A year-end trading update from Hollywood Bowl (BOWL) helps sustain the company’s impressive track record since listing in 2016.
The company says it will deliver pre-tax profit growth of 10% in the 12 months to 30 September, in line with expectations.
Strong cash generation means the company is also in a position to mull a return of surplus cash to shareholders.
The shares advance 4.2% to 209.5p to sit up 30% on the 160p issue price from the September 2016 IPO.
Based on broker Shore Capital’s forecast earnings per share for September 2019 financial year, the stock trades on a price-to-earnings ratio of 16.1 times.
AJ Bell investment director Russ Mould is impressed by the lack of excuses in the statement linked to the weather or World Cup, something which has been a feature of a lot of updates from consumer facing businesses of late.
MANAGEMENT GETTING ON WITH THE JOB
‘Today's trading update reveals robust growth in profit and unlike other consumer-facing firms there is, refreshingly, no attempt to attribute the comparatively modest revenue growth to factors such as the weather or this summer's football World Cup.
‘Instead management have just got on with it, keeping tight control on costs and continuing their judicious roll-out of new venues.’
‘Brexit looms on the horizon as it does for other consumer businesses but there is reason to believe that like the cinema, which tends to weather downturns as it is seen as an affordable treat, the company's superior bowling offer might do the same,’ Mould adds.
Shore Capital analyst Greg Johnson is also impressed, reiterating his ‘buy’ recommendation.
He says: ‘We introduce a 3.6p special dividend (£5.4m) to our estimates, up 10% on last year, implying a total dividend for the year of 9.7p - giving a yield of c5%.
‘We continue to view Hollywood Bowl as an exceptionally well run business in an attractive sub-sector of the leisure market.’
