Source - LSE Regulatory
RNS Number : 6554M
Hollywood Bowl Group plc
25 May 2022
 



Hollywood Bowl Group plc

 

Interim Results for the Six Months Ended 31 March 2022

 

RECORD FIRST HALF PERFORMANCE AND EXCELLENT PROGRESS WITH GROWTH STRATEGY

 

 

Hollywood Bowl, the UK's largest ten-pin bowling operator, is pleased to announce its Interim Results for the six-month period ended 31 March 2022 ("H1 FY2022").

 

Financial highlights

 

 

 

H1 FY2022 (Statutory)

H1 FY2022 (excl VAT benefit on bowling 3)

H1 FY2021

H1 FY2019

Movement vs H1 FY2019

Revenue

£100.2m

£91.3m

£10.4m

£67.0m

+36.3%

Group adjusted EBITDA2

£42.2m

£39.2m

£0.2m

N/A

 

Group adjusted EBITDA2 pre-IFRS 16

£34.0m

£31.0m

(£7.4m)

£21.1m

+46.8%

Group profit after tax

£27.0m

£20.4m

(£11.6m)

£13.4m

+52.5%

Interim ordinary dividend per share

3.00p

3.00p

-

2.27p

+32.2%

 

 

Operational highlights 

 

·    Strong pent-up demand driving profit and free cash flow

LFL1 revenue growth of 26.8 per cent (versus H1 FY2019), with total revenues of £91.3m

Group adjusted EBITDA2 increased 46.8 per cent when compared to H1 FY2019, to £31.0m

Reinstated dividend - Interim dividend of 3p per share 

No government support was taken during the period as the business was able to continue to trade with only a limited impact from Omicron in December 2021

 

·    Attractive returns from improving the quality of the estate through new centres, refurbishments and rebrands

Two new centres; Hollywood Bowl Birmingham Resorts World and Puttstars Harrow opened and performing well

Two refurbishments completed in Glasgow Springfield Quay and Birmingham Rubery

AMF Shrewsbury refurbished and rebranded as Hollywood Bowl

Three centres had solar panels installed

 

·    LFL growth driven by improvements to our excellent value for money customer experience

Games LFL volumes increased 18.1 per cent and average spend per game up 7.5 per cent to £10.52

Amusement revenue up 43.6 per cent following improvements to games and layouts

Food revenue up 8.4 per cent as we retained simplified food menu and reduced prices by 10.9 per cent while focusing on quality and speed of service

Drinks LFL revenue up 22.9 per cent supported by lane ordering technology

 

·    Continued investment in technology, enhancing customer offer

Pins on Strings installed in seven centres with nine more planned before year end meaning a total of 44 sites will be using the new technology

Enhanced Data Platform improving digital marketing engagement rates

Further investment in website and booking engine functionality

Ongoing investment in technology initiatives at or above group's hurdle rate of 30 per cent ROI

 

·    Strong start to the year with good progress on growth strategy

International expansion with acquisition of Splitsville in Canada, announced separately today

Hollywood Bowl Belfast opened in April 2022 and two new centres are planned to open within the next six months, with a strong new centre pipeline for Hollywood Bowl and Puttstars brands to meet openings target

Two refurbishments completed since year end with three further planned - on track to meet guided refurbishment target of 7-10 centres by year end

Ongoing innovation and investment in technology

Seven more solar panel installations planned before year end bringing total to 15 centres self-producing 33 per cent of their required electricity

 

Stephen Burns, Chief Executive, commented:

 

"We saw exceptional pent-up demand in the first half which, in addition to the investments made in our customer experience, led to us achieving a record first half with four of our top performing months ever. I am very proud of the hard work that went into delivering this excellent performance with high customer satisfaction scores and we were delighted to reward our team members as well as now reinstating our dividend. The strength of our balance sheet supports our ability to continue to invest in our growth strategy, including growing our portfolio in the UK as well as our entry into the Canadian market. While we are aware of the financial challenges many of our customers are facing, we continue to provide a great value for money experience. We are confident that demand will remain resilient as families seek out affordable leisure activities."

 

1 Like-for-like (LFL) revenue growth is total revenues (£100.2m) excluding any revenues relating to the reduced rate (TRR) of VAT for prior years (£5.8m), TRR of VAT for FY2022 (£3.0m) and any new centres FY2019 onwards (£6.5m). New centres are included in the LFL revenue after they complete the calendar anniversary of their opening date.

 

2 Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business. It is calculated as statutory operating profit plus depreciation, amortisation, loss on disposal of property, right-of-use assets, plant and equipment and software and any exceptional costs or income and is also shown pre-IFRS 16 as well as adjusted for IFRS 16. The reconciliation to operating profit is set out below in this section of the report.

 

3 During FY2020 the Chancellor announced the reduced rate (TRR) of VAT on hospitality activities from which bowling activities were initially excluded. The Tenpin Bowling Proprietors Association has been lobbying on the industry's behalf, since that date, for the sector to be treated in line with the hospitality industry. We received confirmation on 12th April 2022 that HMRC agreed that there is indeed a clear distinction between the sport of competitive bowling and the leisure activity of bowling - with the latter being able to benefit from TRR of VAT retrospectively. The total value of this is detailed in the report below.

 

Enquiries:

Hollywood Bowl Group PLC                                                                        Via Tulchan Communications

Stephen Burns, Chief Executive

Laurence Keen, Chief Financial Officer

Mat Hart, Chief Marketing and Technology Officer

Tulchan Communications                                                                            Hollywoodbowl@tulchangroup.com

James Macey White                                                                                       +44 (0)20 7353 4200

Elizabeth Snow

Laura Marshall

 

CHIEF EXECUTIVE REVIEW

It is very pleasing to report on an exceptionally successful period for the Group. Thankfully, the first half of our financial year has been devoid of any significant COVID based disruption, with only a very small amount of disruption in December from the Omicron strain.

Like for like (LFL) revenue growth of 26.8 per cent versus the last normalised period of trading in FY2019 and total statutory revenue growth of 49.5 per cent, is a record-breaking performance for the Group, and whilst undoubtedly helped by the incredibly favourable environment for leisure post the COVID lockdowns, is testament to the quality of our industry-leading operating model that governs our centres.

During FY2020 the Government introduced the reduced rate (TRR) of VAT on hospitality activities from which bowling activities were excluded. We were pleased that this decision was reversed by HMRC in April 2022 with leisure bowling being able to benefit from this rate retrospectively.

Including the impact of TRR of VAT on bowling, LFL revenues saw growth of 31.2 per cent.

We continue to improve the overall quality of the estate through new centre openings, refurbishments and rebrands, and through innovation of the customer offer and investment in technology. We completed three major centre refurbishments including one rebrand and opened two new centres in the half year.

Statutory profit before tax grew by £47.9m, to £33.4m, when compared to the same period in FY2021, and is £17.1m (104.1 per cent) ahead of the same period in FY2019. All Group centres had a positive contribution and the average centre EBITDA for H1 FY2022 (on a pre-IFRS 16 basis) of £661,000, is industry leading. First half free cash flow of £19.6m is further demonstration of our highly cash generative business model, and with net cash of £49.6m as at the end of H1 FY2022, the business is in strong financial health.

As a result of the strength of our trading performance since our re-opening in May 2021, we did not claim any COVID-related government support grants during the half year.

It gives me great pleasure to announce the resumption of our dividend. In line with our progressive dividend policy, the Board has declared an interim dividend of 3.0 pence per share.

Like-for-like growth

LFL sales (excluding TRR of VAT on bowling activities) grew 26.8 per cent during the first half of the financial year, with all revenue lines showing sales growth on the comparative period in 2019.

On a LFL basis (excluding TRR of VAT on bowling activities), game volumes grew by 18.1 per cent. LFL spend per game grew by 7.5 per cent. in the period, up from £9.79 in H1 FY2019 to £10.52 in H1 FY2022. Our dynamic pricing structure allowed us to introduce new discounts for the non-peak periods driving overall capacity utilisation, whilst also automatically managing the price during the peak periods. This has the result of driving yield whilst still keeping our headline pricing the lowest of all the branded bowling operators - with a family of four able to bowl for less than £22.

Drink spend per game grew on an LFL basis by 4.9 per cent, helped in part by the roll out of the at lane ordering technology, with LFL revenues in this area growing by 22.9 per cent against H1 FY2019.

Amusement spend per game also showed solid growth during the period, up 21.7 per cent on a LFL basis over the half, with LFL revenues up 43.6 per cent. Whilst some of the significant growth in amusement revenues is a direct consequence of the increased footfall, a combination of our investments and innovations, including new game formats, improvements in payment technology removing a barrier to play, as well as a significant increase in machine density through the refurbishment programme, allowed us to capitalise on the more favourable trading environment.

Prior to re-opening the business, we took the strategic decision to streamline the diner menu, reducing price, removing the more operationally complex products and simplifying specifications for ease of delivery and to minimise the exposure to supply chain and food inflation issues. These initiatives have been welcomed by our customers and the focus on speed and quality, at a value price point, have succeeded in driving LFL diner revenue by 8.4 per cent, and LFL gross profit contribution from food by 7.9 per cent despite a 10.9 per cent overall reduction in average menu pricing.

Growth strategy

As we emerged from the pandemic in the past year, we took the opportunity to review and refresh our strategy to ensure that it remained relevant for the post COVID operating environment. Our strategic priorities can be summarised around three key initiatives - (i) investing in our estate and leading customer offer (ii) organic growth through new centre openings and strategic acquisitions; and (iii) growing sustainably. I am pleased with the progress made in each of these areas during the half.

Investing in our estate and new centre openings

We completed the refurbishment of two centres and a refurbishment and rebrand of one centre during the half. AMF Shrewsbury reopened its doors as a Hollywood Bowl on 18th February 2022, and initial trading is very encouraging.

The refurbishment programme for the rest of the estate is also on track with completed the refurbishments of our centres in Glasgow Springfield Quay and Birmingham Rubery during the period. Since the end of the first half, we have also completed the refurbishment of our Bolton and Glasgow Coatbridge Hollywood Bowls.

We are currently on site in one centre, and we plan to complete at least two further refurbishments before the end of the financial year. We are on track to meet our guided seven to ten refurbishments/rebrands by the end of FY2022. The average LFL revenue growth from the most recent seven refurbishments / rebrands is 39.5 per cent versus FY2019.

Two new centres opened during the half, taking the total number of centres in the estate to 66 at the end of the first half. Hollywood Bowl Birmingham Resorts World at the popular leisure and retail scheme next to the NEC opened just in time for the Christmas trade on 10th December, following a net capital spend of £1.4m. The centre is a key anchor complementing the new leisure focus of the scheme, alongside a well-established Cinema, Escape Hunt, and a good selection of restaurants. The 17-lane centre occupying 27k square feet has been very well received and is trading in line with expectations.

The second centre opened during the half is a Puttstars in the long-established St Georges shopping centre in Harrow. This 27-hole 20k square foot centre is the fourth trial centre of our new mini golf brand and incorporates all the learnings from the first three centres we opened. The centre has traded very well over in its first few weeks of opening in February.

Investment in all aspects of the customer journey has continued, with seven centres having benefited from the installation of the Pins on Strings technology in the half. 54 per cent of the estate has now been completed, and we plan to install Pins on Strings in a further nine centres before the year end.

We remain confident in our ability to continue to deliver on our plan of an average of at least three new openings a year. Belfast opened its doors in April 2022, taking the total number of UK centres in the estate to 67 as at the date of this announcement, and we will be on site in Peterborough and Liverpool during the second half of the financial year.

International expansion

In line with our long-term growth plan, developing our business in international markets is part of our vision and growth strategy. We were delighted to announce today the acquisition of the Canada based Teaquinn Holdings Inc, which incorporates five Splitsville bowling centres and the Striker Bowling Solutions business. The company is a well operated, asset backed business that provides the Group with a strategic entry point into a fragmented and underinvested market.

The company met our strict investment criteria; it has a quality management team with ambition for growth and it operates in a market that closely mirrors the UK and will be receptive to a modified version of our operating model. The market is stable and well-established and offers both consolidation and new development opportunities. There is low downside risk due to the freehold valuations, with good medium to longer term opportunity for sustained profitable growth.

The purchase was made at an attractive multiple, funded from cash on our balance sheet. The Group will provide some funding to the Canadian business to support its growth strategy, but it is not envisaged that this funding will impact on the Group's overall capital allocation policy. Further detail is included in the announcement released separately today.

Growing sustainably

Our strategy for growing our business sustainably, is based around three pillars: (i) operating safe and inclusive leisure destinations (ii) developing outstanding workplaces and (iii) continually improving the sustainability credentials of our centres.

We take the role our centres play in their communities very seriously and have worked closely with special needs and concessionary groups for many years, to make our centres as accessible as possible to every part of the community. Over £1.5m of concessionary discounts were redeemed in the half and we extended the discount periods to include all peak trading days.

We have worked very hard on our people initiatives to continue to attract and retain the very best talent in an increasingly competitive labour market. Our industry leading talent development programmes were reintroduced post the COVID lock downs, and we now have well over 100 team members enrolled, with over 40 per cent of all management vacancies filled from our internal talent pipeline during the half. We re-assessed our team members pay in the current inflationary environment, increasing our salaried teams' remuneration by 5.8 percent, and also introduced generous bonus schemes for all team members, with over £3.2m earned in recognition of their tireless efforts and commitment during the half.

Eight centres now have large solar arrays on their roofs after completing three installs during the half, and we are on track to have 15 centres with solar panels by the end of FY2022 with the capacity to generate over 4.6 MWH per year. Each centre generates over 30 per cent of the energy it needs and feeds clean energy back to the grid when over-generating. Paybacks on the technology are ahead of our expectations, and with current energy inflation set to continue, are proving to be a sound long term investment.

Outlook

While we are mindful of the challenges many of our customers are facing in this higher inflationary environment, we continue to provide great value for money. This clearly resonated with our customers in the first half of FY2022 and I am confident this momentum will carry into the second half of the year. We will continue to invest in all areas across the business which, coupled with our sustainable growth strategy, gives the Board confidence in the outlook of the business. I am encouraged by the progress we are making with our key strategic priorities, and we are on track to meet Board expectations for the full year.

Stephen Burns

Chief Executive Officer

25 May 2022

 

CHIEF FINANCIAL OFFICER REVIEW

 

Group financial results

 

H1 FY2022 (Statutory)

H1 FY2022 (excl VAT benefit on bowling)

H1 FY2021

H1 FY2019

Movement vs H1 FY2019

Revenue

£100.2m

£91.3m

£10.4m

£67.0m

+36.3%

Gross profit

£86.5m

£77.7m

£9.2m

£59.3m

+35.1%

Gross profit margin

86.4%

85.1%

88.6%

85.9%

-0.8%pts

Administrative expenses

£48.9m

£48.7m

£20.9m

£40.8m

+19.5%

Group adjusted EBITDA1

£42.2m

£39.2m

£0.2m

N/A

 

Group adjusted EBITDA1 pre-IFRS 16

£34.0m

£31.0m

(£7.4m)

£21.1m

+46.8%

Group profit before tax

£33.4m

£24.8m

(£14.5m)

£16.4m

+51.5%

Group profit after tax

£27.0m

£20.4m

(£11.6m)

£13.4m

+52.5%

Free cash flow2

£19.6m

£19.6m

(£12.7m)

£9.3m

+112.1%

Interim ordinary dividend per share

3.00p

3.00p

-

2.27p

+32.2%

Group expansionary capital expenditure 3

£7.0m

£7.0m

£0.3m

£6.1m

+14.6%

 

1    Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business. It is calculated as statutory operating profit plus depreciation, amortisation, loss on disposal of property, right-of-use assets, plant and equipment and software and any exceptional costs or income and is also shown pre-IFRS 16 as well as adjusted for IFRS 16. The reconciliation to operating profit is set out below in this section of the report.

2       Free cash flow is defined as net cash flow pre-dividends, bank funding and any equity placing.

3       Group expansionary capital expenditure includes all capital on new centres, refurbishments and rebrands only.

 

Following the introduction of the new lease accounting standard IFRS 16, the Group has decided to maintain the reporting of Group adjusted EBITDA on a pre-IFRS 16 basis as well as on an IFRS 16 basis. This is because the pre-IFRS 16 measure is consistent with the basis used for business decisions, as well as a measure investors use to consider the underlying business performance. Group adjusted EBITDA on a pre-IFRS 16 basis is also a measure used within the Group's revolving credit facility agreement. For the purposes of this review, the commentary will clearly state when it is referring to figures on an IFRS 16 or pre-IFRS 16 basis.

 

The trading periods for FY2020 and FY2021 were disrupted due to a combination of COVID-19 lockdowns and trading restrictions once open, therefore comparisons in this financial review are made with H1 FY2019 unless otherwise stated.

 

Reduced rate of VAT on bowling activities

During FY2020 the Chancellor announced the reduced rate (TRR) of VAT on hospitality activities from which bowling activities were initially excluded. The Tenpin Bowling Proprietors Association has been lobbying on the industry's behalf, since that date, for the sector to be treated in line with the hospitality industry. We received confirmation on 12th April 2022 that HMRC agreed that there is indeed a clear distinction between the sport of competitive bowling and the leisure activity of bowling - with the latter being able to benefit from TRR of VAT retrospectively.

 

For the periods from July 2020 to December 2021, the Group has submitted an Error Correction Notice to HMRC to the value of £7.3m and for the period January 2022 to March 2022 it applied the appropriate VAT rate in its VAT return. The overall VAT benefit is £8.8m to statutory revenue (£5.8m in relation to prior periods and £3.0m for FY2022) and £8.6m to statutory profit before tax. The £5.8m revenue and £5.6m profit relating to prior periods, has been recognised as an exceptional item. 

 

This VAT adjustment is not an accounting error as the evidence used and available for the prior years was correct at the time. Therefore, there is no restatement of prior year comparatives. However, to ensure the review compared to prior years is more relevant, the Group has distinguished this benefit in this report and will clearly state where it is using statutory figures or excluding TRR of VAT on bowling.

 

All LFL revenue commentary excludes TRR of VAT on bowling, but for information this would increase LFL revenue growth to 31.2 per cent vs H1 FY2019.

 

Revenue

The Group continued its strong momentum from FY2021 into FY2022, with significant LFL growth at 26.8 per cent for the first half when compared to the same period in FY2019. Furthermore, it is worth noting that four of the five highest revenue months ever recorded by the Group were in the first half, with February the second highest ever (after August 2021), at £17.7m.

 

LFL revenue growth was a combination of a growth in spend per game of 7.5 per cent as well as game volume of 18.1 per cent.  This LFL growth alongside the on-target performance of the Group's new centres, resulted in record revenues of £91.3m in the first half, and growth of 36.3 per cent compared to H1 FY2019 (statutory revenue for H1 FY2022 is £100.2m).

 

Gross profit margin

Gross profit was £77.7m excluding TRR of VAT on bowling (£85.5m on a statutory basis) with margin in line with expectations, at 85.1 per cent, a decline of 80 basis points compared to FY2019. Revenues grew across all categories, but the strongest growth was seen in amusements, with LFL revenue growth of 43.6 per cent, outstripping other revenue lines. Given the amusements' lower margin rate, this has impacted overall gross profit margin but equated to more gross profit.

 

Administrative expenses

Following the adoption of IFRS 16 during FY2020, administrative expenses exclude property rents (turnover rents are not excluded) and include the depreciation of property right-of-use assets.

 

Administrative expenses on a statutory basis were £48.9m. On a pre-IFRS 16 basis, administrative expenses were £52.4m, compared to £40.8m during the corresponding period in FY2019.

 

Employee costs in centres increased by £3.1m when compared to H1 FY2019, with LFL centres up £1.7m (13.9 per cent) due to a combination of salary increases over the periods and the impact of higher revenues. The balance of the increase compared to H1 FY2019 is in respect of new centres.

 

Total property costs, accounted for under pre-IFRS 16, were £15.5m (H1 FY2019: £15.0m). Property costs increased by only £0.5m, with new centre costs of £1.4m offset by the lower property rates in the half. It is worth noting that property rates have returned to normal levels for the second half of FY2022.

 

Alongside all other costs, energy costs continue to be a focus for the Group. Electricity costs are hedged to 2024, and we have continued to work closely with our landlords to install solar panels on more centres, with eight centres installed at the end of the first half and at least a further seven planned for the second half. This will mean that by the end of FY2022, the Group is expected to generate 4.6 MWH of electricity from its solar panels (in FY2019 the Group used 18.4 MWH of electricity).

 

Total property costs, under IFRS 16, were £16.1m for H1 FY2022, including £4.7m accounted for as property lease assets' depreciation and £4.1m in implied interest relating to the lease liability under IFRS 16.

 

Corporate costs include all central costs as well as the outperformance bonus for centres. Total corporate costs increased by £5.9m when compared to FY2019. The main driver of this increase is due to centre level bonuses, driven by the outperformance of centres and with over £2.8m accrued in the first half. This is testament to the hard work and commitment of our amazing centre teams across the estate. Other increases have been seen in marketing spend, £0.5m, and £0.4m in the support centre headcount as we continue to invest in our teams.

 

The statutory depreciation, amortisation and impairment charge for H1 FY2022 was £10.2m. Excluding property lease assets' depreciation, this charge was £5.5m. The increase compared to H1 FY2019 is due to the continued capital investment programme, including new centres and refurbishments as well as the accelerated depreciation on the mechanical pinspotters as they are replaced by Pins on Strings.

 

Exceptional items

As a result of the HMRC position on TRR of VAT, the Group has made a retrospective claim for the overpaid VAT and the prior period amounts have been classified as exceptional items. The total exceptional amount, net of associated expenses, is £5.6m. Note 2 to the financial statements includes more detail on the impact of TRR of VAT included in the half year results.

 

Group adjusted EBITDA and operating profit

Group adjusted EBITDA on a pre-IFRS 16 basis (excluding the prior periods and current year impact of TRR of VAT on bowling activities) increased to a record £31.0m.

 

Comparing performance in the first half, excluding the prior year and current year EBITDA impact of TRR of VAT on bowling activities, this was an increase of 46.8 per cent when compared to H1 FY2019 (£21.1m). The increase is primarily due to the increased revenue performance and the Group's relatively fixed cost base, which delivered a Group adjusted EBITDA margin of 34.0 per cent. As can be seen from historic performances, it is normal for the Group to have a higher Group adjusted EBITDA margin in the first half when compared to the second half. 

 

The reconciliation between statutory operating profit and Group adjusted EBITDA on a both a pre-IFRS 16 and under IFRS 16 basis, is below.

 

Group adjusted EBITDA and operating profit/(loss)

 

H1 FY2022

£'000

H1 FY2021

£'000

Operating profit / (loss)1

37,616

(10,022)

Depreciation

9,949

9,974

Amortisation

236

239

Loss / (profit) on property, right-of-use assets, plant and equipment and software disposal

(20)

-

Exceptional items (prior periods impact of TRR of VAT on bowling activities)

(5,641)

-

Group adjusted EBITDA under IFRS 16

42,158

191

Current year impact of TRR of VAT on bowling activities

(2,970)

-

IFRS 16 adjustment2

(8,156)

(7,642)

Group adjusted EBITDA pre-IFRS 16

31,033

(7,450)

 

1       Operating profit in H1 FY2021 includes government grant income of £1.6m

2       IFRS 16 adoption has an impact on EBITDA, with the removal of rent from the calculation. For Group adjusted EBITDA pre-IFRS 16, rent is deducted for comparative purposes and is used by investors as a key measure of the business.

 

Share-based payments

During the first half of the year, the Group granted further Long-Term Incentive Plan (LTIP) shares to the senior leadership team. These awards vest in three years providing continuous employment during this period and attainment of performance conditions relating to earnings per share (EPS).

 

The Group recognised a total charge of £403,043 (H1 FY2021: £418,626) in relation to the Group's share-based payment arrangements.

 

Financing

Finance costs compared to H1 FY2021 decreased to £4.2m in H1 FY2022 (H1 FY2021: £4.5m) comprising the implied interest relating to the lease liability under IFRS 16 of £4.1m and £0.1m associated with our bank borrowing facilities. The Group's bank borrowing facilities are a revolving credit facility (RCF) of £25m at a margin rate of 1.75 per cent above SONIA and an agreed accordion of £5m. The loan term runs to the end of December 2024, this RCF remains fully undrawn.

 

The liquidity position of the Group remains strong, with a cash position of £49.6m at the end of the first half and has grown to £55.2m by the end of April 2022. It also has £25m available through the RCF.

 

Taxation

The Group's tax charge for the first half is £6.4m, including a charge of £2.0m in relation to TRR of VAT on bowling refund due from HMRC.

 

Earnings

Statutory profit before tax for the first half was a record £33.4m. Excluding the benefit from TRR of VAT on bowling activities, profit before tax was also a record £24.8m.

 

The Group delivered statutory profit after tax of £27.0m (H1 FY2019: £13.4m) and basic earnings per share was 15.8 pence.

Cash flow and net debt

Net cash at 31 March 2022 was £49.6m, compared to a net cash position of £29.9m at the end of FY2021. Detail on the cash movement in the year is shown in the table below.

 

Net cash is defined as cash and cash equivalents as per the statement of financial position less any bank borrowings.

 

Capital expenditure

During the first half, the Group invested net capex of £11.1m. A total of £1.2m was invested into the refurbishment programme, with Glasgow Springfield Quay and Birmingham Rubery centres completed, whilst a rebrand was also completed at AMF Shrewsbury. At least a further four centres will be refurbished in the second half, with Bolton and Glasgow Coatbridge already completed. The returns on those investments are all expected to exceed the Group's hurdle rate of 33 per cent.

 

New centre capital expenditure was a net £5.8m, in relation to both new centres that opened in the first half, Hollywood Bowl Resorts World and Puttstars Harrow, as well as a significant amount of the expenditure for Hollywood Bowl Belfast which opened during April 2022.

 

The Group spent a total of £4.1m on maintenance capital, including £1.4m on implementing Pins on Strings technology across more centres, as well as £0.7m on solar installs.

 

 

Cash flow

 

H1 FY2022

£'000

H1 FY2021

£'000

Group adjusted EBITDA under IFRS 16

42,158

191

Movement in working capital

2,115

(3,304)

Maintenance capital expenditure

(4,106)

(2,090)

Taxation

(1,530)

-

Payment of capital elements of leases

(7,916)

(2,179)

Adjusted operating cash flow (OCF)1

30,721

(7,382)

Adjusted OCF conversion

72.9%

(3,870)%

Expansionary capital expenditure2

(6,997)

(322)

Net bank loan interest paid

(41)

(715)

Lease interest paid

(4,054)

(3,956)

Debt repayments

-

(300)

Free cash flow (FCF)3

19,634

(12,676)

Equity placing (net of fees)

-

29,252

Net cash flow

19,634

16,576

 

1       Adjusted operating cash flow is calculated as Group adjusted EBITDA less working capital, maintenance capital expenditure, taxation and payment of the capital element of leases. This represents a good measure for the cash generated by the business after taking into account all necessary maintenance capital expenditure to ensure the routine running of the business. This excludes exceptional items, net interest paid, debt drawdowns and any debt repayments.

2       Expansionary capital expenditure includes all capital on new centres, refurbishments and rebrands only.

3       Free cash flow is defined as net cash flow pre-debt facility repayment, RCF drawdowns, dividends and equity placing.

 

Dividend

In line with its capital allocation policy, the Group is pleased to be able to reintroduce its interim dividend for FY2022. The Directors have declared an interim dividend of 3.00 pence per share. The ex-dividend date is 9 June 2022, with a record date of 10 June 2022 and a payment date of 6 July 2022.

 

Going concern

As detailed in note 2 to the Financial Statements, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report.

 

Outlook and guidance

We are pleased with how the year has started and are positive for the second half of FY2022. Given the increased foreign travel forecasted in July and August, we expect full year LFL growth to be mid-teen double digits.

 

Inflationary pressures are expected to continue during the second half; however we are well placed to manage these with the relatively low labour costs representing circa 18 per cent of revenue at centre level, and food and drink costs representing less than 10 per cent of our overall costs. Our energy costs are hedged out to the end of FY2024 and we will be continuing with the installation of solar panels on our centres in the second half.

 

 

Laurence Keen

 

Chief Financial Officer

 

25 May 2022

 

 

Note on alternative performance measures (APMs)

The Group uses APMs to enable management and users of the financial statements to better understand elements of the financial performance in the period. APMs referenced earlier in the report are explained as follows. It should be noted that trading periods for FY2020 and FY2021 were disrupted due to a combination of COVID-19 lockdowns and trading restrictions once open, therefore comparisons in this financial review use FY2019 as a base.

 

Like-for-like (LFL) revenue growth is total revenues (£100.2m) excluding any revenues relating to TRR of VAT for prior years (£5.8m), TRR of VAT for FY2022 (£3.0m) and any new centres for FY2019 onwards (£6.5m). New centres are included in the LFL revenue after they complete the calendar anniversary of their opening date.

 

Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business. It is calculated as statutory operating profit plus depreciation, amortisation, loss on disposal of property, right-of-use assets, plant and equipment and software and any exceptional costs or income and is also shown pre-IFRS 16 as well as adjusted for IFRS 16. The reconciliation to operating profit is set out in this report.

 

Free cash flow is defined as net cash flow pre-dividends, bank funding and any equity placing.

 

Spend per game is defined as revenue in the year (excluding any revenues relating to TRR of VAT for prior years (£5.8m) and TRR of VAT for FY2022 (£3.0m)) divided by the number of bowling games and golf rounds played.

 

Adjusted operating cash flow is calculated as Group adjusted EBITDA less working capital, maintenance capital expenditure, taxation and payment of the capital element of leases. This represents a good measure for the cash generated by the business after taking into account all necessary maintenance capital expenditure to ensure the routine running of the business. This excludes exceptional items, net interest paid, debt drawdowns and any debt repayments.

 

Expansionary capital expenditure includes all capital on new centres, refurbishments and rebrands only.

 

Condensed Consolidated Income Statement and Statement of Comprehensive Income

For the six months ended 31 March 2022


 

 

Six months ended 31 March 2022

Six months

ended 31

March 2021

restated

Unaudited

£'000

 

 

 

Note

Before exceptional items

Unaudited

£'000

Exceptional items

Unaudited

£'000

Total

Unaudited

£'000

Year ended

30 September

2021

Audited

£'000


 








Revenue

   

94,381

5,792

100,173

10,433

71,878


Cost of sales


(13,641)

-

(13,641)

(1,192)

(10,257)




________

________

________

________

________


Gross profit

    

80,740

5,792

86,532

9,241

61,621


Other income

     4

-

-

-

1,594

2,814


Administrative expenses


(48,765)

(151)

(48,916)

(20,857)

(54,855)




________

________

________

________

________


Operating profit/(loss)


31,975

5,641

37,616

(10,022)

9,580


Finance expenses

     6

(4,179)

-

(4,179)

(4,467)

(9,118)




________

________

________

________

________


Profit/(loss) before tax


27,796

5,641

33,437

(14,489)

462


Tax (expense)/credit

     8

(5,354)

(1,058)

(6,412)

2,856

1,266




________

________

________

________

________


 

Total comprehensive income/(loss) for the period attributable to equity shareholders


22,442

4,583

27,025

(11,633)

1,728


 


________

________

________

________

_______


 








 








Earnings per share (based on weighted average number of shares)

     7



Pence

Pence

Pence


Basic




15.82

(7.34)

1.05


Diluted




15.76

(7.34)

1.04


Weighted average number of shares in issue for period - Basic (number)




170,828,776

158,577,985

164,607,791


Weighted average number of shares in issue for period - Diluted (number)




171,431,946

159,675,997

165,467,223








 

 


 


Six months

ended 31

March 2022

Unaudited

 

 

Six months

ended 31

March 2021

Unaudited

 

 

Year ended

30 September

2021

   Audited

 

 

 

Reconciliation of operating profit to Group Adjusted EBITDA


£'000

£'000

£'000

 

Operating profit/(loss)


37,616

(10,022)

9,580

 

Exceptional items

      5

(5,641)

-

-

 

Depreciation of property, plant and equipment

      10

4,144

3,805

7,740

 

Depreciation of right-of-use assets

      11

5,805

6,169

11,882

 

Amortisation of intangible assets

 12

236

239

477

 

Impairment of property, plant and equipment


-

-

299

 

Impairment of right-of-use assets


-

-

551

 

(Profit)/loss on disposal of property, plant and equipment, right-of-use assets and software

 

10, 11, 12

 

(2)

 

-

 

29

 



_______

_______

_______

 

Group Adjusted EBITDA


42,158

191

30,558

 

 


_______

_______

_______

 

Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business. It is calculated as operating profit plus depreciation, amortisation, impairment losses and loss on disposal of property, plant and equipment, right-of-use assets and software and exceptional items.

Group Adjusted EBITDA is a non-GAAP metric used by management as a key performance measure and is not an IFRS disclosure.


Prior year comparatives for the period ended 31 March 2021 have been restated due to a reclassification of government grant income from revenue to other income (note 4).


 

 

 

 

 

 


Six months

ended 31

March 2022

Unaudited

 

 

Six months

ended 31

March 2021

Unaudited

 

 

Year ended

30 September

2021

   Audited

 

 

Reconciliation of net debt


£'000

£'000

£'000

Borrowings from bank facilities


-

29,200

-

Cash and cash equivalents


(49,577)

(37,360)

(29,942)



_______

_______

_______

Net (cash)/debt excluding finance leases


(49,577)

(8,160)

(29,942)






Finance leases


172,430

172,939

173,940



_______

_______

_______

Net debt


122,853

164,779

143,998

 


_______

_______

_______

 

Net debt is defined as borrowings from bank facilities excluding issue costs, plus finance leases less cash and cash equivalents.

 

 

 

 



 

Condensed Consolidated Statement of Financial Position

As at 31 March 2022

ASSETS

Non-current assets

 

 

Note

31 March

2022

Unaudited

£'000

31 March

2021

Unaudited

£'000

30 September

2021

Audited

£'000

Property, plant and equipment

10

55,977

46,369

49,036

Right-of-use assets

11

133,077

130,321

132,342

Goodwill and intangible assets

12

77,807

78,006

77,948

Deferred tax asset


4,130

7,802

6,290



_______

_______

_______



270,991

262,498

265,616

 


_______

_______

_______

Current assets





Cash and cash equivalents


49,577

37,360

29,942

Trade and other receivables

9

10,474

2,319

3,300

Corporation tax receivable


-

722

650

Inventories


1,739

1,278

1,461



_______

_______

_______



61,790

41,679

35,353

 


_______

_______

_______

Total assets


332,781

304,177

300,969

 


_______

_______

_______

LIABILITIES





Current liabilities





Trade and other payables


21,773

6,389

18,142

Lease liabilities

11

11,615

16,948

13,811

Corporation tax payable


2,067

-

-

Loans and borrowings

14

-

4,368

-



_______

_______

_______



35,455

27,705

31,953

 


_______

_______

_______

Non-current liabilities





Other payables


516

825

565

Lease liabilities

11

160,916

155,991

160,129

Loans & borrowings

14

-

24,517

-

Provisions


3,769

3,521

3,635



_______

_______

_______



165,201

184,854

164,329



_______

_______

_______

Total liabilities


200,656

212,559

196,282

 


_______

_______

_______

NET ASSETS


132,125

91,618

104,687

 


_______

_______

_______

Equity attributable to shareholders





Share capital

13

1,711

1,706

1,706

Share premium

13

39,691

39,587

39,691

Merger reserve

    

(49,897)

(49,897)

(49,897)

Retained earnings

 


140,620

100,222

113,187



_______

_______

_______

TOTAL EQUITY


132,125

            91,618

104,687

 


_______

_______

_______

 

 

Condensed Consolidated Statement of Changes in Equity

For the six months ended 31 March 2022

 

 

 

 

 

Share
capital

      £'000

 

Share

Premium

£'000

Merger

reserve

£'000

Retained
earnings

£'000

 

Total

£'000

 


 

 

 

 

 

 

 

 

Equity at 30 September 2020 (audited)

 

 

1,575

10,466

(49,897)

111,350

73,494

 

Shares issued during the period (Note 13)



131

29,121

-

-

29,252

 

Share-based payments (Note 15)



-

-

-

418

418

 

Deferred tax recognised in equity



-

-

-

87

87

 

Loss for the period



-

-

-

(11,633)

(11,633)

 

 



_______

_______

________

________

________

 

Equity at 31 March 2021 (unaudited)

 

 

1,706

39,587

(49,897)

100,222

91,618

 

Shares issued during the period



-

104

-

-

104

 

Share-based payments (Note 15)



-

-

-

(402)

(402)

 

Deferred tax on share-based payments



-

-

-

6

6

 

Profit for the period



-

-

-

13,361

13,361

 

 



_______

_______

________

________

________

 

Equity at 30 September 2021 (audited)



1,706

39,691

(49,897)

113,187

104,687

 

Shares issued during the period (Note 13)



5

-

-

-

5

 

Share-based payments (Note 15)



-

-

-

403

403

 

Deferred tax recognised in equity



-

-

-

5

5

 

Profit for the period



-

-

-

27,025

27,025

 

 



________

________

________

________

________

 

Equity at 31 March 2022 (unaudited)

 

 

1,711

39,691

(49,897)

140,620

132,125

 

 



__ _____

__ _____

___    ___

___ ____

_______

 

 

 



 

Condensed Consolidated Statement of Cash Flows

For the six months ended 31 March 2022

Cash flows from operating activities

 

 

 

 

Note

Six months

ended 31

March 2022

Unaudited

£'000

Six months

ended 31

March 2021

Unaudited

£'000

Year ended

30 September

2021

Audited

£'000

Profit/(loss) before tax


33,437

(14,489)

462

Adjusted by:





Depreciation of property, plant and equipment (PPE)

10

4,144

3,805

7,740

Depreciation of right-of-use (ROU) assets

11

5,805

6,169

11,882

Amortisation of intangible assets

12

236

239

477

Impairment of PPE and ROU assets


-

-

850

Net interest expense


4,179

4,467

9,118

(Profit)/loss on disposal of property, plant

and equipment, software and ROU Assets


(2)

-

29

Share-based payments


403

418

16



_______

_______

_______

Operating profit before working capital changes


48,202

609

30,574

(Increase)/decrease in inventories


(278)

62

(121)

Increase in trade and other receivables

9

(7,194)

(600)

(1,446)

Increase/(decrease) in payables and provisions


3,400

(3,185)

8,456



_______

_______

_______

Cash inflow generated from operations


44,130

(3,114)

37,463

Corporation tax paid


(1,530)

-

-

Bank interest paid


(41)

(715)

(1,207)

Lease interest paid


(4,054)

(3,956)

(7,952)



_______

_______

_______

Net cash inflow from operating activities


38,505

(7,785)

28,304

Investing activities





Purchase of property, plant and equipment


(11,007)

(2,340)

(9,330)

Purchase of intangible assets


(95)

(72)

(252)



_______

_______

_______

Net cash used in investing activities


(11,102)

(2,412)

(9,582)



_______

_______

_______

Cash flows from financing activities

 





Repayment of bank loan


-

(300)

(29,500)

Payment of capital elements of leases


(7,773)

(2,179)

(9,420)

Issue of shares


5

29,252

29,356



_______

_______

_______

Net cash used in financing activities


(7,768)

26,773

(9,564)

 


_______

_______

_______

Net change in cash and cash equivalents for the period


19,635

16,576

9,158

Cash and cash equivalents at the beginning of the period


29,942

20,784

20,784



_______

_______

_______

Cash and cash equivalents at the end of the period


49,577

37,360

29,942

 


___ ____

____  ___

_____ __

 

 

 

 

 

Notes to the condensed consolidated interim financial statements

 

1. General information

 

The Directors of Hollywood Bowl Group plc (together with its subsidiaries, the "Group" or "HWB Group") present their interim report and the unaudited financial statements for the six months ended 31 March 2022 ('Interim Financial Statements').

 

HWB Group is incorporated and domiciled in England and Wales, under company registration number 10229630. The registered office of the company is Focus 31, West Wing, Cleveland Road, Hemel Hempstead, HP2 7BW, United Kingdom.

 

The interim Financial Statements were approved by the Board of Directors on 25 May 2022.

 

The Group's last annual audited financial statements for the year ended 30 September 2021 have been prepared in accordance with International Account Standards in conformity with the requirements of the Companies Act 2006 and in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and these Interim Financial statements should be read in conjunction with them.

 

The comparative figures for the year ended 30 September 2021 are an abridged version of the Group's last annual financial statements and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 30 September 2021 have been delivered to the Registrar of Companies. The external auditor has reported on those accounts: their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

 

2. Basis of preparation

 

The Interim Financial Statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' and the Disclosures and Transparency Rules of the United Kingdom's Financial Conduct Authority. They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last financial statements.

 

The Interim Financial Statements are presented in Pounds Sterling, rounded to the nearest thousand pounds, except where otherwise indicated; and under the historical cost convention.

 

The accounting policies adopted in the preparation of the Interim Financial Statements are consistent with those applied in the presentation of the Group's consolidated financial statements for the year ended 30 September 2021. At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards applicable to the Group have been published but are not yet effective and have not been adopted early by the Group. The impact of these standards is not expected to be material.

 

Exceptional items

 

During the six-month period ended 31 March 2022, HMRC conducted a review of its policy position on the reduced rate of VAT for hospitality and tourism and the extent to which it applies to bowling.  Following its review, HMRC now accepts that leisure bowling should fall within the scope of the temporary reduced rate of VAT for tourism and hospitality, as a similar activity to those listed in Group 16 of schedule 7A of the VAT Act 1994.

 

As a result, the Group has made a retrospective claim for overpaid output VAT for the period 15 July 2020 to 30 September 2021 totalling £5,792,000 and included within bowling revenue, and has incurred associated expenses totalling £151,000, which are included within administrative expenses (See note 5).

 

Other receivables includes £7,292,000 (£5,792,000 for the period 15 July 2020 to 30 September 2021 as noted above and £1,500,000 for the period 1 October 2021 to 31 December 2021) due from HMRC in relation to the claim. An additional £1,548,000 for the period 1 January 2022 to 31 March 2022 is offset against the VAT due to HMRC as at 31 March 2022 included within trade and other payables.

 

Going concern

 

The financial position of the Group, its cash flows, performance and position are described in the financial review section. Details of the Group's available and drawn facilities are included in note 14.  At 31 March 2022, the Group had a cash balance of £49.6m with an undrawn RCF of £25m with Barclays Bank plc, and no outstanding loan balances. The principal risks of the Group are set out in note 16 to these financial statements.

 

As part of the review of the going concern basis of preparation, the Group has modelled a base case forecast and a severe but plausible case for the period covering 12 months from the date of these financial statements.

 

The base case forecast assumes that the Group trades in line with the FY2022 budget for the remainder of the financial year, and for the first 8 months of FY2023 using the following assumptions:

 

-       October to December 2022 revenue down 5.0 per cent on a like-for-like (LFL) basis versus FY2022

-       January to March 2023 revenue down 7.7 per cent on a LFL basis versus FY2022

-       April and May 2023 revenue in line, on a LFL basis, with April and May 2019

-       Payroll inflation of 5 per cent above FY2022

-       All other cost inflation of 3 per cent above FY2022

-       Dividend payments for FY2022 to be paid at 50 per cent of profit after tax

 

The severe but plausible downside scenario assumes that the Group trades 5 per cent down on revenue budget for the remainder of FY2022 and 10 per cent down on a LFL basis versus FY2022 for October 2022 to May 2023. The other key assumptions are as follows:

 

-       Payroll inflation of 10 per cent above FY2022

-       All other cost inflation of 8 per cent above FY2022

-       Dividend payments for FY2022 to be paid at 50 per cent of profit after tax

 

Taking the above and the principal risks faced by the Group into consideration, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least twelve months from the date of this report. Accordingly, the Group continues to adopt the going concern basis in preparing these interim financial statements.

 

Accounting estimates and judgements

 

The preparation of the Group financial statements requires management to make judgements, estimates and assumptions in applying the Group's accounting policies to determine the reported amounts of assets, liabilities, income and expenditure. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis, with revisions applied prospectively.

Judgements made by the Directors in the application of these accounting policies that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are set out below.

Critical accounting judgements

·       Determining the incremental borrowing rate used to measure lease liabilities

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. Judgement is applied in determining the components of the IBR used for each lease including risk-free rates, the Group's credit risk and any lease specific adjustments.

IBRs depend on the term and start date of the lease. The IBR is determined based on a series of inputs including: the risk-free rate based on government bond rates and a credit risk adjustment based on the average credit spread from commercial bank lenders.

Key sources of estimation uncertainty

The key estimates about the future at the reporting period end that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

·       Property, plant and equipment and right-of-use asset impairment reviews

Property, plant and equipment and right-of-use assets are reviewed for impairment when there is an indication that the assets might be impaired by comparing the carrying value of the assets with their recoverable amounts. The recoverable amount of an asset or a CGU is typically determined based on value-in-use calculations prepared on the basis of management's assumptions and estimates.

The key assumptions in the value-in-use calculations include growth rates of revenue and expenses, and discount rates. The carrying value of property, plant and equipment and right-of-use assets have been assessed to reasonable possible changes in key assumptions and these would not lead to a material impairment.

Further information in respect of the Group's property, plant and equipment and right-of-use assets is included in notes 10 and 11 respectively.

 

Standards issued not yet effective

 

At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards applicable to the Group have been published but are not yet effective and have not been adopted early by the Group. The impact of these standards is not expected to be material.

 

3. Segmental reporting

 

Management consider that the Group consists of a single segment, and operates within the UK. No single customer provides more than 10 per cent of the Group's revenue. Within this one operating segment there are multiple revenue streams which consist of the following:


Six months ended 31 March 2021

restated

Unaudited

£'000



Bowling

5,050

Food and drink

2,647

Amusements

2,452

Mini-golf

219

Other

65


_______

_______

_______


10,433


_______

_______

_______

Prior year comparatives for the period ended 31 March 2021 have been restated due to a reclassification of government grant income from revenue to other income of £1,594,000.

 

4. Other income

 


Six months ended 31 March 2021

restated

Unaudited

£'000


_______

_______

_______

Government grants for the purpose of immediate financial support

1,594


_______

_______

_______

 

Other income includes government grants received in prior years (31 March 2021: £1,594,000, 30 September 2021 £2,814,000). These were received as part of a government initiative to provide immediate financial support for businesses that were forced to close as a result of trading restrictions due to the COVID-19 pandemic. No government grants were received in the current financial year to 31 March 2022.

Prior year comparatives for the period ended 31 March 2021 have been restated due to a reclassification of government grant income from revenue to other income of £1,594,000.

 

5. Exceptional items

 

Exceptional items are disclosed separately in the financial statements where the Directors consider it necessary to do so to provide further understanding of the financial performance of the Group. They are material items or expenses that have been shown separately due to the significance of their nature or amount:

 

 


Six months ended 31 March 2021

Unaudited

£'000



Bowling revenue1

-

Administrative expenses2

-


_______

_______

_______


-


_______

_______

_______

 

1 Exceptional bowling revenue relates to overpaid output VAT for the period 15 July 2020 to 30 September 2021 following HMRC's review of its policy position on the reduced rate of VAT for hospitality and tourism (note 2).

2 Exceptional administrative expenses relate to the exceptional bowling revenue and constitute additional turnover rent and profit share due to landlords, and also professional fees.

 

 

 

6. Finance expenses


Six months

ended 31

March 2022

Unaudited

£'000

Six months

ended 31

March 2021

Unaudited

£'000

Year ended

30 September

2021

Audited

£'000

Interest on bank borrowings

-

506

1,155

Other interest

102

-

3

Unwinding of discount on provisions

23

5

8

Finance costs on lease liabilities

4,054

3,956

7,952


_______

_______

_______


4,179

4,467

9,118


_______

_______

_______

 

7. Earnings/(losses) per share

 

Basic earnings/(losses) per share is calculated by dividing the profit/(loss) attributable to equity holders of Hollywood Bowl Group plc by the weighted average number of ordinary shares in issue during the period, excluding invested shares held pursuant to Long Term Incentive Plans (note 15).

Diluted earnings/(losses) per share is calculated by adjusting the weighted average number of ordinary shares in issue during the financial year adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned. During the period ended 31 March 2022, the Group had potentially dilutive shares in the form of unvested shares pursuant to Long Term Incentive Plans (note 15).

 

 

 

Basic and diluted

Six months

ended 31

March 2022

Unaudited

 

Six months

ended 31

March 2021

Unaudited

 

 

Year ended

30 September

2021

Audited

 

Profit/(loss) for the period after tax (£'000)

27,025

(11,633)

1,728

Basic weighted average number of shares in issue for the period (number)

170,828,776

158,577,985

164,607,791

Adjusted for share awards

603,170

1,098,012

859,432


___     ____

__     _____

___     ____

Diluted weighted average number of shares

171,431,946

159,675,997

165,467,223


__     _____

__     _____

__     _____

Basic earnings per share (pence)

15.82

(7.34)

1.05

Diluted earnings per share (pence)

15.76

(7.34)

1.04


____     ___

___     ____

__     _____

APM: Adjusted underlying earnings per share

 

Adjusted underlying earnings per share are calculated by dividing adjusted underlying earnings after tax by the weighted average number of shares issued during the period. Adjusted underlying earnings are calculated by adjusting earnings by any exceptional items in the period.


Six months

ended 31

March 2022

Unaudited

 

Six months

ended 31

March 2021

Unaudited

 

 

Year ended

30 September

2021

Audited

 

Adjusted underlying earnings/(loss) after tax (£'000)

22,442

(11,633)

1,728

Basic adjusted earnings per share (pence)

13.14

(7.34)

1.05

Diluted adjusted earnings per share (pence)

13.09

(7.34)

1.04


_______

_______

_______

Adjusted underlying earnings/(loss) after tax is calculated as follows:


Profit/(loss) before tax

33,437

(14,489)

462

Exceptional items (note 5)

(5,641)

-

-


_______

_______

_______

Adjusted underlying profit/(loss) before tax

27,796

(14,489)

462

(Less)/add tax

(5,354)

2,856

1,266


_______

_______

_______

Adjusted underlying earnings/(loss) after tax

22,442

(11,633)

1,728


_______

_______

_______

8. Taxation

 

 

 

 

 

 

Six months

ended 31

March 2022

Unaudited

£'000

Six months

ended 31

March 2021

Unaudited

£'000

Year ended

30 September

2021

Audited

£'000

The tax expense/(credit) is as follows:




- UK Corporation tax

4,311

(436)

(384)

- Adjustments in respect of previous periods

-

-

20


________

________

________

Total current tax

4,311

(436)

(364)





Deferred tax:




Origination and reversal of temporary differences

2,101

(2,420)

287

Effects of changes in tax rates

-

-

(1,202)

Adjustments in respect of previous periods

-

-

13


________

________

________

Total deferred tax

2,101

(2,420)

(902)


________

________

________

Total tax expense/(credit)

6,412

(2,856)

(1,266)


________

_______

_______

 

Factors affecting tax charge:

The income tax expense/(credit) was recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the profit before tax for the half year ended 31 March 2022.

 

Deferred tax

 

At Budget March 2021, the government confirmed that the corporation tax main rate would remain at 19 per cent and increase to 25 per cent from 1 April 2023. As such, the rate used to calculate the deferred tax balances as at 31 March 2022 and 30 September 2021 has increased from 19 per cent to a blended rate up to 25 per cent depending on when the deferred tax balance will be released.

 

 

 

9. Trade and other receivables



Six months

ended 31

March 2022

Unaudited

£'000

Six months

ended 31

March 2021

Unaudited

£'000

Year ended

30 September

2021

Audited

£'000

Trade receivables

577

335

611

Other receivables

7,399

67

89

Prepayments

2,498

1,917

2,600


_______

_______

_______


10,474

2,319

3,300


_______

_______

_______

 

 

Other receivables includes £7,292,000 (31 March 2021 and 30 September 2021: £nil) of previously overpaid VAT due from HMRC following its review of its policy position on the reduced rate of VAT for hospitality and tourism. (See note 2).

 

 

 

 

 

 

 

 

10. Property, plant and equipment

 


 

 Long leasehold property

£'000

Short leasehold property £'000

Lanes and pinspotters

£'000

Plant & machinery, fixtures and fittings

£'000

Total

£'000

Cost:





 


At 1 October 2020


1,240

28,652

12,269

36,157

80,682

Additions


-

1,435

1,489

6,406

9,330

Disposals


-

(424)

(448)

(406)

(1,278)



________

________

________

________

________

At 30 September 2021 (audited)

 

1,240

29,663

13,310

42,157

86,370

Additions


-

3,240

2,100

5,779

11,119

Disposals


-

(24)

(309)

(223)

(556)



________

________

________

________

________

At 31 March 2022 (unaudited)

 

1,240

32,879

15,101

47,713

96,933

 


________

________

________

________

________

Accumulated depreciation:





 


At 1 October 2020


292

11,011

4,347

14,448

30,098

Depreciation charge


48

2,773

694

4,225

7,740

Impairment charge


-

-

-

299

299

Disposals


-

(38)

(428)

(337)

(803)



____________

________

________

________

________

At 30 September 2021 (audited)

 

340

13,746

4,613

18,635

37,334

Depreciation charge


24

1,411

356

2,353

4,144

Disposals


-

(24)

(303)

(195)

(522)



________

________

_______________

________

________

At 31 March 2021 (unaudited)

 

364

15,133

4,666

20,793

40,956



________

________

___ _____

________

________

Net book value





 


At 31 March 2022 (unaudited)

 

876

17,746

10,435

26,920

55,977

At 30 September 2021 (audited)


900

15,917

8,697

23,522

49,036



________

________

________

________

________








Plant & machinery, fixtures and fittings includes £3,343,000 (31 March 2021: £422,000; 30 September 2021: £2,162,000) of assets in the course of construction, relating to the development of new centres.

 

As at 31 March 2022, outstanding capital commitments totalled £2,351,000 (31 March 2021: £1,074,000; 30 September 2021: £3,041,000).

 




________

________

________

________

 


11. Leases

 

Group as a lessee

 

The Group has lease contracts for property and amusement machines used in its operations. The Group's obligations under its leases are secured by the lessor's title to the leased assets. The Group is restricted from assigning and subleasing the leased assets. There are eight lease contracts that include variable lease payments in the form of revenue-based rent top-ups.

 

The Group also has certain leases of equipment with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions for these leases.

 

Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:

 

 


 

 

Property £'000

Amusement machines

£'000

Total

£'000

Cost






At 1 September 2020



139,699

7,662

147,361

Lease additions



2,581

587

3,168

Lease surrenders



-

(443)

(443)

Lease modifications 



7,710

-

7,710




________

________

________

At 30 September 2021 (audited)

 

 

148,722

8,109

156,831

Lease additions

 

 

3,530

1,499

5,029

Lease surrenders

 

 

-

(213)

(213)

Lease modifications 

 

 

1,578

-

1,578




________

________

________

At 31 March 2022 (unaudited)



153,830

9,395

163,225




________

________

________

 

Accumulated depreciation






At 1 October 2020



9,742

2,443

12,185

Depreciation charge



9,339

2,543

11,882

Impairment charge



551

-

551

Lease surrenders



-

(129)

(129)




________

________

________

At 30 September 2021 (audited)

 

 

19,632

4,857

24,489

Depreciation charge



4,714

1,091

5,805

Lease surrenders



-

(146)

(146)




________

________

________

At 31 March 2022 (unaudited)



24,346

5,802

30,148




________

________

________







Net book value






At 31 March 2022 (unaudited)

 

 

129,484

3,593

133,077

At 30 September 2021 (audited)



129,090

3,252

132,342

 

 



________

________

________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Set out below are the carrying amounts of lease liabilities and the movements during the period:

 


 

 

Property £'000

Amusement machines

£'000

Total

£'000

Lease liabilities






At 1 October 2020



167,100

6,704

173,804

Lease additions



2,581

587

3,168

Accretion of interest



7,836

116

7,952

Lease modifications 



6,442

(11)

6,431

Payments1 



(15,429)

(1,986)

(17,415)




________

________

________

At 30 September 2021 (audited)

 

 

168,530

5,410

173,940

Lease additions

 

 

3,530

1,499

5,029

Accretion of interest

 

 

4,012

42

4,054

Lease modifications 

 

 

1,578

(100)

1,478

Payments1 

 

 

(10,513)

(1,457)

(11,970)




________

________

________

At 31 March 2022 (unaudited)



167,137

5,394

172,531




________

________

________

Current



9,633

1,982

11,615

Non-current



157,504

3,412

160,916




________

________

________

At 31 March 2022

 

 

167,137

5,394

172,531




________

________

________







Current



11,644

2,167

13,811

Non-current



156,886

3,243

160,129




________

________

________

At 30 September 2021



168,530

5,410

173,940




________

________

________







 

1 As a result of COVID-19 rent concessions, during the periods ended 31 March 2021 and 30 September 2021 respectively, £3,304,000 and £991,000 of property payments and £693,000 and £745,000 of amusement machine payments were deferred during those periods. A further £1,019,000 for the period ended 31 March 2021 and £2,110,000 for the period ended 31 September 2021 of property rent savings were taken to profit or loss as a credit to variable lease payments within administrative expenses. There were no such deferrals or savings in the period ended 31 March 2022.

 

12. Goodwill and intangible assets


Goodwill

 £'000

Brand

£'000

Trademark £'000

Software

£'000

Total

£'000

Cost






At 1 October 2020

75,034

3,360

798

1,860

81,052

Additions

-

-

-

252

252


________

________

________

________

________

At 30 September 2021 (audited)

75,034

3,360

798

2,112

81,304

Additions

-

-

-

95

95


________

________

________

________

________

At 31 March 2022 (unaudited)

75,034

3,360

798

2,207

81,399

 

________

________

________

________

________

 

Accumulated amortisation






At 1 October 2020

-

1,020

316

1,543

2,879

Amortisation charge

-

168

50

259

477


________

________

________

________

________

At 30 September 2021 (audited)

-

1,188

366

1,802

3,356

 

 

 

 

 

 

Amortisation charge

-

84

25

127

236


   ________

________

________

________

________

At 31 March 2022 (unaudited)

-

1,272

391

1,929

3,592

 

   ________

________

________

________

________

Net book value






At 31 March 2022 (unaudited)

75,034

2,088

407

278

77,807

At 30 September 2021 (audited)

75,034

2,172

432

310

77,948


________

________

________

________

________

 

 

13. Share capital

 

 

During the period, 428,113 ordinary shares of £0.01 each were issued under the Group's Long Term Incentive Plan (LTIP) and a further 158 ordinary shares of £0.01 each were issued under the Group's SAYE scheme.

 


31 March 2022

31 March 2021

30 September 2021


No of shares

£'000

No of Shares

£'000

No of shares

£'000

Ordinary shares of £0.01 each

171,059,454

1,711

170,578,333

1,706

170,631,183

1,706


____    ____

________

___    _____

________

_____    ___

________



 

14. Loans and borrowings

Current

31 March

2022

Unaudited

£'000

31 March

2021

Unaudited

£'000

30 September

2021

Audited

£'000

Bank loan

-

368

-

Revolving credit facility

-

4,000

-


________

________

________

Borrowings (less than 1 year)

-

4,368

-

 

________

________

________

Non-current




Bank loan

-

24,517

-


________

________

________

Borrowings (greater than 1 year)

-

24,517

-

 

________

________

________

Total borrowings

-

28,885

-

 

________

________

________

 

On 29 September 2021, the Group repaid and cancelled its borrowing facilities with Lloyds Bank plc, and on the same day entered into a new £25m revolving credit facility (RCF) with Barclays Bank plc.

 

The RCF has a termination date of 31 December 2024. Interest is charged on any drawn balance based on the reference rate (SONIA), plus a margin of 1.75 per cent.

 

A commitment fee equal to 35 per cent of the drawn margin is payable on the undrawn facility balance. The commitment fee rate as at 31 March 2022 was therefore 0.6125 per cent (30 September 2021: 0.6125 per cent).

 

Issue costs of £135,000 were paid to Barclays Bank plc on commencement of the RCF. These costs are being amortised over the term of the facility and are included within prepayments.

 

The terms of the Barclays Bank plc facility include the following Group financial covenants:

 

(i) For the 7 month period ended 31 December 2021, the ratio of total net debt to adjusted EBITDA shall not exceed 

    1.75:1.

(ii) For the 12 month period ending on each reference date, commencing 31 March 2022 and each quarter thereafter,

     the ratio of total net debt to adjusted EBITDA pre-IFRS 16 shall not exceed 1.75:1.

 

The Group operated within the covenants during the period and the previous period.

 

15.  Performance share-based payments - Long term employee incentive costs

 

The Group had the following performance share based payment arrangements in operation during the period:

a) The Hollywood Bowl Group plc Long Term Incentive Plan 2020

b) The Hollywood Bowl Group plc Long Term Incentive Plan 2021

c) The Hollywood Bowl Group plc Long Term Incentive Plan 2022

 

Long Term Incentive Plans

 

HWB Group plc operates Long Term Incentive Plans (LTIPs) for certain key management. In accordance with IFRS 2 Share Based Payments, the value of the awards are measured at fair value at the date of the grant.  The exercise price of the LTIPs is equal to the market price of the underlying shares on the date of grant. The fair value is determined based on the exercise price and number of shares granted and is written off on a straight-line basis over the vesting period, based on management's estimate of the number of shares that will eventually vest.

 

In accordance with the LTIP schemes outlined in the Group's Remuneration Policy (Annual Report FY2021), the vesting of these awards is conditional upon the achievement of an EPS target set at the time of grant and measured at the end of a 3 year period ending 30 September 2022, 2023 and 2024 and the Executive Directors' continued employment at the date of vesting.

 

During the six months ended 31 March 2022, 463,436 (31 March 2021:nil, 30 September 2021:452,993) share awards were granted under the LTIP. 

 

For the six months ended 31 March 2022, the Group has recognised £399,275 of performance share-based payment expense in the profit or loss account (31 March 2021: £395,708 and 30 September 2021: credit of £8,753).

 

The LTIP shares are dilutive for the purposes of calculating diluted earnings per share.

 

 

16.  Principal Risks and Uncertainties

 

The Directors have reconsidered the principal risks and uncertainties of the Group and have determined that those reported in the Annual Report for the year ended 30 September 2021 remain relevant for the remaining half of the financial year, as well as the impact the Ukraine / Russia crisis could have on inflation and therefore the risk of recession in the UK. These risks are summarised below, and how the Group seeks to mitigate these risks is set out on pages 44 to 47 of the Annual Report and Accounts 2021, which can be found at www.hollywoodbowlgroup.com.

 

In summary, these include:

 

·      The COVID-19 pandemic and associated business interruption

·      The economic condition in the UK - results in a decline in GDP, consumer spending, a fall in revenue and inflation pressure impacting the Group's strategy

·      Dependency on the performance of IT systems - reducing the ability of the Group to take bookings and resulting in loss of revenue

·      Delivery of products from third party suppliers which are key to the customer experience - impacting on the overall offer to the customer

·      Retention of key team members - a reduction in our talent pool, as well as failure to maintain staff engagement, retention of key team in a tightening labour market

·      Data security and protection - impacting on customer information and potential fines

·      Breach of covenants

·      Compliance with regulatory requirements

·      Breach of laws and regulations

 

17.  Related Party Transactions

 

31 March 2022 and 31 March 2021

 

There were no related party transactions during either period.

 

Responsibility Statement

 

We confirm that to the best of our knowledge:

 

·      The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'.

·      The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

This responsibility statement was approved by the Board on 25 May 2022 and is signed on its behalf by:

 

 

 

 

 

Stephen Burns                                                                                    Laurence Keen

CEO                                                                                                      CFO

25 May 2022                                                                                         25 May 2022

 

 

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