- First-half sales increase 16.2%
- Full-year profit expected to top market expectations
- Significant long-term growth opportunity
Tenpin bowling and mini-golf centre operator Hollywood Bowl (BOWL) continued its strong growth trend after revealing annual revenues to 30 September grew 16.2% to £215 million, around 7% above market expectations.
Growth was driven by a combination of ‘strong’ demand from existing customers, who visited more frequently and increased average spend, and from new customers.
Soggy summer weather during the school holidays also provided a tailwind.
Management consequently expects full-year EBITDA (earnings before interest, tax, depreciation, and amortisation) to be above market expectations.
Today’s positive news shouldn’t come as too much of a surprise to investors given the strong trading update (20 September) from peer Ten Entertainment (TEG:AIM) (20 September), which noted accelerated summer trading.
Shares in Hollywood Bowl were up 3.5% in early trading to 241.7p and have gained 18% over the last 12-months.
WHAT DID MANAGEMENT SAY?
CEO Stephen Burns commented: ‘I am delighted to report another period of excellent financial and operational performance. It has been fantastic to see so many families in our centres as they sought out fun, inclusive, affordable activities to keep their kids entertained throughout the year including during the unseasonal wet summer.
‘The long-term growth opportunity is significant, and we look forward to seizing this while continuing to provide high-quality, great value entertainment for families and friends.’
Like-for-like sales growth increased 4.1% in the UK, which implies an acceleration of the 3.5% growth seen in the first half, while growth in Canada increased by 15%.
The company told Shares that like-for-like sales growth of 3% is considered a good outcome and puts strong current trading into context.
Hollywood Bowl opened three new centres in the financial year and refurbished 15 centres. Including the post-period end acquisition of Lincoln Bowl in the UK for £4.4 million, the group trades from 80 sites.
Lincoln Bowl has been family-owned for over 40-years and known to Hollywood Bowl’s management since 2018. The company said it paid four times EBITDA for the business and £2 million for the freehold property.
The group expects to pay a final dividend per share of ‘at least’ 7p and said it will update the market on its capital allocation policy at the full-year results.
ANALYSTS INCREASE EARNINGS ESTIMATES
Berenberg has increased its 2023 EBITDA forecast by 9% to £81 million and pushed through smaller upgrades for the following two years.
The investment bank commented: ‘With its market-leading position in the UK and the growth opportunities in Canada, as well as the continued cash flow generation of the business, we remain confident in the outlook for Hollywood Bowl.’
Greg Johnson, leisure analyst at Shore Capital said: ‘We upgrade our full-year 2023 estimates by circa £6 million to £63.5 million (including circa £3 million of one-off benefits) and flow through a circa £3 million improvement in full-year 2024 and outer years.
‘We continue to see Hollywood Bowl as exceptionally positioned to deliver significant value for shareholders.’
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