HOL­LY­WOOD BOWL (BOWL)

Shares - - TALKING POINT -

We be­lieve the mar­ket may favour well-in­vested, highly cash-gen­er­a­tive com­pa­nies with min­i­mal debt and un­de­mand­ing equity val­u­a­tions go­ing into 2019. Hol­ly­wood Bowl has all th­ese char­ac­ter­is­tics and of­fers slow but steady growth po­ten­tial, plus scope for de­cent div­i­dends over the long term.

Bowl­ing is af­ford­able and a nice treat. In tougher eco­nomic con­di­tions we still want a break from the stress of work and life and bowl­ing is of­ten the des­ti­na­tion of choice to re­lax and get away from it all.

The com­pany wouldn’t be en­tirely im­mune from an eco­nomic down­turn but we feel it would be more re­silient than many other con­sumer-fac­ing busi­nesses.

Hol­ly­wood Bowl has 59 sites in the UK, nine of which were re­fur­bished in its past fi­nan­cial year and a fur­ther seven to 10 cen­tres will be re­vamped in the cur­rent fi­nan­cial year. Pre­vi­ous re­fur­bish­ments have led to a boost in trad­ing.

Re­tail land­lords view the com­pany as a mag­net for con­sumers so they are happy to give sweet­en­ers like free rent for up to 12 months or money to­wards the fit-out if Hol­ly­wood Bowl signs up to new or re­fur­bished cen­tres.

Hol­ly­wood Bowl has im­proved its food of­fer­ing and spruced up its din­ers in or­der to im­prove cus­tomer dwell time.

Var­i­ous ef­fi­ciency ini­tia­tives are be­ing rolled out to po­ten­tially en­hance profit in the fu­ture. For ex­am­ple, it is in­tro­duc­ing a new scor­ing sys­tem where it is much easier for the cus­tomer to in­put their in­for­ma­tion.

This data is also used for mar­ket­ing pur­poses and Hol­ly­wood Bowl says more than 80% of peo­ple open its emails con­tain­ing their scores from re­cent games. This very high en­gage­ment rate presents an op­por­tu­nity to in­clude pro­mo­tions to get cus­tomers vis­it­ing its sites more reg­u­larly.

Seven sites have been fit­ted with pins-on­strings to re­place the tra­di­tional pin set­ting sys­tem which has count­less mov­ing parts and has a habit of break­ing down. Hol­ly­wood Bowl says the tra­di­tional sys­tem sup­ports an av­er­age of 396 games be­fore a fault stops play ver­sus 1,443 games from the pins-on-strings sys­tem.

It plans to test a new in­door mini-golf con­cept which could help to ac­cel­er­ate group earn­ings sig­nif­i­cantly if suc­cess­ful.

Hol­ly­wood Bowl will pay a 4.23p nor­mal div­i­dend and a 4.33p spe­cial div­i­dend in Fe­bru­ary 2019, both de­clared at the 2018 full year re­sults on 10 De­cem­ber.

Bro­ker Shore Cap­i­tal fore­casts 6.8p nor­mal div­i­dends for the cur­rent fi­nan­cial year, im­ply­ing a 3.1% prospec­tive yield. While this fore­cast doesn’t in­clude a spe­cial div­i­dend, it is worth not­ing that Hol­ly­wood Bowl has de­clared ‘spe­cials’ for the past two years in a row.

HIGHLY CASH GEN­ER­A­TIVE BUSI­NESS WITH PLENTY OF IDEAS TO EN­HANCE EARN­INGS

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