- Record revenue and profit
- New year started positively
- Long runway of growth
The UK and Canada’s largest tenpin bowling operator Hollywood Bowl (BOWL) reported record revenue and profit for the year to 30 September despite tough prior year comparatives and said the new financial year had started positively.
Despite the positive progress investors were not bowled over and took the opportunity to take some profits with the shares falling 7% in early dealings. Over the last year the shares are now up 5% compared with an 8% advance for the mid-cap FTSE 250 index.
A RESILIENT YEAR
Revenue increased 7% to £230.4 million with like-for-like growth up 0.2% overall reflecting strong 6.3% growth in Canada, and a flat performance in the UK although UK bowling centres contributed 0.3% growth. The company booked a £5.3 million impairment charge relating to its mini-golf centres.
UK like-for-like performance was driven by increased spend per game across all areas of the business with overall spend per game increasing 3.3%.
Group adjusted EBITDA (Earnings before interest, tax, depreciation, and amortisation) increased 4.3% to £67.7 million, ahead of expectations and the post year end statement in October of ‘at least £65 million’.
Group pre-tax profit fell 5% to £42 million reflecting the impairment charge and operating cash flow before working capital movements increased 6% to £86.9 million.
The company declared a final dividend per share of 8.08p taking the full year payout 2% higher to 12.06p per share, representing a payout ratio of 55% of adjusted after-tax profit.
VALUE FOR MONEY PROPOSITION
Hollywood Bowl remains one of the best value for money experiences in UK hospitality with an average family of four being able to enjoy a game of bowling for under £26.
UK bowling prices increased by 20p in 2024, well below inflation and since 2018 the real cost of bowling has decreased by around a fifth, demonstrating the company’s leading value proposition.
Looking ahead the company expects to add four new centres in the UK and two in Canada in 2025, taking the total number of centres to 91. Hollywood Bowl is well placed to meet it longer term target of operating from 130 centres by 2025.
EXPERT VIEWS
Berenberg increased it price target to 440p saying: ‘we remain confident in the company’s prospects given its best-in-class management team, solid balance sheet and long runway for growth.’
Analyst Greg Johnson at Shore Capital said he was minded to leave his 2025 EBITDA forecast of £69 million unchanged, adding, ‘we see numbers are conservatively set, with a significant contribution anticipated from ongoing investment.’
Investment director Russ Mould at AJ Bell said: ‘Hollywood Bowl’s offering of a relatively good value, family-oriented activity, which can be enjoyed when the weather is poor, is clearly resonating in both the UK and Canada.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
