
is not expected to have a material impact on the Group.
1 January 2022
Interest rate benchmark
reform: Phase 2
The amendments address issues that might affect IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
as a result of the reform of an interest rate benchmark. The amendment is not expected to
have a material impact on the Group.
1 January 2021
110
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
BASIS OF CONSOLIDATION
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases. All intercompany balances and transactions and any unrealised gains on transactions between Group companies
are eliminated.
On acquisition of a subsidiary, all of the identifiable acquired assets (including intangible assets), liabilities and contingent liabilities are recorded
at their fair values, reflecting their condition on the date control passes. The cost of an acquisition is measured as the fair value of the assets
given, equity instruments issued and liabilities incurred or assumed. The excess of the cost of the acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as goodwill. All accounting policies are applied consistently throughout the
Group companies.
GOING CONCERN
In assessing the going concern position of the Group and Company for the Annual Report and the financial statements for the year ended 27
December 2020, the Directors have considered its business activities in light of the uncertainty caused by the Covid-19 outbreak and the
impact on the Group’s profit, cash flow, liquidity and covenants. All the Group’s centres were closed for trade from 20 March 2020 with a
phased reopening from 4 August 2020 when it reopened the three Welsh centres, with the majority of the English centres then reopening from
15 August 2020. All English centres were closed again during the November Lockdown and though the majority of centres reopened in
December, the bulk closed again during the month as local Lockdowns and tiered restrictions were imposed, leaving only six centres open as at
27 December 2020. These centres then closed when the national Lockdown resumed in January 2021 and all centres have remained closed
until the date of this Annual Report.
As part of the review of the potential impact of the Covid-19 outbreak on the Group’s cash flows and liquidity over the next 12 months, a base
case and a downside case were prepared. Critical to both cases was the availability of cash from the bank facilities with RBS and amended
covenants that could be met in both cases.
In January 2021, the Group negotiated a new £14m CLBILS term loan facility agreement with RBS, with a term of three years. This, along with
the current £25m revolving credit facility with RBS, provides the Group with a £39m available debt facility.
In May 2020, RBS agreed to the waiver of the leverage and fixed charge covenants that were in place, until the end of June 2021. As part of the
negotiation of the CLBILS facility in January 2021, the covenants were renegotiated and amended to the following:
CURRENT COVENANTS:
Leverage covenant (Ratio of total net debt to adjusted EBITDA)
Testing for 2021 waived, replaced by new covenants
March 2022 – reference level – 1.10x
June 2022 – reference level – 1.25x
September 2022 – reference level – 1.50x
December 2022 – reference level – 1.50x
NEW COVENANTS:
Introduced for January 2021 to December 2021:
Minimum EBITDA
Quarter 1 – £5,550,000 EBITDA loss
Quarter 2 – £10,550,000 cumulative EBITDA loss
Quarter 3 – £10,550,000 cumulative EBITDA loss
Quarter 4 – £12,550,000 cumulative EBITDA loss
Fixed charge covenant (Adjusted EBITDA plus rent to rent
adjusted finance costs)
Testing for 2021 waived, replaced by new covenants
March 2022 – reference level – 7.50x
June 2022 – reference level – 5.00x
September 2022 – reference level – 4.00x
December 2022 – reference level – 2.25x
Minimum liquidity
Quarter 1 – £4,750,000 in cash and cash equivalents
Quarter 2 – £4,000,000 in cash and cash equivalents
Quarter 3 – £1,500,000 in cash and cash equivalents
Quarter 4 – £1,500,000 in cash and cash equivalents
The base case was prepared using the following key assumptions:
● centres forced to close with no revenue for January to May 2021;
● during closure, CJRS is still being provided and a significant portion of employees are on furlough, variable operating and central costs are
kept to a minimum, the business rates holiday is still being provided, but fixed costs as rent and service charges are maintained as normal;
● centres reopen from May, with levels of trade starting at -65% of the equivalent periods in FY19, moving up to -30%, with trade by the latter
quarter of the year and the first quarter of FY22 expected to be at similar levels to FY19;
● the -65% and -30% trading options reflect disruption from local Lockdowns and reflects the similar effects of social distancing restrictions
such as the 'Rule of Six', household mixing and curfews, as was felt in 2020, had on revenue. Variable operating and administrative costs
are reflective of the level of trade with fixed costs as rent, business rates and support centre costs maintained as normal as the centres are
open;
● reduced maintenance and marketing spend, as well as reducing all non-essential and non-committed capital expenditure in FY21 and the
first quarter of FY22; and
● no dividend payments in FY21 or FY22.
Under this base case scenario in FY21, the Group is not expected to be profitable but will have sufficient liquidity and no covenant breaches are
forecast within the next 12 months from the signing of the Annual Report and Accounts.
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111
STATEMENT OF ACCOUNTING POLICIES CONTINUED
GOING CONCERN CONTINUED
The downside case was prepared using the following key assumptions:
● revenue is assumed at 37% down on the base case for FY21 and 9% down on the base case for FY22;
● where the base case expected trade to return to FY19 levels for the last quarter of FY21 and into the first quarter of FY22, the downside case
reflects these at -65% and -30% of FY19 levels;
● in line with the revenue reduction, there is a reflective reduction in variable operating costs including employee costs. Where centres are
forced to close, it is assumed CJRS is available and is taken up until September but after that no claim is assumed;
● reduced maintenance and marketing spend, as well as reducing all non-essential and non-committed capital expenditure in FY21 and FY22
as in the base case; and
● no dividend payments in FY21 or FY22.
The downside case modelled is severe but plausible and would still leave the Group with £5m of liquidity at the end of FY21 and in 12 months
from now and the Group would pass the minimum liquidity tests but would breach the EBITDA test for September and December 2021 as
there would be no CJRS claimed after September when it is currently expected to end. The fixed cost and leverage covenants commencing
from quarter one of FY22 pass. In the event of a full lockdown in any of the months in quarter one of FY22, there would be a breach of the first
quarters covenants. In the event that a covenant is breached, an extension of this covenant would need to be negotiated with RBS. The
Directors believe this would likely be given as the Group would still have £5m of liquidity available, has a strong relationship with RBS and has
successfully obtained covenant waivers recently.
Nevertheless, in the event of extended Lockdown measures impacting the Group’s operations, the possibility of a covenant breach at the end
of December 2021 cannot be discounted, and as such represents a material uncertainty that may cast significant doubt on the Group and
Company’s ability to continue as a going concern.
Taking the above and the principal risks faced by the Group and Company into consideration, and the Directors expectation that they could
negotiate an extension to the covenant should the need arise, the Directors are satisfied that the Group and Company have adequate
resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, the
Group and Company continue to adopt the going concern basis in preparing these financial statements.
The Financial Statements do not include the adjustments that would result if the Group and Company were unable to continue as a going
concern.
USE OF JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires the use of accounting estimates and requires management to exercise judgement in the
process of applying the Group’s accounting policies.
Accounting estimates are based on historical experience and various other factors, including expectations of future events that are believed to
be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and
liabilities that are not readily available from other sources.
Actual results may differ from these estimates and the estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both the current and future periods. The following assets and liabilities or areas have been
affected by these estimates and judgements:
JUDGEMENT: JOINT VENTURES
Where the Group collaborates with other entities on a contract, a judgement is made of the nature of the relationship. Where there is joint
control (as described by IFRS 11), the arrangement is classified as a joint arrangement and accounted for using the equity method (for joint
ventures). The Group’s joint ventures are disclosed in Note 10.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals
or exceeds its interests in the joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the joint venture.
Unrealised losses arising on transactions between the Group and its joint ventures are eliminated unless the transaction provides evidence of
an impairment of the asset transferred. The Group funds its joint ventures through loans from Tenpin Limited which are secured and incur
interest at a market rate. The Directors review the recoverability of investments and loans for impairment annually. Where an investment is
held in a joint venture which has net liabilities, the investment is held at £nil.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Judgement: Non-GAAP performance measures
The Group 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 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 and profit or
loss on disposal of assets. The reconciliation to operating profit is included in Note 2.
Costs of sales – Costs of sales in the financial summary are determined by management as consisting of the direct bar, food, vending,
amusements and gaming machine related costs. Statutory costs of sales reflected in the statement of comprehensive income also include the
staff costs but excludes security and machine licence costs incurred by the centres.
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 impairment provisions. The reconciliation of this number to profit after tax is included under Note 2.
Exceptional items – exceptional items are those significant items which management considers to be one-off and non-recurring. The separate
reporting of these per Note 5 helps to provide a better indication of underlying performance.
Like-for-like sales – these are a measure of growth of sales adjusted for new or divested sites over a comparable trading period.
Return on Capital Employed ('ROCE') – this is operating profit as a percentage of total capital employed which consists of non-current assets
and current assets less current liabilities.
Bank net debt – this is made up of bank borrowings less cash and cash equivalents.
ESTIMATE: INTANGIBLE ASSETS, RIGHT-OF-USE ASSETS AND PROPERTY, PLANT AND EQUIPMENT
These assets are affected by impairment assessments and estimates of value in use and residual value. The calculation of value in use is based
on pre-tax cash flow projections from the financial budgets approved by the Board covering a one-year period and extrapolated by
management using an estimated medium-term growth rate for a further two years. Cash flows beyond this three-year period are extrapolated
over the life of the lease relating to that centre at the estimated long-term growth rate. The pre-tax discount rate applied to the cash flow
projections approximates the Group’s weighted average cost of capital, adjusted only to reflect the way in which the market would assess the
specific risks associated with the estimated cash flows of the bowling businesses and to exclude any risks that are not relevant to estimated
cash flows of the bowling businesses, or for which they have already been adjusted. The effect of varying the key assumptions in the goodwill
and tangible property, plant and equipment impairment calculations is presented in Note 12.
ESTIMATE: DEFERRED TAX
Estimation is required of temporary differences between the carrying amount of assets and liabilities and their tax base. Deferred tax liabilities
are recognised for all taxable temporary differences but, where deductible temporary differences exist, management’s judgement is required as
to whether a deferred tax asset should be recognised based on the availability of future taxable profits. The deferred tax assets actually
recoverable may differ from the amounts recognised if actual taxable profits differ from management’s estimates.
ESTIMATE: INCREMENTAL BORROWING RATE
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate (‘IBR’) to discount future minimum lease
payments. Judgment is applied in determining the components of the IBR used for each lease including the movement in risk-free rates, the
Group’s borrowing margin and any lease specific adjustments. The applicable IBR for each lease varies between 2.1% and 3.8% depending on
its length of term. To determine the incremental borrowing rate, the Group where possible, uses recent third party financing received by the
Group as a starting point otherwise it has obtained borrowing rates from its lender for a range of maturity terms. The same approach has been
used for modifications during the year where a borrowing rate of 2.54% has been used.
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113
STATEMENT OF ACCOUNTING POLICIES CONTINUED
LEASES
IFRS 16 Leases replaces existing guidance under IAS 17 and introduces a fundamental change to the recognition, measurement, presentation
and disclosure of leases for lessees.
The Group adopted IFRS 16 with effect from 30 December 2019. The Group applied the standard using the modified retrospective approach and
thus comparative information has not been restated and is presented, as previously reported, under IAS 17. The new standard results in all
property leases which were classified as operating leases under IAS 17, being recognised on the Statement of Financial Position as, from a lessee
perspective, there is no longer any distinction between operating and finance leases. Under IFRS 16, an asset, based on the right to use a leased
item over a long-term period and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
The Group leases properties, which under IAS 17 were classified as operating leases with payments made charged to profit or loss as arising over
the period of the lease. From 30 December 2019, under IFRS 16, leases are recognised as a right-of-use asset with a corresponding lease liability
from the date at which the leased asset becomes available for use by the Group. Each lease payment is allocated between the liability and a
finance cost. The finance cost is charged to profit or loss over the lease period using the effective interest method. Right-of-use assets are
measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised, less any lease incentives received. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. Lease liabilities are measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any
lease incentives receivable and variable lease payments that depend on an index or a rate. Variable lease payments that do not depend on an index
or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
● use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
● short-term leases (leases of less than 12 months) and leases with less than 12 months remaining as at the date of adoption of the new
standard are not within the scope of IFRS 16;
● leases for which the asset is of low value (IT equipment and small items of office equipment) are not within the scope of IFRS 16; and
● exclusion of initial direct costs from the measurement of the right-of-use asset on transition.
On transition to IFRS 16, the Group elected to apply the practical expedient to apply the definition of a lease from IAS 17 for contracts in place at
30 December 2019. For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability
immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The
measurement principles of IFRS 16 are only applied after that date. For all leases previously classified as operating leases, these liabilities and
assets were measured at the present value of the remaining lease payments, discounted using the Group’s average incremental borrowing rate
(IBR) as of 30 December 2019, specific to the portfolio of leases. The IBR is a significant area of estimation, as the Group obtained a range of
borrowing rates for differing terms to determine a range of rates on adoption as reflected in IBR accounting policy. A 1% increase in all of these
rates would decrease the value of the right-of-use asset on adoption by £13.1m, while a 1% decrease in the rates would increase the value
by £15.1m.
Under IFRS 16, the right-of-use assets are tested for impairment in accordance with IAS 36 ’Impairment of Assets’. This replaces the previous
requirement to recognise a provision for onerous leases. An impairment assessment of the cash-generating unit (‘CGU’) assets was performed
on transition at 30 December 2019 with an impairment charge of £16.3m identified as part of the adoption of IFRS 16 in retained earnings. A
CGU is each of the 46 (2019: 45) centres open as at the period end. The recoverable amount of each CGU has been calculated as the higher of
its value in use and its fair value less cost to sell. The calculation of value in use is based on pre-tax cash flow projections from the financial
forecasts approved by the Board covering a one-year period and extrapolated by management using an estimated medium-term growth rate
for a further two years. Cash flows beyond this three-year period are extrapolated over the life of the lease relating to that centre.
The key assumptions of the value in use calculation at the adoption date are:
Period on which management-approved forecasts are based
Growth rate applied beyond approved forecast period
Pre-tax discount rate
3 years
2%
11.6%
The pre-tax discount rate applied to the cash flow projections approximates the Group’s weighted average cost of capital (‘WACC’), adjusted
only to reflect the way in which the market would assess the specific risks associated with the estimated cash flows of the bowling businesses
and to exclude any risks that are not relevant to estimated cash flows of the bowling businesses, or for which they have already been adjusted.
The budgets which underlie the calculations are compiled on a site-by-site basis, with gross margin, staff cost, property cost and other
operating profit assumptions being based on past performance and known factors specific to that centre which are expected by management
to affect future performance, to reflect the operating circumstances and risks relevant to each part of the business at the time of adoption.
They also include an allocation of central overheads which are allocated across the centres based on turnover. Due to the timing of the
adoption of IFRS 16 these forecasts do not take the impact of Covid-19 into consideration.
The key assumptions to which the calculation is sensitive are the pre-tax discount rate, the future trading performance and the growth rate that
is expected of each centre. If the discount rate applied in the calculations is increased by 1%, the impairment charge increases by £3.4m. If the
growth rate applied is changed to 1% then impairment increases by £2.4m.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
The effect of the accounting policy change on the Consolidated Statement of Financial Position at implementation on 30 December 2019 was:
Assets
Right-of-use assets
Deferred tax asset on IFRS 16 transition
Prepayments
Liabilities
Lease – Property current
Lease – Property non-current
Deferred income – Lease incentive
Onerous lease provision
Retained earnings
Retained earnings
As at
29 December
2019
£000
IFRS
adjustment
£000
As at
30 December
2019
£000
—
—
2,559
2,559
—
—
(1,578)
(779)
148,645
3,168
(2,559)
149,254
(12,400)
(151,538)
1,578
779
148,645
3,168
—
151,813
(12,400)
(151,538)
—
—
(2,357)
(161,581)
(163,938)
49,815
49,815
(11,802)
(11,802)
38,013
38,013
The adoption of IFRS 16 reduced opening retained earnings as at 30 December 2019 by £11.8m.
During the period ended 27 December 2020, the application of IFRS 16 resulted in increased adjusted EBITDA, as reported in the Consolidated
Income Statement and Consolidated Statement of Comprehensive Income, of £11.2m in comparison to treatment under IAS 17. There was an
increase to operating profit of £2.6m. The differences have arisen as operating lease payments under IAS 17 were replaced by a depreciation
charge on right-of-use assets, onerous lease provision under IAS 17 has been replaced by impairment of assets and adjustments to rent free
periods and other lease incentives. Profit before taxation therefore decreased by a total of £2.8m with the inclusion of £5.4m of finance costs
under the new standard. The table below reconciles operating profit between IAS 17 and the new standard, IFRS 16:
Add: Operating lease costs under IAS 17
Impact on adjusted EBITDA for the period ended 27 December 2020:
Less: Depreciation of right-of-use assets for leases previously recognised as operating leases under IAS 17
Less: Onerous lease provision previously recognised under IAS 17
Impact on operating profit for the period ended 27 December 2020:
Less: Finance costs (interest)
Net decrease to profit before tax
£000
11,230
11,230
(8,648)
(17)
2,565
(5,388)
(2,823)
The table below represents a reconciliation from operating lease commitments disclosed at 29 December 2019 to lease liabilities recognised at
30 December 2019:
Operating lease commitments disclosed at 29 December 2019
Increase from contractual rent reviews1
Effect of discounting lease payments2
Lease liabilities recognised at 30 December 2019
£000
197,386
37,248
(70,695)
163,938
1 The previous disclosure of commitments was based on the current agreed rent over the term of the lease, whilst under IFRS 16 lease commitments factor in the minimum
rent increases agreed in the rent review clauses of the leases.
2 The previous disclosure of commitments was undiscounted, while under IFRS 16 lease commitments are discounted over the term of the lease based on the Group's
incremental borrowing rate.
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115
STATEMENT OF ACCOUNTING POLICIES CONTINUED
REVENUE
Revenue is accounted for by identifying the contract with a customer and the particular performance obligations in that contract. The Group’s
performance obligations represent the total amounts earned from customers from bowling, food, beverage, machines and amusements,
together with any other goods and services delivered in the normal course of business, net of VAT. The transaction price is a fixed price set for
the goods and services ordered by the customer and payment of the transaction price is due immediately upon the customer booking the
goods or services at the centre or call centre, or on the website. The Group is not obliged to provide refunds or returns but all refunds are
provided at 100% of the original transaction price paid for the goods or services by the customer. Revenue for food and drink is recognised
when the performance obligation, being the transfer of the products to the buyer in exchange for consideration, is completed. Revenue arising
from bowling is recognised when the performance obligation of the customer actually playing is completed. Deposits paid in advance are held
on the balance sheet until that time and then recognised as income. Revenue for amusements and machines is recognised when the cash is
collected from the amusement machine. The Group sells bundles whereby bowling is offered with food and drink at a discounted price versus
if they were sold individually. In accordance with IFRS 15 Revenue from Contracts with Customers, the discount is allocated amongst the
products in the bundle based on each product's standalone selling price as a proportion of the sum of the total standalone selling prices of all
the products in the bundle. Given the nature of the Group’s revenue streams, recognition of revenue is not considered to be a significant area
of judgement.
DEFERRED INCOME
Advance bookings paid for by customers are recognised as deposits and held on the balance sheets as deferred income until the customer
redeems their booking which becomes 'paid and played'. It is then transferred from the balance sheet and recognised as revenue in the
statement of comprehensive income.
GOVERNMENT GRANTS
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be
complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related
costs, for which it is intended to compensate, are expensed. Coronavirus Job Retention Scheme (CJRS) grant is recognised against staff costs
within administrative expenses and the local council Lockdown grants are recognised separately within administrative expenses in the
Consolidated Income Statement.
CJRS grant is recognised against staff costs within administrative expenses in the Consolidated Income Statement.
INTANGIBLE ASSETS
GOODWILL
Goodwill represents the excess of the cost of the acquisition of a subsidiary or business combination over the fair value of the Group’s share of
the identifiable net assets acquired. Goodwill is carried at cost less impairment, and is tested annually for impairment, or earlier if
circumstances indicate that impairment may have occurred. Excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets,
liabilities and contingent liabilities over cost arising on acquisition is recognised immediately in the statement of comprehensive income.
Goodwill is not allocated to individual cash-generating units ('CGUs') as the Group considers that the synergies arising from each acquisition
benefit the Group as a whole rather than individual centres and monitors goodwill in aggregate for internal purposes. Therefore, for goodwill
impairment testing, the CGUs are aggregated into a single group.
SOFTWARE
Software costs are capitalised and amortised over their estimated useful lives of up to three years on a straight-line basis. All software has been
purchased and generated externally.
FAIR VALUED INTANGIBLES ON ACQUISITION
CUSTOMER LISTS
Customer lists are recognised at fair value on acquisition of subsidiaries and are amortised over the years from which their expected benefits
are determined to be recognised in the income statement to nil over a five-year period with the rate of amortisation decreasing.
FAVOURABLE LEASES
Favourable leases are recognised at fair value on acquisition of subsidiaries and are amortised over the period of the lease on a
straight-line basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated depreciation and any impairment in value with property, plant and
equipment acquired in a business combination recognised at their fair value. Cost of assets includes acquisition costs net of VAT, as well as
other directly attributable costs in bringing the asset into a working condition. Depreciation is calculated so as to write off the cost, less
estimated residual value, of each asset on a straight-line basis over its expected useful economic life. The principal useful lives used for this
purpose are as follows:
Fixed furnishings
The length of the lease or their estimated useful lives
Fixtures, fittings and equipment
Between 3 and 40 years
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GOVERNANCE
FINANCIAL STATEMENTS
Assets in the course of construction are not depreciated until they are brought into use. As required by IAS 16, property, plant and equipment’s
expected useful life and residual values are reviewed annually. Residual value is calculated based upon prices prevailing at the date
of acquisition.
IMPAIRMENT OF ASSETS
At each reporting date, all financial and non-financial assets are considered for evidence of impairment. If there is an indication of impairment,
the Group carries out an impairment test by measuring the asset’s recoverable amount, which is the higher of the fair value less costs to sell
and the value in use. If this recoverable amount is below the carrying value, an impairment loss is recognised in the statement of
comprehensive income and the asset is written down to the recoverable amount.
In assessing value in use, the estimated future cash flows arising from the use of the asset are discounted to their present value using a
discount rate which reflects current market assessments of the time value of money and the risks specific to the asset. Impairment of the
Group’s property, plant and equipment and right of use assets is assessed at the cash-generating unit (‘CGU’) level being a bowling centre, with
goodwill allocated at Company level and impairment tested for goodwill at Company level. Impairment losses are charged to the statement of
comprehensive income in the period in which they are identified and are allocated first to goodwill then to carrying amounts of other assets at
the CGU level.
REVERSALS OF IMPAIRMENT
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication
that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
PROPERTY DISPOSALS
Disposals of properties and any resultant gain or loss on disposal are recognised in the statement of comprehensive income once all conditions
of the sale contract become unconditional.
RIGHT-OF-USE ASSETS
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives received. Right-of-use assets are related to the property leases
and are depreciated on a straight-line basis over the lease term.
LEASES
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with
a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and
telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are
consumed.
BUSINESS COMBINATIONS
The purchase of a company or bowling centre, being a group of inputs and processes capable of generating profits, is accounted for as a
business combination. Business combinations are accounted for using the acquisition method of accounting. The consideration for a business
combination is measured at fair value on the date of acquisition with the assets acquired and liabilities incurred measured at fair value on
exchange. Goodwill is recognised as the surplus of the consideration over the fair value of the net assets acquired and is accounted for as per
the accounting policy on goodwill. Transaction costs that the Group incurs in connection with business combinations are expensed as incurred.
Management judgements are made in the measurement of fair values to the net assets acquired in a business combination, in particular the
customer lists, inventories and property, plant and equipment acquired.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is calculated as cost of purchase on a first in, first out basis based on
normal levels of activity. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and
disposal which is the same method used to fair value the inventory on a business combination. Provision is made for obsolete, slow-moving or
defective items where appropriate.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised in the Group’s balance sheet when the Group becomes party to the contractual rights and
obligations of the instrument.
INITIAL RECOGNITION AND SUBSEQUENT MEASUREMENT
Financial assets
All financial assets are initially recognised at fair value less transaction costs and then can be subsequently measured at amortised cost or
fair value.
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117
STATEMENT OF ACCOUNTING POLICIES CONTINUED
FINANCIAL INSTRUMENTS CONTINUED
Trade and other receivables
Trade receivables are measured at fair value at initial recognition, do not carry any interest and are subsequently measured at amortised cost
using the effective interest rate method. Other receivables are subsequently measured at amortised cost using the effective interest rate
method and any interest income is recognised in profit and loss. Appropriate allowances for estimated irrecoverable amounts are recognised in
the income statement. Allowances for doubtful debts are recognised based on management’s expectation of losses, without regard to
whether an impairment trigger has occurred or not (an ‘expected credit loss’ model under IFRS 9).
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Interest-bearing bank borrowings
Interest-bearing borrowings are recognised initially at fair value with attributable debt issue costs capitalised. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
statement of comprehensive income over the period of the borrowings on an effective interest basis.
Debt issue costs
Issue costs of debt such as bank arrangement fees and legal fees incurred in arranging debt are capitalised under non-current other receivables
and are amortised in the statement of comprehensive income on an effective interest rate method.
Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently held at amortised cost using the effective interest rate method.
Derecognition of financial assets and financial liabilities
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights
to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are
transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain
control of the financial asset.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises
a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial
liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying
amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Impairment
The Group recognises loss allowances for expected credit losses ('ECLs') on financial assets measured at amortised cost. These are always
measured at an amount equal to 12 months ECL. The maximum period considered when estimating ECLs is the maximum contractual period
over which the Group is exposed to credit risk. When determining whether there is default or the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant
and available without undue cost or effort. This includes both qualitative and quantitative information and analysis, based on the Group’s
historical experience and informed credit assessment and forward-looking information. This same information is used to determine if financial
instruments have low credit risk upon initial recognition. Loss allowances for financial assets measured at amortised cost are deducted from
the gross carrying amount of the assets. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that
there is no realistic prospect of recovery.
PENSION COSTS
The Group operates a defined contribution pension plan. The Group pays contributions to privately administered pension insurance plans on a
mandatory basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised
as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
118
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as the result of a past event and it is both probable
that an outflow of resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Where the
Group expects to be reimbursed for an outflow of resources associated with a provision, for example under an insurance contract, the
expected reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value
of money is material, provisions are calculated by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the unwinding of the discount over time is charged to finance costs in the statement of comprehensive income.
TAX
The tax charge comprises current tax payable and deferred tax. The current tax charge represents an estimate of the tax payable in respect of
the Group’s taxable profits and is based on an interpretation of existing tax laws.
As required by IAS 12 (revised), the Group provides deferred income tax using the balance sheet liability method on all temporary differences
between the tax bases of assets and liabilities and their carrying values at the balance sheet date. Deferred income tax assets and liabilities so
recognised are determined using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are
based on the expected manner of realisation or settlement of the carrying amount of the assets or liabilities.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised. Deferred tax is not recognised in respect of the initial recognition of an asset or liability acquired in a
transaction which is not a business combination and at the time of the transaction does not affect accounting or taxable profits.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
SEGMENT REPORTING
The Group’s segments (distinguishable components of the Group that are engaged either in providing products or services) are its tenpin
bowling operations and its central management. The Group wholly operates within the UK. The Group has identified the Board of Directors as
the Chief Operating Decision Maker ('CODM').
SHARE CAPITAL
Ordinary shares are classified as equity. Share premium arises on the excess between the fair value of the shares issued and the par value of the
shares issued and the existing shares issued have none. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, against share premium.
SHARE-BASED PAYMENTS
Performance Share Plans ('PSPs') for the Executive Directors are accounted for in accordance with IFRS 2 Share-Based Payments. The value of
the awards is measured at fair value at the date of the grant and recognised as an expense. The total amount expensed is determined by
reference to the fair value of the awards granted including any market performance conditions. The cost of the transactions is recognised
together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on
which the relevant Directors become fully entitled to the award.
Ten Entertainment Group plc Annual Report and Accounts 2020
119
NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
1 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. There are no differences in the measurement of segment profit or loss, assets and liabilities for each segment.
The Group comprises the following segments:
Tenpin Limited – Tenpin Limited 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 and the Board of Directors’ and general head office assets and costs.
The segment results for the 52-week period ended 27 December 2020 are used by the Board for strategic decision making, and a reconciliation of
those results to the reported profit in the Consolidated Statement of Comprehensive Income, and the segment assets are as follows:
For the 52-week period ended 27 December 2020
Segment revenue – external
Bowling
Food and drink
Machines and amusements
Other
Adjusted EBITDA (Note 2)
Segment assets as at 27 December 2020
Segment liabilities as at 27 December 2020
Reconciliation of adjusted EBITDA to reported operating (loss)/profit
Adjusted EBITDA (Note 2)
Amortisation and depreciation of intangibles, property, plant and equipment and
right-of-use assets
Amortisation of fair value items
Impairment
Profit on disposals (Note 5)
Operating loss
Finance costs (Note 4)
Loss before taxation
For the 52-week period ended 29 December 2019
Segment revenue – external
Bowling
Food and drink
Machines and amusements
Other
Adjusted EBITDA (Note 2)
Segment assets as at 29 December 2019
Segment liabilities as at 29 December 2019
Reconciliation of adjusted EBITDA to reported operating profit
Adjusted EBITDA (Note 2)
Amortisation and depreciation of intangibles and property, plant and equipment
Loss on disposals (Note 5)
Profit on share of joint venture
Amortisation of fair valued intangibles
Exceptional items (Note 5)
Operating profit/(loss)
Finance (costs)/income (Note 4)
Profit/(loss) before taxation
All assets have been allocated to segments.
120
Ten Entertainment Group plc Annual Report and Accounts 2020
Tenpin
Limited
£000
36,269
16,830
9,898
8,298
1,243
Central
£000
—
—
—
—
—
Group
£000
36,269
16,830
9,898
8,298
1,243
5,466
223,200
(193,029)
(2,119)
21,528
(21,890)
3,347
244,728
(214,919)
5,466
(2,119)
3,347
(16,634)
(142)
(2,521)
99
(13,732)
(5,654)
(19,386)
Tenpin
Limited
£000
84,122
39,912
21,426
19,649
3,135
25,526
88,420
(28,189)
25,526
(7,379)
(932)
10
(114)
(2,300)
14,811
(865)
13,946
—
—
—
—
(2,119)
(161)
(2,280)
(16,634)
(142)
(2,521)
99
(15,851)
(5,815)
(21,666)
Central
£000
Group
£000
—
—
—
—
—
(1,958)
(2,445)
(875)
(1,958)
—
—
—
(179)
(91)
(2,228)
77
(2,151)
84,122
39,912
21,426
19,649
3,135
23,568
85,975
(29,064)
23,568
(7,379)
(932)
10
(293)
(2,391)
12,583
(788)
11,795
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
2 ALTERNATIVE PERFORMANCE MEASURES – NON-GAAP MEASURES
The Group 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 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 and profit or
loss on disposal of assets.
Reconciliation of operating profit to Group adjusted EBITDA
Group adjusted EBITDA
Amortisation of software
Amortisation of fair valued items on acquisition
Profit on disposals
Impairment
Depreciation of property, plant and equipment and right-of-use assets
Profit on share of joint venture
Operating profit before exceptional items
Exceptional items – other
Operating profit
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
3,347
(184)
(142)
99
(2,521)
(16,450)
—
(15,851)
—
(15,851)
23,568
(283)
(293)
(932)
(7,096)
10
14,974
(2,391)
12,583
Costs of sales – Costs of sales in the financial summary are determined by management as consisting of the direct bar, food, vending,
amusements and gaming machine related costs. Statutory costs of sales reflected in the statement of comprehensive income also include the
staff costs but excludes security and machine licence costs incurred by the centres.
Reconciliation of costs of sales
Costs of sales per the financial review
Site labour costs
Machine licence and security costs in administrative expenses
Costs of sales per the statement of comprehensive income
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(4,854)
(9,519)
278
(14,095)
(10,387)
(15,173)
630
(24,930)
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 impairment provisions. The reconciliation of this number to profit after tax is included under Note 8.
Exceptional costs – exceptional items are those significant items which management considers to be one-off and non-recurring. The separate
reporting of these per Note 5 helps to provide a better indication of underlying performance.
Like-for-like sales – these are a measure of growth of sales adjusted for new or divested sites over a comparable trading period.
Return on Capital Employed (‘ROCE’) – this is operating profit as a percentage of total capital employed which consists of non-current assets
and current assets less current liabilities.
Bank net debt – this is made up of bank borrowings less cash and cash equivalents.
Ten Entertainment Group plc Annual Report and Accounts 2020
121
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
3 STAFF COSTS AND NUMBERS
Staff costs – Group
Wages and salaries
Social security costs
Other pension costs
Share-based payments (Note 25)
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
11,829
1,088
170
(25)
13,062
17,553
1,154
180
116
19,003
Staff costs included within costs of sales are £9.0m (2019: £14.6m). The balance of staff costs is recorded within administrative expenses. The staff
costs are net of CJRS which amount to £5.2m. Details of Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 76 to
93. No Directors have accrued any retirement benefits and Directors that resigned during the year received no compensation for loss of office. The
highest paid Director for the 52-week period ended 27 December 2020 received remuneration of £267,323 (2019: £348,633). The 2017 LTIP
scheme vested in 2020 and 96,970 awards were exercised at a market value of £133,819. All key management positions are held by Executive
Directors of Ten Entertainment Group plc and, accordingly, no further disclosure of key management remuneration is deemed necessary.
The average monthly number of persons employed (including Executive Directors) during the period, analysed by category, was as follows:
Staff numbers – Group
Site staff
Administration
Unit management
Staff costs – Company
Wages and salaries
Social security costs
Other pension costs
Share-based payments (Note 25)
Staff numbers – Company
Administration (including Executive Directors)
4 FINANCE COSTS
Interest on bank loans and overdrafts
Amortisation of debt issuance costs
Lease interest
Notional interest on unwinding of discount on provisions (Note 21)
Other
Finance costs
122
Ten Entertainment Group plc Annual Report and Accounts 2020
52 weeks to
27 December
2020
Number
52 weeks to
29 December
2019
Number
931
45
150
1,126
978
56
153
1,187
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
1,144
123
11
(25)
1,253
1,125
96
13
116
1,350
Number
Number
6
9
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
330
49
5,393
—
43
5,815
277
56
282
7
166
788
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
5 (LOSS)/PROFIT BEFORE TAXATION
The following items have been included in arriving at a (loss)/profit before taxation:
Staff costs (Note 3)
Consumables charged to cost of sales
Depreciation of property, plant and equipment (Note 12)
Depreciation of right-of-use assets (Note 13)
Amortisation of software (Note 9)
Amortisation of fair valued intangibles on acquisition (Note 9)
(Profit)/loss on disposal of assets
Profit on share of joint venture
Impairment
Government grants received (excluding CJRS)
CJRS grants received
Operating lease rentals (receivable)/payable – property
Share-based payments (Note 25)
Repairs on property, plant and equipment
Exceptional items
Provision for updated HMRC guidance
Redundancy and restructuring costs
Costs relating to acquisitions and one-off lease charges
Total exceptional costs
Auditors’ remuneration
Fees payable to Company’s auditors for the Company and Consolidated financial statements
Audit of Company’s subsidiaries
Audit-related assurance services
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
13,062
754
5,498
10,965
171
101
(99)
—
2,521
(148)
(5,205)
(10)
(25)
2,436
—
—
—
—
40
95
35
170
19,003
1,770
7,096
—
283
245
932
(10)
11,932
116
1,943
822
643
926
2,391
53
70
39
162
6 RESULTS ATTRIBUTABLE TO TEN ENTERTAINMENT GROUP PLC
The financial statements of the Company, Ten Entertainment Group plc, were approved by the Board of Directors on 29 March 2021. The result
for the financial year dealt with in the financial statements of Ten Entertainment Group plc was a profit of £5.3m (2019: profit of £5.4m). As
permitted by Section 408 of the Companies Act 2006, no separate statement of comprehensive income is presented in respect
of the Company.
7 TAXATION
Recognised in the consolidated statement of comprehensive income:
Current tax
Current tax on (loss)/profit for the period
Adjustment in respect of prior years
Deferred tax (Note 22)
Origination and reversal of temporary differences
Adjustment in respect of prior years
Tax (credit)/charge in statement of comprehensive income
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
—
(2,494)
(1,384)
(41)
(3,919)
2,678
126
(92)
46
2,758
Ten Entertainment Group plc Annual Report and Accounts 2020
123
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
7 TAXATION CONTINUED
The tax on the Group’s (loss)/profit before tax differs (2019: differs) from the theoretical amount that would arise using the standard rate of tax
in the UK of 19% (2019: 19%). The differences are explained below:
(Loss)/profit before taxation
Tax using the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible
Adjustment in respect of prior years
Allowable depreciation on leases
Permanent differences
Loss carry back
Tax (credit)/charge
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(21,666)
11,795
(4,118)
(372)
(2,535)
—
605
2,501
(3,919)
2,241
509
172
(414)
250
—
2,758
In the Spring Budget 2020, the UK Government announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than
reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. Deferred taxes at the balance sheet date
have been measured using these enacted tax rates and reflected in these financial statements. In the Spring Budget 2021, the Government
announced that from 1 April 2023 the corporation tax rate will increase to 25%. As the proposal to increase the rate to 25% had not been
substantively enacted at the balance sheet date, its effects are not included in these financial statements. However, it is likely that the overall
effect of the change, had it been substantively enacted by the balance sheet date, would be to increase the tax expense for the period by
£1.2m, to increase the deferred tax asset by £1.0m.
8 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. The total shares in issue at the end of the 52-week period were 68,346,970.
The Company has 103,673 potentially issuable shares (2019: 179,451), 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 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 has been calculated in order to compare earnings per share year-on-year and to aid future comparisons.
Earnings has been adjusted to exclude exceptional expenses 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.
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(17,747)
9,037
67,471,461
103,673
65,000,000
179,451
67,575,134
65,179,451
(26.30)p
(26.30)p
13.90p
13.87p
Basic and diluted
(Loss)/profit after tax
Basic weighted average number of shares in issue
Adjustment for share awards
Diluted weighted average number of shares in issue
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)*
124
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Below is the calculation of the adjusted earnings per share:
Adjusted (loss)/earnings per share
(Loss)/profit after tax
Amortisation of fair valued items on acquisition
(Profit)/loss on disposals
Profit on share of joint venture
Impairment
Exceptional costs
Tax impact on above adjustments
Adjusted underlying (loss)/profit after tax
Adjusted (loss)/profit after tax
Weighted average number of shares in issue
Adjusted basic (loss)/earnings per share
Adjusted diluted (loss)/earnings per share1
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(17,747)
142
(99)
—
2,521
—
(456)
(15,639)
(15,139)
9,037
293
932
(10)
—
2,391
(78)
12,565
12,565
67,471,461
65,000,000
(23.18)p
(23.18)p
19.33p
19.27p
1 The diluted EPS is the same as the basic EPS as the adjustment for the share awards would be anti-dilutive so has been excluded.
9 GOODWILL AND INTANGIBLE ASSETS
Group
Cost
At 1 January 2018
Additions
At 29 December 2019
Additions
Adjustment on initial application of IFRS 16
At 27 December 2020
Accumulated amortisation and impairment losses
At 1 January 2018
Charge for the period – amortisation
At 29 December 2019
Charge for the period – amortisation
Adjustment on initial application of IFRS 16
At 27 December 2020
Net book value
At 27 December 2020
At 29 December 2019
At 30 December 2018
Fair valued
intangibles on
acquisition
£000
Goodwill
£000
Software
£000
2,938
—
2,938
—
—
28,045
1,305
29,350
—
—
1,010
212
1,222
119
(40)
Total
£000
31,993
1,517
33,510
119
(40)
2,938
29,350
1,301
33,589
2,331
245
2,576
101
—
2,677
261
362
607
—
—
—
—
—
—
29,350
29,350
28,045
648
283
931
171
(16)
1,086
215
291
362
2,979
528
3,507
272
(16)
3,763
29,826
30,003
29,014
Impairment testing is carried out at the cash-generating unit ('CGU') level on an annual basis. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Each individual centre is considered to
be a CGU. However, for the purposes of testing goodwill for impairment, it is acceptable under IAS 36 to group CGUs, in order to reflect the level at
which goodwill is monitored by management. The whole Group is considered to be one group of CGUs, for the purposes of goodwill impairment
testing, on the basis of the level at which goodwill is monitored by management and historical allocation of goodwill upon acquisition. The overall
process for testing impairment follows the same methodology as detailed in Note 12 for property, plant and equipment. As part of the business
combination accounting for the acquisition of Essenden Limited in 2015, the fair value of customer lists, rebate contracts and the Tenpin Limited
website was recognised and have been fully amortised over the period for which the benefits were expected to be recognised. The remaining value is
for the lease acquired at the Worcester centre which was significantly below market value and was fair valued and accounted for on acquisition in 2016
and is being amortised until the end of the lease. The amortisation charged on the above intangible assets is included in other administrative
expenses in the statement of comprehensive income. Bank borrowings are secured on property, plant and equipment for the value of £25.0m
(2019: £25.0m).
Ten Entertainment Group plc Annual Report and Accounts 2020
125
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
10 INVESTMENTS IN JOINT VENTURE
Group and Company
At 1 January 2018
Acquisitions and disposals
At 29 December 2019
Share of post-tax profit in new venture
At 27 December 2020
£000
310
310
—
310
Company
Country of incorporation Ownership interest %
Principal activity
Houdini’s Escape Room Experience Limited (Registered address:
UK
50%
Leisure
11 Stares Close, Gosport, Hampshire, England, PO13 9RZ)
In December 2019, the Company entered into a Share Purchase Agreement and acquired 50% of the share capital of Houdini’s Escape Rooms
Experience Limited for £0.3m. The Company also entered into a joint venture agreement to determine the arrangements around the selection
of Directors, dividend policy, premises use, provision of services, put and call option arrangements and deadlock procedures. Tenpin Limited
and Houdini’s also entered into a £2.5m loan facility agreement whereby Houdini’s can borrow money from Tenpin Limited over a three-year
period to fund the building of Escape Rooms on their premises. £0.2m has been borrowed as at 27 December 2020. The loans will incur a
market rate of interest and have been secured by a Debenture Agreement that the two parties entered into. As the purpose of the joint venture
is to fund and build Escape Rooms there is a restriction in the agreement around the payment of dividends by Houdini’s. Houdini’s has a
financial year ending 31 July and once its financial statements have been finalised and submitted the Group will look at changing the date to be
that of the Group. Due to the Covid-19 pandemic, Houdini’s has been closed for a significant portion of the year and no profit has been
generated of which a 50% share would be added to the investment value. The business has not impaired the investment in Houdini’s as it
believes the impact of the pandemic on the joint venture is short term, and it will return to a profitable position once trade returns to normal.
Prior to the above agreements, in 2019 Houdini’s built and operated Escape Rooms at three of Tenpin’s centres which were covered by a
revenue share agreement between the parties. Going forward after entering into the joint venture arrangement, Tenpin will charge Houdini’s an
operating licence fee instead. Further rooms are under construction at other centres but due to the Covid-19 pandemic, the rollout has
been delayed.
11 INVESTMENTS
Company
At 1 January 2019
Acquisitions and disposals
At 29 December 2019
Acquisitions and disposals
At 27 December 2020
Subsidiaries’
shares
£000
38,915
—
38,915
—
38,915
The Directors believe that the carrying value of the investments is supported by the underlying net assets of the business and the future profits
that will be generated by the Group.
126
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
GROUP INVESTMENTS
The Company has investments in the following subsidiary undertakings, which affected the results and net assets of the Group:
Companies owned directly by Ten Entertainment Group plc
TEG Holdings Limited
Companies owned indirectly by Ten Entertainment Group plc
Tenpin Limited
Indoor Bowling Equity Limited
Indoor Bowling Acquisitions Limited
Essenden Limited
Georgica Limited
Georgica Holdings Limited
Tenpin Five Limited
Tenpin One Limited
Georgica (Lewisham) Limited
GNU 5 Limited
Tenpin (Sunderland) Limited
Quattroleisure Limited
Tenpin (Halifax) Limited
Parent
Country of
registration
Percentage of
shares held
England & Wales
100%
TEG Holdings Limited
TEG Holdings Limited
Indoor Bowling Equity Limited
Indoor Bowling Acquisitions Limited
Essenden Limited
Georgica Limited
Tenpin Limited
Tenpin Limited
Georgica Holdings Limited
Georgica Holdings Limited
Tenpin Limited
Tenpin Limited
Tenpin Limited
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%]
Ten Entertainment Group plc and all its Group companies have their registered office at Aragon House, University Way, Cranfield Technology
Park, Cranfield, Bedford MK43 0EQ.
Tenpin Five Limited and Tenpin One Limited are claiming exemption from the audit and the preparation of financial statements in accordance
with Section 476A of the Companies Act 2006. A parent guarantee will be issued for the liabilities of these companies which only consist of
intercompany loans with the parent company and thus the guarantee is not expected to be called upon.
12 PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 January 2019
Additions
Acquisition of new sites
Disposals
At 29 December 2019
Adjustment on initial application of IFRS 16
Additions
Disposals
At 27 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the period
Disposals – depreciation
At 29 December 2019
Adjustment on initial application of IFRS 16
Charge for the period
Impairment charge
Disposals – depreciation
At 27 December 2020
Net book value
At 27 December 2020
At 29 December 2019
At 30 December 2018
Fixed
furnishings
£000
Amusement
machines
£000
Fixtures,
fittings and
equipment
£000
11,691
—
—
—
11,691
—
—
(323)
11,368
1,928
1,023
—
2,951
—
1,022
—
(167)
3,806
7,562
8,740
9,763
9,461
3,624
—
(1,514)
11,571
(10,217)
47
—
1,401
4,391
2,177
(1,164)
5,404
(4,378)
133
—
—
1,159
242
6,167
5,070
Total
£000
55,053
13,575
111
(2,457)
66,282
(10,686)
6,595
(323)
61,868
13,336
7,096
(1,398)
19,034
(4,400)
5,498
450
(167)
33,901
9,951
111
(943)
43,020
(469)
6,548
—
49,099
7,017
3,896
(234)
10,679
(22)
4,343
450
—
15,450
20,415
33,649
32,341
26,884
41,453
47,248
41,717
Ten Entertainment Group plc Annual Report and Accounts 2020
127
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
12 PROPERTY, PLANT AND EQUIPMENT CONTINUED
Property, plant and equipment and right-of-use assets are reviewed for impairment on an annual basis. The recoverable amount of each CGU
(each of the 46 (2019: 45) centres open as at the period end has been treated as a CGU) and has been calculated as the higher of its value in
use and its fair value less cost to sell. The calculation of value in use is based on pre-tax cash flow projections from the financial forecasts
approved by the Board covering a one-year period and which accounts for the impact of Covid-19 with year two and three expected to have
returned to 2019 pre-Covid-19 levels. Cash flows beyond this three-year period are extrapolated over the life of the lease relating to that centre.
The key assumptions of the value in use calculation are:
Period on which management-approved forecasts are based
Growth rate applied beyond approved forecast period
Speed of recovery to pre-Covid-19 levels
Pre-tax discount rate
27 December
2020
29 December
2019
3 years
2%
Year 2
10.78%
3 years
2%
N/A
13.0%
The pre-tax discount rate applied to the cash flow projections approximates the Group’s weighted average cost of capital (‘WACC’), adjusted
only to reflect the way in which the market would assess the specific risks associated with the estimated cash flows of the bowling businesses
and to exclude any risks that are not relevant to estimated cash flows of the bowling businesses, or for which they have already been adjusted.
This pre-tax discount rate has been benchmarked against the discount rates applied by other companies in the leisure sector. The pre-tax
discount rate has reduced in this financial year due to the adoption of IFRS 16. The target Debt:Equity ratio used in the WACC calculation now
accounts for IFRS 16 and so there has been a significant increase in the debt side of the ratio as well as an increase in the value of the beta
which increased the cost of equity element. As debt has a lower cost than equity, the calculation has led to a lower discount rate. The pre-tax
cash flows have also increased as there is no longer a rental cost, but the value of the assets has increased due to the accounting for the
right-of-use assets. The impact of the Covid-19 pandemic has been factored into the calculations of the cash flows at the year end which is
why there has been further impairment raised when this has been retested at the period end. Impairment on transition has been explained
under “Leases” in the statement of accounting policies. The impairment recognised at the year end as been apportioned between right-of-use
assets and property, plant and equipment based on the total values of these categories. The approach used to test for impairment on the
adoption of IFRS 16 is disclosed under “Leases” in the statement of accounting policies.
Due to the uncertainty brought about by Covid-19, the budgets which underly the calculations have been compiled on a Group basis, with
gross margin, staff cost, property cost and other operating profit assumptions being based on past performance and known factors which are
expected by management to affect future performance, to reflect the operating circumstances and risks relevant to each part of the business.
This has been allocated on a site basis based on the actual 2019 trading performance and also includes an allocation of central overheads
which are allocated across the centres based on turnover.
The key assumptions to which the calculation is sensitive remain the future trading performance, the growth rate that is expected of each
centre, the pre-tax discount rate and speed of recovery. If the discount rate applied in the calculations is increased by 1%, the impairment
charge increases by £3.5m (2019: £0.04m). If the growth rate applied is changed to 1% then impairment increases by £5.3m (2019: £0.05m). If
the speed of recovery is slower and the year two trade levels mirror year one then impairment increases by £10.3m. The business has been
prudent in its forecasting of its short-term profitability due to the impact of Covid-19.
For the calculation of fair value less cost to sell, management has assumed that each Tenpin Limited business could be sold for a multiple of 5x
EBITDA (2019: 5x EBITDA).
The depreciation and impairment charges are recognised in administrative expenses in the statement of comprehensive income. Bank
borrowings are secured on property, plant and equipment for the value of £25.0m (2019: £25.0m).
128
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Amusement
machines
and other
£000
10,727
—
444
(348)
—
Property
£000
164,920
(16,275)
—
—
14,869
—
Total
£000
175,647
(16,275)
444
(348)
14,869
—
163,514
10,823
174,337
—
8,648
2,072
—
10,720
152,794
—
4,416
2,317
—
(261)
6,472
4,351
—
4,416
10,965
2,072
(261)
17,192
157,145
—
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
508
1,297
—
—
13 RIGHT OF USE ASSETS
Group
Cost
At transition on 30 December 2019
Impairment of assets on transition
Lease additions
Disposals
Modification of leases
Lease surrenders
At 27 December 2020
Accumulated depreciation and impairment
At transition on 30 December 2019
Charge for the period
Impairment charge
Disposals – depreciation
At 27 December 2020
Net book value
At 27 December 2020
At 29 December 2019
14 INVENTORIES
Goods held for resale
The cost of inventories recognised as an expense and included in cost of sales amounted to £3.6m (2019: £7.5m). There is a provision of £1.0m
(2019: £0.5m) for obsolete bowling spares and shoes and then food and drink stocks due to the impact of centre closures around the year end,
due to the Covid-19 pandemic. These are included in the figures above. Bank borrowings for the value of £25.0m (2019: £25.0m) are secured on
all assets of the Group including inventory.
15 TRADE AND OTHER RECEIVABLES
Current receivables
Trade receivables
Amounts owed by subsidiary undertakings (Note 24)
Other receivables
Prepayments
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
58
—
1,063
551
1,672
198
—
252
4,479
4,929
—
60
2
—
62
—
2,405
—
7
2,412
There is a provision of £0.1m (2019: £nil) for trade receivables that are beyond their due date and a provision of £0.1m against other receivables
for a deposit paid to a landlord that may not be recoverable. Included in other receivables is a loan to Houdini’s for £0.2m which is charged
interest at the effective interest rate agreed at the time of the loan.
Ten Entertainment Group plc Annual Report and Accounts 2020
129
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
16 CASH AND CASH EQUIVALENTS
Cash and cash equivalents
17 SHARE CAPITAL
Group and Company
65,000,000 ordinary shares of £0.01 each
Issue of share capital during the period
Ordinary shares of £0.01 each
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
7,394
2,188
4,577
3
27 December 2020
29 December 2019
Shares
65,000,000
3,346,970
68,346,970
£000
650
33
683
Shares
65,000,000
—
65,000,000
£000
650
—
650
As at 27 December 2020, the Company’s authorised share capital was £683,470 (2019: £650,000) divided into a single class of 68,346,970
(2019: 65,000,000) ordinary shares of 1p each. All issued ordinary shares are fully paid up. The share capital of the Group is represented by the
share capital of the Company, Ten Entertainment Group plc, which was incorporated on 15 March 2017. The shares confer on each holder the
right to attend, speak and vote at all the meetings of the Company with one vote per ordinary share on a poll or written resolution.
18 CASH GENERATED FROM OPERATIONS
Cash flows from operating activities
(Loss)/profit for the period
Adjustments for:
Tax
Finance costs
Profit on share of joint venture
Non-cash one-off costs
Non-cash share-based payments charge
(Profit)/loss on disposal of assets
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right to use assets
Impairment
Changes in working capital:
Decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in provisions
Cash generated from/(used in) operations
19 BANK BORROWINGS AND LEASE LIABILITIES
Current liabilities
Bank loans
Leases – Machines/other
Leases – Properties
Capitalised financing costs
Group
Company
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
52 weeks to
27 December
2020
£000
52 weeks to
29 December
2019
£000
(17,747)
9,037
(2,126)
(1,990)
(3,919)
5,815
—
—
(25)
(125)
272
5,498
10,965
2,521
789
3,257
(2,821)
—
4,480
2,758
788
(10)
800
116
921
528
7,096
—
—
208
(622)
1,938
359
23,917
—
—
—
—
(25)
—
—
—
—
—
—
2,350
(5,557)
—
(5,358)
—
—
(10)
—
116
—
—
—
—
—
—
(2,383)
2,163
—
(2,104)
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
20,000
3,201
10,922
(92)
34,031
6,250
3,118
—
(141)
9,227
—
—
—
(6)
(6)
—
—
—
(9)
(9)
In September 2019, the Group entered into a £25.0m facility with the Royal Bank of Scotland plc ('RBS'). This facility consists of a committed
£25.0m facility split into a £23.0m revolving credit facility and a £2.0m overdraft facility. All loans carry interest at LIBOR plus a margin of 1.40%.
130
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
3,744
167,280
171,024
4,991
—
4,991
—
—
—
—
—
—
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
20,000
20,000
6,250
6,250
—
—
—
—
Non-current liabilities
Leases – Machines/other
Leases – Property
Bank borrowings are repayable as follows:
Bank loans
Within one year
The drawdown under the revolving credit facility ('RCF') has been included as payable within one year on the basis that the business draws
down and repays under the RCF on a regular basis.
Available borrowings are as follows:
Group
Revolving credit facility
Bank overdraft
Total borrowings
Currency
Interest rates
Maturity
GBP
GBP
LIBOR + 1.40%
LIBOR + 1.40%
Sept 2022
Annually
Total available
£000
Total drawn
£000
23,000
2,000
25,000
20,000
—
20,000
The payment profile of minimum lease payments under Leases is as follows:
Net
Within one year
Between one and two years
Between two and five years
After five years
Gross
Within one year
Between one and two years
Between two and five years
After five years
Future finance charges on leases
Present value of lease liabilities
Property leases
Machines and other leases
Total
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
10,922
6,168
20,971
140,140
178,201
3
3
12
264
282
3,201
2,667
1,077
—
6,945
3,115
2,323
2,389
—
7,827
14,123
8,835
22,048
140,140
185,146
3,118
2,326
2,401
264
8,109
Property leases
Machines and other leases
Total
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
17,522
12,348
38,039
180,932
248,841
(70,640)
178,201
23
23
68
540
654
(372)
282
3,402
2,768
1,111
—
7,281
(336)
6,945
3,242
2,385
2,407
—
8,034
(207)
7,827
20,924
15,116
39,150
180,932
256,122
(70,976)
185,146
3,265
2,408
2,475
540
8,688
(579)
8,109
Leases are in place for all 46 centres (2019: one) at a value of £178.2m (2019: £0.3m), amusement machines from Bandai Namco Europe
Limited with a value of £6.4m (2019: £7.3m), Wi-Fi equipment with a value of £0.1m (2019: £0.1m) and coffee machines acquired in 2019 with a
value of £0.4m (2019: £0.5m).
Ten Entertainment Group plc Annual Report and Accounts 2020
131
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
19 BANK BORROWINGS AND FINANCE LEASES CONTINUED
ANALYSIS OF STATUTORY NET DEBT
Net (debt)/cash as analysed by the Group consists of cash and cash equivalents less bank loans and amounts to (£12.6m) (2019: (£4.1m)).
Statutory net debt as analysed below includes leases.
Balance at 1 January 2019
Cash flows
Lease acquisition of amusement machines
Balance at 29 December 2019
Adoption of IFRS 16
Balance at 30 December 2019
Cash flows
Lease modifications in the year
Lease acquisitions
Balance at 27 December 2020
Cash
and cash
equivalents
£000
5,298
(3,110)
—
2,188
2,188
5,206
—
—
7,394
20 TRADE AND OTHER PAYABLES AND OTHER NON-CURRENT LIABILITIES
Trade and other payables
Trade payables
Amounts owed to subsidiary undertakings (Note 24)
Social security and other taxes
Other payables
Accruals
Deferred income – lease incentives
Other non-current liabilities
Deferred income – lease incentives
21 PROVISIONS
The Group’s onerous lease provisions are as follows:
Group
At 31 December 2018 – current
At 31 December 2018 – non-current
Provided in the period
Utilised in the period
Released unused in the period
Notional interest on unwinding of discount
At 29 December 2019 – current
At 29 December 2019 – non-current
Provided in the period
Released in the period as a transition adjustment upon the adoption of IFRS 16
Notional interest on unwinding of discount
At 27 December 2020 – current
At 27 December 2020 – non-current
Bank
loans and
overdrafts
£000
(9,500)
3,250
—
(6,250)
(6,250)
(13,750)
—
—
Net cash
excluding
notes and
leases
£000
(4,202)
140
—
(4,062)
(4,062)
(8,544)
—
—
Leases
£000
(6,467)
2,709
(4,351)
(8,109)
Statutory
net debt
£000
(10,669)
2,849
(4,351)
(12,171)
(163,846)
(163,846)
(171,955)
2,853
(14,962)
(1,082)
(176,017)
(5,691)
(14,962)
(1,082)
(20,000)
(12,606)
(185,146)
(197,752)
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
1,856
—
2,222
1,193
3,011
—
8,282
2,771
—
2,611
1,923
2,375
139
9,819
—
987
—
—
325
—
1,312
—
6,793
—
—
78
—
6,871
Group
Company
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
—
1,284
—
—
Total
£000
63
350
382
(23)
—
7
91
688
—
(779)
7
—
—
The onerous lease provision was removed upon the adoption of IFRS 16 with the full lease liability now recognised on the balance sheet and
any right-of-use asset tested for impairment. The net of all transition adjustments has been reflected against retained earnings.
132
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
22 DEFERRED TAX
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Tax losses
Fair value on business combination
Other
Total
Assets
Liabilities
Net
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
27 December
2020
£000
29 December
2019
£000
—
1,132
—
2,986
4,118
—
—
—
564
564
(1,426)
—
(156)
—
(1,582)
(1,867)
—
(190)
(564)
(2,621)
(1,426)
1,132
(156)
2,986
2,536
(1,867)
—
(190)
—
(2,057)
A deferred tax asset of £1.1m is recognised on taxable losses to the extent that there will be probable future taxable income against which the
loss can be utilised. It is expected the Group will return to a profitable position and so a deferred tax asset has been provided for on the losses
generated in the year. A deferred tax asset of £3.0m has been recognised on the impairment loss that was accounted for on adoption of IFRS 16
as the impairment is expected to be utilised against future taxable profits generated by Tenpin Limited. In the Spring Budget 2021, the
Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. As the proposal to increase the rate to 25% had
not been substantively enacted at the balance sheet date, its effects are not included in these financial statements. However, it is likely that the
overall effect of the change, had it been substantively enacted by the balance sheet date, would be to increase the deferred tax asset by £1.0m.
Movement in deferred tax during the 52-week period ended 27 December 2020:
Property, plant and equipment
Tax losses
Fair value on business combination
Other
Total deferred tax
Current income tax
Total taxation
29 December
2019
£000
Recognised
on-site
acquisitions
£000
Recognised
in income
statement
£000
Taxation
paid
£000
27 December
2020
£000
(1,867)
—
(190)
3,168
1,111
(907)
204
—
—
—
—
3,168
—
3,168
441
1,132
34
(182)
1,425
2,494
3,919
—
—
—
—
—
715
715
(1,426)
1,132
(156)
2,986
2,536
2,302
4,838
Movement in deferred tax during the 52-week period ended 29 December 2019:
Property, plant and equipment
Fair value on business combination
Other
Total deferred tax
Current income tax
Total taxation
1 January
2018
£000
(1,900)
(238)
51
(2,087)
(719)
(2,806)
Recognised
on-site
acquisitions
£000
Recognised
in income
statement
£000
Taxation
paid
£000
29 December
2019
£000
Adjustment
on IFRS 16
adoption
£000
30 December
2019
£000
—
(16)
—
(16)
—
(16)
33
64
(51)
46
(2,804)
(2,758)
—
—
—
—
2,616
2,616
(1,867)
(190)
—
(2,057)
(907)
(2,964)
—
—
3,168
3,168
—
3,168
(1,867)
(190)
3,168
1,111
(907)
204
The Group has carry-forward tax losses of an estimated £21.4m (2019: £21.4m) on which no deferred tax has been recognised. Of these,
£12.2m (2019: £12.2m) are held by Essenden Limited, £8.7m (2019: £8.7m) held by Georgica Limited and £0.4m (2019: £0.4m) held by Indoor
Bowling Acquisitions Limited. The losses in the Group companies have not been recognised as these are historic brought-forward losses and
these companies are not currently generating profits for which these losses can be utilised. The potential deferred tax asset not recognised is
£4.1m (2019: £3.6m). There are £3.7m (2019: £3.7m) of capital losses from disposals of the historic CVA sites on which no deferred tax asset
has been recognised as Tenpin Limited is not expected to generate profit from the disposal of sites which these losses could be utilised against.
The potential un-recognised deferred tax asset on this would amount to £0.7m (2019:£0.7m).
Ten Entertainment Group plc Annual Report and Accounts 2020
133
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
23 FINANCIAL INSTRUMENTS
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the
value measurements:
Level 1: inputs are quoted prices in active markets.
Level 2: a valuation that uses observable inputs for the asset or liability other than quoted prices in active markets.
Level 3: a valuation using unobservable inputs, i.e. a valuation technique.
There were no transfers between levels throughout the periods under review.
The Group’s principal financial instruments comprise bank loans, cash and short-term deposits and are held in Sterling. The purpose of these
financial instruments is to provide finance for the Group’s operations. The Group has various other financial instruments such as trade
receivables, trade payables and leases that arise directly from its operations. All the Group’s financial instruments are denominated in Pounds
Sterling. The carrying value of all the Group’s financial instruments approximates fair value and they are classified as financial assets and
financial liabilities measured at amortised cost.
The following tables show the fair value of financial assets and financial liabilities within the Group at the balance sheet date. The carrying value
of all financial assets was materially equal to their fair value and hence there has been no impairment.
FINANCIAL INSTRUMENTS BY CATEGORY
Group
Financial assets – measured at amortised cost
Current trade and other receivables
Cash and cash equivalents
Group
Financial liabilities – measured at amortised cost
Current borrowings excluding leases
Leases
Current trade and other payables
MATURITY ANALYSIS OF FINANCIAL LIABILITIES
Financial assets
27 December
2020
£000
29 December
2019
£000
1,120
7,394
8,514
449
2,188
2,637
Financial liabilities
at amortised cost
27 December
2020
£000
29 December
2019
£000
19,908
185,146
6,060
211,114
6,109
8,109
7,070
21,288
Within one year
Between one and two years
Between two and five years
After five years
27 December 2020
29 December 2019
Bank loans
£000
Leases
£000
Trade and
other
payables
£000
Total
£000
Bank loans
£000
19,908
14,123
—
8,835
22,048
—
— 140,140
6,060
40,091
—
8,835
22,048
—
— 140,140
19,908
185,146
6,060
211,114
6,109
—
—
—
6,109
Trade and
other
payables
£000
7,070
—
—
—
7,070
Leases
£000
3,118
2,326
2,401
264
8,109
Total
£000
16,297
2,326
2,401
264
21,288
134
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
FINANCIAL RISK MANAGEMENT
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return on risk. The Group holds no currency denominated assets or liabilities,
nor does it hold investments in shares of third-party companies that would pose a market risk.
Cash flow and fair value interest rate risk
The Group borrows in Sterling at floating rates of interest. The interest rate profile of the Group’s financial liabilities gross of debt issue costs
was as follows:
Interest rate risk profile of financial liabilities
Floating rate financial liabilities
Leases
Financial liabilities on which no interest is paid
27 December
2020
£000
29 December
2019
£000
20,000
185,146
—
205,146
6,250
8,109
779
15,138
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 1.40%. 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 provisions, is eight years. 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. A 1% increase in the current interest rate charged on the bank loans would decrease earnings by £0.2m (2019: £0.1m).
The bulk of the leases liability is for amusement machines and there is no actual interest charge on the arrangement with the supplier.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order to
minimise this risk the Group endeavours only to deal with companies which are demonstrably creditworthy. In addition, a significant proportion
of revenue results from cash transactions. The aggregate financial exposure is continuously monitored. The maximum exposure to credit risk is
the value of the outstanding amount of trade receivables. Management does not consider that there is any concentration of risk within either
trade or other receivables.
As almost all of the Group’s sales are for cash, the Group is exposed to minimal credit risk. The trade and other receivables mainly relate to
rebate income or vouchers sold and are from companies with strong credit histories and good credit ratings. A small balance of £0.1m has been
made to provide for balances that are past due but are still to be chased and a further £0.1m provision made against a deposit with a landlord
with whom rent negotiations are being carried out. There is a short-term loan to Houdini’s as explained in Notes 15 and 24 to assist with the
build of new Escape Rooms. As the company is 50% owned and managed by the Group it is believed the company will return to profit when
trade returns to normal and will be able to repay this loan. The majority of prepayments are for rents, service charges, business rates and
insurances which are to companies with strong credit histories and for less than six months in advance and thus pose a low risk of becoming
impaired and thus no provision has been made.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as is possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s cash position and cash
flow forecasts are reviewed by management on a daily basis with the objective to ensure the Group has sufficient funds available to finance its
business strategy. The current bank facilities consist of a £25.0m facility with £20.0m of the RCF in use. The risk is measured by comparing the
bank debt in use to the total facility available which shows that £5.0m of the facility is still available for use. The total risk would be if the entire
facility were unavailable for use if the Group were to default on its banking agreement by not meeting its agreed covenants. The Consolidated
Statement of Financial Position shows that the Group has a net current liability position which is due to the bank loans being reflected as
current liabilities. The facilities are available to the Group until September 2022 after being renegotiated with the Royal Bank of Scotland plc in
September 2019. During the year, due to Covid-19, the Group has implemented a number of measures to manage the outflow of cash from
negotiating rent free periods and rent deferrals with landlords, payment holidays with key suppliers, claiming CJRS, VAT and corporation tax
deferrals to obtaining cash from shareholders through the placement of shares.
Credit quality of financial assets
Group
Cash at bank and short-term bank deposits
'A' rated
Other cash-related balances
Total cash and cash equivalents
27 December
2020
£000
29 December
2019
£000
6,703
691
7,394
996
1,192
2,188
Ten Entertainment Group plc Annual Report and Accounts 2020
135
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
23 FINANCIAL INSTRUMENTS CONTINUED
Capital risk management
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern and to provide an adequate return
to shareholders by pricing products and services commensurate with the level of risk. The Group paid the 2019 interim dividend of 3.7p after
not recommending a final dividend with a total of £2.4m paid in cash to shareholders in January 2020. The Group monitors capital on the basis
of the carrying amount of equity less cash and cash equivalents as presented on the face of the Consolidated Statement of Financial Position.
Total equity
Cash and cash equivalents (Note 16)
Capital
Total financing
Leases (Note 19)
Bank borrowings (Note 19)
Overall financing
Capital to overall financing ratio
27 December
2020
£000
29 December
2019
£000
29,809
(7,394)
22,415
22,415
185,146
20,000
227,561
9.9%
56,911
(2,188)
54,723
54,723
8,109
6,250
69,082
79.2%
24 RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
The Executive and Non-Executive Directors are deemed to be key management personnel of the Company. It is the Board which has
responsibility for planning, directing and controlling the activities of the Company. There were no material transactions or balances between
the Company and its key management personnel or members of their close family. At the end of the period, key management personnel did
not owe the Company any amounts. The compensation of key management personnel is summarised in Note 3 to the consolidated financial
statements. The remuneration of the Directors of Ten Entertainment Group plc is set out in detail in the Directors’ Remuneration Report
commencing on page 76 with a table of their remuneration for the period on page 86.
TRANSACTIONS WITH OTHER RELATED PARTIES
During the period the Group entered into transactions, in the ordinary course of business, with related parties. Transactions entered into, and
trading balances outstanding with related parties, are as follows:
Related party
Houdini’s Escape Room Experience Limited
Goals Plc
29 December 2019
Houdini’s Escape Room Experience Limited
Source BioScience
We Play Limited
27 December 2020
Sales from
transactions
with related
party
£000
Expenses from
transactions
with related
party
£000
Loans to
related party
£000
Amounts
outstanding
with related
party
£000
—
—
—
—
—
—
—
—
—
—
—
8
4
12
—
—
—
166
—
—
166
42
—
42
237
—
—
237
Sales and purchases between related parties are made at normal market prices. Outstanding balances with entities are unsecured and
interest-free and cash settlement is expected within 30 days of invoice. The Group has not provided for or benefited from any guarantees for
any related party receivables or payables. During the financial year ended 27 December 2020, the Group has made a provision of £0.1m (2019:
£nil) for doubtful debts relating to amounts owed by related parties. The related party balance with Houdini’s Escape Room Experience Limited
consists of £0.1m that was due by them to Tenpin Limited prior to the joint venture arrangement when Ten Entertainment Group plc acquired
50% of the share capital of Houdini’s and then £0.2m was loaned to Houdini’s by Tenpin Limited during 2020 to assist with the building of new
Escape Rooms.
136
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
All intercompany transactions and balances have been eliminated on consolidation. The intercompany balances and transactions incurred by
the Company relate to dividends received or loans received to provide funding for the Company to pay its operating costs as a plc:
Essenden Limited
Georgica Limited
Indoor Bowling Equity Limited
Tenpin Limited
TEG Holdings Limited
27 December
2020
£000
29 December
2019
£000
—
—
—
(987)
60
(783)
3
(2)
(6,010)
2,405
25 PERFORMANCE SHARE PLAN
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. In accordance with the PSP scheme announced on 30 November
2020 ('the 2020 scheme'), the vesting of these awards is conditional upon the achievement of three performance conditions which will be
measured following the announcement of results for the year to 1 January 2023 ('FY22').
The first performance condition applying to the awards will be based on earnings per share of the Company ('EPS') and will apply to 50% 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 FY22 relative to a comparator group of companies and will apply to the remaining 50% of share
awards granted.
The third condition is a share price underpin where by no award or part of an award may vest unless the average share price of the Company
calculated over a three-month period ending on the vesting date exceeds the share price on the date of grant.
The assumptions used in the calculation of share-based payments are as follows:
● an expected term for awards granted under the PSP as being three years from the date of grant on the basis that these are nil-cost awards
and therefore we assume that participants will exercise their options as soon as possible to benefit from full shareholder rights (e.g. voting
and sale rights);
● the risk-free rate has been based on the implied yield of zero-coupon UK Government bonds ('UK Strips') with a remaining term equal to the
expected term;
● expected dividend yield is 6.16%; and
● the expected volatility is based on historical daily data over a term commensurate with the expected life of the awards.
The models and model inputs are as follows:
Model used for valuation
Share price at valuation date (£)
Exercise price (£)
Risk-free rate
Expected dividend yield
Life of option
Expected volatility
Fair value of one share (£)
EPS condition
with underpin
TSR condition
with underpin
Monte
Carlo
1.96
£0.1
-0.02%
6.16%
3 years
47.22%
0.94
Monte
Carlo
1.96
£0.1
-0.02%
6.16%
3 years
46.70%
0.83
During the period ended 27 December 2020, 428,572 (2019: 456,666) share awards were granted under the PSP, 311,940 (2019: nil) share
awards were forfeited, 96,970 (2019: nil) lapsed and 96,970 (2019: nil) were exercised. For the exercised awards, these were settled by the
allotment of ordinary shares in the Company. For the year, the Company recognised a net (credit)/charge of (£24,831) (2019: charge of
(£115,660)) which has mainly been as a result of the forfeit of awards and the determination that the EPS performance conditions will not be
met for the 2018 and 2019 schemes. The schemes are equity-settled share-based payments and the remaining contractual life of the 2019
scheme share options at the period end is one year and six months, while the 2018 scheme share options’ remaining contractual life is six
months and the 2017 scheme share options have been exercised or lapsed.
Ten Entertainment Group plc Annual Report and Accounts 2020
137
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE 52-WEEK PERIOD ENDED 27 DECEMBER 2020
25 PERFORMANCE SHARE PLAN CONTINUED
The following table splits the awards that were granted, exercised, lapsed and forfeited by the Executive Directors:
Director
Grants as at 1 January 2018
Granted in the year:
Duncan Garrood
Mark Willis
Graham Blackwell
Forfeited in the year due to resignation:
Alan Hand
Mark Willis
Total as at 30 December 2018
Granted in the year:
Duncan Garrood
Antony Smith
Graham Blackwell
Forfeited in the year due to resignation:
None
Total as at 29 December 2019
Granted in the year:
Antony Smith
Graham Blackwell
Forfeited in the year due to resignation:
Duncan Garrood
Exercised in the year:
Graham Blackwell
Lapsed in the year:
Graham Blackwell
Total as at 27 December 2020
Split as:
2018 scheme
2019 scheme
2020 scheme
Position
Chief Executive Officer
Chief Financial Officer
Chief Commercial Officer
Chief Executive Officer
Chief Financial Officer
Chief Executive Officer
Chief Financial Officer
Chief Commercial Officer
Chief Financial Officer
Chief Executive Officer
Number
of share
awards
granted
739,393
111,940
111,940
95,149
(333,333)
(324,061)
401,028
200,000
133,333
123,333
—
857,694
195,489
233,083
Chief Executive Officer
(311,940)
Chief Executive Officer
(96,970)
Chief Executive Officer
(96,970)
780,386
95,149
256,666
428,572
As reflected in the Director’s Remuneration Report, of the 95,149 awards from the 2018 scheme that are exercisable in 2021, it is expected that
only 25% of the award will vest which amounts to 23,787 awards and at an average share price for the last three months of the 27 December
2020 financial year, giving a fair value of £39,785. In accordance with the PSP schemes outlined in the Group’s Remuneration Policy, the vesting
of these awards is conditional upon the achievement of an EPS target set at the time of grant, measured at the end of a three-year period
ending 27 December 2020 for the 2018 scheme, 2 January 2022 for the 2019 scheme and 1 January 2023 for the 2020 scheme, and the
Executive Directors’ continued employment at the date of vesting. The awards will vest based on the following adjusted EPS targets:
Adjusted EPS in the final year of the performance period (pence)
2020 scheme
17.00p
17.00p–23.00p
More than 23.00p
2019 scheme
2018 scheme
25.65p
25.65p–27.30p
More than 27.30p
24.50p
24.50p–26.69p
More than 26.69p
Vesting
12.5%
12.5% – 50%
50%
138
Ten Entertainment Group plc Annual Report and Accounts 2020
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
26 DIVIDENDS PAID AND PROPOSED
The following dividends were declared and proposed:
The following dividends were paid by the Group:
Final dividend year ended 29 December 2019 – nil, 30 December 2018 – 7.7p per ordinary share
Interim dividend paid by Directors for year ended 29 December 2019 – 3.7p per ordinary share
(paid 3 January 2020) 30 December 2018 – 3.3p per ordinary share (paid 5 January 2019)
The following dividends were declared and proposed by the Group:
Interim dividend declared by Directors for year ended 27 December 2020 – nil, 29 December 2019 – 3.7p per
ordinary share (paid 3 January 2020)
The below relates to final dividends proposed:
Final dividend year ended 27 December 2020 – nil per ordinary share, 29 December 2019 – nil per
ordinary share
27 December
2020
£000
29 December
2019
£000
—
2,405
—
—
5,005
2,145
2,405
—
The Company received a dividend of £7,458,679 (2019: £2,405,000) from its subsidiary TEG Holdings Limited that was declared in the financial
year ended 27 December 2020.
27 POST-BALANCE SHEET EVENTS
CORONAVIRUS LARGE BUSINESS INTERRUPTION LOAN SCHEME ('CLBILS')
The Group successfully applied for and received in January 2021, a £14.0m term loan under the scheme. The facility is a three-year loan that
was arranged through RBS and whose terms and security mirror the same arrangements in the commercial banking agreement.
COVID-19 UPDATE
Following the phased introduction of Tier 4 restrictions in a number of regions in December 2020, the Group had closed 40 of its centres, with
only 6 remaining open at the year end. On 4 January 2021 all remaining centres were required to close as the UK Government announced a
nationwide lockdown. The UK Government has announced that the leisure sector in England could re-open on 17 May 2021 if there is
continued progress with the Government’s four criteria for monitoring the pandemic. The Scottish and Welsh Government have not yet
announced firm dates for the re-opening of the industry.
In the Government’s Budget statement of 3 March 2021, it was announced that Business Rates relief would be extended and further grants for
closed businesses would be made available. The Group will benefit from both of these measures to an estimated combined value of
approximately £2.7m between April and August 2021.
Unaudited five-year record
Sales
Cost of sales
Gross profit
Administrative and other costs
(Loss)/profit before finance charges
Finance charges
(Loss)/profit before taxation
Taxation
(Loss)/profit after taxation
52 weeks to
27 December
2020 – IFRS 16
£000
52 weeks to
29 December
2019
£000
52 weeks to
30 December
2018
£000
52 weeks to
31 December
2017
£000
53 weeks to
1 January
2017
£000
36,269
(14,095)
22,174
(38,025)
(15,851)
(5,815)
(21,666)
3,919
(17,747)
84,122
(24,930)
59,192
(46,609)
12,583
(788)
11,795
(2,758)
9,037
76,350
(22,423)
53,927
(42,565)
11,362
(693)
10,669
(2,527)
8,142
71,040
(21,478)
49,562
(39,640)
9,922
(2,630)
7,292
(2,111)
5,181
67,319
(20,639)
46,680
(36,924)
9,756
(4,320)
5,436
(1,805)
3,631
Ten Entertainment Group plc Annual Report and Accounts 2020
139
DIRECTORS, COMPANY SECRETARY AND ADVISERS
Directors:
Nick Basing
Graham Blackwell
Antony Smith
Adam Bellamy
Christopher Mills
Julie Sneddon
Company Secretary:
Antony Smith
Registered Office:
Solicitors:
Independent auditors:
Registrars:
Brokers:
Aragon House
University Way
Cranfield Technology Park
Cranfield
Bedford, MK43 0EQ
BDB Pitmans LLP
50 Broadway
London, SW1H 0BL
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London, WC2N 6RH
Computershare Investor Services Plc
120 London Wall
London, EC2Y 5ET
Peel Hunt LLP
100 Liverpool Street
London, EC2M 2AT
Liberum Capital
Ropemaker Place, 12th Floor
25 Ropemaker Street
London, EC2Y 9LY
Company number:
10672501
Country of registration:
England and Wales (United Kingdom)
140
Ten Entertainment Group plc Annual Report and Accounts 2020
Aragon House
University Way
Cranfield Technology Park
Cranfield
Bedford, MK43 0EQ