Ahead of planned reopening on 17 May, the message of Ten Entertainment Group (TEG) is clear. With tenpin bowling as the driver, it has the product (a successful value proposition enhanced during the pandemic) and the resources (strong balance sheet with over £18m liquidity headroom) to capitalise in both the short and longer term. Despite 2020 sales down 57% because of COVID-19 restrictions investment continued apace (c 70% of 2019 levels), from digital to key refurbishments and ‘next-generation’ expansion. Consequent scope for lucrative marginal revenue growth on total 1.3m sq ft is a formidable draw, as is the outlook for reopening and beyond. Pent-up demand seems a given in view of TEG’s buoyancy after the spring 2020 lockdown (August/September l-f-l sales 77% of prior year despite 50% lane capacity, addressed now by lane dividers), while pandemic fallout should facilitate expansion on advantageous terms.
Ten Entertainment Group |
Strike!
|
Travel & leisure |
QuickView
21 April 2021 |
Share price graph
Share details
Business description
Bull
Bear
Analysts
|
||||||||||||||||||||||||
Ahead of planned reopening on 17 May, the message of Ten Entertainment Group (TEG) is clear. With tenpin bowling as the driver, it has the product (a successful value proposition enhanced during the pandemic) and the resources (strong balance sheet with over £18m liquidity headroom) to capitalise in both the short and longer term. Despite 2020 sales down 57% because of COVID-19 restrictions investment continued apace (c 70% of 2019 levels), from digital to key refurbishments and ‘next-generation’ expansion. Consequent scope for lucrative marginal revenue growth on total 1.3m sq ft is a formidable draw, as is the outlook for reopening and beyond. Pent-up demand seems a given in view of TEG’s buoyancy after the spring 2020 lockdown (August/September l-f-l sales 77% of prior year despite 50% lane capacity, addressed now by lane dividers), while pandemic fallout should facilitate expansion on advantageous terms.
Strategy unbowed
Given pre-COVID-19 momentum (bowling market up by a quarter since 2014, per Mintel, and TEG’s l-f-l sales up c 10% in the first 11 weeks of 2020), it is little surprise that the company should have continued, where possible, to develop in 2020 despite disruption. Indeed, its belief in the appeal of its offering (competitively priced at £13.99 spend per head in 2020 and a highly accessible form of family entertainment) may only have been reinforced by the pandemic, not least with the accent for the time being on domestic leisure. Management reports a ‘step-change’ in digital strategy with a new table ordering app for F&B, a more than doubling in online bookings to 70%, enhanced scoring technology and increased social media engagement (a third of customers now on database). Maximising use of space continued via the installation of lane dividers to restore 100% capacity during social distancing, while the roll-out of escape rooms broadened the offer. TEG’s first new build (Manchester Printworks) was duly completed and launched to acclaim.
Unsurprisingly resilient
Despite trading days halving (c £7m cash burn in the spring lockdown) and a sharper fall in sales, 2020 saw bank net debt, eased by H1’s £5m placing, grow by £8.5m to £12.6m, which allowed significant strategic capex (c 70% of 2019 levels). A £14m additional facility raised liquidity headroom to £18m+ at March 2021.
Valuation: Tried and tested
Demonstrably successful before COVID-19, TEG should be a clear beneficiary of economic tailwinds, assuming a properly managed relaxation of restrictions, and a benign structural environment. 2022 consensus forecasts appear cautious.
|
Consensus estimates
Source: Refinitiv. Note: *Pre-IFRS 16. |
EDISON QUICKVIEWS ARE NORMALLY ONE OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
|
||||||||||||
|
||||||||||||
Research: Healthcare
Kazia announced that it is expanding its pipeline to include EVT801, a novel small molecule inhibitor of VEGFR3. The drug is being licensed from Evotec for €1m upfront, €308m in milestones and tiered single-digit royalties. EVT801 was developed as part of a collaboration between Evotec and Sanofi. Kazia will be responsible for development, but will collaborate with and have access to Evotec resources to support development. The product is currently in preclinical development, but Kazia believes it can launch a Phase I study before the end of CY21.