Hollywood Bowl investors eye strong profits

Investors in the ten-pin bowling operator will also be looking for more information on its growth plans when it updates the market on Monday.

The update, which comes amid a quiet period for the equity markets ahead of Christmas, will help shed light on consumer spending trends across the UK amid a challenging economic backdrop.

Britons have seen households’ budgets squeezed by soaring energy prices, higher food bills and rising mortgage rates over the past year.

However, in its previous update in October, Hollywood Bowl, which opened a new centre in Merry Hill this year and has centres at Bentley Bridge, Wolverhampton and Shrewsbury, said customer demand was still positive as many families prioritised leisure spending.

As a result, on Monday it is expected to confirm revenues of around £215 million for the year to September, up 11% year-on-year. It has indicated that earnings for the full year will surpass previous expectations due to the strong growth, which has been buoyed by its Canadian operation.

Analysts at Numis have forecast it will reveal earnings before interest, tax, depreciation and amortization of £63 million for the year. Numis also said the company is likely to benefit from an “encouraging” pipeline of new sites in the coming year, with plans for a further 15 UK sites over the next three years.

The update also comes weeks after key rival Ten Entertainment agreed a £287 million takeover deal by Neon Buyer, a subsidiary of US private equity firm Trive Capital.

Shares in Hollywood Bowl ticked slightly higher as a result of the move, taking them towards their highest level since the pandemic hit in February 2020.

The uplift comes amid an active backdrop of dealmaking in the sector, with hospitality giant The Restaurant Group sealing a £701 million private equity takeover in recent months.

Roberta Ciaccia at Investec, said the acquisition of Ten Entertainment supports the brokerage’s view that “the experiential entertainment space in the UK is currently undervalued”.

The analyst added: “That said, in our view Hollywood Bowl’s sites are higher quality than Ten’s in terms of location and performance – and current pipeline remains strong and visible.

“Also, Hollywood Bowl has secured a significant growth opportunity in Canada, which is already contributing to earnings but could become a much more significant component going forward.”