REG - Hollywood Bowl Group - Final Results - Year Ending 30 September 2024
17/12/2024 07:00
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RNS Number : 2547Q Hollywood Bowl Group plc 17 December 2024
Hollywood Bowl Group plc
("Hollywood Bowl", or the "Group")
Final Results for the Year Ended 30 September 2024
RECORD YEAR OF INVESTMENT IN THE PORTFOLIO AND CONTINUED INNOVATION OF THE
CUSTOMER EXPERIENCE DRIVING RECORD REVENUE
Hollywood Bowl Group plc, the UK and Canada's largest ten-pin bowling
operator, announces its audited results for the year ended 30 September 2024
("FY2024").
Financial summary
FY2024 FY2023 Movement vs FY2023
Revenues £230.4m £215.1m(4) +7.1%
Group adjusted EBITDA(1) £87.6m £82.7m +5.9%
Group adjusted EBITDA(1) pre-IFRS 16 £67.7m £64.9m +4.3%
Group profit before tax £42.8m £45.1m -5.2%
Group adjusted profit before tax(2) £45.0m £47.5m -5.2%
Group profit after tax £29.9m £34.2m -12.4%
Group adjusted profit after tax(2) £32.3m £36.6m -11.8%
Earnings per share 17.42p 19.92p -12.5%
Adjusted earnings per share(2) 18.82p 21.37p -11.9%
Free cash flow(3) £16.9m £29.5m -42.6%
Net cash/(debt) £28.7m £52.5m -45.3%
Total ordinary dividend per share 12.06p 11.81p +2.1%
1 Group adjusted EBITDA (earnings before interest,
tax, depreciation and amortisation) is calculated as statutory operating
profit plus depreciation, amortisation, impairment, 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. These adjustments show the underlying trade of the overall
business which these costs or income can distort. The reconciliation to
operating profit is set out below in the CFO review.
2 Adjusted group profit before /after tax is
calculated as group profit before/after tax, adding back acquisition fees of
£0.9m (FY2023: £0.7m), the non-cash expense of £1.9m (FY2023: £2.0m)
related to the fair value of the earn out consideration on the Teaquinn
acquisition in May 2022 and deducting the £0.6m received in compensation for
the closure of our Surrey Quays centre. Also, in FY2023 it included the
removal of the reduced rate (TRR) of VAT benefit on bowling of £0.3m.
3 Free cash flow is defined as net cash flow
pre-exceptional items, cost of acquisitions, debt facility repayment, RCF
drawdowns, dividends and equity placing.
4 Group revenue in FY2023 includes £0.2m in respect
of TRR of VAT.
5 Revenues in GBP based on an actual foreign exchange
rate over the relevant period, unless otherwise stated.
Key highlights
A year of record revenue driven by strong customer demand and operational
delivery
· Total revenue of £230.4m, up 7.1% (FY2023: £215.1m)
· +0.2% like-for-like (LFL) revenue growth compared to FY2023
o UK total LFL: flat overall, with UK bowling centres LFL of +0.3%
o Canada total LFL: +6.3%, with Canada bowling centres LFL of +5.9%, on a
constant currency basis
· Group adjusted EBITDA (pre-IFRS) of £67.7m (FY2023: £64.9m)
ahead of expectations
· Group adjusted profit before tax of £45.0m (FY2023: £47.5m);
Group profit before tax decreased to £42.8m (FY2023: £45.1m) reflecting the
£5.3m (FY2023: £2.2m) impairment relating to mini-golf centres in the year
· Group adjusted profit after tax of £32.3m (FY2023: £36.6m);
Group profit after tax decreased to £29.9m (FY2023: £34.2m)
· In line with last year's updated capital allocation policy,
proposed final ordinary dividend of 8.08 pence per share, bringing total
ordinary dividend to 12.06 pence per share
Driving returns through record £50m investment in the quality of the estate
and expanding the portfolio in the UK and Canada
· UK - 72 centres at period end
o Ten centres refurbished with all trading in line with expectations
including those on 2(nd) or 3(rd) refurbishment cycle
o Four new centres added, including the acquisition of Lincoln Bowl and new
centres in Dundee, Westwood Cross (Kent) and Colchester
o Solar panels installed at three more centres in FY2024, bringing the total
to 30 centres in the UK (42% of the estate)
· Canada - 13 centres at period end
o Two refurbishments completed, leveraging expertise and practices from the
UK, all performing in line with expectations and receiving positive customer
feedback
o Four new centres added including first custom-built development in
Waterloo, Ontario
Continued innovation and investment into our customer offer, resulting in
higher spend per game, customer satisfaction and dwell time
· Group average spend per game increased by 2.1% to £11.05 (2023:
£10.82)
o Investment in amusements offer and further expansion of contactless
payment technology increasing amusement spend per game by 6.1%
o 6.0% increase in diner spend per game and 0.6% in bar spend per game
supported by at-lane drink ordering technology
· Achieved record UK net promoter score of 70% (FY2023: 64%) and
value-for-money customer feedback scores up 4%pts compared to FY2023
· Further investment in quality of offer with Pins on Strings
technology now in over 90% of UK estate and trial commenced in Canada
· Investment of £1.5m in new modern and flexible customer booking
system rolled out in UK resulting in improved reliability and reduced costs;
pilot commenced in Canada
Outlook
Strong liquidity position and resilience to inflationary pressures
· Net cash at year end of £28.7m following record levels of
capital investment and expansion and the £25m RCF remains fully undrawn
· Over 70% of Group revenue not subject to cost of goods inflation
· Labour cost in the UK less than 20% of revenue at centre level
· Expected increase from NI changes expected to be c.£1.2m on an
annualised basis from April 2025
· Well-placed to mitigate the increased costs while keeping bowling
offer affordable for our customers with a family of four able to bowl for £26
Well-placed to continue executing against ambitious growth strategy
· High demand for competitive socialising and strong appeal of
bowling as a family-friendly activity with Hollywood Bowl the lowest cost
option of the major UK ten-pin bowling operators
· Group trading performance has started well in FY2025 and we
remain positive about our future prospects
· Maintaining our well-invested estate with ten refurbishments
planned across the UK and Canada in FY2025
· Expect to open at least four additional centres in the UK and two
in Canada by the end of FY2025
· On track to meet target of 130 centres by 2035
Stephen Burns, Chief Executive Officer, commented:
"We are pleased to report another strong performance reflecting the ongoing
demand for family friendly, affordable leisure. I am extremely grateful to my
fantastic colleagues for their hard work and dedication each day to giving our
customers the best possible experiences.
"Following a year of record levels of investment, our proven growth strategy
continues to deliver strong returns. Bowling is unique in its ability to
appeal to a wide demographic with anyone able to take part, and we are
confident in the ongoing strong demand for fun and inclusive family-friendly
experiences at an affordable price. The outlook remains positive as we
continue to expand and innovate in the UK and seize the significant market
opportunity in Canada."
Enquiries: Via Teneo
Hollywood Bowl Group PLC
Stephen Burns, Chief Executive Officer
Laurence Keen, Chief Financial Officer
Mat Hart, Chief Marketing and Technology Officer
Teneo
Elizabeth Snow hollywoodbowl@teneo.com
Laura Marshall +44 (0)20 7353 4200
Chair's statement
Hollywood Bowl Group has had another successful year, delivering further
revenue growth and making excellent strategic progress, enhancing the quality
of our estate and expanding our footprint in the UK and Canada.
The successful execution of our growth strategy, underpinned by our
customer-focused, value-for-money proposition, is strengthening our position
as a market-leader in both the ten-pin bowling market and the wider
competitive socialising market.
Group revenue grew by 7.1 per cent to £230.4m and 0.2 per cent on a LFL
basis, as we achieved another year of record revenues, in line with
expectations, against the very strong prior year comparative and previous two
years of exceptional growth. Our continued focus on operational excellence and
customer experience supported our growth in Group adjusted EBITDA to £87.6m
and delivered profit after tax of £29.9m.
The strong performance in FY2024 is a testament to the continued dedication of
our team members and proof of their hard work in delivering outstanding
customer experiences, as demonstrated by our record customer satisfaction
levels achieved during the year.
We made further progress in our ESG strategy and our collective efforts to
embed a sustainable and responsible approach across all of our operations are
a real source of pride.
FY2024 was a year of further investments supporting the Group's growth
strategy, including the record ongoing investment into our existing assets and
growing our estate, supported by our strong liquidity. We have invested more
than £50m into the estate in the past year, maintaining the current centres,
continuing to roll out Pins on Strings, opening and acquiring new centres as
well as completing 12 refurbishments across the UK and Canada. We added eight
centres to our estate during the year, bringing our total to 85, with 72 in
the UK and 13 in Canada.
We have also continued to invest in technology to support our next stage of
growth, and in July launched a new modern and flexible reservation platform.
The system has been rolled out in the UK with excellent results including
improved usability, reliability, speed and reduced operational costs. Already
being piloted, we will be rolling this system out in our Canadian operations
in FY2025.
Further growth in the UK
UK families continue to face cost of living challenges, and against that
backdrop, delivering high-quality experiences that can be enjoyed for great
value is even more important. Our resilience to inflationary pressures means
that we have been able to keep our prices affordable, a family of four being
able to enjoy a game of bowling with us for under £26. Our bowling prices in
the UK rose by just 20 pence in FY2024, well below inflation, to an average of
£7.15 for adults and £6.21 for children, and with food, drink and amusement
price increases also kept low, meaning that, in real terms, it was cheaper
than the previous year for our customers to enjoy an outing to Hollywood Bowl.
UK LFL performance was driven by increased spend per game in all areas of the
business and an overall spend per game increase of 3.3 per cent. Game volumes
declined marginally, primarily as a result of the difference in trading
conditions compared to FY2023 when unseasonal weather conditions during key
trading periods drove people indoors, compounded by the impact of a summer of
major sporting events in FY2024.
We are constantly innovating and improving our customer experience, trialling
new initiatives which, if successful, are introduced to our centres as part of
our ongoing refurbishment programme. We completed ten UK centre refurbishments
in the year, some of which are now entering their second or third-generation
cycle. We continue to deliver impressive returns on investment for all
generations of refurbishments as well as receiving excellent customer
feedback.
We have continued to grow our UK estate, adding four centres during the year,
including one acquisition, Lincoln Bowl, which has since been rebranded and
refurbished and is trading in line with expectations.
Excellent progress in Canada
Our Canadian business continues to go from strength to strength. Since
entering the market in May 2022, through the acquisition of Splitsville and
its five centres, we have more than doubled the size of our estate to 13
centres. In FY2024, we added four new centres through the three acquisitions
and opening of our first new, state-of-the-art development in Waterloo,
Ontario.
The refurbishment programme is progressing well and we completed two during
the year, leveraging our customer-led operating expertise, technology and
brand experience from the UK. We continue to test and seek feedback when
developing new ways to evolve the offer for customers in Canada, allowing us
to attract a wider customer base. We have so far transferred four UK team
members to Canada, demonstrating the importance we place on the sharing of
knowledge between our UK and Canadian teams.
Splitsville is already the largest single branded operator in the territory
and, as the market remains under-invested and highly fragmented, we are
excited about the significant opportunity to grow and add value to the
Splitsville business. We have a pipeline of acquisition opportunities and new
development centres and by the end of FY2025, we expect to have tripled our
original size.
Capital allocation policy
Given our financial position and cash balance at year end, the Board is
pleased to declare a final ordinary dividend of 8.08 pence per share in line
with our capital allocation policy of 55 per cent of adjusted profit after
tax. Together with the interim dividend of 3.98 pence per share, this
represents 2.1 per cent growth in the ordinary dividend compared to the prior
year. Total shareholder returns for FY2024 will amount to £20.7m.
Social and environmental responsibility
We are progressing with our environmental and social agenda, with oversight
from the Corporate Responsibility Committee which we established in FY2023. To
support our wider pathway to achieving net zero, we installed more solar
panels in our centres, with 42 per cent of our UK estate now fitted with
nearly 15,000 solar panels, providing clean energy to our centres and reducing
our reliance on bought-in energy and exposure to energy prices. We have also
made progress with our waste recycling levels, our responsible construction
approach and our supplier engagement programme. Furthermore, we have also
begun to introduce our sustainability strategy to our Canadian operations and
have set targets for FY2025.
Our people are our most important asset and are critical to our customers
receiving a consistently high-quality experience in our centres. We are proud
to support all our team members through our industry-leading training and
development programmes, as well as financially through comprehensive bonus and
incentive schemes. We have made further progress through our updated employer
brand which was relaunched last year, enabling us to attract the best talent
but also to give our team members the opportunity to progress and develop
their careers. Our UK operation has a low staff turnover rate compared to the
wider hospitality sector, and we are delighted that 58 per cent of management
appointments in FY2024 were filled by internal talent. The efforts of our
people team were recognised once again, as the Group was named one of The UK's
Best Big Companies to Work For.
We were pleased to continue to support the communities where we operate,
including increasing the number of concessionary discount games played to over
1m and breaking our charity fundraising target for our partner Macmillan by
raising £85,000.
Board changes
Nick Backhouse, who served as the Group's Senior Independent Director (SID),
retired by rotation from the Board at the Annual General Meeting (AGM) in
January 2024. Consequently, Rachel Addison, appointed to the Board in July
2023, has stepped up as SID and also taken on the position of Chair of the
Audit Committee.
In line with the Group's succession planning, I too will be retiring by
rotation from the Board after ten years as Non-Executive Chairman, Chair of
the Nomination Committee and member of the Corporate Responsibility Committee
at the AGM in January 2025.
Darren Shapland has been appointed as an independent Non-Executive Director
and Chair Designate, as well as a member of the Nomination and Corporate
Responsibility Committees, effective 1 December 2024. Darren brings extensive
experience from his 40-year career in retail and consumer businesses and I am
confident he is the right person to lead the Board as the Group enters its
next stage of growth.
I am very proud of the Group's many achievements since I joined in 2014, up to
and including its inclusion in the FTSE 250 in March 2024, and look forward to
following the Group's continued growth.
Long-term growth
Our continued strong performance demonstrates the robust demand for fun,
affordable, family-friendly leisure activities.
We remain resilient to inflationary pressures with over 70 per cent of Group
revenue not subject to cost-of-goods inflation, enabling us to continue to
meet this demand while reinforcing our reputation for delivering high-quality,
great value-for-money experiences.
The new measures announced by the UK Government in the October Budget will
disproportionately impact the hospitality industry as a result of the
significantly increased employment costs for a sector powered by people. Even
with these new changes, Hollywood Bowl remains well positioned for future
growth and to mitigate the significantly increased labour costs while keeping
our bowling offer affordable for our customers.
The Group has a successful, proven strategy focused on growing and improving
the quality of the estate in the UK and Canada, and enhancing the customer
experience. The highly cash generative nature of the business and strength of
our balance sheet mean that we are well placed to pursue opportunities to
invest in our future growth and meet our target of 130 centres by 2035, whilst
continuing to make returns to shareholders.
I would like to take the opportunity in this, my final Annual Report as
Chairman, to thank every team member and my fellow Board members, past and
present, for ten memorable and exciting years. I also wish to thank the many
and varying stakeholders for the support and contributions they have made over
the past ten years. It has been a privilege to serve as the Group's Chairman.
Hollywood Bowl Group has a very promising future, and I wish it every success.
Peter Boddy
Non-Executive Chair
16 December 2024
Chief Executive Officer's review
Hollywood Bowl Group delivered another excellent performance in FY2024. The
continued investment in the quality and expansion of the estate in the UK and
Canada, as well as further innovation of the customer experience, led to
impressive operational and financial performance.
Group revenue grew 7.1 per cent to £230.4m and 0.2 per cent on a LFL basis,
with adjusted profit before tax of £45.0m, and adjusted profit after tax of
£32.3m. Statutory profit before tax was £42.8m (FY2023: £45.1m) and profit
after tax £29.9m (FY2023: £34.2m). This includes the impact of an impairment
in the year of £5.3m (FY2023: £2.2m) in relation to the mini-golf centres.
Our continued growth has been achieved by executing our clear and consistent
customer-led strategy to provide great value-for-money, family-friendly
experiences in well-invested venues, and to grow the size of our estate.
The Group's robust financial position, characterised by a highly cash
generative model and no bank debt drawn, underpins our ability to drive
returns through investment in our growth strategy. The Group's capital
investment in new centres, acquisitions and refurbishments in FY2024 was over
£50m. The Group grew to 85 centres, opening four new centres in the UK and
four in Canada, as well as completing ten UK and two Canada refurbishments in
FY2024. Net cash at the end of FY2024 was £28.7m.
In the UK, we are the established market leader delivering a best-in-class
experience while remaining the best value of the branded bowling operators.
Our progress in Canada means we are now the largest branded bowling operator
and, leveraging our Group expertise, we are enhancing the standard of
experience for our customers.
None of this would be possible without our highly talented, enthusiastic and
motivated teams. I thank them for the hard work that goes into providing our
customers with an excellent customer experience each day as evidenced by the
record UK customer satisfaction levels achieved during the year.
Outstanding UK performance
We delivered another outstanding result in the UK, particularly in the context
of the two previous years of exceptional performances.
Our FY2024 performance demonstrates the robust demand for family-friendly,
affordable leisure activities, as well as the success of our growth strategy.
As a result of our customer-focused operating model, we grew average spend per
game by 2.1 per cent to £11.05.
Total UK revenue grew 3.8 per cent year on year, with LFL revenue flat year on
year, with growth of 0.3 per cent in the Hollywood Bowl centres offset by the
decline seen in the Puttstars trial centres. Adjusted EBITDA on a pre-IFRS 16
basis in the UK increased to a record £62.3m and there is more detail on this
in the Chief Financial Officer's review.
Value for money
UK families remain under pressure from cost-of-living challenges and we are
proud that we can still offer a family of four a game of bowling for £26,
even at peak times. Headline bowling prices have increased by a CAGR of just
2.6 per cent since 2021, well below inflation and National Living Wage
increases. Our dynamic pricing allows us to offer even better value for
customers at non-peak periods, helping to drive incremental volume alongside
carefully controlled yield enhancement.
Our simplified food menu and the focus on speed, quality, consistency and
value for money have supported a 2.4 per cent increase in bar and diner spend
per game, with value-for-money scores also up compared to FY2023.
Our market-leading amusements continues to be key to our attractiveness to
customers. In FY2024 we saw spend per game grow by 6.1 per cent with
investment in new machines, as well as the use of seamless payment technology,
being fundamental in this performance. Our play for prizes machines are a
great way for our customers to play and win, which provides an unmatched
value-for-money experience.
Refurbishments
Our rolling refurbishment programme remains on track. Ten UK centre
refurbishments were completed during the year, some of which are on their
second or third generation refurbishment, benefiting from the continuous
learnings made over the last cycle of investment.
This constant innovation of our customer offer is a key driver of higher spend
in our centres. In addition to introducing the latest digital signage and new
brand environments, we are finding new opportunities to optimise our space
that complement our core bowling offer and increase the yield per sq ft
potential. This includes increasing the density and range of our amusements,
as well as introducing new payment options, helping drive amusement SPG by
more than 6 per cent. In some centres, where space allows, we have introduced
extra full-size or compact-format bowling lanes, such as duck-pin and
five-pin, as well as including mini-golf courses.
All of the completed refurbishments are trading in line with or above our
expectations since the investment.
We have continued the roll out of Pins on Strings with eight installed in the
year and a further four have been completed since the end of the financial
year, meaning that all but two of our UK centres benefit from this cost-saving
and experience-enhancing technology at the time of writing.
New centres
We added four centres in the UK during the year, taking our total UK estate to
72. We acquired Lincoln Bowl in the first half of the year, and opened three
new centres in the second half, in Dundee, Westwood Cross (Kent) and
Colchester. We are pleased with the performance of all the new centres,
demonstrating the strength of our new centre pipeline and our ability to
secure opportunities in prime locations in line with our strict investment
criteria.
The highly anticipated Westward Cross centre, which saw a former department
store transformed into an anchor leisure destination, set trading records in
its opening weekend in August 2024 following a two-year development.
The success of our recent openings is also helping to evolve our framework of
what creates a prime new centre location. This has been demonstrated by the
new Merry Hill and Westward Cross centres which are both located in
high-footfall shopping centre schemes and are trading ahead of expectations.
It was disappointing to have to close our centre in Surrey Quays as part of a
landlord redevelopment, but we have added capacity to our centre at London O2
as part of its refurbishment and are confident this will be appealing to those
customers.
We have an exciting pipeline of new opportunities with a further four expected
to open in FY2025 and we remain on track to meet our target of six new UK
centres by FY2026.
Puttstars
In FY2020, we launched a mini-golf leisure brand called Puttstars, testing the
concept in five centres. Whilst we have seen some good performance, it has
become clear that bowling centres offer higher returns potential and will
remain the Group's first choice when entering new locations.
The significant insights gained from the Puttstars centres have allowed us to
evolve our mini-golf customer offer and optimise space returns through the
addition of complementary duck-pin bowling and amusement activities in four of
the five centres. To better reflect the extended offer, leverage the Hollywood
Bowl brand association and marketing channels, and deliver greater operational
efficiencies, these four Puttstars centres have now been rebranded as 'Putt
and Play from Hollywood Bowl'. The fifth centre in York, which had Puttstars
as a standalone offer above a Hollywood Bowl, was integrated into the
Hollywood Bowl unit and operated as a combined single unit, from July 2024.
Investment in technology
We have invested significantly in our customers' digital journey over the last
year, developing our own new, modern and flexible technology platform that we
can further evolve and which will support our next stage of growth.
We successfully launched the system in July 2024, resulting in a more
scalable, reliable and usable reservation system that integrates with our
marketing and data platforms. We are delighted with the results so far. The
booking experience has been significantly improved for our customers and team
members, with increased usability, reliability, speed and an uptick in online
conversion rates, as well as reduced operational costs.
We have direct control of the system, having developed the technology
in-house, and therefore we can enhance functionality over time. Following the
success of this launch in the UK, we are piloting the system in Canada and
will make any locally relevant adjustments before beginning the roll out in
FY2025.
Exciting Canada opportunity
Our business in Canada performed well, with total revenue increasing by 42.2
per cent to CAD 53.0m (£30.7m) and LFL revenue on a constant currency basis
up by 6.3 per cent. Adjusted EBITDA on a pre-IFRS 16 basis increased by CAD
2.1m to CAD 9.5m (£5.4m).
Acquisitions and new centre developments
The Canadian market remains highly fragmented and underinvested, creating a
significant opportunity for us to acquire existing businesses that fit our
strict criteria or extend our geographic presence through new centre
developments in well-populated urban areas that are currently under-served by
family entertainment offers.
We added four new sites during the year, taking the total size of the estate
to 13 centres and making the Group the single largest branded bowling operator
in Canada.
We acquired two centres, Woodlawn Bowl in Ontario and Richmond Riverport
(Lucky 9) in British Columbia, in the first half, and Stoked in Saskatchewan
in June 2024, all of which are performing in line with expectations.
Woodlawn Bowl is a 36,000 sq ft centre acquired for CAD 4.7m (£2.8m). It
offers 24 lanes of ten-pin and 8 lanes of five-pin bowling, a large amusements
area and a bar and diner. Richmond Riverport was acquired for a total
consideration of CAD 425k and included the assets and lease of a family
entertainment centre featuring 34 ten-pin and 6 five-pin lanes, a large bar
and diner, and a small amusements area.
Woodlawn Bowl and Richmond Riverport have had signage installed rebranding
them to Splitsville and essential maintenance capital invested, prior to their
full refurbishments which are due to be completed in FY2025.
The Saskatoon centre is a high-quality indoor entertainment complex operating
as 'Stoked', a well-established brand in the local area. In addition to 15
bowling lanes, the centre offers multiple activities, including high ropes,
zipline, go karting, arcade and a bar and dining area. The centre, which will
remain under the management of its existing local team with support from the
Splitsville team, provides us with the opportunity to trial an enhanced
entertainment offer and other competitive socialising activities in the
Canadian market.
We were delighted to open our first custom-built centre in Waterloo, Ontario,
in July. Located in the heart of this tri-university city, benefitting from a
large local student population, the 43,000 sq ft state-of-the-art Splitsville
Waterloo is the first family entertainment bowling centre in the area.
Offering 24 bowling lanes, an arcade, a bar and lounge, pool tables and sports
games, it is well on its way to achieving its return targets. Given the
infancy of the Splitsville brand, we expect new centres in Canada to take a
little longer to get to maturity than in the UK.
As we continue to open new centres in Canada, we are leveraging our
development expertise gained in the UK to ensure that future construction and
refurbishment projects are delivered on budget and on time. We have exchanged
on a further three new sites, two of which are in Alberta and one in Ottawa;
at least two of these are expected to open in FY2025.
In addition to our organic growth pipeline, we continue to see opportunity to
grow the estate through the acquisition of single-owned centres or small
group-owned businesses.
Refurbishments
Our refurbishment programme has also progressed well, delivering strong
returns and excellent customer feedback. We completed the refurbishment of two
centres in FY2024, at Kingston and Glamorgan, introducing new signage,
upgraded environments, new technologies and yield-enhancing space
optimisations. We are confident these investments will hit our 25 per cent
hurdle rate for refurbishments in Canada.
Leveraging our expertise
Our success to date demonstrates our ability to increase our market share,
enhance the customer offer through refurbishments and innovation, and provide
an industry-leading competitive socialising experience to a wide customer
demographic. As we continue to learn more about our Canadian customers, we can
do more to apply our insights alongside our proven UK operating model to this
market.
This will be evident in a number of different ways. We have already begun
sharing our best practice and knowledge, not least through a number of our UK
team taking up a variety of operational roles in our Canada business. We are
moving to align our technology and Group support functions, increasing our
operational efficiency and further enhancing our returns in Canada.
Striker
Our Striker business continues to perform well and grow in line with increased
investment into bowling centres. Revenues in FY2024 totalled CAD 7.7m
(£4.5m), with a good order book for multiple installation and maintenance
projects in FY2025.
Our ability to invest in bowling equipment and technology at cost has
significantly reduced our capital expenditure and lead times for centre
upgrades as we invest in the quality of the estate in Canada.
An industry-leading team
Our teams are at the heart of delivering an excellent customer experience and
key to the Group's success.
We take great pride in our industry-leading, in-house training and development
programme. For the third year running, we ranked among the UK's Best Big
Companies to Work For. We also retained the top 3* ranking for our working
practices at our Hemel Hempstead Group support office.
This year, we achieved record attendance on our management development
programmes, and we were delighted that 58 per cent of internal management
positions were achieved through internal appointments. These results explain
why we have relatively low team member turnover rates compared to the wider
leisure market and illustrate our record in home-growing talent.
For FY2024 we paid out over £1.0m in centre-level management bonuses and
£0.6m to hourly rate team members measured against financial, environmental
and customer satisfaction criteria.
Growing sustainably
Running and growing our business in a sustainable manner remains a key focus
for the Group, and we are making good progress against our sustainability
strategy and targets. We have recycled more waste than ever before, an
achievement supported by behavioural programmes and the application of
standard operating procedures. The rollout of solar panels in the UK continues
with 30 centres benefiting from solar arrays at the year end, and two more
currently in progress.
Discussions with landlords and identifying opportunities to increase the
number of centres using renewable energy is a key priority as we continue to
seek to reduce our centre level carbon footprint and reliance on purchased
electricity. We are also installing more low-carbon materials and
energy-efficient technologies in refurbishments and new centre builds.
Our centres continue to play an important social role in our local
communities, and we were pleased to have beaten our targets for concessionary
discount and school games played and for charity fundraising for our new
charity partner, Macmillan.
We will be more closely aligning our Canadian operations with our UK
sustainability strategy from FY2025, so that we can further improve our
environmental and social performance.
Resilient to inflationary pressures
Our unrelenting focus on service and delivering value for our stakeholders,
alongside managing costs, has continued and we have hedged our energy costs
through FY2027. In addition, we are well insulated from inflationary pressures
with over 70 per cent of our revenue not subject to cost-of-goods inflation.
We also have relatively low exposure to National Living Wage increases
compared to other leisure operators, given our labour cost in the UK is less
than 20 per cent of revenue at centre level.
Update following UK Government Budget
The recent changes announced by the Government in the Budget to Employers'
National Insurance contributions and threshold levels, coupled with ongoing
wage increases will have a significant impact on the hospitality industry. It
will be felt most keenly by smaller operators across the country for whom the
increased costs will be unsustainable and therefore could be at risk of
closure. There are likely to be further consequences following the Government
changes with potential for higher inflation, and future job creation, and
growth investment at risk.
While we are not immune from these changes, as a bowling business with an
average customer frequency of around once a year, significant scale
advantages, strong cost culture and a relatively low labour-to-revenue ratio
of under 20 per cent in the UK, we are in a better position than many to
mitigate the effect of increased costs.
The Employers National Insurance cost for an average UK hourly paid team
member working 20 hours per week, on national living wage, will increase from
just under £400 per annum, to £1,155 per annum. We expect the cost impact to
be c. £1.2m on an annualised basis from when the changes are implemented in
April 2025.
As a people-led business, our success hinges on having great people who
deliver the best possible experience to our customers. We are working to
mitigate the cost challenges presented by the Chancellor's recent budget, and
our commitment to prioritising investment in attracting and retaining top
talent won't change as a result of these new measures.
Outlook
The recent changes announced by the Chancellor to employers' National
Insurance, coupled with ongoing wage increases, pose challenges for many
businesses. We had expected the increase to wages, but the increased tax
burden now falls heavily on labour-intensive sectors, like hospitality.
The competitive socialising market has evolved in recent years due to a strong
consumer appetite to share unique and inclusive experiences, shaping how
consumers spend their discretionary income. Whilst many new and different
concepts have launched in recent years, we believe that bowling retains its
unique position with its ability to appeal to a wide demographic with anyone
able to take part.
In a growing market, and against the backdrop of upcoming inflationary
pressures off the back of the new Government measures, customer service and
great value for money will be a true point of differentiation. We are
committed to supporting our teams to deliver outstanding customer service,
whilst maintaining an affordable price point for our customers.
Our performance in FY2024 demonstrates our ability to execute our customer-led
strategy and generate attractive returns through investment, supported by our
strong balance sheet and highly cash generative business model.
We have ten refurbishments planned across the UK and Canada in FY2025 as we
continue to prioritise maintaining our well-invested estate with further
innovation of our customer offer, setting industry standards.
The Group is on track to reach our target of 130 centres by FY2035 and plan to
open four new centres in the UK and at least two in Canada, in FY2025.
We are in an excellent position for future growth, with our strong UK and
international pipeline, capital investment programme and our highly resilient
business model. We remain confident in the outlook for the business as the
market leader in competitive socialising in both the UK and Canada, and we are
well positioned for another successful year ahead.
Stephen Burns
Chief Executive Officer
16 December 2024
Chief Financial Officer's review
Group financial results
FY2023 Movement
FY2024 vs
FY2024 FY2023
Revenue £230.4m £215.1m (5) +7.1%
Gross profit on cost of goods sold(1) £191.2m £177.6m +4.5%
Gross profit margin on cost of goods sold(1) 83.0% 82.6% +40bps
Administrative expenses(1) £137.7m £123.5m +11.5%
Group adjusted EBITDA(2) £87.6m £82.7m +5.9%
Group adjusted EBITDA(2) pre-IFRS 16 £67.7m £64.9m +4.3%
Group profit before tax £42.8m £45.1m -5.2%
Group profit after tax £29.9m £34.2m -12.4%
Group adjusted profit before tax(3) £45.0m £47.5m -5.2%
Group adjusted profit after tax(3) £32.3m £36.6m -11.8%
Free cash flow(4) £16.9m £29.5m -42.6%
Total ordinary dividend per share 12.06p 11.81p +2.1%
1 Gross profit on cost of goods sold is calculated as revenue less
directly attributable cost of goods sold and excludes any payroll costs. This
is how we report in the business monthly and at centre level, as labour costs
are judged as material and thus reported separately within administrative
expenses. Administrative expenses also includes a settlement payment from the
landlord resulting from the closure of Hollywood Bowl Surrey Quays (£0.6m).
2 Group adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation) is calculated as statutory operating profit plus
depreciation, amortisation, impairment, 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. These adjustments show the underlying trade of the overall business which
these costs or income can distort. The reconciliation to operating profit is
set out below.
3 Adjusted group profit before /after tax is calculated as group profit
before/after tax, adding back acquisition fees of £0.9m (FY2023: £0.7m), the
non-cash expense of £1.9m (FY2023: £2.0m) related to the fair value of the
earn out consideration on the Teaquinn acquisition in May 2022 and deducting
the £0.6m received in compensation for the closure of our Surrey Quays
centre. Also, in FY2023 it included the removal of the reduced rate (TRR) of
VAT benefit on bowling of £0.3m.
4 Free cash flow is defined as net cash flow pre-exceptional items,
cost of acquisitions, debt facility repayment, RCF drawdowns, dividends and
equity placing.
5 Group revenue in FY2023 includes £0.2m in respect of TRR of VAT.
6 Revenues in GBP based on an actual foreign exchange rate over the
relevant period, unless otherwise stated.
Following the introduction of the lease accounting standard IFRS 16, the Group
continues 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, a measure that
investors use to consider the underlying business performance as well as being
a measure contained within the group's available loan facility. 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.
All LFL revenue commentary excludes the impact of TRR of VAT on bowling. New
centres in the UK and Canada are included in LFL revenue after they complete
the calendar anniversary of their opening date. Closed centres are excluded
for the full financial year in which they were closed.
Further details on the alternative performance measures used are at the end of
this report.
Revenue
On the back of record revenues in FY2023, it was encouraging to continue to
see revenue growth in both the UK and Canada. Total Group revenue for FY2024
was £230.4m, 7.1 per cent growth on FY2023.
UK centre LFL revenue growth was flat with spend per game growth of 3.3 per
cent, taking LFL average spend per game to £11.19, and a 3.2 per cent decline
in LFL game volumes. The LFL revenues, alongside the performance of the new UK
centres, resulted in record UK revenues of £199.7m and growth of 3.8 per cent
compared to the very strong underlying revenues in the prior year. Since
FY2019 the UK business has seen 5.9 per cent compound annual revenue growth.
Canadian LFL revenue growth, when reviewing in Canadian Dollars (CAD) to allow
for the disaggregation of the foreign currency effect (constant currency), was
6.3 per cent. Alongside this strong LFL revenue growth, new centres performed
well and resulted in total revenue of CAD 53.0m (£30.7m), growth year on year
in Canada of 42.2 per cent on a constant currency basis. Splitsville bowling
centre revenue was up CAD 15.2m (50.4 per cent) to CAD 45.3m.
Gross profit on cost of goods sold
Gross profit on cost of goods sold is calculated as revenue less directly
attributable cost of goods sold and does not include any payroll costs. Gross
profit on cost of goods sold was £191.2m, 7.7 per cent growth on FY2023 with
gross profit margin on cost of goods sold at 83.0 per cent in FY2024, up 40bps
on FY2023.
Gross profit on cost of goods sold for the UK business was £167.6m with a
margin of 83.9 per cent, up 20 bps on FY2023.
Gross profit on cost of goods sold for the Canadian business was in line with
expectations at CAD 40.7m (£23.6m), with a margin of 76.8 per cent (FY2023:
73.6 per cent). This margin increase is due in part to the significant revenue
growth seen in the Splitsville bowling centres which make up a significantly
larger proportion of total revenue in Canada versus our Striker equipment
business. Splitsville had a gross profit margin on cost of goods sold of 84.8
per cent, in line with expectations. Striker generated revenue of CAD 7.7m
(FY2023: CAD 7.1m) in the year.
Administrative expenses
Following the adoption of IFRS 16 in FY2020, administrative expenses exclude
property rents (turnover rents are not excluded) and include the depreciation
of property right-of-use assets.
Total administrative expenses, including all payroll costs, were £138.3m. On
a pre-IFRS 16 basis, administrative expenses were £144.3m, compared to
£130.0m in FY2023.
Employee costs in centres were £45.7m, an increase of £5.0m when compared to
FY2023, due to a combination of the impact of the higher than inflationary
national minimum and living wage increases seen compared to the prior year,
the impact of higher LFL revenues, new UK centres, as well as the significant
revenue growth in Canadian centres.
Total centre employee costs in Canada were CAD 13.6m (£7.8m), an increase of
CAD 4.1m (£2.2m), whilst UK centre employee costs were £37.9m, an increase
of £2.9m when compared to FY2023.
Total property-related costs, accounted for under pre-IFRS 16, were £42.0m,
with £37.4m for the UK business (FY2023: £33.9m). Rent costs account for
nearly 50 per cent of total property costs in the UK and increased to £18.3m
(FY2023: £17.6m) and were up less than one per cent on a LFL basis. We
received business rates rebates in the second half, in relation to claims made
in respect of the 2023 revaluation being agreed. These rebates resulted in
business rates in the UK being flat year on year, at £5.6m. Underlying
business rates for H2 FY2025 are expected to increase by 1.7 per cent on a LFL
basis.
Canadian property centre costs were in line with expectations at CAD 7.9m
(£4.6m), an increase of CAD 3.4m due to the increased size of the estate when
compared to FY2023.
Utility costs increased compared to the same period in FY2023, by £1.9m, with
UK centres accounting for £1.7m of this increase due to a combination of an
increase in the cost per unit and the hedge sell off during FY2023, with the
balance in relation to the increased number of centres in Canada.
Total property costs, under IFRS 16, were £47.6m, including £13.8m accounted
for as property lease assets depreciation and £11.6m in implied interest
relating to the lease liability.
Total corporate costs decreased marginally year on year, by £0.4m, to
£24.9m. UK corporate costs reduced by £2.0m to £20.6m. As we continue to
build out our support team in Canada for growth, corporate costs increased to
CAD 6.5m (£3.8m) from CAD 3.9m (£2.4m).
The statutory depreciation, amortisation and impairment charge for FY2024 was
£32.2m compared to £26.1m in FY2023. This increase is in part due to the
continued capital investment programme, including new centres and
refurbishments.
We undertook detailed impairment testing which resulted in an impairment
charge in the year of a total of £5.3m (FY2023: £2.2m). This impairment
primarily relates to our Puttstars mini-golf centres.
Whilst these centres were intended to explore customer interest in mini-golf
based entertainment alongside a food, drink and amusement offering, the
results have indicated that customer demand for mini-golf centres is lower
than anticipated. These results support the decision to focus on the continued
expansion of our Hollywood Bowl and Splitsville locations, as well as
rebranding of Puttstars mini-golf centres to 'Putt & Play from Hollywood
Bowl'.
The impairment reflects a discounted cash flow analysis of future cash flows,
resulting in a reassessment of the carrying value of property, plant and
equipment (PPE) and right-of-use (ROU) assets associated with the mini-golf
centres on the balance sheet. The discount rate used for the weighted average
cost of capital (WACC) was 12.4 per cent pre-tax (FY2023: 12.7 per cent) in
the UK.
See note 12 to the Financial Statements for more information.
Canadian performance
The Group has continued to grow its footprint in Canada, with 13 centres at
the end of FY2024 (FY2023: 9). During FY2024 the Group acquired three centres
- in November 2023 it acquired Woodlawn Bowl in Ontario and Lucky 9 Bowling
Centre Limited as well as its associated restaurant and bar, Monkey 9 Brewing
Pub Corp ('Riverport') in British Columbia. Both of these centres will benefit
from investment in FY2025, with Riverport having a significant refurbishment
costing over CAD 3.0m, which will include, but not be limited to, the
introduction of a full amusement offer as well as the installation of Pins on
Strings.
In June 2024, the Group acquired Stoked, a multi-activity family entertainment
centre in Saskatoon. All three acquisitions are trading in line with
management expectations. We were also pleased to open our first greenfield
centre, in Waterloo, Ontario.
The Canadian business continues to trade strongly, with total revenues in
Canada of CAD 53.0m (£30.7m), and just over CAD 9.4m (£5.4m) of EBITDA on a
pre-IFRS 16 basis. Bowling centres contributed CAD 45.3m of revenues with
EBITDA on a pre-IFRS 16 basis of CAD 14.7m, an increase of CAD 4.4m on the
same period in FY2023.
Exceptional costs
Exceptional costs in FY2024 totalled £2.3m (FY2023: £2.4m) and relate to
three areas. The first is the acquisition costs in relation to the acquisition
of four centres - one in the UK and three in Canada, which totalled £0.9m.
The second is the earn out consideration for Teaquinn President Pat Haggerty,
which is an exceptional cost of £1.9m, of which £1.5m is in administrative
expenses and £0.4m is in interest expenses. See the table below for the
exceptional items included in the Group adjusted EBITDA and operating profit
reconciliation. We also received £0.6m in compensation for the closure of our
Surrey Quays centre. More detail on these exceptional costs is shown in note 5
to the Financial Statements.
Group adjusted EBITDA and operating profit
Group adjusted EBITDA pre-IFRS 16 increased 4.3 per cent, to £67.7m. The
increase is due to a combination of LFL revenue performance in both the UK and
Canada as well as the new centre growth across both territories when compared
to the same period in FY2023. The reconciliation between statutory operating
profit and Group adjusted EBITDA on both a pre-IFRS 16 and under-IFRS 16 basis
is shown in the table below.
FY2024 FY2023
£'000 £'000
Operating profit(1) 53,506 54,085
Depreciation 25,919 23,107
Impairment 5,316 2,210
Amortisation 935 820
Loss on property, right-of-use assets, plant and equipment and software 88 306
disposal
Exceptional costs excluding interest 1,823 2,203
Group adjusted EBITDA under IFRS 16 87,587 82,731
IFRS 16 adjustment (19,838) (17,799)
Group adjusted EBITDA pre-IFRS 16 67,749 64,932
Segmentation
Year ended 30 September 2024
UK Canada Total
£'000 £'000 £'000
Revenue 199,696 30,703 230,399
Group adjusted EBITDA(1) pre-IFRS 16 62,308 5,441 67,749
Group adjusted EBITDA(1) 79,715 7,872 87,587
Depreciation and amortisation 23,490 3,364 26,854
Impairment of PPE and ROU assets 5,316 - 5,316
Loss on property, right-of-use assets, plant and equipment and software 88 - 88
disposal
Exceptional costs/(income) excluding interest (591) 2,414 1,823
Operating profit 51,412 2,094 53,506
Finance (income) (1,580) (142) (1,722)
Finance expense 10,425 2,045 12,470
Profit before tax 42,567 191 42,758
(1) IFRS 16 adoption has an impact on EBITDA, with the removal of rent
from the calculation. For Group adjusted EBITDA pre-IFRS 16, it is deducted
for comparative purposes and is used by investors as a key measure of the
business. The IFRS 16 adjustment is in relation to all rents that are
considered to be non-variable and of a nature to be captured by the standard.
Share-based payments
During the year, the Group granted further Long-Term Incentive Plan (LTIP)
shares to the senior leadership team as well as starting a new save as you
earn (SAYE) scheme for all team members. The LTIP awards vest in three years
providing continuous employment during the period, and attainment of
performance conditions as outlined in the FY2024 Annual Report. The Group
recognised a total charge of £1.8m (FY2023: £1.2m) in relation to the
Group's share-based arrangements. Share-based costs are not classified as
exceptional costs.
Financing
Finance costs (net of finance income) increased to £12.5m in FY2024 (FY2023:
£10.4m) comprising mainly of implied interest relating to the lease liability
under IFRS 16 of £11.6m.
During the year, the Group agreed a 12-month extension to the £25m RCF and
£5m accordion, resulting in a margin rate reduction to 1.65 per cent above
SONIA effective from 22 March 2024. The RCF term now runs to the end of
December 2025 and remains fully undrawn.
Cash flow and liquidity
The liquidity position of the Group remains strong, with a net cash position
of £28.7m as at 30 September 2024. Detail on the cash movement in the year is
shown in the table opposite.
Capital expenditure
During the financial year, the Group invested a record net capex of £52.7m,
including £13.8m on the acquisition of four centres, one of which, Lincoln
Bowl, was in the UK.
On 2 October 2023, the Group purchased the assets, including the long
leasehold, of Lincoln Bowl for total of £4.5m, of which £2.0m was allocated
to the long leasehold.
In Canada, three centres were acquired in FY2024. The first was a family
entertainment centre in Guelph, Ontario, for CAD 4.7m (£2.8m), on 7 November
2023. The second was the acquisition of the assets and lease of a centre in
Vancouver, for consideration of CAD 0.4m (£0.3m). The final acquisition was
'Stoked' in Saskatchewan, for a total consideration of CAD 10.8m (£6.2m).
More information on all of these acquisitions is provided in note 20 to the
Financial Statements.
A total of £11.5m was invested into the refurbishment programme, with ten UK
centres refurbished as well as investments into the Canadian estate.
A significant proportion of the refurbishment spend in the UK, £1.9m, was in
relation to the extension and refurbishment of our centre in Stockton. This
centre was already one of the most successful in the estate and we have now
increased its potential. In conjunction with a new lease for a period of 15
years and investment into the existing space, the Group also extended into the
adjacent unit, adding an extra five lanes, a Puttstars mini-golf course and a
large amusements area. The refurbishment was completed in time for Easter
trading and results are very encouraging.
Despite inflationary pressures, returns on the UK refurbishments continue to
exceed the UK hurdle rate of 33 per cent return on investment.
New centre capital expenditure was a net £19.5m.
The Group's strong liquidity ensures it can continue to invest in profitable
growth with plans to open more locations during FY2024 and beyond.
The Group spent £8.0m on maintenance capital, including continued spend on
the rollout of Pins on Strings technology (£1.8m) and solar panels as well as
extensions of current installations (£1.0m).
We expect total capital expenditure for FY2025 to be in the region of £40m to
£45m.
Cash flow and net debt
FY2024 FY2023
£'000 £'000
Group adjusted EBITDA under IFRS 16 87,587 82,731
Movement in working capital 1,097 (1,103)
Maintenance capital expenditure (7,973) (9,072)
Taxation (10,536) (9,100)
Payment of capital elements of leases (12,305) (11,419)
Adjusted operating cash flow (OCF)1 57,870 52,037
Adjusted OCF conversion 66.1% 62.9%
Expansionary capital expenditure(2) (30,952) (13,786)
Disposal proceeds - 10
Net bank interest received 1,616 1,008
Lease interest paid (11,615) (9,808)
Free cash flow (FCF)3 16,919 29,461
Exceptional items (436) (343)
Acquisition of centres in Canada (9,283) (7,716)
Cash acquired in acquisitions 78 319
Acquisition of centres in UK (4,474) -
Share (buyback)/issue (378) 6
Dividends paid (26,180) (25,338)
Net cash flow (23,754) (3,611)
(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 considering 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 refurbishment and new
centre capital expenditure.
(3) Free cash flow is defined as net cash flow pre-exceptional items,
cost of acquisitions, debt facility repayment, debt drawdowns, dividends and
equity placing.
Taxation
The Group's tax charge for the year is £12.8m arising on the profit before
tax generated in the period. The increase in the Group's tax charge is due to
the increase in the UK corporation tax rate from 19 per cent to 25 per cent
from April 2023.
Earnings
Statutory profit before tax for the year was £42.8m (FY2023: £45.1m), with
an impairment charge of £5.3m, which was higher by £3.1m than the previous
year.
The Group delivered profit after tax of £29.9m (FY2023: £34.2m) and basic
earnings per share was 17.42 pence (FY2023: 19.92 pence).
Group adjusted profit before tax is £45.0m, whilst Group adjusted profit
after tax is £32.3m and basic adjusted earnings per share of 18.82 pence per
share (FY2023: 21.37 pence per share).
These adjustments are adding back the exceptional costs highlighted earlier in
the report. For more detail see note 5 to the Financial Statements.
It is also noteworthy to highlight Group adjusted profit before tax adding
back impairments, is £50.3m (FY2023: £49.9m).
Dividend and capital allocation policy
In line with the Group's capital allocation policy, the Board has declared a
final ordinary dividend of 8.08 pence per share.
Subject to approval at the AGM, the ex-dividend date will be 30 January 2025,
with a record date of 31 January 2025 and a payment date of 21 February 2025.
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.
UK Government Budget
As outlined in the Chief Executive Officer's review, the changes to Employers
National Insurance Contributions and Thresholds will result in significantly
increased employment costs, impacting the hospitality industry in particular.
We expect to see an increase in employee costs in UK LFL centres in excess of
8 per cent for the second half of FY2025 given the National Living and Minimum
Wage announcement, with the National Insurance increase costing in excess of
£1.2m on an annualised basis.
Laurence Keen
Chief Financial Officer
16 December 2024
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. These are not
intended to replace statutory financial measures
UK like-for-like (LFL) revenue for FY2024 is calculated as:
• Total Group revenues £230.4m, less
• New UK centre revenues for FY2024 that have not annualised £7.8m,
less
• Closed centres for the full year of £3.1m, less
• Canada revenues for FY2024 of £30.7m (CAD 53.0m)
Canada like-for-like (LFL) revenue for FY2024 is calculated as:
• Total Canada revenues CAD 53.0m, less
• New Canada centre revenues for FY2024 that have not annualised CAD
13.4m
New centres are included in the LFL revenue after they complete the calendar
anniversary of their opening date. Closed centres are excluded for the full
financial year in which they were closed. LFL UK comparatives for FY2023 are
£188.8m. LFL Canada comparatives for FY2023 are CAD 37.3m.
Gross profit on cost of goods sold is calculated as revenue less directly
attributable cost of goods sold and excludes any payroll costs. This is how we
report in the business monthly and at centre level, as labour costs are judged
as material and thus reported separately within administrative expenses. These
amounts are presented separately on the consolidated income statement for ease
of reconciliation.
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,
impairment, 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, exceptional items,
acquisition costs, bank funding and any equity placing. Useful for investors
to evaluate cash from normalised trading.
LFL spend per game is defined as LFL revenue in the year 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 considering all necessary maintenance capital
expenditure to ensure the routine running of the business. This excludes
exceptional items, acquisitions, share buyback/issue, dividends paid, net
interest paid, debt drawdowns and any debt repayments.
Expansionary capital expenditure includes all capital on new centres,
refurbishments and rebrands only. Investors see this as growth potential.
Group adjusted profit after tax is calculated as statutory profit after tax,
adding back the acquisition fees of £0.9m (FY2023: £0.6m), the non-cash
expense of £1.9m (FY2023: £2.0m) related to the fair value of the earn out
consideration on the Canadian acquisition in May 2022 and deducting the £0.6m
in compensation received for the closure of our Surrey Quays centre. This
adjusted profit after tax is also used to calculate adjusted earnings per
share.
Constant currency exchange rates are the actual periodic exchange rates from
the previous financial period and are used to eliminate the effects of the
exchange rate fluctuations in assessing certain KPIs and performance.
Consolidated income statement and statement of comprehensive income
Year ending 30 September 2024
Note Before exceptional Exceptional Total Before exceptional Exceptional Total
items items (note 5) 30 September items items (note 5) 30 September
30 September 30 September 2024 30 September 30 September 2023
2024 2024 £'000 2023 2023 £'000
£'000 £'000 £'000 £'000
Revenue 3 230,399 - 230,399 214,829 253 215,082
Cost of goods sold (39,178) - (39,178) (37,491) - (37,491)
Centre staff costs (45,723) - (45,723) (40,717) - (40,717)
Gross profit 145,498 - 145,498 136,621 253 136,874
Other income - 607 607 - - -
Administrative expenses 6 (90,169) (2,430) (92,599) (80,333) (2,456) (82,789)
Operating profit 55,329 (1,823) 53,506 56,288 (2,203) 54,085
Finance income 8 1,722 - 1,722 1,440 - 1,440
Finance expenses 8 (12,040) (430) (12,470) (10,220) (225) (10,445)
Profit before tax 45,011 (2,253) 42,758 47,508 (2,428) 45,080
Tax charge 9 (12,700) (148) (12,848) (10,866) (63) (10,929)
Profit for the year attributable to equity shareholders 32,311 (2,401) 29,910 36,642 (2,491) 34,151
Other comprehensive income
Retranslation loss of foreign currency denominated operations (1,057) - (1,057) (544) - (544)
Total comprehensive income for the year attributable to equity shareholders 31,254 (2,401) 28,853 36,098 (2,491) 33,607
Basic earnings per share (pence) 10 17.42 19.92
Diluted earnings per share (pence) 10 17.31 19.82
Consolidated statement of financial position
As at 30 September 2024
Note 30 September 30 September
2024 2023
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 11 101,936 78,279
Right-of-use assets 12 172,767 150,811
Goodwill and intangible assets 13 100,323 89,376
Deferred tax asset 17 518 1,309
375,544 319,775
Current assets
Cash and cash equivalents 28,702 52,455
Trade and other receivables 14 9,420 8,116
Corporation tax receivable 1,268 715
Inventories 2,897 2,445
42,287 63,731
Total assets 417,831 383,506
LIABILITIES
Current liabilities
Trade and other payables 15 30,427 29,109
Lease liabilities 12 14,231 12,553
44,658 41,662
Non-current liabilities
Other payables 15 7,116 5,208
Lease liabilities 12 204,011 181,652
Deferred tax liability 17 3,993 1,960
Provisions 5,848 5,084
220,968 193,904
Total liabilities 265,626 235,566
NET ASSETS 152,205 147,940
Equity attributable to shareholders
Share capital 1,721 1,717
Share premium 39,716 39,716
Capital redemption reserve 1 -
Merger reserve (49,897) (49,897)
Foreign currency translation reserve (1,190) (133)
Retained earnings 161,854 156,537
TOTAL EQUITY 152,205 147,940
Consolidated statement of changes in equity
For the year ended 30 September 2024
Share Capital Share Merger Foreign currency Retained Total
capital redemption premium reserve translation reserve earnings £'000
£'000 reserve £'000 £'000 £'000 £'000
£'000
Equity at 30 September 2022 1,711 - 39,716 (49,897) 411 146,479 138,420
Shares issued during the year 6 - - - - - 6
Dividends paid (note 19) - - - - - (25,338) (25,338)
Share-based payments - - - - - 1,204 1,204
Deferred tax on share-based payments - - - - - 41 41
Retranslation of foreign currency denominated operations - - - - (544) - (544)
Profit for the year - - - - - 34,151 34,151
Equity at 30 September 2023 1,717 - 39,716 (49,897) (133) 156,537 147,940
Shares issued during the year 5 - - - - - 5
Share buy back (1) 1 - - - (379) (379)
Dividends paid (note 19) - - - - - (26,180) (26,180)
Share-based payments - - - - - 1,782 1,782
Deferred tax on share-based payments - - - - - 184 184
Retranslation of foreign currency denominated operations - - - - (1,057) - (1,057)
Profit for the year - - - - - 29,910 29,910
Equity at 30 September 2024 1,721 1 39,716 (49,897) (1,190) 161,854 152,205
Consolidated statement of cash flows
For the year ended 30 September 2024
Note 30 September 30 September
2024 2023
£'000 £'000
Cash flows from operating activities
Profit before tax 42,758 45,080
Adjusted by:
Depreciation of property, plant and equipment (PPE) 11 11,167 10,142
Depreciation of right-of-use (ROU) assets 12 14,752 12,965
Amortisation of intangible assets 13 935 820
Impairment of PPE and ROU assets 11, 12 5,316 2,210
Net interest expense 8 10,748 9,005
Loss on disposal of property, plant and equipment and software 88 306
Landlord settlement 5 (607) -
Share-based payments 1,782 1,204
Operating profit before working capital changes 86,939 81,732
Increase in inventories (294) (251)
Increase in trade and other receivables (1,183) (2,849)
Increase in payables and provisions 2,495 2,741
Cash inflow generated from operations 87,957 81,373
Interest received 1,782 1,305
Income tax paid - corporation tax (10,536) (9,100)
Bank interest paid (166) (296)
Lease interest paid (11,615) (9,808)
Landlord settlement 5 607 -
Net cash inflow from operating activities 68,029 63,474
Cash flows from investing activities
Acquisition of subsidiaries 20 (13,757) (7,716)
Subsidiary cash acquired 20 78 319
Purchase of property, plant and equipment (37,979) (21,801)
Purchase of intangible assets (946) (1,057)
Proceeds from sale of assets - 10
Net cash used in investing activities (52,604) (30,245)
Cash flows from financing activities
Payment of capital elements of leases (12,305) (11,419)
Issue of shares - 6
Share buy back (379) -
Dividends paid (26,180) (25,338)
Net cash used in financing activities (38,864) (36,751)
Net change in cash and cash equivalents for the year (23,439) (3,522)
Effect of foreign exchange rates on cash and cash equivalents (314) (89)
Cash and cash equivalents at the beginning of the year 52,455 56,066
Cash and cash equivalents at the end of the year 28,702 52,455
Notes to the financial statements
For the year ended 30 September 2024
1. General information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2024 or 2023, but is
derived from these accounts. Statutory accounts for 2023 have been delivered
to the registrar of companies, and those for 2024 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters which the auditor
drew attention by way of emphasis without qualifying their report and (iii)
did not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
Hollywood Bowl Group plc (together with its subsidiaries, 'the Group') is a
public limited company whose shares are publicly traded on the London Stock
Exchange and is incorporated and domiciled in England and Wales. The
registered office of the Parent Company is Focus 31, West Wing, Cleveland
Road, Hemel Hempstead, HP2 7BW, United Kingdom. The registered company number
is 10229630.
On 2 October 2023, the Group acquired the assets and long leasehold of Lincoln
Bowl. On 7 November 2023 the Group acquired Woodlawn Bowl Inc. in Guelph,
Ontario and on 11 November 2023, the assets and lease of Lucky 9 Bowling
Centre Limited in Richmond, British Columbia, as well as its associated
restaurant and bar, Monkey 9 Brewing Pub Corp. On 24 June 2024 the Group
acquired Stoked Entertainment Centre Limited in Saskatoon, Saskatchewan. These
four acquisitions are consolidated in Hollywood Bowl Group plc's Financial
Statements with effect from their respective date of acquisition.
The Group's principal activities are that of the operation of ten-pin bowling
and mini-golf centres, and a supplier and installer of bowling equipment as
well as the development of new centres and other associated activities.
The Directors of the Group are responsible for the consolidated Financial
Statements, which comprise the Financial Statements of the Company and its
subsidiaries as at 30 September 2024.
2. Material accounting policies
The material accounting policies applied in the consolidated Financial
Statements are set out below. These accounting policies have been applied
consistently to all periods presented in these consolidated Financial
Statements. The financial information presented is as at and for the financial
years ended 30 September 2024 and 30 September 2023.
Statement of compliance
The consolidated Financial Statements have been prepared in accordance with
UK-adopted International Accounting Standards ('IFRS Accounting standards')
and the requirements of the Companies Act 2006. The functional currencies of
entities in the Group are Pounds Sterling and Canadian Dollars. The
consolidated Financial Statements are presented in Pounds Sterling and all
values are rounded to the nearest thousand, except where otherwise indicated.
Basis of preparation
The consolidated Financial Statements have been prepared on a going concern
basis under the historical cost convention, except for fair value items on
acquisition (see note 20).
The Company has elected to prepare its Financial Statements in accordance with
FRS 102, the Financial Reporting Standard applicable in the UK and Republic of
Ireland. On publishing the Parent Company Financial Statements here together
with the Group Financial Statements, the Company has taken advantage of the
exemption in s408 of the Companies Act 2006 not to present its individual
income statement and statement of comprehensive income and related notes that
form a part of these approved Financial Statements.
Basis of consolidation
The consolidated financial information incorporates the Financial Statements
of the Company and all of its subsidiary undertakings. The Financial
Statements of all Group companies are adjusted, where necessary, to ensure the
use of consistent accounting policies. Acquisitions are accounted for under
the acquisition method from the date control passes to the Group. On
acquisition, the assets, liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill, or a gain on bargain purchase if
the fair values of the identifiable net assets are below the cost of
acquisition. Intragroup balances and any unrealised gains and losses or income
and expenses arising from intragroup transactions are eliminated in preparing
the consolidated financial statements.
The results of Lincoln Bowl, Woodlawn Bowl Inc., Lucky 9 Bowling Centre
Limited as well as its associated restaurant and bar, Monkey 9 Brewing Pub
Corp and Stoked Entertainment Centre Limited are included from the respective
dates of acquisition, being 2 October 2023, 7 November 2023, 11 November 2023
and 24 June 2024.
Earnings per share
The calculation of earnings per ordinary share is based on earnings after tax
and the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has two types of dilutive potential ordinary shares, being
those unvested shares granted under the Long-Term Incentive Plans and
Save-As-You-Earn plans.
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. These are listed below:
Standard/interpretation Content Applicable for financial
years beginning on/after
IAS 1 Classification of Liabilities as Current or Non-current and Non-current Amendments made to IAS 1 Presentation of Financial Statements in 2020 and 2022 1 October 2024
liabilities with covenants clarify that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting period.
Classification is unaffected by the entity's expectations or events after the
reporting date (for example, the receipt of a waiver or a breach of covenant
that an entity is required to comply with only after the reporting period).
IAS 7 and IFRS 7 Supplier finance arrangements The amendments introduce new disclosures relating to supplier finance 1 October 2024
arrangements that assist users of the financial statements to assess the
effects of these arrangements on an entity's liabilities and cash flows and on
an entity's exposure to liquidity risk.
IFRS 16 Lease liability in a sale and leaseback These amendments include requirements for sale and leaseback transactions in 1 October 2024
IFRS 16 to explain how an entity accounts for a sale and leaseback after the
date of the transaction. Sale and leaseback transactions where some or all the
lease payments are variable lease payments that do not depend on an index or
rate are most likely to be impacted.
IAS 21 Lack of exchangeability An entity is impacted by the amendments when it has a transaction or an 1 October 2025
operation in a foreign currency that is not exchangeable into another currency
at a measurement date for a specified purpose. A currency is exchangeable when
there is an ability to obtain the other currency (with a normal administrative
delay), and the transaction would take place through a market or exchange
mechanism that creates enforceable rights and obligations.
Amendments to IFRS 9 and IFRS 7 Classification and measurement of financial On 30 May 2024, the IASB issued targeted amendments to IFRS 9 and IFRS 7 to 1 October 2026
instruments respond to recent questions arising in practice, and to include new
requirements not only for financial institutions but also for corporate
entities. These amendments:
- clarify the date of recognition and derecognition of some financial assets
and liabilities, with a new exception for some financial liabilities settled
through an electronic cash transfer system;
- clarify and add further guidance for assessing whether a financial asset
meets the solely payments of principal and interest (SPPI) criterion;
- add new disclosures for certain instruments with contractual terms that can
change cash flows (such as some financial instruments with features linked to
the achievement of environment, social and governance targets); and
- update the disclosures for equity instruments designated at fair value
through other comprehensive income (FVOCI).
IFRS 18 Presentation and disclosure in financials statements IFRS 18 will replace IAS 1 Presentation of financial statements and introduces 1 October 2027
the following key requirements:
- Entities are required to classify all income and expenses into five
categories in the statement of profit or loss, namely the operating,
investing, financing, discontinued operations and income tax categories.
Entities are also required to present a newly-defined operating profit
subtotal. Entities' net profit will not change.
- Management-defined performance measures (MPMs) are disclosed in a single
note in the financial statements.
- Enhanced guidance is provided on how to group information in the financial
statements.
In addition, all entities are required to use the operating profit subtotal as
the starting point for the statement of cash flows when presenting operating
cash flows under the indirect method. The Group is still in the process of
assessing the impact of the new standard, particularly with respect to the
structure of the Group's statement of profit or loss, the statement of cash
flows and the additional disclosures required for MPMs.
None of the above amendments are expected to have a material impact on the
Group.
Climate change
In preparing the consolidated financial statements, management has considered
the impact of climate change, taking into account the relevant disclosures in
the strategic report, including those made in accordance with the
recommendations of the Task Force on Climate-related Financial Disclosures
(TCFD) and the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulation 2022 and our sustainability targets.
The expected environmental impact on the business has been modelled. The
current available information and assessment did not identify any risks that
would require the useful economic life of assets to be reduced in the year or
identify the need for impairment that would impact the carrying values of such
assets or have any other impact on the financial statements.
For many years, Hollywood Bowl Group plc has placed sustainability at the
centre of its strategy and has been working on becoming a more sustainable
business. A number of actions have been implemented to help mitigate and adapt
against climate-related risks. The cost and benefits of such actions are
embedded into the cost structure of the business and are included in our
five-year plan. This includes the roll-out of Pins on Strings technology,
solar panels and the move to 100 per cent renewable energy. The five-year plan
has been used to support our impairment reviews and going concern and
viability assessment (see viability statement).
Our TCFD disclosures in the full annual report include climate-related risks
and opportunities based on various scenarios. When considering climate
scenario analysis, and modelling severe but plausible downside scenarios, we
have used the NGFS 'early action' scenario as the most severe case for climate
transition risks, and the IPCC's SSP5-8.5 as the most severe case for physical
climate risk. Whilst these represent situations where climate could have a
significant effect on the operations, these do not include our future
mitigating actions which we would adopt as part of our strategy. The climate
transition plan to net zero outlines that it may not be feasible to completely
abate Scope 1, 2 and 3 emissions by 2050. In this instance, the Group will
offset residual emissions through actions like carbon removals or ecosystem
restoration.
The assessment with respect to the impact of climate change will be kept under
review by management, as the future impacts depend on factors outside of the
Group's control, which are not all currently known.
Going concern
In assessing the going concern position of the Group for the Consolidated
Financial Statements for the year ended 30 September 2024, the Directors have
considered the Group's cash flow, liquidity, and business activities, as well
as the principal risks identified in the Group's Risk Register.
As at 30 September 2024, the Group had cash balances of £28.7m, no
outstanding loan balances and an undrawn RCF of £25m.
The Group has undertaken a review of its liquidity using a base case and a
severe but plausible downside scenario.
The base case is the Board approved budget for FY2025 as well as the first
three months of FY2026 which forms part of the Board approved five-year plan.
As noted above, the costs and benefits of our actions on climate change are
embedded into the cost structure of the business and included in our five-year
plan. Under this scenario there would be positive cash flow, strong profit
performance and all covenants would be passed. It should also be noted that
the RCF remains undrawn. Furthermore, it is assumed that the Group adheres to
its capital allocation policy. The most severe downside scenario stress tests
for reasonably adverse variations in the economic environment leading to a
deterioration in trading conditions and performance.
Under this severe but plausible downside scenario, the Group has modelled
revenues dropping by 3 and 4 per cent from the assumed base case for FY2025
and FY2026 respectively and inflation continues at an even higher rate than in
the base case, specifically around cost of labour in respect of National
Living and Minimum wage as well as increased National Insurance contributions.
The model still assumes that investments into new centres would continue,
whilst refurbishments in the early part of FY2025 would be reduced. These are
all mitigating actions that the Group has in its control. Under this scenario,
the Group will still be profitable and have sufficient liquidity within its
cash position to not draw down the RCF, with all financial covenants passed.
Taking the above and the principal risks faced by the Group into
consideration, the Directors are satisfied that the Group and Company have
adequate resources to continue in operation and meet their liabilities as they
fall due for the foreseeable future, a period of at least 12 months from the
date of this report.
Accordingly, the Group and Company continue to adopt the going concern basis
in preparing these Financial Statements.
Leases
The Group as lessee
The Group assesses whether a contract is, or contains, a lease, at inception
of the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee from the date at which the leased asset becomes available for use by
the Group, except for short-term leases (defined as leases with a lease term
of 12 months or less) and leases of low-value assets. For these leases, the
Group recognises the lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased
assets are consumed.
Right-of-use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets. The lease term is the
non-cancellable period for which the lessee has the right to use an underlying
asset plus periods covered by an extension option if an extension is
reasonably certain. The majority of property leases are covered by the
Landlord and Tenant Act 1985 (LTA) which gives the right to extend the lease
beyond the termination date. The Group expects to extend the property leases
covered by the LTA. This extension period is not included within the lease
term as a termination date cannot be determined as the Group is not reasonably
certain to extend the lease given the contractual rights of the landlord under
certain circumstances.
Lease liabilities are measured at the present value of lease payments to be
made over the lease term. The lease payments include fixed payments (including
in-substance fixed payments) less any lease incentives receivable and variable
lease payments that depend on an index or a rate. Variable lease payments that
do not depend on an index or a rate are recognised as expenses in the period
in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change
in the lease term or a change in the lease payments (e.g. changes to future
payments resulting from a change in an index or rate used to determine such
lease payments).
The Group applies IAS 36 to determine whether a right-of-use asset is impaired
and accounts for any identified impairment loss as described in the
'impairment' policy.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term
leases of machinery and equipment (i.e. those leases that have a lease term of
12 months or less from the commencement date and do not contain a purchase
option). It also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered to be low value. Lease
payments on short-term leases and leases of low-value assets are recognised as
expenses on a straight-line basis over the lease term.
Exceptional items and other adjustments
Exceptional items and other adjustments are those that in management's
judgement need to be disclosed by virtue of their size, nature and incidence,
in order to draw the attention of the reader and to show the underlying
business performance of the Group more accurately. Such items are included
within the income statement caption to which they relate and are separately
disclosed on the face of the consolidated income statement and in the notes to
the consolidated Financial Statements.
Adjusted measures
The Group uses a number of non-Generally Accepted Accounting Principles
(non-GAAP) financial measures in addition to those reported in accordance with
IFRS. The Directors believe that these non-GAAP measures, listed below, are
important when assessing the underlying financial and operating performance of
the Group by investors and shareholders. These non-GAAP measures comprise of
like-for-like revenue growth, adjusted profit after tax, adjusted earnings per
share, net cash, Group adjusted operating cash flow, revenue generating capex,
total average spend per game, free cash flow, gross profit on costs of goods
sold, Group adjusted EBITDA and Group adjusted EBITDA margin.
A reconciliation between key adjusted and statutory measures, as well as notes
on alternative performance measures, is provided in the Chief Financial
Officer's review. This also details the impact of exceptional and other
adjusted items when comparing to the non-GAAP financial measures in addition
to those reported in accordance with IFRS.
Summary of other estimates and judgements
The preparation of the consolidated 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 consolidated Group Financial Statements are discussed below.
Key sources of estimation uncertainty
There are no estimates that have a significant risk of resulting in a material
adjustment to carrying amounts of assets and liabilities in the next financial
year. Set out below are certain areas of estimation uncertainty in the
financial statements. There are also no key judgements other than those
related to an area of estimation uncertainty:
Property, plant and equipment and right-of-use asset impairment reviews
Property, plant and equipment and right-of-use assets are assessed 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 costs during the five year forecast period, discount rates and the
long term growth rate. Following the impairment charge recorded in the year of
£5,316,000, the estimation uncertainty associated with the remaining carrying
amounts is significantly reduced, and whilst estimation uncertainty remains,
this is no longer assessed as being material. As such, reasonably possible
changes to the assumptions in the future in four mini-golf and one combined
centre would not lead to material adjustments to the carrying values in the
next financial year. The remaining carrying amount of property, plant and
equipment is £3,156,000 and right-of-use assets is £5,086,000 at these
centres. Further information in respect of the Group's property, plant and
equipment and right-of-use assets is included in notes 12 and 13 respectively.
Contingent consideration
Non-current other payables includes contingent consideration in respect of the
acquisition of Teaquinn Holdings Inc. in FY2022. The additional consideration
to be paid is contingent on the future financial performance of Teaquinn
Holdings Inc. in FY2025 or FY2026. This is based on a multiple of 9.2x
Teaquinn's EBITDA pre-IFRS 16 in the financial period of settlement and is
capped at CAD 17m. The contingent consideration has been accounted for as
post-acquisition employee remuneration and recognised over the duration of the
employment contract to FY2026. The key assumptions include a range of possible
outcomes for the value of the contingent consideration based on Teaquinn's
forecasted EBITDA pre-IFRS 16 and the year of payment. Further information in
respect of the Group's contingent consideration is included in note 15.
Dilapidations provision
A provision is made for future expected dilapidation costs on the opening of
leasehold properties not covered by the LTA and is expected to be utilised on
lease expiry. This also includes properties covered by the LTA where we may
not extend the lease, after consideration of the long-term trading and
viability of the centre. Properties covered by the LTA provide security of
tenure and we intend to occupy these premises indefinitely until the landlord
serves notice that the centre is to be redeveloped. As such, no charge for
dilapidations can be imposed and no dilapidation provision is considered
necessary as the outflow of economic benefit is not considered to be probable.
Acquisitions
The acquisitions of Lincoln Bowl, Woodlawn Bowl Inc., Lucky 9 Bowling Centre
Limited and Stoked Entertainment Centre Limited have been accounted for using
the acquisition method under IFRS 3. The identifiable assets, liabilities and
contingent liabilities are recognised at their fair value at date of
acquisition. Calculating the fair values of net assets, notably the fair
values of intangible assets identified as part of the purchase price
allocation, involves estimation and consequently the fair value exercise is
recorded as another accounting estimate. The amortisation charge is sensitive
to the value of the intangible asset values, so a higher or lower fair value
calculation would lead to a change in the amortisation charge in the period
following acquisition.
3. Segmental reporting
Management consider that the Group consists of two operating segments, as it
operates within the UK and Canada. No single customer provides more than ten
per cent of the Group's revenue. Within these two operating segments there are
multiple revenue streams which consist of the following:
Before exceptional Exceptional income Total UK Canada Total
income UK UK (note 5) 30 September 30 September 30 September
30 September 30 September 2024 2024 2024
2024 2024 £'000 £'000 £'000
£'000 £'000
Bowling 89,347 - 89,347 14,370 103,717
Food and drink 52,316 - 52,316 7,554 59,870
Amusements 55,587 - 55,587 3,691 59,278
Mini-golf 2,360 - 2,360 189 2,549
Installation of bowling equipment - - - 4,456 4,456
Other 86 - 86 443 529
199,696 - 199,696 30,703 230,399
Before exceptional Exceptional income Total UK Canada Total
income UK UK (note 5) 30 September 30 September 30 September
30 September 30 September 2023 2023 2023
2023 2023 £'000 £'000 £'000
£'000 £'000
Bowling 86,988 192 87,180 9,765 96,945
Food and drink 50,671 - 50,671 5,265 55,936
Amusements 51,938 61 51,999 2,794 54,793
Mini-golf 2,576 - 2,576 128 2,704
Installation of bowling equipment - - - 4,391 4,391
Other 183 - 183 130 313
192,356 253 192,609 22,473 215,082
The UK operating segment includes the Hollywood Bowl and Putt&Play brands.
The Canada operating segment includes the Splitsville and Striker Bowling
Solutions brands.
Year ended 30 September 2024 Year ended 30 September 2023
UK Canada Total UK Canada Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 199,696 30,703 230,399 192,609 22,473 215,082
Group adjusted EBITDA(1) pre-IFRS 16 62,308 5,441 67,749 60,570 4,485 65,055
Group adjusted EBITDA(1) 79,715 7,872 87,587 76,828 5,903 82,731
Depreciation and amortisation 23,490 3,364 26,854 21,973 1,954 23,927
Impairment of PPE and ROU assets 5,316 - 5,316 2,210 - 2,210
Loss on property, right-of-use assets, plant and equipment and software 88 - 88 306 - 306
disposals
Exceptional items excluding interest (591) 2,414 1,823 (89) 2,292 2,203
Operating profit 51,412 2,094 53,506 52,428 1,657 54,085
Finance income (1,580) (142) (1,722) (1,296) (144) (1,440)
Finance expense 10,425 2,045 12,470 9,291 1,154 10.445
Profit before tax 42,567 191 42,758 44,434 646 45,080
Non-current asset additions - Property, plant and equipment 26,855 11,675 38,530 18,844 3,157 22,001
Non-current asset additions - Intangible assets 946 - 946 1,057 - 1,057
Total assets 338,654 79,177 417,831 341,589 41,917 383,506
Total liabilities 218,814 46,812 265,626 207,798 27,768 235,566
1 Group adjusted EBITDA is defined in note 4.
4. Reconciliation of operating profit to Group adjusted EBITDA
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, loss on disposal of property, plant and equipment, right-of-use assets
and software and exceptional items.
Management use Group adjusted EBITDA as a key performance measure of the
business and it is considered by management to be a measure investors look at
to reflect the underlying business.
30 September 30 September
2024 2023
£'000 £'000
Operating profit 53,506 54,085
Depreciation of property, plant and equipment (note 11) 11,167 10,142
Depreciation of right-of-use assets (note 12) 14,752 12,965
Amortisation of intangible assets (note 13) 935 820
Impairment of property, plant and equipment (note 11) 2,808 1,392
Impairment of right-of-use assets (note 12) 2,508 818
Loss on disposal of property, plant and equipment, right-of-use assets and 88 306
software (notes 11-13)
Exceptional items excluding interest (note 5) 1,823 2,203
Group adjusted EBITDA 87,587 82,731
Adjustment for IFRS 16 (19,838) (17,799)
Group adjusted EBITDA pre-IFRS16 67,749 64,932
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, in the Directors judgement, their
significance, one-off nature or amount:
Exceptional items: 30 September 30 September
2024 2023
£'000 £'000
VAT rebate(1) - 253
Administrative expenses(2) (15) (2)
Acquisition fees(3) (921) (700)
Landlord settlement(4) 607 -
Contingent consideration(5) (1,924) (1,979)
Exceptional items before tax (2,253) (2,428)
Tax charge (148) (63)
Exceptional items after tax (2,401) (2,491)
1 During FY2022, HMRC conducted a review of its policy position on the
reduced rate of VAT for leisure and hospitality and the extent to which it
applies to bowling. Following its review, HMRC accepts that leisure bowling
should fall within the scope of the temporary reduced rate of VAT for leisure
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 made a retrospective claim for
overpaid output VAT for the period 15 July 2020 to 30 September 2021 relating
to package sales totalling £193,000 during FY2023, included within bowling
revenue.
In addition, a rebate of £60,000 overpaid VAT on gaming machines
for the period 1 January 2003 to 31 December 2005 was received in FY2023.
2 FY2024 relates to expenses associated with the closure of our Surrey
Quays centre. FY2023 expenses were associated with the VAT rebate, relating to
additional profit share due to landlords, which are included within
administrative expenses.
3 Legal and professional fees relating to the acquisition of Lincoln
Bowl, Woodlawn Bowl Inc., Lucky 9 Bowling Centre Limited and Stoked
Entertainment Centre Limited in the year (note 32) (FY2023: relating to the
acquisition of HLD Investments Inc. (operating as YYC Bowling &
Entertainment), Mountain View Bowl Inc and Wong and Lewis Investments Inc.
(operating as Let's Bowl)).
4 Settlement payment from the landlord resulting from the closure of
Hollywood Bowl Surrey Quays.
5 Contingent consideration of £1,494,000 (FY2023: £1,754,000) in
administrative expenses and £430,000 (FY2023: £225,000) of interest expense
in relation to the acquisition of Teaquinn in May 2022.
6. Expenses and auditor's remuneration
Included in profit from operations are the following:
30 September 30 September
2024 2023
£'000 £'000
Amortisation of intangible assets 935 820
Depreciation of property, plant and equipment 11,167 10,142
Depreciation of right-of-use assets 14,752 12,965
Impairment of property, plant and equipment 2,808 1,633
Impairment reversal of property, plant and equipment - (241)
Impairment of right-of-use assets 2,508 1,277
Impairment reversal of right-of-use assets - (459)
Operating leases 80 57
Loss on disposal of property, plant and equipment, right-of-use assets and 88 306
software
Exceptional items (note 5) 2,253 2,428
Loss on foreign exchange 486 208
Auditor's remuneration:
- Fees payable for audit of these Financial Statements 350 344
Fees payable for other services:
- Audit of subsidiaries 140 71
- Other non-audit assurance services 8 8
498 423
7. Staff numbers and costs
The average number of employees (including Directors) during the year was as
follows:
30 September 30 September
2024 2023
Directors 7 7
Administration 118 112
Operations 2,701 2,668
Total staff 2,826 2,787
The cost of employees (including Directors) during the year was as follows:
30 September 30 September
2024 2023
£'000 £'000
Wages and salaries 52,824 49,988
Social security costs 4,217 3,882
Pension costs 607 543
Share-based payments 1,782 1,204
Total staff cost 59,430 55,617
Staff costs included within cost of sales are £45,723,000 (30 September 2023:
£40,717,000). The balance of staff costs are recorded within administrative
expenses.
Wages and salaries includes £1,494,000 (30 September 2023: £1,754,000) of
contingent consideration in relation to the acquisition of Teaquinn in May
2022, which is recorded within exceptional items (note 5).
8. Finance income and expenses
30 September 30 September
2024 2023
£'000 £'000
Interest on bank deposits 1,722 1,440
Finance income 1,722 1,440
Interest on bank borrowings 190 200
Other interest 22 9
Finance costs on lease liabilities 11,615 9,808
Unwinding of discount on contingent consideration 430 225
Unwinding of discount on provisions 213 203
Finance expense 12,470 10,445
9. Taxation
30 September 30 September
2024 2023
£'000 £'000
The tax expense is as follows:
- UK corporation tax 8,495 7,704
- Adjustment in respect of prior years - 312
- Foreign tax suffered 1,252 692
Total current tax 9,747 8,708
Deferred tax:
Origination and reversal of temporary differences 1,967 1,996
Effect of changes in tax rates (17) 161
Adjustment in respect of prior years 1,151 64
Total deferred tax 3,101 2,221
Total tax expense 12,848 10,929
Factors affecting current tax charge:
The tax assessed on the profit for the period is different to the standard
rate of corporation tax in the UK of 25 per cent (30 September 2023: 22 per
cent). The differences are explained below:
30 September 30 September
2024 2023
£'000 £'000
Profit excluding taxation 42,758 45,080
Tax using the UK corporation tax rate of 25% (2023: 22%) 10,690 9,918
Change in tax rate on deferred tax balances (17) 154
Non-deductible expenses 508 60
Non-deductible acquisition related exceptional costs 510 523
Effects of overseas tax rates 34 137
Effects of capital allowances super deduction - (182)
Share-based payments (28) (57)
Adjustment in respect of prior years 1,151 376
Total tax expense included in profit or loss 12,848 10,929
The Group's standard tax rate for the year ended 30 September 2024 was 25 per
cent (30 September 2023: 22 per cent).
The UK corporation tax main rate increased from 19 per cent to 25 per cent
from 1 April 2023. As such, in the prior year, the rate used to calculate the
deferred tax balances increased from a blended rate to 25 per cent.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of Hollywood Bowl Group plc by the weighted average number of
shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. During the years ended 30 September 2024 and 30
September 2023, the Group had potentially dilutive ordinary shares in the form
of unvested shares pursuant to LTIPs and SAYE schemes .
30 September 30 September
2024 2023
Basic and diluted
Profit for the year after tax (£'000) 29,910 34,151
Basic weighted average number of shares in issue for the period (number) 171,647,892 171,468,034
Adjustment for share awards 1,154,221 833,880
Diluted weighted average number of shares 172,802,113 172,301,914
Basic earnings per share (pence) 17.42 19.92
Diluted earnings per share (pence) 17.31 19.82
11. Property, plant and equipment
Freehold Long leasehold Short leasehold Lanes and Plant and Total
property property improvements pins on strings machinery, £'000
£'000 £'000 £'000 £'000 fixtures and
fittings
£'000
Cost
At 1 October 2022 7,406 1,240 38,686 18,050 50,518 115,900
Additions - - 11,554 4,269 6,178 22,001
Acquisition (note 20) - - 77 74 46 197
Disposals - - (451) (222) (1,840) (2,513)
Effects of movement in foreign exchange (517) - (102) (8) (34) (661)
At 30 September 2023 6,889 1,240 49,764 22,163 54,868 134,924
Additions - - 23,723 3,900 10,907 38,530
Acquisition (note 20) - - 189 448 545 1,182
Disposals - - (846) (648) (2,343) (3,837)
Transfer to right-of-use assets(1) - (1,240) - - - (1,240)
Effects of movement in foreign exchange (615) - (249) (170) (141) (1,175)
At 30 September 2024 6,274 - 72,581 25,693 63,836 168,384
Accumulated depreciation
At 1 October 2022 24 388 18,857 4,534 23,456 47,259
Depreciation charge 63 29 3,399 740 5,911 10,142
Impairment charge - - - - 1,633 1,633
Impairment reversal - - - - (241) (241)
Disposals - - (436) (162) (1,548) (2,146)
Effects of movement in foreign exchange (1) - (1) - - (2)
At 30 September 2023 86 417 21,819 5,112 29,211 56,645
Depreciation charge 64 - 3,810 932 6,361 11,167
Impairment charge - - 1,605 - 1,203 2,808
Disposals - - (834) (589) (2,245) (3,668)
Transfer to right-of-use assets(1) - (417) - - - (417)
Effects of movement in foreign exchange (10) - (27) (22) (28) (87)
At 30 September 2024 140 - 26,373 5,433 34,502 66,448
Net book value
At 30 September 2024 6,134 - 46,208 20,260 29,334 101,936
At 30 September 2023 6,803 823 27,945 17,051 25,657 78,279
1 During the year, management reviewed the classification of long
leasehold property. Subsequently, the long leasehold property previously
classified as property, plant and equipment has been reclassified as
right-of-use assets (see note 12).
Short leasehold property includes £7,721,000 (30 September 2023: £845,000)
of assets in the course of construction, relating to the development of new
centres.
Impairment
Impairment testing is carried out at the CGU level on an annual basis at the
balance sheet date, or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. A CGU is the smallest
identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Each
individual centre is considered to be a CGU.
An initial impairment test was performed on all eighty five centres assessing
for indicators of impairment. A detailed impairment test based on a base case
was then performed on twelve centres, where the excess of value-in-use over
the carrying value calculation was sensitive to changes in the key
assumptions.
Property, plant and equipment and right-of-use assets for twelve centres have
been tested for impairment by comparing the carrying value of each CGU with
its recoverable amount determined from value-in-use calculations using cash
flow projections based on financial budgets approved by the Board covering a
five-year period.
The key assumptions used in the value-in-use calculations are revenue growth,
cost inflation during the five year forecast period, the long term growth rate
and discount rate assumptions. The key risks to those assumptions are the
potential adverse variations in the economic environment leading to a
deterioration in trading conditions and performance during FY2025 and FY2026.
Cash flows beyond this two-year period are included in the Board-approved
five-year plan and assume a recovery in the economy and the performance of our
centres. The other assumptions used in the value-in-use calculations were:
2024 2023
Revenue growth rate (within five years) - UK & Canada 3.0% 3.5%
Cost inflation (within five years) - UK 3.2% 3.1%
Cost inflation (within five years) - Canada 3.7% -
Discount rate (pre-tax) - UK 12.4% 12.7%
Discount rate (pre-tax) - Canada 10.6% -
Growth rate (beyond five years) - UK and Canada 2.5% 2.5%
Discount rates reflect current market assessments of the time value of money
and the risks specific to the industry. This is the benchmark used by
management to assess operating performance and to evaluate future capital
investment proposals. These discount rates are derived from the weighted
average cost of capital for the UK and Canada. Changes in the discount rates
over the years are calculated with reference to latest market assumptions for
the risk-free rate, equity risk premium and the cost of debt.
Detailed impairment testing, due to the financial performance of certain
centres, resulted in the recognition of an impairment charge in the year of
£2,808,000 (FY2023: £1,633,000) against property, plant and equipment assets
and £2,508,000 (FY2023: £1,277,000) against right-of-use assets for four
(FY2023: three) mini-golf centres and one combined centre (FY2023: none) (note
12), which form part of the UK operating segment. The impairment charge in the
prior year was reduced by the reversal of an impairment charge of £241,000
against property, plant and equipment assets and £459,000 against
right-of-use assets for one combined centre. Following the recognition of the
impairment charge, the carrying value of property, plant and equipment is
£3,156,000 (30 September 2023: £6,487,000) and right-of-use assets is
£5,086,000 (30 September 2023: £8,125,000) for these four (FY2023: three) UK
mini-golf centres and one combined centre (FY2023: none) (note 12).
Sensitivity to changes in assumptions
The estimate of the recoverable amounts for seven centres affords reasonable
headroom over the carrying value of the property, plant and equipment and
right-of-use asset, and an impairment charge of £5,316,000 (30 September
2023: £2,910,000) for five centres under the base case. Management have
sensitised the key assumptions in the impairment tests of these twelve centres
under the base case.
A reduction in revenue of three and four percentage points down on the base
case for FY2025 and FY2026 respectively and a one percentage point increase in
operating costs on the base case for FY2025 and FY2026 to reflect higher
inflation, would not cause the carrying value to exceed its recoverable amount
for seven centres, which include both bowling and mini-golf centres.
Therefore, management believe that any reasonable possible changes in the key
assumptions would not result in an impairment charge for these seven centres.
However, a further impairment of £515,000 would arise under this sensitised
case in relation to three centres where we have already recognised an
impairment charge in the year.
12. 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 (FY2023: nine) 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 year:
Right-of-use assets Property Amusement Total
£'000 machines £'000
£'000
Cost
At 1 October 2022 174,260 11,239 185,499
Lease additions 2,452 5,522 7,974
Acquisition (note 20) 4,911 - 4,911
Lease surrenders - (1,071) (1,071)
Lease modifications 5,418 - 5,418
Effects of movement in foreign exchange (1,070) - (1,070)
At 30 September 2023 185,971 15,690 201,661
Lease additions 13,405 5,029 18,434
Acquisition (note 20) 17,641 - 17,641
Lease surrenders - (1,391) (1,391)
Lease modifications 4,890 - 4,890
Transfer from property, plant and equipment(1) 1,240 - 1,240
Effects of movement in foreign exchange (2,338) - (2,338)
At 30 September 2024 220,809 19,328 240,137
Accumulated depreciation
At 1 October 2022 31,264 6,780 38,044
Depreciation charge 10,464 2,501 12,965
Impairment charge 1,277 - 1,277
Impairment reversal (459) - (459)
Lease surrenders - (977) (977)
At 30 September 2023 42,546 8,304 50,850
Depreciation charge 11,577 3,175 14,752
Impairment charge 2,508 - 2,508
Transfer from property, plant and equipment(1) 417 - 417
Lease surrenders - (1,157) (1,157)
At 30 September 2024 57,048 10,322 67,370
Net book value
At 30 September 2024 163,761 9,006 172,767
At 30 September 2023 143,425 7,386 150,811
1 During the year, management reviewed the classification of long
leasehold property. Subsequently, the long leasehold property previously
classified as property, plant and equipment has been reclassified as
right-of-use assets (see note 11).
Set out below are the carrying amounts of lease liabilities and the movements
during the year:
Lease liabilities Property Amusement Total
£'000 machines £'000
£'000
At 1 October 2022 182,550 5,819 188,369
Lease additions 2,452 5,522 7,974
Acquisition (note 20) 4,911 - 4,911
Accretion of interest 9,568 240 9,808
Lease modifications 5,418 - 5,418
Lease surrenders - (145) (145)
Payments(1) (17,882) (3,167) (21,049)
Effects of movement in foreign exchange (1,081) - (1,081)
At 30 September 2023 185,936 8,269 194,205
Lease additions 13,405 5,029 18,434
Acquisition (note 20) 15,641 - 15,641
Accretion of interest 11,144 471 11,615
Lease modifications 4,890 - 4,890
Lease surrenders - (322) (322)
Payments(1) (19,962) (3,805) (23,767)
Effects of movement in foreign exchange (2,454) - (2,454)
At 30 September 2024 208,600 9,642 218,242
Current 10,349 3,882 14,231
Non-current 198,251 5,760 204,011
At 30 September 2024 208,600 9,642 218,242
Current 9,304 3,249 12,553
Non-current 176,632 5,020 181,652
At 30 September 2023 185,936 8,269 194,205
1 In FY2024, £153,000 (FY2023: £179,000) of rent payments were part
of the working capital movements in the year.
The following are the amounts recognised in profit or loss:
2024 2023
£'000 £'000
Depreciation expense of right-of-use assets 14,752 12,965
Impairment charge of right-of-use assets 2,508 818
Interest expense on lease liabilities 11,615 9,808
Expense relating to leases of low-value assets (included in administrative 80 57
expenses)
Variable lease payments (included in administrative expenses) 1,285 824
Total amount recognised in profit or loss 30,240 24,472
The Group has contingent lease contracts for eight (FY2023: nine) sites. There
is a revenue-based rent top-up on these sites. Variable lease payments include
revenue-based rent top-ups at eight (FY2023: eight) centres totalling
£897,000 (FY2023: £619,000). It is anticipated that top-ups totalling
£1,374,000 will be payable in the year to 30 September 2025 based on current
expectations.
Impairment testing is carried out as outlined in note 11. Detailed impairment
testing resulted in the recognition of an impairment charge in the year of
£2,508,000 (FY2023: £1,277,000) against right-of-use assets for four UK
mini-golf centres and one combined centre (FY2023: three UK mini-golf
centres). The impairment charge in the prior year was reduced by the reversal
of an impairment charge of £459,000 against right-of-use assets for one
combined centre.
13. Goodwill and intangible assets
Goodwill Brands (1) Trademark( 2) Customer Software Total
£'000 £'000 £'000 relationships £'000 £'000
£'000
Cost
At 1 October 2022 75,194 7,248 798 314 2,220 85,774
Additions - - - - 1,057 1,057
Acquisition (note 20) 6,865 - - 503 - 7,368
Effects of movement in foreign exchange (11) - - (12) - (23)
At 30 September 2023 82,048 7,248 798 805 3,277 94,176
Additions - - - - 946 946
Acquisition (note 20) 10,668 - - 306 - 10,974
Disposals - - - (1,320) (1,320)
Effects of movement in foreign exchange (3) (19) - (6) - (28)
At 30 September 2024 92,713 7,229 798 1,105 2,903 104,748
Accumulated amortisation
At 1 October 2022 - 1,523 416 8 2,033 3,980
Amortisation charge - 568 50 45 157 820
At 30 September 2023 - 2,091 466 53 2,190 4,800
Amortisation charge - 568 50 73 244 935
Disposals - - - - (1,313) (1,313)
Effects of movement in foreign exchange - 3 - - - 3
At 30 September 2024 - 2,662 516 126 1,121 4,425
Net book value
At 30 September 2024 92,713 4,567 282 979 1,782 100,323
At 30 September 2023 82,048 5,157 332 752 1,087 89,376
1 This relates to the Hollywood Bowl, Splitsville and Striker Bowling
Solutions brands.
2 This relates to the Hollywood Bowl trademark only.
The components of goodwill comprise the following businesses:
30 September 30 September
2024 2023
UK 77,174 75,034
Canada 15,539 7,014
92,713 82,048
At the acquisition date, goodwill is allocated to each group of CGUs expected
to benefit from the combination.
Impairment testing is carried out at the CGU level on an annual basis. A CGU
is the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or groups of
assets. Each individual centre is considered to be a CGU. However, for the
purposes of testing goodwill for impairment, it is acceptable under IAS 36 to
group CGUs, in order to reflect the level at which goodwill is monitored by
management. The UK and Canada are each considered to be a CGU, for the
purposes of goodwill impairment testing. The goodwill acquisition in the year
relates to the UK acquisition of Lincoln Bowl, and the three centres acquired
in Canada (note 20). The four centres are each considered a CGU but have been
allocated to either the UK or Canada group of CGU for the purpose of goodwill
impairment testing. These CGUs form part of the UK and Canada operating
segments respectively.
The recoverable amount of each of the CGUs is determined based on a
value-in-use calculation using cash flow projections based on financial
budgets approved by the Board covering a five-year period. Cash flows beyond
this period are extrapolated using the estimated growth rates stated in the
key assumptions. The key assumptions are disclosed in note 11.
Sensitivity to changes in assumptions
Management believe that any reasonable change in the key assumptions would not
result in an impairment charge of the goodwill. The goodwill on the
acquisitions in the year is included in note 20.
14. Trade and other receivables
30 September 30 September
2024 2023
£'000 £'000
Trade receivables 1,537 2,356
Other receivables 95 129
Prepayments 7,788 5,631
9,420 8,116
Trade receivables have an ECL against them that is immaterial. There were no
overdue receivables at the end of either year.
15. Trade and other payables
30 September 30 September
2024 2023
£'000 £'000
Current
Trade payables 5,494 7,025
Other payables 3,658 1,366
Accruals and deferred income 16,162 15,421
Taxation and social security 5,113 5,297
Total trade and other payables 30,427 29,109
30 September 30 September
2024 2023
£'000 £'000
Non-current
Other payables 7,116 5,208
Accruals and deferred income includes a staff bonus accrual of £3,950,000 (30
September 2023: £4,955,000). Deferred income includes £983,000 (30 September
2023: £801,000) of customer deposits received in advance and £2,628,000 (30
September 2023: £1,870,000) relating to bowling equipment installations, all
of which will be recognised in the income statement during the following
financial year.
Non-current other payables includes £3,928,000 (30 September 2023:
£2,359,000) of contingent consideration and £1,759,000 (30 September 2023:
£1,862,000) of deferred consideration in respect of the acquisition of
Teaquinn Holdings Inc. The additional consideration to be paid is contingent
on the future financial performance of Teaquinn Holdings Inc. in FY2025 or
FY2026. This is based on a multiple of 9.2x Teaquinn's EBITDA pre-IFRS 16 in
the financial period of settlement and is capped at CAD 17m. The contingent
consideration has been accounted for as post-acquisition employee remuneration
in accordance with IFRS 3 paragraph B55 and recognised over the duration of
the employment contract to FY2026. The present value of the contingent
consideration has been discounted using a WACC of 13 per cent. There is a
range of possible outcomes for the value of the contingent consideration based
on Teaquinn's forecasted EBITDA pre-IFRS 16 and the year of payment. This
ranges from a payment (undiscounted) in FY2025 of £6,534,000 (undiscounted)
to a payment in FY2026 of £9,146,000 (undiscounted), using the FY2024
year-end exchange rate. The fair value of the contingent consideration will be
re-assessed at every financial reporting date, with changes recognised in the
income statement. In FY2024, this re-assessment resulted in a reduction in the
charge of £261,000 based on the current expectation of the final
consideration payment, which has been recognised in exceptional administrative
expenses.
16. Loans and borrowings
On 29 September 2021, the Group entered into a £25m revolving credit facility
(RCF) with Barclays Bank plc. The RCF had an original termination date of 31
December 2024. On 22 March 2024, the RCF had the termination date extended to
31 December 2025.
Interest is charged on any drawn balance based on the reference rate (SONIA),
plus a margin of 1.65 per cent (30 September 2023: 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 30 September 2024 was
therefore 0.5775 per cent (30 September 2023: 0.6125 per cent).
Issue costs of £135,000 were paid to Barclays Bank plc on commencement of the
RCF and a further £35,000 on extension of the RCF. These costs are being
amortised over the term of the facility and are included within prepayments
(note 14).
The terms of the Barclays Bank plc facility include a Group financial
covenants that each quarter the ratio of total net debt to Group adjusted
EBITDA pre-IFRS 16 shall not exceed 1.75:1.
The Group operated within the covenant during the year and the previous year.
17. Deferred tax assets and liabilities
30 September 30 September
2024 2023
£'000 £'000
Deferred tax assets and liabilities
Deferred tax assets - UK 5,934 6,500
Deferred tax assets - Canada 518 244
Deferred tax liabilities - UK (7,247) (5,191)
Deferred tax liabilities - Canada (2,680) (2,204)
(3,475) (651)
30 September 30 September
2024 2023
£'000 £'000
Reconciliation of deferred tax balances
Balance at the beginning of the year (651) 1,647
Deferred tax credit for the year - in profit or loss (1,950) (2,157)
Deferred tax credit for the year - in equity 101 8
On acquisition (20) (148)
Effects of changes in tax rates (17) -
Effects of foreign exchange 213 63
Adjustment in respect of prior years (1,151) (64)
Balance at the end of the year (3,475) (651)
The components of deferred tax are:
30 September 30 September
2024 2023
£'000 £'000
Deferred tax assets
Fixed assets 5,192 6,080
Trading losses 29 15
Other temporary differences 895 649
6,116 6,744
Deferred tax liabilities
Property, plant and equipment (8,205) (5,857)
Intangible assets (1,386) (1,538)
(9,591) (7,395)
Deferred tax assets and liabilities are measured using the tax rates that are
expected to apply to the periods when the assets are realised or liabilities
settled, based on tax rates enacted or substantively enacted at 30 September
2024.
18. Related party transactions
30 September 2024 and 30 September 2023
During the year, and the previous year, there were no transactions with
related parties.
19. Dividends paid and proposed
30 September 30 September
2024 2023
£'000 £'000
The following dividends were declared and paid by the Group:
Final dividend year ended 30 September 2022 - 8.53 pence per ordinary share - 14,592
Special dividend year ended 30 September 2022 - 3.00 pence per ordinary share - 5,132
Interim dividend year ended 30 September 2023 - 3.27 pence per ordinary share - 5,614
Final dividend year ended 30 September 2023 - 8.54 pence per ordinary share 14,664 -
Special dividend year ended 30 September 2023 - 2.73 pence per ordinary share 4,688 -
Interim dividend year ended 30 September 2024 - 3.98 pence per ordinary share 6,828 -
Proposed for the approval by shareholders at AGM (not recognised as a
liability at 30 September 2024):
Final dividend year ended 30 September 2024 - 8.08 pence per ordinary share 13,904 14,664
(2023: 8.54 pence)
Special dividend year ended 30 September 2024 - nil pence per ordinary share - 4,688
(2023: 2.73 pence)
20. Acquisition of Lincoln Bowl, Woodlawn Bowl Inc., Lucky 9 Bowling Centre
Limited and Stoked Entertainment Centre Limited
On 2 October 2023, the Group purchased the assets, including the long
leasehold, of Lincoln Bowl. On 7 November 2023 the Group acquired Woodlawn
Bowl Inc. in Guelph, Ontario, on 11 November 2023, the assets and lease of
Lucky 9 Bowling Centre Limited as well as its associated restaurant and bar,
Monkey 9 Brewing Pub Corp in Richmond, British Columbia, and on 24 June 2024
the Group acquired Stoked Entertainment Centre Limited in Saskatoon,
Saskatchewan. All four businesses are operators of ten-pin bowling centres.
Stoked Entertainment Centre Limited also operates indoor go-karts and high
ropes. The purpose of the acquisitions was to grow the Group's core ten-pin
bowling business in their respective regions.
The results of Lincoln Bowl, Woodlawn Bowl Inc., Lucky 9 Bowling Centre
Limited and Stoked Entertainment Centre Limited are consolidated into the
Group financial statements from the respective dates of acquisition, being 2
October 2023, 7 November 2023, 11 November 2023 and 24 June 2024.
Since acquisition, Woodlawn Bowl Inc. has been dissolved and amalgamated into
Xtreme Bowling Entertainment Corporation.
The details of the business combinations are as follows (stated at acquisition
date fair values):
Lincoln Bowl Woodlawn Lucky 9 Stoked Total
Bowl Inc. Bowling Limited Entertainment
Centre Limited
£'000 £'000 £'000 £'000 £'000
Fair value of consideration transferred
Amount settled in cash 4,474 2,784 277 6,222 13,757
Recognised amounts of identifiable net assets
Property, plant and equipment 100 289 228 565 1,182
Right-of-use assets 2,000 1,426 4,255 9,960 17,641
Intangible assets 135 171 - - 306
Inventories 8 21 27 103 159
Trade and other receivables 91 42 22 7 162
Cash and cash equivalents 10 10 - 58 78
Trade and other payables (10) (62) - (583) (655)
Lease liabilities - (1,426) (4,255) (9,960) (15,641)
Deferred tax liabilities - (54) - (89) (143)
Identifiable net assets 2,334 417 277 61 3,089
Goodwill arising on acquisition 2,140 2,367 - 6,161 10,668
Consideration for equity settled in cash 4,474 2,784 277 6,222 13,757
Cash and cash equivalents acquired (10) (10) - (58) (78)
Net cash outflow on acquisition 4,464 2,774 277 6,164 13,679
Acquisition costs paid charged to expenses 921
Net cash paid in relation to the acquisitions 14,600
Acquisition related costs of £921,000 are not included as part of the
consideration transferred and have been recognised as an expense in the
consolidated income statement within administrative expenses.
The fair value of the identifiable intangible assets acquired includes
£306,000 in relation to customer relationships. The customer relationships
have been valued using the multi-period excess earnings method.
The fair value of right-of-use assets and lease liabilities were measured as
the present value of the remaining lease payments, in accordance with IFRS 16.
The fair value and gross contractual amounts receivable of trade and other
receivables acquired as part of the business combination amounted to
£162,000. At the acquisition date the Group's best estimate of the
contractual cash flows expected not to be collected amounted to £nil.
Goodwill amounting to £10,668,000 was recognised on acquisition (note 13).
The goodwill relates to the locations of the bowling centres acquired, the
expected commercial opportunities of an enhanced leisure offering in an
underserved market and the expected synergies from combining the four centres
into the Hollywood Bowl Group.
In the period since acquisition to 30 September 2024, the Group recognised
£6,967,000 of revenue and £1,503,000 of profit before tax in relation to the
acquired businesses. Had the acquisitions occurred on 1 October 2023, the
contribution to the Group's revenue would have been £11,513,000 and the
contribution to the Group's profit before tax for the period would have been
£2,478,000.
Risk management
Our approach to risk
The Board and senior management take their responsibility for risk management
and internal controls very seriously, and for reviewing their effectiveness at
least bi-annually. An effective risk management process balances the risks and
rewards as well as being dependent on the judgement of the likelihood and
impact of the risk involved. The Board has overall responsibility for ensuring
there is an effective risk management process in place and to provide
reasonable assurance that it is fully understood and managed.
When we look at risk, we specifically consider the effects it could have on
our business model, our culture and therefore our ability to deliver our
long-term strategic purpose.
We consider both short and long-term risks and split them into the following
groups: financial, social, operational, technical, governance and
environmental risks.
Risk appetite
This describes the amount of risk we are willing to tolerate as a business. We
have a higher appetite for risks accompanying a clear opportunity to deliver
on the strategy of the business.
We have a low appetite for, and tolerance of, risks that have a downside only,
particularly when they could adversely impact health and safety or our values,
culture or business model.
Our risk management process
The Board is ultimately responsible for ensuring that a robust risk management
process is in place and that it is being adhered to. The main steps in this
process are:
Department heads
Each functional area of the Group maintains an operational risk register,
where senior management identifies and documents the risks that their
department faces in the short term, as well as the longer term. A review of
these risks is undertaken on at least a bi-annual basis to compile the
department risk register. They consider the impact each risk could have on the
department and overall business, as well as the mitigating controls in place.
They assess the likelihood and impact of each risk.
The Executive team
The Executive team reviews each departmental risk register. Any risks which
are deemed to have a level above our appetite are added to/retained on the
Group risk register (GRR) which provides an overview of such risks and how
they are being managed. The GRR also includes any risks the Executive team is
managing at a Group level. The Executive team determines mitigation plans for
review by the Board.
The Board
The Board challenges and agrees the Group's key risks, appetite and mitigation
actions at least twice yearly and uses its findings to finalise the Group's
principal risks. The principal and emerging risks are taken into account in
the Board's consideration of long-term viability as outlined in the Viability
statement.
Risk management activities
Risks are identified through operational reviews by senior management;
internal audits; control environments; our whistleblowing helpline; and
independent project analysis.
The internal audit team provides independent assessment of the operation and
effectiveness of the risk framework and process in centres, including the
effectiveness of the controls, reporting of risks and reliability of checks by
management.
We continually review the organisation's risk profile to verify that current
and emerging risks have been identified and considered by each head of
department.
Each risk has been scaled as shown on the risk heat map.
Principal risks
The Board has identified 11 principal risks. These are the risks which we
believe to be the most material to our business model, which could adversely
affect the revenue, profit, cash flow and assets of the Group and operations,
which may prevent the Group from achieving its strategic objectives.
We acknowledge that risks and uncertainties of which we are unaware, or which
we currently believe are immaterial, may have an adverse effect on the Group.
Financial risks
1. Economic environment
Risk and impact Mitigating factors
· Change in economic conditions, in particular a recession, as well · There is still a risk of a contraction on disposable income
as inflationary pressures from the wars in Ukraine and the Middle East. levels, impacting consumer confidence and discretionary income. The Group has
Macroeconomic growth in the UK and Canada is low and could turn into a low customer frequency per annum and also the lowest price per game of the
recession. branded operators in the UK. Therefore, whilst it would suffer in such a
recession, the Board is comfortable that the majority of centre locations are
· Adverse economic conditions, including but not limited to, based in high-footfall locations which should better withstand a recessionary
increases in interest rates/inflation may affect Group results. decline.
· With an abundance of empty retail units across the UK, this · The impacts of the UK Government's Budget national insurance and
provides opportunities for less focused operators to open new locations in living wage increases have been considered and factored into the Group's
Hollywood Bowl markets which impacts on the revenue of its centres. financial planning.
· A decline in spend on discretionary leisure activity could · Continued focus on value for money as well as appealing to all
negatively affect all financial as well as non-financial KPIs. demographics.
· Along with appropriate financial modelling and available
liquidity, a focus on opening new centres and acquiring sites in high-quality
locations only with appropriate property costs, as well as capital
contributions, remains key to the Group's new centre-opening strategy.
· Electricity prices are hedged in the UK until September 2027.
Plans are developed to mitigate many cost increases, as well as a flexible
labour model, if required, in an economic downturn.
· The new customer booking system will provide more detailed
customer data and trends which should allow for further enhancement of offers
in both the UK and Canada.
2. Covenant breach
Risk and impact Mitigating factors
· The banking facility, with Barclays Plc, has quarterly leverage · Financial resilience has always been central to our decision
covenant tests which are set at a level the Group is comfortably forecasting making and will remain key for the foreseeable future.
to be within.
· The current RCF is £25m, margin of 165ps above SONIA as well as
· Covenant breach could result in a review of banking arrangements an accordion of £5m. The facility is currently undrawn, which under the
and potential liquidity issues. agreement, results in a cost of less than £200k per annum.
· Net cash position was £28.7m at the end of September 2024.
· Appropriate financial modelling has been undertaken to support
the assessment of the business as a going concern. The Group has headroom on
the current facility with leverage cover within its covenant levels, as shown
in the monthly Board packs. We prepare short-term and long-term cash flow,
Group adjusted EBITDA (pre-IFRS 16) and covenant forecasts to ensure risks are
identified early. Tight controls exist over the approval for capital
expenditure and expenses.
· The Directors consider that the combination of events required to
lower the profitability of the Group to the point of breaching bank covenants
is unlikely.
3. Expansion and growth
Risk and impact Mitigating factors
· Competitive environment for new centres results in less new Group · The Group uses multiple agents to seek out opportunities across
centre openings. the UK and Canada.
· New competitive socialising concepts could appear more attractive · Keep future opportunities confidential until launch and continue
to landlords. with non-compete clauses where appropriate.
· Higher rents offered by short-term private groups. · Strong financial covenant provides forward-looking landlords with
both value and future letting opportunities.
· Given the success of Hollywood Bowl, other operators are prepared
to enter its markets for a slice of the demographic, in less desirable · Continued focus with landlords on initial investment, innovation,
locations, but still splits the revenue opportunity. as well as refurbishment and maintenance capital.
· Attended key property conferences in the UK and Canada, with
positive feedback and a number of opportunities in negotiation.
· Demographic modelling to be enhanced with new customer
reservation data as becomes available, to ensure as up to date as possible.
Operational risks
4. Core systems
Risk and impact Mitigating factors
· Failure in the stability or availability of information through · All core UK systems are operated in Microsoft 365 & Azure
IT systems could affect Group business and operations. with external back-up to immutable storage in an independent security domain.
· Technical or business failure in a critical IT partner could · Microsoft Azure and Amazon AWS are robust organisations with the
impact the operations of IT systems. highest levels of security, compliance and resilience guarantees, as is our
chosen payment services provider.
· Customers not being able to book through the website is a bigger
risk given the higher proportion of online bookings compared to prior years. · Our Compass reservations system is deployed to the whole UK
estate and in trial in Canada. This system has been built in house and has
· Inaccuracy of data could lead to incorrect business decisions improved performance, resilience and future development flexibility. The
being made. system is hosted in Azure.
· The CRM/CMS and CDP system is hosted by a third party utilising
cloud infrastructure with data recovery contingency in place.
· Our core Canadian systems are continuing to evolve to towards
parity in with UK systems.
· All Group technology changes which affect core systems are
subject to authorisation and change control procedures with steering groups in
place for key projects.
5. Food and drink suppliers
Risk and impact Mitigating factors
· Operational business failures from key suppliers. · The Group has key food and drink suppliers under contract with
tight service level agreements (SLAs). Alternative suppliers that know our
· Unable to provide customers with a full experience. business could be introduced, if needed, at short notice. UK centres hold
between 14 and 21 days of food and drink product. Canadian centres hold
· The cost of food and drink for resale increase due to changes in marginally more food and drink stock due to their supplier base and potential
demand, legislation or production costs, leading to decreased profits. for missed deliveries.
· Regular reviews and updates are held with external partners to
identify any perceived allergen risks and their resolutions. A policy is in
place to ensure the safe procurement of food and drink within allergen
controls.
· Regular reviews of food and drink menus are also undertaken to
ensure appropriate stockturn and profitability.
· Key food and drink contracts have cost increase limits negotiated
into them and full contract.
· Splitsville uses Xtreme Hospitality (XH), a group buying company,
and Molson Coors, to align itself with tier one suppliers in all service
categories including food and drink. If XH is unable to provide a service or
product, Splitsville is able to source directly itself.
6. Amusement supplier
Risk and impact Mitigating factors
· Any disruption which affects Group relationship with amusement · Namco is a long-term partner that has a strong UK presence and
suppliers. supports the Group with trials, initiatives and discovery visits.
· Customers would be unable to utilise a core offer in the centres. · In the UK, regular key supplier meetings are held between
Hollywood Bowl's Head of Amusements and Namco. There are half-yearly meetings
· Any internal failure of data cabling or wifi could impact on the between the CEO, CFO and the Namco UK leadership team.
customer and their ability to play unhindered. This is most notable in Canada
where it is a "non-cash" playcard system. · Namco also has strong liquidity which should allow for a
continued relationship during or post any consumer recession.
· Appointment of a Head of Amusements in Canada in late FY2024 to
ensure a focus and accountability for a growing part of the business in
Canada.
· The Canadian supplier is Player 1.
· New connectivity has been rolled out to all centres in Canada in
the past financial year and this will continue to be tested on a frequent
basis.
7. Management retention and recruitment
Risk and impact Mitigating factors
· Loss of key personnel - centre managers. · The Group runs Centre Manager In Training (CMIT) and Assistant
Manager In Training (AMIT) programmes annually in the UK, which identify
· Lack of direction at centre level with effect on customer centre talent and develop team members ready for these roles. Centre managers
experience. in training run centres, with assistance from their regional support manager
as well as experienced centre managers from across the region, when a vacancy
· More difficult to execute business plans and strategy, impacting needs to be filled at short notice. The AMIT programme was also run in Canada
on revenue and profitability. in FY2024 and the CMIT is being launched in FY2025.
· Increase in Team Member absence impacting on operational · The bonus schemes are reviewed each financial year in the UK and
delivery. Canada, to ensure they are still a strong recruitment and retention tool.
· Impact of employment law changes. · The hourly bonus scheme has paid out to over 60 per cent of the
UK team in each month in FY2024.
· Increased the People Partner support in the UK in FY2024 to
provide further support to our centres improving engagement and retention.
Also recruiting in Canada to double the headcount in this areas.
8. Food safety
Risk and impact Mitigating factors
· Major food incident including allergen or fresh food issues. · Food and drink audits are undertaken in all centres based upon
learnings of prior year and food incidents seen in other companies.
· Loss of trade and reputation, potential closure and litigation.
· UK - allergen awareness is part of our team member training
matrix which needs be completed before team members can take food or drink
orders. Information is regularly updated and remains a focus for the centres.
This was enhanced further in the latest menu, along with an online allergens
list which is available for all customers. A primary local authority
partnership is in place with South Gloucestershire covering health and safety,
as well as food safety.
· In conjunction with the supply chain risk the Allergen Control
Policy has been reviewed and updated (August 2024).
· All food menus in the UK have an allergen disclaimer as well as
QR code, linking the customer to up-to-date allergen content for each product,
updated through the 'Nutritics' system.
· Canada - all food menus have an allergen disclaimer. Allergen
checks are undertaken with all customers when they order and are also audited
as part of the Food and Drink audits.
Technical risks
9. Cyber security and GDPR
Risk and impact Mitigating factors
· Risk of cyber-attack/terrorism could impact the Group's ability · The area is a key focus for the Group and it adopts a
to keep trading and prevent customers from booking online. multi-faceted approach to protecting its IT networks through protected
firewalls and secure two-factor authentication passwords, as well as the
· Non-accreditation can lead to the acquiring bank removing frequent running of vulnerability scans to ensure the integrity of the
transaction processing. firewalls.
· Data protection or GDPR breach. Theft of customer email · An external Security Operations Centre is in place to provide
addresses, staff emails and other personal information - all of which can 24/7/365 monitoring and actioning of cyber security alerts and incidents. We
impact on brand reputation in the case of a breach. have additional retained services via our Cyber Insurers and Broker to work
with the Group on a priority basis to provide proactive incident response
services should a breach occur. As noted below, full integration of Canada
into the SOC is planned.
· Advancements in the internal IT infrastructure have resulted in a
more secure way of working. By leveraging Microsoft technologies such as AI
threat intelligence and NCSC recommended baselines, our overall IT estate
utilises widely accepted security solutions and configurations. The Group
website is hosted in Amazon Web Services which enforces a high level of
physical security to safeguard its data centres, with military grade perimeter
controls.
· The website and booking site are protected by Cloudflare WAF with
DDoS (Distributed Denial of Service) protection.
· We have achieved PCI compliance across our payment channels, with
robust controls in place externally audited and verified through the
submission of the annual PCI Report on Compliance (ROC) to both the PCI
Council and our acquiring bank. We maintain compliance through a rigorous,
ongoing program of continuous improvement and continuous development to
address new and emerging risks.
· Canadian systems, including identities, applications and devices
will move towards a managed state in FY2025, in line with UK operations for
centralised control, including full integration with the UK 24/7 SOC
(Security).
· Cyber Essentials Plus certification achieved, verifying controls
such as secure access and vulnerability management.
· A Data Protection Officer has been in position for several years
in the UK and we have a newly appointed Head of IT Security and Compliance who
oversees our strategy, applications and activity in this area with periodic
updates given to the Board.
· GDPR controls and documentation have been externally assessed and
validated assuring us of no areas of non-compliance.
· Broad cyber insurance coverage policy is in place which extends
cover for Canadian systems.
Regulatory risk
10. Compliance
Risk and impact Mitigating factors
· Failure to adhere to regulatory requirements such as listing · Expert opinion is sought where relevant. We run regular training
rules, taxation, health and safety, planning regulations and other laws. and development for appropriately qualified staff.
· Potential financial penalties and reputational damage. · The Board has oversight of the management of regulatory risk and
ensures that each member of the Board is aware of their responsibilities.
· Compliance documentation for centres to complete for health and
safety, and food safety, are updated and circulated twice per year. Adherence
to Company/legal standards is audited by the internal audit team.
11. Climate change
Risk and impact Mitigating factors
· Utility non-commodity cost increases. · Significant progress already made with UK solar panel installations,
transitioning energy contracts to renewable sources and improving the energy
· Business interruption and damage to assets. efficiency of our existing centres and new builds. We will be extending our UK
sustainability strategy and initiatives into our Canadian operations where
· Cost of transitioning operations to net zero. appropriate.
· Increased environmental legislation. · The range of climate-related targets has been extended for FY2025 to
include Canada.
· We have commenced a supplier engagement programme with key suppliers to
understand their carbon reduction plans, access data specific to our purchased
goods and increase visibility of likely price increases and supply challenges
over time.
· The CRC monitors and reports on climate-related risks and
opportunities.
· Our TCFD disclosure includes scenario planning which was undertaken to
understand materiality of risks. This did not identify any material short to
mid-term risks for the Group.
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