Hollywood Bowl LON:BOWL, the Hemel Hempstead-based operator of 10-pin bowling arcades and mini-golf courses, published its final results to end-September Tuesday (17th December).
Things looked grim for the bowling alley operator during the Covid-19 pandemic, and it was touch-and-go whether the entertainment company would survive. But since the end of the coronavirus lockdown, Hollywood Bowl has gone from strength-to-strength and 10-pin bowling has cemented itself as one of the top leisure activities for British families and corporate entertainment.
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The company reacted to the upsurge in demand by investing in its facilities and estate. It refurbished ten of its bowling alleys during the year and invested in four new sites, taking its total UK estate to 72 outlets. The company is also investing in expanding its footprint in Canada. Hollywood Bowl plans to open another four centres next year and six more in the following year.
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A record year of investment, which the company pledges to break again in the next few years, has been accompanied by a year of record revenues with total revenue up 7.1% year-on-year to £230.4m. Canada led the way in terms of revenue growth with a 6.3% like-for-like increase y-o-y.
Hollywood Bowl still attracting discretionary spend
This led to group earnings of £67.7m, a 4.3% increase y-o-y and ahead of market expectations. Although the UK is still suffering from a cost-of-living crisis, with declining economic indicators across the board, which some analysts are saying may turn to recession in 2025/26, it seems that consumers are still prepared to spend on a discretionary basis on bowling and putting.
Hollywood Bowl says that this is a result of their value-for-money approach and customer service. Chairman, Peter Boddy said in a statement: “UK families continue to face cost-of-living challenges, and against that backdrop, delivering high-quality experiences that can be enjoyed for great value is even more important. Our resilience to inflationary pressures means that we have been able to keep our prices affordable, a family of four being able to enjoy a game of bowling with us for under £26. Our bowling prices in the UK rose by just 20 pence in FY2024, well below inflation, to an average of £7.15 for adults and £6.21 for children, and with food, drink and amusement price increases also kept low, meaning that, in real terms, it was cheaper than the previous year for our customers to enjoy an outing to Hollywood Bowl.”
The company is keen on retaining footfall and suppressing its pricing to below-inflation to maintain its customer loyalty. This has had an impact on its profits with profit-before-tax falling £2.5m y-o-y to £45m. However, management noted that the company also had to book £5.3m impairment charges, up from £2.2m the year before, with regards to its mini-gold centres during the year.
Lower-than-anticipated interest in Puttstars brand
The entertainment firm had been experimenting with its ‘Puttstars’ brand of mini-golf courses. However, after testing it was found that mini-golf was not as attractive to customers as its core 10-pin bowling offering, which led to the leisure provider prioritising bowling in new locations and rebranding its ‘Puttstars’ product to ‘Putt & Play’. The lower demand for golf products prompted a review of the company’s discounted cash flow analysis of future cash flows, reassessing the carrying value of mini-golf-related property, plant and equipment. The discount rate used for the weighted average cost of capital was 12.4% pre-tax, reduced from 12.7% the year previously in the UK.
Stephen Burns, Hollwood Bowl’s CEO Said: “In FY2020, we launched a mini-golf leisure brand called Puttstars, testing the concept in five centres. Whilst we have seen some good performance, it has become clear that bowling centres offer higher returns potential and will remain the group’s first choice when entering new locations.”
Nevertheless, Hollywood Bowl maintained a good dividend yield and in line with last year’s updated capital allocation policy, proposed a final ordinary dividend of 8.08p/share, bringing the total ordinary dividend for the year to 12.06p/share.
New NI burdens a concern
One cloud on the horizon, however, was the increased burden of National Insurance contributions, hiked in the new government’s autumn budget. Burns warned: “The recent changes announced by the government in the budget to Employers’ National Insurance contributions and threshold levels, coupled with ongoing wage increases will have a significant impact on the hospitality industry.”
The CEO said that Hollywood Bowl’s NI costs for an average employee working 20-hours a week on national living wage would increase from £400 a year to £1,155 a year from the new tax year in April. He said: “The recent changes announced by the Chancellor to employers’ National Insurance, coupled with ongoing wage increases, pose challenges for many businesses. We had expected the increase to wages, but the increased tax burden now falls heavily on labour-intensive sectors, like hospitality.”
The company’s shares opened the day at 315p, up 7.6% over one-year. Hollywood Bowl has ranged between 272.49p and 355p and the company has a market cap of £573.9m.
Despite the challenging economic climate, Hollywood Bowl’s strong performance and strategic focus on bowling have positioned it as a resilient and profitable leisure company. While the increased tax burden on the hospitality sector presents a hurdle, the company’s commitment to providing value-for-money experiences and its ability to adapt to changing consumer preferences suggest a promising outlook for the future.
