30th May 2023 17:20
(Alliance News) - Hollywood Bowl Group PLC on Tuesday posted "record" revenue growth in its latest interim results, boosted by a strong performance from its recent acquisitions in Canada.
"Hollywood Bowl looks to have scored a strike with its 2022 acquisitions in Canada, judging by its latest first-half results which revealed a strong contribution from this part of the business," said Russ Mould, investment director at AJ Bell.
The ten-pin bowling operator said pretax profit for the first half of the year ending September 30 was GBP26.7 million, down 20% from GBP33.4 million a year prior. Excluding a value-added tax rebate from a year prior, however, pretax profit was up 7.7% from GBP24.8 million.
Revenue was up by 10% to a "record" GBP110.2 million from GBP100.2 million a year prior. Excluding the VAT benefit, revenue was 21% higher than the GBP91.3 million achieved the year prior.
Hollywood Bowl said the recent acquisition of Teaquinn Holdings Inc contributed to around GBP11.3 million in revenue.
Teaquinn consists of Splitsville, an operator of ten-pin bowling centres, and Striker Bowling Solutions, a business-to-business supplier and installer of bowling equipment.
The company was Hollywood Bowl's first foray into the Canadian market. In February, the company bought three more Canada-based bowling businesses - HLD Investments Inc, Mountain View Bowl Inc and Wong & Lewis Investments Inc - for CAD12 million, or around GBP7.5 million.
Analysts at Berenberg said it was an "impressive set" of interim results and consequently lifted its price target for Hollywood Bowl to 370 pence from 360p and kept its rating at 'buy'.
The stock finished 1.2% higher at 263.00p on Tuesday in London.
"With its market-leading position in the UK and growth opportunities in Canada, the continued cash flow generation of the business, the success of its refurbishment and new centre opening strategy, our confidence in the company's future prospects are further reaffirmed by this set of results," Berenberg said.
"The pipeline remains exciting, while the company continues to deliver strong returns on its refurbishment with the eight completed in the half all trading in line with or above return on investment expectations."
Shore Capital said it expects to "modestly" revise up its financial 2023 earnings before interest, tax, depreciation and amortisation estimate of GBP55.5 million on the back of its strong showing from last year's acquisition in Canada, though it warned that second-half estimates remain "conservatively set".
In financial 2022, Hollywood Bowl reported a pre-IFRS 16 adjusted Ebitda of GBP60.6 million.
"The group remains well placed to manage cost inflation (energy hedged to financial 2024), whilst strengthening its value proposition relative to other leisure activities. We believe that this, coupled with ongoing investment, leaves it well positioned to continue developing like-for-like revenues," Shore said.
"The group remains on track for 15-20 new centre openings by financial 2025, which we believe will add materially to long-term profitability and cash flows."
By Heather Rydings, Alliance News senior economics reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.