Hollywood Bowl rolls on

Revenue soared against pre-pandemic figures at Hollywood Bowl (BOWL), with pent-up demand driving performance after the ten-pin bowling operator’s estate was closed for more than half of the previous financial year. The company also revealed international expansion through the £11mn acquisition of a Canadian bowling business, and confirmed the expected reinstatement of the interim dividend.

Revenue was up by almost 50 per cent against the 2019 financial year, and by more than a quarter on a like-for-like basis, as demand rocketed and customers hit the bowling lanes. Four out of the company’s five biggest ever revenue months were recorded in these results, and there was only a “limited impact” this time around on the pandemic front due to the outbreak of the Omicron variant. So, solid progress with the top line.

The acquisition of Teaquinn Holdings, which has five sites, will be funded from the existing cash pile. The deal is expected to benefit earnings from the 2023 financial year, and Investec analysts have raised their earnings per share forecast for that year by 6 per cent. Developing internationally is a key part of the company’s growth strategy, and there could be much more to come given that Hollywood has “identified a pipeline of acquisitions as well as new site opportunities” in Canada.  

Berenberg has the shares trading on 14 times forward 2023 earnings. The broker’s analysts said that “we are more bullish than ever on the prospect for continued value creation for shareholders and reiterate our buy rating”. We feel the same, given Hollywood’s strong growth outlook and because the company is well-placed to deal with inflationary pressures with its relatively low cost base. Buy.

Last IC view: Buy, 227p, 15 Dec 2021