3rd Jun 2024 11:44
(Alliance News) - Analysts see further upside to earnings forecasts at Hollywood Bowl Group PLC after a "slightly better" than expected first half performance.
In the half-year to March, the Hemel Hempstead, England-based ten-pin bowling centre operator said pretax profit rose 11% to GBP29.5 million from GBP26.7 million a year prior.
Revenue increased 8.1% to GBP119.2 million from GBP110.2 million. UK like-for-like revenue increased by 1.3%, surpassing GBP100 million for the first time. Total revenue growth in Canada was 47% to GBP15.9 million, with the Canadian bowling centres growing by 8.0% on a LFL basis.
Hollywood Bowl said demand was "resilient" and growth would be supported by its "strong balance sheet and cash generative business model".
Reflecting the improved profitability, Hollywood Bowl raised its interim dividend 22% to 3.98 pence from 3.27p a year prior.
Chief Executive Stephen Burns said: "We continue to expect further, modest like-for-like growth, even with the very strong prior year comparative, as a result of our customer-led innovation and investment in our profitable growth strategy. We are confident in the outlook for Hollywood Bowl and in our ability to capture the longer-term opportunity to grow our estate to over 130 centres in the next ten years."
Hollywood Bowl said two UK centres and one Canadian centre are due to open in the second half of the current financial year with the onward pipeline continuing to build.
"Our new centre pipeline is strong with six already signed and more in heads of terms and legals stages. We remain confident in our ability to continue to deliver on our plan of an average of at least three new UK openings a year," the company said.
Peel Hunt said the results were "slightly better than we expected", due to margins being up 50 basis points.
Gross margins drove this, the broker noted, with the UK up 10 basis points to around 84% and Canada up 640 points to 80%.
Peel Hunt raised its financial 2024 pretax profit forecast by 2% which assumes like-for-like sale rising by 1.4% and allows for a 8% to 9% increase in LFL employee costs in the second half.
"We believe there is further upside to forecasts" in the second half, the broker added, "despite the big summer of televised sport and tough weather [comparatives], which could keep customers at home or in the pubs.
Peel Hunt expects investment in the business to be prioritised by Hollywood Bowl over share buybacks.
The broker has an 'add' rating on Hollywood Bowl and views the valuation as "attractive".
"Our 375p target price reflects scope for forecast upgrades and a slight re-rating over the next year," it added.
Shares in Hollywood Bowl fell 2.6% to 323.39p in London on Monday near midday.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Hollywood Bwl