MIDAS SHARE TIPS: Ten-pin bowling firm Hollywood Bowl is on target as profits soar - and dividends are tipped to be generous too
Ten-pin bowling has a lot going for it. It appeals to all ages, is fun and pretty cheap. Yet many companies in the sector have had a chequered past – overexpanding, overborrowing and ending up in trouble.
Hollywood Bowl hopes to avoid these mistakes. The UK’s largest ten-pin bowling operator, it listed on the stock market in September 2016 at 160p. The shares are now 188½p. They are likely to increase as the business expands – and dividends are tipped to be generous too.
The group owns 58 centres across the country and prides itself on running bright, modern sites in or near places that people like to visit, such as shopping malls or cinemas.
On a roll: Hollywood Bowl spent £3.5 million improving sites
It is run by Stephen Burns, who joined in 2011 as business development director and moved up to become chief executive in 2014.
Burns spent several years at Cannons Health and Fitness, a gym chain where he had considerable success before it was acquired in 2009. Finance director Laurence Keen was formerly at Paddy Power, as well as Debenhams, Pizza Hut and Tesco, so the duo are highly experienced at operating consumer-related businesses.
Both are keen to differentiate Hollywood Bowl centres from rivals in both how they look and what they offer. So in the first year as a listed company the group spent £3.5 million refurbishing older sites. Almost 40 have now been renovated, attracting more customers, who in turn tend to spend more while they are bowling.
The group has also upgraded the food on offer. Prices are kept low so customers can enjoy a game of bowls, a burger and a drink for less than the price of a cinema ticket.
There are VIP lanes too, which cost about £1 more than ordinary lanes but have proved popular. With large VIP signs above the lanes, different balls, coloured pins and mobile phone chargers, they make customers feel special – and should encourage return visits.
Overall, the objective is to ensure that Hollywood Bowl centres appeal to as wide a range of customers as possible, from league players to families and groups of young adults out for the evening.
Burns and Keen are big fans of using digital marketing to achieve this objective – taking customers’ email addresses and messaging them with news, updates and offers. While this can be annoying, it also works. The company has built a database of 1.6 million names – and the larger that becomes, the more customers it is likely to attract.
Flexible pricing helps, too. A recent introduction, it means that customers pay less if they book in advance or come at less busy times, while prices rise at peak periods, such as Friday and Saturday evenings. Prices vary across the country as well, to take account of spending patterns in different regions but games tend to cost no more than £7 in any part of the UK.
At present, the average customer visits Hollywood Bowl 1.3 times a year so the company is keen both to increase visits and attract new customers. Refurbishing sites and building new ones helps on both scores.
Keen, however, is determined not to fall into the trap of other bowling groups – expanding too fast and paying too much rent.
The company drives a hard bargain on the rent that it pays and expansion will be slow and steady over the next few years. Shopping mall landlords tend to like Hollywood too as bowling increases evening footfall.
Over the past year, the group has opened four new sites and there is a strong pipeline of further openings, as Keen is in advanced discussions on ten more and expects to open around two a year.
Hollywood’s financial year runs to September 30 and a trading update in October signalled that all was going well. Results will be published on December 11, marking the first annual figures from the group as a public company.
Brokers expect pre-tax profits of £20.7 million and a dividend of 5.4p. Encouragingly too, the group has hinted that a special dividend might be on the cards so there should be more cash coming shareholders’ way.
Midas verdict: There are 319 bowling centres in the UK but many of them are old-fashioned, gloomy and located in sub-optimal areas. Hollywood Bowl is not only the largest player in the industry; it also has some of the best sites.
The business is well managed, profitable and growing at a steady clip. Dividend payouts are attractive too. Buy.
Traded on: Main Market Ticker: BOWL Contact: hollywoodbowlgroup.com
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