annual report 2009 -...

ANNUAL REPORT 2009

CONTENTS

03 Directors, secretary and advisors

04 Board of directors

07 Chairman’s statement

08 Chief executive’s report

1 1 Directors’ report

20 Independent auditors’ reports

22 Consolidated income statement

23 Consolidated statement of comprehensive income

24 Balance sheets

25 Cash flow statements

26 Statements of changes in equity

27 Statement of accounting policies

33 Notes to the financial statements

56 Unaudited supplementary information

essenden annual report 2009 01

DIRECTORS, SECRETARYAND ADVISORS

Directors: Rory Macnamara (Chairman)Nick BasingRichard DarwinPeter HaspelChristopher MillsMargaret MountfordNicholas OppenheimKailayapillai Ranjan

Company Secretary: Peter Smith

Registered Office: 33, King Street,London, SW1Y 6RJ.Tel: 020 7600 8200

Nominated Advisor: Strand Hanson Limited,26, Mount Row,London, W1K 3SQ.

Solicitors: Herbert Smith LLP,Exchange House,Primrose Street,London, EC2A 2HS.

Joint Stockbrokers: Mirabaud Securities Ltd, Oriel Securities Ltd,21, St James’s Square, 125, Wood Street,London, SW1Y 4JP. London, EC2V 7AN.

Public Relations: College Hill,The Registry,Royal Mint Court,London, EC3N 4QN.

Auditors: PricewaterhouseCoopers LLP,1, Embankment Place,London, WC2N 6RH.

Registrars: Capita Registrars,Northern House,Fenay Bridge,Woodsome Park,Huddersfield,West Yorkshire, HD8 0GA.Tel: 0871 664 0300(Calls cost 10p per minute plus network charge)

Tel (Overseas): 44 208 639 3399

Company number: 6838368

Country of registration: England and Wales


BOARD OF DIRECTORS

Rory MacnamaraNon-executive chairman (55)

Rory qualified as a chartered accountant with Price Waterhouse and worked in merchant bankingwith Morgan Grenfell for 17 years (during which time it was acquired by Deutsche Bank AG). During his time at Morgan Grenfell he was a director in Corporate Finance, Head of Mergers andAcquisitions and Vice Chairman. In 1999 he joined Lehman Brothers, where he was a ManagingDirector in UK Investment Banking until 2001. He currently acts as a corporate consultant and holds a number of directorships. Rory was appointed to the board of Essenden on 26th May 2009.

Nick BasingChief executive officer (48)

Nick is a highly experienced industry leader who has 25 years experience in the leisure sector. Most recently, Nick was responsible for the turnaround and growth, both organically and viaacquisition, of Paramount Holdings (‘Paramount’) including Chez Gerard, where he was chiefexecutive for 6 years. Prior to Paramount he held a number of senior management positions withleading companies such as Rank, First Leisure, Unilever and Granada. During this time he gainedexperience of a wide range of leading consumer brands in a multi-site context including Hard Rock Café, Odeon, Universal Studios, Travel Inn and Goodwood. Nick was awarded UK Retailers’Retailer of the Year in 2006. He was appointed to the board of Essenden on 18th August 2009 andbecame CEO in October 2009.

Richard DarwinFinance director (42)

Richard qualified as a chartered accountant with Coopers and Lybrand. He has held senior finance roles in a number of public and private companies including Hard Rock Café, Diageo and Paramount Holdings. He has significant operational finance and transactional experienceobtained through working with a number of leading leisure and consumer brands. He wasappointed to the board of Essenden on 1st January 2010.

Peter HaspelManaging director (39)

Peter qualified as a chartered accountant at Arthur Andersen in 1995. He joined Prudential in 1996where he was ultimately employed as finance director of Prudential UK – Operations, Distributionand Shared Services. He was appointed to the board of Georgica as finance director on 1st March2004, and was appointed managing director on 20th November 2006. He was appointed to theboard of Essenden on 5th March 2009.

04

Christopher MillsNon-executive director (57)

Christopher is a founding director of JO Hambro Capital Management, Chief Investment Officer of North Atlantic Value LLP and Chief Executive of North Atlantic Smaller Companies InvestmentTrust plc. Before joining JO Hambro Capital Management he worked for Samuel Montagu Limited,Montagu Investment Management Limited and its successor company, Invesco MIM until 1993. He was a director of Invesco MIM and held positions as Head of North American Investments and Head of North American Venture Capital. He was appointed to the board on 26th May 2009.

Margaret MountfordNon-executive director (58)

Margaret was a partner at Herbert Smith, solicitors, from 1983 to 1999 during which time shebecame joint head of corporate finance advising a wide range of clients including various listedcompanies. Margaret was appointed as a non-executive director of Georgica in September 2000and to the board of Essenden on 26th May 2009.

Nicholas OppenheimNon-executive director (62)

Nicholas graduated from Columbia University in the City of New York in 1972 with an MBA. Since then he has been a director and substantial shareholder in a number of quoted companies.He joined Georgica in September 2000, and was the executive deputy chairman. He was appointed to the board of Essenden on 16th March 2009.

Kailayapillai RanjanNon-executive director (48)

Kailayapillai is the Chief Executive of Petchey Holdings plc. He was appointed to the board on 23rd August 2009.


CHAIRMAN’S STATEMENT

I am pleased to present Essenden’s results for the 52 week periodended 27th December 2009. Essenden is the largest operator oftenpin bowling in the country, with 38 leisure retail sites locatedacross the UK, which operate under the “Tenpin” brand.

The past year has seen a period of significant change for the group. The creation of Essendenoccurred in May 2009, as a result of the group reconstruction, with the intent of realising value forshareholders. With this in mind, the board of directors of Essenden (the “board”) appointed NickBasing, a highly experienced leisure sector operator with a track record in delivering shareholdervalue, as CEO in October 2009. These changes are intended to enable the business to refocus on its operational performance so as to return to sales growth and realise improved profitability.

The Essenden transaction was accounted for as a reverse acquisition and therefore the resultsinclude the entire year’s business performance. The business generated EBITDA of £5.1m, a similarresult to the previous year (2008: £5.1m), a creditable performance, against the backdrop of such achallenging economic environment, which had an inevitable impact on the business and resulted ina sales decline of £4.7m from £62.8m to £58.1m. During this period, a number of cost rationalisationmeasures were implemented which enabled the business to maintain its EBITDA performance. Thegroup reported a profit before tax, one-offs, provisions and non cash write-downs of £0.3m (2008: a loss of £0.2m). The loss before tax after one-offs, provisions and non cash write-downs was £11.9m(2008: a loss of £44.5m). The business continues to be cash generative whilst maintaining a lowgearing, with net debt (excluding shareholder loan notes) at the year end being reduced to £3.6m(2008: £4.0m).

The new management team has made rapid progress in identifying operational and strategicchanges within the business to improve performance. I remain encouraged by our market leadingposition and believe that we can create a solid platform from which to generate growth in bothsales and profits. Whilst the market remains challenging, we believe that the business is wellpositioned to benefit from a return of consumer confidence and to capitalise on any opportunitieswhich may be presented within our market place.

Rory Macnamara9th March 2010


CHIEF EXECUTIVE’S REPORT

REVIEWI am encouraged by the core assets and the characteristics of the business including theenthusiasm and expertise throughout the company. Our core proposition of bowling and its fiveancillary product areas are genuinely enjoyed by a wide range of customers, with a total of 4.7mcustomer visits to our locations last year. The business offers value for money and affordableentertainment for families, adults and children alike in an accessible, safe and fun environment. It is also well invested with over £3.3m spent on industry-leading IT systems over the past threeyears to support new channels of demand. I am in no doubt that there is substantial opportunity for enhanced utilisation and revitalisation of our estate to deliver a significantly better performancethan the recent sales trends.

The following steps that have been identified are aimed at enhancing the popularity of our unitsand creating greater value for the customer:• improving the existing product categories of bowling, food, beverage, machines and amusements;• introducing new products to enhance the reputation of the brand;• upgrading customer service and value;• improving yield from the existing estate;• introducing a streamlined operating structure for the business; and• relaunching marketing, sales and distribution systems to further drive demand.

These steps will include an upgrade to the existing bowling products such as the use of audiovisual,light and sound effects, children’s birthday parties and further utilisation of our market leadingbowling software.

Following our review of the food and beverage offering, a new more appropriate food concept willbe launched within the next three months and subsequently rolled out.

In addition, new entertainment features are already being introduced to increase the service offeringat our sites and give our customers more reason to visit. I am pleased to announce that we havereached agreement with ”Lucky Voice” (the market leading provider of karaoke) to trial a new ‘ownlabel’ karaoke concept with a view to rolling it out across all our sites. The Quasar product, currentlyavailable at 15 sites, is to be re-launched as a modern attraction. In addition, during the year, weplan to refurbish one of our existing bowling centres as a flagship ”New Generation” bowlingconcept which will be the benchmark for all future venue developments.

We have commissioned a research programme to understand the experience of both recurring and non-recurring customers at each of our entertainment venues. We are using the results of thisresearch to introduce a customer focused culture within the business and drive the way the brandis represented and developed in the future. We have also introduced a monthly mystery customerprogramme that tracks customer loyalty and word of mouth so that we can understand which sitesare meeting the exacting customer service standards that we set for the business.

I am pleased to present my first report as CEO of Essenden. In the four months since becoming CEO, good progress has been made inidentifying those steps that need to be implemented to create a modernefficient leisure retail business. We have completed our strategic reviewof the business and have made a meaningful start on implementing thekey operational strategies required to turnaround the business.

08

An initiative is also being introduced to teach new customers how to bowl to ensure they getmaximum enjoyment from the game and to encourage frequency of visits.

We anticipate that the use of our existing and recently improved systems and operational capabilityin the business, particularly using our online facilities and our call centre, will start to improveefficiency and drive yield from the existing estate. New operational measures and KPIs have beenintroduced to help focus performance and speed up decision making at unit level. Additionalmarketing funds have been allocated to drive awareness and customer footfall by using modernand effective means of customer communication, including email and SMS. Existing operatingcontracts are being reviewed, and where appropriate, renegotiated as they fall due to ensure thatthe business is operating as efficiently as possible.

The operational structure has been simplified and these changes resulted in the removal of twolayers of management above site level, shortening reporting lines and empowering front line staff.The executive team has also been overhauled with four senior executives having left the businessand a further two having had their roles redefined.

Within our portfolio, we have over 1.2m sq ft of leisure retail space which are located on a number of the UK’s leading leisure parks. Our goal is to maximise the use of our assets. The aim of thesestrategic changes is to transform our businesses into a portfolio of modern leisure retail attractions.

PEOPLEDuring the year I took over the running of the business from Nick Oppenheim. We are pleased toretain the benefit of his experience as a non-executive director and the board has been furtherstrengthened by Kailayapillai Ranjan joining as a non-executive. I am delighted that Richard Darwinjoined the board as Finance Director effective from 1st January 2010. Simon Prew and Kaye Collinshave both resigned from the board.

My colleagues at each of our 38 units are highly valuable to our future plans. The changes that we are implementing to the business will not be possible without the support of these people. The board is very grateful for their continued efforts over the past difficult year and during the year of transition ahead.

OUTLOOKThe UK bowling sector has not been immune from the economic difficulties experienced by allleisure operators. The snow fall during January made for a difficult start to what will be a challengingyear. Subsequently we are trading broadly in line with our expectations.

We expect the general economic environment to remain challenging in the coming year. The initialreview has highlighted that this business has some good assets. We are now implementing the firststeps of our plan to realise value for shareholders. We are confident that the year of transition whichwe have embarked upon will create a solid platform for the business to return to growth.

Nick Basing9th March 2010


DIRECTORS’ REPORT

The directors present their annual report on the affairs of the group, together with theaudited financial statements for the 52 week period ended 27th December 2009 forthe group and the audited financial statements of the company for the period 5th March2009 to 27th December 2009. The parent company was incorporated on 5th March 2009.

PRINCIPAL ACTIVITYEssenden PLC (“Essenden” or the “company”) is the holding company for the tenpin bowlingoperations of Tenpin Limited and a portfolio of 5 investment properties held for sale forredevelopment. The principal activity of the group comprises the operation of 38 tenpin bowlingcentres through Tenpin Limited (37 centres) and Tenpin (Sunderland) Limited (1 centre), together the largest tenpin bowling operation in the UK with an approximate 20% share of the market. The subsidiary undertakings principally affecting the profits or net assets of the group in the period are listed in note 13 to the financial statements.

BUSINESS REVIEW AND FUTURE DEVELOPMENTSOperating review:The group reconstruction effected in May 2009 resulted in the listing of Essenden on the AIMmarket of the London Stock Exchange and the listing of the Essenden loan notes on PLUS-quoted and Essenden becoming the head of the group in place of Georgica Plc (“Georgica”). This reconstruction has been accounted for as a reverse acquisition, with the consolidated financialinformation presented on the basis that it represents the continuation of Georgica’s consolidatedfinancial information modified only as required to recognise Essenden’s capital structure, as thelegal head of the group, and to include it as part of the group.

Group2009 2008 £000 £000

Continuing operations:

Revenue 58,094 62,814EBITDA 5,054 5,065Loss before tax (11,860) (44,499)Tax 2,904 5,377Loss after tax from continuing operations (8,956) (39,122)

Profit / (loss) before tax, one-offs, impairments and provisions (i) 281 (221)

(i) Profit / (loss) before tax, one-offs, impairments and provisions represents operating profit before one-off items together with net interest excluding loan note interest and notional interest on provisions.


DIRECTORS’ REPORTContinued

Group result:In spite of an 8% decline in like for like revenue in the 52 weeks to 27th December 2009 (“2009”),group EBITDA was unchanged at £5.1m. The £4.7m decline in revenue in 2009 and an increasein rent of £0.6m and other property costs of £0.4m was offset by cost of sales, staff, operating cost and overhead reductions of £5.7m from a series of cost saving initiatives implemented fromNovember 2008. Group profit before tax, one-offs, impairments and provisions improved by £0.5mfrom a loss of £0.2m in the 52 weeks to 28th December 2008 (“2008”) to a profit of £0.3m in 2009as depreciation reduced by £0.5m principally due to the reduced net book value following the£11.5m impairment write-down in 2008. Loss before tax improved by £32.6m to a loss of £11.9min 2009, as impairment and net provision charges reduced by £36.2m to £10.0m. Loss after taximproved by £30.2m to £9.0m.

Detail of the performance of individual segments (tenpin bowling and central overheads) is set out in the unaudited supplementary information on page 56.

Future outlook:Information on future developments is contained in the chief executive’s report on page 8, whichis incorporated in this report by reference.

Principal risks and uncertainties:Detailed in the unaudited segmental analysis on page 33 are the principal risks and uncertaintieswhich have been identified by management as facing the group. Additional risks and uncertaintieswhich are not currently known or are deemed immaterial may also have a material impact on thegroup.

RESULTS AND DIVIDENDSThe results for the 52 week period ended 27th December 2009 are set out in the consolidatedincome statement. The group loss after taxation for the period was £8,956,000 (2008: loss aftertaxation of £39,122,000).

The directors do not recommend the payment of a dividend for the period to 27th December 2009(2008: £nil).

12

DIRECTORSThe directors of Essenden during the period were as follows:

Rory Macnamara Non-executive chairman Appointed 26th May 2009

Nick Basing Chief executive officer Appointed 18th August 2009

Richard Darwin Finance director Appointed 1st January 2010

Peter Haspel Managing director Appointed 5th March 2009

Christopher Mills Non-executive director Appointed 26th May 2009

Margaret Mountford Non-executive director Appointed 26th May 2009

Nicholas Oppenheim Non-executive director Appointed 16th March 2009

Kailayapillai Ranjan Non-executive director Appointed 23rd July 2009

Kaye Collins Managing director, Tenpin Limited Appointed 26th May 2009, Resigned 15th January 2010

Simon Prew Finance director Appointed 6th March 2009, Resigned 31st December 2009

Peter Smith Director Appointed 5th March 2009, Resigned 16th March 2009

All of the current directors of Essenden retire at the first annual general meeting and, being eligible,offer themselves for election. All directors have rolling contracts with a 6 month notice period, exceptfor Nick Basing who has a 3 month notice period, and there are no special arrangements forcompensation payments on termination of any of the directors’ contracts. All directors areresponsible for their own pension arrangements.

The directors are all covered by a Directors’ and Officers’ Liability Insurance policy maintained bythe company.

DIRECTORS’ INTERESTS

As at 27th December 2009

Ordinary shares of 1p each Loan notes of £1 each

Rory Macnamara - -Nick Basing - -Richard Darwin 1,980 1,980Peter Haspel 4,766 4,766Christopher Mills * 5,412,000 5,412,000Margaret Mountford 5,000 5,000Nicholas Oppenheim 912,184 912,184Kailayapillai Ranjan - -

* The number of ordinary shares shown as held by Christopher Mills includes ordinary shares held by certain funds of which North Atlantic Value LLP is the discretionary fund manager.


DIRECTORS’ REMUNERATION

52 week 52 week period to 27th period to 28th

Salary Fees Bonus Benefits December 2009 December 2008Director £ £ £ £ £ £

Rory Macnamara - 11,974 - - 11,974 -(appointed 26th May 2009)

Nick Basing 64,744 - 30,000 - 94,744 -(appointed 18th August 2009)

Richard Darwin - - - - - -(appointed 1st January 2010)

Peter Haspel 1 225,100 - 100,000 - 325,100 250,000

Christopher Mills - - - - - -(appointed 26th May 2009)

Margaret Mountford - 10,000 - - 10,000 20,000

Nicholas Oppenheim 2 88,613 - - 4,655 93,268 125,872

Kailayapillai Ranjan - - - - - -(appointed 23rd July 2009)

Former directors:

Kaye Collins 3 230,859 - - - 230,859 133,900(resigned 15th January 2010)

Don Hanson 4 - 21,038 - - 21,038 30,000(resigned 26th May 2009)

Clive Preston 5 - 39,387 - - 39,387 104,000(resigned 26th May 2009)

Simon Prew 6 265,505 - - - 265,505 155,033(resigned 31st December 2009)

Robert Wickham 7 - 14,026 - - 14,026 20,000(resigned 26th May 2009)

Vineet Arora - - - - - 43,638(resigned 28th May 2008)

Derham O’Neill - - - - - 11,538(resigned 28th May 2008)

Total 874,821 96,425 130,000 4,655 1,105,901 893,981


14

1 £35,250 (2008: £62,503) was recharged to Aida Capital Limited, a company in which Nicholas Oppenheim has a significant interest, or its affiliates by Georgica for services provided by Peter Haspel prior to the Essenden transaction in May 2009 (seenote 29). Peter’s salary includes £50,000 received as compensation for a change in earnings.

2 Nicholas Oppenheim’s salary includes £56,869 received as compensation for loss of office as an executive director of Georgica. The benefits relate to the provision of a car under his service contract for part of the financial period. Nicholas does not receiveany fees for being a non-executive director of Essenden.

3 Kaye Collins’ salary includes £96,750 accrued in respect of compensation for loss of office as an executive director of Essenden.4 Don Hanson’s fees includes £15,000 received as compensation for loss of office as chairman of Georgica.5 Clive Preston’s fees includes £10,000 received as compensation for loss of office as a non-executive director of Georgica and

£25,361 (2008: £84,000) relating to site reviews performed in connection with Georgica’s capital expenditure programme, foradvising on Tenpin’s operations and for participating in investor presentations.

6 Simon Prew’s salary includes £77,700 accrued in respect of compensation for loss of office as an executive director of Essenden and £31,798 accrued in respect of services provided under a compromise agreement.

7 Robert Wickham’s fees includes £10,000 received as compensation for loss of office as a non-executive director of Georgica.

No third party fees were incurred.

DIRECTORS’ INCENTIVESThe chief executive and finance director have incentive schemes in place which commenced in October 2009 as follows:

(i) An amount payable if the Essenden loan notes are repaid in full. The amount payable under the incentive is £2.25m if the loan notes are repaid in full on 19th January 2012 and increasesby £112.5k for each month that the loan notes are repaid in full before 19th January 2012 anddecreases by £112.5k for each month that the loan notes are repaid in full after 19th January2012. If the Loan Notes are not repaid in full before 19th September 2013 no incentive would be payable.

(ii) An amount payable in cash based on the future share price performance of Essenden. The Opening Price for the share price incentive is 38.8p being the average price for the 30 days after the announcement of the appointment of the new CEO. This Opening Price hasan annual hurdle of 12% applied to it. The earliest that the incentive can be earned is 3 yearsfrom the commencement date of 16th October 2009 (except in certain specified circumstancessuch as on a takeover of Essenden) and it falls away if it has not been earned by 7 years fromthe commencement date. The total value of the incentive that could be paid is 12.5% of thegain in the share price (after the Opening Price is adjusted for the annual hurdle of 12%)multiplied by the number of shares in existence at the exercise date. The arrangement takesaccount of additional shares issued by applying an Opening Price (also adjusted for the annualhurdle of 12%) for these additional shares which is the share price on the date of issuance.

There were no material amounts to accrue in 2009 in relation to these Essenden incentive schemes.The second scheme is expected to be replaced by a similar equity based scheme during 2010. All incentive schemes of Georgica, including the Georgica Executive Participation Plan and theGeorgica Share Incentive Plan, were cancelled in 2009 without material cost or liability.

CORPORATE GOVERNANCEThe Essenden board comprises five non-executive directors and three executive directors. It meetsfour times a year at a minimum, and more frequently if circumstances require it. The board has anestablished schedule of matters specifically reserved for its decision, including proposed changesto capital structure, significant acquisitions and disposals, strategic plans, accounting policies,dividends and share purchases, group budgets, financing loans and agreements, treasury policy,financial statements, major press releases and Stock Exchange releases, long term incentiveprogrammes, material agreements and major capital expenditure. Other operational decisions are delegated to the company’s management.

The board has established three committees: an audit committee chaired by Rory Macnamara, a remuneration committee chaired by Margaret Mountford and a nomination committee chaired by Kailayapillai Ranjan. Each committee comprises all five non-executive directors.


The purpose of the audit committee is to review the financial statements and monitor financialprocedures and policies including statutory reporting and compliance. It is responsible for ensuringthat the company’s accounting and financial policies and controls are proper and effective, that theinternal and external auditing processes are properly co-ordinated and work effectively and that thefinancial statements and information published by the company has integrity. Meetings are normallyattended by the company’s auditors. Executive directors may also attend the meetings at theinvitation of the chairman. Non-audit services supplied by the auditors are generally other assuranceservices in nature which complement the audit process and do not risk compromising the auditors’independence e.g. structuring and vendor due diligence services. There is an operational internalauditor based at Tenpin who reports to the board of that business, but there is no corporate internalaudit function due to the relatively small size of the group. The audit committee does periodicallyreview the arrangements by which staff of the company, in confidence, raise concerns aboutpossible improprieties in financial reporting or other matters, and the independent investigation and resolution of such concerns.

The remuneration committee ensures that the executive directors and their senior executives arefairly, but responsibly, rewarded for their individual contributions to the performance of the group.This is done independently of the executive directors, avoiding any possible conflicting personalinterests and with due regard to the interests of the shareholders. Recommendations are made withrespect to individual remuneration and the overall framework of remuneration of senior executivesin accordance with the general terms of reference of the committee. The remuneration of the non-executive directors is established by the board as a whole.

The nomination committee makes recommendations to the board on the appointment of newexecutive and non-executive directors, including making recommendations as to the composition of the board generally and the balance as between executive and non-executive directors. Inexercising its duties the committee will liaise with the board and remuneration committee; seekadvice from outside advisors; advertise vacancies where appropriate; consider guidance from the board and consider the guidance in the 2006 Combined Code, as required. The terms andconditions of appointment of non-executive directors are included in their letters of appointment,which are available for review from the company secretary. Where appropriate an external searchconsultancy is employed for board appointments.

Communication with shareholders is given a high priority. In addition to the publication of the annualand interim reports, there is regular dialogue with shareholders and analysts normally led by theCEO and finance director. The Annual General Meeting is attended by all executive directors and is considered to be an important forum for communicating with private shareholders, allowing themto raise questions with the board.


16

SUBSTANTIAL SHAREHOLDINGSOn 4th March 2010 the company had been notified of the following interests in the ordinary sharecapital of the company.

Number of 1p Percentage of 1pordinary shares ordinary shares

North Atlantic Value 5,412,000 25.26%Trefick Limited 4,155,428 19.40%Schroder Investment Management Limited 3,153,095 14.72%M & G Investment Management 2,566,042 11.98%Man Financial / MF Global 1,897,774 8.86%J.P. Morgan Asset Management 654,750 3.06%

PURCHASE OF OWN SHARES The company did not purchase any shares for cancellation during the period.

FINANCIAL INSTRUMENTSThe group holds a £15m interest rate cap, which is in place until April 2010. The group has no fairvalue interest rate risk. Cash flow interest rate risk derives from the group’s floating rate financialliabilities, being its bank debt and overdraft facility, which are both linked to LIBOR plus a margin of between 3.25% and 4.5%.

SUPPLIER PAYMENT POLICYThe company does not follow any code or standard on payment practice. The group’s policy forsettlement of debts is to maintain satisfactory relationships with all suppliers whilst maximisingshareholder value. Trade payables of Tenpin Limited at 27th December 2009 were equivalent to 10 days purchases (2008: 43 days). The company has no trade payables.

DISABLED EMPLOYEESApplications for employment by disabled persons are always fully considered bearing in mind theaptitudes of the applicant concerned. In the event of members of staff becoming disabled effortsare 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 ofdisabled persons should as far as possible be identical with that of other employees.


EMPLOYEE CONSULTATIONThe group attaches importance to good communications and relations with employees. Informationthat is or may be relevant to employees in the performance of their duties is circulated to them ona regular basis, or immediately if it requires their immediate attention. There is regular consultationwith employees through meetings or other lines of communication, so that their views are knownand 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 bonusand incentive schemes and there is regular communication with all employees on the performanceof their bowling venue or central function and on the financial and economic factors affecting theoverall performance of the group.

AUDITORS AND DISCLOSURE OF INFORMATION TO AUDITORSPricewaterhouseCoopers LLP are the auditors of Essenden.

For each of the persons who were directors at the time this report was prepared, the followingapplies:

(i) so far as the directors are aware, there is no relevant audit information (i.e. information needed by the company’s auditors in connection with preparing their report) of which the company’sauditors are unaware; and

(ii) the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the company’sauditors are aware of that information.

PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a resolutionto reappoint them as auditors will be proposed at the forthcoming Annual General Meeting.

STATEMENT OF DIRECTORS’ RESPONSIBILITIESThe directors are responsible for preparing the Annual Report and the financial statementsin accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Underthat law the directors have elected to prepare the group and parent company financial statementsin accordance with International Financial Reporting Standards (IFRSs) as adopted by the EuropeanUnion. Under company law the directors must not approve the financial statements unless they aresatisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing these financial statements, thedirectors are required to:

• select suitable accounting policies and then apply them consistently;• make judgments and accounting estimates that are reasonable and prudent;• state whether applicable IFRSs as adopted by the European Union have been followed,

subject to any material departures disclosed and explained in the financial statements.


18

The directors are responsible for keeping adequate accounting records that are sufficient to showand explain the company’s transactions and disclose with reasonable accuracy at any time thefinancial position of the company and the group and enable them to ensure that the financialstatements comply with the Companies Act 2006. They are also responsible for safeguarding theassets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 financialstatements may differ from legislation in other jurisdictions.

GOING CONCERNThe financial statements are prepared on a going concern basis, which the directors believe to be appropriate based on their ongoing review of the availability of cash to fund operationalrequirements and future debt repayments, and their assessment that the group will continue to comply with its banking covenants for at least the next 12 months.

33, King Street, By order of the board,London,SW1Y 6RJ.

9th March 2010 Peter Smith – Company Secretary


INDEPENDENTAUDITORS’ REPORTON THE CONSOLIDATED ACCOUNTS

TO THE MEMBERS OF ESSENDEN PLCWe have audited the group financial statements ofEssenden PLC for the 52 week period ended 27thDecember 2009 which comprise the ConsolidatedIncome Statement, the Consolidated Statement ofComprehensive Income, the Group Balance Sheet,the Group Cash Flow Statement, the GroupStatement of Changes in Equity and the relatednotes on pages 22 to 55. The financial reportingframework that has been applied in their preparationis applicable law and International FinancialReporting Standards (IFRSs) as adopted by theEuropean Union.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSAs explained more fully in the Directors’Responsibilities Statement on page 18 the directorsare responsible for the preparation of the financialstatements and for being satisfied that they give atrue and fair view. Our responsibility is to audit thefinancial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland). Those standards require us to complywith the Auditing Practices Board’s Ethical Standardsfor Auditors.

This report, including the opinions, has beenprepared for and only for the company’s membersas a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no otherpurpose. We do not, in giving these opinions, acceptor assume responsibility for any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expresslyagreed by our prior consent in writing.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTSAn audit involves obtaining evidence about theamounts and disclosures in the financial statementssufficient to give reasonable assurance that thefinancial statements are free from materialmisstatement, whether caused by fraud or error. This includes an assessment of: whether theaccounting policies are appropriate to the group’scircumstances and have been consistently appliedand adequately disclosed; the reasonableness ofsignificant accounting estimates made by thedirectors; and the overall presentation of thefinancial statements.

OPINION ON FINANCIAL STATEMENTS In our opinion the group financial statements:

• give a true and fair view of the state of the group’s affairs as at 27th December 2009 and of its loss and cash flows for the 52 week period then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006In our opinion the information given in the Directors’Report for the financial period for which the groupfinancial statements are prepared is consistent with the group financial statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTIONWe have nothing to report in respect of the followingmatters where the Companies Act 2006 requires us to report to you if, in our opinion:

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

OTHER MATTER We have reported separately on the parent companyfinancial statements of Essenden PLC for the period 5th March 2009 to 27th December 2009.

Philip Stokes (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon9th March 2010

20

INDEPENDENTAUDITORS’ REPORT ON THE PARENT COMPANY ACCOUNTS

TO THE MEMBERS OF ESSENDEN PLCWe have audited the parent company financialstatements of Essenden PLC for the period 5thMarch 2009 to 27th December 2009 which comprisethe Company Balance Sheet, the Company CashFlow Statement, the Company Statement of Changesin Equity and the related notes on pages 22 to 55. The financial reporting framework that has beenapplied in their preparation is applicable law andInternational Financial Reporting Standards (IFRSs)as adopted by the European Union and as appliedin accordance with the Companies Act 2006.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSAs explained more fully in the Directors’Responsibilities Statement on page 18 the directorsare responsible for the preparation of the financialstatements and for being satisfied that they give atrue and fair view. Our responsibility is to audit thefinancial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland). Those standards require us to complywith the Auditing Practices Board’s Ethical Standardsfor Auditors.

This report, including the opinions, has beenprepared for and only for the company’s membersas a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no otherpurpose. We do not, in giving these opinions, acceptor assume responsibility for any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expresslyagreed by our prior consent in writing.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTSAn audit involves obtaining evidence about theamounts and disclosures in the financial statementssufficient to give reasonable assurance that thefinancial statements are free from materialmisstatement, whether caused by fraud or error. Thisincludes an assessment of: whether the accountingpolicies are appropriate to the parent company’scircumstances and have been consistently appliedand adequately disclosed; the reasonableness ofsignificant accounting estimates made by thedirectors; and the overall presentation of the financial statements.

OPINION ON FINANCIAL STATEMENTS In our opinion the parent company financialstatements:

• give a true and fair view of the state of the company’s affairs as at 27th December 2009 and of its cash flows for the period then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006In our opinion the information given in the Directors’Report for the financial year for which the parentcompany financial statements are prepared isconsistent with the parent company financialstatements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTIONWe have nothing to report in respect of the followingmatters where the Companies Act 2006 requires usto report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

OTHER MATTER We have reported separately on the group financialstatements of Essenden PLC for the 52 week periodended 27th December 2009.

Philip Stokes (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon9th March 2010


CONSOLIDATEDINCOME STATEMENTfor the 52 week period ended 27th December 2009

52 weeks to 52 weeks to27th December 2009 28th December 2008

Notes £000 £000

Continuing operations:

Revenue 1 58,094 62,814

Cost of sales (22,800) (25,899)

Gross profit 35,294 36,915

Administrative expenses:

Profit on disposal 3 386 3,412Impairment 7 (1,962) (39,019)Other administrative expenses (43,878) (44,876)

Total administrative expenses (45,454) (80,483)

Operating loss (10,160) (43,568)

Interest payable and similar charges 5 (1,741) (1,502)Interest receivable 6 41 571

Finance costs, net (1,700) (931)

Loss before taxation 7 (11,860) (44,499)

Taxation 8 2,904 5,377

Loss for the financial period attributableto the equity holders of the company (8,956) (39,122)

Earnings per share attributable to the equityholders of the company during the period

Basic earnings per share 20 (42.5)p (190.3)pDiluted earnings per share 20 (42.5)p (190.3)p

22

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the 52 week period ended 27th December 2009


£000 £000

Loss for the financial period (8,956) (39,122)

Other comprehensive income, net of tax - -

Total comprehensive loss for the financial period (8,956) (39,122)


BALANCE SHEETSat 27th December 2009

Group Group Company27th December 2009 28th December 2008 27th December 2009

Notes £000 £000 £000

Assets

Non-current assetsGoodwill 11 15,661 15,661 -Intangible assets 11 677 698 -Investment property 12 1,576 3,169 -Investments 13 - - 16,337Property, plant and equipment 14 28,817 33,339 -Deferred tax asset 25 6,288 3,384 -

53,019 56,251 16,337Current assetsInventories 15 1,736 1,755 -Trade and other receivables 16 5,650 7,264 1,731Financial assets 17 - 20 -Cash and cash equivalents 18 1,568 2,386 2,222

8,954 11,425 3,953Liabilities

Current liabilitiesFinancial liabilities 22 (4,952) (3,750) (4,866)Trade and other payables 23 (6,482) (9,385) (377)Provisions 24 (2,173) (696) -

(13,607) (13,831) (5,243)

Net current liabilities (4,653) (2,406) (1,290)

Non-current liabilitiesFinancial liabilities 22 (20,254) (5,158) (17,635)Other non-current liabilities 23 (1,075) (1,148) -Provisions 24 (13,227) (7,322) -

(34,556) (13,628) (17,635)

Net assets / (liabilities) 13,810 40,217 (2,588)

Equity

Share capital 19 214 6,140 214Share premium - 34,841 -Other reserves 81,095 57,724 (1,283)Profit and loss account (67,499) (58,488) (1,519)

Total equity 13,810 40,217 (2,588)

The financial statements on pages 22 to 55 were authorised for issue by the board of directors and authorised for issue on 9th March 2010 and were signed on its behalf by:

Richard Darwin Rory Macnamara

Company number: 6838368

24

CASH FLOW STATEMENTSfor the 52 week period ended 27th December 2009


Group Notes £000 £000

Cash flows from operating activities

Cash generated from operations 21 203 3,505Interest received 43 710Interest paid (683) (1,279)

Net cash (used in) / from operating activities (437) 2,936Cash flows from investing activities

Proceeds from sale of investment properties 979 2,052Proceeds from sale of property, plant and equipment 1,776 3,907Purchase of property, plant and equipment (1,042) (6,138)Purchase of software (406) (1,900)

Net cash from / (used in) investing activities 1,307 (2,079)Cash flows from financing activities

Finance lease principal payments (87) (71)Receipts from borrowings 5,329 5,299Repayment of borrowings (6,875) (3,870)Purchase of treasury shares (55) -

Net cash (used in) / from financing activities (1,688) 1,358Net (decrease) / increase in cash, cash equivalents and bank overdrafts (818) 2,215Cash, cash equivalents and bank overdrafts– beginning of period 18 2,386 171

Cash, cash equivalents and bank overdrafts – end of period 18 1,568 2,386

Period to27th December 2009

Company Notes £000

Cash flows from operating activities

Cash used in operations 21 (897)Interest received -Interest paid -

Net cash used in operating activities (897)Cash flows from investing activities

Purchase of property, plant and equipment -

Net cash from investing activities -Cash flows from financing activities

Receipts from borrowings 2,458Borrowings from subsidiaries, net 989Repayment of borrowings (328)

Net cash from financing activities 3,119Net increase in cash, cash equivalents and bank overdrafts 2,222Cash, cash equivalents and bank overdrafts– beginning of period 18 -

Cash, cash equivalents andbank overdrafts – end of period 18 2,222


STATEMENTS OFCHANGES IN EQUITYfor the 52 week period ended 27th December 2009

Share Share Other Retained Totalcapital premium reserves earnings equity

Group £000 £000 £000 £000 £000

Balance at 31st December 2007 6,140 34,841 57,724 (19,366) 79,339

Total comprehensive loss for the period - - - (39,122) (39,122)

Balance at 28th December 2008 6,140 34,841 57,724 (58,488) 40,217

Purchase of treasury shares (23) - 23 (55) (55)Business combination (see note 2) (6,117) (34,841) 23,613 - (17,345)Issue of ordinary shares related to business combination 214 - - - 214Transaction costs of share issuance - - (265) - (265)Total comprehensive loss for the period - - - (8,956) (8,956)

Balance at 27th December 2009 214 - 81,095 (67,499) 13,810

The group’s other reserves at 27th December 2009 comprise a special capital reserve of £49,000; a capital redemption reserve of £140,000; a merger reserve in Essenden which arose in 2009 on thetransaction with Georgica of £(1,283,000); a group merger reserve which arose in 2009 on the reversetakeover of Essenden of £24,631,000; a group merger reserve which arose on the takeover of AlliedLeisure PLC by Georgica in 2000 of £56,882,000, and a reserve arising on consolidation from theacquisition of the 50% of the Megabowl joint venture not previously owned in 2003 of £676,000.

Share Share Other Retained Totalcapital premium reserves earnings equity

Company £000 £000 £000 £000 £000

Balance at 5th March 2009 - - - - -

Business combination (see note 2) - - (1,018) - (1,018)Issue of ordinary shares related to business combination 214 - - - 214Transaction costs of share issuance - - (265) - (265)Total comprehensive loss for the period - - - (1,519) (1,519)

Balance at 27th December 2009 214 - (1,283) (1,519) (2,588)

The company’s reserves at 27th December 2009 comprise a merger reserve which arose in 2009 on the transaction with Georgica of £(1,283,000).

26

STATEMENT OFACCOUNTING POLICIES

GENERAL INFORMATIONEssenden PLC (“Essenden” or the “company”) is a public limited company incorporated and domiciled in the United Kingdom. The address of the registeredoffice is 33, King Street, London, SW1Y 6RJ. Theconsolidated financial statements of the company forthe period ended 27th December 2009 comprise thecompany and its subsidiaries (together referred to asthe “group”). The parent company financial statementscover the period from incorporation on 5th March2009 to 27th December 2009 and present informationabout the company as a separate entity and notabout its group. The principal activity of the groupcomprises the operation of tenpin bowling centres.

STATEMENT OF COMPLIANCEBoth the parent company financial statements and the group financial statements have been prepared and approved by the directors in accordance withInternational Financial Reporting Standards asadopted by the European Union (“Adopted IFRSs”),IFRIC interpretations and those parts of theCompanies Act 2006 applicable to companiesreporting under IFRS. IFRS is subject to an ongoingprocess of review and endorsement by the EuropeanCommission and amendment and interpretation by the International Accounting Standards Board.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES The following new standards, amendments tostandards or interpretations are mandatory for the firsttime for the financial year ended 27th December 2009and have been adopted in the financial statements:IFRS 7 (amendment), ‘Financial instruments –disclosures’ which has enhanced disclosure of fairvalue and liquidity risk; IFRS 8, ‘Operating segments’which has revised the basis of segment reporting inthe financial statements; and IAS 23 (amendment),‘Borrowing costs’. The following new standards,amendments to standards or interpretations havebeen issued but are not effective for the financialyear ended 27th December 2009 and have not beenearly adopted: IFRIC 9 (amendment), ‘Reassessmentof embedded derivatives’; IFRIC 16 (amendment),‘Hedges of a net investment in a foreign operation’;IFRIC 17, ‘Distributions of non-cash assets to owners’;IFRIC 18, ‘Transfers of assets from customers’; IFRS 2 (amendment), ‘Share-based payment’; IFRS 3(amendment), ‘Business combinations; IFRS 5(amendment), ‘Non-current assets held for sale and discontinued operations’; IAS 1 (amendment),‘Presentation of financial statements’; IAS 7(amendment), ‘Statement of cash flows’; IAS 17(amendment), ‘Leases’; IAS 27 (amendment),‘Consolidated and separate financial statements’; IAS 36 (amendment), ‘Impairment of assets’; IAS 38(amendment), ‘Intangible assets’; and IAS 39(amendments), ‘Financial instruments: recognitionand measurement’.

On publishing the parent company financialstatements here together with the group financialstatements, the company is taking advantage of the exemption in s408 of the Companies Act 2006not to present its individual income statement andrelated notes that form a part of these approvedfinancial statements.

BASIS OF PREPARATIONThe financial statements have been prepared underthe historical cost convention, as modified by therevaluation of derivative instruments to fair valuethrough the income statement, and incorporate the consolidated results of Essenden and all itssubsidiaries for the 52 week period ended 27thDecember 2009. Pursuant to a group reconstructioncompleted on 22nd May 2009, Essenden, a newlyincorporated company, was established as the ownerof 100% of the issued share capital of Georgica bymeans of a scheme of arrangement under Part 26 of the Companies Act 2006. Essenden issued fiveordinary shares and one Essenden loan note to each Georgica ordinary shareholder as considerationfor five Georgica shares. Immediately following this exchange, the newly issued Essenden shareswere consolidated on a five-for-one basis. Thereconstruction has been accounted for as a reverseacquisition in accordance with IFRS 3, ‘Businesscombinations’. Accordingly, the financial information in this report is presented on the basis that itrepresents the continuation of Georgica’sconsolidated financial information modified only as required to recognise Essenden’s capitalstructure, as the legal head of the group, and toinclude it as part of the group. The comparativefinancial information is for the Georgica group for the 52 week period to 28th December 2008 and has been extracted from the financial statements of Georgica for that period, on which the auditorsgave an unqualified opinion, and which have beenfiled with the Registrar of Companies.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSThe preparation of financial statements requires the use of accounting estimates, and requiresmanagement to exercise judgment in the process of applying the group’s accounting policies.Accounting estimates are based on historicalexperience and various other factors, includingexpectations of future events that are believed to be reasonable under the circumstances, the resultsof which form the basis of making the judgmentsabout the carrying values of assets and liabilitiesthat are not readily available from other sources.


STATEMENT OF ACCOUNTING POLICIESContinued

The principal balance sheet accounts affected byjudgment are goodwill (affected by the valuation of assets acquired and by impairment assessments),tangible fixed assets (affected by impairmentassessments and estimates of useful life and residualvalue), investment properties (affected by valuationassumptions), financial assets (affected by valuationassumptions), other non-current liabilities (affected by the assumptions used to value share basedpayments), onerous lease provisions and deferredtax. Actual results may differ from these estimates.The effect of varying the key assumptions in thegoodwill and tangible fixed asset impairmentcalculations is presented in note 11. The effect of a 1%change in the corporation tax rate on the value of thegroup’s deferred tax asset is presented in note 25.

The estimates and underlying assumptions arereviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised if the revision affectsonly that period, or in the period of the revision andfuture periods if the revision affects both the currentand future periods.

BASIS OF CONSOLIDATIONSubsidiaries, which are companies in which thegroup holds more than 50% of the voting rights andover which it has the power to govern the financialand operating policies, are consolidated from thedate on which control passes to the group, andcease to be consolidated from the date on whichcontrol passes from the group. All intercompanybalances and transactions, and any unrealised gainson transactions between group companies areeliminated.

On acquisition of a subsidiary, all of the identifiableacquired 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, plus expenses directly attributable to the acquisition. The excess of the cost of theacquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill.

FUNCTIONAL CURRENCYThe financial information in this report is presentedin sterling, the functional currency of the companyand group, rounded to the nearest thousand.

REVENUERevenue represents the total amounts earned fromcustomers from bowling, food, beverage, machinesand amusements, together with any other goods andservices delivered in the normal course of business,net of VAT.

INTANGIBLE ASSETSGoodwillGoodwill represents the excess of the cost of theacquisition of a subsidiary or business over the fair value of the group’s share of the identifiable netassets acquired. Goodwill is carried at cost lessimpairment, and is tested annually for impairment, or earlier if circumstances indicate that animpairment may have occurred. Negative goodwillarising on acquisition is recognised immediately inthe income statement.

SoftwareSoftware costs are capitalised and depreciated over their estimated useful lives of up to 3 years.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at cost,less accumulated depreciation and any impairmentin value. Depreciation is calculated so as to write offthe cost, less estimated residual value, of each asseton a straight line basis over its expected usefuleconomic life. The principal annual rates used forthis purpose are as follows:

Long leasehold premises:The shorter of 50 years or their estimated useful lives

Short leasehold premises:Their estimated useful lives

Fixtures, fittings and equipment:Between 3 and 20 years

Bowling lanes:40 years

Assets in the course of construction are not depreciated until they are brought into use. Residualvalue is calculated based upon prices prevailing at the date of acquisition, and is reassessed annually.

28

IMPAIRMENT OF ASSETSAt each reporting date, all assets are considered forevidence of impairment. If there is an indication ofimpairment, 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 andthe value in use. If this recoverable amount is belowthe carrying value, an impairment loss is recognisedin the income statement and the asset is writtendown to the recoverable amount. In assessing valuein use, the estimated future cash flows arising fromthe use of the asset are discounted to their presentvalue using a discount rate which reflects currentmarket assessments of the time value of money andthe risks specific to the asset. Impairment of thegroup’s operating businesses is assessed at thecash generating unit (CGU) level, with goodwillallocated to each CGU for this purpose. Impairmentlosses are charged to the income statement in theperiod in which they are identified and are allocatedfirst to goodwill then to carrying amounts of otherassets in the CGU.

REVERSALS OF IMPAIRMENTAn impairment loss in respect of a held-to-maturitysecurity or receivable carried at amortised cost isreversed if the subsequent increase in recoverableamount can be related objectively to an eventoccurring after the impairment loss was recognised.An impairment loss in respect of goodwill is notreversed. In respect of other assets, an impairmentloss is reversed when there is an indication that theimpairment loss may no longer exist and there hasbeen a change in the estimates used to determinethe recoverable amount. An impairment loss isreversed only to the extent that the asset’s carryingamount does not exceed the carrying amount thatwould have been determined, net of depreciation or amortisation, if no impairment loss had beenrecognised.

PROPERTY DISPOSALSDisposals of properties and any resultant gain or loss on disposal are recognised in the incomestatement once all conditions of the sale contractbecome unconditional.

INVESTMENT PROPERTIESInvestment properties are included in the balancesheet as non-current assets, brought in at cost andrevalued to fair value at each reporting date. Rentalincome from investment properties is recognised inadministrative expenses in the income statement on a straight line basis over the term of the lease.

INVESTMENTSFixed asset investments are stated at cost less anyprovision for impairment in value.

INVENTORIESInventories are stated at the lower of cost and netrealisable value. Cost is calculated as cost ofpurchase on a first in, first out basis based on normallevels of activity. Net realisable value is based onestimated selling price, less further costs expectedto be incurred to completion and disposal. Provisionis made for obsolete, slow-moving or defective itemswhere appropriate.

TRADE AND OTHER RECEIVABLESTrade and other receivables are stated at their cost less impairment losses.

FINANCIAL ASSETSThe group classifies its financial assets as either atfair value through profit and loss (all of which weredesignated as such upon recognition) or as loansand receivables. There are no financial assets heldas available for sale.

Financial assets at fair value through profit and loss:financial assets held for interest rate managementare classified in this category – the group uses twoforms of derivative financial instrument to reduceexposure to interest rate increases; interest ratecaps and interest rate swaps. These derivatives are initially recognised at fair value on the date the contract is entered into, and are subsequentlyrecognised at fair value re-measured as at eachreporting date. The gain or loss on re-measurementto fair value is recognised in finance costs in theincome statement.

Loans and receivables: non-derivative financialassets with fixed or determinable payments – loansand receivables are classified as “trade and otherreceivables” in the balance sheet.


CASH AND CASH EQUIVALENTSCash and cash equivalents comprise cash balancesand call deposits. Bank overdrafts that are repayableon demand and form an integral part of the group’scash management are included as a component ofcash and cash equivalents for the purpose of thestatement of cash flows.

INTEREST-BEARING BORROWINGSInterest-bearing borrowings are recognised initially at fair value less attributable transaction costs.Subsequent to initial recognition, interest-bearingborrowings are stated at amortised cost with anydifference between cost and redemption value beingrecognised in the income statement over the periodof the borrowings on an effective interest basis.

TRADE AND OTHER PAYABLESTrade and other payables are stated at cost.

SHAREHOLDER LOAN NOTESThe Essenden loan notes are £1 principal amount,zero coupon, perpetual notes which are freelytransferable and are listed on PLUS-quoted. They arefully repayable at par on the occurrence of certainspecified events, including a change of control ofEssenden, an insolvency event or a change inoperating activity. They are recognised on thebalance sheet at their fair value within financialliabilities due after more than one year, as there is no fixed redemption date and no current obligationto make any redemptions within one year. Thediscount to par value at which the notes were initiallyrecognised on the balance sheet is being amortisedon a straight line basis over the expected period offull repayment of the notes, which is estimated bythe directors to be 5 years. The amortisation ischarged to interest payable and similar charges.

LEASESCosts incurred in respect of operating leases arecharged to the income statement on a straight linebasis over the term of the lease. Benefits receivedand receivable as an incentive to sign an operatinglease are similarly spread on a straight line basisover the lease term. The majority of the group’s shortterm property leases are treated as operating leases.

Finance lease arrangements, which transfersubstantially all of the benefits and risks ofownership of the related property to the group, are treated as if the property had been acquired.The properties are included in property, plant andequipment, classified as long leasehold premises,and the capital element of the leasing commitmentis shown as a finance lease obligation in liabilities.Lease rentals are separated into capital and interestelements, with the capital element applied to reducethe finance lease obligation and the interest elementcharged to finance costs in the income statement,so as to give a constant periodic rate of charge onthe remaining balance of the obligation outstandingat each accounting period end.

CASH SETTLED SHARE BASED PAYMENTSThe group operated a long-term cash settledincentive plan linked to growth in shareholder value. It consisted of a number of tranches of options,linked to the performance of Georgica’s shares,granted to executive directors and senior employees.The options were accounted for at valuation, usingthe Binomial Model and taking into account relevantfactors such as share price volatility, share pricegrowth hurdles, lapse rates and dividend expectations.The fair value of each tranche of options overperformance shares made under the plan wasrecognised in the income statement over the periodfrom the effective date of grant to the vesting datefor that tranche. Operating profit for the period wasreduced by the cost of options allocated to thatperiod, based on the valuation as at the period end,together with any adjustment to charges recorded in earlier periods due to revisions in the valuation inthe period, which principally arose from changes inGeorgica’s share price. The incentive plan wasterminated during 2009 for no liability.

DEBT ISSUE COSTSIssue costs of debt are recognised in the incomestatement on a systematic basis over the term of the debt.

ONEROUS LEASE COMMITMENTSProvisions are recognised for the present value ofonerous leases and vacant properties, calculated as the expected net cash out flows over theremaining life of the lease, discounted at a ratewhich approximates the group’s weighted averagecost of capital. Notional interest is charged inrespect of the unwinding of the discount.

STATEMENT OF ACCOUNTING POLICIESContinued

30

PROVISIONSProvisions are recognised when the group has apresent obligation (legal or constructive) as theresult of a past event and it is both probable that an outflow of resources will be required to settle theobligation and the amount of the obligation can bereliably estimated. Where the group expects to bereimbursed for an outflow of resources associatedwith a provision, for example under an insurancecontract, the expected reimbursement is recognisedas a separate asset but only when the reimbursementis virtually certain. If the effect of the time value ofmoney is material, provisions are calculated bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessmentsof 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 theunwinding of the discount over time is charged tofinance costs in the income statement.

TAXThe tax charge comprises current tax payable anddeferred tax. The current tax charge represents anestimate of the tax payable in respect of the group’staxable profits and is based on an interpretation ofexisting tax laws.

As required by IAS 12 (revised), the group providesdeferred income tax using the balance sheet liabilitymethod on all temporary differences between thetax bases of assets and liabilities and their carryingvalues at the balance sheet date. Deferred incometax assets and liabilities so recognised aredetermined using the tax rates and laws that havebeen enacted or substantively enacted by thebalance sheet date and are based on the expectedmanner of realisation or settlement of the carryingamount of the assets or liabilities. Deferred incometax assets are recognised to the extent that it isprobable that future taxable profits will be availableagainst which the temporary differences can beutilised. Deferred income tax balances are notdiscounted. Deferred tax is not recognised in respectof the initial recognition of an asset or liabilityacquired in a transaction which is not a businesscombination and at the time of the transaction does not affect accounting or taxable profits.


SEGMENT REPORTINGThe group’s segments (distinguishable componentsof the group that are engaged either in providingproducts or services) are its tenpin bowlingoperations and its central management andinvestment properties. The group wholly operateswithin the United Kingdom.

DISCONTINUED OPERATIONSA discontinued operation is a component of thegroup’s business that either has been disposed of orclassified as held for sale or is a company or groupof companies to which a receiver or administratorhas been appointed and over which the group doesnot exercise control.

DIVIDENDSDividends receivable are recognised when the rightto receive the dividend is established, which isgenerally when the dividend is received.

NOTES TO THE FINANCIALSTATEMENTSfor the 52 week period ended 27th December 2009

1 SEGMENT REPORTINGSegmental information is presented in respect of the group’s business segments. Strategic decisionsare made by the Essenden board based on information presented in respect of these segments.

The group comprises the following segments:Tenpin (Bowls) – Tenpin is the largest tenpin bowling operator in the UK with an approximate 20% share of the UK market. All revenue is derived from activities conducted in the UK.Central – this comprises 5 properties held as investment properties together with centralmanagement, being company secretarial the board, head office assets and costs.

The segment results for the 52 week period ended 27th December 2009 and for the 52 weekperiod ended 28th December 2008 that are used by the board for strategic decision making, and a reconciliation of those results to the reported loss in the consolidated income statement, and the segment assets are as follows:

Tenpin Central Total Group£000 £000 £000

For the 52 week period ended 27th December 2009:

Segment revenue - external 58,094 - 58,094

EBITDA 6,222 (1,168) 5,054

Segment assets as at 27th December 2009 56,735 5,238 61,973

Reconciliation of EBITDA to reported operating loss:

EBITDA 6,222 (1,168) 5,054Depreciation of intangible and tangible fixed assets (3,864) (67) (3,931)Impairment of intangible and tangible fixed assets (1,652) (310) (1,962)Investment property revaluation - (1,000) (1,000)Profit on disposal - 386 386One-off costs (528) (1,160) (1,688)Onerous lease provision movement (6,486) (533) (7,019)

Operating loss (6,308) (3,852) (10,160)

For the 52 week period ended 28th December 2008:

Segment revenue - external 62,814 - 62,814

EBITDA 6,562 (1,497) 5,065

Segment assets as at 28th December 2008 64,372 2,932 67,304

Reconciliation of EBITDA to reported operating loss:

EBITDA 6,562 (1,497) 5,065Depreciation of intangible and tangible fixed assets (4,393) (79) (4,472)Impairment of goodwill, intangible and tangible fixed assets (39,019) - (39,019)Investment property revaluation - (437) (437)Profit on disposal 2,146 1,266 3,412One-off costs (266) (1,132) (1,398)Onerous lease provision movement (6,719) - (6,719)

Operating loss (41,689) (1,879) (43,568)

All assets have been allocated to segments. There are no inter-segmental transactions except fordividends paid by Tenpin to Georgica (in Central).


NOTES TO THE FINANCIAL STATEMENTSContinued

2 BUSINESS COMBINATIONSEssenden was incorporated on 5th March 2009 and was established as the owner of 100% of the issued share capital of Georgica by means of a scheme of arrangement under Part 26 of the Companies Act 2006. Essenden issued five ordinary shares and one Essenden loan note toeach Georgica ordinary shareholder on 22nd May 2009 as consideration for five Georgica shares.Immediately following this exchange, the newly issued Essenden shares were consolidated on afive-for-one basis.

The transaction has been accounted for as a reverse acquisition in accordance with IFRS 3,‘Business combinations’. Accordingly, the consolidated financial statements of Essenden represent a continuation of the financial statements of Georgica and the business combination is accountedfor as the acquisition of Essenden. The assets and liabilities of Georgica (the deemed “acquirer”)are recognised and measured in the consolidated financial statements at their pre-combinationcarrying amounts, whilst the assets, liabilities and contingent liabilities of Essenden are fair valuedas at 22nd May 2009.

The Essenden loan notes are £1 principal amount, zero coupon, perpetual notes which are freelytransferable and are listed on PLUS-quoted. They are fully repayable at par on the occurrence ofcertain specified events, including a change of control of Essenden, an insolvency event or achange in operating activity. They are recognised on the balance sheet at their fair value withinfinancial liabilities due after more than one year, as there is no fixed redemption date and nocurrent obligation to make any redemptions within one year.

3 PROFIT ON DISPOSAL OF PROPERTIESProfit on disposal of properties comprises:

52 week period ended 27th December 2009 52 week period ended 28th December 2008£000 £000

Sale of Leigh Rileys 386 -Sale of Cardiff bowl - 468Sale and leaseback of Stoke bowl - 2,248Closure of Kinnaird Park bowl (Edinburgh) - (502)Closure of Metro bowl (Gateshead) - (68)Sale of Westcliff Rileys - 1,097Sale of Pontefract Rileys - 169

386 3,412

During March 2009 the group sold one of the investment properties it owns. Sale proceeds of £1.0mwere received in cash for the site in Leigh, and a profit of £0.4m was generated.

During 2008 Tenpin sold and leased back its bowl in Cardiff for consideration of £1.54m and a profiton disposal of £0.5m was recorded. The bowl closed in August 2008. The sale and leaseback ofStoke bowl completed in April 2008 for consideration of £3.25m and a profit of £2.2m was recorded.This brought the total proceeds from sale and leasebacks completed in 2007 and 2008 to £46.25mand the combined initial annual rent charge to £2.8m. Two bowls in Edinburgh and Gateshead whichwere on short leases with regular breaks were closed in April 2008, and a loss on disposal of £0.6mwas recorded. During 2008 the group also sold two development properties, at Pontefract andWestcliff, for £2.3m. A profit of £1.3m was generated.

34


4 STAFF COST AND NUMBERSStaff costs and numbers – group:


Wages and salaries 13,833 15,413Social security contributions 1,089 1,188Cash-settled share based payments (note 9) - (20)

14,922 16,581

Staff costs included within cost of sales is £11.8m (2008: £13.3m). The balance of staff costs isrecorded within administrative expenses.

Details of directors’ remuneration are set out in the directors’ report. No amounts were received or receivable by directors under long term incentive schemes or the exercise of share options and no directors have accrued any retirement benefits. The highest paid director for the 52 weekperiod ended 27th December 2009 received remuneration of £325,100 (2008: highest paid directorof Georgica received £250,000). All key management positions are held by executive directors ofEssenden and accordingly, no further disclosure of key management remuneration is deemednecessary.

The average number of persons employed (including executive directors) during the period,analysed by category, was as follows:

52 week period ended 27th December 2009 52 week period ended 28th December 2008number number

Weighted average number of employees:

Staff 960 1,091Administration 56 64Unit management 236 195

1,251 1,350

Staff costs and numbers – company:

Period ended 27th December 2009£000

Wages and salaries 497Social security contributions 80

577

These company staff costs are for Essenden for the period from May 2009. Including the staff costs incurred by Georgica for the period to May 2009, the staff costs are as follows:


Wages and salaries 860 926Social security contributions 130 126Cash-settled share based payments - (20)

990 1,032

Period ended 27th December 2009number

Administration (including executive directors) 7

5 INTEREST PAYABLE AND SIMILAR CHARGES


Bank loans and overdrafts 223 491Amortisation of deferred financing costs 300 546Essenden loan notes – amortisation of the initial discount 495 -Finance leases 275 281Notional interest on unwinding of discount on provisions 363 117(see note 24)

Other 85 67

1,741 1,502


36

6 INTEREST RECEIVABLE


Interest income on bank deposits 41 179Financial instruments - 392

41 571

7 LOSS BEFORE TAXATIONThe following items have been included in arriving at loss before taxation:


Staff costs (see note 4) 14,922 16,581Consumables charged to cost of sales 4,701 4,942Depreciation of property, plant and equipment 3,514 3,924Depreciation and amortisation of intangible assets 417 548

Impairment:

- property, plant and equipment 1,952 11,460- goodwill - 26,772- intangible assets 10 787

Total impairment 1,962 39,019

Onerous lease provisions 7,019 6,719Rental income from investment properties 157 233Valuation loss on investment properties 1,000 437Operating lease rentals payable - property 11,257 10,461Repairs on property, plant and equipment 1,028 1,202Gains/(losses) on financial assets at fair value through profit and loss - 392

Auditors’ remuneration:

Audit of group and company financial statements 35 35Audit of subsidiary financial statements 40 40Tax compliance 15 -Transaction due diligence 138 200Consulting services 82 110

The PwC fees for transaction due diligence in 2009 related to the reverse acquisition of Essenden.The consulting services principally related to a group restructuring to facilitate the future repaymentof Essenden loan notes.


8 TAXATIONRecognised in the income statement:


Deferred tax:

Origination and reversal of temporary differences (1,852) (3,518)Prior period adjustments (1,052) (1,859)

Tax credit in income statement (note 25) (2,904) (5,377)

The tax on the group’s loss before tax differs from the theoretical amount that wouldarise using the standard rate of tax in the UK of 28% (2008: 28.5%). The differences are explained below.


Loss before tax (11,860) (44,499)

Tax using the UK corporation tax rate of 28% (2008: 28.5%) (3,321) (12,682)Expense not deductible for tax purposes 134 7,516Effect of tax losses 1,335 1,648Prior period adjustments (1,052) (1,859)

Tax credit in income statement (2,904) (5,377)

9 SHARE-BASED PAYMENTSIn 2001, Georgica established the Georgica Executive Participation Plan under which share basedpayment options were granted to key management personnel and senior employees. Participantsreceived an option over a number of performance shares. The performance share was a unit ofmeasurement for the purposes of calculating rewards under the plan and was equivalent in value toone ordinary share in the company. The option over performance shares enabled the participant torealise a cash sum (or, at the discretion of the directors, a number of ordinary shares) subject to thesatisfaction of performance criteria and continuing employment. All of the remaining options lapsedor were terminated during the 52 week period ended 27th December 2009 in connection with theEssenden reconstruction.


38

The movement in number and weighted average value of performance shares is as follows:

52 week period ended 27th December 2009 52 week period ended 28th December 2008

Weighted Value Number Charge/ Weighted Value Number Charge/ average per of (credit) average per of (credit)exercise Binomial performance and exercise Binomial performance and

price Model shares liability price Model shares liabilitypence pence £000 pence pence £000

Beginning of the period 89.7 0.03 1,415,000 - 86.7 1.1 2,652,500 20Granted during the period - - - - - - - -Exercised during the period - - - - - - - -Lapsed during the period - - - - - - (1,237,500) -Cancelled during the period - - (1,415,000) - - - - -Change in fair value (spread) - - - - - - - (20)

Outstanding at the endof the period - - - - 89.7 0.03 1,415,000 -

Exercisable at the endof the period - - - - 85.2 - 357,500 -

The change in fair value in the period was spread over the period to first exercise date of eachtranche of performance shares, representing the period over which the benefit of the shares wasbeing earned.

The fair value of services received in return for performance shares granted was measured by reference to the fair value of the performance shares granted. The estimate of the fair value of the services received was measured based on the Binomial Model. The contractual life of the performance share was used as an input into this model. Expectations of exercise were also incorporated into the model. In valuing the performance shares, it was assumed that 10% of the shares would lapse before reaching the exercise date.

Key assumptions in the Binomial Model used:

27th December 2009 28th December 2008

Fair value at measurement date - £0.0003Share price at measurement date - £0.155Expected volatility - 42% - 84%(expressed as weighted average volatility used in the modelling under the Binomial model)

Option life - 0.2 - 6.7 years(expressed as weighted average life used inthe modelling under the Binomial model)

Expected dividends - -Risk-free interest rate - 0.6% to 3.1%

The expected volatility was based on the historic volatility (calculated with reference to the weighted average remaining life of the performance shares at the reporting date).Performance shares were granted under a service condition. Such conditions were nottaken into account in the grant date fair value measurement of the services received. There were no market conditions associated with the performance share grants.


10 RESULT ATTRIBUTABLE TO ESSENDENThe financial statements of the parent company, Essenden, were approved by the board of directors on 9th March 2010. The result for the financial period dealt with in the financialstatements of Essenden was a loss of £1.5m. As permitted by Section 408 of the CompaniesAct 2006, no separate Income Statement is presented in respect of the parent company.

11 GOODWILL AND INTANGIBLE ASSETS

Goodwill Software TotalGroup £000 £000 £000

Cost

At 30th December 2007 44,755 588 45,343Additions - 1,909 1,909Disposals (195) - (195)

At 28th December 2008 44,560 2,497 47,057Additions - 406 406Disposals - - -

At 27th December 2009 44,560 2,903 47,463

Amortisation and impairment losses

At 30th December 2007 2,127 464 2,591Charge for the period – amortisation - 548 548Impairment losses 26,772 787 27,559

At 28th December 2008 28,899 1,799 30,698Charge for the period – amortisation - 417 417Impairment losses - 10 10

At 27th December 2009 28,899 2,226 31,125

Net book value

At 27th December 2009 15,661 677 16,338

At 28th December 2008 15,661 698 16,359

At 30th December 2007 42,628 124 42,752

The amortisation and impairment charges are recognised in administrative expenses in the incomestatement.


40

Impairment lossGoodwill has been allocated to cash generating units and is summarised as follows:

27th December 2009 28th December 2008£000 £000

Goodwill at the period end 15,661 15,661Impairment of goodwill recorded in the period - 26,772

The recoverable amount of each cash generating unit (each of the 38 bowls has been treated as a cash generating unit) has been calculated as the higher of its value in use and its fair value lesscost to sell. The calculations of value in use are based on pre-tax cash flow projections from thefinancial budgets approved by the board covering a two year period. Cash flows beyond this twoyear period are extrapolated over the life of the lease relating to that site, extended by 15 years forshort leasehold premises in England and Wales where the provisions of the Landlord and TenantsAct apply and the company has the right and expects to extend the lease on expiry, or over 50years for a long leasehold or freehold site.

The key features of this calculation are shown below:

27th December 2009 28th December 2008£000 £000

Period on which management approved forecasts are based 2 years 2 yearsGrowth rate applied beyond approved forecast period 2% 2%Pre-tax discount rate 13.3% 13.0%

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 pastperformance and known factors specific to that site which are expected by management to affectfuture performance, to reflect the operating circumstances and risks relevant to each part of thebusiness. They also include an allocation of central overheads which are allocated evenly acrossthe sites. The pre-tax discount rate applied to the cash flow projections approximates the group’sweighted average cost of capital, adjusted only to reflect the way in which the market would assessthe specific risks associated with the estimated cash flows of the bowling businesses and to excludeany risks that are not relevant to estimated cash flows of the bowling businesses, or for which theyhave already been adjusted. This pre-tax discount rate has been benchmarked against the discountrates applied by other companies in the leisure sector.

The key assumption to which the calculation is sensitive remains the future trading performanceexpected of each bowl, which has a more significant effect on the quantum of goodwill and tangiblefixed asset impairment than the discount or growth rates assumed. If the sales in the budgets whichunderlie the calculations are reduced by 5%, reducing the cash flows of the bowls by the salesreduction converting to cash at 79% (the average conversion achieved by Tenpin), the indicatedimpairment charge increases by £1.0m (2008: £10.6m). If the pre-tax discount rate applied in thecalculations is increased by 5%, the indicated impairment charge increases by £nil (2008: £8.6m).

For the calculation of fair value less cost to sell, management have assumed that each Tenpinbusiness could be sold for a multiple of 5 x EBITDA (2008: 5 x EBITDA).


12 INVESTMENT PROPERTYAs at 28th December 2008 the group held the freehold property interest in 6 cue sports clubsleased to Rileys Limited, a former group company. During 2009, one of the investment properties at Leigh was sold for £1m. Although being marketed for sale, the remaining interests continue to be classified as investment properties as there is not a strong market for them.


£000 £000 £000

Investment properties brought forward 3,169 - -Transfers from current assets held for resale - 3,606 -Disposals (593) - -Revaluation (1,000) (437) -

Investment properties carried forward 1,576 3,169 -

A revaluation to fair value was performed as at 27th December 2009 and a loss on revaluation of £1,000,000 was recorded (2008: a loss of £437,000). The valuation was made by the directorsbased on the valuation methodology performed by the group’s property advisors, Fletcher King, in previous years and applying a current yield provided by Fletcher King to the annual rentalincome stream. The rental income received from these properties in the period and included in administrative expenses in the income statement was £157,000 (2008: £233,000).

13 INVESTMENTS

SubsidiariesShares

Company £000

Cost

Additions – acquisition of Georgica Limited 16,337

At 27th December 2009 16,337


42

Principal group investmentsThe parent company has investments in the following subsidiary undertakings, which principallyaffected the results and net assets of the group. Details of investments which are not significanthave been omitted.

Country of PercentageCountry of incorporation of ordinary

registration and operation Principal activity shares held

Companies owned directly by Essenden PLC Georgica Limited (formerly Georgica PLC) England & Wales Great Britain Holding Company 100%

Companies owned indirectly by Essenden PLCGeorgica Holdings Limited * England & Wales Great Britain Holding Company 100%

Tenpin Limited * England & Wales Great Britain Bowling 100%

Georgica Share Incentive Plan Limited * England & Wales Great Britain Share Incentive Plan 100%

Georgica (Lewisham) Limited ** England & Wales Great Britain Non trading 100%

GNU 5 Limited ** England & Wales Great Britain Non trading 100%

Tenpin (Sunderland) Limited *** England & Wales Great Britain Bowling 100%

Tenpin (Halifax) Limited *** England & Wales Great Britain Non trading 100%

Tenpin (Widnes) Limited *** England & Wales Great Britain Non trading 100%

* These companies are all directly held subsidiaries of Georgica Limited. ** These companies are all directly held subsidiaries of Georgica Holdings Limited.

*** These companies are all directly held subsidiaries of Tenpin Limited.

Nine group companies were placed into members’ voluntary liquidation in October 2007, following a group reorganisation to simplify the group structure. These comprised Georgica Leisure PLC,Georgica Bowling Limited, Georgica Franchises Limited, Georgica Realisations Limited, TenpinGroup Limited, Tenpin Finance Limited, Megabowl Group Limited, Megabowl Services (CI) Limitedand Pondtrail Limited. These companies were all dissolved in 2009.

Four other dormant group companies were also dissolved in 2009. These comprised GNU 2 Limited,GNU 4 Limited, TPNU 1 Limited and TPNU 4 Limited.


14 PROPERTY, PLANT AND EQUIPMENT

Long leasehold Short leasehold Fixtures, fittingspremises premises and equipment Total

Group £000 £000 £000 £000

Cost

At 30th December 2007 7,324 21,485 39,797 68,606Additions 40 3,636 1,348 5,024Disposals (1,339) (166) (1,002) (2,507)

At 28th December 2008 6,025 24,955 40,143 71,123Additions - 602 368 970Disposals - - (75) (75)

At 27th December 2009 6,025 25,557 40,436 72,018

Depreciation and impairment

At 30th December 2007 1,310 7,042 14,590 22,942Charge for the period 209 504 3,211 3,924Disposals (208) (23) (311) (542)Impairment 1,439 6,209 3,812 11,460

At 28th December 2008 2,750 13,732 21,302 37,784Charge for the period 145 360 3,009 3,514Disposals - - (49) (49)Impairment charge - 408 2,189 2,597Impairment credit - (645) - (645)

At 27th December 2009 2,895 13,855 26,451 43,201

Net book value

At 27th December 2009 3,130 11,702 13,985 28,817

At 28th December 2008 3,275 11,223 18,841 33,339

At 30th December 2007 6,014 14,443 25,207 45,664

Bank borrowings are secured on property, plant and equipment for the value of £5.2m (2008: £6.4m).

Properties held under finance leases had a property net book value of £3.1m (2008: £3.3m) and thefinance lease depreciation charged in the period was £76,000 (2008: £104,000).

Impairment has been assessed on a consistent basis with impairment of goodwill, using the approachand assumptions detailed in note 11. An impairment charge of £2.6m and the reversal of previouslybooked impairment of £0.6m was recorded in the period (2008: a charge of £11.5m).

Disposals in 2008 comprise the sale and leaseback of Stoke bowl, the sale of Cardiff bowl forredevelopment and the closure of bowls in Edinburgh and Gateshead.

The company has no property, plant and equipment.


44

15 INVENTORIES


£000 £000 £000

Goods held for resale 1,736 1,755 -

The cost of inventories recognised as an expense and included in cost of sales amounted to £4,701,000 (2008: £4,942,000).

16 TRADE AND OTHER RECEIVABLES


£000 £000 £000

Trade receivables 268 255 -Amounts owed by subsidiary undertakings - - 1,719Other receivables 243 3,126 12Prepayments and accrued income 5,139 3,883 -

5,650 7,264 1,731

Amounts owed by subsidiary undertakings were loaned at the group’s average borrowing rate, beingcommercial loans repayable on demand. All trade and other receivables are due within 12 months.

17 FINANCIAL ASSETS


£000 £000 £000

Interest receivable - 7 -Interest rate cap - 13 -

- 20 -


18 CASH AND CASH EQUIVALENTS


£000 £000 £000

Cash at bank and on hand 1,568 2,340 2,222Short term bank deposits - 46 -

Cash and cash equivalents 1,568 2,386 2,222

Overdrafts - - -

Cash, cash equivalents and bank overdrafts as reported in the cash flow statement 1,568 2,386 2,222

19 SHARE CAPITAL

27th December 2009 28th December 2008Group £000 £000

Authorised share capital

800,000,000 ordinary shares of 1p each 8,000 -130,000,000 ordinary shares of 5p each - 6,5002,538,075 convertible ordinary shares of 50p each - 1,269

8,000 7,769

Allotted, called up and fully paid share capital

21,424,740 ordinary shares of 1p each 214 -97,422,700 (2007:97,422,700) ordinary shares of 5p each - 4,8712,538,075 (2007:2,538,075) convertible ordinary shares of 50p each - 1,269

214 6,140

27th December 2009Company £000

Authorised share capital

800,000,000 ordinary shares of 1p each 8,000

8,000

Allotted, called up and fully paid share capital

21,424,740 ordinary shares of 1p each 214

214


46

The movements on group issued share capital in the financial period were as follows:

Number of shares Value of sharesGroup £000

Georgica ordinary shares of 5p each 97,422,700 4,871Georgica convertible ordinary shares of 50p each 2,538,075 1,269

Georgica share capital brought forward 99,960,775 6,140Buy back of ordinary shares of Georgica (450,000) (23)Conversion of convertible ordinary shares of Georgica to 10,152,300 ordinary shares 7,614,225 -

Georgica ordinary shares of 5p each on reverse acquisition of Essenden 107,125,000 6,117Effect of the scheme of arrangement (1,300) (5,903)

Essenden ordinary shares of 0.2p each 107,123,700 214Effect of one for five consolidation (85,698,960) -

Essenden ordinary shares of 1p each – share capital carried forward 21,424,740 214

Essenden share capital:Essenden was incorporated on 5th March 2009 with an authorised share capital of £50,000comprising 50,000 ordinary shares of £1 each. On 6th March 2009 the ordinary shares weresubdivided into 25,000,000 ordinary shares of 0.2p each, and the authorised share capital wasincreased by £8,000,000 to £8,050,000 by the creation of 50,000 £1 preference shares and3,975,000,000 ordinary shares of 0.2p each. The issued share capital of the company of £50,000comprised 1,000 ordinary shares of 0.2p each and 49,998 £1 preference shares. The holders ofthe preference shares were not entitled to receive a dividend; had no right to vote at any generalmeeting of the company except in certain specified circumstances, and on a return of capital would receive £1 per share.

On 22nd May 2009 a scheme of arrangement under Part 26 of the Companies Act 2006 wascompleted followed by a 1 for 5 share capital consolidation. Under the scheme of arrangement107,123,700 ordinary shares of 0.2p each were issued to holders of Georgica PLC shares in a sharefor share exchange, immediately consolidated to 21,424,740 ordinary shares of 1p each. The 49,998£1 preference shares were redeemed at the same time.

The company purchased no shares for cancellation in the period.


20 EARNINGS PER SHAREBasic earnings per share for each period is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issue during theperiod. Earnings per share is based on the capital structure of Essenden, amended to reflectchanges in the capital structure of Georgica (eg for the conversion of convertible shares or thepotentially dilutive effect of shares held by the Georgica Share Incentive Plan Limited) during therelevant period as though they were changes in the capital structure of Essenden.

Details of the earnings and weighted average number of ordinary shares used in each calculationare set out below.


£000 £000

Earnings attributable to ordinary shareholders (8,956) (39,122)

Weighted average number of ordinary shares: Number of shares

For basic earnings per share 21,078,729 20,558,754

Effect of shares held by the Georgica Share Incentive Plan 13,269 33,310For diluted earnings per share 21,091,998 20,592,064

Pence per share

Basic earnings per share (42.5)p (190.3)p

Diluted earnings per share (42.5)p (190.3)p

21 CASH GENERATED FROM OPERATIONS

Group Company52 weeks to 52 weeks to Period to

27th December 2009 28th December 2008 27th December 2009Cash flows from operating activities £000 £000 £000

Loss for the period (8,956) (39,122) (1,519)Adjustments for:

Tax (2,904) (5,377) -Interest income (41) (571) -Interest expense and finance charges 1,741 1,502 513Impairment of property, plant and equipment 1,952 11,460 -Impairment of goodwill - 26,772 -Impairment of intangible assets 10 787 -Depreciation and amortisation of intangible assets 417 548 -Depreciation 3,514 3,924 -Revaluation of investment properties 1,000 437 -Profit on disposal (386) (3,412) -Changes in working capital:

Decrease / (increase) in inventories 19 (159) -Decrease / (increase) in trade and other receivables 440 (94) (18)(Decrease) / increase in trade and other payables (3,622) (57) 127Increase in provisions 7,019 6,867 -

Cash generated from / (used in) operations 203 3,505 (897)


48

22 FINANCIAL LIABILITIES


Current liabilities £000 £000 £000

Bank loans 4,866 3,679 4,866Finance leases 86 71 -

4,952 3,750 4,866

Bank loans due within one year are shown net of deferred financing costs of £301,000 (2008: £58,000).


Non-current liabilities £000 £000 £000

Bank loans - 2,437 -Essenden loan notes 17,635 - 17,635Finance leases 2,619 2,721 -

20,254 5,158 17,635

Bank loans due after more than one year are shown net of £nil (2008: £188,000) of deferred financingcosts. The bank loans and overdrafts are secured by fixed and floating charges on all of the group’sproperties and assets. The Essenden loan notes are £1 principal amount, zero coupon, perpetualnotes which are freely transferable and are listed on PLUS-quoted. They are fully repayable at par onthe occurrence of certain specified events, including a change of control of Essenden, an insolvencyevent or a change in operating activity. They are recognised on the balance sheet at their initial fairvalue less amortisation of the initial discount within financial liabilities due after more than one year,as there is no fixed redemption date and no current obligation to make any redemptions within oneyear. Their fair value at 27 th December 2009 was £11.1m based on their price on PLUS-quoted.

Borrowings are repayable as follows:


Bank loans £000 £000 £000

Between one and two years - 750 -Between two and five years - 1,875 -

- 2,625 -

Within one year 5,167 3,737 5,167

5,167 6,362 5,167

The group had £nil (2008: £6,638,000) of undrawn capex facilities and £nil (2008: £nil) of undrawnrevolving facilities at 27th December 2009. The group had cash on deposit of £nil (2008: £46,000). Since 27th December 2009 the bank loans have been rescheduled and £1,739,000 is now due after more than one year of which £997,000 is due after two years.


Finance lease liabilities – GroupThe payment profile of minimum lease payments under finance leases is as follows:

Net Gross

27th December 2009 28th December 2008 27th December 2009 28th December 2008£000 £000 £000 £000

Within one year 86 71 352 352Between one and five years 443 365 1,408 1,408After five years 2,176 2,356 3,756 4,122

2,705 2,792 5,516 5,882Future finance chargeson finance leases - - (2,811) (3,090)

Present value of financelease liabilities 2,705 2,792 2,705 2,792

23 TRADE AND OTHER PAYABLES AND OTHER NON-CURRENT LIABILITIES


Trade and other payables £000 £000 £000

Trade payables 1,102 2,488 -Social security and other taxes 965 943 2Other payables 1,398 3,590 69Accruals 2,910 2,261 306Deferred income – lease incentives 107 103 -

6,482 9,385 377


Other non-current liabilities £000 £000 £000

Deferred income – lease incentives 1,075 1,148 -

1,075 1,148 -


50

24 PROVISIONSThe company has no onerous lease provisions.The group’s onerous lease provisions are as follows:

£000

At 30th December 2007 1,182Provided in the period 6,969Utilised in the period (250)Notional interest on unwinding of discount 117

At 28th December 2008 - current 696

At 28th December 2008 - non-current 7,322

Provided in the period 8,910Utilised in the period (1,409)Released unused in the period (482)Notional interest on unwinding of discount 363

At 27th December 2009 - current 2,173

At 27th December 2009 - non-current 13,227

The provision for onerous contracts comprises provision for the onerous element of the propertyleases on certain trading units, covering the expected period of the onerous commitment. Theassumptions underlying the onerous lease provisions are consistent with the assumptions used for impairment (see note 11). As the provision is based on the future budgeted trading performanceof the bowling centres subject to the onerous leases the amount and timing of the related cashoutflows is sensitive to future variances in EBITDA from those budgets.

The provision is expected to unwind as follows:

TotalOnerous lease provisions £000

Between one and two years 2,098Between two and five years 6,333After five years 4,796

13,227

Within one year 2,173

15,400


25 DEFERRED TAXDeferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net

27th 28th 27th 28th 27th 28thDecember December December December December December

2009 2008 2009 2008 2009 2008£000 £000 £000 £000 £000 £000

Property, plant and equipment - - (312) (2,748) (312) (2,748)Tax losses 7,392 6,924 - - 7,392 6,924Other - - (792) (792) (792) (792)

Total 7,392 6,924 (1,104) (3,540) 6,288 3,384

Of the total deferred tax asset of £6.3m (2008: £3.4m) at 27th December 2009, £1.3m (2008: £1.0m) is expected to be utilised within 12 months and so represents the current portion of the asset. The non-current portion of deferred tax to be utilised after 12 months is £5.0m (2008: £2.4m). A 1% change in the corporation tax rate would cause a £0.2m change in the value of the deferredtax asset.

Movement in deferred tax during the 52 week period ended 27th December 2009:

29th December Recognised in Recognised 27th December2008 income statement in equity 2009£000 £000 £000 £000

Property, plant and equipment (2,748) 2,436 - (312)Tax losses 6,924 468 - 7,392Other (792) - - (792)

Total 3,384 2,904 - 6,288

Movement in deferred tax during the 52 week period ended 28th December 2008:

31st December Recognised in Recognised 28th December2007 income statement in equity 2008£000 £000 £000 £000

Property, plant and equipment (5,096) 2,348 - (2,748)Tax losses 5,176 1,748 - 6,924Other (2,073) 1,281 - (792)

Total (1,993) 5,377 - 3,384


52

The group has carry-forward tax losses of an estimated £40.4m (2008: £25.1m). Of these, £24.1m areheld by Tenpin Limited, £10.9m are held by Georgica Limited, £3.9m are held by Georgica HoldingsLimited and £1.5m are held by the company. All of the Tenpin Limited losses have been included inthe deferred tax assets set out above, as management believe that it is highly probable that Tenpin’sbusiness will make profits sufficient to utilise these losses in due course. £2.1m of the GeorgicaHoldings Limited losses have been included in the deferred tax assets, as management believe that it is more likely than not that the investment properties held by Georgica Holdings Limited willgenerate a profit on disposal sufficient to utilise these losses in due course or there will be otheropportunities to utilise the losses within the group in future. The remaining £14.2m of losses inGeorgica Limited, Essenden and Georgica Holdings Limited have not been recognised. Thepotential deferred tax asset of £4.0m on these losses is the only unprovided deferred tax.

26 FINANCIAL INSTRUMENTSThe group’s principal financial instruments comprise bank loans, an interest rate cap, cash andshort-term deposits and are held in sterling. The purpose of these financial instruments is toprovide finance for the group’s operations. The group has various other financial instruments such as trade receivables and trade payables that arise directly from its operations. All the group’sfinancial instruments are denominated in £ sterling. The carrying value of all the group’s financialinstruments approximates fair value and they are classified as loans and receivables, except thegroup’s interest rate cap which is carried at fair value through the income statement reassessed at each reporting date on a mark to market basis.

Financial risk management:

Cash flow and fair value interest rate riskThe group borrows in sterling at floating rates of interest and has entered into an interest rate capfor the interest rate of its financial liabilities. After taking account of this instrument the interest rateprofile of the group’s financial liabilities, gross of debt issue costs, was as follows:

27th December 2009 28th December 2008Interest rate risk profile of financial liabilities £000 £000

Floating rate financial liabilities 5,167 6,362Finance leases 2,705 2,792Financial liabilities on which no interest is paid 33,035 8,018

40,907 17,172

Cash flow interest rate risk derives from the group’s floating rate financial liabilities, being its bankdebt and overdraft facility, which are linked to LIBOR plus a margin of between 3.25% and 4.5%.From 31st December 2007 to 4th July 2008 £100m of the group’s floating rate interest risk wascapped at 6%. On 4th July 2008 £85m in value of the cap was sold for cash proceeds of £510,000,leaving an interest rate cap in place of £15m which is in place until April 2010. The group has no fairvalue interest rate risk.


The weighted average period to the expected maturity date of the interest-free financial liabilities,being the Essenden loan notes and onerous lease provisions, is 5 years (2008: 6 years).

Sensitivity analysis: In managing interest rate risk the group aims to reduce the impact of short-termfluctuations on the group’s earnings. Over the longer-term, however, sustained changes in interestrates would have an impact on consolidated earnings. It is estimated that a general increase of onepercentage point in interest rates would decrease the group’s profit before tax by less than £0.1m(2008: less than £0.1m). The interest rate cap has been included in this calculation.

Credit riskAs almost all of the group’s sales are for cash, the group is exposed to minimal credit risk.

Liquidity riskThe group’s cash position and cash flow forecasts are reviewed by management on a daily basis.The £5.2m bank debt facility and £2m overdraft facilities are available to 30th June 2012 subject toa repayment profile. The debt drawn under the facility agreement at 27th December 2009 was allcurrent at that date but has since been rescheduled and is now due to be repaid as follows:

2010 2011 2012

Term debt repayment profile 928,000 742,000 997,000Revolving debt repayment profile 2,500,000 - -

The £2.5m revolving debt was drawn at 27th December 2009 and was repaid in full in January 2010. It is available for redrawing until the facility agreement terminates in June 2012. There were noundrawn bank facilities at 27th December 2009, other than the £2m overdraft facilities.

Currency riskThe group has no material exposure to currency risk.

27 CAPITAL COMMITMENTSNeither the company nor the group had any capital commitments which were contracted for but not provided for at 27th December 2009 or at 28th December 2008.


54

28 OPERATING LEASESThe company has not entered into any operating leases. The group’s future aggregate minimumlease payments under non-cancellable operating leases are as follows:

27th December 2009 28th December 2008Payments due: £000 £000

Within one year 10,663 10,042Between one and five years 44,052 41,973After five years 99,085 94,231

153,800 146,246

Tenpin has 34 (2008: 34) bowling venues held on operating leases, all with less than 25 years to run.Of these, two of the leases are subject to landlord breaks on very short notice with no compensation.The majority of the leases are in England and Wales, and the provision of the Landlord and TenantsAct giving the tenant the right to extend the lease by 15 years on expiry applies in most cases.

29 RELATED PARTY TRANSACTIONSThe company sub-lets part of its London office to Aida Capital Limited, a company in whichNicholas Oppenheim has a significant interest. In 2009, rent and other service costs of £242,500(2008: £242,430) including £32,250 (2008: £62,503) for the services of Peter Haspel, an Essendendirector, were recharged to this company or its affiliates, all of which was invoiced.

During 2009 Essenden received intercompany funding payments of £1.0m from Georgica Limited.Interest of £15,089 accrued during the period and was not paid. At 27th December 2009 Essendenowed £1,016,025 to Georgica Limited. In December 2009 the group’s bank debt was novated fromTenpin Limited to the company for consideration of £2.7m (the drawn debt amount less deferredfinancing costs), which remains outstanding on intercompany account.

Fees paid to non-executive directors in respect of services provided to the company are disclosedin the Directors’ report. Christopher Mills, a non-executive director, is also a director of InspiredGaming Group Plc, a subsidiary of which is a key supplier of amusement and gaming machines to the group.

The company is listed on the AIM market of the London Stock Exchange, and no individual investorholds more than 30% of the company’s shares or has more than 30% voting control. Accordingly,the directors do not believe that there is an ultimate controlling party.


UNAUDITED SUPPLEMENTARYINFORMATIONFor the 52 week period ended 27th December 2009

DETAILED OPERATING REVIEWOverview:Essenden is the holding company for the tenpin bowling operations of Tenpin Limited and aportfolio of 5 investment properties held for sale for redevelopment. The principal activity of thegroup comprises the operation of 38 tenpin bowling centres through Tenpin Limited (37 centres)and Tenpin (Sunderland) Limited (1 centre), together the largest tenpin bowling operation in the UK with an approximate 20% share of the market. The activities of Tenpin Limited and Tenpin(Sunderland) Limited are combined opposite under the heading “Tenpin”. The activities ofEssenden, Georgica Limited, Georgica Holdings Limited and Georgica (Lewisham) Limited arecombined opposite under the heading “Central”.

56

Tenpin Central Total2009 2008 2009 2008 2009 2008

Continuing operations: £000 £000 £000 £000 £000 £000

Revenue 58,094 62,814 - - 58,094 62,814

Cost of sales (22,800) (25,899) - - (22,800) (25,899)Operating costs (15,024) (16,560) - - (15,024) (16,560)Rent (10,928) (10,395) 157 233 (10,771) (10,162)

Contribution 9,342 9,960 157 233 9,499 10,193

Overheads (3,120) (3,398) (1,325) (1,730) (4,445) (5,128)

EBITDA 6,222 6,562 (1,168) (1,497) 5,054 5,065

Depreciation of intangible assets (417) (548) - - (417) (548)Depreciation of property,plant & equipment (3,447) (3,845) (67) (79) (3,514) (3,924)

Operating profit before one-off items 2,358 2,169 (1,235) (1,576) 1,123 593

One-off gains / (costs):

Profit on disposal - 2,146 386 1,266 386 3,412One-off costs (528) (266) (1,160) (1,132) (1,688) (1,398)

Operating profit / (loss) beforeimpairments and provisions 1,830 4,049 (2,009) (1,442) (179) 2,607

Investment property revaluation - - (1,000) (437) (1,000) (437)Goodwill impairment - (26,772) - - - (26,772)Intangible asset impairment (10) (787) - - (10) (787)Property, plant & equipment impairment (1,642) (11,460) (310) - (1,952) (11,460)Onerous lease provision provided (8,325) (6,969) (585) - (8,910) (6,969)Onerous lease provision released 1,839 250 52 - 1,891 250

Operating loss (6,308) (41,689) (3,852) (1,879) (10,160) (43,568)

Net interest excluding loan note interestand notional interest on provisions (810) (786) (32) (28) (842) (814)Essenden loan note interest - - (495) - (495) -Notional interest - onerous lease provisions (345) (117) (18) - (363) (117)

Loss before tax (7,463) (42,592) (4,397) (1,907) (11,860) (44,499)

Tax 2,063 5,377 841 - 2,904 5,377

Loss after tax from continuingoperations (5,400) (37,215) (3,556) (1,907) (8,956) (39,122)

Profit / (loss) before tax, one-offs,impairments and provisions 1,548 1,383 (1,267) (1,604) 281 (221)

Profit / (loss) before tax, impairmentsand provisions 1,020 3,263 (2,041) (1,470) (1,021) 1,793

(i) EBITDA represents earnings before interest, tax, depreciation, impairment, non recurring items and net movement on provisions.(ii) Profit / (loss) before tax, one-offs, impairments and provisions represents operating profit before one-off items together

with net interest excluding loan note interest and notional interest on provisions.(iii) Profit / (loss) before tax, impairments and provisions represents operating profit / (loss) before impairments and provisions

together with net interest excluding loan note interest and notional interest on provisions.


Tenpin’s deferred tax credit has declined by £3.3mfrom £5.4m in 2008 to £2.1m in 2009; loss after taxhas declined from £(37.2)m in 2008 to £(5.4)m in2009, a reduction of £31.8m.

CENTRALCentral comprises the overheads incurred byEssenden and Georgica, together with rental incomeand investment property related costs in GeorgicaHoldings Limited. The EBITDA loss for the centredecreased by £0.3m (20%) from £1.5m in the 52 weeksto 28th December 2008 to £1.2m in the 52 weeks to27th December 2009. The £0.3m reduction in EBITDAloss was attributable to £0.4m of overhead costsavings being partially offset by a £0.1m reduction in the rent receivable on the investment properties.

The central operating loss before impairments andprovisions increased by £0.6m to a loss of £2.0m asthe £0.3m reduction in EBITDA was more than offsetby a £0.9m increase in operating loss due to areduction in profit from the disposal of investmentproperties. One-off costs associated with corporatetransactions and the investment propertyprogramme were unchanged at £1.1m. Due toimpairments of £0.3m and onerous lease provisionsof £0.5m in 2009, together with a £0.6m increase inthe charge from revaluation of investment properties,central operating loss increased by £2.0m to £3.9m.

The central loss before tax has increased by £2.5mto £(4.4)m in 2009 from £(1.9)m in 2008. The £2.0mcentral operating loss increase was further increasedby a £0.5m charge in 2009 for amortisation of adiscount on issuance of £21.5m of Essenden loannotes. Other changes to net interest, including areduction in the amortisation of deferred financingcosts and a reduction in gains related to the interestrate cap, have no net impact on the movement incentral loss between 2008 and 2009. Tax assets of£0.8m have been recognised by central companiescomprising £0.6m from losses and £0.2m from capitalallowances on the fixed asset pool. The tax lossesrecognised are restricted to the amount which thedirectors believe will be utilised against future profits.

PROPERTY MATTERSTenpin: During 2008 Tenpin opened two new sites inWrexham (October) and Sunderland (November).Since July 2005 Tenpin has acquired 4 bowls, openedthree new bowls and signed agreements to lease afurther 2 sites (formerly 3 – one has terminated at no cost). There is no intention currently to fit out andopen these 2 potential new sites.

TENPIN PERFORMANCETurnover decreased by £4.7m (7.5%) from £62.8m in2008 to £58.1m in 2009. Sales from two new buildsites opened in 2008 (Wrexham and Sunderlandwhich both opened in Q4 2008) added £1.8m.However, the effect of these incremental sales waspartially offset by a £1.6m sales reduction from thedisposal for redevelopment of a site in Cardiff(closure Q3 2008) and the closure of sites atEdinburgh and Gateshead at the end of their leases(both Q2 2008). There was a £4.9m decline in theturnover of the underlying estate.

Contribution decreased by £0.7m (7.0%) from £10.0m in2008 to £9.3m in 2009, although contribution marginincreased by 0.2% points from 15.9% to 16.1%. The newsites opened in 2008 at Wrexham and Sunderlandcontributed an incremental £0.2m, whilst sites thatclosed during 2008 reduced contribution by £0.1m.Underlying business contribution decreased by £0.8mdue to lower contribution from sales (£3.9m) andhigher property costs (£0.8m) being partially offsetby cost savings totalling £3.9m, comprising staff costsavings of £2.2m, marketing savings of £0.6m, areduction in utility costs of £0.4m, operating costsavings of £0.4m and a reduction in repairs of £0.3m.

Tenpin’s EBITDA decreased by £0.4m (6.1%) from£6.6m in 2008 to £6.2m in 2009, with EBITDA margin up 0.2% points to 10.7%. This decrease wasattributable to the contribution decrease of £0.7mpartially offset by a £0.3m decrease in overheadsfrom cost savings.

Tenpin’s operating loss decreased by £35.4m, from a loss of £(41.7)m in 2008 to a loss of £(6.3)m in 2009.The reduction in operating loss was attributable to a reduction in impairment charges of £37.3m, areduction in onerous lease provision charges, net ofutilisation and releases, of £0.2m and a reduction of£0.6m in the depreciation charge, attributable to thereduction in the asset base resulting from the 2008impairments, less the EBITDA decrease of £0.4m, anincrease in one-off costs of £0.2m to £0.5m and thenon-recurrence of gains on disposal (net of closurecosts) of £2.1m.

Tenpin’s loss before tax decreased by £35.1m, from a loss of £(42.6m) in 2008 to a loss of £(7.5)m. Thereduction in operating loss was partially offset by a £0.2m increase in notional interest (being theunwinding of the discount recorded in respect ofonerous lease provisions), as net interest excludingnotional interest remained constant at £0.8m. Tenpin’sprofit before tax, one-off costs, impairments andprovisions (comprising the operating profit beforeone-off items less net interest excluding notionalinterest) has increased by £0.2m to £1.55m in 2009.Tenpin’s profit before tax, impairments and provisions(comprising the operating profit before impairmentsand provisions less net interest excluding notionalinterest) has decreased by £2.2m to £1.0m in 2009.

58

UNAUDITED SUPPLEMENTARY INFORMATIONContinued


One bowl is on a lease of less than 5 years, withregular break clauses on 4 months notice. This bowlcurrently contributes £0.1m from annual sales of £0.9m.The landlord of a second bowl has been granted anoption to terminate the lease (which has less than 6years remaining) on 3 months notice. This bowl lost£0.1m on sales of £1.3m in 2009. Two bowls (inEdinburgh and Gateshead) which were on similarleases closed during 2008 (these bowls hadcombined annual turnover of £3.0m and combinedannual EBITDA of £0.5m).

The sale and leaseback of Stoke bowl completed in 2008 for consideration of £3.25m, with an initialannual rent charge of £0.3m. This brought the totalproceeds from Tenpin sale and leasebackscompleted in 2007 and 2008 to £46.25m, and the combined initial annual rent charge to £2.8m.

Asset realisation programme:Between 2005 and 2008 the group completed thesale of five Tenpin freehold and long leasehold siteswhere the redevelopment value exceeded the tradingvalue of the units. The five bowls, with annual EBITDAof £0.55m, were sold for redevelopment forconsideration of £21.9m, including Cardiff sold for£1.5m in 2008.

Georgica Holdings Limited sold one of the remaining6 investment properties that it owns during thefinancial period for £1.0m (2008: two properties soldfor £2.3m). The remaining 5 properties are still beingmarketed.

PRINCIPAL RISKS AND UNCERTAINTIESListed below are the principal risks and uncertaintieswhich have been identified by management as facingthe group. Additional risks and uncertainties whichare not currently known or are deemed immaterialmay also have a material impact on the group.

Risks relating to operations:• Tenpin’s bowling business is based exclusively

in the UK and so is exposed to UK economicconditions and consumer confidence. As a leisureactivity, bowling may be affected by the generallevel of consumer spending on leisure activitiesand may also be affected by changing consumerpreferences.

• The business is subject to seasonal demand variations. Warm weather adversely impactsrevenues as does unusual weather conditionssuch as heavy snow, icy conditions or high windsthat discourage people from venturing out. Majorsporting events also affect the results of Tenpin;events such as the football world cup canadversely affect revenues as supporters visitvenues with large screens dedicated to the sport.School holidays are beneficial for the bowlingbusiness, which is also affected by the timing of bank holidays.

• The group relies on key suppliers for certain requirements of the business. In the event that akey supplier ceased to trade or was otherwiseunable to continue to supply the group it ispossible that an adequate alternative source ofsupply may not be identified in the short term, witha consequent adverse impact on the operation ofthe business.

• Approximately 21% of the group’s turnover is from bar sales, principally of alcoholic beverages. Thesesales could be adversely affected by changes inlicensing requirements, or by increased concernsabout the effect of alcohol on health or of drinkingand driving.

• Approximately 15% of the group's turnover is generated from amusement and gamingmachines. The loss of the related licences, or a further reduction in the popular appeal ofamusement and gaming machines among thetarget consumers could adversely affect sales.

• Possible regulatory threats to the profitability of the business include UK or EU employmentlegislation, such as minimum wage increases and the working time regulations; competition,consumer protection and environmental laws; and further implementation of the DisabilityDiscrimination Act.

• Following the sale or sale and lease back of all of Tenpin’s freehold and long leasehold properties,there is a relatively high rental charge and so arelatively high fixed cost element to the businesswhich means that financial performance isrelatively sensitive to changes in turnover.

• Tenpin’s properties are subject to periodic rent reviews and renegotiation of rents when leases are renewed; this may have an adverse effect onprofits and rents may increase to the extent thatindividual businesses become unprofitable.

• A number of UK fiscal factors affect the business such as duty on alcoholic drinks, VAT and otherbusiness and corporation taxes. Changes inlegislation which affect any of these factors couldadversely impact the results of the business.

• The group depends on the continued contribution of key management, and the loss of a significantmember of the management team could adverselyaffect the business.

• The business may face increased competition, especially from consolidation in the bowling sectorwhich might lead to a competitor with greaterfinancial resources or a more aggressive pricingpolicy, which could adversely affect financialperformance.

Risks relating to financing:• The continued availability of the group’s senior

debt finance is dependent on continued covenantcompliance.

• Any rise in base lending rates has an adverse impact on financing costs.

Five year record

52 weeks to 52 weeks to 52 weeks to 52 weeks to 53 weeks to27th December 28th December 30th December 31st December 1st January

2009 2008 2007 2006 2006£m £m £m £m £m

Sales 58.1 62.8 65.7 125.6 129.0Cost of sales (22.8) (25.9) (26.8) (56.2) (56.9)

Gross profit 35.3 36.9 38.9 69.4 72.1

Administrative expenses (45.9) (83.9) (42.1) (63.8) (58.8)Profit on disposal 0.4 3.4 26.3 9.1 0.2

(Loss) / profit before finance charges (10.2) (43.6) 23.1 14.7 13.5

Finance charges (1.7) (0.9) (15.9) (10.7) (11.1)

(Loss) / profit before taxation (11.9) (44.5) 7.2 4.0 2.4

Taxation 2.9 5.4 1.4 (2.3) 5.8Discontinued operations - - (19.0) 2.4 -

(Loss) / profit after taxation (9.0) (39.1) (10.4) 4.1 8.2

Note: The figures for 2006 have been presented as published in the 2006 annual report, without the reclassification of the operations of Rileys Limited to discontinued operations.

Capitalisation table

As at 27th December 2009 As at 28th December 2008£m £m

Debt (excluding cash and overdraft):

Essenden shareholder loan notes 17.6 -Senior term loan facilities 2.7 3.4Senior revolving credit facility 2.5 3.0

Gross debt (excluding cash and overdraft) 22.8 6.4

Debt issue costs (0.3) (0.3)

Net debt (excluding cash and overdraft) 22.5 6.1

Shareholders’ funds 13.4 40.2

Total capitalisation 35.9 46.3

Reconciliation to statutory net debt and to adjusted net debt

Net debt (excluding cash and overdraft) 22.5 6.1

Net cash (1.6) (2.4)

Statutory net debt 20.9 3.7

Exclude Essenden shareholder loan notes (17.6) -Exclude debt issue costs 0.3 0.3

Adjusted net debt 3.6 4.0

60

UNAUDITED SUPPLEMENTARY INFORMATIONContinued

annual report 2009 -...

Documents