REG - Hollywood Bowl Group - Half Year Results
03/06/2024 07:00
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RNS Number : 6898Q Hollywood Bowl Group plc 03 June 2024
Hollywood Bowl Group plc
("Hollywood Bowl", the "Company" or the "Group")
Interim Results
for the Six Months ended 31 March 2024
EXCELLENT PERFORMANCE DRIVEN BY CONTINUED INVESTMENT IN CUSTOMER EXPERIENCE
AND FURTHER GROWTH IN CANADA
Financial summary
H1 FY2024 H1 FY2023 Change
Revenue £119.2m £110.2m5 +8.1%
Group adjusted EBITDA(1) £48.3m £43.9m +10.0%
Group adjusted EBITDA(1) pre-IFRS 16 £38.6m £35.1m +10.0%
Group profit before tax £29.5m £26.7m +10.5%
Group profit after tax £21.9m £20.9m +5.0%
Group adjusted profit before tax(2) £30.9m £27.7m +11.7%
Group adjusted profit after tax(2) £23.3m £21.9m +6.5%
Adjusted earnings per share(2) 13.60p 12.80p +6.2%
Free cash flow(3) £16.5m £15.3m +7.8%
Net cash(4) £41.4m £44.1m -6.2%
Interim ordinary dividend per share 3.98p 3.27p +21.7%
1 Group adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation) is calculated as statutory operating profit plus
depreciation, amortisation, impairment, loss on disposal of property,
right-of-use assets, plant and equipment and software and any exceptional
costs or income, and is also shown pre-IFRS 16 as well as adjusted for IFRS
16. These adjustments show the underlying trade of the overall business which
these costs or income can distort. The reconciliation to operating profit is
set out below.
2 Adjusted group profit before / after tax is calculated as group
profit before / after tax, adding back acquisition fees of £0.3m (H1 FY2023:
£0.5m) and the non-cash expense of £1.1m (H1 FY2023: £0.7m) related to the
fair value of the earn out consideration on the Teaquinn acquisition in May
2022. Also, in H1 FY2023 it included the removal of the reduced rate (TRR) of
VAT benefit on bowling of £0.2m.
3 Free cash flow is defined as net cash flow pre-exceptional items,
cost of acquisitions, debt facility repayment, RCF drawdowns and dividends.
4 Net cash/(debt) is defined as cash and cash equivalents less
borrowings from bank facilities excluding issue costs.
5 Group revenue in H1 FY2023 includes £0.2m in respect of TRR of VAT.
6 Revenues in GBP based on an actual foreign exchange rate over the
relevant period, unless otherwise stated.
Key highlights
· Excellent financial performance supported by successful execution
of proven domestic and Canadian growth strategy
o Record first half Group revenue of £119.2m (H1 FY2023: £110.2m)
o Group adjusted EBITDA pre-IFRS 16 increased by 10.0 per cent to £38.6m
(H1 FY2023: £35.1m)
o UK LFL revenue growth of 1.3 per cent and 8.0 per cent in Splitsville
centres in Canada
o Interim dividend up 21.7% to 3.98 pence per share (H1 FY 2023 interim
dividend: 3.27 pence per share)
o Cash generative model provides investment capital and balance sheet
strength: robust net cash position at 31 March 2024 of £41.4m;
o Extended undrawn £25m revolving credit facility to December 2025
UK - 71 centres at period end
· Enhancing and expanding our high-quality, profitable UK estate
o Completed refurbishments of Hollywood Bowl centres in Watford Woodside,
Stockton and Cardiff
o Acquired, re-branded and refurbished centre in Lincoln, with encouraging
trading since completion
o Solar panels installed at two further centres
o New centre, Hollywood Bowl Dundee, opened in May 2024, post period end
· Constant improvement of customer experience driving 3.2% higher
UK spend per game (SPG) and increased customer satisfaction scores to 67% NPS
o Space optimisations and new game formats across the estate driving 4.5%
increase in amusement SPG
o Installed Puttstars courses in two Hollywood Bowl centres
o Pins on Strings installed in six centres, increasing total to 90% of UK
estate, saving further costs and enhancing the customer experience
o New core reservation system, delivering improved performance, reliability
and efficiencies
Canada - 11 centres at period end
· Canadian business trading in line with management's expectations
and performing well with successful execution against growth strategy
o Total revenue growth of 46.9% to CAD 27m (£15.9m) and pre-IFRS 16 EBITDA
of CAD 7.5m (£4.4m)
o Two centres acquired in Guelph, Ontario and Vancouver, British Columbia
o First new build centre Waterloo, Ontario due to be completed in June 2024,
post period end, and two new centres signed in Calgary and Ottawa
o Refurbishment of Kingston site due to be completed in June 2024 and
Glamorgan and Meridian centres in Calgary due to complete in the second half
o Successful investment in Canada customer experience, leveraging UK
operating model; trialling Pins on Strings in three centres
Outlook
· Strong balance sheet and cash generative business model supports
investment in future growth with new centre pipeline continuing to build
across UK and Canada
o Resilient demand for value for money leisure experiences
o Further growth of the estate, two UK centres and one Canadian centre due
to open in H2 and FY2025, with onward pipeline continuing to build
o Well-insulated from inflationary pressures with 72% of revenue not subject
to cost of goods inflation
o New UK energy hedge signed to end of FY2027 with increases of <30% for
FY2025
o Investment in technology and website will support ecommerce sales and
yield performance
o Well positioned to grow Group estate to over 130 centres
Stephen Burns, Chief Executive Officer, commented:
"We are pleased to have welcomed so many families, friends and colleagues to
our centres in the first half, demonstrating the continued demand for
high-quality, family-friendly leisure experiences at affordable prices,
particularly against the backdrop of higher living expenses. I am extremely
grateful to our excellent team members whose hard work has resulted in even
longer customer dwell times and higher satisfaction score. We are proud to
invest in our team and to once again be recognised as a top Company to work
for.
"We continue to expect further, modest like-for-like growth, even with the
very strong prior year comparative, as a result of our customer-led innovation
and investment in our profitable growth strategy. We are confident in the
outlook for Hollywood Bowl and in our ability to capture the longer-term
opportunity to grow our estate to over 130 centres in the next ten years."
Enquiries: Via Teneo
Hollywood Bowl Group PLC
Stephen Burns, Chief Executive Officer
Laurence Keen, Chief Financial Officer
Mat Hart, Chief Marketing and Technology Officer
Teneo
Elizabeth Snow hollywoodbowl@teneo.com
Laura Marshall +44 (0)20 7353 4200
CHIEF EXECUTIVE OFFICER'S REVIEW
Hollywood Bowl Group has delivered another strong performance in the first
half of the year. The continued successful execution of our customer focused
strategy and investment in our estate resulted in further profitable growth.
The Group achieved record revenues with an 8.1 per cent increase to £119.2m,
even against the strong comparative of last year's outstanding performance. UK
like-for-like (LFL) revenues increased by 1.3 per cent, and we were very
pleased to achieve over £100m of revenue in the UK for the first time. The
Canadian business continues to perform strongly with 8.0 per cent LFL revenue
growth on a constant currency basis in the bowling centres.
The Group made further progress with investment in growing the estate in UK
and Canada while our overall refurbishment programme remains on track and is
delivering returns. These refurbishments continue to evolve our customer
proposition, resulting in an increase in the number of games played and spend
per game alongside growing customer service scores.
Adjusted profit before tax grew by 11.7 per cent, to £30.9m, whilst adjusted
profit after tax grew by 6.5 per cent to £23.3m. Statutory profit before tax
grew by £2.8m to £29.5m (H1 FY2023: £26.7m) up 10.5 per cent on the prior
period.
The Group's strong earnings growth, coupled with its highly cash generative
business model resulted in net cash at the period end of £41.4m. This strong
financial position is after the payment of the final ordinary and special
dividend for FY2023 as well as our continued investment in new centres and
refurbishments during FY2024.
In line with our capital allocation policy, the Board has declared an interim
dividend of 3.98 pence per share, representing 21.7 per cent growth on the
same period last year.
As UK families continue to face cost of living challenges, we have worked hard
to ensure that our customer offer remains a great value for money, high
quality experience, keeping our prices low so that a family of four can bowl
at peak times for less than £25. Our team members are key to providing these
positive customer experiences and we remain focused on ensuring our team are
motivated and well rewarded, with opportunities for progression through our
in-house training and development programmes.
Growth strategy
We have made good progress with our simple, effective and proven growth
strategy, driving returns through investment in the quality and size of our
estate and through yield enhancing customer-led initiatives.
We are meeting our ambitious targets for opening new centres in both the UK
and Canada and delivering solid returns above target levels from our ongoing
refurbishment programme.
Like-for-like growth
Even though the comparison period was extremely strong, Group LFL revenue
still increased, with a 1.6 per cent rise during the first half of the
financial year. Our UK centres grew by 1.3 per cent, our Canadian centres saw
an 8.0 per cent increase and, due to the timing of installations and
invoicing, a 14 per cent year on year decline in Striker, the bowling
equipment business.
On a LFL basis, UK spend per game increased by 3.2 per cent in the period, to
£11.21 in H1 FY2024, whilst volumes, on the back of exceptionally strong
growth over the previous two years, were down only 1.6 per cent. In line with
our value for money positioning, we increased headline prices by only 1.4 per
cent, well below inflation, maintaining affordability for our customers.
Investing in our UK estate and new centre openings
Refurbishments and estate investments:
Our refurbishment programme has remained on track during the period, with
three refurbishments/space optimisation projects completed in Watford
Woodside, Stockton and Cardiff, enlarging the amusement offer, introducing the
latest digital signage and new brand treatments. All refurbished centres are
trading in line with our expectations.
The refurbishment of our Stockton centre, one of the busiest centres in the
Group, included extending into the unit next door, previously occupied by a
restaurant operator, enabling us to add five additional bowling lanes, 12
holes of mini-golf and an increased amusements offering. We also agreed a new
long-term lease on the centre.
We are currently on-site refurbishing Hollywood Bowl at the London O2 and
Portsmouth Gunwharf Quay and will complete at least two further refurbishments
during the second half.
Pins on Strings were installed in a further six centres during the first half
and by the end of the financial year all but two of our centres will benefit
from this cost saving and customer experience enhancing technology.
New centres:
We are currently on site at new centres in Westwood Cross in Kent and
Colchester, at the Northern Gateway leisure complex, combining 26 bowling
lanes, mini-golf, bar, diner and an amusement offer.
During H1 FY2024, we added one centre to the UK estate. Lincoln Bowl, the
20-lane family owned and operated centre was acquired in October 2023. Located
on the outskirts of the City of Lincoln, the centre was a well operated family
entertainment business in a strategically important location, filling a
location gap between our centres in Sheffield, Derby and Leicester. Following
a rebrand and extensive refurbishment that also included a new roof, this
new-look Hollywood Bowl boasts a large amusement space, combined reception,
bar and diner with 20 lanes of state-of-the-art bowling served by pins on
strings. We are very pleased with the early trading performance and customer
feedback, and are confident that this site will deliver returns in line with
our expectations.
Since the start of the second half of the year, we have opened a new Hollywood
Bowl in Dundee, a key market in Scotland at a quality leisure park, co-located
with the number one cinema in town and a restaurant offering. This centre
opened in late May 2024 and the early trading performance has been
encouraging.
Our new centre pipeline is strong with six already signed and more in heads of
terms and legals stages. We remain confident in our ability to continue to
deliver on our plan of an average of at least three new UK openings a year.
Technology:
We have made excellent progress with the in-house development of our new core
reservation system which started to be rolled out to the UK estate in the
first half and completes in June. The new system is delivering improved
performance and usability for our team members and customers giving us a
strong platform to continue to develop functionality and support our Group
growth plans.
Continued strong growth in Canada
Our business in Canada continues to perform very well. In the first half, the
Canadian business contributed CAD 27.0m (£15.9m) in revenue and CAD 7.5m
(£4.4m) of EBITDA on a pre-IFRS 16 basis. Total revenue growth in Canada was
46.9 per cent, with the Canadian Bowling centres growing by 8.0 per cent on a
LFL basis. Our growth strategy in Canada is based on four areas: improving the
current estate; buying existing businesses that fit our exacting acquisition
criteria; opening new centres; and supporting the wider Canadian bowling
market with Striker's products and services.
In the half, the Group completed two acquisitions taking the estate to 11
centres. The first was the acquisition of an owner-operated family
entertainment centre located on a mixed-use retail and leisure park in the
heart of Guelph Ontario, called Woodlawn Bowl, for CAD 4.7m. Woodlawn Bowl is
a 36,000 sq. ft. centre boasting 24 lanes of ten-pin and 8 lanes of five-pin
bowling and a large amusements area with bar and diner. The second was the
acquisition of the assets and lease of a family entertainment centre in
Vancouver, for a total consideration of CAD 425k. The centre, which is in need
of reconfiguration and refurbishment, is located on a popular leisure scheme
with a cinema and ice rink and offers 34 ten-pin and 6 five-pin lanes, a large
bar and diner, and a very small amusements area. Both businesses have had
temporary signage installed rebranding them to Splitsville and essential
maintenance capital invested, prior to their full refurbishments which are due
to be completed in early FY2025.
On new builds, works are nearly completed at our new site in Waterloo,
Ontario, which is planned to open during June 2024. This is the first new
centre we have built in Canada, and we are excited to bring this
state-of-the-art family entertainment concept to the market.
Furthermore, we are very pleased to have signed two further new centres at
locations in Creekside, Calgary and Kanata, Ottawa. We are due to be on site
with construction on both sites commencing during the second half of this
financial year and are forecasted to open in FY2025.
Our refurbishment programme has progressed well and we are currently putting
the finishing touches to a full makeover of our Kingston site. We are now
working on full refurbishments and re-brands for our Glamorgan and Meridian
centres in Calgary and will also start work on our Highfield centre in Calgary
in late June, all due to be completed during FY2024.
Canada remains an exciting growth opportunity for the Group. We continue to
learn more about our Canadian customers and how we can apply our proven UK
operating model to this market. We have received excellent feedback from
customers, particularly in recently rebranded centres and we continue to
explore opportunities to innovate the customer experience as we learn more.
The market is highly fragmented and often under-invested, with many
opportunities to acquire single-owned centres or small group-owned business,
as well as opportunity for organic growth through our new centre pipeline.
The Striker business continues to grow as a result of increased investment
into bowling centres across the country. Revenues totalled CAD 2.5m (£1.4m)
and the order book is strong with multiple installation and maintenance
projects signed to commence in H2 FY2024.
Growing sustainably
Running and growing our business in a sustainable manner remains a key focus
for the Group and we have continued to make good progress delivering against
our ESG strategy and our targets in the first half. Waste recycling
percentages improved in the first half and we continued the rollout of solar
panels in the UK estate taking our centre total to 29, with additional panels
being installed in four existing roof locations. Our People team has made
further progress with our industry-leading training and development programme
and internal candidates represented more than 60 per cent of management
appointments. We also continue to play an important role in our local
communities, increasing the number of concessionary access games played.
Outlook
We remain focused on the Group's future growth through investment in the size
and quality of our estate and in our customer experience. We are on course to
achieve our key strategic goals for the year and are trading in line with the
Board's financial expectations.
Offering a great value for money, high quality customer experience remains our
key priority, particularly as our customers continue to face the challenges of
higher living costs and interest rates. We provide an affordable experience
that they can enjoy with family or friends. Through our investment in our
centres, and in our customer experience, we can continue to attract more
visits from new and returning customers and increase the time they spend in
our centres.
We remain fully committed to our ongoing investment programme across the
business, supported by our strong balance sheet and cash generative business
model, which along with our wider strategy for sustainable, profitable,
growth, gives the Board every confidence in our future outlook.
Stephen Burns
Chief Executive Officer
3 June 2024
CHIEF FINANCIAL OFFICER'S REVIEW
Group financial results
H1 FY2024 H1 FY2023
Change
Revenue £119.2m £110.2m5 +8.1%
Gross profit on cost of goods sold1 £99.4m £91.3m +8.9%
Gross profit margin on cost of goods sold1 83.4% 82.8% +60bps
Administrative expenses1 £65.0m £60.0m +8.3%
Group adjusted EBITDA2 £48.3m £43.9m +10.0%
Group adjusted EBITDA2 pre-IFRS 16 £38.6m £35.1m +10.0%
Group profit before tax £29.5m £26.7m +10.5%
Group profit after tax £21.9m £20.9m +5.0%
Group adjusted profit before tax3 £30.9m £27.7m +11.7%
Group adjusted profit after tax3 £23.3m £21.9m +6.5%
Free cash flow4 £16.5m £15.3m +7.8%
Interim dividend per share 3.98p 3.27p +21.7%
1 Gross profit on cost of goods sold is calculated as revenue less
directly attributable cost of goods sold and excludes any payroll costs. This
is how we report in the business monthly and at centre level, as labour costs
are judged as material and thus reported separately within administrative
expenses.
2 Group adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation) is calculated as statutory operating profit plus
depreciation, amortisation, impairment, loss on disposal of property,
right-of-use assets, plant and equipment and software and any exceptional
costs or income, and is also shown pre-IFRS 16 as well as adjusted for IFRS
16. These adjustments show the underlying trade of the overall business which
these costs or income can distort. The reconciliation to operating profit is
set out below.
3 Adjusted group profit before / after tax is calculated as group
profit before / after tax, adding back acquisition fees of £0.3m (H1 FY2023:
£0.5m) and the non-cash expense of £1.1m (H1 FY2023: £0.7m) related to the
fair value of the earn out consideration on the Teaquinn acquisition in May
2022. Also, in H1 FY2023 it included the removal of the reduced rate (TRR) of
VAT benefit on bowling of £0.2m.
4 Free cash flow is defined as net cash flow pre-exceptional items,
cost of acquisitions, debt facility repayment, RCF drawdowns and dividends.
5 Group revenue in H1 FY2023 includes £0.2m in respect of TRR of VAT.
6 Revenues in GBP based on an actual foreign exchange rate over the
relevant period, unless otherwise stated.
Following the introduction of the lease accounting standard IFRS 16, the Group
continues to maintain the reporting of Group adjusted EBITDA on a pre-IFRS 16
basis, as well as on an IFRS 16 basis. This is because the pre-IFRS 16 measure
is consistent with the basis used for business decisions, 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 significant growth over the past two years and record revenues
in FY2023, it is pleasing to see continued LFL growth in the UK and Canada
centres. UK centre LFL revenue growth was 1.3 per cent with spend per game
growth of 3.2 per cent, taking LFL average spend per game to £11.21, and a
marginal decline in LFL game volumes. The LFL growth, alongside the
performance of the new UK centres, resulted in record UK revenues exceeding
£100m in the first half for the first time, at £103.3m and growth of 4.4 per
cent compared to the very strong underlying revenues in H1 FY2023. It is
worth noting that the UK business has seen 5.9 per cent compound annual
revenue growth since FY2019.
Canadian LFL revenue growth, when reviewing in Canadian Dollars (CAD) to allow
for disaggregating the foreign currency effect (constant currency), was 8.0
per cent. Alongside this strong LFL revenue growth, new centres performed well
and resulted in total revenue of CAD 27m (£15.9m), growth year on year in
Canada of 46.9 per cent on a constant currency basis. Splitsville bowling
centre revenue was up CAD 9.0m (58.1 per cent) to CAD 24.5m.
Total Group revenue for H1 FY2024 was £119.2m, 8.1 per cent growth on H1
FY2023.
Gross profit on cost of goods sold
Gross profit on cost of goods sold is calculated as revenue less directly
attributable cost of goods sold and does not include any payroll costs. Gross
profit on cost of goods sold was £99.4m, 8.9 per cent growth on the same
period in FY2023 with gross profit margin on cost of goods sold at 83.4 per
cent in FY2024.
Gross profit on cost of goods sold for the UK business was £86.7m with a
margin of 83.9 per cent, up 10 bps on H1 FY2023.
Gross profit on cost of goods sold for the Canadian business was in line with
expectations at CAD 21.6m (£12.7m), with a margin of 80.0 per cent (H1
FY2023: 73.6 per cent). This margin increase is due in part to the significant
revenue growth seen in the Splitsville bowling centres which make up a larger
proportion of total revenue in Canada versus our Striker equipment business.
Splitsville had a gross profit margin on cost of goods sold of 84.8 per cent,
in line with expectations. Striker generated revenue of CAD 2.5m (H1 FY2023:
CAD 2.9m) in the year, the year-on-year decline is in the main because of
installation contracts that were not certified as finished, coupled with an
increase year-on-year in respect of the supply and installation of equipment
into the Splitsville centres, which is counted as intra-group revenue and
eliminated on consolidation.
Administrative expenses
Following the adoption of IFRS 16 in FY2020, administrative expenses exclude
property rents (turnover rents are not excluded) and include the depreciation
of property right-of-use assets.
Total administrative expenses, including all payroll costs, were £65.0m. On a
pre-IFRS 16 basis, administrative expenses were £69.2m, compared to £63.6m
in H1 FY2023.
Employee costs in centres were £22.3m, an increase of £2.3m when compared to
H1 FY2023, due to a combination of salary increases, the impact of higher LFL
revenues, new UK centres, as well as the significant revenue growth in
Canadian centres. Total centre employee costs in Canada were CAD 6.4m
(£3.8m), an increase of CAD 1.9m (£1.0m), whilst UK centre employee costs
were £18.5m, an increase of £1.4m when compared to H1 FY2023. The increase
in LFL employee costs in the UK were 4.8 per cent, but we expect this to
increase to the region of 8-9 per cent in the second half as we see the impact
of the higher than inflationary increase in national minimum and living wage
from April 2024.
Total property-related costs, accounted for under pre-IFRS 16, were £20.6m,
with £18.7m for the UK business (H1 FY2023: £17.6m). Rent costs account for
nearly 50 per cent of total property costs in the UK and increased to £9.2m
(H1 FY2023: £8.8m) and were up less than two per cent on a LFL basis. We
received further business rates rebates in the first half, in relation to
claims made in respect of the 2015 revaluation finally being agreed. The
benefit in the first half was £0.9m, whilst underlying business rates
increased by over 4.5 per cent.
Canadian property centre costs were in line with expectations at CAD 3.2m
(£1.9m), an increase of CAD 1.3m due to the increased size of the estate in
the half when compared to H1 FY2023.
As noted in the FY2023 preliminary results, we were pleased to have agreed a
new electricity commodity price hedge up to the end of FY2027, with FY2025
forecasted to increase by 33 per cent (£1.0m) compared to our FY2024 costs,
whilst still being able to take advantage of lower costs should such market
conditions prevail during this period. Utility costs increased in H1 FY2024
compared to the same period in FY2023, by £1.1m, with UK centres accounting
for £1.0m of this increase due to a combination of an increase in the cost
per unit and the hedge sell off during H1 FY2023, with the balance in relation
to the increased number of centres in Canada.
Total property costs, under IFRS 16, were £21.9m, including £5.5m accounted
for as property lease assets depreciation and £5.5m in implied interest
relating to the lease liability.
Total corporate costs increased by £0.6m to £12.3m when compared to H1
FY2023. UK corporate costs reduced by £0.4m to £10.6m. As we continue to
build out our support team in Canada for growth, corporate costs increased to
CAD 2.8m (£1.7m) from CAD 1.1m (£0.7m).
The statutory depreciation, amortisation and impairment charge for H1 FY2024
was £12.7m compared to £11.7m in H1 FY2023. Excluding property lease assets
depreciation, this charge in H1 FY2024 was £7.3m (H1 FY2023: £6.5m). This is
due to the continued capital investment programme, including new centres and
refurbishments, as well as the full year impact of Canada.
Canadian performance
The Group has continued to grow its footprint in Canada, with 11 centres at
the end of H1 FY2024 (H1 FY2023: 9). During the first half of FY2024 the Group
acquired two centres - Woodlawn Bowl in Ontario; and Lucky 9 Bowling Centre
Limited as well as its associated restaurant and bar, Monkey 9 Brewing Pub
Corp ("Riverport") in British Columbia. Both acquisitions are trading in line
with management expectations and will benefit from refurbishment investment in
FY2025.
Since the end of the first half, we are also pleased to see our first
greenfield centre open in Waterloo, Ontario.
The business continues to trade strongly, with total revenues in Canada of CAD
27m (£15.9m), and just over CAD 7.6m (£4.4m) of EBITDA on a pre-IFRS 16
basis. Bowling centres contributed CAD 24.5m of revenues with EBITDA on a
pre-IFRS 16 basis of CAD 10.2m, an increase of CAD 4.2m on the same period in
FY2023.
Given the growth in our Canadian portfolio, it is important we continue to
invest in our support team in Canada as well as utilise our UK support teams'
expertise and experience. This resulted in corporate costs in Canada
increasing to CAD 2.9m (£1.7m) from CAD 1.1m (£0.7m).
Gross profit on cost of goods sold for the Canadian business was in line with
expectations at CAD 21.6m (£12.7m), with a margin of 80.0 per cent (H1
FY2023: 73.6 per cent).
Exceptional costs
Exceptional costs in H1 FY2024 totalled £1.4m (H1 FY2023: £1.0m) and relate
to two areas. The first is the acquisition costs in relation to the
acquisition of three centres - one in the UK and two in Calgary, which
totalled £0.3m. The second is the earn out consideration for Teaquinn
President Pat Haggerty, which is an exceptional cost of £1.1m in the first
half, of which £0.9m is in administrative expenses and £0.2m is in interest
expenses. See the table below for exceptional items included in the Group
adjusted EBITDA and operating profit reconciliation. 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 10 per cent, to £38.6m and
includes a contribution of £4.4m (CAD 7.6m) from the Canadian business. The
increase is due to a combination of LFL revenue performance in both the UK and
Canada as well as the new centre growth across both territories when compared
to the same period in FY2023. The reconciliation between statutory operating
profit and Group adjusted EBITDA on both a pre-IFRS 16 and under-IFRS 16 basis
is shown in the table below.
H1 FY2024 H1 FY2023
£'000 £'000
Operating profit 34,368 31,248
Depreciation 12,271 11,303
Amortisation 431 395
Loss on property, right-of-use assets, plant and equipment and software 15 42
disposal
Exceptional items 1,197 899
Group adjusted EBITDA under IFRS 16 48,282 43,886
IFRS 16 adjustment (9,663) (8,775)
Group adjusted EBITDA pre-IFRS 161 38,619 35,112
1 IFRS 16 adoption has an impact on EBITDA, with the removal of rent from
the calculation. For Group adjusted EBITDA pre-IFRS 16, it is deducted for
comparative purposes and is used by investors as a key measure of the
business. The IFRS 16 adjustment is in relation to all rents that are
considered to be non-variable and of a nature to be captured by the standard.
Share-based payments
During the first half of 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 FY2023 Annual Report. The Group recognised a total
charge of £0.8m (H1 FY2023: £0.5m) in relation to the Group's share-based
arrangements. Share-based costs are not classified as exceptional costs.
Financing
Finance costs (net of finance income) increased to £4.8m in H1 FY2024 (H1
FY2023: £4.5m) comprising mainly of implied interest relating to the lease
liability under IFRS 16 of £5.4m. Bank interest costs in relation to the
Group's undrawn revolving credit facility of £0.1m were offset by the
interest received (£1.0m) on the Group's bank balances.
In the first half the year, the Group agreed a 12-month extension to the £25m
RCF and £5m accordion, resulting in a margin rate reduction to 1.65 per cent
above SONIA effective from 22 March 2024. The RCF term now runs to the end
of December 2025 and remains fully undrawn.
Cash flow and liquidity
The liquidity position of the Group remains strong, with a net cash position
of £41.4m as at 31 March 2024. Detail on the cash movement in the year is
shown in the table below.
Capital expenditure
The Group invested £23.5m in the first half of the year, including £7.5m on
the acquisition of three centres, one of which, Lincoln Bowl, was in the UK.
Net capex (excluding acquisitions) in H1 FY2024 was £16.0m.
On 2 October 2023, the Group purchased the assets, including the long
leasehold, of Lincoln Bowl for total of £4.5m, of which £2.0m was allocated
to the long leasehold.
In Canada, two centres were acquired in H1 FY2024. The first was a family
entertainment centre in Guelph, Ontario for CAD 4.7m (£2.8m), on 7 November
2023. The second was the acquisition of the assets and lease of a centre in
Vancouver, for consideration of CAD 0.4m (£0.3m). Both centres have been
rebranded and our centre in Vancouver will undergo a significant refurbishment
which will complete in the first half of FY2025.
More information on all of these acquisitions is provided in note 17 to the
Financial Statements.
A total of £5.7m was invested into the refurbishment programme, with three UK
centres (£3.0m) refurbished as well as investments into the Canadian estate
(£2.7m).
A significant proportion of the refurbishment spend in the UK, nearly £2m,
was in relation to the extension and refurbishment of our centre in Stockton.
This centre was already one of the most successful in the estate and we have
now increased its potential. In conjunction with a new lease for a period of
15 years and investment into the existing space, the Group also extended into
the adjacent unit, adding an extra five lanes, a Puttstars mini-golf course
and large amusements area. The refurbishment was completed in time for Easter
trading and early signs are very encouraging.
Despite inflationary pressures, returns on the UK refurbishments continue to
exceed the Group's hurdle rate of 33 per cent.
New centre capital expenditure was a net £4.8m. This relates, in the main, to
two centres that open in H2 FY2024 - Hollywood Bowl Dundee (£2.2m) and
Splitsville Waterloo, Canada (£1.9m).
The Group's strong balance sheet ensures it can continue to invest in
profitable growth with plans to open more locations during FY2024 and beyond.
The Group spent £5.7m on maintenance capital in the UK, including continued
spend on the rollout of Pins on Strings technology (£1.0m) and solar panel
installations as well as extensions of current installs (£0.6m). At the end
of the first half of FY2024, Pins on Strings were in 58 centres and solar
panels on 29 centres.
Technology investment was £0.8m as we continue to develop our new in-house
core reservations platform (Compass) which has now been rolled out in the UK.
It is expected that Compass will start to roll out in Canada during the second
half of the financial year. We also upgraded our websites, payment platform
and customer data platform, and maintained a continued focus on our cyber
security.
We expect total capital expenditure for FY2024, including acquisitions
completed in the first half, to still be in the region of £35m to £40m.
Cash flow and net debt
H1 FY2024 H1 FY2023
£'000 £'000
Group adjusted EBITDA under IFRS 16 48,282 43,886
Movement in working capital (340) (2,997)
Maintenance capital expenditure (5,685) (4,362)
Taxation (4,964) (4,269)
Payment of capital elements of leases (5,995) (5,540)
Adjusted operating cash flow (OCF)1 31,298 26,719
Adjusted OCF conversion 64.8% 60.9%
Expansionary capital expenditure2 (10,273) (6,934)
Net bank interest received/(paid) 960 287
Lease interest paid (5,453) (4,741)
Free cash flow (FCF)3 16,532 15,331
Exceptional items (297) (278)
Acquisition of centres in Canada (3,060) (7,574)
Cash acquired in Canada acquisitions 20 320
Acquisition of centres in UK (4,475) -
Share (buyback) / issue (379) 6
Dividends paid (19,351) (19,724)
Net cash flow (11,010) (11,918)
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 £7.6m arising on the profit before tax
generated in the period. The increase in the Group's effective rate of tax to
25.7 per cent is due in the main to the increase in the UK corporation tax
rate from 19 per cent to 25 per cent from April 2023, resulting in an increase
of 3.9 percentage points on the effective rate of tax year when compared to
the prior period.
Earnings
Statutory profit before tax for the year was £29.5m and 10.5 per cent higher
than H1 FY2023.
The Group delivered profit after tax of £21.9m (H1 FY2023: £20.9m) and basic
earnings per share was 12.78 pence (H1 FY2023: 12.21 pence).
Group adjusted profit before tax is £30.9m, whilst Group adjusted profit
after tax is £23.3m and a basic adjusted earnings per share of 13.60 pence
per share (H1 FY2023: 12.80 pence per share).
The adjustments are made to reflect the underlying trade of the Group. These
adjustments are adding back acquisition fees of £0.3m and the non-cash
expense of £1.1m related to the fair value of the earn out consideration on
the Canadian acquisition in May 2022. For more detail see note 4 to the
Financial Statements.
Dividend and capital allocation policy
In line with the Group's capital allocation policy, the Board has declared an
interim dividend of 3.98 pence per share.
The ex-dividend date is 13 June 2024, with a record date of 14 June 2024 and a
payment date of 10 July 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.
Laurence Keen
Chief Financial Officer
3 June 2024
Note on alternative performance measures (APMs)
The Group uses APMs to enable management and users of the financial statements
to better understand elements of the financial performance in the period. APMs
referenced earlier in the report are explained as follows.
UK like-for-like (LFL) revenue for H1 FY2024 is calculated as:
• Total Group revenues £119.2m, less
• New UK centre revenues for H1 FY2023 and H1 FY2024 that have not
annualised £3.3 m, less
• Canada revenues for H1 FY2024 of £15.9m
New centres are included in the LFL revenue after they complete the calendar
anniversary of their opening date. LFL UK comparatives for H1 FY2023 are
£98.8m.
Gross profit on cost of goods sold is calculated as revenue less directly
attributable cost of goods sold and excludes any payroll costs. This is how we
report in the business monthly and at centre level, as labour costs are judged
as material and thus reported separately within administrative expenses. These
amounts are presented separately on the consolidated income statement for ease
of reconciliation.
Group adjusted EBITDA (earnings before interest, tax, depreciation and
amortisation) reflects the underlying trade of the overall business. It is
calculated as statutory operating profit plus depreciation, amortisation,
impairment, loss on disposal of property, right-of-use assets, plant and
equipment and software and any exceptional costs or income, and is also shown
pre-IFRS 16 as well as adjusted for IFRS 16. The reconciliation to operating
profit is set out in this report.
Free cash flow is defined as net cash flow pre-dividends, exceptional items,
acquisition costs, bank funding and any equity placing. Useful for investors
to evaluation cash from normalised trading.
LFL spend per game is defined as LFL revenue in the year divided by the number
of bowling games and golf rounds played.
Adjusted operating cash flow is calculated as Group adjusted EBITDA less
working capital, maintenance capital expenditure, taxation and payment of the
capital element of leases. This represents a good measure for the cash
generated by the business after considering all necessary maintenance capital
expenditure to ensure the routine running of the business. This excludes
exceptional items, acquisitions, share buyback/issue, dividends paid, net
interest paid, debt drawdowns and any debt repayments.
Expansionary capital expenditure includes all capital on new centres,
refurbishments and rebrands only. Investors see this as growth potential.
Adjusted profit after tax is calculated as statutory profit after tax, adding
back the acquisition fees in Canada of £0.3m (H1 FY2023: £0.5m) and the
non-cash expense of £1.1m (H1 FY2023: £0.7m) 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.
Condensed Consolidated Income Statement and Statement of Comprehensive Income
For the six months ended 31 March 2024
Six months ended 31 March 2024 Six months ended 31 March 2023
Before exceptional Exceptional items Total Before exceptional Exceptional Total(1)
items (note 4) Unaudited Items(1) Items Unaudited
Unaudited Unaudited £'000 Unaudited (note 4) £'000
£'000 £'000 £'000 Unaudited
Note £'000
Revenue 119,187 - 119,187 110,052 192 110,244
Cost of goods sold (19,825) - (19,285) (18,972) - (18,972)
Centre staff costs(1) (22,269) - (22,269) (19,903) - (19,903)
Gross profit 77,093 - 77,093 71,177 192 71,369
Administrative expenses (41,528) (1,197) (42,725) (39,031) (1,091) (40,122)
Operating profit 35,565 (1,197) 34,368 32,146 (899) 31,247
Finance income 5 1,029 - 1,029 497 - 497
Finance expenses 5 (5,668) (201) (5,869) (4,954) (79) (5,033)
Profit before tax 30,926 (1,398) 29,528 27,689 (978) 26,711
Tax charge 6 (7,581) - (7,581) (5,769) (42) (5,811)
Profit for the period attributable to equity shareholders 23,345 (1,398) 21,947 21,920 (1,020) 20,900
(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.
Other comprehensive income (321) - (321) (724) - (724)
Retranslation (loss) of foreign currency denominated operations
Total comprehensive income for the period attributable to equity shareholders 23,024 (1,398) 21,626 21,196 (1,020) 20,176
Earnings per share
Basic earnings per share (pence) 12.78 12.21
Diluted earnings per share (pence) 12.69 12.16
Weighted average number of shares - Basic 171,676,053 171,222,369
Dilutive potential ordinary shares 1,306,478 649,078
Weighted average number of shares - Diluted 172,982,531 171,871,447
Reconciliation of operating profit to Group adjusted EBITDA
Six months ended 31 March 2024 Six months ended 31 March 2023
Unaudited Unaudited
Note £'000 £'000
Operating profit 34,368 31,247
Exceptional items 4 1,197 899
Depreciation of property, plant and equipment 9 5,256 4,932
Depreciation of right-of-use assets 10 7,015 6,370
Amortisation of intangible assets 11 431 395
Loss on disposal of property, plant and equipment, right-of-use assets and 9, 10, 11
software
15 43
Group adjusted EBITDA 48,282 43,886
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.
Reconciliation of net debt Six months Six months Year ended
ended ended 30 September
31 March 2024 31 March 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash and cash equivalents (41,404) (44,149) (52,455)
Net (cash) excluding finance leases (41,404) (44,149) (52,455)
Finance leases 205,054 192,279 194,205
Net debt 163,650 148,130 141,750
Net debt is defined as borrowings from bank facilities excluding issue costs,
plus finance leases less cash and cash equivalents.
Condensed Consolidated Statement of Financial Position
As at 31 March 2024
31 March 31 March 30 September
2024 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Note
Assets
Non-current assets
Property, plant and equipment 9 91,209 74,734 78,279
Right-of-use assets 10 160,840 150,563 150,811
Goodwill and intangible assets 11 94,150 88,628 89,376
Deferred tax asset 131 298 1,309
346,330 314,223 319,775
Current assets
Cash and cash equivalents 41,404 44,149 52,455
Trade and other receivables 7 9,213 5,898 8,116
Corporation tax receivable - - 715
Inventories 2,898 2,639 2,445
53,515 52,686 63,731
Total assets 399,845 366,909 383,506
LIABILITIES
Current liabilities
Trade and other payables 8 29,574 25,984 29,109
Lease liabilities 10 12,964 11,910 12,553
Corporation tax payable 799 96 -
43,337 37,990 41,662
Non-current liabilities
Other payables 8 6,237 3,866 5,208
Lease liabilities 10 192,090 180,369 181,652
Deferred tax liability 1,655 - 1,960
Provisions 5,652 5,297 5,084
205,634 189,532 193,904
Total liabilities 248,971 227,522 235,566
NET ASSETS 150,874 139,387 147,940
Equity attributable to shareholders
Share capital 12 1,716 1,717 1,717
Share premium 39,716 39,716 39,716
Merger reserve (49,897) (49,897) (49,897)
Capital redemption reserve 1 - -
Foreign currency translation reserve (454) (313) (133)
Retained earnings 159,792 148,164 156,537
TOTAL EQUITY 150,874 139,387 147,940
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 March 2024
Note Share Merger Foreign Retained
capital
earnings
Capital redemption reserve reserve currency translation reserve
Total
£'000
£'000
£'000 Share £'000 £'000 £'000
premium
£'000
Equity at 30 September 2022 (audited) 1,711 - 39,716 (49,897) 411 146,479 138,420
Shares issued during the period 6 - - - - - 6
Dividends paid - - - - - (19,723) (19,723)
Share-based payments 14 - - - - - 541 541
Deferred tax on share-based payments - - - - - (33) (33)
Retranslation of foreign currency denominated operations - - - - (724) - (724)
Profit for the period - - - - - 20,900 20,900
Equity at 31 March 2023 (unaudited) 1,717 - 39,716 (49,897) (313) 148,164 139,387
Dividends paid - - - - - (5,615) (5,615)
Share-based payments 14 - - - - - 663 663
Deferred tax on share-based payments - - - - - 74 74
Retranslation of foreign currency denominated operations - - - - 180 - 180
Profit for the period - - - - - 13,251 13,251
Equity at 30 September 2023(audited) 1,717 - 39,716 (49,897) (133) 156,537 147,940
Share buy back 12 (1) 1 (379) (379)
Dividends paid - - - - - (19,351) (19,351)
Share-based payments 14 - - - - - 752 752
Deferred tax on share-based payments - - - - - 286 286
Retranslation of foreign currency denominated operations - - - - (321) - (321)
Profit for the period - - - - - 21,947 21,947
Equity at 31 March 2024 (unaudited) 1,716 1 39,716 (49,897) (454) 159,792 150,874
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 March 2024
Note Six months Six months
ended ended
31 March 2024 31 March 2023
Unaudited Unaudited
£'000 £'000
Cash flows from operating activities
Profit before tax 29,528 26,711
Adjusted by:
Depreciation of property, plant and equipment (PPE) 9 5,256 4,932
Depreciation of right-of-use (ROU) assets 10 7,015 6,370
Amortisation of intangible assets 11 431 395
Net interest expense 5 4,840 4,536
Loss on disposal of property, plant 15 43
and equipment, software and ROU Assets
Share-based payments 752 541
Operating profit before working capital changes 47,837 43,528
(Increase) in inventories (397) (426)
(Increase) in trade and other receivables (962) (584)
Increase/(decrease) in payables and provisions 1,167 (1,905)
Cash inflow generated from operations 47,645 40,613
Interest received 1,040 411
Corporation tax paid (4,964) (4,270)
Bank interest paid (80) (124)
Lease interest paid (5,453) (4,741)
Net cash inflow from operating activities 38,188 31,889
Cash flows from investing activities
Acquisition of subsidiaries 17 (7,535) (7,574)
Subsidiary cash acquired 17 20 320
Purchase of property, plant and equipment (15,523) (11,230)
Purchase of intangible assets (435) (65)
Net cash used in investing activities (23,473) (18,549)
Cash flows from financing activities
Payment of capital elements of leases (5,995) (5,540)
Issue of shares - 6
Share buy back 12 (379) -
Dividends paid (19,351) (19,723)
Net cash used in financing activities (25,725) (25,257)
Net change in cash and cash equivalents for the period (11,010) (11,917)
Effect of foreign exchange rates on cash and cash equivalents (41) -
Cash and cash equivalents at the beginning of the period 52,455 56,066
Cash and cash equivalents at the end of the period 41,404 44,149
Notes to the condensed consolidated interim financial statements
1. General information
The Directors of Hollywood Bowl Group plc (together with its subsidiaries, the
"Group" or "HWB Group") present their interim report and the unaudited
financial statements for the six months ended 31 March 2024 ('Interim
Financial Statements').
HWB Group is incorporated and domiciled in England and Wales, under company
registration number 10229630. The registered office of the company is Focus
31, West Wing, Cleveland Road, Hemel Hempstead, HP2 7BW, United Kingdom.
On 2 October 2023, the Group acquired the assets, including the long
leasehold, of Lincoln Bowl. On 7 November 2023 the Group acquired Woodlawn
Bowl Inc. in Guelph, Ontario and on 11 November 2023, the assets and lease of
Lucky 9 Bowling Centre Limited in Richmond, British Columbia, as well as its
associated restaurant and bar, Monkey 9 Brewing Pub Corp. These three
acquisitions are consolidated in Hollywood Bowl Group plc's Financial
Statements with effect from their respective date of acquisition.
The interim Financial Statements were approved by the Board of Directors on 3
June 2024.
The Group's last annual audited financial statements for the year ended 30
September 2023 have been prepared in accordance with UK-adopted International
Accounting Standards and the requirements of the Companies Act 2006, and these
Interim Financial statements should be read in conjunction with them.
The comparative figures for the year ended 30 September 2023 are an abridged
version of the Group's last annual financial statements and, together with
other financial information contained in these interim results, do not
constitute statutory financial statements of the Group as defined in section
434 of the Companies Act 2006. A copy of the statutory accounts for the year
ended 30 September 2023 have been delivered to the Registrar of Companies. The
external auditor has reported on those accounts: their report was unqualified
and did not contain a statement under s498 (2) or (3) of the Companies Act
2006.
2. Basis of preparation
The Interim Financial Statements have been prepared in accordance with IAS 34,
'Interim Financial Reporting' and the Disclosures and Transparency Rules of
the United Kingdom's Financial Conduct Authority. They do not include all of
the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and
transactions that are significant to an understanding of the changes in the
Group's financial position and performance since the last financial
statements.
The Interim Financial Statements are presented in Pounds Sterling, rounded to
the nearest thousand pounds, except where otherwise indicated; and under the
historical cost convention, except for fair value items on acquisition.
The accounting policies adopted in the preparation of the Interim Financial
Statements are consistent with those applied in the presentation of the
Group's consolidated financial statements for the year ended 30 September
2023. 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. The impact of these standards is not expected to
be material.
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 greater than the cost of
acquisition. Intragroup balances and any unrealised gains and losses or income
and expenses arising from intragroup transactions are eliminated in preparing
the consolidated financial statements.
The results of Lincoln Bowl, Woodlawn Bowl Inc. and Lucky 9 Bowling Centre
Limited as well as its associated restaurant and bar, Monkey 9 Brewing Pub
Corp are included from the respective dates of acquisition, being 2 October
2023, 7 November 2023 and 11 November 2023.
Going concern
The financial position of the Group, its cash flows, performance and position
are described in the financial review section. Details of the Group's
available and drawn facilities are included in note 13. At 31 March 2024, the
Group had a cash balance of £41.4m with an undrawn RCF of £25m with Barclays
Bank plc, and no outstanding loan balances, giving an overall liquidity of
£66.4m.
In their consideration of going concern, the Directors have reviewed the
Group's future cash forecasts and profit projections using a base case and a
severe but plausible downside scenario. The Directors are of the opinion that
the Group's forecasts and projections show that the Group is able to operate
within its current facilities and comfortably comply with the covenants
outlined in its RCF.
Taking the above, and the principal risks faced by the Group as outlined in
note 15 to these interim financial statements, into consideration, the
Directors are satisfied that the Group has adequate resources to continue in
operation for the foreseeable future, a period of at least twelve months from
the date of this report. Accordingly, the Group continues to adopt the going
concern basis in preparing these interim financial statements.
Exceptional items and other adjustments
Exceptional items and other adjustments are those that in management's
judgement need to be disclosed by virtue of their size, nature and incidence,
in order to draw the attention of the reader and to show the underlying
business performance of the Group more accurately. Such items are included
within the income statement caption to which they relate and are separately
disclosed on the face of the condensed consolidated income statement and in
the notes to these interim Financial Statements.
Accounting estimates and judgements
The preparation of the 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 financial statements and
estimates with a significant risk of material adjustment in the next financial
year are set out 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 these would not lead to a material
impairment.
Further information in respect of the Group's property, plant and equipment
and right-of-use assets is included in notes 9 and 10 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.
Other estimates
The acquisitions of Lincoln Bowl, Woodlawn Bowl Inc. and Lucky 9 Bowling
Centre Limited have been accounted for using the acquisition method under IFRS
3. The identifiable assets, liabilities and contingent liabilities are
recognised at their fair value at date of acquisition. Calculating the fair
values of net assets, notably the fair values of intangible assets identified
as part of the purchase price allocation, involves estimation and consequently
the fair value exercise is recorded as another accounting estimate. The
amortisation charge is sensitive to the value of the intangible asset values,
so a higher or lower fair value calculation would lead to a change in the
amortisation charge in the period following acquisition. 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.
Adjusted measures
The Group uses a number of non-Generally Accepted Accounting Principles
(non-GAAP) financial measures in addition to those reported in accordance with
IFRS. The Directors believe that these non-GAAP measures, listed below, are
important when assessing the underlying financial and operating performance of
the Group by investors and shareholders. These non-GAAP measures comprise of
like-for-like revenue growth, adjusted profit after tax, adjusted earnings per
share, net debt, Group operating cash flow, Group adjusted EBITDA and Group
adjusted EBITDA margin.
Further explanation on alternative performance measures is provided in the
Chief Financial Officer's review.
3. Segmental reporting
Management consider that the Group consists of two operating segments, as it
operates within the UK and Canada The UK operating segment includes the
Hollywood Bowl and Puttstars brands. The Canada operating segment includes the
Splitsville and Striker Bowling Solutions brands. Within these two operating
segments there are multiple revenue streams which consist of the following:
Six months ended 31 March 2024 Six months ended 31 March 2023
UK Canada Total UK Canada Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
£'000 £'000 £'000 £'000 £'000 £'000
Bowling 46,387 8,249 54,636 45,164 5,042 50,206
Food and drink 28,527 4,178 32,705 26,743 2,805 29,548
Amusements 27,216 1,783 28,999 25,612 1,515 27,127
Mini-golf 1,153 105 1,258 1,307 44 1,307
Installation of bowling equipment - 1,449 1,449 - 1,757 1,757
Other 46 94 140 120 135 299
103,329 15,858 119,187 98,946 11,298 110,244
No single customer provides more than ten per cent of the Group's revenue.
Six months ended 31 March 2024 Six months ended 31 March 2023
UK Canada Total UK Canada Total
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 103,329 15,858 119,187 98,945 11,298 110,244
Group adjusted EBITDA(1) 42,708 5,574 48,282 40,207 3,679 43,886
Operating profit 31,471 2,897 34,368 28,656 2,591 31,247
Finance income 957 72 1,029 444 53 497
Finance expense 4,980 889 5,869 4,621 412 5,033
Depreciation and amortisation 11,221 1,481 12,702 11,063 634 11,697
Profit before tax 27,448 2,080 29,528 24,479 2,232 26,711
PPE asset additions 11,086 4,890 15,976 9,946 1,799 11,745
Intangible asset additions 435 - 435 65 - 65
Total assets 338,873 60,972 399,845 328,011 38,898 367,788
Total liabilities 211,052 37,919 248,971 207,014 20,508 227,522
(1) Group adjusted EBITDA (earnings before interest, tax, depreciation and
amortisation) 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.
4. 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:
Six months ended Six months ended
31 March 2024 31 March 2023
Unaudited Unaudited
£'000 £'000
Bowling revenue VAT rebate(1) - 192
Administrative expenses(2) - (2)
Acquisition fees(3) (297) (469)
Contingent consideration(4) (1,101) (699)
Exceptional items before tax (1,398) (978)
Tax charge - (42)
Exceptional items after tax (1,398) (1,020)
(1) During FY2022, HMRC conducted a review of its policy position on the
reduced rate of VAT for leisure and hospitality and the extent to which it
applies to bowling. Following its review, HMRC 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, in the prior year, 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 £192,000, included
within bowling revenue.
(2) Prior year expenses associated with the VAT rebate, 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 acquisitions of Lincoln Bowl,
Woodlawn Bowl Inc and Lucky 9 Bowling Centre Limited (31 March 2023: HLD
Investments Inc. (operating as YYC Bowling & Entertainment), Mountain View
Bowl Inc and Wong and Lewis Investments Inc. (operating as Let's Bowl)).
(4) Contingent consideration of £900,000 (31 March 2023: £620,000) in
administrative expenses and £201,000) (31 March 2023: £79,000) of interest
expense in relation to the acquisition of Teaquinn in May 2022.
5. Finance income and expenses
Six months Six months
ended ended
31 March 2024 31 March 2023
Unaudited Unaudited
£'000 £'000
Interest on bank deposits 1,029 497
Finance income 1,029 497
Interest on bank borrowings 100 113
Unwinding of discount on provisions 115 100
Unwinding of discount on contingent consideration (note 4) 201 79
Finance costs on lease liabilities 5,453 4,741
Finance expense 5,869 5,033
6. Taxation
Six months Six months
ended ended
31 March 2024 31 March 2023
Unaudited Unaudited
£'000 £'000
The tax expense is as follows:
- UK Corporation tax 5,399 3,901
- Foreign tax suffered 968 622
Total current tax 6,367 4,523
Deferred tax:
Origination and reversal of temporary differences 1,214 1,238
Effects of changes in tax rates - 50
Total deferred tax 1,214 1,288
Total tax expense 7,581 5,811
Factors affecting tax charge:
The income tax expense was recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full financial
year applied to the profit before tax for the half year ended 31 March 2024.
.
Deferred tax
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 31 March 2024.
7. Trade and other receivables
Six months Six months Year ended
ended ended 30 September
31 March 2024 31 March 2023 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Trade receivables 1,799 1,498 2,356
Other receivables 115 140 129
Prepayments 7,299 4,260 5,631
9,213 5,898 8,116
Trade receivables have an ECL against them that is immaterial. There were no
overdue receivables at the end of any period.
8. Trade and other payables
Six months Six months Year ended
ended ended 30 September
31 March 2024 31 March 2023 2023
Unaudited Unaudited Audited
Current £'000 £'000 £'000
Trade payables 4,783 4,593 7,025
Other payables 3,785 2,509 1,366
Accruals and deferred income 15,723 12,768 15,421
Taxation and social security 5,283 6,114 5,297
29,574 25,984 29,109
Six months Six months Year ended
ended ended 30 September
31 March 2024 31 March 2023 2023
Unaudited Unaudited Audited
Non-current £'000 £'000 £'000
Other payables 6,237 3,866 5,208
Accruals and deferred income includes a staff bonus accrual of £2,097,000 (31
March 2023: £2,485,000, 30 September 2023: £4,955,000). Deferred income
includes £1,065,000 (31 March 2023: £1,129,000, 30 September 2023:
£801,000) of customer deposits received in advance and £3,342,000 (31 March
2023: £1,096,000, 30 September 2023: £1,870,000) relating to bowling
equipment installations, all of which is recognised in the income statement
during the following 12 months.
Non-current other payables includes £3,357,000 (31 March 2023: £1,352,000,
30 September 2023: £2,359,000) of contingent consideration and £1,831,000
(31 March 2023: £1,803,000, 30 September 2023: £1,862,000) of deferred
consideration in respect of the acquisition of Teaquinn Holdings Inc.
9. Property, plant and equipment
Freehold property Long leasehold property Short leasehold property £'000 Lanes and pinspotters Plant & machinery, fixtures and fittings Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 October 2022 7,406 1,240 38,686 18,050 50,518 115,900
Additions - - 11,554 4,269 6,178 22,001
Acquisitions - - 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 (audited) 6,889 1,240 49,764 22,163 54,868 134,924
Additions - - 9,958 1,503 4,515 15,976
Acquisitions (note 17) - 2,000 74 479 65 2,618
Disposals - - (430) (478) (1,362) (2,270)
Effects of movement in foreign exchange (235) - (52) (54) (38) (379)
At 31 March 2024 (unaudited) 6,654 3,240 59,314 23,613 58,048 150,869
Accumulated depreciation
At 1 October 2022 24 388 18,857 4,534 23,456 47,259
Depreciation charge 63 29 3,399 740 5,911 10,142
Impairment charge - - - - 1,633 1,633
Impairment reversal - - - - (241) (241)
Disposals - - (436) (162) (1,548) (2,146)
Effects of movement in foreign exchange (1) - (1) - - (2)
At 30 September 2023 (audited) 86 417 21,819 5,112 29,211 56,645
Depreciation charge 31 12 1,758 451 3,004 5,256
Disposals - - (427) (463) (1,331) (2,221)
Effects of movement in foreign exchange (3) - (7) (4) (6) (20)
At 31 March 2024 (unaudited) 114 429 23,143 5,096 30,878 59,660
Net book value
At 31 March 2024 (unaudited) 6,540 2,811 36,171 18,517 27,170 91,209
At 30 September 2023 (audited) 6,803 823 27,945 17,051 25,657 78,279
Plant & machinery, fixtures and fittings includes £4,157,000 (31 March
2023: £2,039,000; 30 September 2023: £845,000) of assets in the course of
construction, relating to the development of new centres.
As at 31 March 2024, outstanding capital commitments to fit out new and
refurbish existing sites and to complete the installation of solar panels
totalled £14,176,000 (31 March 2023: £673,000; 30 September 2023:
£5,450,000).
10. 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 (FY2023: 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 period:
Property Amusement machines Total
£'000 £'000 £'000
Cost
At 1 October 2022 174,260 11,239 185,499
Lease additions 2,452 5,522 7,974
Acquisition 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 (audited) 185,971 15,690 201,661
Lease additions 7,169 1,862 9,031
Acquisitions (note 17) 5,711 - 5,711
Lease surrenders - (676) (676)
Lease modifications 3,007 - 3,007
Effects of movement in foreign exchange (630) - (630)
At 31 March 2023 (unaudited) 201,228 16,876 218,104
Accumulated depreciation
At 1 October 2022 31,264 6,780 38,044
Depreciation charge 10,464 2,501 12,965
Impairment charge 1,277 - 1,277
Impairment reversal (459) - (459)
Lease surrenders - (977) (977)
At 30 September 2023 (audited) 42,546 8,304 50,850
Depreciation charge 5,549 1,466 7,015
Lease surrenders - (601) (601)
At 31 March 2024 (unaudited) 48,095 9,169 57,264
Net book value
At 31 March 2024 (unaudited) 153,133 7,707 160,840
At 30 September 2023 (audited) 143,425 7,386 150,811
Set out below are the carrying amounts of lease liabilities and the movements
during the period:
Property Amusement machines Total
£'000 £'000 £'000
Lease liabilities
At 1 October 2022 182,550 5,819 188,369
Lease additions 2,452 5,522 7,974
Acquisitions 4,911 - 4,911
Accretion of interest 9,568 240 9,808
Lease modifications 5,418 - 5,418
Lease surrenders - (145) (145)
Payments(1) (17,882) (3,167) (21,049)
Effects of movement in foreign exchange (1,081) - (1,081)
At 30 September 2023 (audited) 185,936 8,269 194,205
Lease additions 7,169 1,862 9,031
Acquisitions (note 17) 5,711 - 5,711
Accretion of interest 5,244 209 5,453
Lease modifications 3,007 - 3,007
Lease Surrenders - (109) (109)
Payments(1) (9,774) (1,811) (11,585)
Effects of movement in foreign exchange (659) - (659)
At 31 March 2024 (unaudited) 196,634 8,420 205,054
Current 9,566 3,398 12,964
Non-current 187,068 5,022 192,090
At 31 March 2024 196,634 8,420 205,054
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
( )
(1) In the 6 month period to 31 March 2024, £136,000 (6 months to 31 March
2023: £34,000) of rent payments were part of the working capital movements in
the year.
11. Goodwill and intangible assets
Goodwill Brand Trademark £'000 Customer relationships £'000 Software Total
£'000 £'000 £'000 £'000
Cost
At 1 October 2022 75,194 7,248 798 314 2,220 85,774
Additions - - - - 1,057 1,057
Acquisitions 6,865 - - 503 - 7,368
Effects of movement in foreign exchange (11) - (12) - (23)
At 30 September 2023 (audited) 82,048 7,248 798 805 3,277 94,176
Additions - - - - 435 435
Acquisitions (note 17) 4,506 - - 306 - 4,812
Disposals - - - - (28) (28)
Effects of movement in foreign exchange (25) (14) - (3) - (42)
At 31 March 2024 (unaudited) 86,529 7,234 798 1,108 3,684 99,353
Accumulated amortisation
At 1 October 2022 - 1,523 416 8 2,033 3,980
Amortisation charge - 568 50 45 157 820
At 30 September 2023 (audited) - 2,091 466 53 2,190 4,800
Amortisation charge - 284 25 37 85 431
Disposals - - - - (28) (28)
At 31 March 2023 (unaudited) - 2,375 491 90 2,247 5,203
Net book value
At 31 March 2024 (unaudited) 86,529 4,859 307 1,018 1,437 94,150
At 30 September 2023 (audited) 82,048 5,157 332 752 1,087 89,376
12. Share capital
The share capital of the Group is represented by the share capital of the
Parent Company, Hollywood Bowl Group plc.
31 March 2024 31 March 2023 30 September 2023
No of shares £'000 No of Shares £'000 No of shares £'000
Ordinary shares of £0.01 each 171,584,143 1,716 171,712,3579 1,717 171,712,357 1,717
During the period, 128,214 ordinary shares of £0.01 each were repurchased and
cancelled under the Group's share buy back programme at a total cost of
£379,327.
The ordinary shares are entitled to dividends.
13. Loans and borrowings
On 29 September 2021, the Group entered into a £25m revolving credit facility
(RCF) with Barclays Bank plc. The RCF had an original termination date of 31
December 2024. On 22 March 2024, the RCF had the termination date extended to
31 December 2025.
Interest is charged on any drawn balance based on the reference rate (SONIA),
plus a margin of 1.65 per cent (31 March 2023 and 30 September 2023: 1.75 per
cent).
A commitment fee equal to 35 per cent of the drawn margin is payable on the
undrawn facility balance. The commitment fee rate as at 31 March 2024 was
therefore 0.5775 per cent (31 March 2023 and 30 September 2023: 0.6125 per
cent).
Issue costs of £135,000 were paid to Barclays Bank plc on commencement of the
RCF and a further £35,000 on extension of the RCF. These costs are being
amortised over the term of the facility and are included within prepayments.
The terms of the Barclays Bank plc facility include the following Group
financial covenants:
(i) For the 7-month period ended 31 December 2021, the ratio of total net debt
to adjusted EBITDA 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 adjusted EBITDA pre-IFRS 16 shall not
exceed 1.75:1.
The Group operated within the covenants during the period and the previous
period.
14. Performance share-based payments - Long term employee incentive costs
The Group had the following performance share based payment arrangements in
operation during the period:
a) The Hollywood Bowl Group plc Long Term Incentive Plan 2022
b) The Hollywood Bowl Group plc Long Term Incentive Plan 2023
c) The Hollywood Bowl Group plc Long Term Incentive Plan 2024
Long Term Incentive Plans
HWB Group plc operates Long Term Incentive Plans (LTIPs) for certain key
management. In accordance with IFRS 2 Share-based payment, the values of the
awards are measured at fair value at the date of grant. The exercise price of
the LTIPs is equal to the market price of the underlying shares on the date of
grant. The fair value is determined based on the exercise price and number of
shares granted, and is written off on a straight-line basis over the vesting
period, based on management's estimate of the number of shares that will
eventually vest.
In accordance with the LTIP schemes outlined in the Group's Remuneration
Policy (Annual Report FY2023), the vesting of these awards is conditional upon
the achievement of an EPS target set at the time of grant and measured at the
end of a 3-year period ending 30 September 2023, 2024, 2025 and 2026 and the
Executive Directors' continued employment at the date of vesting. The LTIP
2022, 2023 and 2024 also have performance targets based on return on centre
invested capital, emissions ratio for Scope 1 and Scope 2 and team member
development.
During the six months ended 31 March 2024, 584,831 (31 March 2023: 627,678 and
30 September 2023:627,678) share awards were granted under the LTIP.
For the six months ended 31 March 2024, the Group has recognised £737,726 of
performance share-based payment expense in the profit or loss account (31
March 2023: £568,286 and 30 September 2023: £1,218,431).
The LTIP shares are dilutive for the purposes of calculating diluted earnings
per share.
15. Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties of the
Group and have determined that those reported in the Annual Report for the
year ended 30 September 2023 remain relevant for the remaining half of the
financial year. These risks are summarised below, and how the Group seeks to
mitigate these risks is set out on pages 71 to 75 of the Annual Report and
Accounts 2023, which can be found at www.hollywoodbowlgroup.com
(http://www.hollywoodbowlgroup.com) .
In summary, these include:
· The economic condition in the UK - results in a decline in GDP,
consumer spending, a fall in revenue and inflation pressure impacting the
Group's strategy.
· Breach of covenants - could result in a review of banking
arrangements and potential liquidity issues.
· Competitive environment for new centres resulting in less new
Group centre openings.
· Dependency on the performance of core IT systems - reducing the
ability of the Group to take bookings and resulting in loss of revenue.
Inaccuracy of data could lead to incorrect business decisions being made.
· Delivery of products and services from third party suppliers
which are key to the customer experience - impacting on the overall offer to
the customer.
· Management retention and recruitment - lack of direction at
centre level with effect on customer experience. More difficult to execute
business plans and strategy, impacting on revenue and profitability.
· Food safety - major food incident including allergen or fresh
food issues. Loss of trade and reputation, potential closure and litigation.
· Cyber security and GDPR - risk of cyber-attack/terrorism could
impact the Group's ability to keep trading and prevent customers from booking
online. Data protection or GDPR breach. Theft of customer email addresses and
impact on brand reputation in the case of a breach.
· Compliance - failure to adhere to regulatory requirements such as
listing rules, taxation, health and safety, planning regulations and other
laws. Potential financial penalties and reputational damage.
· Climate change - increasing carbon taxes, business interruption
and damage to assets and cost of transitioning operations to net zero.
16. Related Party Transactions
There were no related party transactions during the period ending 31 March
2024 or 31 March 2023.
17. Acquisitions
On 2 October 2023, the Group purchased the assets, including the long
leasehold, of Lincoln Bowl. On 7 November 2023 the Group acquired Woodlawn
Bowl Inc. in Guelph, Ontario and on 11 November 2023, the assets and lease of
Lucky 9 Bowling Centre Limited as well as its associated restaurant and bar,
Monkey 9 Brewing Pub Corp in Richmond, British Columbia. 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 their respective regions.
These three acquisitions are consolidated in Hollywood Bowl Group plc's
Financial Statements with effect from 2 October 2023, 7 November 2023 and 11
November 2023 respectively.
The details of the business combination are as follows (stated at acquisition
date fair values):
Lincoln Bowl Woodlawn Bowl Inc. Lucky 9 Bowling Total
£'000 £'000 £'000 £'000
Fair value of consideration transferred
Amount settled in cash 4,474 2,784 277 7,535
Recognised amounts of identifiable net assets
Property, plant and equipment 2,100 290 228 2,618
Right-of-use assets - 1,413 4,298 5,711
Intangible assets 135 171 - 306
Inventories 8 21 27 56
Trade and other receivables 91 42 22 155
Cash and cash equivalents 10 10 - 20
Trade and other payables (10) (62) - (72)
Lease liabilities - (1,413) (4,298) (5,711)
Deferred tax liabilities - (54) - (54)
Identifiable net assets 2,334 418 277 3,029
Goodwill arising on acquisition 2,140 2,366 - 4,506
Consideration settled in cash 4,474 2,784 277 7,535
Cash and cash equivalents acquired (10) (10) - (20)
Net cash outflow on acquisition 4,464 2,774 277 7,515
Acquisition costs paid charged to expenses 297
Net cash paid in relation to the acquisitions 7,812
Acquisition related costs of £297,000 are not included as part of the
consideration transferred and have been recognised as an expense in the
consolidated income statement within administrative expenses.
The fair value of the identifiable intangible assets acquired includes
£306,000 in relation to customer relationships. The customer relationships
have been valued using the multi-period excess earnings method.
The fair value of right-of-use assets and lease liabilities were measured as
the present value of the remaining lease payments, in accordance with IFRS 16.
The fair value and gross contractual amounts receivable of trade and other
receivables acquired as part of the business combinations amounted to
£155,000. At the acquisition date the Group's best estimate of the
contractual cash flows expected not to be collected amounted to £nil.
In the period since acquisition to 31 March 2024, the Group recognised
£3,077,000 of revenue and £1,042,000 of profit before tax in relation to the
acquired businesses. Had the acquisition occurred on 1 October 2023, the
contribution to the Group's revenue would have been £3,581,000 and the
contribution to the Group's profit before tax for the period would have been
£1,177,000.
Responsibility Statement
We confirm that to the best of our knowledge:
· The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting'.
· The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
This responsibility statement was approved by the Board on 3 June 2024 and is
signed on its behalf by:
Stephen
Burns
Laurence Keen
CEO
CFO
3 June
2024
3 June 2024
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