Hollywood Bowl considers cash return as full-year revenue rises

In an update for the year to 30 September, the ten-pin bowling operator said it has continued to trade well thanks to its investment in centre refurbishment and rebrand programme.

Total revenue in the year was up 5.8%, with like-for-like revenue up 1.8% and the company said it expects to report pre-tax profit growth of 10%, in line with market views.

In addition, the group said it continues to benefit from "significant" cash generation and returns from both the ongoing investment programme and core business. Hollywood Bowl said it remains committed to continuing to invest in the business through its ongoing cash generation, in addition to considering the appropriate use of surplus cash to enhance shareholder returns.

As a result, in line with the capital structure and cash allocation priorities outlined in its FY2017 results, it is now considering returning additional capital to shareholders.

Chief executive officer Stephen Burns said: "We are very pleased with our full year performance. We have delivered good results in line with expectations, through the effective execution of our customer led strategy which is underpinned by our capital expenditure programme. Our centre teams have worked very hard to ensure our customers continued to enjoy fun-filled, great value for money leisure experiences, whilst carefully managing costs and improving our margins."

Shore Capital said the LFL performance was around one percentage point below its expectations at the start of the financial year and implies a modest decline in the second half. However, set against the backdrop of weather - both snow and sun - the World Cup and general malaise on the high street, the update demonstrates "the robustness of the business model and management's excellent execution, including its dynamic pricing model."

"We continue to view Hollywood Bowl as an exceptionally well-run business in an attractive sub-sector of the leisure market. Our cash flow based fair value remains at c240p/share although we see scope to raise this over the medium term," said analyst Greg Johnson. He added that the recent weakness in the share price appears unwarranted.

Russ Mould, investment director at AJ Bell, said it was refreshing that unlike many other consumer-facing firms, Hollywood Bowl did not try to attribute the comparatively modest revenue growth to factors such as the weather or the World Cup.

"Instead management have just got on with it, keeping tight control on costs and continuing their judicious roll-out of new venues.

"Always a good sign, the company is also throwing off plenty of cash, so much in fact that it is considering returning some of this money to shareholders - just like it did a year ago via a special dividend."

At 1030 BST, the shares were up 4.3% to 209.58p.