Shares in leading ten-pin bowling operator Hollywood Bowl (BOWL:AIM) were 0.7% firmer to 244.6p on Friday after the company said it had experienced a robust rebound in customer demand and strong like-for-like revenue growth.
Since reopening sites in England and Wales on 17 May like-for-like revenues grew 29% compared with 2019 while demand seems to have sky-rocketed during the summer with record revenues generated in August of £20.1 million, up 50% compared with 2019.
This means that the company generated full year revenues to 30 September of £74.6 million, only 6% shy of the 2020 outturn despite the estate being closed for roughly half the year.
BLOWING THE LIGHTS OUT
Even more impressively, Hollywood Bowl has generated cash in every month since May and indicated that full year EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins are expected to be similar to 2020 and would return to pre-pandemic levels going forward.
It is surprising that the shares haven’t responded more positively because revenues are around a third higher than consensus expectations while EBITDA is significantly higher, according to Refinitiv data.
That said, analysts were already expecting Hollywood Bowl to pull ahead of 2019 revenues (£130 million) in the current financial year.
Gregg Johnson at Shore Capital nudged up his 2022 estimate by £1.5 million to £149 million and said he expects to increase his pre-tax profit forecast by 5% to £30.7 million.
BACK TO GROWTH
The company confirmed it is on track to deliver on its target to open 14-to-18 centres by 2024 while it also continued its refurbishment programme in the second half.
AJ Bell investment director Russ Mould commented: ‘It has been a key part of the Hollywood Bowl story to bring its venues up to scratch by refurbishing seating, carpets and the diner and bar areas to make its venues attractive places to visit.
‘Bowling is also a relatively inexpensive leisure activity and could therefore demonstrate some resilience as a brewing cost of living crisis in the UK starts to bite.’
Gregg Johnson reiterated his buy stance on the stock saying, ‘As trading recovers, profitability builds and the pipeline expands, we anticipate Hollywood Bowl sustaining a premium rating.’
