8th Apr 2022 11:17
(Alliance News) - Hollywood Bowl Group PLC could see its fortunes hit by a bleak UK consumer outlook, but for now, the ten-pin bowling operator has thrived thanks to its "low-cost family entertainment" offering.
Hollywood Bowl expects to report record revenue and also reinstate a dividend for the half-year ended March 31.
Analysts at Berenberg commented: "We think that Hollywood Bowl has all the ingredients of a business that can compound returns for shareholders for years to come. It is the market leader in low-cost family entertainment in the UK. It has an exceptional management team that have 'skin in the game', in our view. It also has a long runway of potential openings, which could allow it to scale its two brands, 'Hollywood Bowl' and 'Puttstars', from around 65 centres to over 100 in the UK alone."
Berenberg has a 'buy' recommendation for the stock, and a 350 pence price target. Hollywood Bowl shares were 6.7% higher 278.50p each in London on Friday morning, and up 21% over the past 12 months.
Berenberg said the company's shares are "too cheap for the returns on offer".
The company said half-year revenue jumped annually to GBP91.3 million from GBP12 million.
Compared to pre-pandemic times, revenue jumped 36% and was up 27% on a like-for-like basis.
Berenberg added: "Since the reopening of sites in May 2021, Hollywood Bowl's like-for-like sales growth has been 29% to September 2021, followed by 38% in October and November 2021, followed by a figure we believe to be in the region of 20% from December 2021 through to March 2022. With December itself likely to have been softer due to the Omicron variant, we believe that the run rate in recent months was probably over 20%. Our latest estimates assume 15% lfl sales growth in FY22 as a whole, which conservatively assumes a slowdown to only roughly 2% in H2. We think that this leaves plenty of scope for further positive upside."
Hollywood Bowl forecasts annual results to be ahead of market expectations.
The company said controlling costs is a focus, as it is not "immune from inflationary pressures", it warned.
Analysts at Shore Capital Markets, who rate the company at 'buy', struck a similarly cautious tone.
Shore commented: "Given the darkening outlook for household expenditure, we leave our outer year estimates unchanged at this stage."
It did lift estimates for financial 2022, however. It expects revenue of GBP160.0 million for the current financial year.
By Eric Cunha; [email protected]
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