UK based Hollywood Bowl Group Plc (BOWL.L) Hollywood Bowl Group is the UK’s largest ten-pin bowling operator, with a portfolio of 59 centres operating across the UK under the Hollywood Bowl, AMF and Bowlplex brands. The Group specialises in operating large, high quality bowling centres, predominantly located in out of town multi-use leisure parks (typically co-located with cinema and casual dining sites) and large retail parks. The centres are designed to offer a complete family entertainment experience with each centre offering at least 12 bowling lanes, on-site dining, licensed bars, and state-of-the-art family games arcades.
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On May 23rd 2018, BOWL announced interim results for the 6 months ending March 31st 2018. The group reported a 17.4% increase in PBT to £14.6m, on revenues up 9.3% at £63.6m. Net debt fell by 46.7% to £7.2m, and BOWL raised the interim dividend by 12.8% to 2.03p. BOWL also noted that spend per game had increased by 5.5% to £9.20. CEO Stephen Burns said the group customer focus, combined with our disciplined capital and cost management, “gives us confidence in delivering another year of progress, and reporting results in line with Board expectations.”
The growth potential within this 10-pin bowling group came to the attention of VectorVest members with a relative value flag as far back as the start of April this year. The RV (Relative Value) rating, an indicator of long-term price appreciation potential logged at 1.42, which is excellent on a scale of 0.0 – 2.0. Other high scoring metrics include a GRT (Earnings Growth Rate) of 27%, which VectorVest also considers excellent. The stock continues to add gains, but even at 232p VectorVest sees more to come, with a valuation of 261p.
The chart of BOWL.L is shown above where the earnings per share (EPS) growth is clear and shown by the blue line study in the window below the price. The share is trending upwards and this trend is defined easily by the blue trendline under the price bars. Over the last month the share has pulled back to this long-term support (which was also an old high) and was aggressively accumulated at this level. This is an extremely positive technical signal.
Summary: To date BOWL management have provided a masterclass in maximising the potential of a niche business. All the group 10-pin bowling sites are leased, keeping centre operating costs and liabilities well under control, while factors such as the increase in profits and growth in spend per game show how management continue to execute an effective strategy to grow the business. With a bullish outlook statement from the CEO, VectorVest backs BOWL management to deliver additional growth throughout the current year. Buy.
Dr David Paul
June 27 2018
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