TIDMBOWL
RNS Number : 0684X
Hollywood Bowl Group plc
18 December 2023
Hollywood Bowl Group plc
("Hollywood Bowl" or the "Group")
Final Results for the Year Ended 30 September 2023
EXCELLENT PERFORMANCE DRIVEN BY STRONG CUSTOMER DEMAND
AND THE SUCCESS OF THE GROUP'S FOCUSED INVESTMENT STRATEGY
Hollywood Bowl Group plc, the UK and Canada's largest ten-pin
bowling operator, announces its audited results for the year ended
30 September 2023 ("FY2023").
Financial summary
Financial performance for FY2023 is compared to FY2022 statutory
performance and excluding the impact of the reduced rate (TRR) of
VAT on bowling received in FY2022.
FY2023 FY2022 FY2022 Movement vs
(ex TRR FY2022 (ex
of VAT on TRR of VAT
bowling)(5) on bowling)
(statutory)
Revenues GBP215.1m(4) GBP193.7m(4) GBP185.0m +16.2%
Group adjusted
EBITDA(1) GBP82.7m GBP77.5m GBP74.5m +11.1%
Group adjusted
EBITDA(1) pre-IFRS
16 GBP64.9m GBP60.6m GBP57.6m +12.7%
Group profit after
tax GBP34.2m GBP37.5m GBP30.9m +10.7%
Group adjusted
profit after tax(2) GBP36.8m GBP39.4m GBP32.8m +12.2%
Free cash flow(3) GBP29.5m GBP34.8m GBP34.8m -15.4%
Net cash/(debt) GBP52.5m GBP56.1m GBP56.1m -6.4%
---------------------- ------------- ------------- ------------- -------------
Interim ordinary
dividend per share 3.27p 3.00p 3.00p +9.0%
Final ordinary
dividend per share 8.54p 8.53p 8.53p +0.1%
Special dividend
per share 2.73p 3.00p 3.00p --9.0%
---------------------- ------------- ------------- ------------- -------------
Total dividend
per share 14.54p 14.53p 14.53p 0%
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 in the Chief Financial Officer's review below.
2 Adjusted group profit before / after tax is calculated as
group profit before / after tax, adding back acquisition fees of
GBP0.7m (FY2022: GBP1.6m) and the non-cash expense of GBP2.0m
(FY2022: GBP0.4m) related to the fair value of the earn out
consideration on the Teaquinn acquisition in May 2022. Also, in
FY2022 it included the deduction of the non-cash credit in relation
to the Teaquinn bargain purchase of GBP39k.
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 FY2022 included a total of GBP8.8m relating
to the reduced rate (TRR) of VAT on bowling. GBP5.8m of this was in
respect of prior years and GBP3.0m for FY2022. FY2023 includes
GBP0.3m in respect of TRR of VAT.
5 FY2022 consolidated income statement included the following in
respect of TRR of VAT on bowling in the UK: Revenue GBP8.8m, gross
profit GBP8.8m, administrative expenses GBP0.1m, Group adjusted
EBITDA GBP3.0m, Group profit before tax GBP8.8m, Group profit after
tax of GBP6.6m and Group adjusted profit after tax of GBP6.6m.
Key highlights
Excellent performance with record revenues and profitable
growth
-- +4.5% like-for-like (LFL) revenue growth compared to FY2022
-- Record revenues of GBP215.1m, up +16.2% (FY2022 ex TRR of VAT
on bowling: GBP185.0m) (FY2022: GBP193.7m)
-- Record Group adjusted EBITDA (pre-IFRS) of GBP64.9m (FY2022
ex TRR of VAT on bowling: GBP57.6m) (FY2022: GBP60.6m)
-- Group adjusted profit after tax GBP36.8m (FY2022 ex TRR of
VAT on bowling: GBP32.8m) (FY2022: GBP39.4m)
Customer experience innovation increasing customer satisfaction,
dwell time and spend per game with LFL growth across all UK revenue
lines
-- UK average spend per game grew 3.4% to GBP11.06 (FY2022: GBP10.69)
-- LFL sales growth of 7.3% in Amusements following expansion of
contactless payment technology and new game formats
-- 9.9% increase in food spend per game with most popular menu items still at 2019 prices
-- Improved net promoter score to 64% (FY2022: 61%)
Attractive returns through investment in growing and enhancing
the UK portfolio
-- 13 refurbishments / rebrands including retiring the AMF brand
-- Three new centres opened (Hollywood Bowl Speke, Hollywood
Bowl Merry Hill and Puttstars Peterborough) and one acquired post
year end (Lincoln Bowl)
-- 13 Pins on Strings installed with 83% of estate now completed
-- Solar panels installed on a further five centres, taking the
total to 27 centres in the UK (38% of the UK estate)
Canada is trading well with strong momentum with growth
strategy
-- Revenues of CAD 37.3m (GBP22.5m) and LFL revenue growth of 15.1%
-- Canada EBITDA pre-IFRS 16 CAD 7.4m (GBP4.5m)
-- One major refurbishment and rebrand to Splitsville delivering
returns above expectations and one further refurbishment
underway
-- Three centres acquired in February 2023 and two further
centres acquired post year end as well as contracts exchanged on a
new build in Ontario due for FY2024, taking the estate to 11
centres
Updated capital allocation policy reflecting a highly
cash-generative business, robust balance sheet and confidence in
outlook
-- Ordinary dividend moves to 55% adjusted profit after tax from 50% - applied for FY2023
-- FY2023 final ordinary dividend of 8.54 pence per share and
special dividend of 2.73 pence bringing the full-year dividend to
14.54 pence per share (FY2022: 14.53 pence per share)
-- In addition, given the surplus cash at the end of FY2023 the
Group has announced a share buyback programme of up to GBP10m, to
commence shortly after the AGM, as per the capital allocation
policy in the Chief Financial Officer's review
Outlook
Robust balance sheet and resilience to inflationary
pressures
-- Net cash at year end of GBP52.5m and fully undrawn GBP25m RCF
-- 72% of UK revenues not subject to cost of goods inflation
-- New UK electricity fixed price hedge up to the end of FY2027
(increase of GBP1.0m per annum) while solar panel roll out offers
protection against higher energy costs
Continued focus on innovating and enhancing the customer
experience while maintaining value for money offer
-- Lowest cost option of the major UK ten-pin bowling operators
with a family of four able to bowl for under GBP25
-- New Group reservations platform with improved functionality
and performance, due to launch in FY2024
Growing and investing in the estate in the UK and Canada
-- At least three further new centres to open in the UK in
FY2024 and a strong pipeline for FY2025 and beyond
-- At least seven UK refurbishments planned in FY2024
-- Growing the Canada pipeline with new Ontario centre due to
open in FY2024 and three new centres at legal stages
-- Three Canada rebrands and refurbs planned with roll out of UK
best practice operations in Canada
-- Opportunity to add up to ten centres in Canada over the next
five years, with the potential to grow the Group estate to 130+
centres across the UK and Canada by 2035
Stephen Burns, Chief Executive of Hollywood Bowl Group,
commented:
"This is another excellent performance for the Group, achieved
against an exceptionally strong prior year. It reflects significant
customer demand, as well as the success of our customer focused
strategy. Innovation of our offer has led to growth across all our
revenue lines while keeping our prices low, with a family of four
able to bowl for GBP25. We have continued to invest in and grow our
estate, opening new centres in the UK and Canada where we see
significant potential.
The strength of our balance sheet and our highly cash generative
business model supports our profitable growth strategy in the UK
and Canada. This includes continued investment in our estate,
technology and enhancing our customer proposition, and the Board's
decision to increase the pay-out ratio for our ordinary dividend to
55% from 50% of adjusted profit after tax. Longer term, we see the
opportunity to grow our estate to at least 130 centres.
We have had an encouraging start to the year with people looking
for ways to enjoy activities with families, friends and colleagues
demonstrating the continued strong demand for high quality, great
value leisure experiences.
Finally, I would like to thank all our team members for their
hard work and continued focus on delivering the best experiences
for our customers in the UK and Canada."
Enquiries:
Hollywood Bowl Group PLC Via Teneo
Stephen Burns, Chief Executive Officer
Laurence Keen, Chief Financial Officer
Mat Hart, Chief Marketing and Technology Officer
Elizabeth Snow Hollywoodbowl@teneo.com
Laura Marshall +44 20 7260 2700
Ayo Sangobowale
Chairman's statement
Hollywood Bowl Group has once again achieved another outstanding
performance in FY2023. We started the financial year with real
momentum, following on from an exceptional FY2022, and we have
built on this to deliver another record revenue year.
This has been achieved in spite of the many and varied
challenges experienced by UK businesses during the year,
demonstrating the strength of our customer offer, resilience to
inflationary pressures, robust balance sheet and cash-generative
business. I continue to be impressed by the clarity of purpose and
single-minded pursuit of excellence consistently demonstrated by
all of our team members in executing the Group strategy which has
led to our track record of sustained profitable growth.
The Group's financial performance in FY2023 exceeded the Board's
expectations, driven by our focus on enhancing the customer
experience and investment in improving the quality of our estate
through our ongoing refurbishment programme. We continue to expand
our footprint, through new centre openings and acquisitions both in
the UK and Canada. Our planned investments in technology have
supported centres' sales and yield growth, while also improving our
customers' digital journey.
Our operating model drove like-for-like (LFL) sales growth
across our four main revenue streams and our relatively fixed cost
base helped deliver another year of strong profits. We were also
able to take advantage of favourable conditions in July and August,
where the unseasonable wet weather encouraged more families to seek
out indoor leisure and entertainment activities, leading to our
busiest ever month in the UK in August.
In light of our performance, the Board is pleased to declare a
final ordinary dividend of 8.54 pence per share as well as a
special dividend of 2.73 pence per share.
Furthermore, given our robust financial position, prospects and
cash generation, as well as the Board's focus on delivering
shareholder returns and capital efficiency, the Board has extended
the Group's capital allocation policy around excess cash to include
share buybacks of up to GBP10m in FY2024, alongside special
dividends. The Board determined that share buybacks can provide
flexibility to achieve an optimal use of cash to deliver value for
shareholders and can represent an attractive investment opportunity
for the Company.
Affordable fun, safe and healthy competition
We know that across, the UK families are facing cost of living
challenges and so we work hard to ensure our customer offer remains
compelling and to deliver our core purpose of bringing families and
friends together for affordable fun and safe, healthy competition.
A family of four can still enjoy an outing with us for as little as
GBP25 during peak times - the best value for money of all the
branded UK bowling operators.
Our amusement machines can still be enjoyed for as little as
GBP1 but operational improvements in the year have enabled us to
drive yield growth. Our simplified menus focus on speed, quality,
consistency and value for money and although higher food and
beverage costs meant we introduced some modest price increases, our
most popular items haven't changed in price since 2019. Our
value-for-money customer proposition has attracted more visits over
the year from new and returning customers who are choosing to spend
more time in our centres, boosting the spend per game.
Further investment in the UK estate
We opened three new centres in the UK during the year in Speke,
Peterborough and Merry Hill, all of which are performing in line
with expectations. Our refurbishment programme saw 13 centres
receive successful upgrades including some centres which are on
their second or third refurbishment.
Post the year end, we were also pleased to announce the
acquisition of Lincoln Bowl on 2 October, which included the long
leasehold. The centre meets our strict investment criteria and has
20 lanes with a bar, diner and amusements, and will be rebranded as
a Hollywood Bowl in the first half of FY2024.
A new growth market
Canada is an exciting growth opportunity for the Group and we
have made excellent progress since we acquired Splitsville,
comprising five centres, and Striker Bowling Solutions in May 2022.
We were quick to add a sixth centre, Kingston, in July 2022 and
this year we acquired three bowling centres in Calgary, a
strategically important location between our current centres in
British Columbia and Ontario. Post the year end, we acquired a
further two centres, and have recently started a new build in
Ontario, due to open in FY2024.
We have also commenced our refurbishment programme in Canada,
based on our UK model, with one centre completed during the year
and one currently on site due to complete in H1 FY2024. The
rebranded and refurbished centre in Richmond Hill has been
extremely well received, attracting a broader customer base, more
diverse revenue streams and higher yields, underpinning our belief
in the long-term opportunity of the Canadian market.
Our initial strategic rationale for entering Canada is being
reaffirmed the more we learn. The market, whilst very well
established, remains highly fragmented and often under-invested,
with many centres single-owned or small-group-owned businesses,
providing an excellent runway for growth.
The Canadian market shares many similarities with the UK and in
FY2023, we undertook a large customer research project to
understand fully how we should adapt our UK operating model for the
Canadian market. The results solidified our view that our operating
model would be very well received and that customers are open to
our high-quality family-friendly offering to sit alongside
competitive bowling leagues. Where differences exist, we are able
to tailor our offering accordingly. For example, there are more
opportunities for the corporate offering due to a higher
expectation of frequent socialising amongst work colleagues, and
for school-age students in the winter months where cold weather
encourages activities indoors.
Integration with the wider Group is going well with the ongoing
sharing of knowledge and innovation between our UK and Canadian
colleagues. Both sides make regular visits to gain greater
understanding of the differing operating models, and how we can
introduce 'best practice' whilst maintaining the entrepreneurial
spirit that initially attracted us.
We have been developing a new Centre Manager pipeline and
putting the structures in place to allow rapid development in
Canada, including transferring four of our UK team members, one to
help introduce our training and development programmes, two Centre
Managers and one of our UK Regional Managers who started as
Director of Operations in October 2023.
Board changes
In July 2023, we appointed Rachel Addison to the Board as a
Non-Executive Director and as a member of the Audit, Remuneration
and Nomination Committees. With c.30 years of finance and
operational management experience, Rachel has held a number of
senior leadership and board positions across media and technology
businesses, bringing financial and operational experience,
including in digital media, which will be of great value to the
Group. Rachel's appointment comes at a time of change for the Board
and is part of our succession planning programme. Nick Backhouse,
who has been a member of the Board and Chair of the Audit Committee
since the Group's listing in 2016, is due to retire by rotation at
our Annual General Meeting (AGM) in January 2024. He has been a
real asset to the Group and his consistent, steady advice, as well
as his wise counsel, has been of great value to Hollywood Bowl
Group's development.
Sustainable growth
In recognition of the importance we place on environmental and
social considerations in our decision making, in FY2023 the Board
formed a Corporate Responsibility Committee (CRC) consisting of
Board and Executive Committee members, and chaired by Non-Executive
Director Ivan Schofield. During the year the CRC established its
terms of reference and worked with the long-standing Corporate
Responsibility Steering Group to set the Group's net zero strategy.
Having already made an early start to how we manage our direct
environmental impacts - we have reduced our UK direct emissions by
62 per cent since 2016 - this year we report on our indirect Scope
3 emissions for the first time, which we estimate makes up around
90 per cent of our total emissions. It is from this baseline year
that we will set science-based targets in our commitment to reach
net zero by 2050. Our pathway to net zero strategy will see us
build on our progress to date and continue to make
sustainability-led improvements across the Group. We look forward
to working closely with our UK and Canadian colleagues, and our
suppliers, to make our plan a reality.
Investing in our people
Our People team has worked extremely hard this year to develop
our next generation of Centre Managers, senior leaders and
technicians, doubling the number of our industry-leading training
and development programmes. I was delighted when the Group was once
again recognised as one of The UK's 25 Best Big Companies to Work
For in 2023, rising up the ranks to 12th position, and that our
Hemel Hempstead support centre was given the highest 3* standard
for workplace engagement.
Exciting growth opportunity
Like all businesses, we have experienced a number of external
challenges in recent years, however, the Group has emerged stronger
than ever and I am excited about the opportunities ahead.
Our operating model, multiple revenue streams and strong balance
sheet, which includes no debt, gives us plenty of headroom to keep
investing in our growth strategy. Although we are not immune from
inflationary pressures, we are well insulated given our relatively
fixed cost base with over 72 per cent of Group revenues not subject
to cost of goods inflation.
Our unwavering focus is on keeping our leisure experiences
fresh, relevant and affordable to our customers and on generating
further attractive returns through investment in our customer
experience. Technology continues to play a big part in this, and I
am looking forward to seeing the launch of our new self-developed
customer booking system later in the coming year. FY2024 will see
further investment in growing and improving the quality of our
estate in the UK and Canada, enhancing the customer experience
through refurbishments and investment in our proprietary technology
that will support the next stages of growth across both
countries.
I would like to thank all our team members, suppliers,
landlords, partners and investors for their support and
contributions to delivering yet another outstanding year, and I
look forward to sharing in our continued success.
Peter Boddy
Non-Executive Chairman
17 December 2023
Chief Executive Officer's review
A record performance
I am delighted with the Group's excellent performance in FY2023,
a year in which we continue to strengthen our position as a UK
market leader in competitive socialising and as one of the largest
operators of ten-pin bowling centres in the world.
Hollywood Bowl Group continues to deliver sustainable,
profitable growth, with total revenue of GBP215.1m, 11.0 per cent
growth on FY2022 (16.2 per cent excluding the reduced rate (TRR) of
VAT benefit on bowling activities in FY2022) and Group
like-for-like (LFL) revenue growth of 4.5 per cent.
Our results reflect the success of our customer-focused
operating model as well as our clear and consistent strategy in
delivering sustainable profit growth and shareholder returns while
maximising favourable trading conditions. We offer fantastic
value-for-money family-friendly entertainment experiences and the
efforts of all our team members ensure our customers enjoy
consistent positive experiences, as reflected by our excellent
customer service scores.
Our strong financial position allows us to invest in growing our
high-quality portfolio domestically and internationally with new
centre openings, acquisitions and our rolling refurbishment
programme and rebrands. We also continue to invest in innovation
and technology as a key driver of the customers' digital journey
and experience.
Group adjusted profit after tax was GBP36.8m, adjusting for
acquisition fees of GBP0.7m and the non-cash expense of GBP2.0m
related to the fair value of the earn out consideration on the
Canada acquisition in May 20222. Statutory profit after tax was
GBP34.2m. Free cash flow of GBP29.5m demonstrates our cash
generative business model, and net cash of GBP52.5m at the end of
FY2023 enables our continued investment in the business.
Growth in all revenue lines
Against an exceptionally successful prior year, UK LFL revenue
(which excludes TRR of VAT on bowling activities in FY2022) grew by
4.1 per cent, with our main revenue lines - bowling, food, drink
and amusements - all showing LFL growth. Whilst our trading levels
were helped by some very favourable weather in the UK, it is due to
our unrelenting customer-focused operating model that we were able
to take advantage of this and deliver a record year.
We saw UK LFL game volumes grow by 0.7 per cent and spend per
game (excluding TRR of VAT on bowling activities in FY2022) by 3.4
per cent to GBP11.06, up from GBP10.69 in FY2022. Our dynamic
pricing technology, which allows us to offer better value for
customers at non-peak periods, helped drive incremental volume and
carefully controlled yield enhancement, yet we still offer the best
value for money and best invested product of all the branded UK
bowling operators.
Food spend in the UK was up in the year showing a 9.9 per cent
improvement, with our focus on speed, quality, consistency and
value-for-money driving this growth. New menu items have been added
in line with customer feedback and sales data, and although we have
made some small changes to price to mitigate food inflationary
increases, the most popular menu items were still below their 2019
price points. Our drinks range also offers excellent
value-for-money. Spend on drink in the UK grew on a per game basis
by 2.3 per cent, underpinned by further enhancements to the at lane
ordering systems and the national rollout of a new drinks
range.
Refurbishments and space optimisation projects, coupled with the
expansion of contactless payment technology and new game formats,
helped drive LFL sales growth of 7.3 per cent in amusements in UK
centres. We have kept the price to play at GBP1 for the majority of
our machines despite the significant improvement in the gaming
experience but are utilising new payment technology to enhance the
yield on certain games where appropriate.
We are very encouraged by the performance of our Canadian
business in the first full trading year since the acquisition in
May 2022. LFL revenue increased by 15.1 per cent on a constant
currency basis. This underpins our belief that there is significant
longer-term opportunity to add further value through leveraging our
customer-led operating model, technology and digital marketing
experience.
Growth strategy - investment and innovation
Our growth strategy remains unchanged. The new centre opening
programme is on track in both the UK and Canada. We continue to
grow LFL revenue through the improvement of the existing estate and
our refurbishment programme continues to deliver above our 33 per
cent returns hurdle rate.
FY2023 was a record year of investment in the estate and a very
busy time for our property teams. In total, we invested GBP30.3m
(excluding professional fees on acquisitions) on new centre
openings, refurbishments and acquisitions.
In the UK, we were pleased to open three new centres in the
year, Hollywood Bowl Speke, Hollywood Bowl Merry Hill, and
Puttstars Peterborough. Lincoln Bowl was acquired on 2 October
bringing our total UK estate to 71 centres.
We remain confident in our ability to deliver on our plan of an
average of three new openings a year. At present we are on site at
another new location and are planning to commence development at
three others in early Q2 FY2024. This year will see the opening of
our long-anticipated centre at the GBP70m Northern Gateway leisure
complex development in Colchester, combining 26 bowling lanes,
mini-golf, bar, diner and an amusement offer.
We completed 13 UK centre refurbishments, introducing the very
latest design innovations and technological improvements to the
sites. These refurbishments included retiring the AMF brand from
the portfolio after rebranding the final two centres and space
optimisation programmes at three centres: increasing amusement
space at Puttstars Harrow, creating a six-lane duck-pin bowling
area aimed at younger families and corporates at Puttstars Leeds
and incorporating a nine-hole Puttstars in underutilised space at
Hollywood Bowl Leeds. Combining offers at centres where space
configuration makes it possible, is proving popular with customers,
keeps our offering fresh and supports centre yield increases. All
the refurbishments are delivering returns in line with
expectations, with the last 13 projects averaging more than a 40
per cent return on investment. We expect to carry out between eight
and ten refurbishments in FY2024.
The Pins on Strings rollout in the UK has continued, with a
further 13 centres benefiting from this cost saving technology
which also enhances our customer experience by significantly
reducing games per stop. 54 centres now have the machines installed
(83 per cent of the Group's UK bowling estate),
Investment in the digital customer journey has continued, as we
refine our sales and marketing activity and online booking systems.
Online sales conversions, centre yields and capacity utilisation
have improved through targeted marketing and dynamic pricing. In
FY2023 we have been developing our own bespoke booking system.
As our business has evolved and grown, we have become aware of
the limitations of current third-party platforms and have decided
to make the investment in a new modern and flexible technology
platform that can evolve and support our next stage of growth.
Built by our in-house development team, the open-source,
multi-channel technology will integrate with our current CRM tools
and improve the booking experience for our customers and team
members. Now nearing completion, the new system will be launched in
Q3 FY2024 in the UK and rolled out to Canada at a later date.
Canada - expansion and acquisitions
Our Canadian operations traded ahead of expectations,
contributing CAD 37.3m (GBP22.5m) in revenue and over CAD 7.4m
(GBP4.5m) of EBITDA on a pre-IFRS 16 basis.
We have made good progress with our growth strategy in Canada,
focused on four areas:
1. investing in the existing estate;
2. acquiring existing businesses that complement the current estate;
3. opening new centres; and
4. supporting the Canadian bowling market with Striker's products and services.
The refurbishment programme is also progressing well, with one
major refurbishment and rebrand to Splitsville completed and one on
site. The newly refurbished centre has been very well received by
customers with returns on investment performing well above our
hurdle rate in Canada. Post completion, LFL revenue growth at this
centre has been over 30 per cent.
This performance in Canada has been supported by insights gained
from detailed customer research carried out in FY2023, which in
many ways echoes the UK's customer needs. Although there are some
variances, such as a greater corporate and educational emphasis,
the research confirmed that our UK customer focused operating model
will translate well for the Canadian market where there are
significant opportunities for sector consolidation and growth.
Our pipeline of new site opportunities and acquisitions is
building with several centres in the diligence process. In February
2023, we acquired three new centres in Calgary. We also exchanged
contracts on a 43,000 square feet new build in Ontario featuring 24
lanes, scheduled to open in FY2024. Post the year end, we have
acquired two further centres, one in Ontario and one in Vancouver,
bringing us to 11 centres in Canada at the time of writing.
The Striker business continues to grow as a result of increased
investment into bowling centres across the country. Revenues
totalled CAD 7.1m (GBP4.3m) and the order book is strong with
several large installation and maintenance projects signed to
commence in FY2024.
We continue to share ideas between the businesses, adapting the
UK operating model to a Canadian audience whilst maintaining the
entrepreneurial spirit of the local management. In order to share
best practice across the Group, we were able to sponsor four UK
team members to take up permanent roles in Canada - one to head up
talent development, which will be vital to growing our operations
and evolving the business culture, two Centre Managers and the
Director of Operations. As the Canadian operations develop, we plan
to offer more opportunities for team member exchanges.
An outstanding team
We have an excellent reputation for our positive working culture
and creating outstanding workplaces is one of the three pillars of
our sustainability strategy. In FY2023, we refreshed our employer
brand aimed at improving communications in our business, attracting
a more diverse team and answering the key question of why a
candidate might want to work with us. The initial insight study
highlighted areas of improvement and we have been taking action to
address this. The response since launch has been fantastic with
significant improvements in team member engagement, social media
and website traffic and job applications.
For the second year running we rank amongst one of the Top 25
UK's Best Big Companies to Work For in 2023. Our Hemel Hempstead
office was awarded the top 3* rank for its working practices,
placing us amongst a select few businesses. Our UK net promoter
score has also increased against the previous year.
Our team members continue to impress, supported by our
industry-leading in-house training and development programme.
Although there continues to be considerable competition for labour
in the leisure market, our exposure has been cushioned somewhat by
our low exposure to the London area. Furthermore, our refreshed
employer brand launched during the year has made a significant
difference to our ability to attract talent. It is important that
we remain competitive and therefore we increased average hourly pay
for team members by over 9 per cent and Centre Manager and
Assistant Centre Managers have seen salary increases of over 5 per
cent during the year.
For FY2023, we will pay out over GBP2.6m in centre level
management bonuses, with Centre Managers on average receiving over
64 per cent of base of pay and Assistant Centre Managers receiving
over 14 per cent base of pay. Also, more than half of our hourly
rate team members received bonuses measured against financial,
environmental and customer satisfaction criteria, equating to
GBP0.6m in total.
Sustainable growth
Running our business in a sustainable manner is a key focus for
the Group and is integral to our decision making. Good progress was
made across all sustainability metrics and we met our key FY2023
targets across our three sustainability pillars. The solar panel
rollout bringing the total to 27 centres, further reducing our
reliance on purchased electricity.
Our indirect Scope 3 emissions are published for the first time
this year, which has helped us to develop our pathway to the net
zero strategy and enabled us to set science-based targets (SBTs)
from FY2024, using FY2023 as a baseline year.
Over the next two years, we will be aligning our Canadian
operations with our UK sustainability strategy so that from FY2025
we can collectively report our environmental and social progress
across the Group.
Outlook
After another year of exceptional performance, we remain focused
on sustainable profitable growth and continued investment across
all areas of the business. It is anticipated that the increases to
national minimum (living) wage rates, which were announced in the
Autumn Statement, will be c. GBP0.6m for H2 FY2024 (c. GBP1.2m
annualised), whilst the other changes, such as business rates, are
expected to have minimal impact. We are confident that our
high-quality leisure experience offers great value for money, which
is why families and friends are continuing to choose our inclusive
and affordable offerings for their leisure spending.
With a strong balance sheet and a highly cash generative
business model, we see the potential in the future to grow our
business to at least 130 centres in the UK and Canada.
I would like to thank all our team members in the UK and Canada
for their continued dedication to our customers and Hollywood Bowl
Group and look forward to another successful and exciting year
ahead.
Stephen Burns
Chief Executive Officer
17 December 2023
Chief Financial Officer's review
Group financial results
Movement
FY2023 vs
FY2022 FY2022
(excluding TRR (excluding TRR
of VAT of VAT
on bowling)
FY2023 FY2022 6 on bowling)
------------------------- --------- --------- --------------- ---------------
GBP215.1m GBP193.7m
Revenue 5 5 GBP185.0m +16.2%
Adjusted gross profit1 GBP177.6m GBP164.3m GBP155.6m +14.0%
Adjusted gross profit
margin1 82.6% 84.8% 84.1% -150bps
Administrative expenses GBP123.5m GBP108.9m GBP108.8m +13.5%
Group adjusted EBITDA2 GBP82.7m GBP77.5m GBP74.5m +11.1%
Group adjusted EBITDA2
pre-IFRS 16 GBP64.9m GBP60.6m GBP57.6m +12.7%
Group profit before tax GBP45.1m GBP46.7m GBP37.9m +19.0%
Group profit after tax GBP34.2m GBP37.5m GBP30.9m +10.7%
Group adjusted profit
before tax3 GBP47.8m GBP48.7m GBP39.9m +19.8%
Group adjusted profit
after tax3 GBP36.8m GBP39.4m GBP32.8m +12.2%
Free cash flow4 GBP29.5m GBP34.8m GBP34.8m -15.4%
Total dividend per share 14.54p 14.53p 14.53p +0.0%
------------------------- --------- --------- --------------- ---------------
1 Adjusted gross profit margin is calculated as revenue less
directly attributable cost of goods sold and excludes any payroll
costs.
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
GBP0.7m (FY2022: GBP1.6m) and the non-cash expense of GBP2.0m
(FY2022: GBP0.4m) related to the fair value of the earn out
consideration on the Teaquinn acquisition in May 2022. Also, in
FY2022 it included the deduction of the non-cash credit in relation
to the Teaquinn bargain purchase of GBP39,075.
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 FY2022 included a total of GBP8.8m relating
to the reduced rate (TRR) of VAT on bowling. GBP5.8m of this was in
respect of prior years and GBP3.0m for FY2022. FY2023 includes
GBP0.3m in respect of TRR of VAT.
6 FY2022 consolidated income statement included the following in
respect of TRR of VAT on bowling in the UK: Revenue GBP8.8m, gross
profit GBP8.8m, administrative expenses GBP0.1m, Group adjusted
EBITDA GBP3.0m, Group profit before tax GBP8.8m, Group profit after
tax of GBP6.6m and Group adjusted profit after tax of GBP6.6m.
7 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, as well as a measure that investors
use to consider the underlying business performance. For the
purposes of this review, the commentary will clearly state when it
is referring to figures on an IFRS 16 or pre-IFRS 16 basis.
All LFL revenue commentary 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.
Further details on the alternative performance measures used are
at the end of this report.
Revenue
On the back of record revenues in FY2022, it was pleasing to see
continued growth, with UK LFL growth of 4.1 per cent in FY2023.
UK LFL revenue growth was a combination of spend per game growth
of 3.4 per cent, taking LFL average spend per game to GBP11.06, as
well as LFL game volume growth of 0.7 per cent. The LFL growth,
alongside the performance of the new UK centres, resulted in record
UK revenues of GBP192.4m and growth of 7.6 per cent compared to the
underlying revenues in FY2022 (excluding the impact of TRR of VAT
on bowling of GBP8.8m in FY2022). It is worth noting that UK
centres benefited from the unseasonable wet weather in July and
August, with both months recording strong revenue and August
achieving a record month (GBP20.2m).
Canadian LFL revenue growth, when reviewing in Canadian Dollars
to allow for disaggregating the foreign currency effect, was 15.1
per cent.
Total statutory revenue for FY2023 was GBP215.1m, 11.0 per cent
growth on FY2022 (16.2 per cent growth excluding TRR of VAT on
bowling in FY2022).
Adjusted gross profit
Adjusted gross profit is calculated as revenue less directly
attributable cost of good sold and does not include any payroll
costs. Gross profit was GBP177.6m, 8.1 per cent growth on FY2022
(14.0 per cent growth excluding TRR of VAT on bowling in FY2022),
with gross profit margin at 82.6 per cent.
Adjusted gross profit for the UK business was GBP161.2m with a
margin of 83.7 per cent. The trend of amusements growing at a
higher rate than bowling continued, producing a higher gross profit
overall, albeit at a reduced gross profit margin (amusements has a
lower gross profit margin).
Adjusted gross profit for the Canadian business was in line with
expectations at CAD 27.2m (GBP16.4m), with a margin of 73.1 per
cent. The lower margin rate when compared to the UK business is as
expected due to the lower gross profit margin of the Striker
bowling equipment and installations business, the higher food and
drink mix in the Canadian bowling centres and the lower contractual
amusement gross profit margin. Splitsville centres contributed CAD
25.2m (GBP15.2m) of gross profit.
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 on a statutory basis were
GBP123.5m. On a pre-IFRS 16 basis, administrative expenses were
GBP130.0m, compared to GBP114.1m in FY2022.
Employee costs in centres increased to GBP40.7m, an increase of
GBP7.0m when compared to FY2022, due to a combination of salary
increases and the impact of higher LFL revenues, new UK centres, as
well as the full-year effect of employee costs in Canadian centres,
which resulted in an increase of CAD 7.0m (GBP4.1m).
Total property-related costs, accounted for under pre-IFRS 16,
were GBP36.6m, with GBP33.9m for the UK business (FY2022:
GBP33.3m). Rent costs in the UK accounted for GBP17.6m in FY2023,
an increase of GBP0.4m compared to the prior year. Underlying
business rates in the UK increased year on year by GBP1.6m as the
COVID-19 concessions were removed during FY2023. However, due to
business rate reduction claims made in respect of the 2015
revaluation finally being agreed, the Group received GBP2.3m in
refunds (net of professional fees), resulting in an overall
decrease in UK business rates of GBP0.7m. Total property costs in
the UK increased by GBP1.1m, with new centre costs increasing by
GBP0.9m. Canadian property centre costs were in line with
expectations at CAD 4.5m (GBP2.7m).
Our current UK electricity hedge runs out at the end of FY2024.
We are therefore pleased to have agreed a new hedge up to the end
of FY2027, with FY2025 seeing a modest increase of 33 per cent
(GBP1.0m) compared to our current FY2024 hedge rate, whilst we
would still be able to take advantage of lower costs should such
market conditions prevail during this period. At the end of FY2023,
we had 27 centres with solar panels installed, resulting in over 38
per cent of our UK estate benefiting from this technology, which
aids in the Group's ESG strategy as well as some level of
protection against higher energy costs.
Total property costs, under IFRS 16, were GBP39.6m, including
GBP10.4m accounted for as property lease assets depreciation and
GBP9.8m in implied interest relating to the lease liability.
Corporate costs include all central costs as well as the
out-performance bonus for centres. Total corporate costs increased
by GBP3.2m to GBP25.3m when compared to FY2022. UK corporate costs
increased by GBP1.3m to GBP22.8m with the main driver of this being
increased marketing spend. As we continue to build out our support
team in Canada for growth, this, combined with a full year of
ownership, resulted in corporate costs increasing by CAD 3.3m to
CAD 3.9m (GBP2.3m). The additional people in Canada included a
Director of Operations as well as leaders in marketing, people and
property.
The statutory depreciation, amortisation and impairment charge
for FY2023 was GBP26.1m compared to GBP25.7m in FY2022. Excluding
property lease assets depreciation, this charge in FY2023 was
GBP14.9m. This is due to the continued capital investment
programme, including new centres and refurbishments, as well as the
full year impact of Canada.
We undertook detailed impairment testing which resulted in an
impairment charge in the year of a total of GBP2.2m (FY2022:
GBP4.3m). The discount rate used for the weighted average cost of
capital (WACC) was 12.7 per cent pre-tax (FY2022: 16.0 per cent).
See note 12 to the Financial Statements for more information.
Canadian performance
Following the Teaquinn acquisition in May 2022, the Group has
continued to grow its footprint in Canada. During FY2023 the Group
acquired three entertainment centres in Calgary, with one new build
in Ontario signed and due to open in early 2024.
The business continues to trade in line with expectations, with
total revenues in Canada of CAD 37.3m (GBP22.5m), and just over CAD
7.4m (GBP4.5m) of EBITDA on a pre-IFRS 16 basis. Of this, Striker,
the bowling equipment and installations business, contributed CAD
7.1m (GBP4.3m) of revenue and CAD 0.9m (GBP0.8m) of EBITDA. On a
LFL basis revenue grew by 15.1 per cent.
Adjusted gross profit (which excludes payroll costs) was in line
with expectations at CAD 27.2m (GBP16.4m), with a margin of 73.1
per cent. The lower margin rate when compared to the UK business is
in line with expectations because of the lower gross profit margin
of the Striker bowling equipment and installations business, higher
food and drink mix and the lower contractual amusement gross profit
margin.
Exceptional costs
Exceptional costs relate in the main to two areas. The first is
the acquisition costs in relation to the acquisition of three
entertainment centres in Calgary and acquisitions in progress at
year end, which totalled GBP0.7m. The second is the earn out
consideration for Teaquinn President Pat Haggerty, which is an
exceptional cost of GBP2.0m in FY2023 (of which GBP1.8m is in
administrative expenses and GBP0.2m is in interest expenses). See
the table below for exceptional items included in the Group
adjusted EBITDA and operating profit reconciliation.
As noted in the FY2022 full-year results, the earn out
consideration is considered a post-acquisition employment expense
and not in the scope of IFRS 3, but instead is accounted for under
IAS 19. The earn out has a cost impact in the following financial
years up to and including at least FY2025. More detail on these
exceptional costs is shown in note 5 to the Financial
Statements.
Group adjusted EBITDA and operating profit
Group adjusted EBITDA pre-IFRS 16 increased to a record GBP64.9m
and includes a contribution of GBP4.5m (CAD 7.4m) from the Canadian
business.
Compared to FY2022 pre-IFRS 16, this was an increase of 7.1 per
cent. When excluding the impacts of TRR of VAT (GBP3.0m in FY2022)
this increase is 12.7 per cent.
FY2023 FY2022
GBP'000 GBP'000
------------------------------------------------- -------- --------
Operating profit1 54,085 55,449
Depreciation 25,317 25,052
Amortisation 820 624
Loss on property, right-of-use assets, plant and
equipment and software disposal 306 18
Exceptional items 2,203 (3,688)
------------------------------------------------- -------- --------
Group adjusted EBITDA under IFRS 16 82,731 77,455
IFRS 16 adjustment (17,799) (16,850)
------------------------------------------------- -------- --------
Group adjusted EBITDA pre-IFRS 16 64,932 60,605
------------------------------------------------- -------- --------
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.
The increase is primarily due to the strong LFL revenue
performance, the new UK centre performance, the Group's relatively
fixed cost base, and the Canadian business. The reconciliation
between statutory operating profit and Group adjusted EBITDA on
both a pre-IFRS 16 and under-IFRS 16 basis is shown in the table
above.
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 scheme (SAYE) for all team members.
The LTIP awards vest in three years providing continuous employment
during the period, and attainment of performance conditions
relating to earnings per share (EPS), as outlined on page 103 of
the Annual Report. The Group recognised a total charge of GBP1.2m
(FY2022: GBP0.9m) in relation to the Group's share-based
arrangements. Share-based costs are not classified as exceptional
costs.
Financing
Finance costs increased to GBP9.0m in FY2023 (FY2022: GBP8.8m)
comprising mainly of implied interest relating to the lease
liability under IFRS 16 of GBP9.8m. Bank interest costs in relation
to the Group's undrawn revolving credit facility of GBP0.2m were
offset by the interest received (GBP1.4m) on the Group's bank
balances.
The Group's bank borrowing facilities are a revolving credit
facility (RCF) of GBP25m at a margin rate of 1.75 per cent above
SONIA and an agreed accordion of GBP5m. The loan term runs to the
end of December 2024, and the RCF remains fully undrawn.
Cash flow and liquidity
The liquidity position of the Group remains strong, with a net
cash position of GBP52.5m as at 30 September 2023, compared to
GBP56.1m at 30 September 2022. Detail on the cash movement in the
year is shown in the table below.
Capital expenditure
During the financial year, the Group invested net capex of
GBP30.3m, including GBP7.4m on the acquisition of three centres in
Calgary.
A total of GBP7.0m was invested into the refurbishment
programme, with 15 UK centres and two Canadian centres, some of
which were still be completed at the end of FY2023. This included a
rebrand of Splitsville Richmond Hill, Canada and the final two
rebrands of AMF to Hollywood Bowl, in Torquay and Worthing. Despite
inflationary pressures, returns on the UK refurbishments continue
to exceed the Group's hurdle rate of 33 per cent.
New UK centre capital expenditure was a net GBP6.8m. This
relates, in the main, to three centres opened in the year -
Hollywood Bowl in Speke and Merry Hill Birmingham and Puttstars
Peterborough.
The Group's strong balance sheet ensures that it can continue to
invest in profitable growth with plans to open more locations
during FY2024 and beyond.
The Group spent GBP9.1m on maintenance capital in the UK,
including continued spend on the rollout of Pins on Strings
technology and solar panel installations. At the end of FY2023,
Pins on Strings were in 56 centres and solar panels on 27
centres.
Technology investment was GBP0.8m as we continue to enhance the
digital customer journey ahead of the launch of our in-house core
reservations platform in FY2024. We also upgraded the website,
payment platform and customer data platform, and maintained a
continued focus on our cyber security.
Considering the rolling refurbishment programme, maintenance
capital, and the new centres in the UK and Canada, we expect
capital expenditure, including acquisitions to be in the region of
GBP35m to GBP40m in FY2024.
Cash flow and net debt
FY2023 FY2022
GBP'000 GBP'000
--------------------------------------- -------- --------
Group adjusted EBITDA under IFRS 16 82,731 77,455
Movement in working capital (1,103) 8,814
Maintenance capital expenditure (9,072) (9,323)
Taxation (9,099) (6,616)
Payment of capital elements of leases (11,419) (14,450)
Adjusted operating cash flow (OCF) 1 52,037 55,881
Adjusted OCF conversion 62.9% 72.2%
Expansionary capital expenditure2 (13,786) (12,508)
Disposal proceeds 10 2
Net bank interest received/(paid) 1,008 (104)
Lease interest paid (9,808) (8,452)
Free cash flow (FCF) 3 29,462 34,819
Exceptional items (343) 4,091
Acquisition of Teaquinn Holdings Inc - (8,099)
Cash acquired in Teaquinn Holdings Inc - 415
Acquisition of Calgary centres (7,716) -
Cash acquired in Calgary centres 319 -
Dividends paid (25,338) (5,132)
Equity placing (net of fees) 6 30
Net cash flow (3,610) 26,124
--------------------------------------- -------- --------
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 GBP10.9m arising on the
profit before tax generated in the period. The increase in the
Group's effective rate of tax to 24.2 per cent is a combination of
the increase in the UK corporation tax rate from 19 per cent to 25
per cent from April 2023 as well as the effect of the disallowable
element, for tax purposes, of the earn out provision charged in
FY2023.
Earnings
Statutory profit before tax for the year was GBP45.1m and 3.4
per cent lower than FY2022. It is worth noting that FY2022 included
a profit before tax benefit of GBP8.6m due to TRR of VAT.
The Group delivered profit after tax of GBP34.2m (FY2022:
GBP37.5m) and basic earnings per share was 19.92 pence (FY2022:
21.91 pence).
Group adjusted profit before tax is GBP47.8m, whilst Group
adjusted profit after tax is GBP36.8m.
The adjustments are made to reflect the underlying trade of the
Group. These adjustments are adding back acquisition fees of
GBP0.7m and the non-cash expense of GBP2.0m related to the fair
value of the earn out consideration on the Canadian acquisition in
May 2022. For more detail see note 5 to the Financial
Statements.
Dividend and capital allocation policy
The Group's highly cash generative business model and strong
balance sheet mean the business is well placed to continue to
invest in its customer-led, UK and international growth strategy
and to take advantage of opportunities as they arise, while
delivering attractive shareholder returns.
The Board has reviewed its capital allocation policy with the
updated priorities for cash as follows:
-- capital investment into the existing centres through an
effective maintenance and refurbishment programme;
-- investments into new centre opportunities, including expansion in both the UK and Canada;
-- to pay and grow the ordinary dividend in line with adjusted
profit after tax. Given the Group's continued strong performance
and the cash balance, the ordinary dividend will be based on a
payout of 55 per cent of adjusted profit after tax;
-- any excess cash will be available for distribution to
shareholders as the Board deems appropriate, without impacting on
investment in the growth of the business.
The FY2023 ordinary dividend will be based on a payout of 55 per
cent of adjusted profit after tax, in line with the revised capital
allocation policy and reflecting the Board's confidence in the
Group's strategy, strong balance sheet and focus on delivering
shareholder returns.
Therefore, the Board has declared a final ordinary dividend of
8.54 pence per share, based on an adjusted profit after tax of
GBP36.8m (adjusted earnings per share of 21.48 pence).
In line with the Group's capital allocation policy, the Board
has proposed a special dividend of 2.73 pence per share be paid to
shareholders alongside the ordinary dividend, bringing the
full-year dividend to 14.54 pence per share (FY2022: 14.53 pence
per share).
Furthermore, given the surplus cash at the end of FY2023, the
Group announces a share buyback programme of up to GBP10m, which is
intended to commence shortly after the AGM.
The Board will periodically assess the progress of this share
buyback programme in light of the Group's capital allocation needs.
Investing in the Group's profitable growth remains the priority use
of cash and any future returns to shareholders will be subject to
operational capital requirements, financial performance and other
available strategic growth opportunities.
Subject to approval from shareholders at the AGM, the
ex-dividend date is 1 February 2024, with a record date of 2
February 2024 and a payment date of 23 February 2024.
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.
Post-year-end events
We were pleased to complete three acquisitions in early
FY2024.
In the UK, on 2 October, we purchased the assets, including the
long leasehold, of Lincoln Bowl for total consideration of
GBP4.4m.
In Canada we completed two acquisitions. The first is the
acquisition of a successful family entertainment centre in Guelph,
Ontario called Woodlawn Bowl Inc, for CAD 4.71m, which on a
proforma EBITDA pre-IFRS 16 basis, generated CAD 1.07m. The second
is the acquisition of the assets and lease of a family
entertainment centre in Vancouver, called Lucky 9 Bowling Centre
Limited as well as its associated restaurant and bar, Monkey 9
Brewing Pub Corp, for a total consideration of CAD 425,000.
Laurence Keen
Chief Financial Officer
17 December 2023
Note on alternative performance measures (APMs)
The Group uses APMs to enable management and users of the
financial statements to better understand elements of the financial
performance in the period. APMs referenced earlier in the report
are explained as follows.
UK like-for-like (LFL) revenue for FY2023 is calculated as:
-- Total Group revenues GBP215.1m, less
-- New UK centre revenues for FY2022 and FY2023 that have not annualised GBP6.3m, less
-- VAT rebates of GBP0.3m relating to prior periods, less
-- Canada revenues for FY2023 of GBP22.5m
New centres are included in the LFL revenue after they complete
the calendar anniversary of their opening date. LFL UK comparatives
for FY2022 are GBP178.7m.
Adjusted gross profit margin is calculated as total revenue less
directly attributable cost of goods sold. Management do not
consider it helpful to include any payroll costs in the gross
margin because although these costs do vary to some extent with
volume, it is in no way linear. These amounts are presented
separately on the consolidated income statement.
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 evaluation cash from normalised
trading.
LFL spend per game is defined as LFL revenue in the year
excluding any revenues relating to TRR of VAT for prior years
(GBP5.8m) and TRR of VAT for FY2022 (GBP3.0m) 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, 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.
Adjusted profit after tax is calculated as statutory profit
after tax, adding back the acquisition fees in Canada of GBP0.6m
and the non-cash expense of GBP2.0m related to the fair value of
the earn out consideration on the Canadian acquisition in May 2022.
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 2023
Before exceptional
Before exceptional Exceptional Items Exceptional Total
items (note items (note
items 5) Total re-presented(1) 5) re-presented(1)
30 September 30 September 30 September 30 September 30 September 30 September
2023 2023 2023 2022 2022 2022
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Revenue 3 214,829 253 215,082 187,949 5,792 193,741
Cost of goods
sold (37,491) - (37,491) (29,392) - (29,392)
Centre staff
costs1 (40,717) - (40,717) (33,713) - (33,713)
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Gross profit 136,621 253 136,874 124,844 5,792 130,636
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Gain on bargain
purchase - - - - 39 39
Administrative
expenses1 6 (80,333) (2,456) (82,789) (73,083) (2,143) (75,226)
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Operating
profit 56,288 (2,203) 54,085 51,761 3,688 55,449
Finance income 8 1,440 - 1,440 12 - 12
Finance
expenses 8 (10,220) (225) (10,445) (8,774) (22) (8,796)
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Profit before
tax 47,508 (2,428) 45,080 42,999 3,666 46,665
Tax charge 9 (10,866) (63) (10,929) (8,135) (1,079) (9,214)
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Profit for the
year
attributable
to
equity
shareholders 36,642 (2,491) 34,151 34,864 2,587 37,451
Other
comprehensive
income
Retranslation
(loss)/gain
of foreign
currency
denominated
operations (544) - (544) 411 - 411
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Total
comprehensive
income for the
year
attributable
to
equity
shareholders 36,098 (2,491) 33,607 35,275 2,587 37,862
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
Basic earnings
per
share (pence) 10 19.92 21.91
Diluted
earnings
per share
(pence) 10 19.82 21.78
--------------- ---- ------------------- -------------- -------------- ------------------ ------------- ----------------
1 The Directors have reviewed their presentation of the
Financial Statements and have now disclosed centre staff costs
within gross profit. Centre staff costs were previously disclosed
within administrative expenses. Comparatives have also been
re-presented.
Consolidated statement of financial position
As at 30 September 2023
30 September 30 September
2023 2022
Note GBP'000 GBP'000
------------------------------------- ---- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 11 78,279 68,641
Right-of-use assets 12 150,811 147,455
Goodwill and intangible assets 13 89,376 81,794
Deferred tax asset 17 1,309 1,647
------------------------------------- ---- ------------ ------------
319,775 299,537
------------------------------------- ---- ------------ ------------
Current assets
Cash and cash equivalents 52,455 56,066
Trade and other receivables 14 8,116 5,130
Corporation tax receivable 715 271
Inventories 2,445 2,148
------------------------------------- ---- ------------ ------------
63,731 63,615
------------------------------------- ---- ------------ ------------
Total assets 383,506 363,152
------------------------------------- ---- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 15 29,109 28,681
Lease liabilities 12 12,553 11,557
------------------------------------- ---- ------------ ------------
41,662 40,238
------------------------------------- ---- ------------ ------------
Non-current liabilities
Other payables 15 5,208 3,000
Lease liabilities 12 181,652 176,812
Deferred tax liability 17 1,960 -
Provisions 5,084 4,682
------------------------------------- ---- ------------ ------------
193,904 184,494
------------------------------------- ---- ------------ ------------
Total liabilities 235,566 224,732
------------------------------------- ---- ------------ ------------
NET ASSETS 147,940 138,420
------------------------------------- ---- ------------ ------------
Equity attributable to shareholders
Share capital 1,717 1,711
Share premium 39,716 39,716
Merger reserve (49,897) (49,897)
Foreign currency translation reserve (133) 411
Retained earnings 156,537 146,479
------------------------------------- ---- ------------ ------------
TOTAL EQUITY 147,940 138,420
------------------------------------- ---- ------------ ------------
Consolidated statement of changes in equity
For the year ended 30 September 2023
Foreign currency
Share Share Merger translation Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- ---------------- --------- --------
Equity at 30 September
2021 1,706 39,691 (49,897) - 113,187 104,687
---------------------------- -------- -------- -------- ---------------- --------- --------
Shares issued during
the year 5 25 - - - 30
Dividends paid - - - - (5,132) (5,132)
Share-based payments - - - - 944 944
Deferred tax on share-based
payments - - - - 29 29
Retranslation of foreign
currency denominated
operations - - - 411 - 411
Profit for the year - - - - 37,451 37,451
---------------------------- -------- -------- -------- ---------------- --------- --------
Equity at 30 September
2022 1,711 39,716 (49,897) 411 146,479 138,420
Shares issued during
the year 6 - - - - 6
Dividends paid - - - - (25,338) (25,338)
Share-based payments - - - - 1,204 1,204
Deferred tax on share-based
payments - - - - 41 41
Retranslation of foreign
currency denominated
operations - - - (544) - (544)
Profit for the year - - - - 34,151 34,151
---------------------------- -------- -------- -------- ---------------- --------- --------
Equity at 30 September
2023 1,717 39,716 (49,897) (133) 156,537 147,940
---------------------------- -------- -------- -------- ---------------- --------- --------
Consolidated statement of cash flows
For the year ended 30 September 2023
30 September 30 September
2023 2022
Note GBP'000 GBP'000
-------------------------------------------------- ------ ------------ -------------
Cash flows from operating activities
Profit before tax 45,080 46,665
Adjusted by:
Depreciation of property, plant and equipment
(PPE) 11 10,142 8,721
Depreciation of right-of-use (ROU) assets 12 12,965 12,010
Amortisation of intangible assets 13 820 624
Impairment of PPE and ROU assets 11, 12 2,210 4,321
Net interest expense 8 9,005 8,784
Loss on disposal of property, plant and equipment
and software 306 18
Gain on bargain purchase - (39)
Share-based payments 1,204 944
-------------------------------------------------- ------ ------------ -------------
Operating profit before working capital changes 81,732 82,048
Increase in inventories (251) (423)
Increase in trade and other receivables (2,849) (1,248)
Increase in payables and provisions 2,741 9,963
-------------------------------------------------- ------ ------------ -------------
Cash inflow generated from operations 81,373 90,340
Interest received 1,305 12
Income tax paid - corporation tax (9,100) (6,616)
Bank interest paid (296) (115)
Lease interest paid (9,808) (8,452)
-------------------------------------------------- ------ ------------ -------------
Net cash inflow from operating activities 63,474 75,169
-------------------------------------------------- ------ ------------ -------------
Cash flows from investing activities
Acquisition of subsidiaries 20 (7,716) (8,099)
Subsidiary cash acquired 20 319 415
Purchase of property, plant and equipment (21,801) (21,653)
Purchase of intangible assets (1,057) (178)
Proceeds from sale of assets 10 2
-------------------------------------------------- ------ ------------ -------------
Net cash used in investing activities (30,245) (29,513)
-------------------------------------------------- ------ ------------ -------------
Cash flows from financing activities
Payment of capital elements of leases (11,419) (14,450)
Issue of shares 6 30
Dividends paid (25,338) (5,132)
-------------------------------------------------- ------ ------------ -------------
Net cash used in financing activities (36,751) (19,552)
-------------------------------------------------- ------ ------------ -------------
Net change in cash and cash equivalents for
the year (3,522) 26,104
Effect of foreign exchange rates on cash and
cash equivalents (89) 20
-------------------------------------------------- ------ ------------ -------------
Cash and cash equivalents at the beginning
of the year 56,066 29,942
-------------------------------------------------- ------ ------------ -------------
Cash and cash equivalents at the end of the
year 52,455 56,066
-------------------------------------------------- ------ ------------ -------------
Notes to the financial statements
For the year ended 30 September 2023
1. General information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2023
or 2022, but is derived from these accounts. Statutory accounts for
2022 have been delivered to the registrar of companies, and those
for 2023 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 15 February 2023, the Group acquired HLD Investments Inc.
(operating as YYC Bowling & Entertainment), Mountain View Bowl
Inc and Wong and Lewis Investments Inc. (operating as Let's Bowl),
three Canadian-based ten-pin bowling businesses. These three
companies are consolidated in Hollywood Bowl Group plc's Financial
Statements with effect from 15 February 2023.
The 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 2023.
2. Accounting policies
The principal 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
2023 and 30 September 2022.
Statement of compliance
The consolidated Financial Statements have been prepared in
accordance with UK-adopted International Accounting Standards and
the requirements of the Companies Act 2006. The functional currency
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 HLD Investments Inc. (operating as YYC Bowling
& Entertainment), Mountain View Bowl Inc and Wong and Lewis
Investments Inc. (operating as Let's Bowl), are included from the
date of acquisition on 15 February 2023.
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
Standard/interpretation Content on/after
---------------------------------- ---------------------------------------------------- ----------------
IAS 1 Classification In January 2020, the IASB issued amendments
of liabilities to paragraphs 69 to 76 of IAS 1 to specify
as current or the requirements for classifying liabilities 1 October
non-current as current or non-current. 2023
---------------------------------- ---------------------------------------------------- ----------------
IAS 1 Presentation
of financial
statements and
IFRS Practice The amendments change the requirements in
Statement 2 making IAS 1 with regard to disclosure of accounting
materiality judgements-disclosure policies. The amendments replace all instances
of accounting of the term 'significant accounting policies' 1 October
policies with 'material accounting policy information'. 2023
---------------------------------- ---------------------------------------------------- ----------------
The amendments replace the definition of a
change in accounting estimates with a new
definition of accounting estimates. Under
IAS 8 Definition the new definition, accounting estimates are
of accounting 'monetary amounts in financial statements 1 October
estimates that are subject to measurement uncertainty'. 2023
---------------------------------- ---------------------------------------------------- ----------------
The amendments introduce a further exception
from the initial recognition exemption. Under
the amendments, an entity does not apply the
IAS 12 Deferred initial recognition exemption for transactions
tax related to that give rise to equal taxable and deductible
assets and liabilities temporary differences. Following the amendments
arising from to IAS 12, an entity is required to recognise 1 October
a single transaction the related deferred tax asset and liability. 2023
---------------------------------- ---------------------------------------------------- ----------------
In May 2017, the IASB issued IFRS 17 Insurance
Contracts (IFRS 17), a comprehensive new accounting
standard for insurance contracts covering
recognition and measurement, presentation
and disclosure. Once effective, IFRS 17 will
IFRS 17 Insurance replace IFRS 4 Insurance Contracts (IFRS 4) 1 October
contracts that was issued in 2005. 2023
---------------------------------- ---------------------------------------------------- ----------------
These amendments give companies temporary
relief from accounting for deferred taxes
arising from the Organisation for Economic
Co-operation and Development's (OECD) international
IAS 12 International tax reform. The amendments also introduce
tax reform pillar targeted disclosure requirements for affected 1 October
two model rules companies. 2023
---------------------------------- ---------------------------------------------------- ----------------
The amendments introduce new disclosures relating
to supplier finance arrangements that assist
users of the financial statements to assess
IAS 7 and IFRS the effects of these arrangements on an entity's
7 Supplier finance liabilities and cash flows and on an entity's 1 October
arrangements exposure to liquidity risk. 2024
---------------------------------- ---------------------------------------------------- ----------------
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
IFRS 16 Lease or all the lease payments are variable lease
liability in payments that do not depend on an index or 1 October
a sale and leaseback rate are most likely to be impacted. 2024
---------------------------------- ---------------------------------------------------- ----------------
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
IAS 21 Lack of a market or exchange mechanism that creates 1 October
exchangeability enforceable rights and obligations. 2025
---------------------------------- ---------------------------------------------------- ----------------
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 quantifications do not therefore represent a likely
financial forecast and are not directly incorporated into any
projections of our long-term cash flows.
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
2023, 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 2023, the Group had cash balances of
GBP52.5m, no outstanding loan balances and an undrawn RCF of
GBP25m, giving an overall liquidity of GBP77.5m.
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 FY2024 as well as
the first three months of FY2025 which forms part of the Board
approved five-year plan. As noted above, the cost 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 adhere 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 c.3 and 4 per cent from the assumed
base case for FY2024 and FY2025 respectively and inflation
continues at an even higher rate than in the base case,
specifically around cost of labour.
The model still assumes that investments into new centres would
continue, whilst refurbishments in the early part of FY2024 would
be reduced. These are all mitigating factors 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 are 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.
Summary of critical accounting 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.
Critical accounting judgements
Dilapidation provision
A provision is made for future expected dilapidation costs on
the opening of leasehold properties not covered by the LTA and is
expected to be utilised on lease expiry. This also includes
properties covered by the LTA where we may not extend the lease,
after consideration of the long-term trading and viability of the
centre. Properties covered by the LTA provide security of tenure
and we intend to occupy these premises indefinitely until the
landlord serves notice that the centre is to be redeveloped. As
such, no charge for dilapidations can be imposed and no
dilapidation provision is considered necessary as the outflow of
economic benefit is not considered to be probable.
Key sources of estimation uncertainty
The key estimates are discussed below:
Property, plant and equipment and right-of-use asset impairment
reviews
Plant and equipment and right-of-use assets are 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 expenses, and discount rates. The
carrying value of property, plant and equipment and right-of-use
assets have been assessed to reasonable possible changes in key
assumptions and the sensitivity of these assumptions is disclosed
in note 11. Reasonable possible changes to the assumptions in the
future in three mini-golf centres may lead to material adjustments
to the carrying amount. The carrying amount of property, plant and
equipment is GBP2,210,000 and right-of-use assets is GBP1,719,000
at these centres.
Further information in respect of the Group's property, plant
and equipment and right-of-use assets is included in notes 11 and
12 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.
Other estimates
The acquisition of HLD Investments Inc. (operating as YYC
Bowling & Entertainment), Mountain View Bowl Inc and Wong and
Lewis Investments Inc. (operating as Let's Bowl) has been accounted
for using the acquisition method under IFRS 3. The identifiable
assets, liabilities and contingent liabilities are recognised at
their fair value at date of acquisition (note 20). The fair value
of the net assets identified were determined with assistance from
independent experts using professional valuation techniques
appropriate to the individual category of asset or liability.
Calculating the fair values of net assets, notably the fair values
of intangible assets identified as part of the purchase price
allocation, involves estimation and consequently the fair value
exercise is recorded as another accounting estimate. The
amortisation charge is sensitive to the value of the intangible
asset values, so a higher or lower fair value calculation would
lead to a change in the amortisation charge in the period following
acquisition. These estimates are not considered key sources of
estimation uncertainty as a material adjustment to the carrying
value is not expected in the following financial year.
3. Segmental reporting
Management consider that the Group consists of 2 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 segment there are multiple revenue
streams which consist of the following:
Exceptional
income
Before exceptional UK (note
income UK 5) Total UK Canada Total
30 September 30 September 30 September 30 September 30 September
2023 2023 2023 2023 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------------ ------------- ------------- ------------- -------------
Bowling 86,988 192 87,180 9,765 96,945
Food and drink 50,671 - 50,671 5,265 55,936
Amusements 51,938 61 51,999 2,794 54,793
Mini-golf 2,576 - 2,576 128 2,704
Installation of bowling equipment - - - 4,391 4,391
Other 183 - 183 130 313
---------------------------------- ------------------ ------------- ------------- ------------- -------------
192,356 253 192,609 22,473 215,082
---------------------------------- ------------------ ------------- ------------- ------------- -------------
Exceptional
income
Before exceptional UK (note
income UK 5) Total UK Canada Total
30 September 30 September 30 September 30 September 30 September
2022 2022 2022 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------------ ------------- ------------- ------------- -------------
Bowling 86,409 5,792 92,201 2,253 94,454
Food and drink 46,660 - 46,660 1,067 47,727
Amusements 46,510 - 46,510 773 47,283
Mini-golf 1,973 - 1,973 - 1,973
Installation of bowling equipment - - - 2,040 2,040
Other 176 - 176 88 264
---------------------------------- ------------------ ------------- ------------- ------------- -------------
181,728 5,792 187,520 6,221 193,741
---------------------------------- ------------------ ------------- ------------- ------------- -------------
The UK operating segment includes the Hollywood Bowl and
Puttstars brands. The Canada operating segment includes the
Splitsville and Striker Bowling Solutions brands.
Year ended 30 September
Year ended 30 September 2023 2022
------------------------------ -------------------------------- ----------------------------
UK Canada Total UK Canada Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- --------- -------- -------- --------
Revenue 192,609 22,473 215,082 187,520 6,221 193,741
Group adjusted EBITDA
as defined in note
4 76,828 5,903 82,731 76,289 1,166 77,455
Operating profit 52,428 1,657 54,085 54,673 776 55,449
Finance income 1,296 144 1,440 - 12 12
Finance expense 9,291 1,154 10,445 8,541 255 8,796
Depreciation and amortisation 21,973 1,954 23,927 20,965 390 21,355
Impairment of PPE
and ROU assets 2,210 - 2,210 4,321 - 4,321
------------------------------ ---------- --------- --------- -------- -------- --------
Profit before tax 44,434 646 45,080 46,132 533 46,665
------------------------------ ---------- --------- --------- -------- -------- --------
Non-current asset
additions - Property,
plant and equipment 18,844 3,157 22,001 21,750 322 22,072
Non-current asset
additions - Intangible
assets 1,057 - 1,057 108 70 178
------------------------------ ---------- --------- --------- -------- -------- --------
Total assets 341,589 41,917 383,506 338,278 24,874 363,152
------------------------------ ---------- --------- --------- -------- -------- --------
Total liabilities 207,798 27,768 235,566 208,930 15,802 224,732
------------------------------ ---------- --------- --------- -------- -------- --------
4. Reconciliation of operating profit to Group adjusted
EBITDA
30 September 30 September
2023 2022
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Operating profit 54,085 55,449
Depreciation of property, plant and equipment (note
11) 10,142 8,721
Depreciation of right-of-use assets (note 12) 12,965 12,010
Amortisation of intangible assets (note 13) 820 624
Impairment of property, plant and equipment (note
11) 1,392 2,535
Impairment of right-of-use assets (note 12) 818 1,786
Loss on disposal of property, plant and equipment,
right-of-use assets and software (notes 11-13) 306 18
Exceptional items (note 5) 2,203 (3,688)
---------------------------------------------------- ------------ ------------
Group adjusted EBITDA 82,731 77,455
---------------------------------------------------- ------------ ------------
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.
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:
30 September 30 September
2023 2022
Exceptional items: GBP'000 GBP'000
----------------------------- ------------ ------------
VAT rebate 1 253 5,792
Administrative expenses 2 (2) (144)
Acquisition fees 3 (700) (1,557)
Gain on bargain purchase 4 - 39
Contingent consideration (5) (1,979) (464)
----------------------------- ------------ ------------
Exceptional items before tax (2,428) 3,666
Tax charge (63) (1,079)
----------------------------- ------------ ------------
Exceptional items after tax (2,491) 2,587
----------------------------- ------------ ------------
1 During the prior year, HMRC conducted a review of its policy
position on the reduced rate of VAT for leisure and hospitality and
the extent to which it applies to bowling. Following its review,
HMRC now accepts that leisure bowling should fall within the scope
of the temporary reduced rate of VAT for leisure and hospitality,
as a similar activity to those listed in Group 16 of Schedule 7A of
the VAT Act 1994. As a result, the Group made a retrospective claim
for overpaid output VAT for the period 15 July 2020 to 30 September
2021 relating to package sales totalling GBP193,000, (30 September
2022: GBP5,792,000 relating to leisure bowling) included within
bowling revenue.
In addition, a rebate of GBP60,000 overpaid VAT on gaming
machines for the period 1 January 2003 to 31 December 2005 was
received in the year (30 September 2022: GBPnil).
2 Expenses associated with the VAT rebate, relating to
additional profit share due to landlords, (30 September 2022:
relating to additional turnover rent, profit share due to landlords
and also professional fees), which are included within
administrative expenses.
3 Legal and professional fees relating to the acquisition of HLD
Investments Inc. (operating as YYC Bowling & Entertainment),
Mountain View Bowl Inc and Wong and Lewis Investments Inc.
(operating as Let's Bowl) during the year (note 20) and Lincoln
Bowl post year end (note 21). (30 September 2022: acquisition of
Teaquinn).
4 Prior year, gain on bargain purchase in relation to the acquisition of Teaquinn in May 2022.
5 Contingent consideration of GBP1,754,000 in administrative
expenses and GBP225,000 of interest expense (30 September 2022:
GBP442,000 in administrative expenses and GBP22,000 of interest
expense) in relation to the acquisition of Teaquinn in May
2022.
6. Expenses and auditor's remuneration
Included in profit from operations are the following:
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
Amortisation of intangible assets 820 624
Depreciation of property, plant and equipment 10,142 8,721
Depreciation of right-of-use assets 12,965 12,010
Impairment of property, plant and equipment 1,633 2,535
Impairment reversal of property, plant and equipment (241) -
Impairment of right-of-use assets 1,277 1,786
Impairment reversal of right-of-use assets (459) -
Operating leases 57 57
Loss on disposal of property, plant and equipment,
right-of-use assets and software 306 18
Exceptional items (note 5) 2,428 (3,666)
Loss on foreign exchange 208 154
------------------------------------------------------- ------------ ------------
Auditor's remuneration:
- Fees payable for audit of these Financial Statements 344 317
Fees payable for other services:
- Audit of subsidiaries 71 66
- Other services 8 16
------------------------------------------------------- ------------ ------------
423 399
------------------------------------------------------- ------------ ------------
7. Staff numbers and costs
The average number of employees (including Directors) during the
year was as follows:
30 September 30 September
2023 2022
--------------- ------------ ------------
Directors 7 7
Administration 112 91
Operations 2,668 2,432
--------------- ------------ ------------
Total staff 2,787 2,530
--------------- ------------ ------------
The cost of employees (including Directors) during the year was
as follows:
30 September 30 September
2023 2022
GBP'000 GBP'000
---------------------- ------------ ------------
Wages and salaries 49,988 42,808
Social security costs 3,882 3,600
Pension costs 543 475
Share-based payments 1,204 944
---------------------- ------------ ------------
Total staff cost 55,617 47,827
---------------------- ------------ ------------
Staff costs included within cost of sales are GBP40,717,000 (30
September 2022: GBP33,713,000). The balance of staff costs are
recorded within administrative expenses.
Wages and salaries includes GBP1,754,000 (30 September 2022:
GBP442,000) of contingent consideration in relation to the
acquisition of Teaquinn in May 2022.
8. Finance income and expenses
30 September 30 September
2023 2022
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Interest on bank deposits 1,440 12
-------------------------------------------------- ------------ ------------
Finance income 1,440 12
-------------------------------------------------- ------------ ------------
Interest on bank borrowings 200 199
Other interest 9 2
Finance costs on lease liabilities 9,808 8,452
Unwinding of discount on contingent consideration 225 46
Unwinding of discount on provisions 203 97
-------------------------------------------------- ------------ ------------
Finance expense 10,445 8,796
-------------------------------------------------- ------------ ------------
9. Taxation
30 September 30 September
2023 2022
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
The tax expense is as follows:
- UK corporation tax 7,704 6,436
- Adjustment in respect of prior years 312 10
- Foreign tax suffered 692 250
- Effects of foreign exchange - 3
-------------------------------------------------- ------------ ------------
Total current tax 8,708 6,699
Deferred tax:
Origination and reversal of temporary differences 1,996 2,431
Effect of changes in tax rates 161 95
Adjustment in respect of prior years 64 (11)
-------------------------------------------------- ------------ ------------
Total deferred tax 2,221 2,515
-------------------------------------------------- ------------ ------------
Total tax expense 10,929 9,214
-------------------------------------------------- ------------ ------------
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 22 per cent (30
September 2022: 19 per cent). The differences are explained
below:
30 September 30 September
2023 2022
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Profit excluding taxation 45,080 46,665
----------------------------------------------------- ------------ ------------
Tax using the UK corporation tax rate of 22% (2022:
19%) 9,918 8,866
Change in tax rate on deferred tax balances 154 95
Non-deductible expenses 60 388
Non-deductible acquisition related exceptional costs 523 296
Effects of overseas tax rates 137 66
Effects of capital allowances super deduction (182) (577)
Share-based payments (57) 81
Adjustment in respect of prior years 376 (1)
----------------------------------------------------- ------------ ------------
Total tax expense included in profit or loss 10,929 9,214
----------------------------------------------------- ------------ ------------
The Group's standard tax rate for the year ended 30 September
2023 was 22 per cent (30 September 2022: 19 per cent).
The UK corporation tax main rate increased from 19 per cent to
25 per cent from 1 April 2023. As such, the rate used to calculate
the deferred tax balances has increased from a blended rate
depending on when the deferred tax balance would have been
released, 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 2023 and 30 September 2022, the Group had
potentially dilutive ordinary shares in the form of unvested shares
pursuant to LTIPs and SAYE schemes.
30 September 30 September
2023 2022
------------------------------------------------- ------------ ------------
Basic and diluted
Profit for the year after tax (GBP'000) 34,151 37,451
Basic weighted average number of shares in issue
for the period (number) 171,468,034 170,949,286
Adjustment for share awards 833,880 963,218
------------------------------------------------- ------------ ------------
Diluted weighted average number of shares 172,301,914 171,912,504
------------------------------------------------- ------------ ------------
Basic earnings per share (pence) 19.92 21.91
Diluted earnings per share (pence) 19.82 21.78
------------------------------------------------- ------------ ------------
11. Property, plant and equipment
Plant and
machinery,
Freehold Long leasehold Short leasehold Lanes and fixtures
property property property pinspotters and Total
GBP'000 GBP'000 GBP'000 GBP'000 fittings GBP'000
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Cost
At 1 October 2021 - 1,240 29,663 13,310 42,157 86,370
Additions - - 8,127 5,238 8,707 22,072
Acquisition of Teaquinn
Holdings Inc. 7,061 - 872 284 237 8,454
Disposals - - (24) (796) (595) (1,415)
Effects of movement
in foreign exchange 345 - 48 14 12 419
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2022 7,406 1,240 38,686 18,050 50,518 115,900
Additions - - 11,554 4,269 6,178 22,001
Acquisition (note 20) - - 77 74 46 197
Disposals - - (451) (222) (1,840) (2,513)
Effects of movement
in foreign exchange (517) - (102) (8) (34) (661)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2023 6,889 1,240 49,764 22,163 54,868 134,924
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Accumulated depreciation
At 1 October 2021 - 340 13,746 4,613 18,635 37,334
Depreciation charge 24 48 3,047 706 4,896 8,721
Impairment charge - - 2,088 - 447 2,535
Disposals - - (24) (785) (522) (1,331)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2022 24 388 18,857 4,534 23,456 47,259
Depreciation charge 63 29 3,399 740 5,911 10,142
Impairment charge - - - - 1,633 1,633
Impairment reversal - - - - (241) (241)
Disposals - - (436) (162) (1,548) (2,146)
Effects of movement
in foreign exchange (1) - (1) - - (2)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2023 86 417 21,819 5,112 29,211 56,645
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Net book value
At 30 September 2023 6,803 823 27,945 17,051 25,657 78,279
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2022 7,382 852 19,829 13,516 27,062 68,641
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Plant and machinery, fixtures and fittings includes GBP845,000
(30 September 2022: GBP2,916,000) 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 seventy eight
centres assessing for indicators of impairment. A detailed
impairment test based on a base case was then performed on ten
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 ten
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 and cost inflation assumptions and 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 FY2024 and FY2025. 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:
2023 2022
-------------------------------- ----- -----
Discount rate (pre-tax) 12.7% 16.0%
Growth rate (beyond five years) 2.5% 2.5%
-------------------------------- ----- -----
Discount rates reflect current market assessments of the time
value of money and the risks specific to the industry. This is the
benchmark used by management to assess operating performance and to
evaluate future capital investment proposals. These discount rates
are derived from the Group's weighted average cost of capital.
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 GBP1,633,000 (FY2022: GBP2,535,000) against
property, plant and equipment assets and GBP1,277,000 (FY2022:
GBP1,786,000) against right-of-use assets for three mini-golf
centres (note 12), which form part of the UK operating segment. The
impairment charge in the year was reduced by the reversal of a
charge in a previous period of GBP241,000 against property, plant
and equipment assets and GBP459,000 against right-of-use assets for
one bowling centre. Following the recognition of the impairment
charge, the carrying value of property, plant and equipment is
GBP2,210,000 (30 September 2022: GBP3,456,000) and right-of-use
assets is GBP1,719,000 (30 September 2022: GBP3,151,000) for these
three UK mini-golf centres (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 GBP2,910,000 (30 September 2022: GBP4,321,000)
for three centres under the base case. Management have sensitised
the key assumptions in the impairment tests of these ten centres
under the base case.
A reduction in revenue of three and four percentage points down
on the base case for FY2024 and FY2025 respectively and a one
percentage point increase in operating costs on the base case for
FY2024 and FY2025 to reflect higher inflation, would not cause the
carrying value to exceed its recoverable amount for these seven
centres, which include 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 the seven
centres. However, a further impairment of GBP530,000 would arise
under this sensitised case in relation to three centres where we
have already recognised an impairment charge in the year, but this
could be as high as GBP1,788,000 if the revenue reduction were 10
percentage points.
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 nine (FY2022: ten) lease contracts that include
variable lease payments in the form of revenue-based rent
top-ups.
The Group also has certain leases of equipment with lease terms
of 12 months or less and leases of office equipment with low value.
The Group applies the 'short-term lease' and 'lease of low-value
assets' recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the year:
Amusement
Property machines Total
Right-of-use assets GBP'000 GBP'000 GBP'000
---------------------------------------- -------- --------- --------
Cost
At 1 October 2021 148,722 8,109 156,831
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. 11,510 - 11,510
Lease surrenders - (332) (332)
Lease modifications 5,640 - 5,640
Effects of movement in foreign exchange 583 - 583
---------------------------------------- -------- --------- --------
At 30 September 2022 174,260 11,239 185,499
Lease additions 2,452 5,522 7,974
Acquisition (note 20) 4,911 - 4,911
Lease surrenders - (1,071) (1,071)
Lease modifications 5,418 - 5,418
Effects of movement in foreign exchange (1,070) - (1,070)
---------------------------------------- -------- --------- --------
At 30 September 2023 185,971 15,690 201,661
---------------------------------------- -------- --------- --------
Accumulated depreciation
At 1 October 2021 19,632 4,857 24,489
Depreciation charge 9,846 2,164 12,010
Impairment charge 1,786 - 1,786
Lease surrenders - (241) (241)
---------------------------------------- -------- --------- --------
At 30 September 2022 31,264 6,780 38,044
Depreciation charge 10,464 2,501 12,965
Impairment charge 1,277 - 1,277
Impairment reversal (459) - (459)
Lease surrenders - (977) (977)
---------------------------------------- -------- --------- --------
At 30 September 2023 42,546 8,304 50,850
---------------------------------------- -------- --------- --------
Net book value
At 30 September 2023 143,425 7,386 150,811
---------------------------------------- -------- --------- --------
At 30 September 2022 142,996 4,459 147,455
---------------------------------------- -------- --------- --------
Set out below are the carrying amounts of lease liabilities and
the movements during the year:
Amusement
Property machines Total
Lease liabilities GBP'000 GBP'000 GBP'000
---------------------------------------- -------- --------- --------
At 1 October 2021 168,530 5,410 173,940
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. 11,510 - 11,510
Accretion of interest 8,354 98 8,452
Lease modifications 5,640 - 5,640
Lease surrenders - (157) (157)
Payments1 (19,873) (2,994) (22,867)
Effects of movement in foreign exchange 584 - 584
---------------------------------------- -------- --------- --------
At 30 September 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 (1,081) - (1,081)
---------------------------------------- -------- --------- --------
At 30 September 2023 185,936 8,269 194,205
---------------------------------------- -------- --------- --------
Current 9,304 3,249 12,553
Non-current 176,632 5,020 181,652
---------------------------------------- -------- --------- --------
At 30 September 2023 185,936 8,269 194,205
---------------------------------------- -------- --------- --------
Current 9,027 2,530 11,557
Non-current 173,523 3,289 176,812
---------------------------------------- -------- --------- --------
At 30 September 2022 182,550 5,819 188,369
---------------------------------------- -------- --------- --------
1 In FY2023, GBP179,000 (FY2022: GBP35,000) of rent payments
were part of the working capital movements in the year.
The following are the amounts recognised in profit or loss:
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Depreciation expense of right-of-use assets 12,965 12,010
Impairment charge of right-of-use assets 818 1,786
Interest expense on lease liabilities 9,808 8,452
Expense relating to leases of low-value assets (included
in administrative expenses) 57 57
Variable lease payments (included in administrative
expenses) 824 788
--------------------------------------------------------- -------- --------
Total amount recognised in profit or loss 24,472 23,093
--------------------------------------------------------- -------- --------
The Group has contingent lease contracts for nine (FY2022: ten)
sites. There is a revenue-based rent top-up on these sites.
Variable lease payments include revenue-based rent top-ups at eight
(FY2022: ten) centres totalling GBP619,000 (FY2022: GBP716,000). It
is anticipated that top-ups totalling GBP962,000 will be payable in
the year to 30 September 2024 based on current expectations.
Impairment testing is carried out as outlined in note 12.
Detailed impairment testing resulted in the recognition of an
impairment charge in the year of GBP1,277,000 (FY2022:
GBP1,786,000) against right-of-use assets for three UK centres
(FY2022: three UK centres). The impairment charge in the year was
reduced by the reversal of a charge in a previous financial period
of GBP459,000 against right-of-use assets for one centre.
13. Goodwill and intangible assets
Trademark Customer
Goodwill Brands 1 2 relationships Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------- -------------- -------- --------
Cost
At 1 October 2021 75,034 3,360 798 - 2,112 81,304
Additions 70 - - - 108 178
Acquisition of Teaquinn
Holdings Inc. 90 3,888 - 314 - 4,292
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2022 75,194 7,248 798 314 2,220 85,774
Additions - - - - 1,057 1,057
Acquisition (note 20) 6,865 - - 503 - 7,368
Effects of movement
in foreign exchange (11) - - (12) - (23)
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2023 82,048 7,248 798 805 3,277 94,176
------------------------- -------- -------- --------- -------------- -------- --------
Accumulated amortisation
At 1 October 2021 - 1,188 366 - 1,802 3,356
Amortisation charge - 335 50 8 231 624
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2022 - 1,523 416 8 2,033 3,980
Amortisation charge - 568 50 45 157 820
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2023 - 2,091 466 53 2,190 4,800
------------------------- -------- -------- --------- -------------- -------- --------
Net book value
At 30 September 2023 82,048 5,157 332 752 1,087 89,376
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2022 75,194 5,725 382 306 187 81,794
------------------------- -------- -------- --------- -------------- -------- --------
1 This relates to the Hollywood Bowl, Splitsville and Striker Bowling Solutions brands.
2 This relates to the Hollywood Bowl trademark only.
The components of goodwill comprise the following
businesses:
30 September 30 September
2023 2022
------- ------------ ------------
UK 75,034 75,034
Canada 7,014 160
------- ------------ ------------
82,048 75,194
------- ------------ ------------
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 Group is considered to be the CGU,
for the purposes of goodwill impairment testing, on the basis that
the goodwill relates mainly to the UK operating segment. The
goodwill acquisition in the year relates to the three centres
acquired in Canada (note 20). These three centres are considered a
CGU for the purpose of goodwill impairment testing for Canada.
These CGU's form part of the UK and Canada operating segments
respectively.
The recoverable amount of each of the CGU's 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 used in the value-in-use calculations are:
2023 2022
-------------------------------- ----- -----
Discount rate (pre-tax) 12.7% 16.0%
Growth rate (beyond five years) 2.5% 2.5%
-------------------------------- ----- -----
Discount rates reflect current market assessments of the time
value of money and the risks specific to the industry. This is the
benchmark used by management to assess operating performance and to
evaluate future capital investment proposals. These discount rates
are derived from the Group's weighted average cost of capital.
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.
Sensitivity to changes in assumptions
Management has sensitised the key assumptions in the impairment
tests of the CGU under the base case scenario. The key assumptions
used and sensitised were forecast growth rates and the discount
rates, which were selected as they are the key variable elements of
the value-in-use calculation. The combined effect of a reduction in
revenue of 3.5 percentage points on the base case for FY2024 and
FY2025, an increase in the discount rate applied to the cash flows
of the CGU of one per cent and a reduction of one per cent in the
growth rate (beyond five years), would reduce the UK headroom by
GBP52.2m. This scenario would not cause the carrying value to
exceed its recoverable amount. Therefore, management believes that
any reasonable possible change in the key assumptions would not
result in an impairment charge.
The goodwill on the Canada acquisition in the year is included
in note 20. Management believe that any reasonable change in the
key assumptions would not result in an impairment charge.
14. Trade and other receivables
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------ ------------ ------------
Trade receivables 2,356 836
Other receivables 129 245
Prepayments 5,631 4,049
------------------ ------------ ------------
8,116 5,130
------------------ ------------ ------------
Trade receivables have an ECL against them that is immaterial.
There were no overdue receivables at the end of either year.
15. Trade and other payables
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------- ------------ ------------
Current
Trade payables 7,025 5,306
Other payables 1,366 1,310
Accruals and deferred income 15,421 17,000
Taxation and social security 5,297 5,065
------------------------------- ------------ ------------
Total trade and other payables 29,109 28,681
------------------------------- ------------ ------------
30 September 30 September
2023 2022
GBP'000 GBP'000
--------------- ------------ ------------
Non-current
Other payables 5,208 3,000
--------------- ------------ ------------
Accruals and deferred income includes a staff bonus accrual of
GBP4,955,000 (30 September 2022: GBP7,758,000) and deferred
consideration of GBPnil (30 September 2022: GBP164,000) in relation
to the acquisition of Teaquinn Holdings Inc. Deferred income
includes GBP801,000 (30 September 2022: GBP983,000) of customer
deposits received in advance and GBP1,870,000 (30 September 2022:
GBP160,000) relating to bowling equipment installations, all of
which is recognised in the income statement during the following
financial year.
Non-current other payables includes GBP2,359,000 (30 September
2022: GBP464,000) of contingent consideration and GBP1,862,000 (30
September 2022: GBP1,841,000) 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
GBP9,084,000 (undiscounted) to a payment in FY2026 of GBP10,300,000
(undiscounted), using the FY2023 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 FY2023, this re-assessment resulted in an additional
charge of GBP485,000 being recognised in exceptional administrative
expenses.
16. Loans and borrowings
On 29 September 2021, the Group entered into a GBP25m revolving
credit facility (RCF) with Barclays Bank plc. The RCF has a
termination date of 31 December 2024.
Interest is charged on any drawn balance based on the reference
rate (SONIA), plus a margin of 1.75 per cent.
A commitment fee equal to 35 per cent of the drawn margin is
payable on the undrawn facility balance. The commitment fee rate as
at 30 September 2023 and 30 September 2022 was therefore 0.6125 per
cent.
Issue costs of GBP135,000 were paid to Barclays Bank plc on
commencement of the RCF. These costs are being amortised over the
term of the facility and are included within prepayments (note
14).
The terms of the Barclays Bank plc facility include the
following Group financial covenants:
(i) For the 7-month period ending 31 December 2021, the ratio of
total net debt to Group adjusted EBITDA pre-IFRS 16 shall not
exceed 1.75:1.
(ii) For the 12-month period ending on each reference date,
commencing 31 March 2022 and each quarter thereafter, the ratio of
total net debt to Group adjusted EBITDA pre-IFRS 16 shall not
exceed 1.75:1.
The Group operated within the covenants during the year and the
previous year.
17. Deferred tax assets and liabilities
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------ ------------ ------------
Deferred tax assets and liabilities
Deferred tax assets - UK 6,500 7,050
Deferred tax assets - Canada 244
Deferred tax liabilities - UK (5,191)
Deferred tax liabilities - Canada (2,204) (5,403)
------------------------------------ ------------ ------------
(651) 1,647
------------------------------------ ------------ ------------
30 September 30 September
2023 2022
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Reconciliation of deferred tax balances
Balance at the beginning of the year 1,647 6,290
Deferred tax credit for the year - in profit or loss (2,157) (2,543)
Deferred tax credit for the year - in equity 8 (29)
On acquisition (148) (2,040)
Effects of foreign exchange 63 (43)
Adjustment in respect of prior years (64) 12
----------------------------------------------------- ------------ ------------
Balance at the end of the year (651) 1,647
----------------------------------------------------- ------------ ------------
The components of deferred tax are:
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------ ------------ ------------
Deferred tax assets
Fixed assets 6,080 6,314
Trading losses 15 -
Other temporary differences 649 736
------------------------------ ------------ ------------
6,744 7,050
------------------------------ ------------ ------------
Deferred tax liabilities
Property, plant and equipment (5,857) (3,694)
Intangible assets (1,538) (1,709)
------------------------------ ------------ ------------
(7,395) (5,403)
------------------------------ ------------ ------------
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 2023.
18. Related party transactions
30 September 2023 and 30 September 2022
During the year, and the previous year, there were no
transactions with related parties.
19. Dividends paid and proposed
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
The following dividends were declared and paid by
the Group:
Interim dividend year ended 30 September 2022 - 3.00
pence per ordinary share - 5,132
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 -
Proposed for the approval by shareholders at AGM
(not recognised as a liability at 30 September 2023):
Final dividend year ended 30 September 2023 - 8.54
pence per ordinary share (2022: 8.53 pence) 14,664 14,592
Special dividend year ended 30 September 2023 - 2.73
pence per ordinary share (2022: 3.00 pence) 4,688 5,132
------------------------------------------------------- ------------ ------------
During the year to 30 September 2024, the Group is considering a
share buyback of up to GBP10m if it falls in line with the Group's
cash allocation policy.
20. Acquisition of HLD Investments Inc. (operating as YYC
Bowling & Entertainment), Mountain View Bowl Inc and Wong and
Lewis Investments Inc. (operating as Let's Bowl)
On 15 February 2023, the Group acquired 100 per cent of the
issued share capital and voting rights of HLD Investments Inc.
(operating as YYC Bowling & Entertainment), Mountain View Bowl
Inc and Wong and Lewis Investments Inc. (operating as Let's Bowl),
based in Canada. All three businesses are operators of ten-pin
bowling centres. The purpose of the acquisition was to grow the
Group's core ten-pin bowling business in the region.
HLD Investments Inc. (operating as YYC Bowling &
Entertainment), Mountain View Bowl Inc and Wong and Lewis
Investments Inc. (operating as Let's Bowl) are consolidated in
Hollywood Bowl Group plc's interim financial statements with effect
from the completion of the acquisition on 15 February 2023.
Since acquisition, these three entities have been dissolved and
amalgamated into Xtreme Bowling Entertainment Corporation.
The details of the business combination are as follows (stated
at acquisition date fair values):
GBP'000
---------------------------------------------- -------
Fair value of consideration transferred
Amount settled in cash 7,716
---------------------------------------------- -------
Recognised amounts of identifiable net assets
Property, plant and equipment 197
Right-of-use assets 4,911
Intangible assets 503
Inventories 46
Trade and other receivables 178
Cash and cash equivalents 319
Trade and other payables (276)
Lease liabilities (4,911)
Deferred tax liabilities (116)
---------------------------------------------- -------
Identifiable net assets 851
---------------------------------------------- -------
Goodwill arising on acquisition 6,865
---------------------------------------------- -------
Consideration for equity settled in cash 7,716
Cash and cash equivalents acquired (319)
---------------------------------------------- -------
Net cash outflow on acquisition 7,397
---------------------------------------------- -------
Acquisition costs paid charged to expenses 453
---------------------------------------------- -------
Net cash paid in relation to the acquisition 7,850
---------------------------------------------- -------
Acquisition related costs of GBP453,000 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 GBP503,000 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 GBP178,000. At the acquisition date the Group's best
estimate of the contractual cash flows expected not to be collected
amounted to GBPnil.
Goodwill amounting to GBP6,865,000 was recognised on acquisition
(note 13). The goodwill relates to the locations of the bowling
centres aquired, the expected commercial opportunities of an
enhanced leisure offering in an underserved market and the expected
synergies from combining the three centres into the Hollywood Bowl
Group.
In the period since acquisition to 30 September 2023, the Group
recognised GBP2,956,000 of revenue and GBP1,330,000 of profit
before tax in relation to the acquired businesses. Had the
acquisition occurred on 1 October 2022, the contribution to the
Group's revenue would have been GBP5,407,000 and the contribution
to the Group's profit before tax for the period would have been
GBP2,406,000.
21. Events after the reporting date
Three acquisitions were completed in early FY2024. In the UK, on
2 October 2023, the Group purchased the assets, including the long
leasehold, of Lincoln Bowl for total consideration of
GBP4.375m.
In Canada, the Group completed two acquisitions. The first was
the acquisition of a family entertainment centre in Guelph,
Ontario, called Woodlawn Bowl Inc, for CAD 4.71m on 7 November
2023. The second was the acquisition of the assets and lease of a
family entertainment centre in Vancouver, called Lucky 9 Bowling
Centre Limited as well as its associated restaurant and bar, Monkey
9 Brewing Pub Corp, for a total consideration of CAD 0.425m on 11
November 2023.
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.
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 risk
--------------------------------------------------------------------------------------------------------------------------------------
1. Economic environment
---------------------------------------------------------- ------------------------------------------------------------------------
Risk and impact Mitigating factors Risk change
---------------------------------------------------------- ------------------------------------------------------------- -----------
Unchanged
* Change in economic conditions, in particular a * There is still a risk of a contraction on disposable
recession, as well as inflationary pressures and the income levels, impacting consumer confidence and
war in Ukraine. 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,
* Adverse economic conditions, including but not whilst it would suffer in such a recession, the Board
limited to, increases in interest rates/inflation ma is comfortable that coupled with the low price point,
y the majority of centre locations are based in
affect Group results. high-footfall locations which should better withstand
a recessionary decline.
* A decline in spend on discretionary leisure activity
could negatively affect all financial as well as * Along with appropriate financial modelling and
non-financial KPIs. 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.
* We have an unrelenting focus on service, costs and
value, along with electricity 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.
---------------------------------------------------------- ------------------------------------------------------------- -----------
2. Covenant breach
---------------------------------------------------------- ------------------------------------------------------------------------
Risk and impact Mitigating factors Risk change
---------------------------------------------------------- ------------------------------------------------------------- -----------
Decreasing
* The banking facility, with Barclays Plc, has * Financial resilience has always been central to our
quarterly leverage covenant tests which are set at a decision making and will remain key for the
level the Group is comfortably forecasting to be foreseeable future.
within.
* The current RCF is GBP25m, margin of 175bps above
* Covenant breach could result in a review of banking SONIA as well as an accordion of GBP5m. Net leverage
arrangements and potential liquidity issues. covenants are 1.75x and are tested quarterly. The
facility is currently undrawn, which under the
agreement results in a cost of less than GBP200k per
annum.
* Net cash position was GBP52.5m at the end of
September 2023.
* Appropriate financial modelling has been undertaken
to support the assessment of the business as a going
concern. The Group has headroom on the current
facility with leverage cover within its covenant
levels, as shown in the monthly Board packs. We
prepare short-term and long-term cash flow, Group
adjusted EBITDA (pre-IFRS 16) and covenant forecasts
to ensure risks are identified early. Tight controls
exist over the approval for capital expenditure and
expenses.
* The Directors consider that the combination of events
required to lower the profitability of the Group to
the point of breaching bank covenants is unlikely.
---------------------------------------------------------- ------------------------------------------------------------- -----------
3. Expansion and growth
---------------------------------------------------------- ------------------------------------------------------------------------
Risk and impact Mitigating factors Risk change
---------------------------------------------------------- ------------------------------------------------------------- -----------
New
* Competitive environment for new centres results in * The Group uses multiple agents to seek out
less new Group centre openings. opportunities across the UK and Canada.
* New competitive socialising concepts could appear * We met with the top five landlords in Canada in July
more attractive to landlords. 2023 with positive feedback and a number of
opportunities in negotiation.
* Higher rents offered by short-term private groups.
* Continued focus with landlords on initial investment,
innovation, as well as refurbishment and maintenance
capital.
* Strong financial covenant provides forward-looking
landlords with both value and comfort.
---------------------------------------------------------- ------------------------------------------------------------- -----------
Operational Risk
------------------------------------------------------------ -----------------------------------------------------------------------
4. Core systems
------------------------------------------------------------ -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
------------------------------------------------------------ ------------------------------------------------------------- ----------
Unchanged
* Failure in the stability or availability of * All core UK systems (non-cloud based) are backed up
information through IT systems could affect Group to our disaster recovery centre.
business and operations.
* The reservation systems, provided by a third party,
* Customers not being able to book through the website are hosted by Microsoft Azure Cloud for added
is a bigger risk given the higher proportion of resilience and performance. This also has full
online bookings compared to prior years. business continuity provision and scalability for
peak trading periods.
* Inaccuracy of data could lead to incorrect business
decisions being made. * Our new Compass reservations system will be rolled
out to the Group estate from FY2024 Q3. This system
has been built in house and will have improved
performance, resilience and future development
flexibility compared to the existing system. It will
also remove the reliance on an external partner.
* 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 still server based and
moving towards cloud based over the next 12 months in
line with the platforms adopted by our UK operation.
* All Group technology changes which affect core
systems are subject to authorisation and change
control procedures with steering groups in place for
key projects.
------------------------------------------------------------ ------------------------------------------------------------- ----------
5. Food and drink suppliers
------------------------------------------------------------ -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
------------------------------------------------------------ ------------------------------------------------------------- ----------
Unchanged
* Operational business failures from key suppliers. * The Group has key food and drink suppliers under
contract with tight service level agreements (SLAs).
Alternative suppliers that know our business could be
* Unable to provide customers with a full experience. 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 risk and its
resolution. This process was updated in November 2022
with substitute products available in all scenarios.
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.
* Splitsville uses Xtreme Hospitality (XH), a group
buying company, and Molson Coors, to align itself
with tier one suppliers in all service categories
including food and drink. If XH is unable to provide
a service or product, Splitsville is able to source
directly itself.
------------------------------------------------------------ ------------------------------------------------------------- ----------
6. Amusement supplier
------------------------------------------------------------ -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
------------------------------------------------------------ ------------------------------------------------------------- ----------
Unchanged
* Any disruption which affects Group relationship with * Regular key supplier meetings between our Head of
amusement suppliers. Amusements, and Namco. There are half-yearly meetings
between the CEO, CFO and the Namco UK leadership
team.
* Customers would be unable to utilise a core offer in
the centres.
* Namco is a long-term partner that has a strong UK
presence and supports the Group with trials,
initiatives and discovery visits.
* Namco also has strong liquidity which should allow
for a continued relationship during or post any
consumer recession.
* The Canadian supplier is Player 1 which is a
subsidiary of Cineplex Inc. which is listed on the
Canadian stock market. Quarterly meetings are held
with Player 1.
------------------------------------------------------------ ------------------------------------------------------------- ----------
7. Management retention and recruitment
------------------------------------------------------------ -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
------------------------------------------------------------ ------------------------------------------------------------- ----------
Unchanged
* Loss of key personnel - centre managers. * The Group runs Centre Manager In Training (CMIT) and
Assistant Manager In Training (AMIT) programmes
annually in the UK, which identify centre talent and
* Lack of direction at centre level with effect on develop team members ready for these roles. Centre
customer experience. managers in training run centres, with assistance
from their regional support manager as well as
experienced centre managers from across the region,
* More competitive recruitment landscape due to Brexit when a vacancy needs to be filled at short notice.
impact of reduced hospitality worker availability.
* The bonus schemes were reviewed for the estate
* More difficult to execute business plans and strategy, reopening in May 2021 and again at the end of FY2022,
impacting on revenue and profitability. to ensure they were still a strong recruitment and
retention tool. The management bonuses were
introduced into the Canadian business for FY2023 and
we are reviewing how to implement a team member
hourly scheme in Canada for FY2024.
* The hourly scheme has paid out to an average of c.52
per cent of the UK team in each month in FY2023.
------------------------------------------------------------ ------------------------------------------------------------- ----------
8. Food safety
------------------------------------------------------------ -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
------------------------------------------------------------ ------------------------------------------------------------- ----------
Unchanged
* Major food incident including allergen or fresh food * Food and drink audits are undertaken in all centres
issues. based upon learnings of prior year and food incidents
seen in other companies.
* Loss of trade and reputation, potential closure and
litigation. * UK - allergen awareness is part of our team member
training matrix which needs be completed before team
members can take food or drink orders. Information is
regularly updated and remains a focus for the
centres. This was enhanced further in the latest menu,
along with an online allergens list which is
available for all customers. A primary local
authority partnership is in place with South
Gloucestershire covering health and safety, as well
as food safety.
* In conjunction with the supply chain risk the
Allergen Control Policy has been reviewed and updated
(May 2023).
* All food menus have an allergen disclaimer.
* All food menus have a 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. An Allergen
Control Policy is being drafted in line with the
launch of the new menu and with the new Head of Food
and Drink. This will be reviewed by the UK before
going live.
------------------------------------------------------------ ------------------------------------------------------------- ----------
Technical risks
--------------------------------------------------------------------------------------------------------------------------------------
9. Cyber security and GDPR
----------------------------------------------------------- -------------------------------- ---------------------------------------
Risk and impact Mitigating factors Risk
change
----------------------------------------------------------- ------------------------------------------------------------- ----------
Unchanged
* Risk of cyber-attack/terrorism could impact the * The area is a key focus for the Group and it adopts a
Group's ability to keep trading and prevent customers multi-faceted approach to protecting its IT networks
from booking online. through protected firewalls and secure two-factor
authentication passwords, as well as the frequent
running of vulnerability scans to ensure the
* Non-accreditation can lead to the acquiring bank integrity of the firewalls.
removing transaction processing.
* An external Security Operations Centre is in place to
* Data protection or GDPR breach. Theft of customer provide 24/7/365 monitoring and actioning of cyber
email addresses and impact on brand reputation in the security alerts and an additional retained service to
case of a breach. work with the Group on a priority basis should a
breach occur.
* 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.
* There is active protection of the network against a
DDoS attack.
* Payment systems have been upgraded to use P2PE
payment devices, greatly reducing PCI DSS risks with
cardholder present transactions in centres. New
payment technology for ecommerce ensures that no card
data passes through Group networks. 98 per cent of
transactions operate in a PCI DSS secure environment.
There are plans to address the remaining 2 per cent
of transactions that occur through the contact centre
by implementing pay-by-link.
* Quarterly vulnerability scanning is being implemented
against the PCI standard. Annual penetration testing
is conducted through a third-party cyber security
company.
* Advanced data loss protection is also now in place to
limit unauthorised, undisclosed, or unidentified
migration or movements of data outside of our control
on unsecured and unmanaged devices, including mobile
phones.
* Cyber Essentials certification has been achieved and
was successfully externally audited in September
2023.
* A Data Protection Officer has been in position for a
number of years in the UK and we have a dedicated
Cyber Security Manager who oversees our strategy,
applications and activity in this area with periodic
updates given to the Board.
* A training course on GDPR awareness is on STARS
(online training tool) and all team members have to
complete this before being able to work on shift.
* In FY2024 we are continuing to upgrade the IT
infrastructure and networks in our Canadian business
to move from centre-based operations to centrally
hosted and managed services.
----------------------------------------------------------- ------------------------------------------------------------- ----------
Regulatory risks
-------------------------------------------------------------------------------------------------------------------------------------
10. Compliance
---------------------------------------------------------- -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
---------------------------------------------------------- ------------------------------------------------------------- ----------
Unchanged
* Failure to adhere to regulatory requirements such as * Expert opinion is sought where relevant. We run
listing rules, taxation, health and safety, planning regular training and development for appropriately
regulations and other laws. qualified staff.
* Potential financial penalties and reputational * The Board has oversight of the management of
damage. regulatory risk and ensures that each member of the
Board is aware of their responsibilities.
* Compliance documentation for centres to complete for
health and safety, and food safety, are updated and
circulated twice per year. Adherence to Company/legal
standards is audited by the internal audit team.
---------------------------------------------------------- ------------------------------------------------------------- ----------
11. Climate change
---------------------------------------------------------- -----------------------------------------------------------------------
Risk and impact Mitigating factors Risk
change
---------------------------------------------------------- ------------------------------------------------------------- ----------
Unchanged
* Increasing carbon taxes. * Significant progress already made with solar panel
installations and transitioning energy contracts to
renewable sources.
* Business interruption and damage to assets.
* The CRC monitors and reports on climate-related risks
* Cost of transitioning operations to net zero. 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.
* The range of climate-related targets has been
extended for FY2024.
* The Group's UK net zero transition plan and milestone
targets are in the full Annual Report.
---------------------------------------------------------- ------------------------------------------------------------- ----------
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END
FR KDLFFXLLFFBV
(END) Dow Jones Newswires
December 18, 2023 02:00 ET (07:00 GMT)
Hollywood Bowl (LSE:BOWL)
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