- Acquisition expands Canada footprint to 9 sites
- Makes first move into Alberta
- Acquired businesses trading ahead of pre-Covid levels
Shares in Hollywood Bowl (BOWL) were bid up 2.3% to 243p after the UK’s biggest 10-pin bowling operator accelerated its expansion in the fragmented and underinvested Canadian market through the acquisition of three bowling centres in Calgary.
The £7.5 million deal expands Hollywood Bowl’s growth platform in Canada to nine bowling centres and should enhance earnings for the current year ending 30 September 2023.
FIRST FORAY OUTSIDE UK
For the uninitiated, Canada is Hollywood Bowl’s first foray outside of the UK, where the company operates a portfolio of high-quality centres under the Hollywood Bowl and Puttstars mini-golf brands.
Building on Splitsville, its maiden acquisition in Canada announced in May 2022, the company has purchased a further three Canadian-based bowling businesses for C$12 million, funding the deal from existing cash resources and for a purchase price of 4.3 times earnings before interest, tax, depreciation and amortisation (EBITDA).
YYC Bowling & Entertainment, Mountain View Bowl and Let’s Bowl operate in the Calgary area, each with 10-pin bowling lanes, dining, drinks and amusement offers.
Hollywood Bowl is already present in Ontario and British Colombia, but this deal marks its first move into the attractive Alberta market.
Encouragingly, the acquired sites have seen ‘strong trading’ since Covid-19 restrictions were relaxed in early March 2022 and are ‘currently outperforming’ versus pre-pandemic 2019 levels, as are Hollywood Bowl’s previously acquired Canadian sites.
The Canadian market is ripe for consolidation and Hollywood Bowl, now one of the world’s largest bowling centre operators, has identified a pipeline of acquisitions and new site opportunities in the North American nation.
WHAT DID THE CEO SAY?
CEO Stephen Burns said the latest acquisitions mark ‘an important step towards our planned expansion of the Splitsville brand in Canada, where there is significant demand for affordable, family-friendly leisure experiences.
‘These are our first centres in the important Alberta market, and together with Pat Haggerty, our Canadian president and managing director, and his team, we are looking forward to applying our knowledge and experience to these centres.
‘We are focused on enhancing the customer experience as we invest in and grow their businesses over the coming years.’
WHY BROKERS ARE BULLISH
With a 350p price target on the stock, Berenberg continues to be ‘bullish’ about Hollywood Bowl’s prospects. ‘Continued buoyant momentum in FY22, alongside relatively limited exposure to cost inflation, means we continue to believe the company is well placed to navigate the macroeconomic backdrop, while over the medium term we also think there is a significant opportunity for new centres, as well as additional shareholder returns.’
Investec analyst Roberta Ciaccia, who has a 340p price target for the shares, commented: ‘With a robust UK business, visible pipeline, cash, dividends and a cost structure that is far more protected against current headwinds than most UK leisure companies, Bowl remains our top pick in the space.’
