Good morning! Let’s see what’s in Tuesday‘s RNS.

We have updates from:

Hollywood Bowl (LON:BOWL)

  • Share price: 231.6p (+2%)
  • No. of shares: 150 million
  • Market cap: £347 million

Trading Statement

Hollywood Bowl Group, ("Hollywood Bowl" or the "Group"), the UK's largest ten-pin bowling operator, is pleased to announce another strong performance for the year to 30 September 2019.

PBT is set to come in "slightly ahead of market expectations".

The prior forecast for PBT was £20.9 million.

Like-for-like revenue growth is 5.5% - not bad. It's easy to forget that like-for-like expenses tend to increase as well, perhaps by 3% or so. So the LfL revenue growth should be more than enough to offset that.

Checking the archives, I see that rival company Ten Entertainment (LON:TEG) reported LfL sales growth of 7.4% in H2. As a sector, bowling is clearly doing rather well this year!

Capital return

I wonder if management of BOWL read this report? Either way, they seem to agree with my view that the company is stable enough to carry a smaller equity cushion (e.g. see my remarks here and here and here).

The company's net debt at March 2019 was just £5.3 million, versus operating profit of £16.8 million in the previous six months. That debt figure was after payment of special dividends. So it was virtually debt-free, relative to profits.

Therefore, I can support this stance:

The Board remains committed to investing in the business while considering the appropriate use of surplus capital to enhance shareholder returns... Therefore, in line with the Group's capital allocation policy, the Board is considering returning additional capital to the Group's shareholders.

It's a cash-generative, successful business. So long as its sites remain well-invested, and there is no financial stress, I don't see why anything left over shouldn't be sent back to shareholders.

BOWL management have already demonstrated their shareholder focus by paying a couple of special dividends, but maybe they can push the boat out a little bit with their next move?

I suppose…

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