Ten Entertainment (TEG:AIM) 290.45p

Gain to date: 35%

We highlighted tenpin bowling and family entertainment operator Ten Entertainment (TEG:AIM) as a great company trading at a great price on 29 September 2022.

The return so far has been very pleasing with the shares up around a third compared with approximately 7% gains for the FTSE All-Share and FTSE 100 indices.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

The company has continued to deliver strong financial performance with full-year sales to 3 January rising 51% to £126.7 million, higher than analysts’ expectations and adjusted pre-tax profit up 84% to £26.1 million, a new record.

Footfall increased 42%, driven by a greater number of new customers and existing customers visiting more frequently. The company attracted over eight million customers in 2022 which is a third more than in 2019, testament to the attraction of its format.

Business in the new financial year has got off to a good start despite tough year-on-year comparatives for the first 10 weeks to 12 March, with like-for-like sales up 2.7%, leaving management ‘cautiously optimistic’ for the rest of the year.

No formal guidance was provided but management said it expects like-for-like growth to moderate to low single digits going forward, augmented by growth from new openings.

Chief executive Graham Blackwell told Shares the company has a strong pipeline of acquisition opportunities it is assessing to complement organic growth.

Historically, the company has opened between two and four new sites a year. A new site in Crewe opened in February while outlets in Milton Keynes and Dundee will open in July and August respectively.

The company ended the past financial year with net cash of £10.3 million after generating £27.2 million of free cash flow.

WHAT SHOULD INVESTORS DO NOW?

With sustainable organic growth of around 8% a year and a dividend yield of 3.5% plus the prospect of increased dividends and acquired growth, the one year forward price to earnings multiple of 9.4 times looks too cheap. Keep buying the shares.

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