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
|
£215.1m4
|
+7.1%
|
Group adjusted
EBITDA1
|
£87.6m
|
£82.7m
|
+5.9%
|
Group adjusted EBITDA1
pre-IFRS 16
|
£67.7m
|
£64.9m
|
+4.3%
|
Group profit before tax
|
£42.8m
|
£45.1m
|
-5.2%
|
Group adjusted profit before
tax2
|
£45.0m
|
£47.5m
|
-5.2%
|
Group profit after tax
|
£29.9m
|
£34.2m
|
-12.4%
|
Group adjusted profit after
tax2
|
£32.3m
|
£36.6m
|
-11.8%
|
Earnings per share
|
17.42p
|
19.92p
|
-12.5%
|
Adjusted earnings per
share2
|
18.82p
|
21.37p
|
-11.9%
|
Free cash flow3
|
£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 2nd or 3rd 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
|
|
|
Movement
FY2024 vs
|
|
|
Revenue
|
£230.4m
|
£215.1m 5
|
+7.1%
|
Gross profit on cost of goods
sold1
|
£191.2m
|
£177.6m
|
+4.5%
|
Gross profit margin on cost of goods
sold1
|
83.0%
|
82.6%
|
+40bps
|
Administrative expenses1
|
£137.7m
|
£123.5m
|
+11.5%
|
Group adjusted EBITDA2
|
£87.6m
|
£82.7m
|
+5.9%
|
Group adjusted EBITDA2 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
tax3
|
£45.0m
|
£47.5m
|
-5.2%
|
Group adjusted profit after
tax3
|
£32.3m
|
£36.6m
|
-11.8%
|
Free cash flow4
|
£16.9m
|
£29.5m
|
-42.6%
|
Total ordinary dividend per share
|
|
|
|
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.
|
|
|
Operating profit1
|
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 disposal
|
88
|
306
|
Exceptional costs excluding interest
|
|
|
Group adjusted EBITDA under IFRS 16
|
87,587
|
82,731
|
|
|
|
Group adjusted EBITDA pre-IFRS 16
|
|
|
Segmentation
|
Year
ended 30 September 2024
|
|
|
|
Revenue
|
199,696
|
30,703
|
230,399
|
Group adjusted EBITDA1 pre-IFRS
16
|
62,308
|
5,441
|
67,749
|
Group adjusted EBITDA1
|
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 disposal
|
88
|
-
|
88
|
Exceptional costs/(income) excluding
interest
|
|
|
|
|
|
|
|
Finance (income)
|
(1,580)
|
(142)
|
(1,722)
|
|
|
|
|
|
|
|
|
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
|
|
|
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
expenditure2
|
(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)
|
|
|
|
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
|
|
Before
exceptional
items
30
September
2024
£'000
|
Exceptional
items
(note 5)
30
September
2024
£'000
|
Total
30
September
2024
£'000
|
Before
exceptional
items
30
September
2023
£'000
|
Exceptional
items (note
5)
30
September
2023
£'000
|
Total
30
September
2023
£'000
|
Revenue
|
3
|
230,399
|
-
|
230,399
|
214,829
|
253
|
215,082
|
Cost of goods sold
|
|
(39,178)
|
-
|
(39,178)
|
(37,491)
|
-
|
(37,491)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
-
|
607
|
607
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
45,011
|
(2,253)
|
42,758
|
47,508
|
(2,428)
|
45,080
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
Total comprehensive income for the
year attributable to equity shareholders
|
|
|
|
|
|
|
|
Basic earnings per share (pence)
|
10
|
|
|
17.42
|
|
|
19.92
|
Diluted earnings per share (pence)
|
|
|
|
|
|
|
|
Consolidated statement of financial
position
As at 30 September 2024
|
|
|
|
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
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
Trade and other payables
|
15
|
30,427
|
29,109
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
Consolidated statement of changes in
equity
For the year ended 30 September 2024
|
|
Capital
redemption
reserve
£'000
|
|
|
Foreign
currency
translation
reserve
£'000
|
|
|
Equity at 30 September
2022
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
Equity at 30 September
2024
|
|
|
|
|
|
|
|
Consolidated statement of cash flows
For the year ended 30 September 2024
|
|
|
|
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)
|
-
|
|
|
|
|
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
|
|
|
|
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)
|
|
|
|
|
Net cash inflow from operating
activities
|
|
|
|
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
|
|
|
|
Net cash used in investing
activities
|
|
|
|
Cash flows from financing
activities
|
|
|
|
Payment of capital elements of
leases
|
|
(12,305)
|
(11,419)
|
Issue of shares
|
|
-
|
6
|
Share buy back
|
|
(379)
|
-
|
|
|
|
|
Net cash used in financing
activities
|
|
|
|
Net change in cash and cash
equivalents for the year
|
|
(23,439)
|
(3,522)
|
Effect of foreign exchange rates on cash and
cash equivalents
|
|
|
|
Cash and cash equivalents at the beginning of
the year
|
|
|
|
Cash and cash equivalents at the end
of the year
|
|
|
|
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:
|
|
Applicable for financial
years beginning on/after
|
IAS 1 Classification of Liabilities as Current
or Non-current and Non-current liabilities with
covenants
|
Amendments made to IAS 1 Presentation of
Financial Statements in 2020 and 2022 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).
|
1 October 2024
|
IAS 7 and IFRS 7 Supplier finance
arrangements
|
The amendments introduce new disclosures
relating to supplier finance 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.
|
1 October 2024
|
IFRS 16 Lease liability in a sale and
leaseback
|
These amendments include requirements for sale
and leaseback transactions in 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.
|
1 October 2024
|
IAS 21 Lack of exchangeability
|
An entity is impacted by the amendments when it
has a transaction or an 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.
|
1 October 2025
|
Amendments to IFRS 9 and IFRS 7 Classification
and measurement of financial instruments
|
On 30 May 2024, the IASB issued targeted
amendments to IFRS 9 and IFRS 7 to 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).
|
1 October 2026
|
IFRS 18 Presentation and disclosure in
financials statements
|
IFRS 18 will replace IAS 1 Presentation of
financial statements and introduces 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.
|
1 October 2027
|
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
income UK
30
September
2024
£'000
|
Exceptional income
UK
(note 5)
30
September
2024
£'000
|
Total
UK
30
September
2024
£'000
|
Canada
30
September
2024
£'000
|
Total
30
September
2024
£'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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
exceptional
income
UK
30
September
2023
£'000
|
Exceptional
income
UK (note
5)
30
September
2023
£'000
|
Total UK
30
September
2023
£'000
|
Canada
30
September
2023
£'000
|
Total
30
September
2023
£'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
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
Revenue
|
199,696
|
30,703
|
230,399
|
|
192,609
|
22,473
|
215,082
|
Group adjusted EBITDA1 pre-IFRS
16
|
62,308
|
5,441
|
67,749
|
|
60,570
|
4,485
|
65,055
|
Group adjusted EBITDA1
|
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 disposals
|
88
|
-
|
88
|
|
306
|
-
|
306
|
Exceptional items excluding interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
(1,580)
|
(142)
|
(1,722)
|
|
(1,296)
|
(144)
|
(1,440)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
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 software (notes
11-13)
|
88
|
306
|
Exceptional items excluding interest (note
5)
|
|
|
|
|
|
|
|
|
Group adjusted EBITDA pre-IFRS16
|
|
|
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:
|
|
|
VAT rebate1
|
-
|
253
|
Administrative expenses2
|
(15)
|
(2)
|
Acquisition fees3
|
(921)
|
(700)
|
Landlord settlement4
|
607
|
-
|
Contingent consideration5
|
|
|
Exceptional items before tax
|
(2,253)
|
(2,428)
|
|
|
|
Exceptional items after tax
|
|
|
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:
|
|
|
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 software
|
88
|
306
|
Exceptional items (note 5)
|
2,253
|
2,428
|
|
|
|
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
|
|
|
|
|
|
7. Staff numbers and costs
The average number of employees (including
Directors) during the year was as follows:
|
|
|
Directors
|
7
|
7
|
Administration
|
118
|
112
|
|
|
|
|
|
|
The cost of employees (including Directors)
during the year was as follows:
|
|
|
Wages and salaries
|
52,824
|
49,988
|
Social security costs
|
4,217
|
3,882
|
Pension costs
|
607
|
543
|
|
|
|
|
|
|
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
|
|
|
Interest on bank deposits
|
|
|
|
|
|
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
|
|
|
|
|
|
9. Taxation
|
|
|
The tax expense is as follows:
|
|
|
- UK corporation tax
|
8,495
|
7,704
|
- Adjustment in respect of prior
years
|
-
|
312
|
|
|
|
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
|
|
|
|
|
|
|
|
|
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:
|
|
|
Profit excluding taxation
|
|
|
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
|
|
|
Total tax expense included in profit
or loss
|
|
|
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
.
|
|
|
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
|
|
|
Diluted weighted average number of
shares
|
|
|
Basic earnings per share (pence)
|
17.42
|
19.92
|
Diluted earnings per share (pence)
|
|
|
11. Property, plant and equipment
|
|
Long
leasehold
property
£'000
|
Short
leasehold
improvements
£'000
|
Lanes and
pins on
strings
£'000
|
Plant and
machinery,
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
|
|
|
|
|
|
|
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
assets1
|
-
|
(1,240)
|
-
|
-
|
-
|
(1,240)
|
Effects of movement in foreign
exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
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
assets1
|
-
|
(417)
|
-
|
-
|
-
|
(417)
|
Effects of movement in foreign
exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
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
|
|
|
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:
|
|
|
|
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
|
|
|
|
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
equipment1
|
1,240
|
-
|
1,240
|
Effects of movement in foreign
exchange
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
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
equipment1
|
417
|
-
|
417
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
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)
|
Payments1
|
(17,882)
|
(3,167)
|
(21,049)
|
Effects of movement in foreign
exchange
|
|
|
|
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)
|
Payments1
|
(19,962)
|
(3,805)
|
(23,767)
|
Effects of movement in foreign
exchange
|
|
|
|
|
|
|
|
Current
|
10,349
|
3,882
|
14,231
|
|
|
|
|
|
|
|
|
Current
|
9,304
|
3,249
|
12,553
|
|
|
|
|
|
|
|
|
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:
|
|
|
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 expenses)
|
80
|
57
|
Variable lease payments (included in
administrative expenses)
|
|
|
Total amount recognised in profit or
loss
|
|
|
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
|
|
|
|
Customer
relationships
£'000
|
|
|
Cost
|
|
|
|
|
|
|
At 1 October 2022
|
75,194
|
7,248
|
798
|
314
|
2,220
|
85,774
|
|
|
|
|
|
|
|
Acquisition (note 20)
|
6,865
|
-
|
-
|
503
|
-
|
7,368
|
Effects of movement in foreign
exchange
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation
|
|
|
|
|
|
|
At 1 October 2022
|
-
|
1,523
|
416
|
8
|
2,033
|
3,980
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
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
|
|
|
Trade receivables
|
1,537
|
2,356
|
Other receivables
|
95
|
129
|
|
|
|
|
|
|
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
|
|
|
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
|
|
|
Total trade and other
payables
|
|
|
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
|
|
|
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
|
|
|
|
|
|
|
|
|
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
|
|
|
Balance at the end of the
year
|
|
|
The components of deferred tax are:
|
|
|
Deferred tax assets
|
|
|
Fixed assets
|
5,192
|
6,080
|
Trading losses
|
29
|
15
|
Other temporary differences
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
Property, plant and equipment
|
(8,205)
|
(5,857)
|
|
|
|
|
|
|
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
|
|
|
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 (2023: 8.54 pence)
|
13,904
|
14,664
|
Special dividend year ended 30 September 2024 -
nil pence per ordinary share (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
Bowl Inc.
|
Lucky 9
Bowling
Limited
|
Stoked
Entertainment
Centre
Limited
|
Total
|
|
|
|
|
|
|
Fair value of consideration
transferred
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill arising on acquisition
|
|
|
|
|
|
Consideration for equity settled in
cash
|
4,474
|
2,784
|
277
|
6,222
|
13,757
|
Cash and cash equivalents acquired
|
|
|
|
|
|
Net cash outflow on acquisition
|
|
|
|
|
|
Acquisition costs paid charged to
expenses
|
|
|
|
|
|
Net cash paid in relation to the
acquisitions
|
|
|
|
|
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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
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· Change
in economic conditions, in particular a recession, as well as
inflationary pressures from the wars in Ukraine and the Middle
East. Macroeconomic growth in the UK and Canada is low and could
turn into a recession.
· Adverse economic conditions, including but not limited to,
increases in interest rates/inflation may affect Group
results.
· With
an abundance of empty retail units across the UK, this provides
opportunities for less focused operators to open new locations in
Hollywood Bowl markets which impacts on the revenue of its
centres.
· A
decline in spend on discretionary leisure activity could negatively
affect all financial as well as non-financial KPIs.
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· There
is still a risk of a contraction on disposable income levels,
impacting consumer confidence and discretionary income. The Group
has low customer frequency per annum and also the lowest price per
game of the 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 based in high-footfall locations
which should better withstand a recessionary decline.
· The
impacts of the UK Government's Budget national insurance and living
wage increases have been considered and factored into the Group's
financial planning.
· Continued focus on value for money as well as appealing to all
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.
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· The
banking facility, with Barclays Plc, has quarterly leverage
covenant tests which are set at a level the Group is comfortably
forecasting to be within.
· Covenant breach could result in a review of banking
arrangements and potential liquidity issues.
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· Financial resilience has always been central to our decision
making and will remain key for the foreseeable future.
· The
current RCF is £25m, margin of 165ps above SONIA as well as an
accordion of £5m. The facility is currently undrawn, which under
the 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.
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· Competitive environment for new centres results in less new
Group centre openings.
· New
competitive socialising concepts could appear more attractive to
landlords.
· Higher
rents offered by short-term private groups.
· Given
the success of Hollywood Bowl, other operators are prepared to
enter its markets for a slice of the demographic, in less desirable
locations, but still splits the revenue opportunity.
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· The
Group uses multiple agents to seek out opportunities across the UK
and Canada.
· Keep
future opportunities confidential until launch and continue with
non-compete clauses where appropriate.
· Strong
financial covenant provides forward-looking landlords with both
value and future letting opportunities.
· Continued focus with landlords on initial investment,
innovation, 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.
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Operational risks
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· Failure in the stability or availability of information
through IT systems could affect Group business and
operations.
· Technical or business failure in a critical IT partner could
impact the operations of IT systems.
· Customers not being able to book through the website is a
bigger risk given the higher proportion of online bookings compared
to prior years.
· Inaccuracy of data could lead to incorrect business decisions
being made.
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· All
core UK systems are operated in Microsoft 365 & Azure with
external back-up to immutable storage in an independent security
domain.
· Microsoft Azure and Amazon AWS are robust organisations with
the highest levels of security, compliance and resilience
guarantees, as is our chosen payment services provider.
· 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
improved performance, resilience and future development
flexibility. The 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.
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5.
Food and drink suppliers
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· Operational business failures from key suppliers.
· Unable
to provide customers with a full experience.
· The
cost of food and drink for resale increase due to changes in
demand, legislation or production costs, leading to decreased
profits.
|
· The
Group has key food and drink suppliers under contract with tight
service level agreements (SLAs). Alternative suppliers that know
our 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 marginally more food and drink stock due to
their supplier base and potential 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.
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· Any
disruption which affects Group relationship with amusement
suppliers.
· Customers would be unable to utilise a core offer in the
centres.
· Any
internal failure of data cabling or wifi could impact on the
customer and their ability to play unhindered. This is most notable
in Canada where it is a "non-cash" playcard system.
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· Namco
is a long-term partner that has a strong UK presence and supports
the Group with trials, initiatives and discovery visits.
· In the
UK, regular key supplier meetings are held between Hollywood Bowl's
Head of Amusements and Namco. There are half-yearly meetings
between the CEO, CFO and the Namco UK leadership team.
· 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.
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7.
Management retention and recruitment
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· Loss
of key personnel - centre managers.
· Lack
of direction at centre level with effect on customer
experience.
· More
difficult to execute business plans and strategy, impacting on
revenue and profitability.
· Increase in Team Member absence impacting on operational
delivery.
· Impact
of employment law changes.
|
· The
Group runs Centre Manager In Training (CMIT) and Assistant Manager
In Training (AMIT) programmes annually in the UK, which identify
centre talent and develop team members ready for these roles.
Centre managers in training run centres, with assistance from their
regional support manager as well as experienced centre managers
from across the region, when a vacancy needs to be filled at short
notice. The AMIT programme was also run in Canada in FY2024 and the
CMIT is being launched in FY2025.
· The
bonus schemes are reviewed each financial year in the UK and
Canada, to ensure they are still a strong recruitment and retention
tool.
· 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.
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· Major
food incident including allergen or fresh food issues.
· Loss
of trade and reputation, potential closure and
litigation.
|
· Food
and drink audits are undertaken in all centres based upon learnings
of prior year and food incidents seen in other
companies.
· 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
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· Risk
of cyber-attack/terrorism could impact the Group's ability to keep
trading and prevent customers from booking online.
· Non-accreditation can lead to the acquiring bank removing
transaction processing.
· Data
protection or GDPR breach. Theft of customer email addresses, staff
emails and other personal information - all of which can impact on
brand reputation in the case of a breach.
|
· The
area is a key focus for the Group and it adopts a multi-faceted
approach to protecting its IT networks through protected firewalls
and secure two-factor authentication passwords, as well as the
frequent running of vulnerability scans to ensure the integrity of
the firewalls.
· An
external Security Operations Centre is in place to provide 24/7/365
monitoring and actioning of cyber security alerts and incidents. We
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
|
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· Failure to adhere to regulatory requirements such as listing
rules, taxation, health and safety, planning regulations and other
laws.
· Potential financial penalties and reputational
damage.
|
· Expert
opinion is sought where relevant. We run regular training and
development for appropriately qualified staff.
· 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.
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· Utility non-commodity cost increases.
· Business interruption and damage to assets.
· Cost of transitioning operations to net zero.
· Increased environmental legislation.
|
· Significant progress already made with UK solar panel
installations, transitioning energy contracts to renewable sources
and improving the energy efficiency of our existing centres and new
builds. We will be extending our UK sustainability strategy and
initiatives into our Canadian operations where
appropriate.
· 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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