Hollywood Bowl Group (LSE: BOWL) topped the FTSE 250 on May 27 with a gain of 16.5 percent to 302p after half-year results for the six months ended March 31 beat market expectations on revenue, profit and the scale of shareholder returns announced alongside the figures.
Group revenue reached a record £141.5 million for the period, up 9.5 percent year on year, with adjusted EBITDA after rent growing 8.9 percent to £42.2 million and adjusted profit before tax rising 8.1 percent to £32.1 million across the estate.
UK revenue increased 9.4 percent to £118.4 million with like-for-like sales up 2.6 percent, a performance that Sharecast described as reflecting “robust” demand for affordable leisure in an environment where many retail and entertainment operators have been issuing profit warnings rather than posting growth.
Canada grew revenue by 12.8 percent despite management noting that performance was impacted by “unseasonably heavy snowfall in certain key periods,” a caveat that actually strengthened the underlying read on the business since the growth arrived despite an adverse weather headwind rather than as a result of conditions.
The company announced a £5 million share buyback programme for the second half of the year alongside a 10.2 percent increase in the interim dividend to 4.52p per share, with both measures signalling board confidence in the cash generation outlook heading into what is traditionally the business’s strongest trading period.
Net cash improved to £26 million, giving the balance sheet a cleaner position than many consumer-facing businesses of comparable size can point to during a period in which household budgets remain under pressure from elevated energy and food costs.
One analyst described the market reaction as partly a function of expectation management: investors appeared to have been bracing for a materially worse outcome given the stock had declined 28 percent in the 12 months prior to the results day, meaning even solid rather than spectacular numbers were enough to trigger a significant rerating.
The bowling format has proven more resilient to consumer spending pressure than discretionary categories like clothing or dining, partly because it sits at the affordable end of family leisure at approximately £26 for a family of four in the UK, a price point that has remained competitive against cinema and other activities even as inflation has eroded purchasing power.
CEO Stephen Burns has positioned international expansion, particularly in Canada’s underserved bowling market, as the primary long-term growth engine beyond the UK estate, and the Canadian revenue performance through a challenging weather winter supports the thesis that the format translates successfully to new geographies.
Eight City brokers covering the stock maintain a consensus strong buy rating with an average price target around 395p, implying further upside from Friday’s closing level even after the day’s sharp move, and the 10.2 percent dividend increase gives income investors a concrete reason to hold rather than take profits at the current level.
