Business Overview
Hollywood Bowl Group Plc (LON: BOWL) is a travel & leisure company, offering bowling entertainment, with a portfolio of approximately 60 centres. This portfolio is divided into two centres: Hollywood Bowl (54 centres) and AMF Bowling (6 centres). The group is the prominent market operator with national scale. Mitchells & Butlers group is a part of the company. It was established in 2010.

Currently, the company expects to report its Interim Results for the six months to 31 March 2020 in late May 2020.

Update Regarding COVID-19 (as on 2^nd April 2020)
This announcement replaces the trading statement planned for 9^th April 2020. The company provides an update on its robust financial and liquidity position and its actions taken in response to COVID-19. The company has temporarily shut down its centres on 20^th March 2020. The Group has granted the one-year exemption from business rates and the VAT payments deferral released by the Government, which when combined is projected to result in 6 million pounds of cash savings for the financial year 2020. The Board has also taken several actions regarding opex and capex initiatives. Driven by COVID-19 situation, the group will reduce costs and conserve cash. However, the Board stay confident in the long-term opportunities of the Hollywood Bowl and will ensure that the company is on-track to re-open centres, when it is appropriate. On 31^st March 2020, the company has around 15.6 million pounds of cash and 30.25 million pounds of debt. Considering the present COVID-19 uncertainty, the lenders have agreed on an extension to the RCF (revolving credit facility) of an additional £10 million.

Financial Highlights for the Year Ended 30 September 2019 (£, million)

(Source: Final Results, Company Website)

In the year ended 30th September 2019, the total revenues increased by 7.8% to £129.9 millionagainst the £120.5 million in FY18 and continue to be encouraged by the LFL performance of the new centres, as well as the whole estate. The revenue increase was driven by the LFL revenues growing at 5.5% as well as 3.1% from new centre openings, offset by the closure of the AMF centre in Gravesend in July 2018. In FY19, the group’s adjusted EBITDA surged by 5.7% to £38.2 million as compared with the previous year data, while adjusted EBITDA margin reduced by 60bps to 29.4% in FY2019. The company recorded a profit after tax of £22.3 million. Basic earnings per share for the financial year 2019 stood at 14.86 pence, an increase of 18.7% from the corresponding period of the last year. In the past 12 months, the cash generation has resulted in a decline in net debt to £2.1 million as compared to the financial year 2018 of £2.5 million.

Share Price Performance

Daily Chart as of April8^th, 2020, after the market closed (Source: Thomson Reuters)


On April 08, 2020, Hollywood Bowl Group PLC shares closed at GBX 143, down by 2.72% against the previous day closing price. Stock's 52 weeks High and Low are GBX 312.44/GBX 70.

Valuation Methodology


Key Risks
Any changes in regulatory norms or any government policy could affect the business and profitability of the company. Cybersecurity is a big concern for the company, and any breach in data could affect the overall performance of the company. Uncertainty from key suppliers could impact the operations of the company.

Conclusion
The company has delivered a decent financial performance during the financial year 2019.The company is an ambitious and dynamic business and have a well?thought?out, and proven, long?term capital investment strategy to continue the refurbishment of the estate with a target of 7-10 investments in FY2020, as well as the opening of three mini?golf centres and one new bowling centre, that will continue to improve the quality of the portfolio.

In technology, the investment will further enhance the industry?leading proposition.  The company do not believe the impact of Brexit to be material to the business operations.There are more several political and principal risks associated with the business of the company. Adverse economic conditions could affect the business of the company.

As a result of the uncertainty surrounding the impact of coronavirus, the management is unable to provide financial guidance for the financial year 2020 until the anticipated duration of centre closures becomes clearer.
Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 143.00 (as on 8th April 2020), with support from new catalysts needs to be evaluated at a later stage.
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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