ANNUAL REPORT 2010

CONTENTS

03 Directors, secretary and advisors

05 Board of directors

07 Chairman’s statement

08 Chief Executive’s report

1 1 Directors’ report

19 Independent auditors’ reports

20 Consolidated income statement

20 Consolidated statement of comprehensive income

21 Balance sheets

23 Cash flow statements

24 Statements of changes in equity

25 Statement of accounting policies

30 Notes to the financial statements

49 Unaudited supplementary information

essenden annual report 2010

01

DIRECTORS, SECRETARY AND ADVISORS

Directors Rory Macnamara (Chairman)Nick BasingRichard DarwinChristopher MillsNicholas OppenheimKailayapillai Ranjan

Company Secretary Richard Darwin

Registered Office 3rd Floor,2-4 St. Georges Road,Wimbledon,London, SW19 4DP.Tel: 020 8879 3932

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

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

Stockbroker Oriel Securities Ltd,125, Wood Street,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,The Registry,34, Beckenham Road,Beckenham, Kent,United Kingdom, BR3 4TU.Tel: 0871 664 0300(Calls cost 10p per minute plus network charge)Tel (Overseas): 44 208 639 3399

Company Number 06838368

Country of Registration England and Wales


03

BOARD OF DIRECTORS

RORY MACNAMARANon-executive Chairman (56)Rory qualified as a chartered accountant with Price Waterhouse and worked in merchant banking with MorganGrenfell for 17 years (during which time it was acquired by Deutsche Bank AG). During his time at Morgan Grenfellhe was a director in Corporate Finance, Head of Mergers and Acquisitions and Vice Chairman. In 1999 he joinedLehman Brothers, where he was a Managing Director in UK Investment Banking until 2001. He currently acts as acorporate consultant and holds a number of directorships. Rory was appointed to the board of Essenden on 26thMay 2009.

NICK BASINGChief Executive Officer (49)Nick is a highly experienced industry leader who has 25 years of operational experience in the leisure sector. Mostrecently, Nick was responsible for the operational turnaround and growth, both organically and via acquisition, ofParamount Holdings (‘Paramount’) including Chez Gerard, Bertorelli and Caffe Uno, where he was Chief Executivefor 6 years. During that time he successfully transformed that business, both culturally and strategically, into aprofitable portfolio of leading restaurant brands. Nick has broad experience in the consumer leisure sector. Prior toParamount he held a number of senior management positions with leading companies such as Rank, First Leisure,Unilever and Granada. During this time he gained experience of a wide range of leading consumer brands in amulti-site context including Hard Rock Café, Odeon, Universal Studios, Travel Inn and Goodwood. Nick was awardedUK Retailers’ Retailer of the Year in 2006. He was appointed to the board of Essenden on 18th August 2009.

RICHARD DARWINFinance Director (43)Richard qualified as a chartered accountant with Coopers and Lybrand. He has held senior finance roles in anumber of public and private companies including Hard Rock Café, Diageo and Paramount Holdings. He hassignificant operational finance and transactional experience obtained through working with a number of leadingleisure and consumer brands. He was appointed to the board of Essenden on 1st January 2010.

CHRISTOPHER MILLSNon-executive Director (58)Christopher is a founding director of JO Hambro Capital Management, Chief Investment Officer of North AtlanticValue LLP and Chief Executive of North Atlantic Smaller Companies Investment Trust plc and of AmericanOpportunity Trust 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 directorof Invesco MIM and held positions as Head of North American Investments and Head of North American VentureCapital. He was appointed to the board on 26th May 2009.

NICHOLAS OPPENHEIMNon-executive Director (63)Nicholas graduated from Columbia University in the City of New York in 1972 with a Masters degree in BusinessAdministration. 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 boardof Essenden on 16th March 2009.

KAILAYAPILLAI RANJANNon-executive Director (49)Kailayapillai is the Chief Executive of Petchey Holdings PLC. He was appointed to the board on 23rd August 2009.


05

CHAIRMAN’S STATEMENT

I am pleased to present Essenden’s results for the 53 week periodended 2nd January 2011. Essenden is a leading operator of bowlingbased family entertainment in the UK, with 37 leisure retail sites thatoperate under the “Tenpin” brand.

The past year has been a year of transition for the business as the new management team led by CEO, NickBasing, continued to implement its three year turnaround plan for the business. As expected, the impact ofdelivering these changes together with a number of external events which caused difficult trading conditions forall bowling operators, has had an impact on the year’s results. The business generated EBITDA of £4.0m, down£1.1m versus the previous year (2009: £5.1m). However, the group returned to profitability with a profit before taxof £93,000 (2009: loss £11.9m). Sales reduced from £58.1m to £56.6m.

The management team has acted swiftly to restructure the business, reducing the annualised cost base byapproximately £4m. The board of Essenden (the ”Board”) believes that much of the benefit of these costreductions will be felt in the 2011 financial year. Further changes have been undertaken to strengthen theoperations, introduce new product trials and improve business performance through the development of anappropriate infrastructure. The Board believes that there remains considerable work to re-establish the businessand these changes are being executed against a backdrop of challenging market conditions. However, I remainconfident that once fully implemented these changes will, in the medium term, transform Essenden into amodern leisure business with a solid platform for growth.

Rory Macnamara31st March 2011


07

CHIEF EXECUTIVE’S REPORT

I am pleased to present my second report as CEO of Essenden, coveringmy first full year of leading the business. The past year has been a year ofsignificant transition where we have implemented a number of bold stepswhich we believe has started the turnaround within the business.

REVIEWI outlined in my review of the business last year that Essenden required a complete overhaul to begin to deliverimproved sales and profitability. With this in mind, in the past year we have implemented the following significantchanges:

Reduced plc overheadStrengthened the senior management teamChanged the operating structure and systemsRe-launched marketing, sales and distribution systems to further drive demandRe-engineered the cost base with approximately £4m of cost savings (on an annualised basis) Exited from two new site commitments and from one loss making siteRe-negotiated contracts with our key suppliers, including Leisurelink and Qubica Introduced revitalised product trials within the Food and Beverage and the Quasar categoryIntroduced new products to the service offering, including karaoke (Sing Dizzy) and Coffee (Costa)

Significant savings have been made on the plc overhead with the business moving from its former King Streetoffices in Central London to a lower cost location outside London. The plc Board has been reduced with fourdepartures and the other plc costs associated with Essenden have been reduced to reflect the current size andscope of the Company.

The new senior team has been significantly changed with five new senior executives brought in and six seniorexecutives replaced. These newly recruited executives bring their experience of other leisure sectors to thebusiness with the aim of establishing a relevant and innovative entertainment business. The Tenpin SupportCentre has been relocated to Cranfield Business Park, a more appropriate location for the business.

To introduce a more appropriate operating structure for the business, a complete restructuring of the sitemanagement was implemented in the second half of the year. This has resulted in a reduction of overheads andensures our managers operate closer to the customers. This, in addition to cost saving measures identified withsupplier contracts, operating costs and overheads, has reduced the cost base by approximately £4m on anannualised basis, and the Board believes that the business will gain the full year benefit of these savings duringthe forthcoming financial year.

As we focus our resources on strong profitable locations, we have successfully negotiated a surrender of the leasecommitments at St Helens and Widnes and at the end of the year, the landlord took up an option for Tenpin tosurrender the lease at Preston. The group – principally through its main trading subsidiary, Tenpin Limited – hasa number of loss-making sites as well as having a commitment on a new site that the group does not now intendto develop. These represent a cash and profit drain on the business and the Board have resolved to take actionto either reduce rental payments and other operating costs on these sites or remove these obligationscompletely. The Board have retained advisers to investigate a range of restructuring options for the tradingsubsidiary, and the intent of the Board is to implement such a restructuring as soon as practicable.

During the year, we tested a new food and beverage concept at our sites in Stoke, Croydon and Fountain Park.The concept, branded Beach Road Café Bar, introduced a more up-to-date look and feel and a range ofimprovements to the quality of our food products. We also rolled out Costa Coffee licensed outlets in 11 of oursites with plans to extend further and this is proving to be an important component of our service offer. A newversion of our laser game product has been introduced called “Sector 7”, that significantly improves the customerexperience and is proving popular and profitable in its trial site in Coventry. We have identified a number of

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additional sites where the Sector 7 concept can be adopted. During the year we trialled karaoke at our Cambridgesite, through a new concept called Sing Dizzy and this product aimed at appealing to the female market, hasproved to be a popular addition to our range of entertainment offerings. After adopting some learnings from thetrial, we will use the concept in other sites where appropriate.

We remain focused on improving the customer experience and are basing all our development initiatives ondetailed customer insight studies. In the sites, we have rolled out an improved customer service initiative and tomeasure performance using net promoter score, we have increased our mystery customer programme frommonthly to weekly visits with improving results.

The next stage in our development of our customer priorities will be to combine these product trials into one site,marking the next chapter in the company. This will incorporate the developments of our bowling product whichwill include new game formats and an easy to use customer experience, including an upgrade to the existingAudio Visual System. We also have plans for an upgraded family/children’s play concept that will be developedin this project along with improved external signage and an updated look and feel to the site. We aim to haveopened this next generation ‘Entertainment Centre’ concept during the second half of the year and this will forman important step in our future growth plans.

Key to all the changes that we have introduced is the ability to drive demand when required through variousdistribution channels. We are investing in an updated website that provides a simpler booking process forcustomers. There are currently over one million customers on the database and using this CRM system, we areable to communicate with existing customers through relevant media channels to drive demand at peak and off-peak times. We remain the only Company in our sector to have an outsourced modern call centre and this formsa key component of our distribution strategy.

These changes are imperative given the pressures caused by falling disposable incomes, high levels ofunemployment and aggressive leisure competitor pricing on our two core customer groups, value consciousfamilies and 18-30 year olds.

PEOPLEDuring the year Kaye Collins, Margaret Mountford, Peter Haspel and Peter Smith (Company Secretary) allresigned from the Board. I would like to thank them for their service to the Company.

My colleagues at our 37 units and in the support office are the lifeblood of our vision. The changes that we areimplementing to the business have had an effect on many of them over the past year. The Board is hugely gratefulfor their continued efforts and support over this difficult year as we continue our journey to create a modernentertainment business relevant to tomorrow’s customers.

OUTLOOKThe UK bowling based entertainment sector has seen only modest investment or industry innovation over the pastfew years and in some regions, supply still exceeds demand, and therefore is experiencing a challenging operatingenvironment. The VAT increase in January 2011 is the latest in a number of challenges for the sector to overcome.

With the full effects of the austerity measures yet to be felt, I expect the general economic environment to remainuncertain and challenging for leisure consumer businesses in the coming year. In an industry already underpressure, this headwind adds an extra challenge in turning round the business. Our focus is to develop ourbusiness building on the good assets that we own and operate. We are continuing to implement a step by stepplan to realise value for shareholders and are in the middle of the difficult and sometimes painful tasks that theBoard believes are required to turn this business around. When this recovery plan has fully been implemented andbedded in, then the Board believes that the business has the potential to return to a sound and profitable footing.

Nick Basing31st March 2011


09

DIRECTORS’ REPORT

The directors present their annual report on the affairs of the group and company, together with the auditedfinancial statements for the 53 week period ended 2nd January 2011.

PRINCIPAL ACTIVITYEssenden PLC (“Essenden” or the “company”) is the holding company for the tenpin bowling operations ofTenpin Limited and a portfolio of 5 investment properties held for sale for redevelopment. The principal activityof the group comprises the operation of 37 tenpin bowling centres through Tenpin Limited (36 centres) andTenpin (Sunderland) Limited (1 centre), together the second largest tenpin bowling operation in the UK with anapproximate 20% share of the market. The subsidiary undertakings principally affecting the profits or net assetsof the group in the period are listed in note 12 to the financial statements.

BUSINESS REVIEW AND FUTURE DEVELOPMENTSOperating review:

GROUP 2010 2009

£000 £000

CONTINUING OPERATIONS:

Revenue 56,572 58,094

EBITDA 4,015 5,054

Profit / (Loss) before tax 93 (11,860)

Tax (349) 2,904

Loss after tax from continuing operations (256) (8,956)

Profit before tax, one-offs, impairments and provisions (i) 122 281

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


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Group result:Group EBITDA for the 53 week period ended 2nd January 2011 (“2010”) was down £1.1m at £4.0m. The £1.5mdecline in revenue in 2010 represented a 5.3% decline in like for like sales (2009: -8%). This was offset by cost ofsales, staff, operating cost and overhead reductions from continued cost saving initiatives of £0.5m. Group profitbefore tax, one-offs, impairments and provisions decreased by £0.2m from a profit of £0.3m in the 52 weeks to27th December 2009 (“2009”) to a profit of £0.1m in 2010. The loss before tax improved by £12.0m to a profit of£0.1m in 2010. Loss after tax improved by £8.7m to a loss of (£0.3m).

Detail of the performance of individual segments (tenpin bowling and central overheads) is set out in theunaudited supplementary information on page 49.

Future outlook:Information on future developments is contained in the Chief Executive’s report on page 8, which is incorporatedin this report by reference. The directors note that the group - principally through its main trading subsidiary,Tenpin Limited - has a number of loss-making sites as well as having a commitment on a new site that the groupdoes not now intend to develop. These represent a cash and profit drain on the business and the directors haveresolved to take action to either reduce rental payments and other operating costs on these sites or remove theseobligations completely. The Board have retained advisers to investigate a range of restructuring options for thetrading subsidiary, and the intent of the Board is to implement such a restructuring as soon as practicable.

Principal risks and uncertainties:Detailed in the unaudited segmental analysis on page 49 are the principal risks and uncertainties which havebeen identified by management as facing the group. Additional risks and uncertainties which are not currentlyknown or are deemed immaterial may also have a material impact on the group.

RESULTS AND DIVIDENDSThe results for the 53 week period ended 2nd January 2011 are set out in the consolidated income statement.The group loss after taxation for the period was £256,000 (2009: loss after taxation of £8,956,000).

The directors do not recommend the payment of a dividend (2009: £nil).

DIRECTORS’ REPORT CONTINUED12

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, Resigned 10th August 2010

Christopher Mills Non-executive Director Appointed 26th May 2009

Margaret Mountford Non-executive Director Appointed 26th May 2009, Resigned 1st October 2010

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

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

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

DIRECTORS’ INTERESTSAS AT 2ND JANUARY 2011

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

Rory Macnamara – –

Nick Basing 57,000 36,400

Richard Darwin 1,980 1,980

Christopher Mills * 6,400,000 7,976,041

Nicholas Oppenheim 912,184 912,184

Kailayapillai Ranjan – –

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


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DIRECTORS’ REMUNERATION53 week period to 52 week period to

Salary Fees Bonus Benefits 2nd January 2011 27th December 2009

£ £ £ £ £ £

DIRECTOR

Rory Macnamara – 20,000 – – 20,000 11,974(appointed 26th May 2009)

Nick Basing 250,000 – – – 250,000 94,744(appointed 18th August 2009)

Richard Darwin 130,000 – – – 130,000 –(appointed 1st January 2010)

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

Nicholas Oppenheim 2 – – – – – 93,268

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

FORMER DIRECTORS

Peter Haspel 1 135,096 – 175,000 – 310,096 325,100(resigned 10th August 2010)

Margaret Mountford – 16,987 – – 16,987 10,000(resigned 1st October 2010)

Kaye Collins – – – – – 230,859(resigned 15th January 2010)

Don Hanson – – – – – 21,038(resigned 26th May 2009)

Clive Preston – – – – – 39,387(resigned 26th May 2009)

Simon Prew – – – – – 265,505(resigned 31st December 2009)

Robert Wickham – – – – – 14,026(resigned 26th May 2009)

Total 515,096 36,987 175,000 – 727,083 1,105,901

1 Peter Haspel’s salary includes £10,096 accrued in respect of services provided under a compromise agreement.

No third party fees were incurred.


DIRECTORS’ INCENTIVESThe Chief Executive and Finance Director have incentive schemes in place which commenced in October 2009as follows:

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 increases by £112.5k for each month that theloan notes are repaid in full before 19th January 2012 and decreases by £112.5k for each month that the loan notesare repaid in full after 19th January 2012. If the Loan Notes are not repaid in full before 19th September 2013 noincentive would be payable.

A share incentive scheme exists with a total of 134 redeemable shares having been issued to the two Executiveson the Essenden Board by Georgica Ltd. Georgica Ltd is the former holding company of the Group and is now awholly owned subsidiary of Essenden Plc. This scheme replaces the share price bonus previously in theExecutives service agreement. The redeemable shares entitle participants to redeem them for cash for 1/1000(per redeemable share) of the “Redemption Value” (described below). For example, 10 redeemable shares areredeemable for cash equal in value to 10/1000 (1%) of the Redemption Value. At the time that they subscribedfor the redeemable shares each participant granted Essenden a call option (“Call Option”), which will enableEssenden to call for the redeemable shares in return for the issue or transfer of Essenden ordinary shares (or acash payment from Essenden), instead of the redeemable shares being redeemed by Georgica for cash. Essendenin turn granted to each participant a put option (”Put Option”), which will enable each participant to requireEssenden to purchase the redeemable shares in return for the issue or transfer of Essenden ordinary shares (butnot a cash payment from Essenden), instead of the redeemable shares being redeemed by Georgica for cash.

The Redemption Value is calculated by reference to the future share price performance of Essenden. The OpeningPrice for the share price incentive is 38.8p being the average price for the 30 days after the announcement of theappointment of the new CEO. This Opening Price has an annual hurdle of 12% applied to it. The earliest that theincentive can be redeemed is 3 years from the commencement date of 16th October 2009 (except in certainspecified circumstances such as on a takeover of Essenden) and it falls away if it has not been earned by 7 yearsfrom the commencement date. Upon redemption any Essenden shares issued have to be held by participants fora period of 2 years. The total value of the incentive that could be paid and converted into Essenden shares to thetwo Essenden Executives is 13.4% of the gain in the share price (after the Opening Price is adjusted for the annualhurdle 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 annual hurdle of 12%) forthese additional shares which is the share price on the date of issuance.

All incentive schemes of Georgica, including the Georgica Executive Participation Plan and the Georgica ShareIncentive Plan, were cancelled in 2009 without material cost or liability.

(i)

(ii)


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CORPORATE GOVERNANCEThe Essenden Board comprises four Non-executive Directors and two Executive Directors. It meets four times ayear at a minimum, and more frequently if circumstances require it. The Board has an established schedule ofmatters specifically reserved for its decision, including proposed changes to capital structure, significantacquisitions 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 Exchangereleases, long term incentive programmes, material agreements and major capital expenditure. Other operationaldecisions are delegated to the company’s management.

The Board has established three committees: an audit committee chaired by Rory Macnamara, a remunerationcommittee chaired by Rory Macnamara and a nomination committee chaired by Kailayapillai Ranjan. Eachcommittee comprises all four Non-executive Directors.

The purpose of the audit committee is to review the financial statements and monitor financial procedures andpolicies including statutory reporting and compliance. It is responsible for ensuring that the company’saccounting and financial policies and controls are proper and effective, that the internal and external auditingprocesses are properly co-ordinated and work effectively and that the financial statements and informationpublished by the company has integrity. Meetings are normally attended by the company’s auditors. ExecutiveDirectors may also attend the meetings at the invitation of the Chairman. Non-audit services supplied by theauditors are generally other assurance services in nature which complement the audit process and do not riskcompromising the auditors’ independence e.g. structuring and vendor due diligence services. There is anoperational internal auditor based at Tenpin who reports to the board of that business, but there is no corporateinternal audit function due to the relatively small size of the group. The audit committee does periodically reviewthe arrangements by which staff of the company, in confidence, raise concerns about possible improprieties infinancial 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 are fairly, butresponsibly, rewarded for their individual contributions to the performance of the group. This is doneindependently of the Executive Directors, avoiding any possible conflicting personal interests and with dueregard to the interests of the shareholders. Recommendations are made with respect to individual remunerationand the overall framework of remuneration of senior executives in accordance with the general terms of referenceof 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 new Executive andNon-executive Directors, including making recommendations as to the composition of the Board generally andthe balance as between Executive and Non-executive Directors. In exercising its duties the committee will liaisewith the Board and remuneration committee; seek advice from outside advisors; advertise vacancies whereappropriate; consider guidance from the Board and consider the guidance in the 2006 Combined Code, asrequired. The terms and conditions of appointment of Non-executive Directors are included in their letters ofappointment, 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 annual and interimreports, there is regular dialogue with shareholders and analysts normally led by the CEO and Finance Director.The Annual General Meeting is attended by all Executive Directors and is considered to be an important forumfor communicating with private shareholders, allowing them to raise questions with the Board.


SUBSTANTIAL SHAREHOLDINGSOn 22nd March 2011 the company had been notified of the following interests in the ordinary share capital of thecompany.

Number of 1p ordinary shares Percentage of 1p ordinary shares

North Atlantic Value 6,400,000 29.87%

Trefick Limited 4,155,428 19.40%

Schroder Investment Management Limited 3,153,095 14.72%

Man Financial / MF Global 1,897,774 8.86%

RBC Trust Company (International) Limited 1,596,041 7.00%

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 £2.5m interest rate cap, which is in place until January 2012. The group has no fair value interestrate risk. Cash flow interest rate risk derives from the group’s floating rate financial liabilities, being its bank debtand 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 for settlement ofdebts is to maintain satisfactory relationships with all suppliers whilst maximising shareholder value. Tradepayables of Tenpin Limited at 2nd January 2011 were equivalent to 35 days purchases (2009: 31 days). Thecompany has no trade payables.

DISABLED EMPLOYEESApplications for employment by disabled persons are always fully considered bearing in mind the aptitudes ofthe applicant concerned. In the event of members of staff becoming disabled efforts are made to ensure thattheir employment with the group continues and that appropriate training is arranged. It is the policy of the groupthat the training, career development and promotion of disabled persons should as far as possible be identicalwith that of other employees.

EMPLOYEE CONSULTATIONThe group attaches importance to good communications and relations with employees. Information that is ormay be relevant to employees in the performance of their duties is circulated to them on a regular basis, orimmediately if it requires their immediate attention. There is regular consultation with employees throughmeetings or other lines of communication, so that their views are known and can be taken into account in makingdecisions on matters that will or may affect them. Employee participation in their bowling venue’s performanceis encouraged through various bonus and incentive schemes and there is regular communication with allemployees on the performance of their bowling venue or central function and on the financial and economicfactors affecting the overall performance of the group.


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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 following applies:

so far as the directors are aware, there is no relevant audit information (i.e. information needed by the company’sauditors in connection with preparing their report) of which the company’s auditors are unaware; andthe directors have taken all steps that they ought to have taken as directors in order to make themselves awareof any relevant audit information and to establish that the company’s auditors are aware of that information.

PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a resolution to reappointthem 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 statements in accordance withapplicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law thedirectors have elected to prepare the group and parent company financial statements in accordance withInternational Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law thedirectors must not approve the financial statements unless they are satisfied that they give a true and fair viewof the state of affairs of the group and the company and of the profit or loss of the group for that period. Inpreparing these financial statements, the directors 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 materialdepartures disclosed and explained in the financial statements.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain thecompany’s transactions and disclose with reasonable accuracy at any time the financial position of the companyand the group and enable them to ensure that the financial statements comply with the Companies Act 2006.They are also responsible for safeguarding the assets of the company and the group and hence for takingreasonable 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 theUnited Kingdom governing the preparation and dissemination of financial statements may differ from legislationin other jurisdictions.

GOING CONCERNThe financial statements are prepared on a going concern basis, which the directors believe to be appropriatebased on their ongoing review of the availability of cash to fund operational requirements and future debtrepayments, and their assessment that the group will continue to comply with its banking covenants for at leastthe next 12 months.

3rd Floor, By order of the board,2-4 St. Georges RoadWimbledonLondonSW19 4DP

31st March 2011 Richard Darwin – Company Secretary

DIRECTORS’ REPORT CONTINUED

(i)

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INDEPENDENT AUDITORS’ REPORT

We have audited the group and parent company financial statements (the ‘‘financial statements’’) of Essendenplc for the 53 week period ended 2 January 2011 which comprise the Consolidated Income Statement, theConsolidated Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Groupand Parent Company Cash Flow Statements, the Group and Parent Company Statement of Changes in Equity, andthe related notes. The financial reporting framework that has been applied in their preparation is applicable lawand International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards theparent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

Respective responsibilities of directors and auditorsAs explained more fully in the Directors’ Responsibilities Statement set out on page 18, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give a true and fairview. Our responsibility is to audit and express an opinion on the financial statements in accordance withapplicable law and International Standards on Auditing (UK and Ireland). Those standards require us to complywith the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body inaccordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in givingthese opinions, accept or assume responsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient togive reasonable assurance that the financial statements are free from material misstatement, whether caused byfraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s andparent company’s circumstances and have been consistently applied and adequately disclosed; thereasonableness of significant accounting estimates made by the directors; and the overall presentation of thefinancial statements.

Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairsas at 2 January 2011 and of the group’s profit and group’s and parent company’s cash flows for the year thenended;the group financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted bythe European Union and as applied in accordance with the provisions of the Companies Act 2006; andthe financial statements 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 financialstatements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us toreport to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit havenot been received from branches not visited by us; or the parent company financial statements are not in agreementwith the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are notmade; or we have not received all the information and explanations we require for our audit.

Philip Stokes (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors, London31st March 2011

19


19

53 weeks to 52 weeks toNotes 2nd January 2011 27th December 2009

£000 £000


Revenue 1 56,572 58,094

Cost of sales (22,714) (22,800)

Gross profit 33,858 35,294

ADMINISTRATIVE EXPENSES:

(Loss) / profit on disposal of properties 2 (146) 386Impairment 6 (1,917) (1,962)Other administrative expenses (30,310) (43,878)

Total administrative expenses (32,373) (45,454)

Operating profit / (loss) 1,485 (10,160)

Interest payable and similar charges 4 (2,064) (1,741)Interest receivable 5 672 41

Finance costs, net (1,392) (1,700)

Profit / (Loss) before taxation 6 93 (11,860)

Taxation 7 (349) 2,904

Loss for the financial period attributableto the equity holders of the company (256) (8,956)

EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY DURING THE PERIOD

Basic earnings per share 18 (1.2)p (42.5)pDiluted earnings per share 18 (1.2)p (42.5)p

53 weeks to 52 weeks to2nd January 2011 27th December 2009

£000 £000

Loss for the financial period (256) (8,956)

CONSOLIDATED INCOME STATEMENTfor the 53 week period ended 2nd January 2011

CONSOLIDATED STATEMENTOF COMPREHENSIVE INCOMEfor the 53 week period ended 2nd January 2011

20


21

GROUP COMPANYNotes 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

AssetsNON-CURRENT ASSETS

Goodwill 10 14,989 15,661 – –Intangible assets 10 261 677 – –Investment property 11 1,355 1,576 – –Investments 12 – – 16,345 16,337Property, plant and equipment 13 26,644 28,817 56 –Deferred tax asset 23 5,939 6,288 10 –

49,188 53,019 16,411 16,337

CURRENT ASSETS

Inventories 14 1,148 1,736 – –Trade and other receivables 15 4,492 5,650 4,941 1,731Cash and cash equivalents 16 1,170 1,568 113 2,222

6,810 8,954 5,054 3,953

LiabilitiesCURRENT LIABILITIES

Financial liabilities 20 (4,181) (4,952) (4,086) (4,866)Trade and other payables 21 (5,549) (6,482) (208) (377)Provisions 22 (1,787) (2,173) – –

(11,517) (13,607) (4,294) (5,243)

Net current(liabilities) / assets (4,707) (4,653) 760 (1,290)

NON-CURRENT LIABILITIES

Financial liabilities 20 (20,248) (20,254) (17,724) (17,635)Other non-current liabilities 21 (973) (1,075) – –Provisions 22 (9,683) (13,227) – –

(30,904) (34,556) (17,724) (17,635)

Net assets / (liabilities) 13,577 13,810 (553) (2,588)

EquityShare capital 17 214 214 214 214Share premium – – – –Other reserves 81,118 81,095 (1,276) (1,283)Profit and loss account (67,755) (67,499) 509 (1,519)

Total equity 13,577 13,810 (553) (2,588)

The financial statements on pages 20 to 48 were authorised for issue by the Board of Directors and authorisedfor issue on 31st March 2011 and were signed on its behalf by:

Richard Darwin Rory MacnamaraCompany number: 06838368

BALANCE SHEETSat 2nd January 2011

53 weeks to 52 weeks toGROUP Notes 2nd January 2011 27th December 2009

£000 £000

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash generated from operations 19 3,153 203Interest received – 43Interest paid (637) (683)

Net cash from / (used in) operating activities 2,516 (437)

CASH FLOWS FROM INVESTING ACTIVITIES:

Costs associated with sale of investment properties (6) 979Proceeds from sale of property, plant and equipment – 1,776Purchase of property, plant and equipment (1,849) (1,042)Purchase of software (36) (406)

Net cash (used in) / from investing activities (1,891) 1,307

CASH FLOWS FROM FINANCING ACTIVITIES:

Finance lease principal payments (95) (87)Receipts from borrowings – 5,329Repayment of borrowings (928) (6,875)Purchase of treasury shares – (55)

Net cash used in financing activities (1,023) (1,688)

Net decrease in cash and cash equivalents (398) (818)Cash and cash equivalents – beginning of period 16 1,568 2,386

Cash and cash equivalents – end of period 16 1,170 1,568

53 weeks to 5th March 2009 toCOMPANY Notes 2nd January 2011 27th December 2009

£000 £000

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash used in operations 19 (839) (897)Interest paid (202) –

Net cash used in operating activities (1,041) (897)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment (60) –

Net cash used in investing activities (60) –

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts from borrowings – 2,458Borrowings from subsidiaries, net (80) 989Repayment of borrowings (928) (328)Financing costs –

Net cash (used in) / from financing activities (1,008) 3,119

Net (decrease) / increase in cash and cash equivalents (2,109) 2,222Cash and cash equivalents – beginning of period 16 2,222 –

Cash and cash equivalents – end of period 16 113 2,222

CASH FLOW STATEMENTSfor the 53 week period ended 2nd January 2011


23

STATEMENTS OF CHANGES IN EQUITYfor the 53 week period ended 2nd January 2011

Share Share Other Retained TotalGROUP capital premium reserves earnings equity

£000 £000 £000 £000 £000

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 (6,117) (34,841) 23,613 – (17,345)Issue of ordinary shares relatedto 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

Total comprehensive loss for the period – – – (256) (256)Share scheme reserve – – 23 – 23

Balance at 2nd January 2011 214 – 81,118 (67,755) 13,577

The group’s other reserves at 2nd January 2011 comprise a special capital reserve of £49,000; a capitalredemption reserve of £140,000; a merger reserve in Essenden which arose in 2009 on the transaction withGeorgica of £(1,283,000); a group merger reserve which arose in 2009 on the reverse takeover of Essenden of£24,631,000; a group merger reserve which arose on the takeover of Allied Leisure PLC by Georgica in 2000 of£56,882,000, and a reserve arising on consolidation from the acquisition of the 50% of the Megabowl jointventure not previously owned in 2003 of £676,000 and a share scheme reserve of £23,000 (created in 2010).

Share Share Other Retained TotalCOMPANY capital premium reserves earnings equity

£000 £000 £000 £000 £000

Balance at 5th March 2009 – – – – –

Business combination – – (1,018) – (1,018)Issue of ordinary shares relatedto 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)

Total comprehensive profit for the period – – – 2,028 2,028Share scheme reserve – – 7 – 7

Balance at 2nd January 2011 214 – (1,276) 509 (553)

The company’s reserves at 2nd January 2011 comprise a merger reserve which arose in 2009 on the transactionwith Georgica of £(1,283,000).

24

General informationEssenden PLC (“Essenden” or the “company”) is a public limited company incorporated and domiciled in theUnited Kingdom. The address of the registered office is 3rd Floor, 2-4 St. Georges Road, Wimbledon, London,SW19 4DP. The consolidated financial statements of the company for the 53 week period ended 2nd January 2011comprise the company and its subsidiaries (together referred to as the “group”). The principal activity of thegroup comprises the operation of tenpin bowling centres.

Statement of complianceBoth the parent company financial statements and the group financial statements have been prepared andapproved by the directors in accordance with International Financial Reporting Standards as adopted by theEuropean Union (“Adopted IFRSs”), IFRIC interpretations and those parts of the Companies Act 2006 applicableto companies reporting under IFRS. IFRS is subject to an ongoing process of review and endorsement by theEuropean Commission and amendment and interpretation by the International Accounting Standards Board.

Changes in accounting policy and disclosures The following new standards, amendments to standards or interpretations are mandatory for the first time forthe financial year ended 2nd January 2011 and have been adopted in the financial statements: IFRS 3 (revised),‘Business combinations’, and consequential amendments to IAS 27, ‘Consolidated and separate financialstatements’; IAS 1 (amendment), ‘Presentation of financial statements’; IAS 36 (amendment), ‘Impairment ofassets’, IFRS 2 (amendments), ’Group cash-settled share-based payment transactions’.

The following new standards, amendments to standards or interpretations are mandatory for the first time forthe financial year ended 2nd January 2011 but are not currently deemed relevant: IAS 28, ‘Investments inassociates', IAS 31, ‘Interests in joint ventures’.

The following new standards, amendments to standards or interpretations have been issued but are not effectivefor the financial year ended 2nd January 2011 and have not been early adopted: IFRIC 17, ‘Distribution of non-cashassets to owners’; IFRIC 18, ‘Transfers of assets from customers’; IFRIC 9, ‘Reassessment of embedded derivativesand IAS 39, Financial instruments: Recognition and measurement’; IFRIC 16, ‘Hedges of a net investment in aforeign operation’; IFRS 5 (amendment), ‘Non-current assets held for sale and discontinued operations’ IFRS 9,‘Financial instruments’; IAS 24 (revised), ‘Related party disclosures’; ‘Classification of rights issues’ (amendmentto IAS 32); IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’; ‘Prepayments of a minimumfunding requirement’ (amendments to IFRIC 14).

Basis of preparationThe financial statements have been prepared under the historical cost convention, as modified by the revaluationof derivative instruments to fair value through the income statement, and incorporate the consolidated results ofEssenden and all its subsidiaries for the 53 week period ended 2nd January 2011. The comparative financialinformation is for the Essenden group for the 52 week period ended 27th December 2009.

On publishing the parent company financial statements here together with the group financial statements, thecompany is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individualincome statement and related notes that form a part of these approved financial statements.

Critical accounting estimates and judgmentsThe preparation of financial statements requires the use of accounting estimates, and requires management toexercise judgment in the process of applying the group’s accounting policies. Accounting estimates are based onhistorical experience and various other factors, including expectations of future events that are believed to bereasonable under the circumstances, the results of which form the basis of making the judgments about thecarrying values of assets and liabilities that are not readily available from other sources.

STATEMENT OF ACCOUNTING POLICIES


25

The principal balance sheet accounts affected by judgment are goodwill (affected by the valuation of assetsacquired and by impairment assessments), tangible fixed assets (affected by impairment assessments andestimates of useful life and residual value), investment properties (affected by valuation assumptions), financialassets (affected by valuation assumptions), other non-current liabilities (affected by the assumptions used tovalue share based payments), onerous lease provisions and deferred tax. Actual results may differ from theseestimates. The effect of varying the key assumptions in the goodwill and tangible fixed asset impairmentcalculations is presented in note 10. The effect of a 1% change in the corporation tax rate on the value of thegroup’s deferred tax asset is presented in note 23.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate is revised if the revision affects only that period, or in theperiod of the revision and future periods if the revision affects both the current and future periods.

Basis of consolidationSubsidiaries, which are companies in which the group holds more than 50% of the voting rights and over whichit has the power to govern the financial and operating policies, are consolidated from the date on which controlpasses to the group, and cease to be consolidated from the date on which control passes from the group. Allintercompany balances and transactions, and any unrealised gains on transactions between group companies areeliminated.

On acquisition of a subsidiary, all of the identifiable acquired assets (including intangible assets), liabilities andcontingent liabilities are recorded at their fair values, reflecting their condition on the date control passes. Thecost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilitiesincurred 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 presented in sterling, the functional currency of the company and group,rounded to the nearest thousand.

RevenueRevenue represents the total amounts earned from customers from bowling, food, beverage, machines andamusements, together with any other goods and services delivered in the normal course of business, net of VAT.

Intangible assetsGoodwillGoodwill represents the excess of the cost of the acquisition of a subsidiary or business over the fair value of thegroup’s share of the identifiable net assets acquired. Goodwill is carried at cost less impairment, and is testedannually for impairment, or earlier if circumstances indicate that an impairment may have occurred. Negativegoodwill arising on acquisition is recognised immediately in the 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 impairment in value.Depreciation is calculated so as to write off the cost, less estimated residual value, of each asset on a straight linebasis over its expected useful economic life. The principal annual rates used for this purpose are as follows:Long leasehold premises The shorter of 50 years or their estimated useful livesShort leasehold premises Their estimated useful livesFixtures, fittings and equipment Between 3 and 20 yearsBowling lanes 40 yearsAssets in the course of construction are not depreciated until they are brought into use. Residual value iscalculated based upon prices prevailing at the date of acquisition, and is reassessed annually.

STATEMENT OF ACCOUNTING POLICIES CONTINUED26

Impairment of assetsAt each reporting date, all assets are considered for evidence of impairment. If there is an indication ofimpairment, the group carries out an impairment test by measuring the asset’s recoverable amount, which is thehigher of the fair value less costs to sell and the value in use. If this recoverable amount is below the carryingvalue, an impairment loss is recognised in the income statement and the asset is written down to the recoverableamount. In assessing value in use, the estimated future cash flows arising from the use of the asset are discountedto their present value using a discount rate which reflects current market assessments of the time value of moneyand the risks specific to the asset. Impairment of the group’s operating businesses is assessed at the cashgenerating unit (CGU) level, with goodwill allocated to each CGU for this purpose. Impairment losses are chargedto the income statement in the period in which they are identified and are allocated first to goodwill then tocarrying amounts of other assets in the CGU.

Reversals of impairmentAn impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed ifthe subsequent increase in recoverable amount can be related objectively to an event occurring after theimpairment loss was recognised. An impairment loss in respect of goodwill is not reversed. In respect of otherassets, an impairment loss is reversed when there is an indication that the impairment loss may no longer existand there has been a change in the estimates used to determine the recoverable amount. An impairment loss isreversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that wouldhave been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Property disposalsDisposals of properties and any resultant gain or loss on disposal are recognised in the income statement onceall conditions of the sale contract become unconditional.

Investment propertiesInvestment properties are included in the balance sheet as non-current assets, brought in at cost and revalued tofair value at each reporting date. Rental income from investment properties is recognised in administrativeexpenses in the income statement on a straight line basis over the term of the lease.

InvestmentsFixed asset investments are stated at cost less any provision for impairment in value.

InventoriesInventories are stated at the lower of cost and net realisable value. Cost is calculated as cost of purchase on a firstin, first out basis based on normal levels of activity. Net realisable value is based on estimated selling price, lessfurther costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow-moving ordefective items where 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 at fair value through profit and loss (all of which were designated assuch upon recognition) or as loans and receivables. There are no financial assets held as available for sale. Financialassets at fair value through profit and loss: financial assets held for interest rate management are classified in thiscategory – the group uses two forms of derivative financial instrument to reduce exposure to interest rateincreases; interest rate caps and interest rate swaps. These derivatives are initially recognised at fair value on thedate the contract is entered into, and are subsequently recognised at fair value re-measured as at each reportingdate. The gain or loss on re-measurement to fair value is recognised in finance costs in the income statement.

Loans and receivables: non-derivative financial assets with fixed or determinable payments – loans andreceivables are classified as “trade and other receivables” in the balance sheet.


27

STATEMENT OF ACCOUNTING POLICIES CONTINUED

Cash and cash equivalentsCash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable ondemand and form an integral part of the group’s cash management are included as a component of cash andcash equivalents for the purpose of the statement of cash flows.

Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequentto initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between costand redemption value being recognised in the income statement over the period of the borrowings on aneffective 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 freely transferable andare listed on PLUS-quoted markets. They are fully repayable at par on the occurrence of certain specified events,including a change of control of Essenden, an insolvency event or a change in operating activity. They arerecognised on the balance sheet at their fair value within financial liabilities due after more than one year, as thereis no fixed redemption date and no current obligation to make any redemptions within one year. The discount topar value at which the notes were initially recognised on the balance sheet is being amortised on a straight linebasis over the expected period of full repayment of the notes. The amortisation is charged to interest payable andsimilar charges. Where the expected period of full repayment is amended the carrying value of the notes isadjusted to reflect the revised estimated cash flows using the original effective interest rate determined on initialrecognition of the notes.

LeasesCosts incurred in respect of operating leases are charged to the income statement on a straight line basis overthe term of the lease. Benefits received and receivable as an incentive to sign an operating lease are similarlyspread on a straight line basis over the lease term. The majority of the group’s short term property leases aretreated as operating leases.

Finance lease arrangements, which transfer substantially all of the benefits and risks of ownership of the relatedproperty to the group, are treated as if the property had been acquired. The properties are included in property,plant and equipment, 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 interest elements,with the capital element applied to reduce the finance lease obligation and the interest element charged tofinance costs in the income statement, so as to give a constant periodic rate of charge on the remaining balanceof the obligation outstanding at each accounting period end.

Cash settled share based paymentsUnder the Essenden Share Incentive Scheme, the incentive shares are accounted for by a valuation, using theBinomial Model and taking into account relevant factors such as expected life of the options, share price volatility,share price growth hurdles and dividend rate. The fair value of each tranche of incentive shares made under theplan is amortised in the income statement over the period from the effective date of grant to the relevant balancesheet date.

28

Debt issue costsIssue costs of debt are recognised in the income statement on a systematic basis over the term of the debt.

Onerous lease commitmentsProvisions are recognised for the present value of onerous leases and vacant properties, calculated as theexpected net cash out flows over the remaining life of the lease, discounted at a rate which approximates thegroup’s weighted average cost of capital. Notional interest is charged in respect of the unwinding of the discount.

ProvisionsProvisions are recognised when the group has a present obligation (legal or constructive) as the result of a pastevent and it is both probable that an outflow of resources will be required to settle the obligation and the amountof the obligation can be reliably estimated. Where the group expects to be reimbursed for an outflow ofresources associated with a provision, for example under an insurance contract, the expected reimbursement isrecognised as a separate asset but only when the reimbursement is virtually certain. If the effect of the time valueof money is material, provisions are calculated by discounting the expected future cash flows at a pre-tax ratethat reflects current market assessments of the time value of money and, where appropriate, the risks specific tothe liability. Where discounting is used, the increase in the provision due to the unwinding of the discount overtime is charged to finance costs in the income statement.

TaxThe tax charge comprises current tax payable and deferred tax. The current tax charge represents an estimate ofthe tax payable in respect of the group’s taxable profits and is based on an interpretation of existing tax laws.

As required by IAS 12 (revised), the group provides deferred income tax using the balance sheet liability methodon all temporary differences between the tax bases of assets and liabilities and their carrying values at thebalance sheet date. Deferred income tax assets and liabilities so recognised are determined using the tax ratesand laws that have been enacted or substantively enacted by the balance sheet date and are based on theexpected manner of realisation or settlement of the carrying amount of the assets or liabilities. Deferred incometax assets are recognised to the extent that it is probable that future taxable profits will be available against whichthe temporary differences can be utilised. Deferred income tax balances are not discounted. Deferred tax is notrecognised in respect of the initial recognition of an asset or liability acquired in a transaction which is not abusiness combination and at the time of the transaction does not affect accounting or taxable profits.

Segment reportingThe group’s segments (distinguishable components of the group that are engaged either in providing productsor services) are its tenpin bowling operations and its central management and investment properties. The groupwholly operates within the United Kingdom.

Discontinued operationsA discontinued operation is a component of the group’s business that either has been disposed of or classifiedas held for sale or is a company or group of companies to which a receiver or administrator has been appointedand over which the group does not exercise control.

DividendsDividends receivable are recognised when the right to receive the dividend is established, which is generallywhen the dividend is received.


29

30

NOTES TO THE FINANCIAL STATEMENTSfor the 53 week period ended 2nd January 2011

1 SEGMENT REPORTINGSegmental information is presented in respect of the group’s business segments. Strategic decisions are madeby the Essenden board based on information presented in respect of these segments.

The group comprises the following segments:Tenpin (Bowls) – Tenpin is a leading tenpin bowling operator in the UK with an approximate 20% share of the UKmarket. All revenue is derived from activities conducted in the UK.Central – this comprises 5 properties held as investment properties together with central management, beingCompany Secretarial the Board, Head Office assets and costs.

The segment results for the 53 week period ended 2nd January 2011 and for the 52 week period ended 27thDecember 2009 that are used by the board for strategic decision making, and a reconciliation of those results tothe reported loss in the consolidated income statement, and the segment assets are as follows:

Tenpin Central Total Group

£000 £000 £000

FOR THE 53 WEEK PERIOD ENDED 2ND JANUARY 2011:

Segment revenue – external 56,572 – 56,572EBITDA 4,258 (243) 4,015Segment assets as at 2nd January 2011 54,072 1,926 55,998

RECONCILIATION OF EBITDA TO REPORTED OPERATING LOSS:

EBITDA 4,258 (243) 4,015Depreciation of intangible and tangible fixed assets (3,054) (33) (3,087)Impairment of intangible and tangible fixed assets (1,917) – (1,917)Investment property revaluation – (221) (221)Profit on disposal (146) – (146)One-off costs (706) (434) (1,140)Onerous lease provision movement 3,903 78 3,981

Operating profit / (loss) 2,338 (853) 1,485

FOR THE 52 WEEK PERIOD ENDED 27TH DECEMBER 2009:

Segment revenue - external 58,094 – 58,094EBITDA 6,222 (1,168) 5,054Segment 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)

All assets have been allocated to segments. There are no inter-segmental transactions.


31

2 (LOSS) / PROFIT ON DISPOSAL OF PROPERTIESProfit and loss on disposal of properties comprises:

53 week period ended 52 week period ended2nd January 2011 27th December 2009

£000 £000

Closure of Preston and costs associated with investment properties (146) –Sale of Leigh Rileys – 386

(146) 386

The landlord has triggered an option for Tenpin to surrender the lease at its site in Preston which will be closedin April 2011. The £146k represents the anticipated costs of closure. During March 2009 the group sold one of theinvestment properties it owns. Sale proceeds of £1.0m were received in cash for the site in Leigh, and a profit of£0.4m was generated.

3 STAFF COST AND NUMBERS53 week period ended 52 week period ended

GROUP 2nd January 2011 27th December 2009

£000 £000

Wages and salaries 13,965 13,833Social security contributions 1,091 1,089Cash-settled share based payments (note 8) 23 –

15,079 14,922

Staff costs included within cost of sales is £12.0m (2009: £11.8m). The balance of staff costs is recorded withinadministrative expenses.

Details of directors’ remuneration are set out in the directors’ report. No amounts were received or receivable bydirectors under long term incentive schemes or the exercise of share options and no directors have accrued anyretirement benefits. The highest paid director for the 53 week period ended 2nd January 2011 receivedremuneration of £310,096 (2009: highest paid director of Essenden received £325,100). All key managementpositions are held by executive directors of Essenden and accordingly, no further disclosure of key managementremuneration is deemed necessary.

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


Number Number

WEIGHTED AVERAGE NUMBER OF EMPLOYEES:

Staff 1,007 960Administration 52 56Unit management 157 236

1,216 1,252

NOTES TO THE FINANCIAL STATEMENTS CONTINUED32

53 week period ended 5th March 2009 toCOMPANY 2nd January 2011 27th December 2009

£000 £000

Wages and salaries 759 860Social security contributions 74 130

833 990

The comparative company staff costs are for Essenden for the period from May 2009. Including the staff costsincurred by Georgica for the period to May 2009.

53 week period ended 5th March 2009 to2nd January 2011 27th December 2009

Number Number

Administration (including executive directors) 4 7

4 INTEREST PAYABLE AND SIMILAR CHARGES53 week period ended 52 week period ended

2nd January 2011 27th December 2009

£000 £000

Bank loans and overdrafts 306 223Amortisation of deferred financing costs 153 300Essenden loan note interest 761 495Finance leases 266 275Notional interest on unwinding of discount on provisions (see note 22) 497 363Other 81 85

2,064 1,741

5 INTEREST RECEIVABLE53 week period ended 52 week period ended


£000 £000

Interest income on bank deposits – 41Gain on Essenden Loan note revaluation 672 –

672 41


33

6 PROFIT/ (LOSS) BEFORE TAXATIONThe following items have been included in arriving at a profit / (loss) before taxation:


£000 £000

Staff costs (see note 3) 15,079 14,922Consumables charged to cost of sales 4,782 4,701Depreciation of property, plant and equipment 2,665 3,514Depreciation and amortisation of intangible assets 422 417

IMPAIRMENT:

– property, plant and equipment 1,216 1,952– goodwill 672 –– intangible assets 30 10

Total impairment 1,918 1,962

Onerous lease provisions (3,981) 7,019Rental income from investment properties 116 157Valuation loss on investment properties 221 1,000Operating lease rentals payable – property 11,072 11,257Repairs on property, plant and equipment 845 1,028Gains/(losses) on financial assets at fair value through profit and loss – –

AUDITORS’ REMUNERATION:

Audit of group and company financial statements 36 35Audit of subsidiary financial statements 41 40Tax compliance 30 15Transaction due diligence – 138Consulting services – 82

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

7 TAXATIONRecognised in the income statement:


£000 £000

DEFERRED TAX:

Origination and reversal of temporary differences 1,212 (1,852)Change in tax rate to 27% in future years (231)Prior period adjustments (632) (1,052)

Tax debit / (credit) in income statement (note 23) 349 (2,904)


The tax on the group’s loss before tax differs from the theoretical amount that would arise using the standardrate of tax in the UK of 28% (2009: 28%). The differences are explained below.


£000 £000


Tax using the UK corporation tax rate of 28% (2009: 28%) 26 (3,321)Expense not deductible for tax purposes 14 134Effect of tax losses 941 1,335Prior period adjustments (632) (1,052)

Tax debit / (credit) 349 (2,904)

The Company current tax expense was nil; (2009: nil).

Future tax charges are impacted by future levels of corporation tax, the levels of capital expenditure allowablefor capital allowances and the utilisation across the Group of tax losses.

8 SHARE-BASED PAYMENTSGeorgica share incentive scheme:In 2001, Georgica established the Georgica Executive Participation Plan under which share based paymentoptions were granted to key management personnel and senior employees. Participants received an option overa number of performance shares. The performance share was a unit of measurement for the purposes ofcalculating rewards under the plan and was equivalent in value to one ordinary share in the company. The optionover performance shares enabled the participant to realise a cash sum (or, at the discretion of the directors, anumber of ordinary shares) subject to the satisfaction of performance criteria and continuing employment. All ofthe remaining options lapsed or were terminated during the 52 week period ended 27th December 2009 inconnection with the Essenden reconstruction.

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

53 week period ended 52 week period ended 2nd January 2011 27th December 2009

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

price Model shares liability price Model shares liability

pence pence £000 pence pence £000

Beginning of the period – – – – 89.7 0.03 1,415,000 –Granted during the period – – – – – – – –Exercised during the period – – – – – – – –Lapsed during the period – – – – – – – –Cancelled during the period – – – – – – (1,415,000) –Change in fair value (spread) – – – – – – – –

Outstanding at theend of the period – – – – – – – –

Exercisable at theend of the period – – – – – – – -


35

Essenden share scheme incentive:In May 2010, 125 redeemable shares were issued by Georgica Limited as part of the Essenden share incentivescheme. In December 2010 a further 75 redeemable shares were issued. Under the Articles this is the totalallowable issue of redeemable shares.

A share incentive scheme exists with a total of 200 redeemable shares having been issued to the two Executiveson the Essenden Board and other Senior Executives of Tenpin by Georgica Limited. This scheme replaces theshare price bonus previously in the Essenden Executives’ service agreements. The redeemable shares entitleparticipants to redeem them for cash for 1/1000 (per redeemable share) of the “Redemption Value” (describedbelow). For example, 10 redeemable shares are redeemable for cash equal in value to 10/1000 (1%) of theRedemption Value. At the time that they subscribed for the redeemable shares each participant granted Essendena call option (“Call Option”), which will enable Essenden to call for the redeemable shares in return for the issueor transfer of Essenden ordinary shares (or a cash payment from Essenden), instead of the redeemable sharesbeing redeemed by Georgica for cash. Essenden in turn granted to each participant a put option (”Put Option”),which will enable each participant to require Essenden to purchase the redeemable shares in return for the issueor transfer of Essenden ordinary shares (but not a cash payment from Essenden), instead of the redeemableshares being redeemed by Georgica for cash.

The Redemption Value is calculated by reference to the future share price performance of Essenden. The OpeningPrice for the share price incentive is 38.8p being the average price for the 30 days after the announcement of theappointment of the new CEO. This Opening Price has an annual hurdle of 12% applied to it. The earliest that theincentive can be redeemed is 3 years from the commencement date of 16th October 2009 (except in certainspecified circumstances such as on a takeover of Essenden) and it falls away if it has not been earned by 7 yearsfrom the commencement date. Upon redemption any Essenden shares issued have to be held by participants fora period of 2 years. The total value of the incentive that could be paid and converted into Essenden shares is 20%of the gain in the share price (after the Opening Price is adjusted for the annual hurdle of 12%) multiplied by thenumber of shares in existence at the exercise date. The arrangement takes account of additional shares issued byapplying an Opening Price (also adjusted for the annual hurdle of 12%) for these additional shares which is theshare price on the date of issuance.

The incentive share was valued upon grant using a Binomial valuation and the charge amortised from the dateof inception of the scheme.

53 week period ended 2nd January 2011

Opening Share Value per Number of Charge/Price for Annual Binomial Incentive (credit) andincentive Hurdle Model shares liability

£000

Granted in period 38.8 12% £0.000013 200 23

TOTAL 38.8 12% £0.000013 200 23

9 RESULT ATTRIBUTABLE TO ESSENDENThe financial statements of the parent company, Essenden, were approved by the board of directors on 31stMarch 2011. The result for the financial period dealt with in the financial statements of Essenden was a profit of£2.0m. As permitted by Section 408 of the Companies Act 2006, no separate Income Statement is presented inrespect of the parent company.


10 GOODWILL AND INTANGIBLE ASSETSGROUP Goodwill Software Total

£000 £000 £000

COST:

At 28th December 2008 44,560 2,497 47,057Additions – 406 406Disposals – – –At 27th December 2009 44,560 2,903 47,463Additions – 36 36Disposals – – –

At 2nd January 2011 44,560 2,939 47,499

AMORTISATION AND IMPAIRMENT LOSSES:

At 28th December 2008 28,899 1,799 30,698Charge for the period - amortisation – 417 417Impairment losses – 10 10At 27th December 2009 28,899 2,226 31,125Charge for the period - amortisation – 422 422Impairment losses 672 30 702

At 2nd January 2011 29,571 2,678 32,249

NET BOOK VALUE:

At 2nd January 2011 14,989 261 15,250

At 27th December 2009 15,661 677 16,338At 28th December 2008 15,661 698 16,359

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

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


£000 £000

Goodwill at the period end 14,989 15,661Impairment of goodwill recorded in the period 672 –

The recoverable amount of each cash generating unit (each of the 37 bowls has been treated as a cash generatingunit) has been calculated as the higher of its value in use and its fair value less cost to sell. The calculations ofvalue in use are based on pre-tax cash flow projections from the financial budgets approved by the boardcovering a two year period. Cash flows beyond this two year period are extrapolated over the life of the leaserelating to that site, extended by 15 years for short leasehold premises in England and Wales where the provisionsof the Landlord and Tenants Act apply and the company has the right and expects to extend the lease on expiry,or over 50 years for a long leasehold or freehold site.


37

The key features of this calculation are shown below:


Period on which management approved forecasts are based 2 years 2 yearsGrowth rate applied beyond approved forecast period 2% 2%Pre-tax discount rate 14.4% 13.3%

The budgets which underlie the calculations are compiled on a site by site basis, with gross margin, staff cost,property cost and other operating profit assumptions being based on past performance and known factorsspecific to that site which are expected by management to affect future performance, to reflect the operatingcircumstances and risks relevant to each part of the business. They also include an allocation of central overheadswhich are allocated evenly across the sites. The pre-tax discount rate applied to the cash flow projectionsapproximates the group’s weighted average cost of capital, adjusted only to reflect the way in which the marketwould assess the 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 they have alreadybeen adjusted. This pre-tax discount rate has been benchmarked against the discount rates applied by othercompanies in the leisure sector.

The key assumption to which the calculation is sensitive remains the future trading performance expected ofeach bowl, which has a more significant effect on the quantum of goodwill and tangible fixed asset impairmentthan the discount or growth rates assumed. If the sales in the budgets which underlie the calculations are reducedby 5%, reducing the cash flows of the bowls by the sales reduction converting to cash at 79% (the averageconversion achieved by Tenpin), the indicated impairment charge increases by £nil (2009: £1.0m). If the pre-taxdiscount rate applied in the calculations is increased by 1%, the onerous lease provision will move by £61K and theindicated impairment charge increases by £nil (2009: £nil).

At the year end, the goodwill associated with two sites was reassessed where trading no longer supported thecarrying value and an impairment recognised.

For the calculation of fair value less cost to sell, management have assumed that each Tenpin business could besold for a multiple of 5 x EBITDA (2009: 5 x EBITDA).

11 INVESTMENT PROPERTYAs at 2nd January 2011 the group held the freehold property interest in 5 cue sports clubs leased to Rileys Limited,a former group company. Although being marketed for sale, the remaining interests continue to be classified asinvestment properties as there is not a strong market for them.

GROUP COMPANY2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Investment properties brought forward 1,576 3,169 – –Transfers from current assets held for resale – – – –Disposals – (593) – –Revaluation (221) (1,000) – –

Investment properties carried forward 1,355 1,576 – –


A revaluation to fair value was performed as at 2nd January 2011 and a loss on revaluation of £221,000 wasrecorded (2009: a loss of £1,000,000). The valuation was made by the directors based on the valuationmethodology performed by the group’s property advisors retained to sell the properties, Davis Coffer Lyons, andbased on expected future sales proceeds. The rental income received from these properties in the period andincluded in administrative expenses in the income statement was £116,000 (2009: £157,000).

12 INVESTMENTSCOMPANY Subsidiaries Shares

£000

At 28th December 2008 –Additions – acquisition of Georgica Limited 16,337

At 27th December 2009 16,337

COST

Additions – share scheme in Georgica 8

At 2nd January 2011 16,345

Principal group investmentsThe parent company has investments in the following subsidiary undertakings, which principally affected theresults and net assets of the group. Details of investments which are not significant have 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 PLC

Georgica 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 Dormant 100%

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

GNU 5 Limited ** England & Wales Great Britain Dormant 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.


39

13 PROPERTY, PLANT AND EQUIPMENT Long leasehold Short leasehold Fixtures, fittings

GROUP premises premises and equipment Total

£000 £000 £000 £000

COST:

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 72,018Additions 10 706 992 1,708Disposals – – – –

At 2nd January 2011 6,035 26,263 41,428 73,726

DEPRECIATION AND IMPAIRMENT:

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 43,201Charge for the period 126 455 2,084 2,665Disposals – – – –Impairment charge – 850 366 1,216Impairment credit – – – –

At 2nd January 2011 3,021 15,160 28,901 47,082

NET BOOK VALUE:

At 2nd January 2011 3,014 11,103 12,527 26,644

At 27th December 2009 3,130 11,702 13,985 28,817At 28th December 2008 3,275 11,223 18,841 33,339

Bank borrowings are secured on property, plant and equipment for the value of £4.2m (2009: £5.2m).

Properties held under finance leases had a property net book value of £2.9m (2009: £3.1m) and the finance leasedepreciation charged in the period was £76,000 (2009: £76,000).

Impairment has been assessed on a consistent basis with impairment of goodwill, using the approach andassumptions detailed in note 10. An impairment charge of £1.2m was recorded in the period (2009: a charge of£2.6m and reversal of £0.6m).


Short leasehold Fixtures, fittingsCOMPANY premises and equipment Total

£000 £000 £000

COST:

At 27th December 2009 – – –Additions 44 16 60

At 2nd January 2011 44 16 60

DEPRECIATION AND IMPAIRMENT:

At 27th December 2009 – – –Charge for the period 1 3 4

At 2nd January 2011 1 3 4

NET BOOK VALUE:

At 2nd January 2011 43 13 56

At 27th December 2009 – – –

14 INVENTORIESGROUP GROUP COMPANY COMPANY

2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Goods held for resale 1,148 1,736 – –

The cost of inventories recognised as an expense and included in cost of sales amounted to £4,781,000 (2009:£4,701,000). £0.3m of obsolete bowling spares stock was written off during 2010.

15 TRADE AND OTHER RECEIVABLESGROUP GROUP COMPANY COMPANY


£000 £000 £000 £000

Trade receivables 228 268 – –Amounts owed by subsidiary undertakings – – 4,913 1,719Other receivables 643 243 11 12Prepayments and accrued income 3,621 5,139 17 –

4,492 5,650 4,941 1,731

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


41

16 CASH AND CASH EQUIVALENTSGROUP GROUP COMPANY COMPANY


£000 £000 £000 £000

Cash at bank and on hand 1,170 1,568 113 2,222Short term bank deposits – – – –

Cash and cash equivalents 1,170 1,568 113 2,222

Overdrafts – – – –

Cash, cash equivalents and bank overdrafts as reported in the cash flow statement 1,170 1,568 113 2,222

17 SHARE CAPITALGROUP 2nd January 2011 27th December 2009

£000 £000

AUTHORISED SHARE CAPITAL:

800,000,000 ordinary shares of 1p each 8,000 8,000130,000,000 ordinary shares of 5p each – –2,538,075 convertible ordinary shares of 50p each – –

8,000 8,000

ALLOTTED, CALLED UP AND FULLY PAID SHARE CAPITAL:

21,424,740 ordinary shares of 1p each 214 21497,422,700 (2007:97,422,700) ordinary shares of 5p each – –2,538,075 (2007:2,538,075) convertible ordinary shares of 50p each – –

214 214

COMPANY 2nd January 2011 27th December 2009

£000 £000

AUTHORISED SHARE CAPITAL

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

8,000 8,000

ALLOTTED, CALLED UP AND FULLY PAID SHARE CAPITAL

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

214 214


18 EARNINGS PER SHAREBasic earnings per share for each period is calculated by dividing the earnings attributable to ordinaryshareholders by the weighted average number of ordinary shares in issue during the period. Earnings per shareis based on the capital structure of Essenden.

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

53 weeks to 52 weeks to2nd January 2011 27th December 2009

£000 £000

Earnings attributable to ordinary shareholders (256) (8,956)

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES: Number of shares

For basic earnings per share 21,424,740 21,078,729

Effect of shares held by the Georgica Share Incentive Plan – 13,269For diluted earnings per share 21,424,740 21,091,998

Pence per share

Basic earnings per share (1.2)p (42.5)p

Diluted earnings per share (1.2)p (42.5)p

19 CASH GENERATED FROM OPERATIONSGROUP COMPANY

53 weeks to 52 weeks to Period to Period to2nd January 27th December 2nd January 27th December

CASH FLOWS FROM OPERATING ACTIVITIES 2011 2009 2011 2009

£000 £000 £000 £000

Profit/(Loss) for the period (256) (8,956) 2,028 (1,519)

ADJUSTMENTS FOR:

Tax 349 (2,904) (9) –Interest income – (41) – –Interest expense and finance charges 1,392 1,741 338 513Impairment of property, plant and equipment 1,216 1,952 – –Impairment of goodwill 672 – – –Impairment of intangible assets 30 10 – –Depreciation and amortisation of intangible assets 422 417 – –Depreciation 2,665 3,514 4 –Revaluation of investment properties 221 1,000 – –Loss / (Profit) on disposal 146 (386) – –

CHANGES IN WORKING CAPITAL:

Decrease in inventories 588 19 – –Decrease / (increase) in trade and other receivables 1,254 440 (3,014) (18)(Decrease) / increase in trade and other payables (1,120) (3,622) (185) 127(Decrease) / increase in provisions (4,426) 7,019 (1) –

Cash generated from/ (used in) operations 3,153 203 (839) (897)


43

20 FINANCIAL LIABILITIESGROUP GROUP COMPANY COMPANY

CURRENT LIABILITIES 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Bank loans 4,086 4,866 4,086 4,866Finance leases 95 86 – –

4,181 4,952 4,086 4,866

Bank loans due within one year are shown net of deferred financing costs of £153,000 (2009: £301,000).

GROUP GROUP COMPANY COMPANYNON-CURRENT LIABILITIES 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Bank loans – – – –Essenden loan notes 17,724 17,635 17,724 17,635Finance leases 2,524 2,619 – –

20,248 20,254 17,724 17,635

Bank loans due after more than one year are shown net of £nil (2009: £nil) of deferred financing costs. The bankloans and overdrafts are secured by fixed and floating charges on all of the group’s properties and assets. TheEssenden loan notes are £1 principal amount, zero coupon, perpetual notes which are freely transferable and arelisted on PLUS-quoted. They are fully repayable at par on the occurrence of certain specified events, including achange of control of Essenden, an insolvency event or a change in operating activity. They are recognised on thebalance sheet at their initial fair value less amortisation of the initial discount within financial liabilities due aftermore than one year, as there is no fixed redemption date and no current obligation to make any redemptionswithin one year. Their fair value at 2nd January 2011 was £6.4m (27th December 2009 : £11.1m) based on theirprice on PLUS-quoted.

Borrowings are repayable as follows:

GROUP GROUP COMPANY COMPANYBANK LOANS 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Between one and two years – – – –Between two and five years – – – –

– – – –

Within one year 4,086 5,167 4,086 5,167

4,086 5,167 4,086 5,167

The group had £nil (2009: £nil) of undrawn capex facilities and £nil (2009: £nil) of undrawn revolving facilities at2nd January 2011. The group had cash on deposit of £nil (2009: £nil).


Finance lease liabilitiesThe payment profile of minimum lease payments under finance leases is as follows:

NET GROSSGROUP 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Within one year 95 86 352 352Between one and five years 488 443 1,408 1,408After five years 2,036 2,176 3,404 3,756

2,619 2,705 5,164 5,516Future finance charges on finance leases – – (2,545) (2,811)

Present value of finance lease liabilities 2,619 2,705 2,619 2,705

21 TRADE AND OTHER PAYABLES AND OTHER NON-CURRENT LIABILITIES

GROUP GROUP COMPANY COMPANYTRADE AND OTHER PAYABLES 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Trade payables 1,171 1,102 – –Social security and other taxes 1,337 965 2 2Other payables 835 1,398 – 69Accruals 2,100 2,910 206 306Deferred income – lease incentives 106 107 – –

5,549 6,482 208 377

GROUP GROUP COMPANY COMPANYOTHER NON-CURRENT LIABILITIES 2nd January 2011 27th December 2009 2nd January 2011 27th December 2009

£000 £000 £000 £000

Deferred income – lease incentives 973 1,075 – –

973 1,075 – –


45

22 PROVISIONSThe group’s onerous lease provisions are as follows:

TOTAL

£000

At 28th December 2008 8,018Provided 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 2,173At 27th December 2009 – non-current 13,227

Provided in the period 1,166Utilised in the period (3,318)Released unused in the period (2,275)Notional interest on unwinding of discount 497

At 2nd January 2011 – current 1,787At 2nd January 2011 - non-current 9,683

The provision for onerous contracts comprises provision for the onerous element of the property leases oncertain trading units, covering the expected period of the onerous commitment. The assumptions underlying theonerous lease provisions are consistent with the assumptions used for impairment (see note 10). As the provisionis based on the future budgeted trading performance of the bowling centres subject to the onerous leases theamount and timing of the related cash outflows is sensitive to future variances in EBITDA from those budgets.

The provision is expected to unwind as follows:

ONEROUS LEASE PROVISIONS TOTAL

£000

Between one and two years 3,507Between two and five years 3,146After five years 3,030

9,683

Within one year 1,787

11,470


23 DEFERRED TAX Deferred tax assets and liabilities are attributable to the following:

ASSETS LIABILITIES NET2nd January 27th December 2nd January 27th December 2nd January 27th December

2011 2009 2011 2009 2011 2009

£000 £000 £000 £000 £000 £000

Property, plantand equipment 940 – (312) 940 (312)Tax losses 5,988 7,392 – – 5,988 7,392Other – – (989) (792) (989) (792)

Total 6,928 7,392 (989) (1,104) 5,939 6,288

Of the total deferred tax asset of £5.9m (2009: £6.3m) at 2nd January 2011, £1.6m (2009: £1.3m) is expected tobe utilised within 12 months.. The non-current portion of deferred tax to be utilised after 12 months is £4.3m(2009: £5.0m). A 1% change in the corporation tax rate would cause a £0.2m change in the value of the deferredtax asset. The company had a deferred tax asset of £10,000 (2009: nil) made up of deferred tax assets of £10,000and deferred tax liabilities of nil.

Movement in deferred tax during the 53 week period ended 2nd January 2011:

Recognised in Recognised27th December 2009 income statement in equity 2nd January 2011

£000 £000 £000 £000

Property, plant and equipment (312) 1,251 – 940Tax losses 7,392 (1,402) – 5,988Other (792) (198) – (989)

Total 6,288 (349) – 5,939

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

Recognised in Recognised29th December 2008 income statement in equity 27th December 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

The group has carry-forward tax losses of an estimated £34.3m (2009: £40.4m). Of these, £19.8m are held byTenpin Limited, £10.4m are held by Georgica Limited, £3.3m are held by Georgica Holdings Limited and £0.8mare held by the company. All of the Tenpin Limited losses have been included in the deferred tax assets set outabove, as management believe that it is highly probable that Tenpin’s business will make profits sufficient toutilise these losses in due course. £2.2m of the Georgica Holdings Limited losses have been included in thedeferred tax assets, as management believe that it is more likely than not that the investment properties held byGeorgica Holdings Limited will generate a profit on disposal sufficient to utilise these losses in due course or therewill be other opportunities to utilise the losses within the group in future. The remaining £12.3m of losses inGeorgica Limited, Essenden and Georgica Holdings Limited have not been recognised. The potential deferred taxasset of £4.0m on these losses is the only unprovided deferred tax.


47

24 FINANCIAL INSTRUMENTSThe group’s principal financial instruments comprise bank loans, an interest rate cap, cash and short-termdeposits and are held in sterling. The purpose of these financial instruments is to provide finance for the group’soperations. The group has various other financial instruments such as trade receivables and trade payables thatarise directly from its operations. All the group’s financial instruments are denominated in £ sterling. The carryingvalue of all the group’s financial instruments approximates fair value and they are classified as loans andreceivables, except the group’s interest rate cap which is carried at fair value through the income statementreassessed 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 cap for the interestrate of its financial liabilities. After taking account of this instrument the interest rate profile of the group’sfinancial liabilities, gross of debt issue costs, was as follows:

INTEREST RATE RISK PROFILE OF FINANCIAL LIABILITIES 2nd January 2011 27th December 2009

£000 £000

Floating rate financial liabilities 4,086 5,167Finance leases 2,619 2,705Financial liabilities on which no interest is paid 29,195 33,035

35,900 40,907

Cash flow interest rate risk derives from the group’s floating rate financial liabilities, being its bank debt andoverdraft facility, which are linked to LIBOR plus a margin of between 3.25% and 4.5%. There is an interest ratecap in place of £2.5m which is in place until January 2012. The group has no fair value interest rate risk.

The weighted average period to the expected maturity date of the interest-free financial liabilities, being theEssenden loan notes and onerous lease provisions, is 4 years (2009: 4 years).

Sensitivity analysis: In managing interest rate risk the group aims to reduce the impact of short-term fluctuationson the group’s earnings. Over the longer-term, however, sustained changes in interest rates would have an impacton consolidated earnings. It is estimated that a general increase of one percentage point in interest rates woulddecrease the group’s profit before tax by less than £0.1m (2009: less than £0.1m). The interest rate cap has beenincluded 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 £4.2m bankdebt facility and £2m overdraft facilities are available to 30th June 2012 subject to a repayment profile. The debtdrawn under the facility agreement at 2nd January 2011 was all current at that date but has since beenrescheduled and is now due to be repaid as follows:

2011 2012

Term debt repayment profile 742,000 997,000Revolving debt repayment profile – –


The £2.5m revolving debt was drawn at 2nd January 2011 and will be repaid in full in February 2011. It is availablefor redrawing until the facility agreement terminates in June 2012. There were no undrawn bank facilities at 2ndJanuary 2011, other than the £2m overdraft facilities.

Currency riskThe group has no material exposure to currency risk.

25 CAPITAL COMMITMENTSNeither the company nor the group had any capital commitments which were contracted for but not providedfor at 2nd January 2011 or at 27th December 2009.

26 OPERATING LEASESThe company has not entered into any operating leases. The group’s future aggregate minimum lease paymentsunder non-cancellable operating leases are as follows:

PAYMENTS DUE 2nd January 2011 27th December 2009

£000 £000

Within one year 9,848 10,663Between one and five years 39,628 44,052After five years 86,542 99,085

136,018 153,800

Tenpin has 33 (2009: 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 theleases are in England and Wales, and the provision of the Landlord and Tenants Act giving the tenant the rightto extend the lease by 15 years on expiry applies in most cases.

27 RELATED PARTY TRANSACTIONSUntil April 2010, the company sub-let part of its London office to Aida Capital Limited, a company in whichNicholas Oppenheim has a significant interest. In 2010, rent and other service costs of £27,072 (2009: £242,500)including £nil (2009: £32,250) for the services of Peter Haspel, an Essenden director, were recharged to thiscompany or its affiliates, all of which was invoiced.

In April 2010 Georgica Limited, a subsidiary of the Company, entered into an assignment of the office at KingStreet, London to Eishken 89, a partnership controlled by family members of Nick Oppenheim. As part of thisassignment Georgica paid a reverse premium of £165K.

At 2nd January 2011, Essenden was owed £ 4.9m; £0.4m by Georgica Limited and £4.4m by Tenpin Limited.

Christopher Mills, a Non-executive Director, is a also a director of Inspired Gaming Group Plc and the companyentered into a renewed contract with Inspired Gaming Group Plc for an additional three years, during the financialyear.

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


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DETAILED OPERATING REVIEWOverview:Essenden is the holding company for the tenpin bowling operations of Tenpin Limited and a portfolio of 5investment properties held for sale for redevelopment. The principal activity of the group comprises the operationof 37 tenpin bowling centres through Tenpin Limited (36 centres) and Tenpin (Sunderland) Limited (1 centre),together the second largest tenpin bowling operation in the UK with an approximate 20% share of the market.

TOTAL2010 2009

£000 £000


Revenue 56,572 58,094Cost of sales (22,714) (22,800)Operating costs (14,896) (15,024)Rent (10,727) (10,771)

Contribution 8,235 9,499

Operating overheads (3,620) (3,414)Plc overheads (600) (1,031)

EBITDA 4,015 5,054

Depreciation of intangible assets (422) (417)Depreciation of property, plant & equipment (2,665) (3,514)

Operating profit before one-off items 928 1,123

ONE-OFF GAINS / (COSTS):

Profit on disposal (146) 386One-off costs (1,140) (1,688)

Operating profit / (loss) before impairments and provisions (358) (179)

Investment property revaluation (221) (1,000)Goodwill impairment (672) –Intangible asset impairment (30) (10)Property, plant & equipment impairment (1,215) (1,952)Onerous lease provision provided (1,166) (8,910)Onerous lease provision released 5,147 1,891

Operating profit / (loss) 1,485 (10,160)

Net interest excluding loan note interest and notional interest on provisions (806) (842)Essenden loan note interest (89) (495)Notional interest – onerous lease provisions (497) (363)


Tax (349) 2,904

Profit / (Loss) after tax from continuing operations (256) (8,956)

Profit / (Loss) before tax, one-offs, impairments and provisions 122 281

Profit / (Loss) before tax, impairments and provisions (1,164) (1,021)

(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 interestexcluding 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 netinterest excluding loan note interest and notional interest on provisions.

UNAUDITED SUPPLEMENTARY INFORMATIONfor the 53 week period ended 2nd January 2011

UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED50

GROUP PERFORMANCETurnover decreased by £1.5m from £58.1m in the 52 weeks ending 27th December 2009 to £56.6m in the 53weeks ending 2nd January 2011, a 5.3% decline on a like for like basis .

Contribution decreased by £1.3m (13.3%) from £9.5m in the 52 weeks ending 27th December 2009 to £8.2m inthe 53 weeks ending 2nd January 2011, the contribution margin decreased by 1.8% points from 16.4% to 14.6%.Underlying business contribution decreased by £1.3m due to lower contribution from sales (£1.5m) being offsetby cost savings in staff costs, repairs and property costs.

EBITDA decreased by £1.0m (20.6%) from £5.0m in the 52 weeks ending 27th December 2009 to £4.0m in the53 weeks ending 2nd January 2011, with EBITDA margin down 1.6% points to 7.1%. This decrease was attributableto the contribution decrease of £1.3m being offset by a decrease in overheads from cost savings.

Operating loss decreased by £11.7m, from a loss of £(10.2)m in the 52 weeks ending 27th December 2009 to aprofit of £1.5m in the 53 weeks ending 2nd January 2011. The increase in operating profit was attributable to areduction in onerous lease provision charges, net of utilisation and releases, of £11.0m, a reduction of £0.8m in thedepreciation charge, a £0.5m reduction in one off costs due to the lower restructuring costs incurred in 2010versus 2009 and £0.8m decrease in investment property revaluation, less the EBITDA decrease of £1.0m,. Thereis also a negative movement of £0.5m on profit and loss on disposal due to the profit of £0.4m in 2009 for thesale of Leigh compared to the £0.1m accrued cost of disposal of Preston in 2010.

Group profit/(loss) before tax increased by £12.0m, from a loss of £(11.9m) in the 52 weeks ending 27th December2009 to a profit of £0.1m in the 53 weeks ending 2nd January 2011. In addition to the reduction in operating lossthere was a £0.4m decrease in the Essenden loan note interest from £0.5m to £0.1m due to the movement of theexpected redemption date to March 2015, this was partially offset by a £0.1m increase in the notional interest(being the unwinding of the discount recorded in respect of onerous lease provisions). The Group profit beforetax, one-off costs, impairments and provisions (comprising the operating profit before one-off items less netinterest excluding notional interest) has decreased by £0.2m to £0.1m in the 53 weeks ending 2nd January 2011.The group loss before tax, impairments and provisions (comprising the operating profit before impairments andprovisions less net interest excluding notional interest) has decreased by £0.3m to £(1.2)m in the 53 weeks ending2nd January 2011.

Group deferred tax credit has declined by £2.6m from £2.9m in the 52 weeks ending 27th December 2009 to£0.3m in the 53 weeks ending 2nd January 2011; loss after tax has declined from (£9.0m) in the 52 weeks ending27th December 2009 to (£0.3m), in the 53 weeks ending 2nd January 2011, a reduction of £8.7m.

PROPERTY MATTERSOne of the bowls has a lease of a very short term nature, with a break clause on 4 months notice. This bowlcurrently contributes £0.1m from annual sales of £0.9m. The landlord has taken up an option for Tenpin tosurrender the lease on Preston in April 2011. The bowl lost £0.2m on sales of £1.3m in the 53 weeks ending 2ndJanuary 2011.

Asset realisation programme:Between 2005 and 2008 the group completed the sale of five Tenpin freehold and long leasehold sites where theredevelopment value exceeded the trading value of the units. The five bowls, with annual EBITDA of £0.55m,were sold for redevelopment for consideration of £21.9m, including Cardiff sold for £1.5m in 2008.

No investment properties were sold in the period (2009: one property sold for £1.0m, 2008: two properties soldfor £2.3m). The remaining 5 properties are still being marketed. Three of the properties earn income from leasingthe sites to Rileys Snooker Clubs.


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PRINCIPAL RISKS AND UNCERTAINTIES:Listed below are the principal risks and uncertainties which have been identified by management as facing thegroup. Additional risks and uncertainties which are not currently known or are deemed immaterial may also havea 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 economic conditions and

consumer confidence. As a leisure activity, bowling may be affected by the general level of consumer spendingon leisure activities and may also be affected by changing consumer preferences.

• The business is subject to seasonal demand variations. Warm weather adversely impacts revenues as does unusual weather conditions such as heavy snow, icy conditions or high winds that discourage people fromventuring out. Major sporting events also affect the results of Tenpin; events such as the football world cup canadversely affect revenues as supporters visit venues with large screens dedicated to the sport. School holidaysare beneficial for the bowling business, 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 a key supplier ceased to trade or was otherwise unable to continue to supply the group it is possible that an adequatealternative source of supply may not be identified in the short term, with a consequent adverse impact on theoperation of the business.

• Approximately 21% of the group’s turnover is from bar sales, principally of alcoholic beverages. These sales could be adversely affected by changes in licensing requirements, or by increased concerns about the effect ofalcohol on health or of drinking and driving.

• Approximately 19% of the group's turnover is generated from amusement and gaming machines. The loss of the related licences, or a further reduction in the popular appeal of amusement and gaming machines among thetarget consumers could adversely affect sales.

• Possible regulatory threats to the profitability of the business include UK or EU employment legislation, such as minimum wage increases and the working time regulations; competition, consumer protection andenvironmental laws; and further implementation of the Disability Discrimination 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 a relatively high fixed cost element to the business which means that financialperformance is relatively 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 on profits and rents may increase to the extent that individual businesses becomeunprofitable.

• A number of UK fiscal factors affect the business such as duty on alcoholic drinks, VAT and other business and corporation taxes. Changes in legislation which affect any of these factors could adversely impact the results ofthe business.

• The group depends on the continued contribution of key management, and the loss of a significant member of the management team could adversely affect the business.

• The business may face increased competition, especially from consolidation in the bowling sector which might lead to a competitor with greater financial resources or a more aggressive pricing policy, which could adverselyaffect financial performance.

Risks relating to financing:• The continued availability of the group’s senior debt finance is dependent on continued covenant compliance.• Any rise in base lending rates has an adverse impact on financing costs.

UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED52

53 weeks to 52 weeks to 52 weeks to 52 weeks to 52 weeks to2nd January 27th December 28th December 30th December 31st December

FIVE YEAR RECORD 2011 2009 2008 2007 2006

£m £m £m £m £m

Sales 56.6 58.1 62.8 65.7 125.6Cost of sales (22.7) (22.8) (25.9) (26.8) (56.2)

Gross profit 33.9 35.3 36.9 38.9 69.4

Administrative expenses (32.3) (45.9) (83.9) (42.1) (63.8)Profit / (Loss) on disposal (0.1) 0.4 3.4 26.3 9.1

(Loss) / profit before finance charges 1.5 (10.2) (43.6) 23.1 14.7

Finance charges (1.4) (1.7) (0.9) (15.9) (10.7)

(Loss) / profit before taxation 0.1 (11.9) (44.5) 7.2 4.0

Taxation (0.4) 2.9 5.4 1.4 (2.3)Discontinued operations – – – (19.0) 2.4

(Loss) / profit after taxation (0.3) (9.0) (39.1) (10.4) 4.1

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

CAPITALISATION TABLE As at 2nd January 2011 As at 27th December 2009

£m £m

DEBT (EXCLUDING CASH AND OVERDRAFT):

Essenden shareholder loan notes 17.7 17.6Senior term loan facilities 1.7 2.7Senior revolving credit facility 2.5 2.5

Gross debt (excluding cash and overdraft) 21.9 22.8

Debt issue costs (0.1) (0.3)

Net debt (excluding cash and overdraft) 21.8 22.5

Shareholders’ funds 13.6 13.4

Total capitalisation 35.4 35.9

Reconciliation to statutory net debt and to adjusted net debt

Net debt (excluding cash and overdraft) 21.8 22.5

Net cash (1.1) (1.6)

Statutory net debt 20.7 20.9

Exclude Essenden shareholder loan notes (17.7) (17.6)Exclude debt issue costs 0.1 0.3

Adjusted net debt 3.1 3.6

ANNUAL REPORT 2010 - NEX...

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