TIDMBOWL
RNS Number : 9118J
Hollywood Bowl Group plc
16 December 2022
Hollywood Bowl Group plc
("Hollywood Bowl" or the "Group")
Final Results for the Year Ended 30 September 2022
INVESTMENT IN UK GROWTH AND INTERNATIONAL EXPANSION DRIVING
EXCELLENT PERFORMANCE AND RECORD REVENUE
Hollywood Bowl Group plc, the UK's largest ten-pin bowling
operator, announces its audited results for the year ended 30
September 2022 ("FY2022").
Financial summary
Financial performance for FY2022 is compared to FY2019, the last
period of uninterrupted trading.
12 months 12 months ended Movement
ended 30 September 30 September
2022 2019
Total revenues GBP193.7m GBP129.9m +49.2%
Gross profit GBP164.3m GBP111.4m +47.6%
Group adjusted EBITDA(1) GBP77.5m N/A N/A
Group adjusted EBITDA(1)
pre-IFRS 16 GBP60.6m GBP38.2m +58.6%
Group profit after tax GBP37.5m GBP22.3m +68.1%
Adjusted group profit
after tax(2) GBP39.4m GBP22.3m +77.0%
Free cash flow(3) GBP34.8m GBP14.7m +142.6%
Net cash/(debt) (4) GBP56.1m (GBP2.1m)
---------------------------- --------------------- ----------------- ---------
Interim ordinary dividend 3.00 pence 2.27 pence
per share
Final ordinary dividend 8.53 pence 5.16 pence
per share
Special dividend per share 3.00 pence 4.50 pence
---------------------------- --------------------- ----------------- ---------
Total dividend per share 14.53 pence 11.93 pence +21.7%
Key highlights
Excellent FY2022 performance supported by strong customer
demand
-- 28.3% LFL revenue growth compared to FY2019
-- Record revenues of GBP193.7m, up 49.2% compared with FY2019 (FY2019: GBP129.9m)
-- Group adjusted EBITDA (pre-IFRS) of GBP60.6m, an increase of 58.6% to FY2019 (GBP38.2m)
Innovation and technology investment driving 8.4% higher spend
per game (SPG) and excellent customer satisfaction scores
-- Games LFL volumes increased by 18.3%
-- Total amusement revenues grew 49.9% compared with FY2019 and
food and drinks revenue increased by 18.6% despite a reduction in
average menu prices
-- Continued rollout of Pins on Strings with 15 centres
completed in FY2022, bringing the total completed to 41 (65% of the
estate) with returns in line with expectations
-- Improved overall net promotor score to 61%, up 6.1%pts vs. FY2019
New centre openings and ongoing refurbishment strategy
continuing to generate attractive, above target returns
-- Six centres refurbished and two AMF centres rebranded to Hollywood Bowl
-- Three new centres opened in FY2022: Hollywood Bowl in Belfast
and Birmingham Resorts World, and Puttstars in Harrow
-- Two additional centres (Hollywood Bowl Speke and Puttstars
Peterborough) opened in H1 FY2023 with two new Hollywood Bowl
centres due to start construction during FY2023
-- A further 10 centres, at least, targeted for opening before the end of FY2025
Canadian acquisition performing in line with expectations and
growth strategy underway
-- For the four months post acquisition, LFL revenues grew by
more than 20%, with total revenues of GBP6.2m and EBITDA pre-IFRS
16 of GBP1.0m
-- First new centre acquisition completed in Kingston, Ontario
and the Splitsville brand acquisition pipeline continues to
build
-- First refurbishment expected to complete in H1 FY2023
-- Opportunity to add up to 10 centres over the next five years,
with the potential of at least a further 20 sites over the next 10
years
Ongoing investment in our people to retain and attract the best
talent
-- Introduced a sector-leading incentive-based bonus scheme for team members
-- One off cost-of-living payment paid in H2 FY2022 totalling GBP0.6m
-- Expanded training and development programmes for team members
Strong balance sheet and continued significant cash
generation
-- Updated capital allocation policy (with FY2025 net cash ratio
(5) target of 0.5X) focused on profitable growth and shareholder
returns
-- Final ordinary dividend and special dividend declared
Outlook
Resilient customer demand and significant opportunity to grow
the business
-- Lowest cost option of the major UK ten-pin bowling operators
with a family of four able to bowl for under GBP24
-- Strong trading momentum at the start of FY2023 with
encouraging pre-bookings for the Christmas period
-- Significant longer-term opportunity to grow to more than 110
centres across the three experiential leisure brands: Hollywood
Bowl and Puttstars in the UK and Splitsville in Canada
Well insulated from inflationary pressures
-- UK electricity usage costs are hedged to the end of FY2024,
and the solar panel installation programme remains on track with 22
centres now completed or under construction (c.30% of Group's UK
centres)
-- Over 74% of revenues are not subject to inflation in cost of goods sold
-- Food and drink costs represent less than 10% of overall costs
with simplification of the menu minimising exposure to supply chain
and food inflation
-- Labour costs account for less than 20% of revenue at a centre level
Strong and flexible balance sheet enables the Group to invest in
profitable growth
-- Net cash at year end of GBP56.1m
-- Undrawn GBP25m revolving credit facility in place to December 2024
Stephen Burns, Chief Executive Officer, commented:
"I am delighted with our excellent performance and record
revenue this year, which demonstrates the continued success of our
proven customer-led strategy. It is also testament to the
significant efforts of our team who have provided consistently
great, affordable experiences, appealing to customers facing
increasing pressures during the cost-of-living crisis.
"We are well positioned to continue to grow our business,
supported by our strong balance sheet, highly cash generative
business model and our resilience to inflationary pressures. We are
very excited about the growth opportunities for our Hollywood Bowl,
Puttstars and Splitsville brands in the UK and Canada and our
ability to generate further attractive returns through investment
in our customer experience.
"We have had a strong start to the new financial year with an
encouraging number of pre-bookings received ahead of Christmas,
demonstrating the continued strong demand for high quality, great
value leisure experiences that families and friends can enjoy
together."
Enquiries
Hollywood Bowl Group PLC Via Tulchan Communications
Stephen Burns, Chief Executive Officer
Laurence Keen, Chief Financial Officer
Mat Hart, Chief Marketing and Technology
Officer
Tulchan Communications Hollywoodbowl@tulchangroup.com
Will Palfreyman +44 (0)20 7353 4200
James Macey White
Laura Marshall
1 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 and right-of-use assets 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 below in this section of the report.
2 Adjusted group profit after tax is calculated as group profit
after tax, adding back the Teaquinn acquisition fees of GBP1.6m, a
non-cash expense of GBP0.4m related to the fair value of the earn
out consideration on the Teaquinn acquisition and deducting the
non-cash credit in relation to the Teaquinn bargain purchase of
GBP39,075.
3 Free cash flow is defined as net cash flow pre-exceptional
items, cost of acquisitions, debt facility repayment, RCF
drawdowns, dividends and equity placing.
4 Net cash/(debt) is defined as cash and cash equivalents as per
the statement of financial position less any bank borrowings.
5 Net cash ratio target is defined as proforma net cash divided
by Group adjusted EBITDA pre-IFRS 16. Proforma net cash is defined
as cash and cash equivalents as per the statement of financial
position less any bank borrowings less any final ordinary dividends
for the financial year.
Chairman's statement
Each year, I cannot help but enthuse about the people who work
with us at Hollywood Bowl Group, and FY2022 has been no
different.
A record year flashed by and, as customers returned in their
droves, our Centre Managers and team members delivered excellent
customer service unfailingly throughout the year.
The Group's excellent financial performance in FY2022 exceeded
the Board's expectations, as well as the FY2019 (the last full year
of uninterrupted trading) revenue levels by 28.3 per cent on a
like-for-like (LFL) basis. We have made further progress against
our customer-led strategy, investing in and growing our estate,
including announcing a new milestone for the business this year
with our first international acquisition in Canada. We have
continued to improve our customer experience, and we are proud of
the great value for money we offer families and friends across the
UK and Canada. As a result of this excellent performance we were
pleased to reinstate our dividend for the year and set out the
Group's updated capital allocation policy, which centres on
sustainable profit growth and shareholder returns, in the Chief
Financial Officer's review below.
Demand for great value competitive socialising remains strong,
and we achieved four of our five-highest ever revenue months during
the year. The UK summer of travel disruptions in 2021, knocked
foreign travel off the agenda for many, benefiting the domestic
leisure and entertainment sector in that period, and we continued
to see the benefit of that during the early months of FY2022. We
also experienced our second-highest revenue month on record during
August 2022, despite the heatwave, with our centres also providing
our customers a welcome reprieve from the hot weather.
This excellent performance has been achieved by our teams who
have stood up to the many, well-publicised challenges experienced
by businesses throughout the year, including COVID-19 related
absences, labour shortages and supply chain issues. Our Centre
Managers successfully navigated these challenges while coordinating
multiple on-site operations and leading their teams on a daily
basis. I salute their efforts in delivering on our purpose and
providing consistently excellent customer experiences. We were
pleased to reward this significant team effort with a
sector-leading bonus scheme in the year.
I am extremely proud of the way our senior leadership team (SLT)
has continued to create stakeholder value while innovating and
elevating customer experiences. We have seized opportunities to
make the Group more operationally efficient, while supporting our
Centre Managers to make well-informed decisions at local level.
Together, the Board and SLT remain laser focused on our strategic
growth initiatives.
We have invested further in our portfolio, refurbishing or
rebranding eight centres during the year. We continue to implement
and introduce a number of performance enhancing initiatives, such
as optimising the layouts in our centres to create more lanes and
extra space for our amusements. We have accelerated our digital
offering and improved how we interact with customers - amplifying
their experiences to meet heightened expectations. Work included
in-centre digital displays, improved Customer Relationship
Management (CRM) capability, as well as website and IT architecture
improvements that collectively help improve our customers'
interactions.
We have grown the portfolio during the year, opening two new
Hollywood Bowl centres in Resorts World Birmingham and in Belfast,
both of which are trading in line with expectations, and we
continue to see significant opportunity to grow the brand in the UK
and add to our pipeline.
Since the launch of our new Puttstars leisure brand, a unique
and modern twist on indoor mini-golf, in March 2020, we have been
testing the format and refining the value proposition. COVID-19
halted progress for nearly two years, however, since the lifting of
restrictions, the trial is progressing well. Informed by customer
research and the lessons we have learned, we are refining the
operational delivery and making modifications in the centre
environments and game-play. We opened two new Puttstars during the
calendar year, and we continue to see opportunity to add to our
pipeline and grow the brand by expanding into those five-star
locations across the UK where a Hollywood Bowl centre is not
suitable, for example, where there is a smaller available
footprint.
Looking further afield, an exciting highlight of the year was
the acquisition in May of Teaquinn Holdings Inc (Teaquinn) in
Canada for an initial consideration of CAD 17m (approximately
GBP10.6m), which was funded from the Group's existing cash
resources. The business comprises Splitsville, a Canadian ten-pin
bowling brand, and Striker Bowling Solutions, a supplier and
installer of bowling equipment across Canada.
This was an excellent opportunity to acquire a well-operated,
freehold-backed business with an experienced existing management
team led by founder Pat Haggerty. The Canadian bowling market is
well established but fragmented and under invested, and ripe for
consolidation. Together with Pat, we see significant potential for
profitable growth in a territory which shares many characteristics
of the UK market of some ten years ago. In addition to
refurbishment opportunities, we have the potential to add up to ten
sites to the portfolio over the next five years. The Board believes
this is an opportunity that aligns well with our strategic growth
plans with targeted returns in line with our financial investment
criteria.
In October 2021, we appointed Melanie Dickinson to the Board as
Chief People Officer in recognition of the huge importance we place
on our team members, and the impact that her role has had on the
success of the Group. We conducted full pay reviews and awarded
well-earned bonuses to our team members, recognising their
contribution to a stellar performance in FY2022. We did this on the
back of a bonus scheme introduced last year, rewarding our centre
teams for displaying behaviours that align with Group strategy and
environmental performance targets. Excellent service is fundamental
to our success, and is embedded in everything we do and the rewards
we offer.
In the context of our focus on our team members, I was delighted
that the Group was recognised as one of The UK's 25 Best Big
Companies to Work For in 2022.
We welcomed Julia Porter as an Independent Non-Executive
Director on 1 September 2022, and as a member of the Audit,
Nomination and Remuneration Committees.
We will sadly say goodbye to Claire Tiney following a
three-month handover with Julia, who will become Chair of the
Remuneration Committee as Claire will be retiring by rotation at
the AGM in January 2023.
I would like to thank Claire for her excellent insights and
contribution to the Group since 2016, and the other members of the
Board for their valued contributions during the year.
Operating sustainably has long been a priority for the Group.
Having evolved our wider environmental, social and governance (ESG)
strategy in FY2021, this year we have further embedded
sustainability considerations in the way we operate, and have
extended our targets and stated ambitions.
This year for the first time, we have integrated the Task Force
on Climate-related Financial Disclosures (TCFD) framework and
recommendations in our reporting, giving more visibility on the
climate-related risks we face, the environmental initiatives we are
currently undertaking, and the steps required to meet stakeholder
expectations. We are putting additional systems and processes in
place to mitigate against future risks and measure performance in
this area.
We work hard to mitigate business risks, and although
inflationary pressures are expected to continue, we are well placed
to withstand them through our operating model, as well as our
multiple revenue streams. We are exceptionally pleased to have
closed FY2022 in a robust cash and liquidity position. With no
current debt we are not directly impacted by interest rate
rises.
The investments and refurbishments made to our estate have
allowed us to deliver great value to all of our stakeholders, while
keeping true to our purpose of bringing people together for
affordable and healthy competition that is safe and fun, in a
wholly positive environment.
Our strict return on investment hurdle rate currently has
sufficient headroom to allow us to continue our capital investment
and refurbishment programmes, as well as pursue our expansion
plans. We are confident in our ability to not only withstand but to
succeed in the face of the current headwinds, and are committed to
keeping our prices affordable for customers so they can continue to
enjoy a family treat at one of our bowling or mini-golf
centres.
I would like to thank all the suppliers, landlords, partners,
shareholders and other stakeholders that have worked with us to
ensure our business could deliver such an outstanding performance,
and I hope you will continue to share in the Group's success in the
years ahead.
Peter Boddy
Non-Executive Chairman
15 December 2022
Chief Executive Officer's review
I am very pleased to report another excellent performance for
Hollywood Bowl Group in FY2022. For the first time since FY2019,
trading has been largely uninterrupted. Our results are reflective
of the effectiveness of our industry-leading operating model, the
execution of our clear and consistent strategy, and the continued
strong customer demand for fantastic value-for-money family
entertainment experiences.
This excellent performance is also due to the efforts of our
team members who have worked hard to deliver great value-for-money
and family-friendly experiences, as shown by the consistently high
customer satisfaction scores achieved throughout the year.
We started the financial year with real momentum and trading has
remained strong throughout the year. Our strong financial position
enabled us to take advantage of the favourable market environment
to invest in growing our portfolio in the UK. We marked a key
milestone for the business with our first international expansion
into Canada via an acquisition in May 2022. The quality of our
overall estate is constantly improving, with new centre openings
and refurbishments generating attractive returns and enhancing our
customer experience.
A record performance across all revenue lines
The profit before tax grew by GBP46.2m when compared to FY2021,
to GBP46.7m and was GBP19.1m (69.2 per cent) ahead of FY2019 (our
last year of uninterrupted trading). Group adjusted EBITDA pre-IFRS
16 was GBP60.6m vs GBP38.2m in FY2019. Each of our centres, that
has been open for at least 12 months, had a positive contribution
with an average EBITDA for FY2022 (on a pre-IFRS 16 basis) of
GBP1.15m per centre, which is an industry-leading result.
The free cash flow of GBP34.8m demonstrates our highly cash
generative business model, and with net cash of GBP56.1m at the end
of FY2022, the business is in excellent financial health.
Total revenues grew to GBP193.7m, a 49.2 per cent increase when
compared to FY2019, with all revenue lines seeing considerable
growth driven by increases in footfall and spend. Games volumes
grew by 18.3 per cent on a LFL basis compared to FY2019, whilst LFL
spend per game grew by 8.4 per cent, up from GBP9.64 in FY2019 to
GBP10.45 in FY2022.
As well as increased game volumes, the improvements and
investments we have made in our centres have continued to drive
average spend per game. We have optimised the layout of centres to
increase the space allocated to amusements, and have also added
additional lanes in certain centres. Amusement spend per game
benefited from this increased density, as well as new game formats
and improvements in payment technology which remove barriers to
play. Food and beverage LFL revenue saw an increase of 18.6 per
cent compared to FY2019, despite a reduction in average menu
pricing. This was a result of our strategic decision to simplify
our menus during the COVID-19 period, to focus on speed of delivery
and quality at accessible price points which in turn increased our
order volume.
We have been pleased with the trading we have seen in Canada
since our acquisition. Total revenue was CAD 9.6m with EBITDA
pre-IFRS 16 of CAD 1.6m. COVID-19 restrictions were lifted in
Canada at the end of March 2022, and the result reflects a similar
'bounce' in demand that was experienced in the UK from May
2021.
An outstanding, committed team
I cannot praise our team members enough for their hard work and
dedication, and for delivering great customer experiences
throughout the year, as reflected by our net promoter score which
has increased by 6.1 percentage points compared to FY2019. This was
achieved against a backdrop of challenges experienced across the
leisure sector including supply chain issues and
COVID-19 related absences, particularly during the peak of the
Omicron wave.
We recognised and incentivised these efforts with a generous
review of our pay and benefits packages and bonus schemes
reflecting our long-held belief that the Group's success should be
shared appropriately.
Incentive-based bonuses paid out to our Centre Managers in
FY2022 were on average 135 per cent of base pay, whilst our
Assistant Managers received an average 24 per cent of base pay.
Furthermore, 64 per cent of our hourly rate team members received
bonuses measured against financial, environmental and customer
satisfaction performance criteria, which equated to GBP0.7m in
FY2022.
These payments were well deserved in an excellent year and our
teams have entered FY2023 stronger than ever.
We have worked very hard on our people initiatives to continue
to attract and retain the very best talent in an increasingly
competitive labour market. We have expanded our industry-leading
training and development programmes, introducing talent programmes
for our Technicians and Contact Centre team for the first time. In
total, 25 new candidates joined our Centre Manager in Training
programme and 75 candidates joined our Assistant Manager in
Training programme.
We are acutely aware that the cost of living crisis has the
potential to impact our team members over the coming months. We
therefore took the decision to further support them by providing a
one-off cost of living payment to team members in September which
totalled GBP0.6m.
We were enormously proud to have been recognised as one of the
UK's Best Big Companies To Work for in 2022. This accolade is a
testament to the fantastic working culture we have built, and the
importance we place on creating outstanding workplaces, which is
one of the three pillars of our sustainability strategy.
Innovating and investing
We have continued to generate attractive returns on the
investments in our portfolio during the year and our new centre
pipeline is progressing well.
We are pleased to have opened two new Hollywood Bowl centres in
Resorts World Birmingham and Belfast, as well as a Puttstars in
Harrow. At the end of FY2022, our UK estate consisted of 67
centres, including four Puttstars. We opened two new centres,
Hollywood Bowl Speke and Puttstars Peterborough, at the start of
FY2023, and are due on site at two new Hollywood Bowl locations in
FY2023. Our pipeline continues to build and we are targeting to
open a further ten UK centres before the end of FY2025.
We refurbished or rebranded eight centres during the year, all
of which are delivering returns in line with our hurdle rate of 33
per cent or above. As part of our refurbishment strategy, we have
invested in enhancing the customer experience in our centres
resulting in higher spend per game. The combination of our dining
and bar areas means that they can be managed more efficiently, and
has also increased the capacity and density of family-friendly
games and amusement machines. This initiative, alongside the
introduction of payment technology that removes barriers to play,
has helped drive revenues in amusements. We plan to commence at
least seven further refurbishments or rebrands in FY2023, including
converting our last two AMF Bowling centres to Hollywood Bowl.
A total of 15 centres have benefited from the installation of
Pins on Strings technology in the period, taking the total of the
estate now completed to 41 centres (65 per cent of the estate).
Investment in all aspects of the digital customer journey has
continued. Since lockdowns ended, there has been a shift in the way
customers make bookings, with the majority now made online. We have
made further investments in our website and booking engine to
improve sales conversions, encourage early bookings and improve
dynamic pricing, allowing us to offer better value for customers at
non-peak periods, driving overall capacity utilisation, whilst also
automatically driving yield during the peak periods. We have also
improved our CRM capabilities, enabling us to be more selective and
targeted in our marketing to improve engagement and conversion
rates.
During the year, we continued to introduce dynamic digital
displays to encourage customer engagement and friendly competition
at our centres. Positioned strategically, these displays publish
live scoring leader boards and showcase food and drink content that
reflect customer profile changes through the day. To stimulate food
and beverage sales further, we have upgraded our WIFI networks in
all centres to support at-lane ordering.
We continue to significantly invest in our technology
initiatives and grow our IT team. We have recently appointed a new
IT and Digital Transformation Director who takes on a strategic
role in the ongoing development of our IT capability, as the
digital customer journey becomes ever more important.
International expansion and acquisition
In May 2022, we were delighted to announce the acquisition of
Teaquinn, comprising Splitsville, an operator of five ten-pin
bowling centres, and Striker Bowling Solutions, a B2B supplier and
installer of bowling equipment, for an initial consideration of CAD
17m (approximately GBP10.6m). This acquisition is a key milestone
for the Group as we take our first steps internationally, in line
with our long-term growth plan.
The company is a well-operated, freehold asset-backed business
that provides us with an exciting platform for growth in the
fragmented and under-invested Canadian market. Bowling is well
established in Canada; it is a popular pastime and there are more
established leagues and regular, committed players when compared to
the UK, but we believe there is an opportunity to leverage our
customer-led operating model, technology and digital marketing
experience to meet unmet demand for affordable family leisure
experiences.
The Canadian market is ripe for consolidation with many centres
under single ownership and few groups operating more than three
centres. In addition, there are a number of well-populated urban
areas that are currently under-served by family entertainment
offers where we see potential for growth.
We will work with Pat Haggerty, Founder and President of
Teaquinn, and his management team, to grow our portfolio in this
new market while maintaining our typical 'test and learn' approach.
Since the acquisition, we have focused on putting in place the
financial systems and structure that will support this growth,
including recruiting a VP of Operations, Head of Marketing and
Director of Finance.
We have completed our first acquisition in Kingston, Ontario,
bringing the number of centres we own in Canada to six; five in
Ontario and one in British Columbia.
We have an identified pipeline of new site opportunities with
the potential that at least ten sites can be added over the next
five years, and at least a further 20 sites over the next ten
years. Our mid-term goal is to open two new sites per year on
average.
Similar to our UK strategy, we will continue to apply a rolling
refurbishment programme that fits within our strict return on
investment criteria. Our first refurbishment is expected to
complete in H1 FY2023, and we also plan to refurbish the recently
acquired centre in Kingston, Ontario. Striker supplies and
maintains a large number of bowling centres across Canada, which
will benefit us and allow us to fit out our own centres
at cost, as we build the business.
We have been very pleased with the trading results since the
acquisition. COVID-19 restrictions were lifted fully in March 2022,
and trading has followed a similar pattern to the UK with an
initial rebound in demand. We achieved double digit LFL revenue
growth against 2019 for the four months to 30 September 2022.
Placing sustainability at the heart of our business
Energy efficiency remains a key focus, and the Group's programme
of solar panel installations remained on track with a total of 22
centres now completed or under construction, with more than 30 per
cent of our centres close to, or actively generating, their own
energy. We will continue to negotiate with our landlords if we see
a feasible opportunity to install solar panels; we believe that
circa. 50 per cent of our UK current estate could benefit from this
approach.
We are making good progress with our waste reduction and
recycling targets, with our team members' bonus allocation in part
being measured against how effectively waste is managed and
recycled. This has supported an excellent performance with eight
centres recycling over 85 per cent of all waste produced. On
average, 77.7 per cent of our waste in FY2022, in the UK, was
recycled, compared to 71.6 per cent in FY2021.
We continue to embed more targets and stated ambitions in our
ESG strategy and have, for the first time this year, integrated the
TCFD framework and recommendations in our reporting. By doing so we
are giving our stakeholders more visibility on the climate-related
risks we face, and the current and developing plans to mitigate
against them.
In recognition of our commitment to sustainability, in FY2023 we
are establishing a Corporate Responsibility Committee that will
report directly to the Board and will be headed by Ivan
Schofield.
Well insulated from inflationary pressures
We are mindful of the increasing cost pressures and have
continued to focus on controlling our costs throughout the year and
we remain well insulated from wider inflationary pressures. Our UK
electricity usage costs are hedged to the end of FY2024 and over 70
per cent of our revenues are not subject to inflation in cost of
goods sold. Labour costs account for less than 20 per cent of
revenue at centre level, and food and drink costs represent less
than 10 per cent of overall costs and through the work undertaken
to simplify our menus, we have reduced our exposure to supply chain
and food inflation.
This enables us to keep our prices low, and our headline price
remains the lowest of all the branded bowling operators - a family
of four is able to bowl with us for less than GBP24.
Outlook
We have continued the momentum from FY2022 into the start of the
current financial year with strong demand and encouraging
pre-bookings for the Christmas period.
Against the backdrop of the increasing cost of living, we
believe our great value-for-money offer will remain attractive to
families seeking affordable, family-friendly leisure experiences.
We are committed to continuing to invest in and supporting our team
members to deliver these positive customer experiences.
We are focused on continuing to execute our customer-led
strategy and generate attractive returns through investing in the
overall quality of the estate via new centre openings,
refurbishments and rebrands, innovation of the customer offer and
technology enhancements.
The strength of our balance sheet, alongside our highly cash
generative business model, means we are in an excellent position to
pursue our growth strategy, and we see the potential in the future
to grow our business to more than 110 centres, through our
Hollywood Bowl and Puttstars brands in the UK, and Splitsville in
Canada.
I would like to thank each and every member of our team for
their efforts last year and look forward to another successful and
exciting year ahead.
Stephen Burns
Chief Executive Officer
15 December 2022
Chief Financial Officer's review
Group financial results
Movement
FY2022
vs
FY2022 FY2021 FY2019 FY2019
----------------------------------- --------- -------- --------- --------
GBP193.7m
Revenue 4 GBP71.9m GBP129.9m +49.2%
Gross profit GBP164.3m GBP61.6m GBP111.4m +47.6%
Gross profit margin 84.8% 85.7% 85.7% -0.9%pts
Administrative expenses GBP108.9m GBP54.9m GBP82.9m +31.3%
Group adjusted EBITDA1 GBP77.5m GBP30.6m N/A N/A
Group adjusted EBITDA1 pre-IFRS 16 GBP60.6m GBP15.1m GBP38.2m +58.6%
Group profit after tax GBP37.5m GBP1.7m GBP22.3m +68.1%
Adjusted group profit after tax2 GBP39.4m GBP1.7m GBP22.3m +77.0%
Free cash flow3 GBP34.8m GBP8.7m GBP14.4m +142.6%
Total dividend per share 14.53p nil 11.93p +21.8%
----------------------------------- --------- -------- --------- --------
1 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. Government grant income of GBP2.8m is
included in Group adjusted EBITDA for FY2021. The reconciliation to
operating profit is set out below in this section of the
report.
2 Adjusted group profit after tax is calculated as group profit
after tax, adding back the Teaquinn acquisition fees of GBP1.6m,
the non-cash expense of GBP0.4m related to the fair value of the
earn out consideration on the Teaquinn acquisition and deducting
the non-cash credit in relation to the Teaquinn bargain purchase of
GBP39,075.
3 Free cash flow is defined as net cash flow pre exceptional
items, cost of acquisitions, debt facility repayment, RCF
drawdowns, dividends and equity placing.
4 During FY2020 the Chancellor announced the reduced rate (TRR)
of VAT on hospitality activities from which bowling activities were
initially excluded. The Tenpin Bowling Proprietors Association has
been lobbying on the industry's behalf, since that date, for the
sector to be treated in line with the hospitality industry. We
received confirmation on 12 April 2022 that HMRC agreed that there
is indeed a clear distinction between the sport of competitive
bowling and the leisure activity of bowling - with the latter being
able to benefit from TRR of VAT retrospectively.
Following the introduction of the new lease accounting standard
IFRS 16, the Group has decided 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
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.
The trading periods of FY2020 and FY2021 were disrupted due to a
combination of COVID-19 lockdowns and trading restrictions once
open; therefore comparisons for this FY2022 financial review are
made with FY2019 (the last full year of uninterrupted trading)
unless otherwise stated.
All LFL revenue commentary excludes the impact of TRR of VAT on
bowling and revenue relating to the Group's Canadian business,
which was acquired in May 2022, as well as any new centres opened
from FY2019 onwards.
Revenue
The Group continued its trajectory of strong momentum from
FY2021 into FY2022, with significant LFL growth at 28.3 per cent
when compared to the same period in FY2019. It is worth noting that
the warm summer weather in the UK did not impact negatively on
revenues, with August 2022 recording the second-highest revenue
month (after August 2021) at GBP17.8m.
LFL revenue growth was a combination of a growth in spend per
game of 8.4 per cent, as well as game volume growth of 18.3 per
cent. The exceptionally strong LFL growth, alongside the
performance of the Group's new UK centres, resulted in record UK
revenues of GBP181.7m, and growth of 37.6 per cent compared to
FY2019. This excludes the prior periods impact of TRR of VAT on
bowling activities which was worth GBP5.8m.
The Group is very pleased with the performance of our Canadian
business Teaquinn since its acquisition in May 2022. Total revenues
were CAD 9.6m, (GBP6.2m) with Splitsville accounting for CAD
6.4m.
Total statutory revenue for FY2022 (including the prior periods
impact of TRR) was GBP193.7m.
Gross profit margin
Statutory gross profit was GBP164.3m with margin at 84.8 per
cent.
Gross profit for the UK business was GBP160.2m with a margin of
85.4 per cent. Excluding the prior periods impact of TRR of VAT,
gross profit was GBP154.4m at a margin of 85.0 per cent, a decline
of 70 basis points compared to FY2019, which was in line with
expectations.
Revenues grew across all categories, but the strongest growth
was seen in amusements, with LFL revenue growth of over 40 per
cent, outstripping other revenue lines. Given the amusements' lower
margin rate, this has impacted on the overall gross profit margin
but equated to more gross profit overall.
Gross profit for Teaquinn was in line with expectations at CAD
6.4m (GBP4.1m), with a margin of 66.2 per cent. This lower margin
rate when compared to the UK business is as guided on acquisition,
and is due to a combination of the higher food and drink mix in the
Splitsville centres, the lower amusement gross margin as well as
the effect of the lower gross profit margin of the Striker business
(which as a gross profit margin of circa. 30 per cent).
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.
Administrative expenses on a statutory basis were GBP108.9m. On
a pre-IFRS 16 basis, administrative expenses were GBP114.1m,
compared to GBP82.9m during the corresponding period in FY2019.
Employee costs in centres increased to GBP33.7m, an increase of
GBP8.7m when compared to FY2019, due to a combination of salary
increases over the periods and the impact of higher revenues. The
balance of the increase compared to FY2019 is in respect of new
centres in the UK and the employee costs in the Canadian business
of CAD 2.5m (GBP1.8m).
Total property-related costs, accounted for under pre-IFRS 16,
were GBP34.5m, with GBP33.3m for the UK business (FY2019:
GBP30.6m). Property costs in the UK increased by GBP2.7m, with new
centre costs of GBP4.5m, whilst business rates were lower due to
the government implemented COVID-19 concession in the first half of
FY2022.
Energy costs continue to be a focus for the Group. UK
electricity usage costs are hedged to the end of FY2024, and we
continue to work closely with our landlords to install solar panels
on more centres. In all, 17 centres had solar panels installed in
FY2022 resulting in nearly 30 per cent (22 centres) of our UK
estate benefiting from this technology. The Group generated
1,865,982 kWh of electricity from its solar panels and used
20,480,858 kWh of electricity in total. It is estimated that on an
annual basis, solar will generate up to 20 per cent of electricity
used.
Total property costs, under IFRS 16, were GBP35.9m, including
GBP9.8m accounted for as property lease assets depreciation and
GBP8.5m in implied interest relating to the lease liability under
IFRS 16.
Corporate costs include all central costs as well as the
out-performance bonus for centres. Total corporate costs increased
by GBP10.2m when compared to FY2019, to GBP22.1m. The main driver
of this increase is centre management out-performance bonuses,
which account for GBP6.4m incremental cost. This is reflective of
the hard work and commitment of our outstanding centre teams across
the estate. Other increases have been seen in marketing spend, of
GBP0.9m, and GBP1.4m in the support centre headcount as we continue
to invest in our teams.
Group adjusted EBITDA and operating profit
FY2022 FY2021
GBP'000 GBP'000
------------------------------------------------- -------- --------
Operating profit1 55,449 9,580
Depreciation and impairment 25,052 20,472
Amortisation 624 477
Loss on property, right-of-use assets, plant and
equipment and software disposal 18 29
Exceptional items (3,688) -
------------------------------------------------- -------- --------
Group adjusted EBITDA under IFRS 16 77,455 30,558
IFRS 16 adjustment2 (16,850) (15,416)
------------------------------------------------- -------- --------
Group adjusted EBITDA pre-IFRS 16 60,605 15,142
------------------------------------------------- -------- --------
1 Operating profit in FY2021 includes government grant income of GBP2.8m (FY2022: nil).
2 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.
Cash flow and net debt
FY2022 FY2021
GBP'000 GBP'000
--------------------------------------- -------- --------
Group adjusted EBITDA under IFRS 16 77,455 30,558
Movement in working capital 8,814 6,905
Maintenance capital expenditure (9,323) (5,951)
Taxation (6,616) -
Payment of capital elements of leases (14,450) (9,420)
Adjusted operating cash flow (OCF) 1 55,881 22,092
Adjusted OCF conversion 72.2% 72.3%
Expansionary capital expenditure2 (12,508) (3,631)
Disposal proceeds 2 -
Net bank loan interest paid (104) (1,207)
Lease interest paid (8,452) (7,952)
Debt repayments3 - (600)
Free cash flow (FCF) 4 34,819 8,702
Exceptional items 4,091 -
Acquisition of Teaquinn Holdings Inc (8,099) -
Cash acquired in Teaquinn Holdings Inc 415 -
Debt facility repayment3 - (24,900)
(Repayment)/drawdown of RCF3 - (4,000)
Dividends paid (5,132) -
Equity placing (net of fees) 30 29,356
Net cash flow 26,124 9,158
--------------------------------------- -------- --------
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 taking into account 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 Note 16 to the Financial Statements includes the aggregated
amounts debt repayments, debt facility repayment and
repayment/drawdown of the RCF.
4 Free cash flow is defined as net cash flow pre exceptional
items, cost of acquisitions, debt facility repayment, RCF
drawdowns, dividends and equity placing.
The statutory depreciation, amortisation and impairment charge
for FY2022 was GBP25.7m compared to GBP20.9m in FY2021. Excluding
property lease assets depreciation, this charge in FY2022 was
GBP14.1m. This is due to the continued capital investment
programme, including new centres and refurbishments.
Detailed impairment testing resulted in an impairment charge in
the year of GBP2.5m against property, plant and equipment and
GBP1.8m against right-of-use assets for three centres. The discount
rate used for the weighted average cost of capital (WACC) is
calculated with reference to the latest market assumptions for the
risk-free rate, equity risk premium and the cost of debt. These
discount rates were impacted by the volatility in the debt markets
as at 30 September 2022. The WACC discount rate (pre-tax) is 16.0
per cent (FY2021: 12.7 per cent).
Exceptional items
As a result of the HMRC position on TRR of VAT, the Group made a
retrospective claim for overpaid VAT, and the prior period amounts
have been classified as exceptional items. The total exceptional
income in relation to this, net of associated expenses, is GBP5.6m.
Note 5 to the financial statements includes more detail on the
impact of TRR of VAT included in the full year results.
Exceptional costs relate to the acquisition of Teaquinn.
Acquisitions costs totalled GBP1.6m. The earn out consideration for
Pat Haggerty has been recognised as an exceptional cost of GBP0.5m
in FY2022. The earn out consideration is considered as a post
acquisition employment expense and not in the scope of IFRS 3., but
instead is accounted for under IAS 19. The earn out has a cost
impact in the following financial years up to and including at
least FY2025.
More detail on this and the acquisition of Teaquinn is shown in
note 20 to the Financial Statements.
Group adjusted EBITDA and operating profit
Group adjusted EBITDA pre-IFRS 16 (excluding the prior periods
impact of TRR of VAT on bowling activities) increased to a record
GBP60.6m and includes a contribution of GBP1.0m from Teaquinn.
Compared to FY2019 this was an increase of 58.6 per cent. The
increase is primarily due to the increased revenue performance and
the Group's relatively fixed cost base.
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.
Share-based payments
During the year, the Group granted further Long Term Incentive
Plan (LTIP) shares to the senior leadership team. These 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 102 of the Annual Report. The
Group recognised a total charge of GBP939,812 in relation to the
Group's share-based LTIP arrangements. Share-based costs are not
classified as exceptional costs.
Financing
Finance costs decreased to GBP8.8m in FY2022 (FY2021: GBP9.1m)
comprising mainly of implied interest relating to the lease
liability under IFRS 16 of GBP8.2m. An amount of GBP0.2m is
associated with the Group bank borrowing facility.
The Group's bank borrowing facilities are a revolving credit
facility (RCF) of GBP25m at a margin rate of 1.75 per cent above
SONIA and an agreed accordion of GBP5m. The loan term runs to the
end of December 2024; and the RCF remains fully undrawn.
Cash flow and liquidity
The liquidity position of the Group remains strong, with a net
cash position of GBP56.1m as at 30 September 2022, compared to
GBP29.9m at 30 September 2021. Detail on the cash movement in the
year is shown in the table above.
Capital expenditure
During the financial year, the Group invested net capex of
GBP21.8m. A total of GBP3.6m was invested into the refurbishment
programme, with eight UK centres completed including a rebrand of
AMF to Hollywood Bowl in Shrewsbury, as well as interim spends of
GBP0.8m on two Canadian centres.
New UK centre capital expenditure was a net GBP9.2m. This
relates to the three centres opened in the year (GBP7.7m) as well
as interim payments totalling GBP1.5m in relation to Hollywood Bowl
Speke and Puttstars Peterborough, which opened in early FY2023.
The Group's strong balance sheet ensures that it can continue to
invest in profitable growth with plans to open more locations
during FY2023 and beyond.
Despite inflationary pressures, returns on these refurbishments
are expected to continue to exceed the Group's hurdle rate of 33
per cent.
The Group spent GBP9.3m on maintenance capital in the UK. This
includes GBP4.1m for the continued rollout of Pins on Strings
technology across the Group with 15 centres completed in FY2022,
bringing the total to 41 centres; as well as GBP1.5m spent on
installing further solar panels, with 22 centres now benefitting
from this technology.
Investments were also made to in-centre digital displays as well
as the Group's CRM, website and IT architecture to increase
performance and to continue to improve our customers' digital
experience.
In light of the rolling refurbishment programme, maintenance
capital, as well as new centres in the UK and Canada, we expect
capital expenditure to be in the region of GBP21m to GBP23m in
FY2023.
Taxation
The Group's tax charge for the year is GBP9.2m arising on the
profit before tax generated in the period.
Earnings
Statutory profit before tax for the year was a record GBP46.7m,
and 69.2 per cent higher than FY2019, the last comparable
period.
The Group delivered profit after tax of GBP37.5m (FY2021:
GBP1.7m and FY2019: GBP22.3m) and basic earnings per share was
21.91 pence (FY2021: 1.05 pence and FY2019: 14.86 pence).
Adjusted profit after tax is GBP39.4m. This is calculated to
take account of the impact of the costs associated with the
Teaquinn acquisition.
It is calculated as statutory profit after tax, adding back the
Teaquinn acquisition fees of GBP1.6m, the non-cash expense of
GBP0.4m related to earn out consideration on the Teaquinn
acquisition and deducting the non-cash credit in relation to the
Teaquinn bargain purchase of GBP39,075.
Dividend and capital allocation policy
The Board has declared a final dividend of 8.53 pence per share,
based on an adjusted profit after tax of GBP39.4m (adjusted
earnings per share of 23.07 pence).
Given the Group's strong liquidity position, the Board has
reviewed its capital allocation policy with the priorities for the
use of cash as follows:
-- Capital investment into the existing centres through an
effective maintenance and refurbishment programme
-- Investments into new centre opportunities, including expansion in both the UK and Canada
-- To pay and grow the ordinary dividend every year with a
payout of 50 per cent of adjusted profit after tax
-- Any excess cash will be available for additional distribution
to shareholders as the Board deems appropriate, without impacting
on our ability for investment in the growth of the business.
The Board believes that setting a proforma net cash1 to Group
adjusted EBITDA pre-IFRS 162 ratio target (net cash ratio target),
provides a good guide for the future allocation of surplus cash
within the business. The Board has set a net cash ratio target of
0.5 times and will look for this target to be achieved by the end
of FY2025, as set out below.
-- End of FY2022 0.600X
-- End of FY2023 0.570X
-- End of FY2024 0.535X
-- End of FY2025 0.500X
In line with this strategy, the Board has proposed a special
dividend of 3.0 pence per share be paid to shareholders alongside
the ordinary dividend of 8.53 pence per share, bringing the full
year dividend to 14.53 pence per share.
Subject to approval from shareholders at the AGM, the
ex-dividend date is 2 February 2023, with a record date of 3
February 2023 and a payment date of 24 February 2023.
Going concern
In assessing the going concern position of the Group for the
Consolidated Financial Statements for the year ended 30 September
2022, the Directors have considered the Group's cash flow,
liquidity, and business activities, as well as the principal risks
identified in the Group's Risk Register.
As at 30 September 2022, the Group had cash balances of
GBP56.1m, no outstanding loan balances, no COVID-19 concession
deferrals and an undrawn RCF of GBP25m, giving an overall liquidity
of GBP81.1m.
The Group has undertaken a review of its liquidity using a base
case and a severe but plausible downside scenario.
The base case is the Board approved budget for FY2023 as well as
the first three months of FY2024 which forms part of the Board
approved five-year plan. Under this scenario there would be
positive cash flow, strong profit performance and all covenants
would be passed. It should also be noted that the RCF remains
undrawn.
The most severe downside scenario stress tests for reasonably
adverse variations in the economic environment leading to a
deterioration in trading conditions and performance. Under this
severe but plausible downside scenario, the Group has modelled
revenues dropping by 4 per cent and 5 per cent for FY2023 and
FY2024 respectively, from the assumed base case and inflation
continues at an even higher rate than in the base case,
specifically around cost of labour. The model still assumes that
investments into new centres would continue, whilst refurbishments
in the early part of FY2024 would be reduced and the Pins on
Strings would be delayed until FY2025. These are all mitigating
factors that the Group has in its control. Under this scenario, the
Group will still be profitable and have sufficient liquidity within
its cash position to not draw down the RCF, with all financial
covenants passed.
Taking the above and the principal risks faced by the Group 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 12 months from the date of this
report.
Accordingly, the Group continues to adopt the going concern
basis in preparing these Financial Statements.
Outlook and guidance
We remain in a strong position to continue to take full
advantage of the opportunities we have both in the UK and Canada.
Our entry into Canada presents us with a significant opportunity to
apply our successful business model in a similarly fragmented and
underfunded market as the UK was ten years ago.
With UK electricity usage costs hedged to the end of FY2024 and
labour costs representing less than 20 per cent of revenue at
centre level, we have the ability to absorb most inflationary
pressures through the dynamics of our business.
We will continue to provide great value for money through
focused pricing, and we believe any price increases we may need to
pass on in FY2023 will be minimal. Our capital deployment
programmes remain unaffected. We believe we are able to achieve our
hurdle rate of 33 per cent return on investment in the seven
refurbishments taking place in FY2023. As a result of our improved
centre environments, together with the continued roll out of Pins
on Strings, dwell time should increase further and therefore
encourage higher customer spend.
Laurence Keen
Chief Financial Officer
15 December 2022
1 Proforma net cash is defined as cash and cash equivalents as
per the statement of financial position less any bank borrowings
less any final ordinary dividends for the financial year
2 Group adjusted EBITDA pre-IFRS 16 is calculated as shown on
page 45 of the Annual Report and excluding any impact from TRR of
VAT in current and prior periods
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. It should be noted that trading periods
for FY2020 and FY2021 were disrupted due to a combination of
COVID-19 lockdowns and trading restrictions once open, therefore
comparisons in this financial review use FY2019 as a base.
Like-for-like (LFL) revenue for FY2022 is calculated as:
-- Total revenues GBP193.7m, less
-- TRR of VAT for prior periods GBP5.8m, less
-- TRR of VAT for FY2022 GBP3.0m, less
-- New centres revenues from FY2019 onwards GBP12.2m, less
-- Teaquinn revenues GBP6.2m
New centres are included in the LFL revenue after they complete
the calendar anniversary of their opening date.
LFL comparatives for FY2019 are GBP129.9m.
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.
Spend per game is defined as UK revenue in the year (excluding
any revenues relating to TRR of VAT for prior years (GBP5.8m) and
TRR of VAT for FY2022 (GBP3.0m)) divided by the number of bowling
games and golf rounds played in the UK.
Adjusted operation 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 taking into account 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.
Expansionary capital expenditure includes all capital on new
centres, refurbishments and rebrands only.
Adjusted profit after tax is calculated as statutory profit
after tax, adding back the Teaquinn acquisition fees of GBP1.6m,
the non-cash expense of GBP0.4m related to the fair value of the
earn out consideration on the Teaquinn acquisition, as well as
deducting the non-cash credit in relation to the Teaquinn bargain
purchase. This adjusted profit after tax is also used to calculated
adjusted earnings per share.
Consolidated income statement and statement of comprehensive
income
Year ending 30 September 2022
Before Exceptional
exceptional items (note
items 5) Total
30 September 30 September 30 September 30 September
2022 2022 2022 2021
Note GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---- ------------- ------------- ------------- ------------
Revenue 3 187,949 5,792 193,741 71,878
Cost of sales (29,392) - (29,392) (10,257)
--------------------------------------- ---- ------------- ------------- ------------- ------------
Gross profit 158,557 5,792 164,349 61,621
--------------------------------------- ---- ------------- ------------- ------------- ------------
Other income - - - 2,814
Gain on bargain purchase 20 - 39 39 -
Administrative expenses 6 (106,796) (2,143) (108,939) (54,855)
--------------------------------------- ---- ------------- ------------- ------------- ------------
Operating profit 51,761 3,688 55,449 9,580
Finance income 8 12 - 12 -
Finance expenses 8 (8,774) (22) (8,796) (9,118)
--------------------------------------- ---- ------------- ------------- ------------- ------------
Profit before tax 42,999 3,666 46,665 462
Tax (charge)/credit 9 (8,135) (1,079) (9,214) 1,266
--------------------------------------- ---- ------------- ------------- ------------- ------------
Profit for the year attributable
to equity shareholders 34,864 2,587 37,451 1,728
Other comprehensive income
Retranslation gain of foreign currency
denominated operations 411 - 411 -
--------------------------------------- ---- ------------- ------------- ------------- ------------
Total comprehensive income for
the year attributable to equity
shareholders 35,275 2,587 37,862 1,728
--------------------------------------- ---- ------------- ------------- ------------- ------------
Basic earnings per share (pence) 10 21.91 1.05
Diluted earnings per share (pence) 10 21.78 1.04
--------------------------------------- ---- ------------- ------------- ------------- ------------
Consolidated statement of financial position
As at 30 September 2022
30 September 30 September
2022 2021
Note GBP'000 GBP'000
------------------------------------- ---- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 11 68,641 49,036
Right-of-use assets 12 147,455 132,342
Goodwill and intangible assets 13 81,794 77,948
Deferred tax asset 17 1,647 6,290
------------------------------------- ---- ------------ ------------
299,537 265,616
------------------------------------- ---- ------------ ------------
Current assets
Cash and cash equivalents 56,066 29,942
Trade and other receivables 14 5,130 3,300
Corporation tax receivable 271 650
Inventories 2,148 1,461
------------------------------------- ---- ------------ ------------
63,615 35,353
------------------------------------- ---- ------------ ------------
Total assets 363,152 300,969
------------------------------------- ---- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 15 28,681 18,142
Lease liabilities 12 11,557 13,811
------------------------------------- ---- ------------ ------------
40,238 31,953
------------------------------------- ---- ------------ ------------
Non-current liabilities
Other payables 15 3,000 565
Lease liabilities 12 176,812 160,129
Provisions 4,682 3,635
------------------------------------- ---- ------------ ------------
184,494 164,329
------------------------------------- ---- ------------ ------------
Total liabilities 224,732 196,282
------------------------------------- ---- ------------ ------------
NET ASSETS 138,420 104,687
------------------------------------- ---- ------------ ------------
Equity attributable to shareholders
Share capital 1,711 1,706
Share premium 39,716 39,691
Merger reserve (49,897) (49,897)
Foreign currency translation reserve 411 -
Retained earnings 146,479 113,187
------------------------------------- ---- ------------ ------------
TOTAL EQUITY 138,420 104,687
------------------------------------- ---- ------------ ------------
Consolidated statement of changes in equity
For the year ended 30 September 2022
Foreign
currency
Share Share Merger translation Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- ------------ --------- --------
Equity at 30 September
2020 1,575 10,466 (49,897) - 111,350 73,494
---------------------------- -------- -------- -------- ------------ --------- --------
Shares issued during
the year 131 29,225 - - - 29,356
Share-based payments - - - - 16 16
Deferred tax on share-based
payments - - - - 93 93
Profit for the year - - - - 1,728 1,728
---------------------------- -------- -------- -------- ------------ --------- --------
Equity at 30 September
2021 1,706 39,691 (49,897) - 113,187 104,687
Shares issued during
the year 5 25 - - - 30
Dividends paid - - - - (5,132) (5,132)
Share-based payments - - - - 944 944
Deferred tax on share-based
payments - - - - 29 29
Retranslation of foreign
currency denominated
operations - - - 411 - 411
Profit for the year - - - - 37,451 37,451
---------------------------- -------- -------- -------- ------------ --------- --------
Equity at 30 September
2022 1,711 39,716 (49,897) 411 146,479 138,420
---------------------------- -------- -------- -------- ------------ --------- --------
Consolidated statement of cash flows
For the year ended 30 September 2022
Restated
1
30 September 30 September
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------- ------ -------------- --------------
Cash flows from operating activities
Profit before tax 46,665 462
Adjusted by:
Depreciation of property, plant and equipment
(PPE) 11 8,721 7,740
Depreciation of right-of-use (ROU) assets 12 12,010 11,882
Amortisation of intangible assets 13 624 477
Impairment of PPE and ROU assets 11, 12 4,321 850
Net interest expense 8 8,784 9,118
Loss on disposal of property, plant and equipment
and software 18 29
COVID-19 rent concessions1 - (2,110)1
Gain on bargain purchase 20 (39) -
Share-based payments 944 16
-------------------------------------------------- ------ -------------- --------------
Operating profit before working capital changes 82,048 28,4641
Increase in inventories (423) (121)
Increase in trade and other receivables (1,248) (1,446)
Increase in payables and provisions 9,983 8,456
-------------------------------------------------- ------ -------------- --------------
Cash inflow generated from operations 90,360 35,3531
Interest received 12 -
Income tax paid - corporation tax (6,616) -
Bank interest paid (115) (1,207)
Lease interest paid (8,452) (7,952)
-------------------------------------------------- ------ -------------- --------------
Net cash inflow from operating activities 75,189 26,1941
-------------------------------------------------- ------ -------------- --------------
Cash flows from investing activities
Acquisition of subsidiaries 20 (8,099) -
Subsidiary cash acquired 20 415 -
Purchase of property, plant and equipment (21,653) (9,330)
Purchase of intangible assets (178) (252)
Sale of assets 2 -
-------------------------------------------------- ------ -------------- --------------
Net cash used in investing activities (29,513) (9,582)
-------------------------------------------------- ------ -------------- --------------
Cash flows from financing activities
Repayment of bank loan - (29,500)
Payment of capital elements of leases (14,450) (7,310)1
Issue of shares 30 29,356
Dividends paid (5,132) -
-------------------------------------------------- ------ -------------- --------------
Net cash used in financing activities (19,552) (7,454)1
-------------------------------------------------- ------ -------------- --------------
Net change in cash and cash equivalents for
the year 26,124 9,158
Cash and cash equivalents at the beginning
of the year 29,942 20,784
-------------------------------------------------- ------ -------------- --------------
Cash and cash equivalents at the end of the
year 56,066 29,942
-------------------------------------------------- ------ -------------- --------------
1 Following the FRC's corporate reporting review of the Group's
Annual Report and Accounts to 30 September 2021, GBP2,110,000 of
COVID-19 rent concessions disclosed as payment of capital elements
of leases under cash flows from financing activities in the 2021
financial statements have been restated as adjustments to cash
flows from operating activities within the 2021 comparative above.
The effect of this change is a decrease of GBP2,110,000 in net cash
used in financing activities and a decrease in net cash inflow from
operating activities. There is no impact to the net change in cash
and cash equivalents for the year. See note 21 'Cash flow
information'.
Notes to the financial statements
For the year ended 30 September 2022
1. General information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2022
or 2021, but is derived from these accounts. Statutory accounts for
2021 have been delivered to the registrar of companies, and those
for 2022 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters which the auditor drew attention
by way of emphasis without qualifying their 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 whose shares are publicly
traded on the London Stock Exchange and 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.
On 24 May 2022, the Company acquired Teaquinn Holdings Inc.
(Teaquinn). Teaquinn comprises of Splitsville, an operator of
ten-pin bowling centres and Striker Bowling Solutions, a supplier
and installer of bowling equipment, based in Canada. Teaquinn is
consolidated in Hollywood Bowl Group plc's Financial Statements
with effect from 24 May 2022.
The Group's principal activities are that of the operation of
ten-pin bowling and mini-golf centres, and a supplier and installer
of bowling equipment as well as the development of new centres and
other associated activities.
The Directors of the Group are responsible for the consolidated
Financial Statements, which comprise the Financial Statements of
the Company and its subsidiaries as at 30 September 2022.
2. Accounting policies
The principal accounting policies applied in the consolidated
Financial Statements are set out below. These accounting policies
have been applied consistently to all periods presented in these
consolidated Financial Statements. The financial information
presented is as at and for the financial years ended 30 September
2022 and 30 September 2021.
Statement of compliance
The consolidated Financial Statements have been prepared in
accordance with UK-adopted International Account Standards and the
requirements of the Companies Act 2006. The functional currency of
entities in the Group are Pounds Sterling and Canadian Dollars. The
consolidated Financial Statements are presented in Pounds Sterling
and all values are rounded to the nearest thousand, except where
otherwise indicated.
Basis of preparation
The consolidated Financial Statements have been prepared on a
going concern basis under the historical cost convention, except
for fair value items on acquisition (see note 20).
The Company has elected to prepare its Financial Statements in
accordance with FRS 102, the Financial Reporting Standard
applicable in the UK and Republic of Ireland. On publishing the
Parent Company Financial Statements here together with the Group
Financial Statements, the Company has taken advantage of the
exemption in s408 of the Companies Act 2006 not to present its
individual income statement and statement of comprehensive income
and related notes that form a part of these approved Financial
Statements.
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 below the cost of acquisition.
Intragroup balances and any unrealised gains and losses or income
and expenses arising from intragoup transactions are eliminated in
preparing the consolidated financial statements.
The results of Teaquinn are included from the date of
acquisition on 24 May 2022.
Earnings per share
The calculation of earnings per ordinary share is based on
earnings after tax and the weighted average number of ordinary
shares in issue during the year.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The Group has two types of
dilutive potential ordinary shares, being those unvested shares
granted under the Long Term Incentive Plans and Save-As-You-Earn
plans.
Standards issued not yet effective
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. These
are listed below:
Applicable
for financial
years beginning
Standard/interpretation Content on/after
---------------------------------- ---------------------------------------------------- ----------------
IAS 1 Classification In January 2020, the IASB issued amendments
of liabilities to paragraphs 69 to 76 of IAS 1 to specify
as current or the requirements for classifying liabilities 1 October
non-current as current or non-current. 2023
---------------------------------- ---------------------------------------------------- ----------------
IAS 1 Presentation
of financial
statements and
IFRS Practice The amendments change the requirements in
Statement 2 making IAS 1 with regard to disclosure of accounting
materiality judgements-disclosure policies. The amendments replace all instances
of accounting of the term 'significant accounting policies' 1 October
policies with 'material accounting policy information'. 2023
---------------------------------- ---------------------------------------------------- ----------------
The amendments replace the definition of a
change in accounting estimates with a new
definition of accounting estimates. Under
IAS 8 Definition the new definition, accounting estimates are
of accounting 'monetary amounts in financial statements 1 October
estimates that are subject to measurement uncertainty'. 2023
---------------------------------- ---------------------------------------------------- ----------------
The amendments introduce a further exception
from the initial recognition exemption. Under
the amendments, an entity does not apply the
IAS 12 Deferred initial recognition exemption for transactions
tax related to that give rise to equal taxable and deductible
assets and liabilities temporary differences. Following the amendments
arising from to IAS 12, an entity is required to recognise 1 October
a single transaction the related deferred tax asset and liability. 2023
---------------------------------- ---------------------------------------------------- ----------------
In May 2017, the IASB issued IFRS 17 Insurance
Contracts (IFRS 17), a comprehensive new accounting
standard for insurance contracts covering
recognition and measurement, presentation
and disclosure. Once effective, IFRS 17 will
IFRS 17 Insurance replace IFRS 4 Insurance Contracts (IFRS 4) 1 October
contracts that was issued in 2005. 2023
---------------------------------- ---------------------------------------------------- ----------------
The annual improvements include amendments
to four Standards: IFRS 1 First-time adoption
Annual improvements of International Financial Reporting Standards,
to IFRS Standards IFRS 9 Financial Instruments, IFRS 16 Leases, 1 October
2018-2020 and IAS 41 Agriculture. 2022
---------------------------------- ---------------------------------------------------- ----------------
IFRS 3 Reference In May 2020, the IASB issued amendments to
to the conceptual IFRS 3 Business Combinations - Reference to 1 October
framework the Conceptual Framework. 2022
---------------------------------- ---------------------------------------------------- ----------------
In May 2020, the IASB issued property, plant
and equipment: proceeds before intended use,
which prohibits entities deducting from the
cost of an item of property, plant and equipment
IAS 16 Property, any proceeds from selling items produced while
plant and equipment: bringing that asset to the location and condition
proceeds before necessary for it to be capable of operating 1 October
intended use in the manner intended by management. 2022
---------------------------------- ---------------------------------------------------- ----------------
IAS 37 Provisions, In May 2020, the IASB issued amendments to
contingent liabilities specify which costs a company includes when
and contingent assessing whether a contract will be loss 1 October
assets making. 2022
---------------------------------- ---------------------------------------------------- ----------------
None of the above amendments are expected to have a material
impact on the Group.
Going concern
In assessing the going concern position of the Group for the
Consolidated Financial Statements for the year ended 30 September
2022, the Directors have considered the Group's cash flow,
liquidity, and business activities, as well as the principal risks
identified in the Groups Risk Register.
As at 30 September 2022, the Group had cash balances of
GBP56.1m, no outstanding loan balances, no COVID-19 concession
deferrals and an undrawn RCF of GBP25m, giving an overall liquidity
of GBP81.1m.
The Group has undertaken a review of its liquidity using a base
case and a severe but plausible downside scenario.
The base case is the Board approved budget for FY2023 as well as
the first three months of FY2024 which forms part of the Board
approved five-year plan. Under this scenario there would be
positive cash flow, strong profit performance and all covenants
would be passed. It should also be noted that the RCF remains
undrawn. Furthermore, it is assumed that the Group adhere to its
capital allocation policy as outlined in the Chief Financial
Officer's review.
The most severe downside scenario stress tests for reasonably
adverse variations in the economic environment leading to a
deterioration in trading conditions and performance.
Under this severe but plausible downside scenario, the Group has
modelled revenues dropping by circa 4 and 5 per cent from the
assumed base case for FY2023 and FY2024 respectively and inflation
continues at an even higher rate than in the base case,
specifically around cost of labour.
The model still assumes that investments into new centres would
continue, whilst refurbishments in the early part of FY2024 would
be reduced and further Pins on Strings installs would be delayed
until FY2025. These are all mitigating factors that the Group has
in its control. Under this scenario, the Group will still be
profitable and have sufficient liquidity within its cash position
to not draw down the RCF, with all financial covenants passed.
Taking the above and the principal risks faced by the Group 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 12 months from the date of this
report.
Accordingly, the Group continues to adopt the going concern
basis in preparing these Financial Statements.
In preparing the financial statements management has considered
the impact of climate change, taking into account the relevant
disclosures in the Strategic report, including those made in
accordance with the recommendations of the Task Force on
Climate-related Financial Disclosure.
The expected environmental impact of climate change on the
business has been modelled. The current available information and
assessment did not identify any risks that would require the useful
economic lives of assets to be reduced in the year or identify the
need for impairment that would impact the carrying values of such
assets or have any other impact on the financial statements. The
impact assessments will be continuously updated to reflect the
latest available information on the impact of climate change.
Leases
The Group as lessee
The Group assesses whether a contract is, or contains, a lease,
at inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee from the date at which the
leased asset becomes available for use by the Group, except for
short-term leases (defined as leases with a lease term of 12 months
or less) and leases of low-value assets. For these leases, the
Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, less any lease
incentives received. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease term and the
estimated useful lives of the assets. The lease term is the
non-cancellable period for which the lessee has the right to use an
underlying asset plus periods covered by an extension option if an
extension is reasonably certain. The majority of property leases
are covered by the Landlord and Tenant Act 1985 (LTA) which gives
the right to extend the lease beyond the termination date. The
Group expects to extend the property leases covered by the LTA.
This extension period is not included within the lease term as a
termination date cannot be determined as the Group are not
reasonably certain to extend the lease given the contractual rights
of the landlord under certain circumstances.
Lease liabilities are measured at the present value of lease
payments to be made over the lease term. The lease payments include
fixed payments (including in-substance fixed payments) less any
lease incentives receivable and variable lease payments that depend
on an index or a rate. Variable lease payments that do not depend
on an index or a rate are recognised as expenses in the period in
which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term or a change in the lease
payments (e.g. changes to future payments resulting from a change
in an index or rate used to determine such lease payments).
The Group applies IAS 36 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss
as described in the 'impairment' policy.
As a practical expedient, IFRS 16 permits a lessee not to
separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The
Group has not used this practical expedient. For contracts that
contain a lease component and one or more additional lease or
non-lease components, the Group allocates the consideration in the
contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e. those leases
that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases of office
equipment that are considered to be low value. Lease payments on
short-term leases and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Amendments to IFRS 16: COVID-19 Related Rent Concessions
On 28 May 2020, the IASB issued COVID-19-Related Rent
Concessions - amendment to IFRS 16 Leases. The amendments provide
relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct
consequence of the COVID-19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a COVID-19-related rent
concession from a lessor is a lease modification. A lessee that
makes this election accounts for any change in lease payments
resulting from the COVID-19-related rent concession the same way it
would account for the change under IFRS 16, if the change were not
a lease modification. The practical expedient was adopted by the
Group and the impact on the consolidated Financial Statements is
outlined in note 12.
Summary of critical accounting estimates and judgements
The preparation of the consolidated 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
consolidated Group Financial Statements are discussed 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 reviewed 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 11 and
12 respectively.
Other estimates
The acquisition of Teaquinn Holdings Inc. has 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 (note 20). The fair value of the net
assets identified were determined with assistance from independent
experts using professional valuation techniques appropriate to the
individual category of asset or liability. Calculating the fair
values of net assets, notably the fair values of contingent
consideration, freehold property and intangible assets identified
as part of the purchase price allocation, involves estimation and
consequently the fair value exercise is recorded as an other
accounting estimate. The depreciation and amortisation charge is
sensitive to the value of the freehold property and intangible
asset values, so a higher or lower fair value calculation would
lead to a change in the depreciation and 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.
3. Segmental reporting
Management consider that the Group consists of 2 operating
segments, as it operates within the UK and Canada (30 September
2021: UK only, no exceptional income). No single customer provides
more than ten per cent of the Group's revenue. Within these two
operating segment there are multiple revenue streams which consist
of the following:
Before Exceptional
exceptional income
income UK (note
UK 5) Total UK Canada Total
30 September 30 September 30 September 30 September 30 September 30 September
2022 2022 2022 2022 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- ------------- ------------- ------------- ------------- ------------
Bowling 86,409 5,792 92,201 2,253 94,454 34,769
Food and drink 46,660 - 46,660 1,067 47,727 17,396
Amusements 46,510 - 46,510 773 47,283 18,625
Mini-golf 1,973 - 1,973 - 1,973 1,076
Installation of bowling
equipment - - - 2,040 2,040 -
Other 176 - 176 88 264 12
------------------------ ------------- ------------- ------------- ------------- ------------- ------------
181,728 5,792 187,520 6,221 193,741 71,878
------------------------ ------------- ------------- ------------- ------------- ------------- ------------
The UK operating segment includes the Hollywood Bowl, AMF
Bowling and Puttstars brands. The Canada operating segment includes
the Splitsville and Striker Bowling Solutions brands.
UK Canada Total
Year ended 30 September 2022 GBP'000 GBP'000 GBP'000
------------------------------------------------ -------- -------- --------
Revenue 187,520 6,221 193,741
Group adjusted EBITDA as defined in note 4 76,289 1,166 77,455
Operating profit 54,673 776 55,449
Finance income - 12 12
Finance expense 8,541 255 8,796
Depreciation and amortisation 20,965 390 21,355
Impairment of PPE and ROU assets 4,321 - 4,321
------------------------------------------------ -------- -------- --------
Profit before tax 46,132 533 46,665
------------------------------------------------ -------- -------- --------
Non-current asset additions - Property, plant
and equipment 21,750 322 22,072
Non-current asset additions - Intangible assets 108 70 178
------------------------------------------------ -------- -------- --------
Total assets 339,194 25,492 364,686
------------------------------------------------ -------- -------- --------
Total liabilities 208,549 17,717 226,266
------------------------------------------------ -------- -------- --------
4. Reconciliation of operating profit to Group adjusted
EBITDA
30 September 30 September
2022 2021
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Operating profit 55,449 9,580
Depreciation of property, plant and equipment (note
11) 8,721 7,740
Depreciation of right-of-use assets (note 12) 12,010 11,882
Amortisation of intangible assets (note 13) 624 477
Impairment of property, plant and equipment (note
11) 2,535 299
Impairment of right-of-use assets (note 12) 1,786 551
Loss on disposal of property, plant and equipment,
right-of-use assets and software (notes 11-13) 18 29
Exceptional items (note 5) (3,688) -
---------------------------------------------------- ------------ ------------
Group adjusted EBITDA 77,455 30,558
---------------------------------------------------- ------------ ------------
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. Operating profit in FY2021 includes government
grant income of GBP2,814,000.
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.
5. 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:
30 September 30 September
Exceptional items: 2022 2021
----------------------------- ------------ ------------
VAT rebate 1 5,792 -
Administrative expenses 2 (144) -
Acquisition fees 3 (1,557) -
Gain on bargain purchase 4 39 -
Contingent consideration 5 (464) -
----------------------------- ------------ ------------
Exceptional items before tax (3,666) -
Tax charge (1,079) -
----------------------------- ------------ ------------
Exceptional items after tax (2,587) -
----------------------------- ------------ ------------
1 During the year, 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, the Group made a retrospective claim
for overpaid output VAT for the period 15 July 2020 to 30 September
2021 totalling GBP5,792,000, included within bowling revenue.
2 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 acquisition of
Teaquinn during the year (note 20).
4 Gain on bargain purchase in relation to the acquisition of
Teaquinn during the year (note 20).
5 Contingent consideration of GBP442,000 in administrative
expenses and GBP22,000 of interest expense in relation to the
acquisition of Teaquinn during the year (note 20).
6. Expenses and auditor's remuneration
Included in profit from operations are the following:
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
Amortisation of intangible assets 624 477
Depreciation of property, plant and equipment 8,721 7,740
Depreciation of right-of-use assets 12,010 11,882
Impairment of property, plant and equipment 2,535 299
Impairment of right-of-use assets 1,786 551
Operating leases 57 43
Loss on disposal of property, plant and equipment,
right-of-use assets and software 18 29
Exceptional items (note 5) (3,666) -
Loss on foreign exchange 154 16
------------------------------------------------------- ------------ ------------
Auditor's remuneration:
- Fees payable for audit of these Financial Statements 317 228
Fees payable for other services:
- Audit of subsidiaries 66 82
- Other services 16 11
------------------------------------------------------- ------------ ------------
399 321
------------------------------------------------------- ------------ ------------
7. Staff numbers and costs
The average number of employees (including Directors) during the
year was as follows:
30 September 30 September
2022 2021
--------------- ------------ ------------
Directors 7 6
Administration 91 58
Operations 2,432 1,723
--------------- ------------ ------------
Total staff 2,530 1,787
--------------- ------------ ------------
The cost of employees (including Directors) during the year was
as follows:
30 September 30 September
2022 2021
GBP'000 GBP'000
---------------------- ------------ ------------
Wages and salaries 42,808 15,853
Social security costs 3,600 1,648
Pension costs 475 336
Share-based payments 944 16
---------------------- ------------ ------------
Total staff cost 47,827 17,853
---------------------- ------------ ------------
FY2022 wages and salaries includes GBP442,000 of contingent
consideration in relation to the acquisition of Teaquinn (note
20).
FY2021 wages and salaries includes GBP8,287,000 of Coronavirus
Job Retention Scheme government grant received.
8. Finance income and expenses
30 September 30 September
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Interest on bank deposits 12 -
-------------------------------------------------- ------------ ------------
Finance income 12 -
-------------------------------------------------- ------------ ------------
Interest on bank borrowings 199 1,155
Other interest 2 3
Finance costs on lease liabilities 8,452 7,952
Unwinding of discount on contingent consideration 46 -
Unwinding of discount on provisions 97 8
-------------------------------------------------- ------------ ------------
Finance expense 8,796 9,118
-------------------------------------------------- ------------ ------------
9. Taxation
30 September 30 September
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
The tax expense/(credit) is as follows:
- UK corporation tax 6,436 (384)
- Adjustment in respect of prior years 10 20
- Foreign tax suffered 250 -
- Effects of foreign exchange 3 -
-------------------------------------------------- ------------ ------------
Total current tax 6,699 (364)
Deferred tax:
Origination and reversal of temporary differences 2,431 287
Effect of changes in tax rates 95 (1,202)
Adjustment in respect of prior years (11) 13
-------------------------------------------------- ------------ ------------
Total deferred tax 2,515 (902)
-------------------------------------------------- ------------ ------------
Total tax expense/(credit) 9,214 (1,266)
-------------------------------------------------- ------------ ------------
Factors affecting current tax credit:
The tax assessed on the profit for the period is different to
the standard rate of corporation tax in the UK of 19 per cent (30
September 2021: 19 per cent). The differences are explained
below:
30 September 30 September
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Profit excluding taxation 46,665 462
----------------------------------------------------- ------------ ------------
Tax using the UK corporation tax rate of 19% (2021:
19%) 8,866 88
Change in tax rate on deferred tax balances 95 (1,202)
Non-deductible expenses 388 22
Non-deductible acquisition related exceptional costs 296 -
Effects of overseas tax rates 66 -
Effects of capital allowances super deduction (577) (137)
Share-based payments 81 (69)
Adjustment in respect of prior years (1) 32
----------------------------------------------------- ------------ ------------
Total tax expense/(credit) included in profit or
loss 9,214 (1,266)
----------------------------------------------------- ------------ ------------
The Group's standard tax rate for the year ended 30 September
2022 was 19 per cent (30 September 2021: 19 per cent).
At Budget March 2021, the government confirmed that the
corporation tax main rate would remain at 19 per cent and increase
to 25 per cent from 1 April 2023. As such, the rate used to
calculate the deferred tax balances has increased from 19 per cent
to a blended rate up to 25 per cent depending on when the deferred
tax balance will be released.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of Hollywood Bowl Group plc by the
weighted average number of shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. During the
years ended 30 September 2022 and 30 September 2021, the Group had
potentially dilutive ordinary shares in the form of unvested shares
pursuant to LTIPs and SAYE schemes.
30 September 30 September
2022 2021
------------------------------------------------- ------------ ------------
Basic and diluted
Profit for the year after tax (GBP'000) 37,451 1,728
Basic weighted average number of shares in issue
for the period (number) 170,949,286 164,607,791
Adjustment for share awards 963,218 859,432
------------------------------------------------- ------------ ------------
Diluted weighted average number of shares 171,912,504 165,467,223
------------------------------------------------- ------------ ------------
Basic earnings per share (pence) 21.91 1.05
Diluted earnings per share (pence) 21.78 1.04
------------------------------------------------- ------------ ------------
11. Property, plant and equipment
Plant and
machinery,
Freehold Long leasehold Short leasehold Lanes and fixtures
property property property pinspotters and Total
GBP'000 GBP'000 GBP'000 GBP'000 fittings GBP'000
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Cost
At 1 October 2020 - 1,240 28,652 12,269 36,157 78,318
Additions - - 1,435 1,489 6,406 9,330
Disposals - - (424) (448) (406) (1,278)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2021 - 1,240 29,663 13,310 42,157 86,370
Additions - - 8,127 5,238 8,707 22,072
Acquisition of Teaquinn
Holdings Inc. (note
20) 7,061 - 872 284 237 8,454
Disposals - - (24) (796) (595) (1,415)
Effects of movement
in foreign exchange 345 - 48 14 12 419
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2022 7,406 1,240 38,686 18,050 50,518 115,900
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Accumulated depreciation
At 1 October 2020 - 292 11,011 4,347 14,448 30,098
Depreciation charge - 48 2,773 694 4,225 7,740
Impairment charge - - - - 299 299
Disposals - - (38) (428) (337) (803)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2021 - 340 13,746 4,613 18,635 37,334
Depreciation charge 24 48 3,047 706 4,896 8,721
Impairment charge - - 2,088 - 447 2,535
Disposals - - (24) (785) (522) (1,331)
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2022 24 388 18,857 4,534 23,456 47,259
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Net book value
At 30 September 2022 7,382 852 19,829 13,516 27,062 68,641
------------------------- ---------- --------------- --------------- ------------ ----------- --------
At 30 September 2021 - 900 15,917 8,697 23,522 49,036
------------------------- ---------- --------------- --------------- ------------ ----------- --------
Plant and machinery, fixtures and fittings includes GBP2,916,000
(30 September 2021: GBP2,162,000) of assets in the course of
construction, relating to the development of new centres.
Impairment
Impairment testing is carried out at the CGU level on an annual
basis at the balance sheet date, or more frequently if events or
changes in circumstances indicate that the carrying value may be
impaired. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. Each individual
centre is considered to be a CGU.
An initial impairment test was performed on all seventy three
centres assessing for indicators of impairment. A detailed
impairment test based on a base case was then performed on nine
centres, where the excess of value-in-use over the carrying value
calculation was sensitive to changes in the key assumptions.
Property, plant and equipment and right-of-use assets for nine
centres have been tested for impairment by comparing the carrying
value of each CGU with its recoverable amount determined from
value-in-use calculations using cash flow projections based on
financial budgets approved by the Board covering a five-year
period. This base case assumes all centres remain open during
FY2023, and the financial years thereafter, and there are no
further trading restrictions associated with the COVID-19
pandemic.
The key assumptions used in the value-in-use calculations are
the potential adverse variations in the economic environment
leading to a deterioration in trading conditions and performance
during FY2023 and FY2024. Cash flows beyond this two-year period
are included in the Board-approved five-year plan and assume a
recovery in the economy and the performance of our centres. The
other assumptions used in the value-in-use calculations were:
2022 2021
--------------------------------- ----- -----
Discount rate (pre-tax) 16.0% 12.7%
Growth rate (beyond three years) 2.5% 2.5%
--------------------------------- ----- -----
Discount rates reflect current market assessments of the time
value of money and the risks specific to the industry. 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 risk premium and the cost of debt. These discount rates were
impacted by the volatility in the debt markets at the time of
calculation, 30 September 2022.
Detailed impairment testing resulted in the recognition of an
impairment charge in the year of GBP2,535,000 (FY2021: GBP299,000)
against property, plant and equipment assets and GBP1,786,000
(FY2021: GBP551,000) against right-of-use assets for three UK
centres (note 12). Following the recognition of the impairment
charge, the carrying value of property, plant and equipment is
GBP3,456,000 and right-of-use assets is GBP3,151,000 for these
three UK centres (note 12).
Sensitivity to changes in assumptions
The estimate of the recoverable amounts for six centres affords
reasonable headroom over the carrying value of the property, plant
and equipment and right-of-use asset, and an impairment charge of
GBP2,535,000 for three centres under the base case. Management have
sensitised the key assumptions in the impairment tests of these
nine centres under the base case.
A reduction in revenue of four and five percentage points down
on the base case for FY2023 and FY2024 respectively and an increase
in operating costs to reflect higher inflation would not cause the
carrying value to exceed its recoverable
amount for these six centres. Therefore, management believe that
any reasonable possible changes in the key assumptions would not
result in an impairment charge. A further impairment of GBP400,000
would arise under this sensitised case in relation to three centres
where we have already recognised an impairment charge in the
year.
12. 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 ten (FY2021: eight) 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 year:
Amusement
Property machines Total
Right-of-use assets GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- --------- --------
Cost
At 1 October 2020 139,699 7,662 147,361
Lease additions 2,581 587 3,168
Lease surrenders - (140) (140)
Lease modifications 6,442 - 6,442
-------------------------------------------- -------- --------- --------
At 30 September 2021 148,722 8,109 156,831
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. (note
20) 11,510 - 11,510
Lease surrenders - (332) (332)
Lease modifications 5,640 - 5,640
Effects of movement in foreign exchange 583 - 583
-------------------------------------------- -------- --------- --------
At 30 September 2022 174,260 11,239 185,499
-------------------------------------------- -------- --------- --------
Accumulated depreciation
At 1 October 2020 9,742 2,443 12,185
Depreciation charge 9,339 2,543 11,882
Impairment charge 551 - 551
Lease surrenders - (129) (129)
-------------------------------------------- -------- --------- --------
At 30 September 2021 19,632 4,857 24,489
Depreciation charge 9,846 2,164 12,010
Impairment charge 1,786 - 1,786
Lease surrenders - (241) (241)
-------------------------------------------- -------- --------- --------
At 30 September 2022 31,264 6,780 38,044
-------------------------------------------- -------- --------- --------
Net book value
At 30 September 2022 142,996 4,459 147,455
-------------------------------------------- -------- --------- --------
At 30 September 2021 129,090 3,252 132,342
-------------------------------------------- -------- --------- --------
Set out below are the carrying amounts of lease liabilities and
the movements during the year:
Amusement
Property machines Total
Lease liabilities GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- --------- --------
At 1 October 2020 167,100 6,704 173,804
Lease additions 2,581 587 3,168
Accretion of interest 7,836 116 7,952
Lease modifications 6,442 (11) 6,431
Payments1 (15,429) (1,986) (17,415)
-------------------------------------------- -------- --------- --------
At 30 September 2021 168,530 5,410 173,940
Lease additions 7,805 3,462 11,267
Acquisition of Teaquinn Holdings Inc. (note
20) 11,510 - 11,510
Accretion of interest 8,354 98 8,452
Lease modifications 5,640 (157) 5,483
Payments2 (19,873) (2,994) (22,867)
Effects of movement in foreign exchange 584 - 584
-------------------------------------------- -------- --------- --------
At 30 September 2022 182,550 5,819 188,369
-------------------------------------------- -------- --------- --------
Current 9,027 2,530 11,557
Non-current 173,523 3,289 176,812
-------------------------------------------- -------- --------- --------
At 30 September 2022 182,550 5,819 188,369
-------------------------------------------- -------- --------- --------
Current 11,644 2,167 13,811
Non-current 156,886 3,243 160,129
-------------------------------------------- -------- --------- --------
At 30 September 2021 168,530 5,410 173,940
-------------------------------------------- -------- --------- --------
1 In FY2021, as a result of COVID-19 rent concessions,
GBP991,000 of property payments and GBP745,000 of amusement machine
payments noted above were deferred during the year and are netted
off the payments. A further GBP2,110,000 of rent savings were taken
to profit or loss as a credit to variable lease payments within
administrative expenses.
2 In FY2022, GBP35,000 (FY2021: GBP43,000) of rent payments were
part of the working capital movements in the year.
The following are the amounts recognised in profit or loss:
2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Depreciation expense of right-of-use assets 12,010 11,882
Impairment charge of right-of-use assets 1,786 551
Interest expense on lease liabilities 8,452 7,952
Expense relating to leases of low-value assets (included
in administrative expenses) 57 43
Variable lease payments (included in administrative
expenses) 788 581
COVID-19 rent savings (included in administrative
expenses) - (2,110)
--------------------------------------------------------- -------- --------
Total amount recognised in profit or loss 23,093 18,899
--------------------------------------------------------- -------- --------
The Group has contingent lease contracts for ten (FY2021: eight)
sites. There is a revenue-based rent top-up on these sites.
Variable lease payments include revenue-based rent top-ups at ten
(FY2021: six) centres totalling GBP716,000 (FY2021: GBP320,000). It
is anticipated that top-ups totalling GBP737,000 will be payable in
the year to 30 September 2023 based on current expectations.
Impairment testing is carried out as outlined in note 11.
Detailed impairment testing resulted in the recognition of an
impairment charge in the year of GBP1,786,000 (FY2021: GBP551,000)
against right-of-use assets for three UK centres (FY2021: one UK
centre).
13. Goodwill and intangible assets
Brands Trademark Customer
Goodwill 1 2 relationships Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------- -------------- -------- --------
Cost
At 1 October 2020 75,034 3,360 798 - 1,860 81,052
Additions - - - - 252 252
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2021 75,034 3,360 798 - 2,112 81,304
Additions 70 - - - 108 178
Acquisition of Teaquinn
Holdings Inc. (note
20) 90 3,888 - 314 - 4,292
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2022 75,194 7,248 798 314 2,220 85,774
------------------------- -------- -------- --------- -------------- -------- --------
Accumulated amortisation
At 1 October 2020 - 1,020 316 - 1,543 2,879
Amortisation charge - 168 50 - 259 477
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2021 - 1,188 366 - 1,802 3,356
Amortisation charge - 335 50 8 231 624
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2022 - 1,523 416 8 2,033 3,980
------------------------- -------- -------- --------- -------------- -------- --------
Net book value
At 30 September 2022 75,194 5,725 382 306 187 81,794
------------------------- -------- -------- --------- -------------- -------- --------
At 30 September 2021 75,034 2,172 432 - 310 77,948
------------------------- -------- -------- --------- -------------- -------- --------
1 This relates to the Hollywood Bowl, Splitsville and Striker Bowling Solutions brands.
2 This relates to the Hollywood Bowl trademark only.
Impairment testing is carried out at the CGU level on an annual
basis. A CGU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. Each individual
centre is considered to be a CGU. However, for the purposes of
testing goodwill for impairment, it is acceptable under IAS 36 to
group CGUs, in order to reflect the level at which goodwill is
monitored by management. The UK Group is considered to be the CGU,
for the purposes of goodwill impairment testing, on the basis that
the goodwill relates mainly to the UK operating segment.
The recoverable amount of the CGU is determined based on a
value-in-use calculation using cash flow projections based on
financial budgets approved by the Board covering a five-year
period. This base case assumes all centres remain open during
FY2023, and the financial years thereafter, and there are no
further trading restrictions associated with the COVID-19
pandemic.
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:
2022 2021
--------------------------------- ----- -----
Discount rate (pre-tax) 16.0% 12.7%
Growth rate (beyond three years) 2.5% 2.5%
--------------------------------- ----- -----
Discount rates reflect current market assessments of the time
value of money and the risks specific to the industry. 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 risk premium and the cost of debt.
Sensitivity to changes in assumptions
Management has sensitised the key assumptions in the impairment
tests of the CGU under the base case scenario.
The key assumptions used and sensitised were forecast growth
rates and the discount rates, which were selected as they are the
key variable elements of the value-in-use calculation. The combined
effect of a reduction in revenue of 4.4 percentage points on the
base case for FY2023 and FY2024, an increase in the discount rate
applied to the cash flows of the CGU of one per cent and a
reduction of one per cent in the growth rate (beyond five years),
would reduce the headroom by GBP57.3m. This scenario would not
cause the carrying value to exceed its recoverable amount.
Therefore, management believes that any reasonable possible change
in the key assumptions would not result in an impairment
charge.
14. Trade and other receivables
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------ ------------ ------------
Trade receivables 836 611
Other receivables 245 89
Prepayments 4,049 2,600
------------------ ------------ ------------
5,130 3,300
------------------ ------------ ------------
Trade receivables have an ECL against them that is immaterial.
There were no overdue receivables at the end of either year.
15. Trade and other payables
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------- ------------ ------------
Current
Trade payables 5,306 5,121
Other payables 1,310 1,131
Accruals and deferred income 17,000 7,421
Taxation and social security 5,065 4,469
------------------------------- ------------ ------------
Total trade and other payables 28,681 18,142
------------------------------- ------------ ------------
30 September 30 September
2022 2021
GBP'000 GBP'000
--------------- ------------ ------------
Non-current
Other payables 3,000 565
--------------- ------------ ------------
Accruals and deferred income includes a staff bonus accrual of
GBP7,758,000 (30 September 2021: GBP1,405,000) and deferred
consideration of GBP164,000 (30 September 2021: GBPnil) in relation
to the acquisition of Teaquinn Holdings Inc. Deferred income
includes GBP983,000 (30 September 2021: GBP746,000) of customer
deposits received in advance and GBP160,000 relating to bowling
equipment installations, all of which is recognised in the income
statement during the following financial year.
Non-current other payables includes GBP464,000 (30 September
2021: GBPnil) of contingent consideration and GBP1,841,000 (30
September 2021: GBPnil) of deferred consideration in respect of the
acquisition of Teaquinn Holdings Inc. (note 20). 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 in accordance with IFRS 3 paragraph B55 and
recognised over the duration of the employment contract to FY2026.
The present value of the contingent consideration has been
discounted using a WACC of 13 per cent. There is a range of
possible outcomes for the value of the contingent consideration
based on Teaquinn forecasted EBITDA pre-IFRS 16 and the year of
payment. This ranges from a payment (undiscounted) in FY2025 of
GBP6,000,000 (undiscounted) to a payment in FY2026 of GBP9,015,000
(undiscounted), using the FY2022 year-end exchange rate. The fair
value of the contingent consideration will be re-assessed at every
financial reporting date, with changes recognised in the income
statement.
16. Loans and borrowings
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------- ------------ ------------
Loans and borrowings brought forward - 29,038
Repayment during the year - (29,500)
Drawdown during the year - -
Issue costs - -
Amortisation of issue costs - 462
------------------------------------- ------------ ------------
Loans and borrowings carried forward - -
------------------------------------- ------------ ------------
On 29 September 2021, the Group repaid and cancelled its
borrowing facilities with Lloyds Bank plc, and on the same day
entered into a new GBP25m revolving credit facility (RCF) with
Barclays Bank plc.
The RCF has a termination date of 31 December 2024. Interest is
charged on any drawn balance based on the reference rate (SONIA),
plus a margin of 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 30 September 2022 and 30 September 2021 was therefore 0.6125 per
cent.
Issue costs of GBP135,000 were paid to Barclays Bank plc on
commencement 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 ending 31 December 2021, the ratio of
total net debt to Group adjusted EBITDA pre-IFRS 16 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 Group adjusted EBITDA pre-IFRS 16 shall not
exceed 1.75:1.
The Group operated within the covenants during the year and the
previous year.
17. Deferred tax assets and liabilities
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------ ------------ ------------
Deferred tax assets and liabilities
Deferred tax assets 7,050 7,809
Deferred tax liabilities (5,403) (1,519)
------------------------------------ ------------ ------------
1,647 6,290
------------------------------------ ------------ ------------
30 September 30 September
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Reconciliation of deferred tax balances
Balance at the beginning of the year 6,290 5,295
Deferred tax credit for the year - in profit or loss (2,543) 915
Deferred tax credit for the year - in equity (29) 93
On acquisition of Teaquinn (note 20) (2,040) -
Effects of foreign exchange (43) -
Adjustment in respect of prior years 12 (13)
----------------------------------------------------- ------------ ------------
Balance at the end of the year 1,647 6,290
----------------------------------------------------- ------------ ------------
The components of deferred tax are:
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------ ------------ ------------
Deferred tax assets
Fixed assets 6,314 6,706
Trading losses - 439
Other temporary differences 736 664
------------------------------ ------------ ------------
7,050 7,809
------------------------------ ------------ ------------
Deferred tax liabilities
Property, plant and equipment (3,694) (721)
Intangible assets (1,709) (798)
------------------------------ ------------ ------------
(5,403) (1,519)
------------------------------ ------------ ------------
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 30 September 2022.
18. Related party transactions
30 September 2022 and 30 September 2021
During the year, and the previous year, there were no
transactions with related parties.
19. Dividends paid and proposed
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
The following dividends were declared and paid by
the Group:
Interim dividend year ended 30 September 2022 - 3.00
pence per ordinary share 5,132 -
Proposed for the approval by shareholders at AGM
(not recognised as a liability at 30 September 2022):
Final dividend year ended 30 September 2022 - 8.53
pence per ordinary share 14,598 -
Special dividend year ended 30 September 2022 - 3.00
pence per ordinary share 5,132 -
------------------------------------------------------- ------------ ------------
20. Acquisition of Teaquinn Holdings Inc.
On 24 May 2022, the Company acquired 100% of the issued share
capital and voting rights of Teaquinn Holdings Inc., the holding
company of Splitsville and Striker Bowling Solutions, based in
Canada. Splitsville is an operator of ten-pin bowling centres and
Striker Bowling Solutions, a supplier and installer of bowling
equipment. The purpose of the acquisition was to grow the Group's
core ten-pin bowling business by expanding into a new geographical
region.
Teaquinn is consolidated in Hollywood Bowl Group plc's financial
statements with effect from the completion of the acquisition on 24
May 2022.
The details of the business combination are as follows (stated
at acquisition date fair values):
GBP'000
---------------------------------------------- --------
Fair value of consideration transferred
Amount settled in cash 10,080
---------------------------------------------- --------
Recognised amounts of identifiable net assets
Property, plant and equipment 8,454
Right-of-use assets 11,510
Intangible assets 4,292
Other non-current assets 6
Inventories 265
Trade and other receivables 631
Cash and cash equivalents 415
Current tax liability (425)
Trade and other payables (1,479)
Lease liabilities (11,510)
Deferred tax liabilities (2,040)
---------------------------------------------- --------
Identifiable net assets 10,119
---------------------------------------------- --------
Gain on bargain purchase 39
---------------------------------------------- --------
Consideration for equity settled in cash 10,080
Cash and cash equivalents acquired (415)
---------------------------------------------- --------
Net cash outflow on acquisition 9,665
---------------------------------------------- --------
Acquisition costs paid charged to expenses 1,557
---------------------------------------------- --------
Net cash paid relation to the acquisition 11,222
---------------------------------------------- --------
The fair value of the consideration transferred of GBP10,080,000
includes the fair value of deferred consideration of GBP164,000 and
GBP1,817,000, included within current and non-current liabilities
respectively at 30 September 2022, which is expected to be settled
in FY2023 and FY2026 respectively.
In addition to the net cash outflow on acquisition, contingent
consideration of GBP464,000 has been recognised in administrative
expenses in the year. The contingent consideration has been
accounted for as post acquisition employee remuneration in
accordance with IFRS 3 paragraph B55. This amount is included
within non-current liabilities at 30 September 2022, and is
expected to be settled in FY2026 for a total of GBP8,360,000
(undiscounted) using the FY2022 year-end exchange rate. The
contingent consideration is to be paid 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 present value of the contingent
consideration has been discounted using a WACC of 13 per cent.
There is a range of possible outcomes for the value of the
contingent consideration based on Teaquinn forecasted EBITDA
pre-IFRS 16 and the year of payment. This ranges from a payment
(undiscounted) in FY2025 of GBP6,000,000 (undiscounted) to a
payment in FY2026 of GBP9,015,000 (undiscounted), using the FY2022
year-end exchange rate.
The gain on bargain purchase arose as a result of the contingent
consideration aspect of the acquisition price relating to post
acquisition employee remuneration as opposed to forming part of the
purchase consideration. The gain on bargain purchase is disclosed
as a separate line item in the consolidated income statement.
Acquisition related costs of GBP1,557,000 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 GBP3,770,000 and GBP118,000 in relation to the Splitsville
and Striker Bowling Solutions brand names respectively, and
GBP314,000 in relation to customer relationships. The brand names
have been valued using the relief from royalty method and customer
relationships have been valued using the multi-period excess
earnings method.
The fair value of property, plant and equipment includes
freehold land and buildings of GBP7,061,000, an uplift of
GBP5,504,000 on the carrying value prior to the acquisition. The
fair value adjustment is based on the open market value using the
direct comparison approach of two properties that were valued by
third party experts in accordance with the Canadian Uniform
Standards of Professional Appraisal Practice as developed by the
Standards Board of the Appraisal Institute of Canada.
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 the Group's policy on page 135 of the Annual
report.
The fair value and gross contractual amounts receivable of trade
and other receivables acquired as part of the business combination
amounted to GBP618,000. At the acquisition date the Group's best
estimate of the contractual cash flows expected not to be collected
amounted to GBPnil.
In the period since acquisition to 30 September 2022, the Group
recognised GBP6,221,000 of revenue and GBP383,000 of profit after
tax in relation to the acquired business. Had the acquisition
occurred on 1 October 2021, the contribution of Teaquinn to the
Group's revenue would have been GBP12,795,000 and the contribution
to the Group's profit before tax for the period would have been
GBP2,187,000.
21. Cash flow information
Restatement of comparative cash flow information
Following the FRC's corporate reporting review of the Group's
Annual Report and Accounts to 30 September 2021 it was felt that,
with respect to the comparative for that period, it would be more
appropriate for the GBP2,110,000 in rent concessions to be
presented within the adjustments to cash flows from operating
activities, and not within the payment of capital leases as
originally disclosed.
As a result of this review, the comparative consolidated cash
flow statement has been restated as follows:
Previously
reported Restatement Restated
Year ended 30 September 2021 GBP'000 GBP'000 GBP'000
------------------------------------------------ ---------- ----------- --------
Cash flow statement line item
Operating profit before working capital changes 30,574 (2,110) 28,464
Net cash inflow from operating activities 28,304 (2,110) 26,194
Payment of capital elements of leases (9,420) 2,110 (7,310)
Net cash used in financing activities (9,564) 2,110 (7,454)
------------------------------------------------ ---------- ----------- --------
There is no adjustment to the net change in cash and cash
equivalents for the year.
The FRC's enquiries, which were limited to a review of the
September 2021 Annual Report and Accounts, are now complete. The
FRC review does not benefit from detailed knowledge of our business
or an understanding of the underlying transactions entered into,
and accordingly the review provides no assurance that the Annual
Report and Accounts are correct in all material respects.
Risk management
Our approach to risk
The Board and senior management take their responsibility for
risk management and internal controls very seriously, and for
reviewing their effectiveness at least bi-annually. An effective
risk management process balances the risk and rewards as well as
being dependent on the judgement of the likelihood and impact of
the risk involved. The Board has overall responsibility for
ensuring there is an effective risk management process in place and
to provide reasonable assurance that they are fully understood and
managed.
When we look at risk, we specifically consider the effects it
could have on our business model, our culture and therefore our
ability to deliver our long-term strategic purpose.
We consider both short and long-term risks and split them into
the following groups: financial, social, operational, technical,
governance and environmental risks.
Risk appetite
This describes the amount of risk we are willing to tolerate as
a business. We have a higher appetite for risks accompanying a
clear opportunity to deliver on the strategy of the business.
We have a low appetite for, and tolerance of, risks that have a
downside only, particularly when they could adversely impact health
and safety or our values, culture or business model.
Our risk management process
The Board is ultimately responsible for ensuring that a robust
risk management process is in place and that it is being adhered
to. The main steps in this process are:
Department heads
Each functional area of the Group maintains an operational risk
register, where senior management identifies and documents the
risks that their department faces in the short term, as well as the
longer term. A review of these risks is undertaken on at least a
bi-annual basis to compile their department risk register. They
consider the impact each risk could have on the department and
overall business, as well as the mitigating controls in place. They
assess the likelihood and impact of each risk.
The Executive team
The Executive team reviews each departmental risk register. Any
risks which are deemed to have a level above our appetite are added
to/retained on the Group risk register (GRR) which provides an
overview of such risks and how they are being managed. The GRR also
includes any risks the Executive team is managing at a Group level.
The Executive team determines mitigation plans for review by the
Board.
The Board
Challenges and agrees the Group's key risks, appetite and
mitigation actions at least twice yearly and uses its findings to
finalise the Group's principal risks.
The principal and emerging risks are taken into account in the
Board's consideration of long-term viability as outlined in the
Viability statement.
Risk management activities
Risks are identified through operational reviews by senior
management; internal audits; control environments; our
whistleblowing helpline; and independent project analysis.
The internal audit team provides independent assessment of the
operation and effectiveness of the risk framework and process in
centres, including the effectiveness of the controls, reporting of
risks and reliability of checks by management.
We continually review the organisation's risk profile to verify
that current and emerging risks have been identified and considered
by each head of department.
Each risk has been scaled as shown on the risk heat map.
Principal risks
The Board has identified 12 principal risks which are set out
below. These are the risks which we believe to be the most material
to our business model, which could adversely affect the revenue,
profit, cash flow and assets of the Group and operations, which may
prevent the Group from achieving its strategic objectives.
We acknowledge that risks and uncertainties of which we are
unaware, or which we currently believe are immaterial, may have an
adverse effect on the Group.
Financial
risks
---------------- ------------------------------------------------------------------------ -------------------------------------------------------------------
Risk Risk and impact Mitigating factors
---------------- ------------------------------------------------------------------------ -------------------------------------------------------------------
1
Economic * Change in economic conditions in particular a * An economic contraction is likely, impacting consumer
environment recession due to the after-effects of COVID-19, as confidence and discretionary income. The Group's has
Increasing well as inflationary pressures and the current war in low customer frequency per annum and also the lowest
Ukraine price per game of the branded operators. Therefore,
whilst it would suffer in such a recession, the Board
is satisfied that the majority of centre locations
* Adverse economic conditions, including, but not are based in high-footfall locations which should
limited to, increases in interest rates/ inflation better withstand a recessionary decline
may affect Group results
* Along with appropriate financial modelling and
* A decline in spend on discretionary leisure activity available liquidity, a focus on opening new centres
could negatively affect all financial as well as in high-quality locations only with appropriate
non-financial KPIs property costs, as well as capital contributions,
remains key to the Group's new centre-opening
strategy
* We have an unrelenting focus on service, costs and
value, along with electricity hedged until September
2024. Plans are developed to mitigate many cost
increases, as well as a flexible labour model, if
required, in an economic downturn
---------------- ------------------------------------------------------------------------ -------------------------------------------------------------------
2
Covenant * The banking facility, with Barclays Plc, has * The potential for future pandemic lockdowns has
breach quarterly leverage covenant tests which are set at a elevated this risk, and financial resilience has
Decreasing level the Group is comfortably forecasting to be therefore become central to our decision-making and
within will remain key for the foreseeable future
* Covenant breach could result in a review of banking * The current RCF is GBP25m, with a margin of 175bps
arrangements and potential liquidity issues above SONIA as well as an accordion of GBP5m. Net
leverage covenants are 1.75x and are tested
quarterly. The facility is currently undrawn
* Group revenue and profit performance since reopening
in May 2021 have been above internal and external
forecasts, which has resulted in a net cash position
of GBP56.1m at the end of FY2022
* Appropriate financial modelling has been undertaken
to support the assessment of the business as a going
concern. The Group has headroom on the current
facility with leverage cover within its covenant
levels, as shown in the monthly Board packs. We
prepare short-term and long-term cash flow, EBITDA
(pre-IFRS 16) and covenant forecasts to ensure risks
are identified early. Tight controls exist over the
approval for capital expenditure and expenses
* The Directors consider that the combination of events
required to lower the profitability of the Group to
the point of breaching bank covenants is unlikely
---------------- ------------------------------------------------------------------------ -------------------------------------------------------------------
3
Expansion/ * Competitive environment for new centres results in * The Group uses multiple agents to seek out
growth less new Group centre openings opportunities across the UK
NEW
* New concepts appear more attractive to landlords * Continued focus with landlords on initial investment
as well as refurbishment and maintenance capital
* Higher rents offered by short-term private groups
* Strong financial covenant provides forward-looking
landlords with both value and comfort
* Relaunched property flyer in June 2022, with good
success
---------------- ------------------------------------------------------------------------ -------------------------------------------------------------------
Operational
risks
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
Risk Risk and impact Mitigating factors
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
4
Core systems * Failure in the stability or availability of * All UK core systems (non-cloud based) are backed up
Unchanged information through IT systems could affect Group to our disaster recovery centre
business and operations
* The reservation systems, provided by a third party,
* Customers not being able to book through the website are hosted by Microsoft Azure Cloud for added
is a bigger risk given the higher proportion of resilience and performance. This also has full
online bookings compared to prior years business continuity provision and scalability for
peak trading periods. The CRM/CDP system is hosted by
a third party utilising cloud infrastructure with
* Inaccuracy of data could lead to incorrect business data recovery contingency in place
decisions being made
* The reservations system also has an offline mode, so
in-centre customers could still book but the Customer
Contact Centre (CCC) and online booking facility
would be down. A back-up system exists for CCC to
take credit card payments offline. A full audit
process exists for offline functionality
* All technology changes which affect core systems are
authorised via change control procedures
* The Group undertakes periodic strategic reviews of
its core system set-up with associated market
comparisons of available operating systems to ensure
that it has the most appropriate technology in place
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
5
Suppliers * Operational business failures from key suppliers * The Group has key UK suppliers in food and drink
(non-amusements) (non-IT) under contract with tight service level agreements
Unchanged (SLAs). Alternative suppliers that know our business
could be introduced, if needed, at short notice.
* Unable to provide customers with a full experience Centres hold between 14 and 21 days of food, drink
and amusement products. Regular reviews and updates
are held with external partners to identify any
perceived risk and its resolution. This process has
been required since reopening in 2021, with
substitute products available in all scenarios. A
policy is in place to ensure the safe procurement of
food and drink within allergen controls
* Splitsville uses Xtreme Hospitality (XH), a group
buying company, to align itself with tier one
suppliers in all service categories including food
and drink. If XH is unable to provide a service or
product, Splitsville is able to source directly
itself
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
6
Amusement * Any disruption which affects Group relationship with * Regular key supplier meetings between our Head of
supplier amusement suppliers Amusements, and Namco and Inspired Gaming. There are
Unchanged half-yearly meetings between the CEO, the CFO and
Namco
* Customers would be unable to utilise a core offer in
the centres
* Namco is a long-term partner that has a strong UK
presence and supports the Group with trials,
initiatives and discovery visits
* Namco also has strong liquidity which should allow
for a continued relationship during or post any
consumer recession
* Player 1 is the amusements supplier to Splitsville.
Player 1 is a subsidiary Cineplex Inc which is listed
on the Canadian stock market. Quarterly meetings are
held with Player 1
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
7
Management * Loss of key personnel - centre managers * The Group runs Centre Manager in Training (CMIT) and
retention Assistant Manager in Training (AMIT) programmes
and recruitment annually, which identify centre talent and develop
* Lack of direction at centre level with effect on team members ready for these roles. Centre managers
customer experience in training run centres, with assistance from their
regional support manager as well as experienced
centre managers from across the region, when a
* More competitive recruitment landscape due to Brexit vacancy needs to be filled at short notice
and COVID-19 pandemic
* The Group bonus schemes were reviewed for the estate
* More difficult to execute business plans and strategy, reopening in May 2021, to ensure they were still a
impacting on revenue and profitability strong recruitment and retention tool. The incentives
now benefit all team members in-centre including
hourly and salaried team. The hourly scheme has paid
out to over 64 per cent of Team Members since the
start of FY2022
* All 18-21 year olds are paid 20p above NMW/NLW, once
they have completed their probation period
* Wellbeing guides were issued across the business
during the pandemic, as well as frequent Group Zoom
Q&A sessions and updates via our team member app, to
improve team engagement
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
8
Food safety * Major food incident including allergen or fresh food * Food and drink audits are undertaken in all centres
Unchanged issues based upon learnings of the prior year and food
incidents seen in other companies, as well as for
health, safety and legal compliance. online training,
* Loss of trade and reputation, potential closure and which includes allergen and intolerance issues, is
litigation reviewed, understood and complied with by team
members
* Allergen awareness is part of our team member
training matrix which needs be completed before team
members can take food or drink orders. Information is
regularly updated and remains a focus for the
centres. This was enhanced further in the latest menu,
along with an online allergens list which is
available for all customers. A primary local
authority partnership is in place with South
Gloucestershire covering health and safety, as well
as food safety
* In conjunction with the supply chain risk the
Allergen Control Policy has been reviewed and updated
* All food menus have an allergen disclaimer
* All food menus have a QR code linking the customer to
up-to-date allergen content for each product, updated
through the 'Nutritics' system
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
Technical
risks
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
Risk Risk and impact Mitigating factors
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
9
GDPR and * Data protection or GDPR breach. Theft of customer * The Group adopts a multi-faceted approach to
cyber security email addresses and impact on brand reputation in the protecting its IT networks through protected
Increasing case of a breach firewalls and secure two-factor authentication
passwords, as well as the frequent running of
vulnerability scans to ensure integrity of the
* Risk of cyber-attack/terrorism could impact the firewalls
Group's ability to keep trading. More bookings are
being taken online currently, which increases this
risk * A Data Protection Officer has been in position for a
number of years and attends external courses to
continue to build knowledge
* All team members have been briefed via online
presentations. A training course on GDPR awareness
was created on STARS (online training tool) and all
team members have to complete this before being able
to work on shift
* A cyber security partner is in place to handle any
cyber security breaches and will work with the Group
on a priority basis - 365x24x7 - if necessary
* Periodic penetration testing is conducted through a
third-party cyber security company
* In FY2023 we will be upgrading the IT infrastructure
and networks in our Canadian business to move from
centres based operations to centrally hosted and
managed services
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
10
Targeted -- Website hack -- The Group has an externally hosted website by
IT threat Fortrabbit in a secure infrastructure using AWS under
/ attack -- Increased threat of targeted hack post COVID-19 ISO 27001 and PCI accreditation
NEW reopening
-- It deploys proactive security on its infrastructure
-- Prevent customers from booking online in the form of regular patching and upgrades as well
as penetration testing
-- PCI accreditation
-- AWS enforces a high level of physical security to
-- Non-accreditation can lead to acquiring bank removing safeguard its data centres, with military grade
transaction processing perimeter controls for example
-- The web site and booking site are protected by
Cloudflare WAF with Distributed Denial of Service
(DDoS) protection
-- There is active protection of the network against a
DDoS attack
-- A quarterly review meeting is held with the card
acquirer, to keep abreast of market developments and
any new technical requirements for PCI and security
-- A PCI gap analysis is performed annually to ensure
the business infrastructure is in line with the
current published PCI standards. Recommendations from
the latest review are being addressed in a project to
select and implement new payment devices, services
and processes to further reduce this risk
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
Regulatory
risk
------------------ -------------------------------------------------------------------- -------------------------------------------------------------------
Risk Risk and impact Mitigating factors
------------------ -------------------------------------------------------------------- -------------------------------------------------------------------
11
Compliance * Failure to adhere to regulatory requirements such as * Expert opinion is sought where relevant. We run
Unchanged listing rules, taxation, health and safety, planning regular training and development for appropriately
regulations and other laws qualified staff
* Potential financial penalties and reputational damage * The Board has oversight of the management of
regulatory risk and ensures that each member of the
Board is aware of their responsibilities
* Compliance documentation for centres to complete for
health and safety, and food safety, is updated and
circulated twice per year. Adherence to Company/legal
standards is audited by the internal audit team
------------------ -------------------------------------------------------------------- -------------------------------------------------------------------
Environmental
risk
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
Risk Risk and impact Mitigating factors
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
12
Climate * Increasing carbon taxes * Significant progress already made with solar panel
change installations and transitioning energy contracts to
NEW renewable sources
* Business interruption and damage to assets
* Corporate Responsibility Committee created to closely
* Cost of transitioning operations to net zero monitor and report on climate related risks and
opportunities
* Extended range of climate related targets created
* TCFD disclosure completed in FY2022 including
scenario planning to understand materiality of risks
* Net zero plan and target being created in FY2023
-------------------- ------------------------------------------------------------------ ---------------------------------------------------------------------
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