By 
Graham Blackwell, chief executive of Ten Entertainment Group PLC, had a simple message for investors when he delivered what under the circumstances was a commendably solid set of interim results.
“Our primary focus is to return the business to the trend of the first quarter through our strengths in operational improvements and commercial innovation,” he told them.
What hasn’t helped in recent weeks, one suspects is the lack of clarity around lockdowns and curfews – or the consistency of messaging from Westminster and the devolved authorities of Scotland and Wales.
Proactive spoke to Blackwell both before and after Boris Johnson’s televised address to the nation on Monday.
The PM’s tiering system (replacing his traffic lights) was designed to provide people and businesses with clearer guidance.
Sadly, it appears to have confused public and annoyed local politicians to the point of open rebellion.
And with a ‘circuit-breaker’ lockdown now being mooted over the half-term holidays, matters are only becoming more opaque.
As Blackwell said in an email the day after Johnson’s update: “Just glad we managed to stay open.”
There will be many in the sector that heaved a sigh of relief. For Blackwell and his colleagues in ten-pin bowling, there’s an added element of frustration.
It’s that the authorities don’t know how to categorise entertainment venues such as Ten Entertainment Group’s (TEG’s), or understand the lengths to which companies like Blackwell’s have gone to ensure the safety of their customers.
On the former, there appears to be confusion around whether its outlets are bars, restaurants, full-on leisure facilities or sporting clubs, with each category treated differently under the often contradictory rules and restrictions brought in to control the coronavirus spread.
Safety made a priority
As for safety, all the precautions are in place: sanitisation stations, cleaning, table service for food and drink along with controls over the numbers of people allowed in.
That means some lanes have been blocked off to respect social distancing requirements.
There’s a less obvious, but important point, and one that Blackwell comes back to many times in our conversation: the average size of a TEG entertainment centre is 29,000 square feet.
To put this into context, that is around a third larger than the average Aldi store (or the size of a smaller Waitrose outlet, if you haven’t been to Aldi).
“In our business, you just don’t have proximity issues because of the size of the venues,” the TEG chief executive says.
In other words, the company’s destinations are arguably safer than restaurants, the daily commute on public transport or the workplaces many millions of people have returned to over the last two months.
‘Robust and resilient’
“We are heavily Covid-secure,” Blackwell adds. “It’s a safe environment, so customers can enjoy themselves and I just think we are probably better geared than most because of the size of our venues.”
The recent interim results revealed a “robust and resilient” business that has a firm lid on costs. When it opened its doors again in August it returned to 83% of previous levels, generating profits and cash despite losing over 50% of lane capacity.
“The lockdown was used wisely to secure the staff and sites, develop Covid-secure protocols to allow the business to reopen safely and to develop apps for food and beverage ordering,” City broker Liberum said in a recent note.
“A new digital strategy was launched in July to build demand and reassure, which after some delay, culminated in the successful reopening during August when finally allowed to.”
Financially, the group is a far cry from the debt-crippled cinema chains that have been forced into hibernation.
TEG’s net debt was a modest £6.7mln at the end of June; not just that, it has significant financial headroom with £18.3mln undrawn from its revolving credit facility.
310p price target
“Cost-cutting and careful cash management mean liquidity is not an issue, with sites already back up and profitable,” Liberum’s analysts said.
“The pipeline expansion will resume when the time is right with opportunities aplenty.”
The broker’s share price target of 310p is more than double the current valuation of the stock. This suggests that once anything approaching normal service for the economy resumes then TEG will feel the financial benefit, making it one to watch.
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