The UK’s largest tenpin bowling operator Hollywood Bowl (BOWL) delivered another strong year of sales and profit growth and revealed an enhanced shareholder return policy including a special dividend and share buyback.

Shares in Hollywood Bowl gained 2% to 288p, a new 12-month high and closing in on the all-time high of 309p achieved before the pandemic.

Hollywood Bowl will soon become the sole publicly-traded tenpin bowling firm after rival Ten Entertainment (TEG:AIM) accepted an all cash 412.5p per cash offer from private equity firm Trive Capital on 6 December.

Revenues for the year to 30 September grew 16.2% on an underlying basis to a record £215.2 million driven by strong 4.5% like-for-like sales growth.

Spend per game grew 3.4% to £11.06 while like-for-like growth in amusements were up 7.3% and food spend per game increased 9.9% with most popular menu items kept at 2019 prices.

Adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) was 12.7% higher at £64.9 million.

Chief executive Stephen Burns commented: ‘This is another excellent performance for the group, achieved against an exceptionally strong prior year.

‘It reflects significant customer demand, as well as the success of our customer focused strategy. Innovation of our offer has led to growth across all our revenue lines while keeping our prices low, with a family of four able to bowl for £25.

‘We have continued to invest in and grow our estate, opening new centres in the UK and Canada where we see significant potential.’

NEW CAPITAL ALLOCATION POLICY

Reflecting a highly cash generative business, with £52.5 million of net cash on the balance sheet at the period end and a fully undrawn £25 million revolving credit facility, Hollywood Bowl increased the ordinary dividend from 50% to 55% of adjusted after-tax profit.

In addition, the group announced a share buyback of £10 million and a special dividend of 2.73p per share taking the full year pay out to 14.54p.

Buying back shares and cancelling them implies an uplift in 2024 earnings per share of around 2% according to Investec estimates.

Commenting on the increased dividend pay-out, Berenberg said: ‘This is despite expectations of higher capex and acquisition spend, further emphasising the resilience of the business model, which we view as a positive.’

AJ Bell investment director Russ Mould commented: ‘Bowling remains an affordable treat which gives people a release from the cares of everyday life and the performance of the nascent Canadian operation will only provide further encouragement for the company to pursue its expansion plans.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (James Crux) own shares in AJ Bell.

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