TIDMBOWL
RNS Number : 6336R
Hollywood Bowl Group plc
13 December 2016
13 December 2016
Hollywood Bowl Group plc
GOOD RESULTS DELIVERED THROUGH SUCCESSFUL EXECUTION OF
STRATEGY
Hollywood Bowl Group plc ("Hollywood Bowl"), the UK's largest
ten-pin bowling operator, is pleased to announce its audited
results for the year ended 30 September 2016.
Financial highlights
Y/E 30 Sept Y/E 30 Sept 2015 % Movement
2016
------------ ----------------- -----------
Like for like
revenues (1) +6.8% +9.1%
Total revenues GBP106.6m GBP86.0m +23.9%
Group Adj. EBITDA
(2) GBP29.4m GBP20.6m +42.6%
Group Adj. EBITDA
margin 27.5% 23.9% +3.6%pt
Net debt / (cash) GBP20.8m GBP24.6m
Net debt:Group
Adj. EBITDA 0.71 1.20
Dividend pence 0.19 Nil
per share
Operating Profit GBP14.4m GBP13.0m +10.3%
------------ ----------------- -----------
Key highlights
-- Acquisition and integration of Bowlplex, adding net ten centres to the estate
o Bowlplex rebrands delivering returns ahead of expectations
-- Good progress made with the refurbishment programme
o Eight centres refurbished in the period including 3 Bowlplex
rebrands to Hollywood Bowl
-- Total Average spend per game increased YOY 6.3%
-- Total Games volumes increased YOY 16.3%
-- Total Number of games played was 12.1m, up from 10.4m in 2015
-- Strong pipeline of opportunities for new centres in place,
with Southampton due to open this month
Stephen Burns, Chief Executive Officer of Hollywood Bowl Group
said:
"We are really pleased to report our maiden results as a listed
business. It has been a transformational year for Hollywood Bowl.
Listing on the stock market is an important step in the development
of the business but it reflects on the strength of the business and
the whole Hollywood Bowl team that at the same time we have also
delivered a strong business performance. We continued to invest in
and enhance the customer proposition meaning we have given millions
of customers a great experience. By making sure we continue to
focus on what our customers want, we are confident that Hollywood
Bowl has a promising future as a listed business.
The new financial year has started well and in line with the
Board's expectations. From October through to the Easter holidays
is a key trading period for any indoor leisure-based business and
we have been pleased with the performance to date."
1 Like-for-like revenue is defined as total revenue excluding
any new centre openings, acquisitions (2016: GBP15.6m), closed
centres (2016: GBP0.3m, 2015: GBP1.4m) from the current or prior
year, and any other non like-for-like income (VAT on children's
shoes and no shows 2016: GBP0.4m) and is used as a key measure of
core same centre growth.
2 Group adjusted EBITDA (earnings before interest, tax,
depreciation and amortisation) reflects the underlying trade of the
overall business and excludes any one off benefits (VAT rebates for
prior years), and costs (the net costs on two property transactions
- Liverpool and Avonmeads - restructuring costs for Bowlplex
acquisition and IPO related expenses). It is our view that these
are not recurring costs.
Enquiries:
Hollywood Bowl Group via Tulchan
Steve Burns, Chief Executive Officer Communications
Laurence Keen, Chief Financial Officer
Mat Hart, Commercial Director
Tulchan Communications
James Macey White
David Allchurch +44 (0) 207
Matt Low 353 4200
Notes to Editors:
Hollywood Bowl is the UK's largest ten-pin bowling operator,
with a portfolio of 54 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 16
bowling lanes, on-site dining, licensed bars, and state-of-the-art
family games arcades.
CHAIRMAN'S STATEMENT
Overview
We were delighted to achieve a major Group milestone this year
and list on the Main Market of the London Stock Exchange on 21
September 2016, and I welcome our new shareholders to this exciting
business.
We focus on offering a high-quality bowling experience, with an
emphasis on family-friendly entertainment, and we are well-placed
to take advantage of the forecast growth in the UK ten-pin bowling
market.
Our proposition is extremely competitive, and we have identified
a number of opportunities to drive further growth. We have a strong
pipeline of new centres, and our refurbishment programme aims to
refurbish and rebrand between 7 and 10 centres each year.
Results
Hollywood Bowl Group has had an excellent year. Highlights
include the acquisition of Bowlplex in December 2015, adding 11 new
sites to our portfolio, and the successful rebranding of 3 of these
Centres into Hollywood Bowl, as well as an increase in
like-for-like and total Group revenue, and EBITDA.
This financial performance demonstrates the strength of our
proven operating model with superior customer service, high-quality
product offering and a disciplined pricing strategy.
Our strong balance sheet has been further strengthened by our
listing, which has also given us greater flexibility to capitalise
on growth opportunities and to generate long-term value for all
shareholders. Our enhanced public profile and status with
customers, landlords, developers and business partners will assist
in the recruitment of key management and employees, as well as
provide our management and employees with the opportunity to be
owners of this great business and give access to capital markets to
deliver our strategy.
Corporate governance
I believe that good corporate governance is vital to support our
future sustainable growth and the Board, which has extensive
experience of running companies in the leisure and retail sectors,
is committed to the highest standards of corporate governance. At
IPO we appointed Nick Backhouse as the Senior Independent
Non-Executive Director and Chairman of the Audit Committee and
Claire Tiney as a Non-Executive Director and Chair of the
Remuneration Committee. Nick and Claire bring significant
additional experience and support to the Board and have already
made a significant contribution to the Board's discussions. Our
Corporate Governance Report describes the work we have done
throughout the IPO process to develop our Board and Committee
processes and to support the development of a robust governance
structure.
Dividend
We intend to adopt a progressive dividend policy while
maintaining an appropriate level of dividend cover. While we have
only just started operating as a publicly-listed company, the Board
is pleased to recommend a final dividend for the year ending 30
September 2016 of 0.19 pence per ordinary share, reflecting the
short period of the financial year that the Group was listed.
People and culture
I would like to record my thanks to the Board and to the whole
team for their commitment and dedication to the Group over 2016. I
believe that attracting, motivating and retaining employees of the
right calibre is vital to the continued success of the Group, and
in 2017 we will introduce a scheme to give all our team the
opportunity to become shareholders of the business.
A key element of our culture is the promotion of corporate
social responsibility within our business and our local
communities, which we believe supports continued generation of
sustainable value and enhances our ability to deliver on our
strategic objectives.
Outlook
I have been enormously impressed by the progress of the
Hollywood Bowl Group over the past year and I am very excited to
continue as Chairman. I believe we are well-positioned to create
value for both institutional and employee shareholders as we work
every day to generate the right levels of positive energy to
deliver the best possible experience for our customers.
Peter Boddy
Chairman
13 December 2016
CHIEF EXECUTIVE REVIEW
I am delighted to present my first Chief Executive's Review
statement following our listing on the Main Market of the London
Stock Exchange in September 2016.
It has been a fantastic year for Hollywood Bowl Group. The
transformational acquisition of Bowlplex, the continued successful
roll-out of our refurbishment programme and our customer-focused
operating model, have combined to deliver revenue growth of 23.9
per cent on the prior year, and 6.8 per cent on a like-for-like
basis. This led to Group adjusted EBITDA of GBP29.4m, showing a
42.6 per cent increase over the year.
Hollywood Bowl Group is the UK ten-pin bowling market leader,
with 54 centres across the UK operating out of a high-quality
property portfolio. Our ongoing refurbishment programme and
investment in new centres over FY2016 has increased our scale,
resulting in reduced operational and capital costs, improving
margins and higher returns.
Our enhanced offering is gaining more traction with our core
family customer group, which are coming to our venues more
frequently, and extending their experience once there. Our
state-of-the-art centres, coupled with our strong covenant, makes
us an attractive choice for landlords looking for a leisure
operator. This underpins the growth of our estate and our future
development pipeline.
Growth Strategy
Our strategy focuses around two core elements: organic growth
and investment- led growth and we are pleased with the progress we
have made in FY2016.
Like-for-like growth
Our rise in like-for-like growth has a number of drivers,
including an increasing number of visits per customer. The branded
bowling industry average frequency of visit per customer is c.1.1
times per year. Hollywood Bowl Group has outperformed this,
increasing its average to 1.32 for FY2016. This result is testament
to our refurbishment programme, which has resulted in more
customers experiencing our high-quality environment. We have
invested in enhancing service levels and are also using our
Customer Relationship Management (CRM) system and customer database
to encourage more regular visits and to promote other revenue
streams via targeted campaigns.
We continue to work to increase spend per game by improving the
customer experience and 'dwell time' in each centre. The average
spend per game rose from GBP8.12 to GBP8.63 in FY2016, while the
number of games played increased from 10.4m in FY2015 to 12.1m in
FY2016. Our prices remain among the lowest of the major multiple
ten-pin bowling operators which we believe provides scope to more
effectively target promotions without impacting the Group's
relative price competitiveness.
The introduction of Hollywood Diner has increased food spend of
customers on-site over FY2016 by 19 per cent year-on-year against
the rest of the estate. Our high-quality amusement offering has
complex and engaging games, and is well maintained, resulting in
shortened repair call-out times, leading to an increase in average
amusement spend per game of 8.8 per cent in FY2016. The
introduction of VIP lanes, currently in 23 centres, which cost an
additional GBP1 per game per person, have also driven incremental
increases in spend per game.
Refurbishment and conversion Programme
We completed 8 full refurbishments in FY2016 including the
rebrand of 3 Bowlplex centres in Oxford, Basingstoke and Poole
Tower Park to Hollywood Bowl. Refurbishments have included a full
refresh of all external signage, the introduction of new bowling
environments, a new customer-friendly scoring system, new dining
concepts such as the Hollywood Diner, as well as the introduction
of VIP lanes. The 8 refurbishments are on track to outperform our
33 per cent targeted Return on Investment (ROI).
Development of our property portfolio
We aim to grow the portfolio through new openings and selective
acquisitions. We have integrated the 11 Bowlplex centres acquired
in December 2015, with initial returns from the first 3 rebrandings
delivering above expectations. We intend to refurbish an average of
3 Bowlplex centres a year, to bring them in line with the higher
standards across the remainder of the Group's estate.
Ongoing focus on our existing portfolio has also paid dividends,
with a surrender and new lease arrangement on our Liverpool centre,
which should result in an estimated GBP450,000 benefit in FY17, and
includes a clause to relocate next to a new cinema on the
redeveloped Edge Lane Park in 2018.
Focus on People
We operate centres in a range of different markets and each one
draws on our central support network to fulfil their local
customer-led ambitions. Our people are instrumental in the running
of our business and we are passionate that diversity in our
employee base, combined with high levels of employee well-being and
job satisfaction, is integral to delivering a high-quality customer
experience. Our Net Promoter Score (NPS) level of 59 per cent is
testament to our successful approach.
We are committed to providing an inclusive and supportive
environment for all our people, with opportunities to develop
rewarding careers.
Centre Managers and Assistant Managers receive an uncapped bonus
for hitting their profit budget which, in turn, entitles them to
share in a proportion of any amount achieved over targeted
management profit (EBITDA pre-property costs), subject to also
meeting customer engagement and satisfaction targets.
In November 2016, we introduced a share scheme, granting free
shares for centre management, and all team members will also have
the opportunity to invest in additional shares via a Share
Incentive Plan (SIP) in the near future.
Use of Technology
Our technology platform offers scalability and flexibility to
support future growth. Over FY2016, we continued to invest in the
development of our sophisticated CRM system to enable and improve
customer targeting. Our web-based reservation and CRM system has
been a key enabler of growth. Accordingly we prioritised the
migration of the Bowlplex centres so that all 54 centres now use
this system.
We have also made further improvements to our proprietary
scoring system, enabling us to deliver a more personalised
communications flow pre- and post-visit, as well as enhancing the
'in-centre experience' and encouraging multi-bowler data capture
throughout the game. We will continue to deploy our proprietary
scoring system in our centres as part of refurbishment and new
centre openings.
Our digital marketing programme has driven significant revenue
and remains a key strategic area. This focus on understanding the
customer and using targeted marketing to reach them has allowed us
to respond to consumer trends in order to drive more frequent
customer visits.
MARKET OVERVIEW
The ten-pin bowling market is part of the wider UK leisure
sector and offers a competitively-priced family leisure experience
and broad customer appeal. The UK leisure sector was worth an
estimated GBP80.3bn in 2015, of which ten-pin bowling had a market
share of 0.3 per cent. The UK ten-pin bowling market generated
estimated sales of GBP303m in 2015, of which Hollywood Bowl Group
had a market share of approximately 33 per cent1.
Recent growth
The amount of total sites in the UK ten-pin bowling market has
remained relatively static over the past 5 years, as a number of
independent sites have closed while Hollywood Bowl Group and QLP
have opened centres.
However, from 2013 to 2015, ten-pin bowling was the
fastest-growing segment of the UK leisure sector, with 6 per cent
revenue growth compared to an average growth of 3 per cent across
the wider UK leisure sector2.
This growth was largely driven by the major multiples, as they
have invested in reinvigorating customer engagement through
customer relationship management platforms, refocusing the bowling
proposition towards family leisure, improving ancillary product
offerings and driving operating improvements. Hollywood Bowl Group
delivered the greatest growth in this market segment, with a CAGR
of 10.7 per cent over 2013 to 2015.
Market Growth Opportunities
As with the wider UK leisure market, growth in ten-pin bowling
is predominantly driven by macroeconomic factors such as increases
in GDP, consumer confidence and disposable income.
The major multiples segment of the UK ten-pin bowling market is
forecast to grow by a CAGR of 4.3 per cent per annum from 2015 to
2019, greater than the total UK leisure sector forecast growth of 3
per cent3.
This growth is expected to be underpinned by developing new
sites, continued refurbishment of existing centres and improvement
in the customer experience, increasing participation in ten-pin
bowling, visit frequency and spend per game. There is also scope
for major multiples to increase their share of the ten-pin bowling
market as weaker operators, particularly independent operators and
other multiples, become less competitive or exit the market.
By comparing visits to ten-pin bowling centres with visits to
the cinema, it is evident that the opportunity to increase the size
of the ten-pin bowling market in the UK is significant4, in terms
of both numbers of centres and frequency of visits.
In the UK, ten-pin bowling is a relatively low-frequency
activity compared to other forms of leisure such as the cinema. 67
per cent of consumers have not participated in ten-pin bowling over
the past 12 months, compared to 32 per cent for cinemas5. This
could be due to the accessibility of bowling sites - an estimated
47 per cent of the UK population live within a 15-minute drive of a
bowling centre, compared to 69 per cent living within a 15-minute
drive from a cinema6. This indicates that there is significant
potential for ten-pin bowling centre roll-out in the UK given the
extent of under-served regions and opportunities to increase
participation through improved customer propositions and
competitive pricing relative to other leisure experiences.
Hollywood Bowl Group is leading the way in driving growth in the
major multiple segment with our refurbishment and new site
development programme and focused strategy of driving repeat visits
and a higher spend per game.
The Group has identified at least 20 potential new sites in the
medium term. This assessment incorporates factors such as catchment
size and demography; competitor presence; and centre type and
availability.
From our established opening model, relationships with
landlords, strong covenant and continued maintenance programme
across the estate, Hollywood Bowl Group is well-positioned to
capitalise on the market growth potential.
Outlook
The new financial year has started well and in line with the
Board's expectations. October through to the Easter holidays is a
key trading period for any indoor leisure-based business and we
have been pleased with the performance to date.
The Bowlplex centres are now fully integrated and reaping the
benefits from the introduction of the Group's operating model, with
revenues up 9.4 per cent year-on-year. The refurbishment and
rebrand of the Brighton Bowlplex will be completed in time for the
Christmas 2016 trading period, and we are on course to complete
between 7 and 10 refurbishments/rebrands in FY2017.
Our property pipeline is at its strongest in our history. We are
on schedule to open in the Southampton Watermark development during
December 2016, and in the intu shopping centre in Derby during
April 2017. We are also in advanced stages of negotiation with
landlords on 4 further potential new sites with 4 others under
review. We are well-positioned to deliver on our target of opening
2 new centres per year.
3 months into our life as a listed business, our strategic
priorities and financial results are progressing well. Our focus
remains on delivering an exceptional experience for every customer,
every time, increasing value for shareholders.
Stephen Burns
Chief Executive Officer
13 December 2016
Key:
1, 2, 3, 4, and 6, Source: Pragma Consulting Report (June
2016).
5, Mintel Leisure Report 2015.
FINANCE REVIEW
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------- ------------ ------------
Total number
of centres 54 44
--------------------- ------------ ------------
Number of games
played 12.1m 10.4m
--------------------- ------------ ------------
Revenue GBP106.6m GBP86.0m
--------------------- ------------ ------------
Gross profit 83.9% 82.6%
--------------------- ------------ ------------
Group adjusted
EBITDA1 GBP29.4m GBP20.6m
--------------------- ------------ ------------
Group operating
cash flow2 GBP23.7m GBP15.4m
--------------------- ------------ ------------
Group expansionary
capital expenditure GBP3.5m GBP2.4m
--------------------- ------------ ------------
1 Group adjusted EBITDA (earnings before interest, tax,
depreciation and amortisation) reflects the underlying trade of the
overall business and excludes any one off benefits (VAT rebates for
prior years), and costs (the net costs on two property transactions
- Liverpool and Avonmeads - restructuring costs for Bowlplex
acquisition and IPO related expenses). It is our view that these
are not recurring costs
2 Group operating cash flow is calculated as Group adjusted
EBITDA less working capital and maintenance capital
expenditure.
Our Group adjusted EBITDA growth has been achieved through
continued customer focus and ensuring that each of our centres
offers a great family experience on every visit. Group adjusted
EBITDA increased by 42.6 per cent during the year mainly due to
revenue growth over this period. This has been driven through the
acquisition of Bowlplex (December 2015) as well as the growth of
the core estate through refurbishments and continued spend on
maintenance capital.
Growth drivers
The strength of the Group's strategy is reflected in our revenue
performance for the year, which was driven by 3 main areas: the
acquisition of Bowlplex in December 2015; growth in spend per game;
and like-for-like growth in the number of games.
Bowlplex revenues since acquisition were GBP15.6m and increased
9.4 per cent versus prior year over the same period. This was in
part due to the implementation of the Group's process and
procedures, including the Customer Contact Centre (CCC), CRM and
reservation system and rebranding of 3 centres during H2 FY2016 to
Hollywood Bowl.
Over the past 12 months, we have invested in refurbishing 5
centres which are on track to deliver above 33% ROI, as well as
rebranding 3 Bowlplex centres, with extremely encouraging returns
of 94 per cent on capital invested (although with less than 26
weeks post-investment for these 3 centres, we urge caution in
extrapolating this out to the full year). VIP lanes are also now
operating in 23 centres and customers continue to enjoy the
surprise and delight element of this.
The continued investment in our centres and teams delivered
like-for-like revenue growth of 6.8 per cent.
Like-for-like revenue is defined as total revenue excluding any
new centre openings, acquisitions (2016: GBP15.6m), closed centres
(2016: GBP0.3m, 2015: GBP1.4m) from the current or prior year, and
any other non like-for-like income (VAT on children's shoes and
'no-shows' 2016: GBP0.4m) and is used as a key measure of same
centre growth.
Given the challenging summer with unprecedented dry and hot
weather over the school holidays, we are pleased with our record
sales performance over this period.
Group revenue increased by 23.9% (GBP20.6m) to GBP106.6m, from
GBP86.0m in the year ended 20 September 2015.
Gross margin
Gross profit margin improved from 82.6 per cent to 83.9 per cent
primarily as a result of the full-year effect of new food and drink
contracts, and improved terms on amusements for the like-for-like
estate post the Bowlplex acquisition. The slight change in revenue
mix also helped margins, with Bowling increasing its share from
47.97 per cent to 48.21 per cent, with a 100 per cent gross
profit.
Administrative expenses
Administration expenses increased by 31.7 per cent driven
primarily by the acquisition of Bowlplex.
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------- ------------ ------------
Employee costs 20,024 16,658
Other fixed property 26,332 22,343
Maintenance and
supplies 1,796 1,545
Other expenses 3,848 2,203
Corporate costs 8,822 7,737
(Profit)/Loss
on disposal of
property, plant
and equipment (745) 17
Depreciation
and amortisation 9,809 8,266
Exceptional items
(excludes other
income in 2016
of GBP1,395k) 6,558 (722)
--------------------- ------------ ------------
76,444 58,047
--------------------- ------------ ------------
Administrative expenses increased to GBP76.4m in the full year
to 30 September 2016, from GBP58.0m in the previous year. Property
and employee costs are the largest expenses in the business, with
the year-on-year increase primarily the result of the acquisition
of Bowlplex in December 2015. Property costs on a constant basis
stayed static across both years, at GBP22.0m with rent reviews and
property rates increases netted off by a reduction in utility usage
with the full-year effect of LED lighting and a lower insurance
charge in the year. Employee costs on a constant centre basis
increased from GBP16.5m to GBP16.9m, driven by the national living
wage and national minimum wage impacts.
Total maintenance and supply costs increased by 16.2 per cent
due to Bowlplex centres as well as purchasing new balls to ensure
customers are receiving a great experience in our centres.
Group adjusted EBITDA
Group adjusted EBITDA increased during the year mainly due to
revenue growth over the 12-month period, driven through the
acquisition of Bowlplex as well as the growth of the core estate
through refurbishments and continued spend on maintenance capital
to ensure that all centres are inviting family entertainment
centres.
Depreciation increased from GBP7.8m in 2015 to GBP9.3m in 2016,
largely as a result of the Bowlplex acquisition. Corporate costs
increased by 14 per cent per cent to GBP8.8m in FY2016, from
GBP7.7m in FY2015. This is due to the investment in specific
business functions to support the integration of Bowlplex, more CCC
heads, the inclusion of a proportion of the plc costs with
Non-Executive Directors, while bonuses were materially the same as
the prior year. Professional fees also rose in FY2016 as a result
of advisers receiving 10 per cent of the rate rebates and an
increase in audit fees, on account of the audit in a PLC
environment and a half year audit for the purpose of IPO. As a
percentage of total sales, total corporate costs represented 8.3
per cent in FY 2016, against 8.9 per cent in FY2015.
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------ ------------ ------------
Operating profit 14,378 13,034
Depreciation 9,316 7,758
Amortisation 493 508
------------------ ------------ ------------
EBITDA 24,187 21,300
Exceptional items 5,163 (722)
------------------ ------------ ------------
Adjusted EBITDA 29,350 20,578
------------------ ------------ ------------
Management use EBITDA adjusted for exceptional items (adjusted
EBITDA) as a key performance measure of the business.
Exceptional items
In FY2016, exceptional items totalled GBP5.2m, with the main
components being a GBP1.4m VAT rebate; costs of GBP2.3m relating to
the acquisition of Bowlplex; GBP2.3m of IPO costs; a GBP1.6m
reverse premium for the Liverpool lease negotiation and a one-off
cost of GBP0.6m for the allocation of free shares to employees
(Centre Management) on IPO.
In FY2015, exceptional items totalled GBP0.7m and consisted
predominantly of GBP1.0m resulting from a sector wide reassessment
of rates in the period which meant that the majority of the Group's
centres were eligible for rebates. Included in this GBP1.0m are all
the historical rebates back to April 2010 received by the Operating
Group. Offsetting this rates rebate, an exceptional charge of
GBP0.2m was recorded in relation to the investment by Electra
Investments Limited in FY2014.
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------- ------------
VAT rebate1 1,395 -
Rates rebate2 79 1,009
Property costs3 (648) -
Acquisition related
expenses4 (2,334) (163)
Restructuring
and legal costs5 (757) (124)
IPO related expenses6 (2,298) -
Share based payments7 (600) -
---------------------- ------------- ------------
(5,163) 722
---------------------- ------------- ------------
1 The Group was able to make a one-off retrospective reclaim in
respect of overpaid VAT relating to customers who were 'no-shows'
and children's shoe hire. This VAT rebate relates to a rebate for
FY 2012 to 2015. This has been classified as other income in the
consolidated statement of comprehensive income. Going forward this
will not be classified as exceptional income as it will be
recognised within revenue.
2 There was a sector wide property rating appeal which was
settled during FY2015 and resulted in a majority of the Group's
centres receiving one-off rebates for the period from April 2010
onwards. Most of this was received in FY2015. With the new rating
list effective from April 2017, the normal rates appeals process
will be followed and in year refunds will not be included within
exceptional costs.
3 For FY2016 this includes profit for the sale of the Avonmeads
Centre (GBP0.8m) and a reverse premium (GBP1.6m) for exiting a
lease rental contract for the Liverpool centre.
4 Costs relating to the acquisition of Bowlplex in December
2015. These costs include legal and research fees in connection
with the lengthy CMA process which was part of the acquisition.
5 Costs relating to restructuring in readiness for, and
subsequent to the acquisition of the Kanyeco Group in September
2014, and the acquisition of Bowlplex in December 2015. Also
includes costs for the management of the Group by Epiris.
6 Costs associated with the IPO of Hollywood Bowl Group plc on
the London Stock Exchange on 21 September 2016. Costs include legal
and accounting transaction fees along with corporate banking
costs.
7 Allocation of shares to employees on IPO date. Shares issued
to employees have been recorded at fair value, being the strike
price at IPO. This comprises the fair value of the shares
(GBP527,000) and the employers' national insurance expense
(GBP73,000). This was a one-off allocation of shares to employees
as part of the IPO. Share based payments and other LTIPs will not
be included in exceptional items as these are envisaged to be
recurring and part of the normal course of business going
forward.
Finance costs
Net interest payment and other finance charges increased by
46.2% from GBP8.1m for FY2015 to GBP11.9m in FY 2016, driven
primarily by an increase in subordinated shareholder loans
(GBP1.2m) and the write off of GBP3.0m of capitalised financing
fees and the costs of cancelling an interest rate swap, both done
as part of the listing.
Taxation
The Group has incurred a tax charge of GBP1.4m for the year
compared to GBP1.2m for the year to 30 September 2015.
Earnings
Profit for the year was GBP1.2m which was lower than the prior
year by GBP2.4m as a result of the factors discussed in the notes
above.
Basic earnings per share was 1.12p, while adjusted earnings per
share was 13.23p. This is calculated by excluding exceptional costs
and shareholder loan interest.
Dividend
Although the business only listed on 21 September 2016 it
intends to pay a dividend of 0.19 pence per share. Subject to
shareholder approval at the AGM on 23 February 2017, this will be
paid on 24 March 2017 to shareholders on the register on 24
February 2017.
Cash flows
The Group continues to deliver strong cash generation with Group
Operating Cash flow 53.8% higher at GBP23.7m (2015: GBP15.4m) due
to an increase in EBITDA and efficient use of working capital,
offset by increased investment in maintenance capital as the estate
grows. All of this resulted in an increase in Group Operating Cash
flow conversion to 80.7% (2015: 74.8%).
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------ ------------
Group Adjusted
EBITDA 29,350 20,578
Movement in working
capital 2,468 1,074
Maintenance capital
expenditure1 (5,768) (4,419)
Taxation (2,352) (1,835)
---------------------- ------------ ------------
Operating cash
flow 23,698 15,398
OCF Conversion 80.7% 74.8%
---------------------- ------------ ------------
Expansionary
capital expenditure (3,468) (2,407)
Disposal proceeds 1,430 -
Exceptional items (2,484) 722
Interest paid (2,093) (2,304)
Acquisition of
subsidiary (22,801) -
Cash acquired
in subsidiary 970 -
Cash flows from
financing activities (724) (693)
---------------------- ------------ ------------
Net Cash flow (5,472) 10,716
---------------------- ------------ ------------
1 Maintenance capital expenditure includes amusements capital
and GBP1.28m of amusement disposal proceeds.
Liquidity and capital resources
The Group's liquidity requirements arise primarily from its
growth strategy, make interest payments on its indebtedness and
meet the working capital requirements of the business. The
Operating Group's principal sources of liquidity have been its cash
flow from operating activities, its bank loans and its subordinated
shareholder loans.
In preparation for the IPO, the Group undertook a capital
reorganisation and refinancing, and executed a complex steps plan
which included the creation of a new holding company, share
exchanges and repayment arrangements for previous shareholders and
bank debt. By applying the principles of reverse acquisition
accounting in accordance with IFRS 3 "business combinations", the
results of the Group are presented as if Hollywood Bowl Group plc
had always owned Kanye Co Limited. Further details about the
accounting for the IPO are included in Note 2.
There was no primary raise at IPO. A new term loan was agreed at
the time of the IPO, which reduced the Group's bank debt down to
GBP30m. As a result of the IPO and the refinancing, combined with
strong trading, Net debt decreased to GBP20.8m.
Incorporation and capital reduction
On 13 June 2016, Hollywood Bowl Group PLC was incorporated and
registered in England and Wales under the Companies Act 2006 as a
public limited company.
The Company has reduced its share capital by means of a
court-sanctioned reduction in capital in order to provide it with
the distributable reserves required to support the intended
dividend policy. The capital reduction received court approval on 9
November 2016 and is detailed in the post balance sheet events
note.
Capital expenditure
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------- ------------ ------------
Maintenance 4,439 2,675
Amusement supplier 2,607 2,194
Refurbishment 2,860 2,417
New centres 608 1,263
----------------------- ------------ ------------
Landlord contributions - (1,255)
----------------------- ------------ ------------
Net disposal
(proceeds)/costs (2,708) (450)
----------------------- ------------ ------------
Total capital
expenditures 7,806 6,844
----------------------- ------------ ------------
Maintenance capital spend increased by a total of GBP1.3m (30
per cent) due to the increased number of sites during the year as
well as the requirement for a higher spend in the Bowlplex sites to
bring them up to the Group's technical standards, which in turn
provides the customer with an overall better experience.
Expansionary capital expenditure increased by 18 per cent as the
refurbishment programme continued, with 5 centres being
refurbished, as well as higher spends on the 3 Bowlplex rebrands
undertaken during the financial year. Management views centres as
typically needing refurbishment every 6 to 8 years. Expansionary
capital expenditure also includes some spend on the FY2017 openings
in Southampton and Derby.
Refurbishments completed in the financial year were:
-- Leeds
-- Surrey Quays
-- Manchester
-- Birmingham
-- Bolton
-- The 3 Bowlplex rebrands in FY2016:
-- Poole Tower Park;
-- Oxford;
-- Basingstoke.
Laurence Keen
Chief Financial Officer
13 December 2016
Consolidated Statement of Comprehensive Income
Year ending 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
-------------------------------------------------------- ---- ------------ ------------
Revenue 106,632 86,044
Cost of sales (17,205) (14,963)
-------------------------------------------------------- ---- ------------ ------------
Gross profit 89,427 71,081
Administrative expenses 5 (76,444) (58,047)
Other income 1,395 (-)
-------------------------------------------------------- ---- ------------ ------------
Operating profit 14,378 13,034
Being:
-------------------------------------------------------- ---- ------------ ------------
Group Adjusted EBITDA* 3 29,350 20,578
Depreciation 10 9,316 7,758
Amortisation 11 493 508
Exceptional items 4 (5,163) 722
-------------------------------------------------------- ---- ------------ ------------
Finance income 7 22 8
Finance expenses 7 (11,905) (8,143)
Movement in derivative financial instrument 79 (134)
-------------------------------------------------------- ---- ------------ ------------
Profit before tax 2,574 4,765
Tax expense 8 (1,387) (1,173)
-------------------------------------------------------- ---- ------------ ------------
Profit for the year attributable to equity shareholders 1,187 3,592
Other comprehensive income - -
-------------------------------------------------------- ---- ------------ ------------
Total comprehensive income for the year attributable
to equity shareholders 1,187 3,592
-------------------------------------------------------- ---- ------------ ------------
Basic and diluted earnings per share (pence) 9 1.12 3.56
-------------------------------------------------------- ---- ------------ ------------
*Group Adjusted EBITDA is a non-GAAP metric used by management
and is not an IFRS disclosure
Consolidated Statement of Financial Position
As at 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
------------------------------------ ---- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 10 37,264 30,854
Intangible assets 11 79,228 66,186
------------------------------------ ---- ------------ ------------
116,492 97,040
------------------------------------ ---- ------------ ------------
Current assets
Cash and cash equivalents 9,224 14,696
Trade and other receivables 9,634 8,023
Inventories 1,018 703
------------------------------------ ---- ------------ ------------
19,876 23,422
------------------------------------ ---- ------------ ------------
Total assets 136,368 120,462
------------------------------------ ---- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 18,866 14,127
Loans and borrowings 12 - 1,009
Corporation tax payable 1,034 637
------------------------------------ ---- ------------ ------------
19,900 15,773
------------------------------------ ---- ------------ ------------
Non-current liabilities
Other payables 6,941 7,886
Loans and borrowings 12 29,403 92,285
Deferred tax liabilities 2,230 1,765
Accruals and provisions 3,476 2,904
Derivative financial instruments 55 134
------------------------------------ ---- ------------ ------------
42,105 104,974
------------------------------------ ---- ------------ ------------
Total liabilities 62,005 120,747
------------------------------------ ---- ------------ ------------
NET ASSETS/(LIABILITIES) 74,363 (285)
------------------------------------ ---- ------------ ------------
Equity attributable to shareholders
Share capital 71,512 49,932
Share premium 51,832 -
Merger reserve (49,897) (49,847)
Capital redemption reserve 99 -
Retained earnings 817 (370)
------------------------------------ ---- ------------ ------------
TOTAL EQUITY/(DEFICIT) 74,363 (285)
------------------------------------ ---- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 30 September 2016
Capital
Share Share Merger redemption Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2014 42,499 - (42,414) - (3,962) (3,877)
Issue of shares 7,433 - (7,433) - - -
Profit for the
period - - - - 3,592 3,592
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2015 49,932 - (49,847) - (370) (285)
Shares issued
during the year 100 - (50) - - 50
Debt for equity
swap 21,424 51,460 - - - 72,884
Issue of shares
to employees 155 372 - - - 527
Shares re-organisation (99) - - 99 - -
Profit for the
period - - - - 1,187 1,187
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2016 71,512 51,832 (49,897) 99 817 74,363
----------------------- -------- -------- -------- ----------- --------- --------
Consolidated Statement of Cash Flows
For the year ended 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
------------------------------------ ---- ------------- -------------
Cash flows from operating
activities
Profit before tax 2,574 4,765
Adjusted by:
Depreciation and impairment 10 9,316 7,758
Amortisation of intangible
assets 11 493 508
Net interest expense 11,883 8,135
(Profit)/loss on disposal
of property, plant and equipment (745) 17
Movement on derivative financial
instrument (79) 134
Share-based payments 526 (-)
------------------------------------ ---- ------------- -------------
Operating profit before working
capital changes 23,968 21,317
Decrease/(increase) in inventories 108 (57)
Decrease/(increase) in trade
and other receivables 5,115 (185)
Increase in payables and provisions 143 1,310
------------------------------------ ---- ------------- -------------
Cash inflow generated from
operations 29,334 22,385
Interest received 7 8
Income tax paid - corporation
tax (2,352) (1,835)
Interest paid (2,100) (2,304)
------------------------------------ ---- ------------- -------------
Net cash inflow from operating
activities 24,889 18,254
------------------------------------ ---- ------------- -------------
Investing activities
Acquisition of subsidiaries (22,801) -
Subsidiary cash acquired 970 -
Purchase of property, plant
and equipment (10,157) (7,073)
Purchase of intangible assets (357) (221)
Sale of assets 2,708 450
------------------------------------ ---- ------------- -------------
Net cash used in investing
activities (29,637) (6,844)
------------------------------------ ---- ------------- -------------
Cash flows from financing
activities
Issue of loan notes 10,000 70
Increase of bank loan (9,250) (750)
Payment of financing costs (1,474) (13)
------------------------------------ ---- ------------- -------------
Net cash flows used in financing
activities (724) (693)
------------------------------------ ---- ------------- -------------
Net change in cash and cash
equivalents for the period (5,472) 10,717
------------------------------------ ---- ------------- -------------
Cash and cash equivalents
at the beginning of the period 14,696 3,979
------------------------------------ ---- ------------- -------------
Cash and cash equivalents
at the end of the period 9,224 14,696
------------------------------------ ---- ------------- -------------
Notes
1. General information
The financial information, comprising statement of comprehensive
income, consolidated statements of financial position, consolidated
statements of changes in equity, consolidated cash flow statement
and related notes, have been extracted from the consolidated
financial statements of Hollywood Bowl Group plc for the year ended
30 September 2016, which were approved by the Board of Directors on
13 December 2016.
The financial information set out in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 30 September 2016, which will be delivered to
the registrar of companies in due course. The auditor has reported
on those accounts; their report was i) unqualified, ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and iii)
did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
Hollywood Bowl Group plc (together with its subsidiaries, the
Group) is a public limited company and was admitted to the premium
listing segment of the Official List of the Financial Conduct
Authority (FCA) and to trade on the Main Market of the London Stock
Exchange on 21 September 2016. The Group is incorporated and
domiciled in England and Wales. The registered office of the Parent
Company is Focus 31, West Wing, Cleveland Road, Hemel Hempstead,
HP2 7BW, United Kingdom. The registered Company number is
10229630.
The Group's principal activities are that of the operation of
ten-pin bowling centres as well as the development of new centres
and other associated activities.
The Directors of the Group are responsible for the consolidated
financial statements.
2. Basis of preparation
The consolidated financial statements have been prepared on a
going concern basis under the historical cost convention as
modified by the recognition of certain financial assets/liabilities
(including derivative instruments) at fair value through the profit
and loss.
Judgements made by the Directors, in the application of these
accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed below.
The Group beneath Hollywood Bowl Group plc, headed by Kanyeco
Limited, previously first time adopted IFRSs in the year ended 30
September 2014. In preparing the consolidated financial statements
for Hollywood Bowl Group plc, the Directors have reflected, under
reverse acquisition accounting, the amounts reported in the Group
headed by Kanyeco Limited.
3. Reconciliation of operating profit to Adjusted EBITDA
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------ ------------ -------------
Operating profit 14,378 13,034
Depreciation 9,316 7,758
Amortisation 493 508
------------------ ------------ -------------
EBITDA 24,187 21,300
Exceptional items 5,163 (722)
------------------ ------------ -------------
Adjusted EBITDA 29,350 20,578
------------------ ------------ -------------
Management use EBITDA adjusted for exceptional items (Adjusted
EBITDA) as a key performance measure of the business. It is felt
that this measure reflects the underling trading of the
business.
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 expense that have been shown
separately due to the significance of their nature or amount:
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------------------- ------------- ------------
VAT rebate(1) 1,395 -
Rates rebate(2) 79 1,009
Property costs(3) (648) -
Acquisition related expenses(4) (2,334) (163)
Restructuring and legal costs(5) (757) (124)
IPO related expenses(6) (2,298) -
Share-based payments(7) (600) -
--------------------------------- ------------- ------------
(5,163) 722
--------------------------------- ------------- ------------
1 The Group was able to make a one-off retrospective reclaim in
respect of overpaid VAT relating to customers who were 'no-shows'
and children's shoe hire. This VAT rebate relates to a rebate for
FY 2012 to 2015. This has been classified as other income in the
consolidated statement of comprehensive income. Going forward this
will not be classified as exceptional income as it will be
recognised within revenue.
2 There was a sector wide property rating appeal which was
settled during FY2015 and resulted in a majority of the Group's
centres receiving one-off rebates for the period from April 2010
onwards. Most of this was received in FY2015. With the new rating
list effective from April 2017, the normal rates appeals process
will be followed and in year refunds will not be included within
exceptional costs.
3 For FY2016 this includes profit for the sale of the Avonmeads
Centre (GBP0.8m) and a reverse premium (GBP1.6m) for exiting a
lease rental contract for the Liverpool centre.
4 Costs relating to the acquisition of Bowlplex in December
2015. These costs include legal and research fees in connection
with the lengthy CMA process which was part of the acquisition.
5 Costs relating to restructuring in readiness for, and
subsequent to the acquisition of the Kanyeco Group in September
2014, and the acquisition of Bowlplex in December 2015. Also
includes costs for the management of the Group by Epiris.
6 Costs associated with the IPO of Hollywood Bowl Group plc on
the London Stock Exchange on 21 September 2016. Costs include legal
and accounting transaction fees along with corporate banking
costs.
7 Allocation of shares to employees on IPO date. Shares issued
to employees have been recorded at fair value, being the strike
price at IPO. This comprises the fair value of the shares
(GBP527,000) and the employers' national insurance expense
(GBP73,000). This was a one-off allocation of shares to employees
as part of the IPO. Share based payments and other LTIPs will not
be included in exceptional items as these are envisaged to be
recurring and part of the normal course of business going
forward.
5. Profit from operations
Profit from operations includes the following:
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Amortisation of intangible assets 493 508
Depreciation of property, plant and
equipment 9,316 7,758
Operating leases:
- Property 13,514 11,543
Loss/(profit) on disposal of property,
plant and equipment1 (745) 17
----------------------------------------- ------------ ------------
Auditor's remuneration:
- Fees payable for audit of these
financial statements 75 -
Fees payable for other services
- Audit of subsidiaries 75 72
- Taxation compliance services 6 -
- Other tax advisory services 225 -
- Services relating to corporate finance
transactions2 737 26
----------------------------------------- ------------ ------------
1,118 98
----------------------------------------- ------------ ------------
1 This includes profit on sale of Avonmeads. See Note 4.
2 The services relating to corporate finance transactions
includes GBP667,000 in relation to the IPO, and GBP70,000 in
relation to the acquisition of Bowlplex in December 2015.
6. Staff numbers and costs
The average number of employees (including Directors) during the
period was made up as follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------- ------------ ------------
Directors 6 7
Administration 57 54
Operations 1,682 1,325
--------------- ------------ ------------
Total staff 1,745 1,386
--------------- ------------ ------------
The cost of employees (including Directors) during the period
was made up as follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------ ------------
Wages and salaries 22,111 19,051
Social security costs 1,614 1,442
Pension costs 185 147
Shared-based payments 600 (-)
---------------------- ------------ ------------
Total staff costs 24,510 20,640
---------------------- ------------ ------------
7. Finance income and expenses
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------ ------------ ------------
Interest on bank deposits 22 8
------------------------------------ ------------ ------------
Finance income 22 8
------------------------------------ ------------ ------------
Interest on bank borrowings 1,900 2,308
Unwinding of discount on provisions 124 189
Interest on loan notes 6,886 5,646
Exceptional finance costs 2,995 -
------------------------------------ ------------ ------------
Finance expense 11,905 8,143
------------------------------------ ------------ ------------
Exceptional finance costs comprise the write off of GBP2,858,000
of capitalised financing fees relating to the old bank facility
that ended on IPO and GBP137,000 to settle the liability on an
outstanding interest rate swap, which was ended on IPO.
8. Taxation
a). Tax on Profit
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------------------------- ------------ ------------
The tax expense is as follows:
- UK corporation tax 2,130 1,605
- Adjustment in respect of previous
periods (42) (168)
-------------------------------------- ------------ ------------
Total current tax 2,088 1,437
Deferred tax:
Origination and reversal of temporary
differences (701) (170)
Adjustment in respect of prior years - (94)
-------------------------------------- ------------ ------------
Total deferred tax (701) (264)
-------------------------------------- ------------ ------------
Total tax expense 1,387 1,173
-------------------------------------- ------------ ------------
b). Reconciliation of Tax charge
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Profit excluding taxation 2,574 4,765
Tax using the UK corporation tax rate
of 20% 515 977
Reduction in tax rate on deferred tax
balances (276) -
Non-deductible expenses 1,234 458
Tax exempt revenues (44) -
Over provided in prior years (42) (262)
Total tax expense included in profit
or loss 1,387 1,173
-------------------------------------- ------------ ------------
The Group's standard tax rate for the year ended 30 September
2016 was 20 per cent (2015: 20.5 per cent).
9. Earnings per share
a). Basic earnings per share are calculated by dividing the
profit attributable to equity holders of Hollywood Bowl Group plc
by the weighted average number of shares issued during the year.
The weighted average number of shares for both the current and
preceding years has been stated as it the Group share for share
exchange (Note 22) has occurred at the beginning of the comparative
year.
30 September 30 September
2016 2015
---------------------------------------- ------------ ------------
Basic and diluted
Profit for the year after tax (GBP'000) 1,187 3,592
Weighted average number of shares in
issue for the period (number) 105,843,170 100,880,334
Earnings per share (pence) 1.12 3.56
---------------------------------------- ------------ ------------
There are no dilutive share arrangements.
b). Adjusted underlying earnings per share
Adjusted earnings per share is calculated by dividing adjusted
underlying earnings after tax by the weighted average number of
shares issued during the year.
30 September 30 September
2016 2015
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax
(before exceptional costs and shareholder
interest) (GBP'000) 14,004 7,901
Weighted average number of shares in
issue for the period (number) 105,843,170 100,880,334
Adjusted earnings per share (pence) 13.23 7.83
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax is calculated as
follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Profit before taxation 2,574 4,765
Exceptional items (Note 5) 5,163 (722)
Exceptional costs within finance expenses
(Note 9) 2,995 -
Shareholder interest (Note 9) 6,886 5,646
------------------------------------------- ------------ ------------
Adjusted underlying profit before taxation 17,618 9,689
------------------------------------------- ------------ ------------
Less taxation (3,614) (1,788)
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax 14,004 7,901
------------------------------------------- ------------ ------------
10. Property, plant and equipment
Plant,
Long Short machinery
leasehold leasehold and fixtures
property property and fittings Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ---------- ------------- --------
Cost
At 1 October 2014 1,224 4,518 26,886 32,628
Additions - 1,495 5,578 7,073
Disposals - (33) (1,521) (1,554)
------------------------- ----------- ---------- ------------- --------
At 30 September 2015 1,224 5,980 30,943 38,147
Additions - 2,674 7,483 10,157
On acquisition - 1,715 5,817 7,532
Disposals - (20) (4,476) (4,496)
------------------------- ----------- ---------- ------------- --------
At 30 September 2016 1,224 10,349 39,767 51,340
------------------------- ----------- ---------- ------------- --------
Accumulated depreciation
At 1 October 2014 5 106 511 622
Depreciation charge 59 1,560 6,139 7,758
Disposals - (33) (1,054) (1,087)
------------------------- ----------- ---------- ------------- --------
At 30 September 2015 64 1,633 5,596 7,293
Depreciation charge 46 1,688 7,582 9,316
Disposals - (10) (2,523) (2,533)
------------------------- ----------- ---------- ------------- --------
At 30 September 2016 110 3,311 10,655 14,076
------------------------- ----------- ---------- ------------- --------
Net book value
At 30 September 2016 1,114 7,038 29,112 37,264
At 30 September 2015 1,160 4,347 25,347 30,854
At 30 September 2014 1,219 4,412 26,375 32,006
------------------------- ----------- ---------- ------------- --------
11. Intangible assets
Goodwill Brand(1) Trademark Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------- -------- --------
Cost
At 1 October 2014 62,014 3,360 798 340 66,512
Additions - - - 221 221
Disposals - - - (17) (17)
------------------------- -------- -------- --------- -------- --------
At 30 September 2015 62,014 3,360 798 544 66,716
Additions - - - 357 357
On acquisition (Note 30) 13,020 - 4 154 13,178
Disposals - - - (15) (15)
------------------------- -------- -------- --------- -------- --------
At 30 September 2016 75,034 3,360 802 1,040 80,236
------------------------- -------- -------- --------- -------- --------
Accumulated amortisation
At 1 October 2014 - 12 4 23 39
Amortisation charge - 168 62 278 508
Disposals - - - (17) (17)
------------------------- -------- -------- --------- -------- --------
At 30 September 2015 180 66 284 530
Amortisation charge - 168 50 275 493
Disposals - - - (15) (15)
------------------------- -------- -------- --------- -------- --------
At 30 September 2016 - 348 116 544 1,008
------------------------- -------- -------- --------- -------- --------
Net book value
At 30 September 2016 75,034 3,012 686 496 79,228
At 30 September 2015 62,014 3,180 732 260 66,186
At 30 September 2014 62,014 3,348 794 317 66,473
------------------------- -------- -------- --------- -------- --------
1 This relates to the Hollywood Bowl brand only.
EU-IFRSs requires that, on acquisition, intangible assets are
recorded at fair value. As explained in Note 32, the Group has not
applied the requirements of IFRS 3 to acquisitions that occurred
before 1 October 2012.
Impairment testing is carried out at the cash-generating unit
(CGU) level on an annual basis.
The recoverable amount of the CGU has been determined based on a
value in use calculation using cash flow projections based on
financial budgets approved by the Board covering a 3-year period.
Cash flows beyond this period are extrapolated using the estimated
growth rates stated in the key assumptions. The key assumptions
used in the value in use calculations are as follows:
2016 2015
-------------- ---- -----
Discount rate 9.8% 10.8%
Growth rate 2.0% 2.0%
-------------- ---- -----
Discount rates reflect management's estimate of return on
capital employed required. This is the benchmark used by management
to assess operating performance and to evaluate future capital
investment proposals. These discount rates are derived from the
Group's weighted average cost of capital. Changes in the discount
rates over the years are calculated with reference to latest market
assumptions for the risk free rate, equity market risk premium and
the cost of debt.
The key assumptions are number of games and spend per game.
Based on these assumptions there is no impairment required.
Goodwill is tested for impairment on at least an annual basis,
or more frequently if events or changes in circumstance indicate
that the carrying value may be impaired. In the years under review
management's value in use calculations have indicated no
requirement to impair.
Sensitivity to changes in assumptions
The estimates of the recoverable amounts associated with the CGU
affords significant head room over the carrying value, consequently
any reasonable possible changes in these key assumptions would not
cause the Group to recognise an impairment loss.
12. Loans and borrowings
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------------------- ------------ ------------
Current
Bank loan - 1,009
--------------------------------- ------------ ------------
Borrowings (less than 1 year) - 1,009
--------------------------------- ------------ ------------
Non-current
--------------------------------- ------------ ------------
Bank loan 29,403 36,314
Other loans - 55,971
--------------------------------- ------------ ------------
Borrowings (greater than 1 year) 29,403 92,285
--------------------------------- ------------ ------------
Total borrowings 29,403 93,294
--------------------------------- ------------ ------------
At 30 September 2015, other loans comprised unsecured
subordinated shareholder loan notes from Electra Investments
Limited and members of Company management which should have been
paid due for repayment in 2021. Interest of 10 per cent per annum
was being charged on these notes which accrued in accordance with
the provisions of the loan note instrument.
On 16 September 2016, the outstanding loan notes were exchanged
for shares in Hollywood Bowl Group plc
Bank borrowings have the following maturity profile:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------ ------------ ------------
Due in less than 1 year - 1,500
Less issue costs - (491)
------------------------ ------------ ------------
- 1,009
Due 2 to 5 years 30,000 12,750
Due over 5 years - 25,000
Less issue costs (597) (1,436)
------------------------ ------------ ------------
29,403 37,323
------------------------ ------------ ------------
The bank loans are secured by a fixed and floating charge over
all assets. The loans carry interest at LIBOR plus a variable
margin. The loans outstanding during FY2014 and FY2015 varied in
accordance with the ratio of gross debt divided by EBITDA. During
FY2014, FY2015 and FY2016 the margins were 4 per cent and 4.5 per
cent.
On 21 September, the Group repaid the outstanding bank loans and
entered into a GBP30m facility with Lloyds Bank plc. This facility
is due for repayment in instalments over a 5-year period up to the
expiry date of 20 September 2021. The first repayment of GBP0.75m
is due 31 December 2017, and in 6 monthly instalments up to 31
December 2020. The remaining balance of GBP24.75m will be repayable
at the expiry date of 20 September 2021. In addition, the Group had
an undrawn GBP5m revolving credit facility and undrawn GBP5m capex
facility. All loans carry interest at LIBOR plus a margin, which
varies in accordance with the ratio of net debt divided by EBITDA.
The margin at 30 September 2016 is 2.25 per cent.
13. Purchase of trade and assets
The Group acquired the entire share capital of Bowlplex Limited
on 9 December 2015 for a total consideration, of GBP22,801,000.
Acquisition related costs of GBP2,334,000 were also incurred and
have been written off to the profit and loss account. The following
table sets out the value of the net assets acquired.
Fair value
GBP'000
------------------------------------------ ----------
Intangible assets 158
Property, plant and equipment 7,532
Inventories 423
Trade receivables 5,019
Prepayments 1,707
Cash at bank and in hand 970
Trade payables and other payables (3,993)
Accruals (271)
Provisions(1) (1,764)
------------------------------------------ ----------
Net assets 9,781
Consideration paid 22,801
------------------------------------------ ----------
Goodwill 13,020
------------------------------------------ ----------
Consideration paid has been satisfied by:
Cash 22,801
------------------------------------------ ----------
1 This includes dilapidations and deferred tax.
IFRS 3 looks into the existence of any intangible assets that
meet the identifiable criteria for recognition other than as
goodwill. These include marketing-related (including brands),
customer related, contract based and technology based intangible
assets. Each was considered separately by the Board and it was
concluded that no value is attributable to other intangibles.
The goodwill arising from this acquisition includes the various
expected business synergies. The business was purchased with
potential synergy cost benefits of circa GBP2.6m per annum (GBP2m
from central support and the rest from contractual Group benefits).
It was also identified that the potential within the Bowlplex sites
is significant given their revenue performance vs the Hollywood
Bowl site revenue performance.
For the period from acquisition to the year end, Bowlplex
revenues were GBP15.6m and EBITDA was GBP3.7m.
14. Events subsequent to the year end
Pursuant to a resolution of the shareholders of the Company
passed on 16 September 2016, The Company has completed a reduction
of capital, cancellation of share premium account and cancellation
of capital redemption reserve (the Reduction and Cancellation).
The Reduction & Cancellation was formally approved by the
High Court of Justice on 9 November 2016. Following registration of
the order of the High Order with Companies House, the Reduction
& Cancellation became effective on 9 November 2016.
Following the Reduction & Cancellation the issued share
capital of the Company consists of 150,000,000 Ordinary Shares of
GBP0.01, as at 9 November 2016.
The effect of the Reduction & Cancellation is to create
distributable reserves to support the Boards future dividend
policy.
15. Dividend proposed
30 September
2016
GBP'000
---------------------------------------------------------------------------- ------------
Proposed for approval by shareholders at AGM (not recognised as a liability
at 30 September 2016)
Final dividend for 2016: 0.19p 286
---------------------------------------------------------------------------- ------------
16. Related party transactions
30 September 2016
During the period Electra Partners LLP, an associate of Electra
Private Equity plc charged a management fee of GBP98,000 to the
Kanyeco Group.
The Kanyeco Group subordinated shareholder loan notes together
with accrued interest of GBP72,935,000 owed to Electra Investments
Limited and members of management of the Kanyeco Group, was
acquired by Hollywood Bowl Group plc in exchange for share
capital.
30 September 2015
During the period Electra Partners LLP, an associate of Electra
Private Equity plc charged a management fee of GBP105,000 to the
Kanyeco Group.
The Kanyeco Group held outstanding subordinated shareholder loan
notes together with accrued interest of GBP56,744,000 owed to
Electra Investments Limited and members of management of the
Kanyeco Group.
Responsibility statement of the directors
The following statement will be contained in the 2016 Annual
Report and Accounts:
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole; and
- the strategic report includes a fair review of the development
and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
- We consider the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the group's position and
performance, business model and strategy.
On behalf of the Board
Stephen Burns Laurence Keen
Chief Executive Officer Chief Financial Officer
13 December 2016 13 December 2016
EFFECTIVE RISK MANAGEMENT
The Board retains ultimate responsibility for the Group's risk
management framework and annually reviews the Group's principal
risks.
In order to gain a full understanding of the risk exposure of
the Group we have reviewed each area of the business, and each
member of the senior leadership team has classified the risk,
taking into account the likelihood of their occurrence and the
scale of the impact (both financial and reputational) on the
business. Each department is responsible for evaluating current
controls and drawing up plans to improve the controls and manage
the risk where appropriate. Details of the risk and controls are
recorded on the Group's risk register which is a working document
and will be updated throughout the year and presented to the Board
half-yearly.
The Board has carried out a robust assessment of the principal
risks facing the Group, including those that would threaten the
Group's business model, future performance, solvency and liquidity.
The risk factors addressed below are those which we believe to be
the most material to us in implementing our business model and
strategy, and which could adversely affect the operations, revenue,
profit, cash flow or assets of the Group. Additional risks and
uncertainties currently unknown to us, or which we currently
believe are immaterial, may also have an adverse effect on the
Group.
Potential
Type of risk Risk effect Mitigation
------------- --------------------- ------------------ -------------------------------
Financial Adverse economic A decline The majority of sites
conditions in spend are based in high footfall
may have on discretionary areas that should stand
an effect leisure activity up against a recessionary
on Group could lead decline. The Board continually
results to a reduction reviews its revenue
in profits streams for opportunities
to enhance the customer
experience
------------- --------------------- ------------------ -------------------------------
Financial Adversely Covenant The Group has considerable
impacted breach headroom on current
by a failure facility with gross
to review debt significantly below
funding arrangements market opportunity for
when they funding. We prepare
become due, short-term and long-term
or a failure cash flow, EBITDA and
to meet banking covenant forecasts to
covenants ensure any risks are
identified early. Tight
controls exist over
the approval for capex
and expenses
------------- --------------------- ------------------ -------------------------------
Information Failure in Customers Systems are backed up
technology the stability not being to our Disaster Recovery
/operational or availability able to book Centre. The reservations
of information through the system also has an offline
through IT website or mode, so customers could
systems CCC, and still book but the CCC
inability and online booking facility
to collect would be down. A back-up
revenue system exists for CCC
to take credit card
payments offline. A
full audit process exists
for offline functionality
------------- --------------------- ------------------ -------------------------------
Operational Operational Unable to The Group has key suppliers
business provide customers in food and drink with
failures with a full tight SLAs stated in
from key experience contracts, with other
suppliers supplier options that
(non-IT) know our business and
could be introduced
if needed at short notice.
Centres hold between
14 and 21 days of food,
drink and amusement
product
------------- --------------------- ------------------ -------------------------------
Operational Any disruption Amusement Regular key supplier
which affects income meetings between our
Group relationship Head of Amusements,
with amusement and Namco and Gamestech.
suppliers Key issues are discussed
as well as future plans.
There are biannual meetings
between the Board and
Namco
------------- --------------------- ------------------ -------------------------------
Operational Loss of key Lack of direction The Company runs a Centre
personnel at centre Manager in Training
- Centre level and (CMIT) programme annually,
Managers therefore which identifies potential
effect on Centre Managers and
customers develops them into these
roles for the future.
At any one time, there
are 5-7 CMITs across
the Group who are able
to step into a Centre
Manager role if required.
The CMITs can run a
centre with support
from the Regional Support
Manager, as well as
from other more experienced
Centre Managers across
the region
------------- --------------------- ------------------ -------------------------------
Operational Inability Reduced CCC We hold regular CCC
to recruit capacity recruitment events,
CCC team and impact and our in-house recruitment
members or on head office team supports all Head
other head functional Office vacancies. We
office support delivery offer enhanced packages
functions to extend the recruitment
due to increased catchment area
local competition
or lack of
local skills
------------- --------------------- ------------------ -------------------------------
Technical Data protection Breach leading The Group's networks
breach to access are all protected by
of customer firewalls and secure
email addresses passwords. Security
and subsequent vulnerability scans
impact on are frequently run on
reputation firewalls to ensure
with customer they are secure. In
base addition, the Group
plans to move to a new
analytics system to
allow the IT team to
see real-time or historical
threat analytics
The Group does not hold
any customer financial
payment information
------------- --------------------- ------------------ -------------------------------
Regulatory Failure to Potential Expert opinion is sought
adhere to financial where relevant. We run
regulatory penalties employment and continuous
requirements and reputational training and development
such as Listing damage for appropriately-qualified
Rules, taxation, staff
health and
safety, planning The Board has oversight
regulations of the management of
and other regulatory risk and
laws ensures that each member
of the Board is aware
of their responsibilities.
Health and safety risk
assessments and audits
are carried out by the
internal audit team,
who provide recommendations
where necessary
------------- --------------------- ------------------ -------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KLLFFQLFXFBE
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December 13, 2016 02:00 ET (07:00 GMT)
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