REG - Hollywood Bowl Group - Half-year Results
30/05/2023 07:00
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RNS Number : 8168A Hollywood Bowl Group plc 30 May 2023
Hollywood Bowl Group plc
("Hollywood Bowl", the "Company" or the "Group")
Interim Results for the Six Months Ended 31 March 2023
CONTINUED STRONG CUSTOMER DEMAND REFLECTING ATTRACTIVENESS OF OFFER AND GREAT
VALUE FOR MONEY PROPOSITION
Hollywood Bowl, the UK and Canada's largest ten-pin bowling operator, is
pleased to announce its Interim Results for the six-month period ended 31
March 2023 ("H1 FY2023").
Financial highlights
H1 FY2023 H1 FY2022 H1 FY2022 Movement
(excluding VAT H1 FY2023 vs H1 FY2022 (excluding VAT benefit on bowling))
benefit on bowling)
Revenue £110.2m(4) £100.2m(4) £91.3m +20.7%
Gross profit £91.3m £86.5m £77.7m +17.5%
Gross profit margin 82.8% 86.4% 85.1% -230bps
Administrative expenses £60.0m £48.9m £48.7m +23.2%
Group adjusted EBITDA1 £43.9m £42.2m £39.2m +12.0%
Group adjusted EBITDA1 pre-IFRS 16 £35.1m £34.0m £31.0m +13.2%
Group profit before tax £26.7m £33.4m £24.8m +7.7%
Group profit after tax £20.9m £27.0m £20.4m +2.5%
Group adjusted profit after tax2 £21.9m £27.0m £20.4m +7.5%
Free cash flow3 £15.3m £19.6m £19.6m -21.9%
Interim dividend per share 3.27p 3.00p 3.00p +9.0%
Operational highlights
· Continued strong performance driven by demand for high-quality,
great value for money offer
o LFL revenue growth(5) of 3.5% with a record first half Group revenue of
£110.2m, up 9.7 per cent vs H1 FY2022(4). Excluding the effect of the reduced
rate (TRR) of VAT in H1 FY2022, group revenues were up 20.7 per cent vs H1
FY2022
o Group adjusted EBITDA(1) pre-IFRS 16 increased 13.2 per cent vs H1 FY2022
(excluding the TRR of VAT in H1 FY2022) to £35.1m
o Interim dividend of 3.27 pence per share
o Strong net cash position at 31 March 2023 of £44.1m; undrawn £25m
revolving credit facility
· Active improvement of the quality of the estate through new
centre openings and successful execution of our refurbishment strategy
o Hollywood Bowl Speke and Puttstars Peterborough opened during the period
and are trading ahead of management's expectations
o Currently on site in Hollywood Bowl Merry Hill which is due to open in Q4
FY2023 and expect to be on site on a combined Hollywood Bowl/Puttstars
offering during H2 FY2023
o Eight refurbishments (including three rebrands) completed in the half,
with all trading in line with or above our return on investment expectations,
with a further two underway
o Four further centres had solar panels installed, bringing the total to 26
centres (38 per cent of UK estate)
· Relentless focus on innovation resulting in high customer
satisfaction and strong LFL growth
o Food LFL revenue up 9.0 per cent and drinks LFL revenue up 1.7 per cent
following the introduction of a simplified food menu new 'snacks and sharers'
lane offering and a new drinks range, all of which are increasing dwell time
and spend
o Pins on Strings installed in seven centres during the period, bringing the
total sites using the new technology to 48 (75 per cent of the Group's UK
bowling centres), with a further five planned before year end
o Increased technology investment in CRM, website and core booking systems
to enhance the digital customer journey
· Canada performing ahead of our expectations
o Canadian business generated EBITDA of CAD: 5.0m (£3.1m)(6) in the period
o Three further entertainment centres in Calgary acquired in February which
are trading in line with expectations.
o Integration with Splitsville is progressing well
o Exchanged on a new build bowling centre in Ontario due to open in H1
FY2024
o Strong momentum and significant expansion potential supported by strong
Group balance sheet
· Outlook - the Group remains well-placed to continue executing its
growth strategy
o Trading in line with the Board's expectations for FY2023
o On track to meet target of 15-20 new centre openings by the end of FY2025
with strong new centre pipeline for Hollywood Bowl and Puttstars brands, as
well as Canadian Splitsville brand
o Continued balance sheet strength and disciplined capital allocation policy
supports ability to grow and further invest and innovate for customers
o Confident in resilient demand as customers look for value for money
leisure experiences
o Well-insulated from inflationary pressures with electricity costs hedged
to the end of FY2024
o Training and development programmes for team members progressing well;
continued investment in people to retain and attract the best talent
1 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, 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.
2 Group adjusted profit after tax is calculated as group profit after
tax, adding back the acquisition fees of £0.5m (H1 FY2022: nil), the non-cash
expense of £0.7m (H1 FY2022: nil) related to the fair value of the earn out
consideration on the Teaquinn acquisition in May 2022 and removing the TRR of
VAT benefit on bowling of £0.2m (H1 FY2022: £6.6m)
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 H1 FY2022 included a total of £8.8m relating to
the reduced rate (TRR) of VAT on bowling. £5.8m of this was in respect of
prior years and £3.0m for H1 FY2022. H1 FY2023 includes £0.2m in respect of
TRR of VAT on bowling parties.
5 Like-for-like (LFL) revenue growth is total revenue excluding any
new centres and Canada. New centres are included in the LFL growth calculation
for the period, after they complete the calendar anniversary of their opening
date. LFL revenues in H1 FY2023 and H1 FY2022 exclude the impact of TRR of VAT
on bowling.
6 Revenues in GBP based on an average foreign exchange rate over the
relevant period of 1.62 CAD: 1 GBP.
Stephen Burns, Chief Executive, commented:
"I am delighted with our record performance in the first half, and I would
like to thank our fantastic team members for all the hard work that goes into
delivering excellent value for money, high quality experiences. It is clear
from our high customer satisfaction scores that our continually evolving
proposition appeals to all generations looking to enjoy affordable leisure
activities together.
"We are looking forward to driving further growth in the UK and Canada,
capturing the significant market opportunity ahead. Our resilience to
inflationary pressures, strong balance sheet and cash-generative model gives
us confidence in the future as we continue to invest so that our customers
have the best experience possible in our centres."
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
Will Palfreyman hollywoodbowl@teneo.com
James Macey White +44 (0)20 7353 4200
Laura Marshall
CHIEF EXECUTIVE REVIEW
I am delighted with the Group's financial performance in the first six months
of the year. We continue to deliver sustainable, profitable growth, with total
revenue of £110.2m, a 20.7 per cent growth to H1 FY2022 (excluding the
reduced rate (TRR) of VAT benefit in H1 FY2022). Like-for-like (LFL) revenues
grew by 3.5 per cent, underpinned by enhancements in margin and volume of
games sold, in conjunction with the successful execution of our customer led
operating model.
We remain focused on enhancing the customer experience and the overall quality
of the estate, through new centre openings and acquisitions, both in the UK
and in Canada, through our programme of refurbishments and rebrands as well as
through product and service innovation and investments in technology.
During the half, we retired the AMF brand from the portfolio, after rebranding
the final two centres to the Hollywood Bowl brand, we refurbished six existing
Hollywood Bowl centres and opened two new centres in high quality locations in
Speke and Peterborough. We are encouraged by the returns from the investments
made and our programme remains on track with further refurbishments of our
centres in the UK and Canada planned in the second half.
Adjusted profit after tax was £21.9m, which is up 7.5 per cent on prior
period (H1 FY2022 (excluding TRR of VAT benefit): £20.4m). Statutory profit
after tax was £20.9m in H1 FY2023.
Payment of the FY2022 final ordinary dividend, the special dividend and
capital investments in the first half of this financial year, offset by the
cash generation of the Group in the period, resulted in net cash of £44.1m at
the end of the period, a reduction of £12.0m from 30 September 2022. In line
with our progressive dividend policy, the Board has declared an interim
dividend of 3.27 pence per share, representing 9 per cent growth on the
comparable period last year.
We remain mindful of the wider economic environment and the resulting consumer
headwinds but are confident that we will continue to deliver attractive
returns for our shareholders by pursuing our proven strategy of delivering a
sector leading leisure experience, at a great value for money price point,
through our motivated and well rewarded teams.
Like-for-like growth
Against the exceptionally successful comparative period, LFL sales (which
exclude TRR of VAT on bowling activities) grew by 3.5 per cent during the
first half of the financial year, with the four main revenue lines all showing
LFL sales growth on the comparative period in FY2022.
On a LFL basis game volumes grew by 0.6 per cent. LFL spend per game
(excluding TRR of VAT on bowling activities), grew by 2.8 per cent.to £10.82
in the period, up from £10.53 in H1 FY2022. Our dynamic pricing technology
has helped drive incremental volume and carefully controlled yield
enhancement. Our wider pricing strategy has remained unchanged, and we still
offer the best value for money product of all the branded UK bowling
operators, with a family of four able to bowl at peak times for less than
£25.
Food spend was also up in the year showing a 8.1 per cent LFL improvement in
the first half. Our focus on speed, quality, consistency and value for money
with our food offer has been well received by our customers. New menu items
have been added in line with customer feedback and sales data, and although we
have made some changes to price to mitigate the inflationary increases, the
most popular menu items were still below their 2019 price point. Our drinks
range has the same value for money proposition, for example a pint of Carling
lager is still available for less than £4. Spend on drink grew on a per game
LFL basis by 1.0 per cent, underpinned by further enhancements to the at lane
ordering systems and the national roll out of a new drinks range.
Refurbishments and space optimisation projects, coupled with the expansion of
contactless payment technology and new game formats, helped drive LFL sales
growth of 6.3% in Amusements. The Amusement offer is an important part of the
customer experience. In the main, we have kept the price to play at £1
despite the significant improvement in the gaming experience but are utilising
new payment technology to enhance the yield on certain games where
appropriate.
Growth strategy - investing in our UK estate and new centre openings
Our growth strategy remains unchanged, and we are pleased with the progress we
have made growing our business during the period. Our new centre opening
programme is on track in both the UK and Canada, and we continue to grow LFL
revenue through the improvement of the existing estate and our refurbishment
programme which continues to deliver above our returns hurdle rate.
FY2023 will be a record year of investment in the estate, and a very busy year
for our property teams. In the first half, we have invested a total of £11.3m
(excluding acquisitions costs), with two new centre openings, three rebrands
and five full centre refurbishments completed in the UK. We will continue this
investment led strategy in the second half with our new Hollywood Bowl in
Merry Hill already on site, at least four more refurbishments and two space
optimisation projects scheduled.
We remain confident in our ability to continue to deliver on our plan of an
average of at least three new openings a year. As set out above, two new
centres were opened in the first half, with Merry Hill, our new 24 lane 36,500
square foot centre, scheduled to open during the second half of the financial
year.
Our two new centre openings in the first half took the total number of centres
in the UK estate to 69. We opened our second Hollywood Bowl in Liverpool at
the popular leisure and retail park in Speke, on 4 November 2022 for a net
capital spend of £2.7m. The centre is a key anchor tenant complementing the
leisure offering of the scheme, alongside a well-established cinema, Ninja
Warrior, and a good selection of restaurants. The 16-lane centre occupying
just under 20,000 square feet has been very well received and is trading ahead
of expectations.
We also opened Puttstars Peterborough on 11th November 2022 for a net capital
spend of £1.8m. The state of the art 27-hole golf venue occupies 19,500
square feet, over two floors and boasts a large amusement offer, cloud-based
scoring and a combined bar diner. This new-look Puttstars is located in the
Queensgate shopping centre in the heart of the city, and part of a
multimillion leisure development by the landlord.
Transformational refurbishments have continued, including bringing the very
latest design innovations and technological improvements to our centres in
Finchley, Milton Keynes (including the addition of one extra bowling lane),
Poole Tower Park and Leeds City, with one amusement enlargement project at
Watford Atria. All the refurbishments are delivering returns in line with
expectation, with the last 12 projects averaging more than a 55 per cent
return on investment.
The Pins on Strings roll out has continued, with a further seven centres
benefiting from the cost saving and customer experience enhancing technology.
48 centres now have the machines (75% of the Group's UK's bowling centres),
delivering a minimum 30 per cent return on invested capital, and we plan to
install into a further eight centres during the second half of the financial
year.
International expansion
In May 2022, we were delighted to announce the acquisition of our Canadian
business (Teaquinn), comprising Splitsville, an operator of five ten-pin
bowling centres, and Striker Bowling Solutions (Striker), a B2B supplier and
installer of bowling equipment, for an initial consideration of CAD 17m
(approximately £10.6m).
Since the acquisition, Teaquinn has traded ahead of our expectations. During
the first half of this financial year it contributed CAD 18.4m (£11.3m) in
revenue and just over CAD 5m (£3.1m) of EBITDA (on a pre-IFRS 16 basis). Our
growth strategy in Canada is focused on four areas; (i) investing in the
existing estate, (ii) acquiring existing businesses that complement the
current estate, (iii) opening new centres and (iv) supporting the Canadian
bowling market with Striker's products and services.
In February, the Group acquired three entertainment centres in Calgary
(Project Owl), a strategically important location between British Columbia and
Ontario. These sites are trading in line with our expectations and integration
with Splitsville is going well, helped in part by the UK management expertise
that has been seconded to the largest of the centres in Calgary. The pipeline
for acquisitions continues to build with several centres in the diligence
process and we will continue to update on any acquisitions once appropriate to
do so.
The group recently exchanged contracts on a new build bowling centre in
Ontario. The 43,000 square feet centre scheduled to open in FY2024, will
feature 24 lanes and will be our first new build bowling centre in Canada.
The Canadian refurbishment programme continues to progress well, with one
refurbishment completed during the half, while one rebrand and two
refurbishments are scheduled on site for the second half of the financial
year.
Our Striker business continues to grow as a result of increased investment
into bowling centres across the country after re-opening following the
COVID-19 lockdowns. Revenues in the first half were CAD 2.9m (£1.8m) and the
order book is strong with several large installation and maintenance projects
already agreed.
Growing sustainably
Running our business in a sustainable manner is a key focus for the Group
and we have continued to make good progress delivering against our ESG
strategy and the FY2023 and longer-term targets aligned to this. Highlights in
the first half included improvements in our Scope 1 and 2 emissions intensity
ratio and waste recycling percentages, more than 50 per cent of management
appointments coming from internal candidates, and the establishment of a Board
Corporate Responsibility Committee.
Outlook
As we navigate the current economic landscape, we understand that many of our
customers are facing challenges such as rising living costs and higher
interest rates. This is why we continue to focus on providing a high-quality
leisure experience that offers great value for money. We are proud that
families and friends are continuing to choose our inclusive and affordable
offerings for their leisure spending, and we are committed to maintaining this
trend through the second half of the year.
To further enhance our business for the benefit of all of our stakeholders, we
are fully committed to our ongoing investment programme across all areas.
This, combined with our sustainable profitable growth strategy, gives the
Board a strong sense of confidence in our future prospects. We are pleased to
report that we are on track to meet our key strategic priorities for the year,
and trading is in line with the Board's financial expectations. We are
encouraged by the progress we have made so far and will continue to strive for
excellence in all aspects of our business.
Stephen Burns
Chief Executive Officer
30 May 2022
CHIEF FINANCIAL OFFICER'S REVIEW
Group financial results
H1 FY2023 H1 FY2022 H1 FY2022 Movement
(excluding VAT H1 FY2023 vs H1 FY2022 (excluding VAT benefit on bowling))
benefit on bowling)
Revenue £110.2m(4) £100.2m4 £91.3m +20.7%
Gross profit £91.3m £86.5m £77.7m +17.5%
Gross profit margin 82.8% 86.4% 85.1% -230bps
Administrative expenses £60.0m £48.9m £48.7m +23.2%
Group adjusted EBITDA1 £43.9m £42.2m £39.2m +12.0%
Group adjusted EBITDA1 pre-IFRS 16 £35.1m £34.0m £31.0m +13.2%
Group profit before tax £26.7m £33.4m £24.8m +7.7%
Group profit after tax £20.9m £27.0m £20.4m +2.5%
Group adjusted profit after tax2 £21.9m £27.0m £20.4m +7.5%
Free cash flow3 £15.3m £19.6m £19.6m -21.9%
Interim dividend per share 3.27p 3.00p 3.00p +9.0%
1 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, 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.
2 Group adjusted profit after tax is calculated as group profit after
tax, adding back the acquisition fees of £0.5m (H1 FY2022: nil), the non-cash
expense of £0.7m (H1 FY2022: nil) related to the fair value of the earn out
consideration on the Teaquinn acquisition in May 2022 and removing the TRR of
VAT benefit on bowling of £0.2m (H1 FY2022: £6.6m)
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 During FY2020 the Chancellor announced the reduced rate (TRR) of VAT
on hospitality activities from which bowling activities were initially
excluded. The Tenpin Bowling Proprietors Association has been lobbying on the
industry's behalf, since that date, for the sector to be treated in line with
the hospitality industry. We received confirmation on 12 April 2022 (FY2022)
that HMRC agreed that there is indeed a clear distinction between the sport of
competitive bowling and the leisure activity of bowling - with the latter
being able to benefit from TRR of VAT retrospectively (H1 FY2022: £8.8m). H1
FY2023 includes £0.2m in respect of TRR of VAT on bowling parties.
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, as well as a measure
that investors use to consider the underlying business performance. 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 is compared to the same period in FY2022, excludes
the impact of TRR of VAT on bowling as well as revenue relating to the Group's
Canadian business, which was acquired in May 2022. New centres are included in
the LFL revenue after they complete the calendar anniversary of their opening
date.
Further details on the Alternative Performance Measures used is at the end of
this report.
Revenue
On the back of an exceptionally strong FY2022, it was pleasing to see LFL
growth of 3.5 per cent in H1 FY2023.
LFL revenue growth was a combination of a spend per game growth of 2.8 per
cent, taking LFL average spend per game to £10.82, as well as LFL game volume
growth of 0.6 per cent. The LFL growth, alongside the performance of the new
UK centres, resulted in record UK revenues of £98.9m and growth of 8.3 per
cent compared to the underlying revenues in H1 FY2022 (excluding the impact of
TRR of VAT £8.8m in H1 FY2022).
Our Canadian business continues to trade ahead of our expectations. Total
revenues in Canada were CAD 18.4m (£11.3m), with bowling centres accounting
for CAD 15.5m (£9.5m).
Total Group revenue for H1 FY2023 was £110.2m a 20.7 per cent growth to H1
FY2022 (excluding VAT benefit in H1 FY2022).
Gross profit margin
Gross profit was £91.3m, 17.5 per cent growth on H1 FY2022 (excluding VAT
benefit in H1 FY2022), with gross profit margin at 82.8 per cent.
Gross profit for the UK business was £83.0m with a margin of 83.8 per cent.
The trend of amusements growing at a higher rate than bowling continued and
given amusements' lower margin rate, this has reduced gross profit margin but
produced a higher gross profit overall.
Gross profit for Teaquinn was in line with expectations, at CAD 13.5m
(£8.3m), with a margin of 73.6 per cent. The lower margin rate when compared
to the UK business is as forecasted due to the effect of the lower gross
profit margin of the Striker bowling equipment and installations business, the
higher food and drink mix in the Canadian bowling centres and the lower
contractual amusement gross profit margin. Splitsville centres contributed CAD
12.9m (£7.9m) of gross profit.
Administrative expenses
Total administrative expenses on a statutory basis were £60.0m, of which the
UK accounted for £54.1m.
On a pre-IFRS 16 basis, total administrative expenses were £63.6m and the UK
accounted for £57.6m in H1 FY2023, compared to £52.4m during the
corresponding period in FY2022.
Employee costs in centres increased to £19.9m, an increase of £4.3m when
compared to H1 FY2022, due to a combination of salary increases over the
period, the impact of higher LFL revenues, new UK centres (£0.8m) as well as
the added employee costs in Canadian centres which were CAD 4.5m (£2.8m).
Property-related costs in centres, accounted for under pre-IFRS 16, were
£19.1m, with £18.0m for the UK centres (H1 FY2022: £15.5m). Property costs
in the UK increased by £2.5m with new centre costs of £0.9m, whilst business
rates were higher by £1.5m due to the government implemented COVID-19
concession in the first half of FY2022. Canadian property centre costs were
CAD 1.9m (£1.1m).
Total property costs, under IFRS 16, were £20.3m, including £5.2m accounted
for as property lease assets depreciation and £4.7m in implied interest
relating to the lease liability.
Corporate costs include all central costs and the out-performance bonus for
centre management teams. Total corporate costs decreased by £0.2m, to
£11.7m, when compared to the corresponding period in FY2022. UK corporate
costs decreased by £1.0m, to £11.0m with the main driver of this being lower
bonus amounts in H1 FY2023, whilst corporate costs for Canada were CAD 1.1m
(£0.7m).
The statutory depreciation and amortisation charge for H1 FY2023 was £11.7m
compared to £10.2m in H1 FY2022, with Canada accounting for £0.8m of the
increase.
Exceptional costs
Exceptional costs relate in the main to two areas. The first is the
acquisition costs in relation to Project Owl, which totalled £0.5m. The
second is the earn out consideration for Pat Haggerty that is an exceptional
cost of £0.7m in H1 FY2023 (of which £0.6m is in administrative expenses and
£0.1m in interest expenses). As noted in the FY2022 full year results, the
earn out consideration is considered a post-acquisition employment expense and
not in the scope of IFRS 3, but instead is accounted for under IAS 19. The
earn out has a cost impact in the following financial years up to and
including at least FY2025.
More detail on these exceptional costs are shown in note 4 to the Financial
Statements.
Group adjusted EBITDA and operating profit
Group adjusted EBITDA pre-IFRS 16 increased to a record £35.1m and includes a
contribution of £3.1m (CAD 5.0m) from the Canadian business.
Compared to H1 FY2022 EBITDA pre-IFRS 16, this was an increase of 3.3 per
cent. When excluding the impact of TRR of VAT (£3.0m) in the H1 FY 2022
comparable, the increase is 13.3 per cent. The increase is primarily due to
the increased revenue performance and the addition of the Canadian business.
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.
Group adjusted EBITDA and operating profit
H1 FY2023 H1 FY2022
£'000 £'000
Operating profit 31,248 37,616
Depreciation 11,303 9,949
Amortisation 395 236
Loss / (profit) on property, right-of-use assets, plant and equipment and 42 (20)
software disposal
Exceptional items 899 (5,641)
Group adjusted EBITDA under IFRS 16 43,886 42,158
In-year impact on FY2022 of TRR of VAT on bowling activities - (2,970)
IFRS 16 adjustment1 (8,775) (8,156)
Group adjusted EBITDA pre-IFRS 16 35,112 31,033
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.
Share-based payments
During the first half of the year, the Group granted Long-Term Incentive Plan
(LTIP) shares to the senior leadership team. These awards vest in three years
providing continuous employment during this period and attainment of
performance conditions as outlined on page 113 of the Annual Report. H1 FY2023
share-based costs were £541,430 (H1 FY2022: £403,043). Share-based costs are
not classified as exceptional costs.
Financing
Finance costs increased to £4.5m in H1 FY2023 (H1 FY2022: £4.2m) comprising
mainly of implied interest relating to the lease liability under IFRS 16 of
£4.7m. Bank interest costs in relation to the Groups undrawn revolving credit
facility of £0.3m were offset by the interest received (£0.5m) on the
Groups' bank balances.
The Group's bank borrowing facilities are a revolving credit facility (RCF) of
£25m at a margin rate of 1.75 per cent above SONIA and an agreed accordion of
£5m. The loan term runs to the end of December 2024; and the RCF remains
fully undrawn.
Capital expenditure
During the financial year, the Group invested £18.6m of net capital
expenditure, including £7.3m on the acquisition of three centres in Calgary.
A total of £3.9m was invested into the refurbishment programme. The
refurbishment of eight UK centres was completed including the final two
rebrands of AMF to Hollywood Bowl, in Torquay and Worthing, as well as interim
spends of £1.7m on two Canadian centres. Despite inflationary pressures,
returns on these UK refurbishments continue to exceed the Group's hurdle rate
of 33 per cent.
New UK centre capital expenditure was a net £3.0m. This relates to the two
centres opened in the year - Hollywood Bowl Speke and Puttstars Peterborough.
The Group spent £4.4m on maintenance capital in the UK, including continued
spend on the rollout of Pins on Strings technology, now in 48 centres, and
solar panel installations, with 26 centres now benefitting from this
technology.
Capital investment in Canada
Three centres were acquired in Calgary during February 2023 for a
consideration of CAD 12m (£7.6m), with £0.3m of cash acquired in the deal.
On a proforma basis for the 12 months to 30 September 2022, these centres
generated CAD 2.8m EBITDA on a pre-IFRS 16 basis, equating to a purchase price
of 4.3x pre-IFRS 16 EBITDA.
We were pleased to complete the refurbishment and rebrand of Splitsville
Richmond Hill in H1 FY2023 and will be on site in H2 FY2023 with
refurbishments in both Kingston and Hamilton. Completion is expected before
the end of the current financial year. We also plan to be on site in a
refurbishment and rebrand in Calgary in late calendar year 2023.
The liquidity position of the Group remains strong, with a net cash position
of £44.1m as at 31 March 2023, compared to £56.1m as at 30 September 2022.
Detail on the cash movement in the year is shown in the table below.
Cash flow and net debt
H1 FY2023 H1 FY2022
£'000 £'000
Group adjusted EBITDA under IFRS 16 43,886 42,158
Movement in working capital (2,997) 1,972
Maintenance capital expenditure (4,362) (4,106)
Taxation (4,269) (1,530)
Payment of capital elements of leases (5,540) (7,773)
Adjusted operating cash flow (OCF)1 26,719 30,721
Adjusted OCF conversion 60.9% 72.9%
Expansionary capital expenditure2 (6,934) (6,997)
Net bank loan interest received / (paid) 287 (41)
Lease interest paid (4,741) (4,054)
Free cash flow (FCF)3 15,331 19,634
Exceptional items (278) -
Acquisition of Project Owl (7,574) -
Cash acquired in Project Owl 320 -
Dividends paid (19,724) -
Net cash flow (11,918) 19,634
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 taking into account 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 first half is £5.8m, including a deferred tax
amount of £1.3m.
Earnings
Statutory profit before tax for the half was £26.7m. The Group delivered
profit after tax of £20.9m and basic earnings per share was 12.21 pence.
Adjusted profit after tax was £21.9m (EPS of 12.80 pence). This is calculated
to take account of the impact of the costs associated with the Teaquinn earn
out consideration as well as acquisition costs.
It is calculated as statutory profit after tax, adding back Canadian
acquisition fees of £0.5m, the non-cash expense of £0.7m related to the earn
out consideration on the Teaquinn acquisition in May 2022 and removing the TRR
of VAT benefit on bowling parties of £0.2m.
Dividend
In line with its capital allocation policy, the Board has declared an interim
dividend of 3.27 pence per share. The ex-dividend date is 8 June 2023, with a
record date of 9 June 2023 and a payment date of 5 July 2023. Detail on the
Group's capital allocation policy can be found on page 44 of the FY2022 Annual
report and accounts.
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.
Laurence Keen
Chief Financial Officer
30 May 2023
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.
Like-for-like (LFL) revenue for H1 FY2023 is calculated as:
• Total revenues £110.2m, less
• New UK centre revenues from FY2022 and FY2023 that have not
annualised £4.3m, less
• Canada revenues £11.3m
New centres are included in the LFL revenue after they complete the calendar
anniversary of their opening date.
LFL comparatives for H1 FY2022 are £91.3m.
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, plant and equipment, right of use
assets, 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
and acquisition costs.
LFL spend per game is defined as UK LFL revenue in the year divided by the
number of LFL bowling games and golf rounds played in the UK.
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 taking into account 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.
Expansionary capital expenditure includes all capital on new centres,
refurbishments and rebrands only.
Adjusted profit after tax for H1 FY2023 is calculated as statutory profit
after tax, adding back Canadian acquisition fees of £0.5m, the non-cash
expense of £0.7m related to the fair value of the earn out consideration on
the Teaquinn acquisition in May 2022 and removing the TRR of VAT benefit on
bowling parties of £0.2m. This adjusted profit after tax is also used to
calculated adjusted earnings per share.
Condensed Consolidated Income Statement and Statement of Comprehensive Income
For the six months ended 31 March 2023
Six months ended 31 March 2023 Six months ended 31 March 2022
Before exceptional Exceptional items Total Before exceptional Exceptional Total
items (note 4) Unaudited items Items Unaudited
Unaudited Unaudited £'000 Unaudited (note 4) £'000
£'000 £'000 £'000 Unaudited
Note £'000
Revenue 110,052 192 110,244 94,381 5,792 100,173
Cost of sales (18,972) - (18,972) (13,641) - (13,641)
Gross profit 91,080 192 91,272 80,740 5,792 86,532
Administrative expenses (58,934) (1,091) (60,025) (48,765) (151) (48,916)
Operating profit/(loss) 32,146 (899) 31,247 31,975 5,641 37,616
Finance income 5 497 - 497 - - -
Finance expenses 5 (4,954) (79) (5,033) (4,179) - (4,179)
Profit/(loss) before tax 27,689 (978) 26,711 27,796 5,641 33,437
Tax charge 6 (5,769) (42) (5,811) (5,354) (1,058) (6,412)
Profit/(loss) for the period attributable to equity shareholders 21,920 (1,020) 20,900 22,442 4,583 27,025
Other comprehensive income (724) - (724) - - -
Retranslation (loss) of foreign currency denominated operations
Total comprehensive income/(loss) for the period attributable to equity 21,196 (1,020) 20,176 22,442 4,583 27,025
shareholders
Earnings per share
Basic earnings per share (pence) 12.21 15.82
Diluted earnings per share (pence) 12.16 15.76
Weighted average number of shares - Basic 171,222,369 170,828,776
Dilutive potential ordinary shares 649,078 603,170
Weighted average number of shares - Diluted 171,871,447 171,431,946
Reconciliation of operating profit to Group adjusted EBITDA
Six months ended 31 March 2023 Six months ended 31 March 2022
Unaudited Unaudited
Note £'000 £'000
Operating profit 31,247 37,616
Exceptional items 4 899 (5,641)
Depreciation of property, plant and equipment 9 4,932 4,144
Depreciation of right-of-use assets 10 6,370 5,805
Amortisation of intangible assets 11 395 236
Loss/(profit) on disposal of property, plant and equipment, right-of-use 9, 10, 11
assets and software
43 (2)
Group adjusted EBITDA 43,886 42,158
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.
Reconciliation of net debt Six months Six months Year ended
ended ended 30 September
31 March 2023 31 March 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash and cash equivalents (44,149) (49,577) (56,066)
Net (cash) excluding finance leases (44,149) (49,577) (56,066)
Finance leases 192,279 172,531 188,369
Net debt 148,130 122,954 132,303
Net debt is defined as borrowings from bank facilities excluding issue costs,
plus finance leases less cash and cash equivalents.
Condensed Consolidated Statement of Financial Position
As at 31 March 2023
31 March 31 March 30 September
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Note
Assets
Non-current assets
Property, plant and equipment 9 74,734 55,977 68,641
Right-of-use assets 10 150,563 133,077 147,455
Goodwill and intangible assets 11 88,628 77,807 81,794
Deferred tax asset 298 4,130 1,647
314,223 270,991 299,537
Current assets
Cash and cash equivalents 44,149 49,577 56,066
Trade and other receivables 7 5,898 10,474 5,130
Corporation tax receivable - - 271
Inventories 2,639 1,739 2,148
52,686 61,790 63,615
Total assets 366,909 332,781 363,152
LIABILITIES
Current liabilities
Trade and other payables 8 25,984 21,773 28,681
Lease liabilities 10 11,910 11,615 11,557
Corporation tax payable 96 2,067 -
37,990 35,455 40,238
Non-current liabilities
Other payables 8 3,866 516 3,000
Lease liabilities 10 180,369 160,916 176,812
Provisions 5,297 3,769 4,682
189,532 165,201 184,494
Total liabilities 227,522 200,656 224,732
NET ASSETS 139,387 132,125 138,420
Equity attributable to shareholders
Share capital 12 1,717 1,711 1,711
Share premium 39,716 39,691 39,716
Merger reserve (49,897) (49,897) (49,897)
Foreign currency translation reserve (313) - 411
Retained earnings 148,164 140,620 146,479
TOTAL EQUITY 139,387 132,125 138,420
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 March 2023
Note Share Merger Foreign Retained
capital
earnings
reserve currency translation reserve
Total
£'000
£'000
Share £'000 £'000 £'000
Premium
£'000
Equity at 30 September 2021 (audited) 1,706 39,691 (49,897) - 113,187 104,687
Shares issued during the period 12 5 - - - - 5
Share-based payments 14 - - - - 403 403
Deferred tax on share-based payments - - - - 5 5
Profit for the period - - - - 27,025 27,025
Equity at 31 March 2022 (unaudited) 1,711 39,691 (49,897) - 140,620 132,125
Shares issued during the period - 25 - - - 25
Dividends paid - - - - (5,132) (5,132)
Share-based payments 14 - - - - 541 541
Deferred tax on share-based payments - - - - 24 24
Retranslation of foreign currency denominated operations - - - 411 - 411
Profit for the period - - - - 10,426 10,426
Equity at 30 September 2022 (audited) 1,711 39,716 (49,897) 411 146,479 138,420
Shares issued during the period 12 6 - - - - 6
Dividends paid - - - - (19,723) (19,723)
Share-based payments 14 - - - - 541 541
Deferred tax on share-based payments - - - - (33) (33)
Retranslation of foreign currency denominated operations - - - (724) - (724)
Profit for the period - - - - 20,900 20,900
Equity at 31 March 2023 (unaudited) 1,717 39,716 (49,897) (313) 148,164 139,387
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 March 2023
Note Six months Six months
ended ended
31 March 2023 31 March 2022
Unaudited Unaudited
£'000 £'000
Cash flows from operating activities
Profit before tax 26,711 33,437
Adjusted by:
Depreciation of property, plant and equipment (PPE) 9 4,932 4,144
Depreciation of right-of-use (ROU) assets 10 6,370 5,805
Amortisation of intangible assets 11 395 236
Net interest expense 5 4,536 4,179
Loss/(profit) on disposal of property, plant 43 (2)
and equipment, software and ROU Assets
Share-based payments 541 403
Operating profit before working capital changes 43,528 48,202
(Increase) in inventories (426) (278)
(Increase) in trade and other receivables (584) (7,194)
(Decrease)/increase in payables and provisions (1,905) 3,400
Cash inflow generated from operations 40,613 44,130
Interest received 411 -
Corporation tax paid (4,270) (1,530)
Bank interest paid (124) (41)
Lease interest paid (4,741) (4,054)
Net cash inflow from operating activities 31,889 38,505
Cash flows from investing activities
Acquisition of subsidiaries 17 (7,574) -
Subsidiary cash acquired 17 320 -
Purchase of property, plant and equipment (11,230) (11,007)
Purchase of intangible assets (65) (95)
Net cash used in investing activities (18,549) (11,102)
Cash flows from financing activities
Payment of capital elements of leases (5,540) (7,773)
Issue of shares 6 5
Dividends paid (19,723) -
Net cash used in financing activities (25,257) (7,768)
Net change in cash and cash equivalents for the period (11,917) 19,635
Cash and cash equivalents at the beginning of the period 56,066 29,942
Cash and cash equivalents at the end of the period 44,149 49,577
Notes to the condensed consolidated interim financial statements
1. General information
The Directors of Hollywood Bowl Group plc (together with its subsidiaries, the
"Group" or "HWB Group") present their interim report and the unaudited
financial statements for the six months ended 31 March 2023 ('Interim
Financial Statements').
HWB Group is incorporated and domiciled in England and Wales, under company
registration number 10229630. The registered office of the company is Focus
31, West Wing, Cleveland Road, Hemel Hempstead, HP2 7BW, United Kingdom.
On 15 February 2023, the Group acquired HLD Investments Inc. (operating as YYC
Bowling & Entertainment), Mountain View Bowl Inc and Wong and Lewis
Investments Inc. (operating as Let's Bowl), three Canadian-based ten-pin
bowling businesses. These three companies are consolidated in Hollywood Bowl
Group plc's Financial Statements with effect from 15 February 2023.
The interim Financial Statements were approved by the Board of Directors on 30
May 2023.
The Group's last annual audited financial statements for the year ended 30
September 2022 have been prepared in accordance with UK-adopted International
Accounting Standards and the requirements of the Companies Act 2006, and these
Interim Financial statements should be read in conjunction with them.
The comparative figures for the year ended 30 September 2022 are an abridged
version of the Group's last annual financial statements and, together with
other financial information contained in these interim results, do not
constitute statutory financial statements of the Group as defined in section
434 of the Companies Act 2006. A copy of the statutory accounts for the year
ended 30 September 2022 have been delivered to the Registrar of Companies. The
external auditor has reported on those accounts: their report was unqualified
and did not contain a statement under s498 (2) or (3) of the Companies Act
2006.
2. Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34,
'Interim Financial Reporting' and the Disclosures and Transparency Rules of
the United Kingdom's Financial Conduct Authority. They do not include all of
the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last financial
statements.
The Interim Financial Statements are presented in Pounds Sterling, rounded to
the nearest thousand pounds, except where otherwise indicated; and under the
historical cost convention, except for fair value items on acquisition.
The accounting policies adopted in the preparation of the Interim Financial
Statements are consistent with those applied in the presentation of the
Group's consolidated financial statements for the year ended 30 September
2022. 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. The impact of these standards is not expected to
be material.
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 greater than 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 HLD Investments Inc. (operating as YYC Bowling &
Entertainment), Mountain View Bowl Inc and Wong and Lewis Investments Inc.
(operating as Let's Bowl), are included from the date of acquisition on 15
February 2023.
Going concern
The financial position of the Group, its cash flows, performance and position
are described in the financial review section. Details of the Group's
available and drawn facilities are included in note 13. At 31 March 2023, the
Group had a cash balance of £44.1m with an undrawn RCF of £25m with Barclays
Bank plc, and no outstanding loan balances, giving an overall liquidity of
£69.1m.
In their consideration of going concern, the Directors have reviewed the
Group's future cash forecasts and profit projections using a base case and a
severe but plausible downside scenario. The Directors are of the opinion that
the Group's forecasts and projections show that the Group is able to operate
within its current facilities and comfortably comply with the covenants
outlined in its RCF.
Taking the above, and the principal risks faced by the Group as outlined in
note 15 to these interim financial statements, into consideration, the
Directors are satisfied that the Group has adequate resources to continue in
operation for the foreseeable future, a period of at least twelve months from
the date of this report. Accordingly, the Group continues to adopt the going
concern basis in preparing these interim financial statements.
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 condensed consolidated income statement and in
the notes to these interim Financial Statements.
Accounting estimates and judgements
The preparation of the 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 financial statements and
estimates with a significant risk of material adjustment in the next financial
year are set out below.
Critical accounting judgements
· Dilapidation 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.
Key sources of estimation uncertainty
The key estimates are discussed below:
· Property, plant and equipment and right-of-use asset impairment
reviews
Plant and equipment and right-of-use assets are reviewed 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 expenses, and discount rates. The carrying value of property,
plant and equipment and right-of-use assets have been assessed to reasonable
possible changes in key assumptions and these would not lead to a material
impairment.
Further information in respect of the Group's property, plant and equipment
and right-of-use assets is included in notes 9 and 10 respectively.
Other estimates
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) has 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 (note 17). The fair
value of the net assets identified were determined with assistance from
independent experts using professional valuation techniques appropriate to the
individual category of asset or liability. 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. These estimates are not considered key
sources of estimation uncertainty as a material adjustment to the carrying
value is not expected in the following financial year.
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, net debt, Group
operating cash flow, Group adjusted EBITDA and Group adjusted EBITDA margin.
Further explanation on alternative performance measures is provided in the
Chief Financial Officer's review.
3. Segmental reporting
Management consider that the Group consists of two operating segments, as it
operates within the UK and Canada (31 March 2022: UK only). The UK operating
segment includes the Hollywood Bowl and Puttstars brands. The Canada operating
segment includes the Splitsville and Striker Bowling Solutions brands
(acquired May 2022), and from 15 February 2023, YYC Bowling &
Entertainment, Mountain View Bowl Inc and Let's Bowl. Within these two
operating segments there are multiple revenue streams which consist of the
following:
Six months ended 31 March 2023
Before exceptional income UK Exceptional income UK (note 4)
Unaudited Unaudited
£'000 £'000 Total UK Canada Total
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Bowling 44,972 192 45,164 5,042 50,206
Food and drink 26,743 - 26,743 2,805 29,548
Amusements 25,612 - 25,612 1,515 27,127
Mini-golf 1,307 - 1,307 - 1,307
Installation of bowling equipment - - - 1,757 1,757
Other 120 - 120 179 299
98,754 192 98,945 11,298 110,244
Six months ended 31 March 2022
Before exceptional income UK Exceptional income UK (note 4)
Unaudited Unaudited
£'000 £'000 Total UK Canada Total
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Bowling 45,833 5,792 51,625 - 51,625
Food and drink 24,529 - 24,529 - 24,529
Amusements 22,909 - 22,909 - 22,909
Mini-golf 1,049 - 1,049 - 1,049
Installation of bowling equipment - - - - -
Other 61 - 61 - 61
94,381 5,792 100,173 - 100,173
No single customer provides more than ten per cent of the Group's revenue.
Six months ended 31 March 2023 Six months ended 31 March 2022
UK Canada Total UK Canada Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 98,945 11,298 110,244 100,173 - 100,173
Group adjusted EBITDA(1) 40,207 3,679 43,886 42,158 - 42,158
Operating profit 28,656 2,591 31,247 37,616 - 37,616
Finance income 444 53 497 - - -
Finance expense 4,621 412 5,033 4,179 - 4,179
Depreciation and amortisation 11,063 634 11,697 10,185 - 10,185
Profit before tax 24,479 2,232 26,711 33,437 - 33,437
PPE asset additions 9,946 1,799 11,745 11,119 - 11,119
Intangible asset additions 65 - 65 95 - 95
Total assets 328,011 38,898 367,788 332,781 - 332,781
Total liabilities 207,014 20,508 227,522 200,656 - 200,656
(1) Group adjusted EBITDA (earnings before interest, tax, depreciation and
amortisation) 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.
4. 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:
Six months ended Six months ended
31 March 2023 31 March 2022
Unaudited Unaudited
£'000 £'000
Bowling revenue VAT rebate(1) 192 5,792
Administrative expenses(2) (2) (151)
Acquisition fees(3) (469) -
Contingent consideration(4) (699) -
Exceptional items before tax (978) 5,641
Tax charge (42) (1,079)
Exceptional items after tax (1,020) 4,562
(1) During the prior year, 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 now 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 £192,000 (31 March 2022 and 30 September
2022: £5,792,000 relating to leisure bowling), included within bowling
revenue.
(2) Expenses associated with the VAT rebate, relating to additional turnover
rent, profit share due to landlords and also professional fees, which are
included within administrative expenses.
(3) Legal and professional fees 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) Contingent consideration of £620,000 in administrative expenses and
£79,000 of interest expense in relation to the acquisition of Teaquinn in May
2022.
5. Finance income and expenses
Six months Six months
ended ended
31 March 2023 31 March 2022
Unaudited Unaudited
£'000 £'000
Interest on bank deposits 497 -
Finance income 497 -
Interest on bank borrowings 113 102
Unwinding of discount on provisions 100 23
Unwinding of discount on contingent consideration (note 4) 79 -
Finance costs on lease liabilities 4,741 4,054
Finance expense 5,033 4,179
6. Taxation
Six months Six months
ended ended
31 March 2023 31 March 2022
Unaudited Unaudited
£'000 £'000
The tax expense is as follows:
- UK Corporation tax 3,901 4,311
- Foreign tax suffered 622 -
Total current tax 4,523 4,311
Deferred tax:
Origination and reversal of temporary differences 1,238 2,101
Effects of changes in tax rates 50 -
Total deferred tax 1,288 2,101
Total tax expense 5,811 6,412
Factors affecting tax charge:
The income tax expense was recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full financial
year applied to the profit before tax for the half year ended 31 March 2023.
Deferred tax
At Budget March 2021, the government confirmed that the corporation tax main
rate would remain at 19 per cent and increase to 25 per cent from 1 April
2023. As such, the rate used to calculate the deferred tax balances as at 31
March 2023 and 30 September 2022 has increased from 19 per cent to a blended
rate up to 25 per cent depending on when the deferred tax balance will be
released.
7. Trade and other receivables
Six months Six months Year ended
ended ended 30 September
31 March 2023 31 March 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Trade receivables 1,498 577 836
Other receivables 140 7,399 245
Prepayments 4,260 2,498 4,049
5,898 10,474 5,130
Trade receivables have an ECL against them that is immaterial. There were no
overdue receivables at the end of any period.
As at 31 March 2022, other receivables included £7,292,000 (31 March 2023 and
30 September 2022: £nil) of previously overpaid VAT due from HMRC following
its review of its policy position on the reduced rate of VAT for hospitality
and tourism. (See note 4).
8. Trade and other payables
Six months Six months Year ended
ended ended 30 September
31 March 2023 31 March 2022 2022
Unaudited Unaudited Audited
Current £'000 £'000 £'000
Trade payables 4,593 3,364 5,306
Other payables 2,509 1,977 1,310
Accruals and deferred income 12,768 13,458 17,000
Taxation and social security 6,114 2,974 5,065
25,984 21,773 28,681
Six months Six months Year ended
ended ended 30 September
31 March 2023 31 March 2022 2022
Unaudited Unaudited Audited
Non-current £'000 £'000 £'000
Other payables 3,866 516 3,000
Accruals and deferred income includes a staff bonus accrual of £2,485,000 (31
March 2022: £5,703,000, 30 September 2022: £7,758,000). Deferred income
includes £1,129,000 (31 March 2022: £893,000, 30 September 2022: £983,000)
of customer deposits received in advance and £1,096,000 (31 March 2022:
£nil, 30 September 2022: £160,000) relating to bowling equipment
installations.
Non-current other payables includes £1,129,000 (31 March 2022: £nil, 30
September 2022: £464,000) of contingent consideration and £1,803,000 (31
March 2022: £nil, 30 September 2022: £1,841,000) of deferred consideration
in respect of the acquisition of Teaquinn Holdings Inc.
9. Property, plant and equipment
Freehold property Long leasehold property Short leasehold property £'000 Lanes and pinspotters Plant & machinery, fixtures and fittings Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 October 2021 - 1,240 29,663 13,310 42,157 86,370
Additions - - 8,127 5,238 8,707 22,072
Acquisition of Teaquinn Holdings Inc. 7,061 - 872 284 237 8,454
Disposals - - (24) (796) (595) (1,415)
Effects of movement in foreign exchange 345 - 48 14 12 419
At 30 September 2022 (audited) 7,406 1,240 38,686 18,050 50,518 115,900
Additions - - 6,543 2,616 2,586 11,745
Acquisitions (note 17) - - 77 73 30 180
Disposals - - (897) (3) (747) (1,647)
Effects of movement in foreign exchange (612) - (136) (33) (52) (833)
At 31 March 2023 (unaudited) 6,794 1,240 44,273 20,703 52,335 125,345
Accumulated depreciation
At 1 October 2021 - 340 13,746 4,613 18,635 37,334
Depreciation charge 24 48 3,047 706 4,896 8,721
Impairment charge - - 2,088 - 447 2,535
Disposals - - (24) (785) (522) (1,331)
At 30 September 2022 (audited) 24 388 18,857 4,534 23,456 47,259
Depreciation charge 32 24 1,478 354 3,044 4,932
Disposals - - (884) (3) (680) (1,567)
Effects of movement in foreign exchange (3) - (5) (2) (3) (13)
At 31 March 2023 (unaudited) 53 412 19,446 4,883 25,817 50,611
Net book value
At 31 March 2023 (unaudited) 6,741 828 24,827 15,820 26,518 74,734
At 30 September 2022 (audited) 7,382 852 19,829 13,516 27,062 68,641
Plant & machinery, fixtures and fittings includes £2,039,000 (31 March
2022: £3,343,000; 30 September 2022: £2,916,000) of assets in the course of
construction, relating to the development of new centres.
As at 31 March 2023, outstanding capital commitments to fit out new and
refurbish existing sites and to complete the installation of solar panels
totalled £673,000 (31 March 2022: £2,351,000; 30 September 2022:
£4,728,000).
10. 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 ten 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 period:
Property Amusement machines Total
£'000 £'000 £'000
Cost
At 1 October 2021 148,722 8,109 156,831
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. 11,510 - 11,510
Lease surrenders - (332) (332)
Lease modifications 5,640 - 5,640
Effects of movement in foreign exchange 583 - 583
At 30 September 2022 (audited) 174,260 11,239 185,499
Lease additions - 2,805 2,805
Acquisitions (note 17) 3,982 - 3,982
Lease surrenders - (606) (606)
Lease modifications 3,982 - 3,982
Effects of movement in foreign exchange (1,257) - (1,257)
At 31 March 2023 (unaudited) 180,967 13,438 194,405
Accumulated depreciation
At 1 October 2021 19,632 4,857 24,489
Depreciation charge 9,846 2,164 12,010
Impairment charge 1,786 - 1,786
Lease surrenders - (241) (241)
At 30 September 2022 (audited) 31,264 6,780 38,044
Depreciation charge 5,198 1,172 6,370
Lease surrenders - (572) (572)
At 31 March 2023 (unaudited) 36,462 7,380 43,842
Net book value
At 31 March 2023 (unaudited) 144,505 6,058 150,563
At 30 September 2022 (audited) 142,996 4,459 147,455
Set out below are the carrying amounts of lease liabilities and the movements
during the period:
Property Amusement machines Total
£'000 £'000 £'000
Lease liabilities
At 1 October 2021 168,530 5,410 173,940
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. 11,510 - 11,510
Accretion of interest 8,354 98 8,452
Lease modifications 5,640 (157) 5,483
Payments(1) (19,873) (2,994) (22,687)
Effects of movement in foreign exchange 584 - 584
At 30 September 2022 (audited) 182,550 5,819 188,369
Lease additions - 2,805 2,805
Acquisitions (note 17) 3,982 - 3,982
Accretion of interest 4,652 89 4,741
Lease modifications 3,982 (72) 3,910
Payments(1) (8,736) (1,510) (10,246)
Effects of movement in foreign exchange (1,282) - (1,282)
At 31 March 2023 (unaudited) 185,148 7,131 192,279
Current 9,025 2,885 11,910
Non-current 176,123 4,246 180,369
At 31 March 2023 185,148 7,131 192,279
Current 9,027 2,530 11,557
Non-current 173,523 3,289 176,812
At 30 September 2022 182,550 5,819 188,369
( )
(1) In FY2023, £34,000 (FY2022: £35,000) of rent payments were part of the
working capital movements in the year.
11. Goodwill and intangible assets
Goodwill Brand Trademark £'000 Customer relationships £'000 Software Total
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 75,034 3,360 798 - 2,112 81,304
Additions 70 - - - 108 178
Acquisition of Teaquinn Holdings Inc. 90 3,888 - 314 - 4,292
At 30 September 2022 (audited) 75,194 7,248 798 314 2,220 85,774
Additions - - - - 65 65
Acquisitions (note 17) 6,697 - - 503 - 7,200
Effects of movement in foreign exchange (13) - - (23) - (36)
At 31 March 2023 (unaudited) 81,878 7,248 798 794 2,285 93,003
Accumulated amortisation
At 1 October 2021 - 1,188 366 - 1,802 3,356
Amortisation charge - 335 50 8 231 624
At 30 September 2022 (audited) - 1,523 416 8 2,033 3,980
Amortisation charge - 284 25 12 74 395
At 31 March 2023 (unaudited) - 1,807 441 20 2,107 4,375
Net book value
At 31 March 2023 (unaudited) 81,878 5,441 357 774 178 88,628
At 30 September 2022 (audited) 75,194 5,725 382 306 187 81,794
12. Share capital
The share capital of the Group is represented by the share capital of the
Parent Company, Hollywood Bowl Group plc.
During the period, 641,567 ordinary shares of £0.01 each were issued under
the Group's Long Term Incentive Plan (LTIP).
31 March 2023 31 March 2022 30 September 2022
No of shares £'000 No of Shares £'000 No of shares £'000
Ordinary shares of £0.01 each 171,712,357 1,717 171,059,454 1,711 171,070,790 1,711
During the periods ended 31 March 2022 and 30 September 2022, 428,113 ordinary
shares of £0.01 each were issued under the Group's LTIP scheme. In addition,
during the period ended 31 March 2023, nil (31 March 2022: 158, 30 September
2022: 11,494) ordinary shares of £0.01 each were issued under the Group's
SAYE scheme.
The ordinary shares are entitled to dividends.
13. Loans and borrowings
On 29 September 2021, the Group entered into a £25m revolving credit facility
(RCF) with Barclays Bank plc. The RCF has a termination date of 31 December
2024.
Interest is charged on any drawn balance based on the reference rate (SONIA),
plus a margin of 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 31 March 2023 was
therefore 0.6125 per cent (31 March 2022 and 30 September 2022: 0.6125 per
cent).
Issue costs of £135,000 were paid to Barclays Bank plc on commencement of the
RCF. These costs are being amortised over the term of the facility and are
included within prepayments.
The terms of the Barclays Bank plc facility include the following Group
financial covenants:
(i) For the 7-month period ended 31 December 2021, the ratio of total net debt
to adjusted EBITDA shall not exceed
1.75:1.
(ii) For the 12-month period ending on each reference date, commencing 31
March 2022 and each quarter thereafter, the ratio of total net debt to
adjusted EBITDA pre-IFRS 16 shall not exceed 1.75:1.
The Group operated within the covenants during the period and the previous
period.
14. Performance share-based payments - Long term employee incentive costs
The Group had the following performance share based payment arrangements in
operation during the period:
a) The Hollywood Bowl Group plc Long Term Incentive Plan 2020
b) The Hollywood Bowl Group plc Long Term Incentive Plan 2021
c) The Hollywood Bowl Group plc Long Term Incentive Plan 2022
c) The Hollywood Bowl Group plc Long Term Incentive Plan 2023
Long Term Incentive Plans
HWB Group plc operates Long Term Incentive Plans (LTIPs) for certain key
management. In accordance with IFRS 2 Share-based payment, the values of the
awards are measured at fair value at the date of grant. The exercise price of
the LTIPs is equal to the market price of the underlying shares on the date of
grant. The fair value is determined based on the exercise price and number of
shares granted, and is written off on a straight-line basis over the vesting
period, based on management's estimate of the number of shares that will
eventually vest.
In accordance with the LTIP schemes outlined in the Group's Remuneration
Policy (Annual Report FY2022), the vesting of these awards is conditional upon
the achievement of an EPS target set at the time of grant and measured at the
end of a 3-year period ending 30 September 2022, 2023, 2024 and 2025 and the
Executive Directors' continued employment at the date of vesting. The LTIP
2022 and LTIP 2023 also have performance targets based on return on centre
invested capital, emissions ratio for Scope 1 and Scope 2 and team member
development.
During the six months ended 31 March 2023, 486,515 (31 March 2022:463,436, 30
September 2022:463,436) share awards were granted under the LTIP.
For the six months ended 31 March 2023, the Group has recognised £568,286 of
performance share-based payment expense in the profit or loss account (31
March 2022: £399,275 and 30 September 2022: £939,812).
The LTIP shares are dilutive for the purposes of calculating diluted earnings
per share.
15. Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties of the
Group and have determined that those reported in the Annual Report for the
year ended 30 September 2022 remain relevant for the remaining half of the
financial year. These risks are summarised below, and how the Group seeks to
mitigate these risks is set out on pages 69 to 73 of the Annual Report and
Accounts 2022, which can be found at www.hollywoodbowlgroup.com
(http://www.hollywoodbowlgroup.com) .
In summary, these include:
· The economic condition in the UK - results in a decline in GDP,
consumer spending, a fall in revenue and inflation pressure impacting the
Group's strategy
· Dependency on the performance of IT systems - reducing the
ability of the Group to take bookings and resulting in loss of revenue
· Delivery of products from third party suppliers which are key to
the customer experience - impacting on the overall offer to the customer
· Retention of key team members - a reduction in our talent pool,
as well as failure to maintain staff engagement, retention of key team in a
tightening labour market
· Data security and protection - impacting on customer information
and potential fines
· Competitive environment for new centres resulting in less new
Group centre openings
· Climate change
· Breach of covenants
· Compliance with regulatory requirements
· Breach of laws and regulations
16. Related Party Transactions
31 March 2023 and 31 March 2022
There were no related party transactions during either period.
17. 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)
On 15 February 2023, the Group acquired 100% of the issued share capital and
voting rights of HLD Investments Inc. (operating as YYC Bowling &
Entertainment), Mountain View Bowl Inc and Wong and Lewis Investments Inc.
(operating as Let's Bowl), based in Canada. All three businesses are operators
of ten-pin bowling centres. The purpose of the acquisition was to grow the
Group's core ten-pin bowling business in the region.
HLD Investments Inc. (operating as YYC Bowling & Entertainment), Mountain
View Bowl Inc and Wong and Lewis Investments Inc. (operating as Let's Bowl)
are consolidated in Hollywood Bowl Group plc's interim financial statements
with effect from the completion of the acquisition on 15 February 2023.
The details of the business combination are as follows (stated at acquisition
date fair values):
£'000
Fair value of consideration transferred
Amount settled in cash 7,574
Recognised amounts of identifiable net assets
Property, plant and equipment 180
Right-of-use assets 3,982
Intangible assets 503
Inventories 65
Trade and other receivables 204
Cash and cash equivalents 320
Current tax liabilities -
Trade and other payables (255)
Lease liabilities (3,982)
Deferred tax liabilities (140)
Identifiable net assets 877
Goodwill arising on acquisition 6,697
Consideration for equity settled in cash 7,574
Cash and cash equivalents acquired (320)
Net cash outflow on acquisition 7,254
Acquisition costs paid charged to expenses 453
Net cash paid in relation to the acquisition 7,707
Acquisition related costs of £453,000 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
£503,000 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
£204,000. At the acquisition date the Group's best estimate of the
contractual cash flows expected not to be collected amounted to £nil.
In the period since acquisition to 31 March 2023, the Group recognised
£889,000 of revenue and £481,000 of profit before tax in relation to the
acquired business. Had the acquisition occurred on 1 October 2022, the
contribution to the Group's revenue would have been £3,340,000 and the
contribution to the Group's profit before tax for the period would have been
£1,811,000.
Responsibility Statement
We confirm that to the best of our knowledge:
· The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting'.
· The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
This responsibility statement was approved by the Board on 30 May 2023 and is
signed on its behalf by:
Stephen
Burns
Laurence Keen
CEO
CFO
30 May
2023
30 May 2023
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