Ten-pin bowling group Hollywood Bowl (BOWL) reported interim revenues to 31 March 2020 up slightly to £69m, although operating profits were 3% lower at £16.3m, impacted by the closure of sites on 20 March in response to government guidelines on social distancing. The shares rallied 3% to 186.5p as the market eyed a successful re-opening of sites.
Prior to the lockdown like-for-like revenues grew 8.6% and site level earnings before interest, tax, depreciation and amortisation (EBITDA) was 12% higher to an average of £832,000, helped by a 2% increase in average spend per game to £10.19.
FAST RESPONSE
Management acted quickly to shore-up Hollywood Bowl’s finances by raising £10.5m from shareholders in April as well as securing a waiver extension and temporary increase in limits on debt testing. Revolving credit facilities were increased by £10m, providing a total of £41.3m.
All discretionary spending was suspended including refurbishments while 98.6% of staff were furloughed. The company negotiated with landlords to significantly lower rent payments for the June quarter. As previously indicated the interim dividend was cancelled.
The net result of these actions has reduced the monthly cash burn to around £1.2m whilst sites remain closed. Cash at the period end was £15.6m with a net debt position of £14.6m which reduces to £4.1m after the equity raise.
Management has modelled a scenario whereby the company receives no revenues for up to five months from June 1 and reduced revenues thereafter. It estimates it has enough liquidity to operate at around 20% of normal trading activity for the next year.
RE-OPENING
The group operates from relatively large centres averaging over 28,000 square feet and predominately located in out of town multi-use leisure parks. The larger spaces make it easier to deploy social distancing measures.
The company describes its reopening strategy as robust and has launched a new campaign called ‘Have Fun-Play Safe’. Measures include only using alternate lanes and requiring customers to pre-book for the Friday to Sunday peak periods. Off-peak hours will be reduced so that new operational measures can be implemented.
The food and drinks menu will be reduced in order to simplify the delivery of the service and keep staff and customers safe.
Broker N-1 Singer reckons the ‘one-stop offering and relative safety features’ are likely to appeal to customers. The broker sees full-year revenues falling around 14% before bouncing back close to pre-pandemic levels in 2021. EBITDA is forecast to drop 32% to £25.8m then surge 41% next year to £36.3m, around 7% shy of 2019 levels.
LONG-TERM GROWTH UNDENTED
The company believes it is well placed to successfully re-open in a capacity restricted environment and capitalise on pent up demand once conditions normalise. Despite the on-going impact from coronavirus management remain confident in continuing to open an average of two sites a year.
Two new centres were signed during the first-half, in Reading and Bracknell, which expands the pipe-line out to 2024 with ten centres secured to open over the next four years.
