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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hollywood Bowl Group Plc | LSE:BOWL | London | Ordinary Share | GB00BD0NVK62 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.50 | -0.75% | 330.00 | 330.00 | 330.50 | 333.00 | 329.00 | 330.00 | 409,012 | 16:29:45 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Bowling Centers | 215.08M | 34.15M | 0.1989 | 16.59 | 566.65M |
From Apr 2019 to Apr 2024
TIDMBOWL
RNS Number : 6336R
Hollywood Bowl Group plc
13 December 2016
13 December 2016
Hollywood Bowl Group plc
GOOD RESULTS DELIVERED THROUGH SUCCESSFUL EXECUTION OF STRATEGY
Hollywood Bowl Group plc ("Hollywood Bowl"), the UK's largest ten-pin bowling operator, is pleased to announce its audited results for the year ended 30 September 2016.
Financial highlights
Hot Features
Premium
Y/E 30 Sept Y/E 30 Sept 2015 % Movement
2016
------------ ----------------- -----------
Like for like
revenues (1) +6.8% +9.1%
Total revenues GBP106.6m GBP86.0m +23.9%
Group Adj. EBITDA
(2) GBP29.4m GBP20.6m +42.6%
Group Adj. EBITDA
margin 27.5% 23.9% +3.6%pt
Net debt / (cash) GBP20.8m GBP24.6m
Net debt:Group
Adj. EBITDA 0.71 1.20
Dividend pence 0.19 Nil
per share
Operating Profit GBP14.4m GBP13.0m +10.3%
------------ ----------------- -----------
Key highlights
-- Acquisition and integration of Bowlplex, adding net ten centres to the estate
o Bowlplex rebrands delivering returns ahead of expectations
-- Good progress made with the refurbishment programme
o Eight centres refurbished in the period including 3 Bowlplex rebrands to Hollywood Bowl
-- Total Average spend per game increased YOY 6.3% -- Total Games volumes increased YOY 16.3% -- Total Number of games played was 12.1m, up from 10.4m in 2015
-- Strong pipeline of opportunities for new centres in place, with Southampton due to open this month
Stephen Burns, Chief Executive Officer of Hollywood Bowl Group said:
"We are really pleased to report our maiden results as a listed business. It has been a transformational year for Hollywood Bowl. Listing on the stock market is an important step in the development of the business but it reflects on the strength of the business and the whole Hollywood Bowl team that at the same time we have also delivered a strong business performance. We continued to invest in and enhance the customer proposition meaning we have given millions of customers a great experience. By making sure we continue to focus on what our customers want, we are confident that Hollywood Bowl has a promising future as a listed business.
The new financial year has started well and in line with the Board's expectations. From October through to the Easter holidays is a key trading period for any indoor leisure-based business and we have been pleased with the performance to date."
1 Like-for-like revenue is defined as total revenue excluding any new centre openings, acquisitions (2016: GBP15.6m), closed centres (2016: GBP0.3m, 2015: GBP1.4m) from the current or prior year, and any other non like-for-like income (VAT on children's shoes and no shows 2016: GBP0.4m) and is used as a key measure of core same centre growth.
2 Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business and excludes any one off benefits (VAT rebates for prior years), and costs (the net costs on two property transactions - Liverpool and Avonmeads - restructuring costs for Bowlplex acquisition and IPO related expenses). It is our view that these are not recurring costs.
Enquiries:
Hollywood Bowl Group via Tulchan Steve Burns, Chief Executive Officer Communications Laurence Keen, Chief Financial Officer Mat Hart, Commercial Director Tulchan Communications James Macey White David Allchurch +44 (0) 207 Matt Low 353 4200
Notes to Editors:
Hollywood Bowl is the UK's largest ten-pin bowling operator, with a portfolio of 54 centres operating across the UK under the Hollywood Bowl, AMF and Bowlplex brands. The Group specialises in operating large, high quality bowling centres, predominantly located in out of town multi-use leisure parks (typically co-located with cinema and casual dining sites) and large retail parks. The centres are designed to offer a complete family entertainment experience with each centre offering at least 16 bowling lanes, on-site dining, licensed bars, and state-of-the-art family games arcades.
CHAIRMAN'S STATEMENT
Overview
We were delighted to achieve a major Group milestone this year and list on the Main Market of the London Stock Exchange on 21 September 2016, and I welcome our new shareholders to this exciting business.
We focus on offering a high-quality bowling experience, with an emphasis on family-friendly entertainment, and we are well-placed to take advantage of the forecast growth in the UK ten-pin bowling market.
Our proposition is extremely competitive, and we have identified a number of opportunities to drive further growth. We have a strong pipeline of new centres, and our refurbishment programme aims to refurbish and rebrand between 7 and 10 centres each year.
Results
Hollywood Bowl Group has had an excellent year. Highlights include the acquisition of Bowlplex in December 2015, adding 11 new sites to our portfolio, and the successful rebranding of 3 of these Centres into Hollywood Bowl, as well as an increase in like-for-like and total Group revenue, and EBITDA.
This financial performance demonstrates the strength of our proven operating model with superior customer service, high-quality product offering and a disciplined pricing strategy.
Our strong balance sheet has been further strengthened by our listing, which has also given us greater flexibility to capitalise on growth opportunities and to generate long-term value for all shareholders. Our enhanced public profile and status with customers, landlords, developers and business partners will assist in the recruitment of key management and employees, as well as provide our management and employees with the opportunity to be owners of this great business and give access to capital markets to deliver our strategy.
Corporate governance
I believe that good corporate governance is vital to support our future sustainable growth and the Board, which has extensive experience of running companies in the leisure and retail sectors, is committed to the highest standards of corporate governance. At IPO we appointed Nick Backhouse as the Senior Independent Non-Executive Director and Chairman of the Audit Committee and Claire Tiney as a Non-Executive Director and Chair of the Remuneration Committee. Nick and Claire bring significant additional experience and support to the Board and have already made a significant contribution to the Board's discussions. Our Corporate Governance Report describes the work we have done throughout the IPO process to develop our Board and Committee processes and to support the development of a robust governance structure.
Dividend
We intend to adopt a progressive dividend policy while maintaining an appropriate level of dividend cover. While we have only just started operating as a publicly-listed company, the Board is pleased to recommend a final dividend for the year ending 30 September 2016 of 0.19 pence per ordinary share, reflecting the short period of the financial year that the Group was listed.
People and culture
I would like to record my thanks to the Board and to the whole team for their commitment and dedication to the Group over 2016. I believe that attracting, motivating and retaining employees of the right calibre is vital to the continued success of the Group, and in 2017 we will introduce a scheme to give all our team the opportunity to become shareholders of the business.
A key element of our culture is the promotion of corporate social responsibility within our business and our local communities, which we believe supports continued generation of sustainable value and enhances our ability to deliver on our strategic objectives.
Outlook
I have been enormously impressed by the progress of the Hollywood Bowl Group over the past year and I am very excited to continue as Chairman. I believe we are well-positioned to create value for both institutional and employee shareholders as we work every day to generate the right levels of positive energy to deliver the best possible experience for our customers.
Peter Boddy
Chairman
13 December 2016
CHIEF EXECUTIVE REVIEW
I am delighted to present my first Chief Executive's Review statement following our listing on the Main Market of the London Stock Exchange in September 2016.
It has been a fantastic year for Hollywood Bowl Group. The transformational acquisition of Bowlplex, the continued successful roll-out of our refurbishment programme and our customer-focused operating model, have combined to deliver revenue growth of 23.9 per cent on the prior year, and 6.8 per cent on a like-for-like basis. This led to Group adjusted EBITDA of GBP29.4m, showing a 42.6 per cent increase over the year.
Hollywood Bowl Group is the UK ten-pin bowling market leader, with 54 centres across the UK operating out of a high-quality property portfolio. Our ongoing refurbishment programme and investment in new centres over FY2016 has increased our scale, resulting in reduced operational and capital costs, improving margins and higher returns.
Our enhanced offering is gaining more traction with our core family customer group, which are coming to our venues more frequently, and extending their experience once there. Our state-of-the-art centres, coupled with our strong covenant, makes us an attractive choice for landlords looking for a leisure operator. This underpins the growth of our estate and our future development pipeline.
Growth Strategy
Our strategy focuses around two core elements: organic growth and investment- led growth and we are pleased with the progress we have made in FY2016.
Like-for-like growth
Our rise in like-for-like growth has a number of drivers, including an increasing number of visits per customer. The branded bowling industry average frequency of visit per customer is c.1.1 times per year. Hollywood Bowl Group has outperformed this, increasing its average to 1.32 for FY2016. This result is testament to our refurbishment programme, which has resulted in more customers experiencing our high-quality environment. We have invested in enhancing service levels and are also using our Customer Relationship Management (CRM) system and customer database to encourage more regular visits and to promote other revenue streams via targeted campaigns.
We continue to work to increase spend per game by improving the customer experience and 'dwell time' in each centre. The average spend per game rose from GBP8.12 to GBP8.63 in FY2016, while the number of games played increased from 10.4m in FY2015 to 12.1m in FY2016. Our prices remain among the lowest of the major multiple ten-pin bowling operators which we believe provides scope to more effectively target promotions without impacting the Group's relative price competitiveness.
The introduction of Hollywood Diner has increased food spend of customers on-site over FY2016 by 19 per cent year-on-year against the rest of the estate. Our high-quality amusement offering has complex and engaging games, and is well maintained, resulting in shortened repair call-out times, leading to an increase in average amusement spend per game of 8.8 per cent in FY2016. The introduction of VIP lanes, currently in 23 centres, which cost an additional GBP1 per game per person, have also driven incremental increases in spend per game.
Refurbishment and conversion Programme
We completed 8 full refurbishments in FY2016 including the rebrand of 3 Bowlplex centres in Oxford, Basingstoke and Poole Tower Park to Hollywood Bowl. Refurbishments have included a full refresh of all external signage, the introduction of new bowling environments, a new customer-friendly scoring system, new dining concepts such as the Hollywood Diner, as well as the introduction of VIP lanes. The 8 refurbishments are on track to outperform our 33 per cent targeted Return on Investment (ROI).
Development of our property portfolio
We aim to grow the portfolio through new openings and selective acquisitions. We have integrated the 11 Bowlplex centres acquired in December 2015, with initial returns from the first 3 rebrandings delivering above expectations. We intend to refurbish an average of 3 Bowlplex centres a year, to bring them in line with the higher standards across the remainder of the Group's estate.
Ongoing focus on our existing portfolio has also paid dividends, with a surrender and new lease arrangement on our Liverpool centre, which should result in an estimated GBP450,000 benefit in FY17, and includes a clause to relocate next to a new cinema on the redeveloped Edge Lane Park in 2018.
Focus on People
We operate centres in a range of different markets and each one draws on our central support network to fulfil their local customer-led ambitions. Our people are instrumental in the running of our business and we are passionate that diversity in our employee base, combined with high levels of employee well-being and job satisfaction, is integral to delivering a high-quality customer experience. Our Net Promoter Score (NPS) level of 59 per cent is testament to our successful approach.
We are committed to providing an inclusive and supportive environment for all our people, with opportunities to develop rewarding careers.
Centre Managers and Assistant Managers receive an uncapped bonus for hitting their profit budget which, in turn, entitles them to share in a proportion of any amount achieved over targeted management profit (EBITDA pre-property costs), subject to also meeting customer engagement and satisfaction targets.
In November 2016, we introduced a share scheme, granting free shares for centre management, and all team members will also have the opportunity to invest in additional shares via a Share Incentive Plan (SIP) in the near future.
Use of Technology
Our technology platform offers scalability and flexibility to support future growth. Over FY2016, we continued to invest in the development of our sophisticated CRM system to enable and improve customer targeting. Our web-based reservation and CRM system has been a key enabler of growth. Accordingly we prioritised the migration of the Bowlplex centres so that all 54 centres now use this system.
We have also made further improvements to our proprietary scoring system, enabling us to deliver a more personalised communications flow pre- and post-visit, as well as enhancing the 'in-centre experience' and encouraging multi-bowler data capture throughout the game. We will continue to deploy our proprietary scoring system in our centres as part of refurbishment and new centre openings.
Our digital marketing programme has driven significant revenue and remains a key strategic area. This focus on understanding the customer and using targeted marketing to reach them has allowed us to respond to consumer trends in order to drive more frequent customer visits.
MARKET OVERVIEW
The ten-pin bowling market is part of the wider UK leisure sector and offers a competitively-priced family leisure experience and broad customer appeal. The UK leisure sector was worth an estimated GBP80.3bn in 2015, of which ten-pin bowling had a market share of 0.3 per cent. The UK ten-pin bowling market generated estimated sales of GBP303m in 2015, of which Hollywood Bowl Group had a market share of approximately 33 per cent1.
Recent growth
The amount of total sites in the UK ten-pin bowling market has remained relatively static over the past 5 years, as a number of independent sites have closed while Hollywood Bowl Group and QLP have opened centres.
However, from 2013 to 2015, ten-pin bowling was the fastest-growing segment of the UK leisure sector, with 6 per cent revenue growth compared to an average growth of 3 per cent across the wider UK leisure sector2.
This growth was largely driven by the major multiples, as they have invested in reinvigorating customer engagement through customer relationship management platforms, refocusing the bowling proposition towards family leisure, improving ancillary product offerings and driving operating improvements. Hollywood Bowl Group delivered the greatest growth in this market segment, with a CAGR of 10.7 per cent over 2013 to 2015.
Market Growth Opportunities
As with the wider UK leisure market, growth in ten-pin bowling is predominantly driven by macroeconomic factors such as increases in GDP, consumer confidence and disposable income.
The major multiples segment of the UK ten-pin bowling market is forecast to grow by a CAGR of 4.3 per cent per annum from 2015 to 2019, greater than the total UK leisure sector forecast growth of 3 per cent3.
This growth is expected to be underpinned by developing new sites, continued refurbishment of existing centres and improvement in the customer experience, increasing participation in ten-pin bowling, visit frequency and spend per game. There is also scope for major multiples to increase their share of the ten-pin bowling market as weaker operators, particularly independent operators and other multiples, become less competitive or exit the market.
By comparing visits to ten-pin bowling centres with visits to the cinema, it is evident that the opportunity to increase the size of the ten-pin bowling market in the UK is significant4, in terms of both numbers of centres and frequency of visits.
In the UK, ten-pin bowling is a relatively low-frequency activity compared to other forms of leisure such as the cinema. 67 per cent of consumers have not participated in ten-pin bowling over the past 12 months, compared to 32 per cent for cinemas5. This could be due to the accessibility of bowling sites - an estimated 47 per cent of the UK population live within a 15-minute drive of a bowling centre, compared to 69 per cent living within a 15-minute drive from a cinema6. This indicates that there is significant potential for ten-pin bowling centre roll-out in the UK given the extent of under-served regions and opportunities to increase participation through improved customer propositions and competitive pricing relative to other leisure experiences.
Hollywood Bowl Group is leading the way in driving growth in the major multiple segment with our refurbishment and new site development programme and focused strategy of driving repeat visits and a higher spend per game.
The Group has identified at least 20 potential new sites in the medium term. This assessment incorporates factors such as catchment size and demography; competitor presence; and centre type and availability.
From our established opening model, relationships with landlords, strong covenant and continued maintenance programme across the estate, Hollywood Bowl Group is well-positioned to capitalise on the market growth potential.
Outlook
The new financial year has started well and in line with the Board's expectations. October through to the Easter holidays is a key trading period for any indoor leisure-based business and we have been pleased with the performance to date.
The Bowlplex centres are now fully integrated and reaping the benefits from the introduction of the Group's operating model, with revenues up 9.4 per cent year-on-year. The refurbishment and rebrand of the Brighton Bowlplex will be completed in time for the Christmas 2016 trading period, and we are on course to complete between 7 and 10 refurbishments/rebrands in FY2017.
Our property pipeline is at its strongest in our history. We are on schedule to open in the Southampton Watermark development during December 2016, and in the intu shopping centre in Derby during April 2017. We are also in advanced stages of negotiation with landlords on 4 further potential new sites with 4 others under review. We are well-positioned to deliver on our target of opening 2 new centres per year.
3 months into our life as a listed business, our strategic priorities and financial results are progressing well. Our focus remains on delivering an exceptional experience for every customer, every time, increasing value for shareholders.
Stephen Burns
Chief Executive Officer
13 December 2016
Key:
1, 2, 3, 4, and 6, Source: Pragma Consulting Report (June 2016).
5, Mintel Leisure Report 2015.
FINANCE REVIEW
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------- ------------ ------------
Total number
of centres 54 44
--------------------- ------------ ------------
Number of games
played 12.1m 10.4m
--------------------- ------------ ------------
Revenue GBP106.6m GBP86.0m
--------------------- ------------ ------------
Gross profit 83.9% 82.6%
--------------------- ------------ ------------
Group adjusted
EBITDA1 GBP29.4m GBP20.6m
--------------------- ------------ ------------
Group operating
cash flow2 GBP23.7m GBP15.4m
--------------------- ------------ ------------
Group expansionary
capital expenditure GBP3.5m GBP2.4m
--------------------- ------------ ------------
1 Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business and excludes any one off benefits (VAT rebates for prior years), and costs (the net costs on two property transactions - Liverpool and Avonmeads - restructuring costs for Bowlplex acquisition and IPO related expenses). It is our view that these are not recurring costs
2 Group operating cash flow is calculated as Group adjusted EBITDA less working capital and maintenance capital expenditure.
Our Group adjusted EBITDA growth has been achieved through continued customer focus and ensuring that each of our centres offers a great family experience on every visit. Group adjusted EBITDA increased by 42.6 per cent during the year mainly due to revenue growth over this period. This has been driven through the acquisition of Bowlplex (December 2015) as well as the growth of the core estate through refurbishments and continued spend on maintenance capital.
Growth drivers
The strength of the Group's strategy is reflected in our revenue performance for the year, which was driven by 3 main areas: the acquisition of Bowlplex in December 2015; growth in spend per game; and like-for-like growth in the number of games.
Bowlplex revenues since acquisition were GBP15.6m and increased 9.4 per cent versus prior year over the same period. This was in part due to the implementation of the Group's process and procedures, including the Customer Contact Centre (CCC), CRM and reservation system and rebranding of 3 centres during H2 FY2016 to Hollywood Bowl.
Over the past 12 months, we have invested in refurbishing 5 centres which are on track to deliver above 33% ROI, as well as rebranding 3 Bowlplex centres, with extremely encouraging returns of 94 per cent on capital invested (although with less than 26 weeks post-investment for these 3 centres, we urge caution in extrapolating this out to the full year). VIP lanes are also now operating in 23 centres and customers continue to enjoy the surprise and delight element of this.
The continued investment in our centres and teams delivered like-for-like revenue growth of 6.8 per cent.
Like-for-like revenue is defined as total revenue excluding any new centre openings, acquisitions (2016: GBP15.6m), closed centres (2016: GBP0.3m, 2015: GBP1.4m) from the current or prior year, and any other non like-for-like income (VAT on children's shoes and 'no-shows' 2016: GBP0.4m) and is used as a key measure of same centre growth.
Given the challenging summer with unprecedented dry and hot weather over the school holidays, we are pleased with our record sales performance over this period.
Group revenue increased by 23.9% (GBP20.6m) to GBP106.6m, from GBP86.0m in the year ended 20 September 2015.
Gross margin
Gross profit margin improved from 82.6 per cent to 83.9 per cent primarily as a result of the full-year effect of new food and drink contracts, and improved terms on amusements for the like-for-like estate post the Bowlplex acquisition. The slight change in revenue mix also helped margins, with Bowling increasing its share from 47.97 per cent to 48.21 per cent, with a 100 per cent gross profit.
Administrative expenses
Administration expenses increased by 31.7 per cent driven primarily by the acquisition of Bowlplex.
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------- ------------ ------------
Employee costs 20,024 16,658
Other fixed property 26,332 22,343
Maintenance and
supplies 1,796 1,545
Other expenses 3,848 2,203
Corporate costs 8,822 7,737
(Profit)/Loss
on disposal of
property, plant
and equipment (745) 17
Depreciation
and amortisation 9,809 8,266
Exceptional items
(excludes other
income in 2016
of GBP1,395k) 6,558 (722)
--------------------- ------------ ------------
76,444 58,047
--------------------- ------------ ------------
Administrative expenses increased to GBP76.4m in the full year to 30 September 2016, from GBP58.0m in the previous year. Property and employee costs are the largest expenses in the business, with the year-on-year increase primarily the result of the acquisition of Bowlplex in December 2015. Property costs on a constant basis stayed static across both years, at GBP22.0m with rent reviews and property rates increases netted off by a reduction in utility usage with the full-year effect of LED lighting and a lower insurance charge in the year. Employee costs on a constant centre basis increased from GBP16.5m to GBP16.9m, driven by the national living wage and national minimum wage impacts.
Total maintenance and supply costs increased by 16.2 per cent due to Bowlplex centres as well as purchasing new balls to ensure customers are receiving a great experience in our centres.
Group adjusted EBITDA
Group adjusted EBITDA increased during the year mainly due to revenue growth over the 12-month period, driven through the acquisition of Bowlplex as well as the growth of the core estate through refurbishments and continued spend on maintenance capital to ensure that all centres are inviting family entertainment centres.
Depreciation increased from GBP7.8m in 2015 to GBP9.3m in 2016, largely as a result of the Bowlplex acquisition. Corporate costs increased by 14 per cent per cent to GBP8.8m in FY2016, from GBP7.7m in FY2015. This is due to the investment in specific business functions to support the integration of Bowlplex, more CCC heads, the inclusion of a proportion of the plc costs with Non-Executive Directors, while bonuses were materially the same as the prior year. Professional fees also rose in FY2016 as a result of advisers receiving 10 per cent of the rate rebates and an increase in audit fees, on account of the audit in a PLC environment and a half year audit for the purpose of IPO. As a percentage of total sales, total corporate costs represented 8.3 per cent in FY 2016, against 8.9 per cent in FY2015.
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------ ------------ ------------
Operating profit 14,378 13,034
Depreciation 9,316 7,758
Amortisation 493 508
------------------ ------------ ------------
EBITDA 24,187 21,300
Exceptional items 5,163 (722)
------------------ ------------ ------------
Adjusted EBITDA 29,350 20,578
------------------ ------------ ------------
Management use EBITDA adjusted for exceptional items (adjusted EBITDA) as a key performance measure of the business.
Exceptional items
In FY2016, exceptional items totalled GBP5.2m, with the main components being a GBP1.4m VAT rebate; costs of GBP2.3m relating to the acquisition of Bowlplex; GBP2.3m of IPO costs; a GBP1.6m reverse premium for the Liverpool lease negotiation and a one-off cost of GBP0.6m for the allocation of free shares to employees (Centre Management) on IPO.
In FY2015, exceptional items totalled GBP0.7m and consisted predominantly of GBP1.0m resulting from a sector wide reassessment of rates in the period which meant that the majority of the Group's centres were eligible for rebates. Included in this GBP1.0m are all the historical rebates back to April 2010 received by the Operating Group. Offsetting this rates rebate, an exceptional charge of GBP0.2m was recorded in relation to the investment by Electra Investments Limited in FY2014.
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------- ------------
VAT rebate1 1,395 -
Rates rebate2 79 1,009
Property costs3 (648) -
Acquisition related
expenses4 (2,334) (163)
Restructuring
and legal costs5 (757) (124)
IPO related expenses6 (2,298) -
Share based payments7 (600) -
---------------------- ------------- ------------
(5,163) 722
---------------------- ------------- ------------
1 The Group was able to make a one-off retrospective reclaim in respect of overpaid VAT relating to customers who were 'no-shows' and children's shoe hire. This VAT rebate relates to a rebate for FY 2012 to 2015. This has been classified as other income in the consolidated statement of comprehensive income. Going forward this will not be classified as exceptional income as it will be recognised within revenue.
2 There was a sector wide property rating appeal which was settled during FY2015 and resulted in a majority of the Group's centres receiving one-off rebates for the period from April 2010 onwards. Most of this was received in FY2015. With the new rating list effective from April 2017, the normal rates appeals process will be followed and in year refunds will not be included within exceptional costs.
3 For FY2016 this includes profit for the sale of the Avonmeads Centre (GBP0.8m) and a reverse premium (GBP1.6m) for exiting a lease rental contract for the Liverpool centre.
4 Costs relating to the acquisition of Bowlplex in December 2015. These costs include legal and research fees in connection with the lengthy CMA process which was part of the acquisition.
5 Costs relating to restructuring in readiness for, and subsequent to the acquisition of the Kanyeco Group in September 2014, and the acquisition of Bowlplex in December 2015. Also includes costs for the management of the Group by Epiris.
6 Costs associated with the IPO of Hollywood Bowl Group plc on the London Stock Exchange on 21 September 2016. Costs include legal and accounting transaction fees along with corporate banking costs.
7 Allocation of shares to employees on IPO date. Shares issued to employees have been recorded at fair value, being the strike price at IPO. This comprises the fair value of the shares (GBP527,000) and the employers' national insurance expense (GBP73,000). This was a one-off allocation of shares to employees as part of the IPO. Share based payments and other LTIPs will not be included in exceptional items as these are envisaged to be recurring and part of the normal course of business going forward.
Finance costs
Net interest payment and other finance charges increased by 46.2% from GBP8.1m for FY2015 to GBP11.9m in FY 2016, driven primarily by an increase in subordinated shareholder loans (GBP1.2m) and the write off of GBP3.0m of capitalised financing fees and the costs of cancelling an interest rate swap, both done as part of the listing.
Taxation
The Group has incurred a tax charge of GBP1.4m for the year compared to GBP1.2m for the year to 30 September 2015.
Earnings
Profit for the year was GBP1.2m which was lower than the prior year by GBP2.4m as a result of the factors discussed in the notes above.
Basic earnings per share was 1.12p, while adjusted earnings per share was 13.23p. This is calculated by excluding exceptional costs and shareholder loan interest.
Dividend
Although the business only listed on 21 September 2016 it intends to pay a dividend of 0.19 pence per share. Subject to shareholder approval at the AGM on 23 February 2017, this will be paid on 24 March 2017 to shareholders on the register on 24 February 2017.
Cash flows
The Group continues to deliver strong cash generation with Group Operating Cash flow 53.8% higher at GBP23.7m (2015: GBP15.4m) due to an increase in EBITDA and efficient use of working capital, offset by increased investment in maintenance capital as the estate grows. All of this resulted in an increase in Group Operating Cash flow conversion to 80.7% (2015: 74.8%).
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------ ------------
Group Adjusted
EBITDA 29,350 20,578
Movement in working
capital 2,468 1,074
Maintenance capital
expenditure1 (5,768) (4,419)
Taxation (2,352) (1,835)
---------------------- ------------ ------------
Operating cash
flow 23,698 15,398
OCF Conversion 80.7% 74.8%
---------------------- ------------ ------------
Expansionary
capital expenditure (3,468) (2,407)
Disposal proceeds 1,430 -
Exceptional items (2,484) 722
Interest paid (2,093) (2,304)
Acquisition of
subsidiary (22,801) -
Cash acquired
in subsidiary 970 -
Cash flows from
financing activities (724) (693)
---------------------- ------------ ------------
Net Cash flow (5,472) 10,716
---------------------- ------------ ------------
1 Maintenance capital expenditure includes amusements capital and GBP1.28m of amusement disposal proceeds.
Liquidity and capital resources
The Group's liquidity requirements arise primarily from its growth strategy, make interest payments on its indebtedness and meet the working capital requirements of the business. The Operating Group's principal sources of liquidity have been its cash flow from operating activities, its bank loans and its subordinated shareholder loans.
In preparation for the IPO, the Group undertook a capital reorganisation and refinancing, and executed a complex steps plan which included the creation of a new holding company, share exchanges and repayment arrangements for previous shareholders and bank debt. By applying the principles of reverse acquisition accounting in accordance with IFRS 3 "business combinations", the results of the Group are presented as if Hollywood Bowl Group plc had always owned Kanye Co Limited. Further details about the accounting for the IPO are included in Note 2.
There was no primary raise at IPO. A new term loan was agreed at the time of the IPO, which reduced the Group's bank debt down to GBP30m. As a result of the IPO and the refinancing, combined with strong trading, Net debt decreased to GBP20.8m.
Incorporation and capital reduction
On 13 June 2016, Hollywood Bowl Group PLC was incorporated and registered in England and Wales under the Companies Act 2006 as a public limited company.
The Company has reduced its share capital by means of a court-sanctioned reduction in capital in order to provide it with the distributable reserves required to support the intended dividend policy. The capital reduction received court approval on 9 November 2016 and is detailed in the post balance sheet events note.
Capital expenditure
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------- ------------ ------------
Maintenance 4,439 2,675
Amusement supplier 2,607 2,194
Refurbishment 2,860 2,417
New centres 608 1,263
----------------------- ------------ ------------
Landlord contributions - (1,255)
----------------------- ------------ ------------
Net disposal
(proceeds)/costs (2,708) (450)
----------------------- ------------ ------------
Total capital
expenditures 7,806 6,844
----------------------- ------------ ------------
Maintenance capital spend increased by a total of GBP1.3m (30 per cent) due to the increased number of sites during the year as well as the requirement for a higher spend in the Bowlplex sites to bring them up to the Group's technical standards, which in turn provides the customer with an overall better experience.
Expansionary capital expenditure increased by 18 per cent as the refurbishment programme continued, with 5 centres being refurbished, as well as higher spends on the 3 Bowlplex rebrands undertaken during the financial year. Management views centres as typically needing refurbishment every 6 to 8 years. Expansionary capital expenditure also includes some spend on the FY2017 openings in Southampton and Derby.
Refurbishments completed in the financial year were:
-- Leeds -- Surrey Quays -- Manchester -- Birmingham -- Bolton -- The 3 Bowlplex rebrands in FY2016: -- Poole Tower Park; -- Oxford; -- Basingstoke.
Laurence Keen
Chief Financial Officer
13 December 2016
Consolidated Statement of Comprehensive Income
Year ending 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
-------------------------------------------------------- ---- ------------ ------------
Revenue 106,632 86,044
Cost of sales (17,205) (14,963)
-------------------------------------------------------- ---- ------------ ------------
Gross profit 89,427 71,081
Administrative expenses 5 (76,444) (58,047)
Other income 1,395 (-)
-------------------------------------------------------- ---- ------------ ------------
Operating profit 14,378 13,034
Being:
-------------------------------------------------------- ---- ------------ ------------
Group Adjusted EBITDA* 3 29,350 20,578
Depreciation 10 9,316 7,758
Amortisation 11 493 508 Exceptional items 4 (5,163) 722 -------------------------------------------------------- ---- ------------ ------------ Finance income 7 22 8 Finance expenses 7 (11,905) (8,143) Movement in derivative financial instrument 79 (134) -------------------------------------------------------- ---- ------------ ------------ Profit before tax 2,574 4,765 Tax expense 8 (1,387) (1,173) -------------------------------------------------------- ---- ------------ ------------ Profit for the year attributable to equity shareholders 1,187 3,592 Other comprehensive income - - -------------------------------------------------------- ---- ------------ ------------ Total comprehensive income for the year attributable to equity shareholders 1,187 3,592 -------------------------------------------------------- ---- ------------ ------------ Basic and diluted earnings per share (pence) 9 1.12 3.56 -------------------------------------------------------- ---- ------------ ------------
*Group Adjusted EBITDA is a non-GAAP metric used by management and is not an IFRS disclosure
Consolidated Statement of Financial Position
As at 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
------------------------------------ ---- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 10 37,264 30,854
Intangible assets 11 79,228 66,186
------------------------------------ ---- ------------ ------------
116,492 97,040
------------------------------------ ---- ------------ ------------
Current assets
Cash and cash equivalents 9,224 14,696
Trade and other receivables 9,634 8,023
Inventories 1,018 703
------------------------------------ ---- ------------ ------------
19,876 23,422
------------------------------------ ---- ------------ ------------
Total assets 136,368 120,462
------------------------------------ ---- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 18,866 14,127
Loans and borrowings 12 - 1,009
Corporation tax payable 1,034 637
------------------------------------ ---- ------------ ------------
19,900 15,773
------------------------------------ ---- ------------ ------------
Non-current liabilities
Other payables 6,941 7,886
Loans and borrowings 12 29,403 92,285
Deferred tax liabilities 2,230 1,765
Accruals and provisions 3,476 2,904
Derivative financial instruments 55 134
------------------------------------ ---- ------------ ------------
42,105 104,974
------------------------------------ ---- ------------ ------------
Total liabilities 62,005 120,747
------------------------------------ ---- ------------ ------------
NET ASSETS/(LIABILITIES) 74,363 (285)
------------------------------------ ---- ------------ ------------
Equity attributable to shareholders
Share capital 71,512 49,932
Share premium 51,832 -
Merger reserve (49,897) (49,847)
Capital redemption reserve 99 -
Retained earnings 817 (370)
------------------------------------ ---- ------------ ------------
TOTAL EQUITY/(DEFICIT) 74,363 (285)
------------------------------------ ---- ------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 30 September 2016
Capital
Share Share Merger redemption Retained
capital premium reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2014 42,499 - (42,414) - (3,962) (3,877)
Issue of shares 7,433 - (7,433) - - -
Profit for the
period - - - - 3,592 3,592
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2015 49,932 - (49,847) - (370) (285)
Shares issued
during the year 100 - (50) - - 50
Debt for equity
swap 21,424 51,460 - - - 72,884
Issue of shares
to employees 155 372 - - - 527
Shares re-organisation (99) - - 99 - -
Profit for the
period - - - - 1,187 1,187
----------------------- -------- -------- -------- ----------- --------- --------
Equity at 30
September 2016 71,512 51,832 (49,897) 99 817 74,363
----------------------- -------- -------- -------- ----------- --------- --------
Consolidated Statement of Cash Flows
For the year ended 30 September 2016
30 September 30 September
2016 2015
Note GBP'000 GBP'000
------------------------------------ ---- ------------- -------------
Cash flows from operating
activities
Profit before tax 2,574 4,765
Adjusted by:
Depreciation and impairment 10 9,316 7,758
Amortisation of intangible
assets 11 493 508
Net interest expense 11,883 8,135
(Profit)/loss on disposal
of property, plant and equipment (745) 17
Movement on derivative financial
instrument (79) 134
Share-based payments 526 (-)
------------------------------------ ---- ------------- -------------
Operating profit before working
capital changes 23,968 21,317
Decrease/(increase) in inventories 108 (57)
Decrease/(increase) in trade
and other receivables 5,115 (185)
Increase in payables and provisions 143 1,310
------------------------------------ ---- ------------- -------------
Cash inflow generated from
operations 29,334 22,385
Interest received 7 8
Income tax paid - corporation
tax (2,352) (1,835)
Interest paid (2,100) (2,304)
------------------------------------ ---- ------------- -------------
Net cash inflow from operating
activities 24,889 18,254
------------------------------------ ---- ------------- -------------
Investing activities
Acquisition of subsidiaries (22,801) -
Subsidiary cash acquired 970 -
Purchase of property, plant
and equipment (10,157) (7,073)
Purchase of intangible assets (357) (221)
Sale of assets 2,708 450
------------------------------------ ---- ------------- -------------
Net cash used in investing
activities (29,637) (6,844)
------------------------------------ ---- ------------- -------------
Cash flows from financing
activities
Issue of loan notes 10,000 70
Increase of bank loan (9,250) (750)
Payment of financing costs (1,474) (13)
------------------------------------ ---- ------------- -------------
Net cash flows used in financing
activities (724) (693)
------------------------------------ ---- ------------- -------------
Net change in cash and cash
equivalents for the period (5,472) 10,717 ------------------------------------ ---- ------------- ------------- Cash and cash equivalents at the beginning of the period 14,696 3,979 ------------------------------------ ---- ------------- ------------- Cash and cash equivalents at the end of the period 9,224 14,696 ------------------------------------ ---- ------------- -------------
Notes
1. General information
The financial information, comprising statement of comprehensive income, consolidated statements of financial position, consolidated statements of changes in equity, consolidated cash flow statement and related notes, have been extracted from the consolidated financial statements of Hollywood Bowl Group plc for the year ended 30 September 2016, which were approved by the Board of Directors on 13 December 2016.
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 30 September 2016, which will be delivered to the registrar of companies in due course. The auditor has reported on those accounts; their report was i) unqualified, ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
Hollywood Bowl Group plc (together with its subsidiaries, the Group) is a public limited company and was admitted to the premium listing segment of the Official List of the Financial Conduct Authority (FCA) and to trade on the Main Market of the London Stock Exchange on 21 September 2016. The Group is incorporated and domiciled in England and Wales. The registered office of the Parent Company is Focus 31, West Wing, Cleveland Road, Hemel Hempstead, HP2 7BW, United Kingdom. The registered Company number is 10229630.
The Group's principal activities are that of the operation of ten-pin bowling centres as well as the development of new centres and other associated activities.
The Directors of the Group are responsible for the consolidated financial statements.
2. Basis of preparation
The consolidated financial statements have been prepared on a going concern basis under the historical cost convention as modified by the recognition of certain financial assets/liabilities (including derivative instruments) at fair value through the profit and loss.
Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.
The Group beneath Hollywood Bowl Group plc, headed by Kanyeco Limited, previously first time adopted IFRSs in the year ended 30 September 2014. In preparing the consolidated financial statements for Hollywood Bowl Group plc, the Directors have reflected, under reverse acquisition accounting, the amounts reported in the Group headed by Kanyeco Limited.
3. Reconciliation of operating profit to Adjusted EBITDA
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------ ------------ -------------
Operating profit 14,378 13,034
Depreciation 9,316 7,758
Amortisation 493 508
------------------ ------------ -------------
EBITDA 24,187 21,300
Exceptional items 5,163 (722)
------------------ ------------ -------------
Adjusted EBITDA 29,350 20,578
------------------ ------------ -------------
Management use EBITDA adjusted for exceptional items (Adjusted EBITDA) as a key performance measure of the business. It is felt that this measure reflects the underling trading of the business.
4. Exceptional items
Exceptional items are disclosed separately in the financial statements where the Directors consider it necessary to do so to provide further understanding of the financial performance of the Group. They are material items or expense that have been shown separately due to the significance of their nature or amount:
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------------------- ------------- ------------
VAT rebate(1) 1,395 -
Rates rebate(2) 79 1,009
Property costs(3) (648) -
Acquisition related expenses(4) (2,334) (163)
Restructuring and legal costs(5) (757) (124)
IPO related expenses(6) (2,298) -
Share-based payments(7) (600) -
--------------------------------- ------------- ------------
(5,163) 722
--------------------------------- ------------- ------------
1 The Group was able to make a one-off retrospective reclaim in respect of overpaid VAT relating to customers who were 'no-shows' and children's shoe hire. This VAT rebate relates to a rebate for FY 2012 to 2015. This has been classified as other income in the consolidated statement of comprehensive income. Going forward this will not be classified as exceptional income as it will be recognised within revenue.
2 There was a sector wide property rating appeal which was settled during FY2015 and resulted in a majority of the Group's centres receiving one-off rebates for the period from April 2010 onwards. Most of this was received in FY2015. With the new rating list effective from April 2017, the normal rates appeals process will be followed and in year refunds will not be included within exceptional costs.
3 For FY2016 this includes profit for the sale of the Avonmeads Centre (GBP0.8m) and a reverse premium (GBP1.6m) for exiting a lease rental contract for the Liverpool centre.
4 Costs relating to the acquisition of Bowlplex in December 2015. These costs include legal and research fees in connection with the lengthy CMA process which was part of the acquisition.
5 Costs relating to restructuring in readiness for, and subsequent to the acquisition of the Kanyeco Group in September 2014, and the acquisition of Bowlplex in December 2015. Also includes costs for the management of the Group by Epiris.
6 Costs associated with the IPO of Hollywood Bowl Group plc on the London Stock Exchange on 21 September 2016. Costs include legal and accounting transaction fees along with corporate banking costs.
7 Allocation of shares to employees on IPO date. Shares issued to employees have been recorded at fair value, being the strike price at IPO. This comprises the fair value of the shares (GBP527,000) and the employers' national insurance expense (GBP73,000). This was a one-off allocation of shares to employees as part of the IPO. Share based payments and other LTIPs will not be included in exceptional items as these are envisaged to be recurring and part of the normal course of business going forward.
5. Profit from operations
Profit from operations includes the following:
30 September 30 September
2016 2015
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Amortisation of intangible assets 493 508
Depreciation of property, plant and
equipment 9,316 7,758
Operating leases:
- Property 13,514 11,543
Loss/(profit) on disposal of property,
plant and equipment1 (745) 17
----------------------------------------- ------------ ------------
Auditor's remuneration:
- Fees payable for audit of these
financial statements 75 -
Fees payable for other services
- Audit of subsidiaries 75 72
- Taxation compliance services 6 -
- Other tax advisory services 225 -
- Services relating to corporate finance
transactions2 737 26
----------------------------------------- ------------ ------------
1,118 98
----------------------------------------- ------------ ------------
1 This includes profit on sale of Avonmeads. See Note 4.
2 The services relating to corporate finance transactions includes GBP667,000 in relation to the IPO, and GBP70,000 in relation to the acquisition of Bowlplex in December 2015.
6. Staff numbers and costs
The average number of employees (including Directors) during the period was made up as follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------- ------------ ------------
Directors 6 7
Administration 57 54
Operations 1,682 1,325
--------------- ------------ ------------
Total staff 1,745 1,386
--------------- ------------ ------------
The cost of employees (including Directors) during the period was made up as follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
---------------------- ------------ ------------
Wages and salaries 22,111 19,051
Social security costs 1,614 1,442
Pension costs 185 147
Shared-based payments 600 (-)
---------------------- ------------ ------------
Total staff costs 24,510 20,640
---------------------- ------------ ------------
7. Finance income and expenses
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------ ------------ ------------
Interest on bank deposits 22 8
------------------------------------ ------------ ------------
Finance income 22 8
------------------------------------ ------------ ------------
Interest on bank borrowings 1,900 2,308
Unwinding of discount on provisions 124 189
Interest on loan notes 6,886 5,646
Exceptional finance costs 2,995 -
------------------------------------ ------------ ------------
Finance expense 11,905 8,143
------------------------------------ ------------ ------------
Exceptional finance costs comprise the write off of GBP2,858,000 of capitalised financing fees relating to the old bank facility that ended on IPO and GBP137,000 to settle the liability on an outstanding interest rate swap, which was ended on IPO.
8. Taxation
a). Tax on Profit
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------------------------- ------------ ------------
The tax expense is as follows:
- UK corporation tax 2,130 1,605
- Adjustment in respect of previous
periods (42) (168)
-------------------------------------- ------------ ------------
Total current tax 2,088 1,437
Deferred tax:
Origination and reversal of temporary
differences (701) (170)
Adjustment in respect of prior years - (94)
-------------------------------------- ------------ ------------
Total deferred tax (701) (264)
-------------------------------------- ------------ ------------
Total tax expense 1,387 1,173
-------------------------------------- ------------ ------------
b). Reconciliation of Tax charge
30 September 30 September
2016 2015
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Profit excluding taxation 2,574 4,765
Tax using the UK corporation tax rate
of 20% 515 977
Reduction in tax rate on deferred tax
balances (276) -
Non-deductible expenses 1,234 458
Tax exempt revenues (44) -
Over provided in prior years (42) (262)
Total tax expense included in profit
or loss 1,387 1,173
-------------------------------------- ------------ ------------
The Group's standard tax rate for the year ended 30 September 2016 was 20 per cent (2015: 20.5 per cent).
9. Earnings per share
a). Basic earnings per share are calculated by dividing the profit attributable to equity holders of Hollywood Bowl Group plc by the weighted average number of shares issued during the year. The weighted average number of shares for both the current and preceding years has been stated as it the Group share for share exchange (Note 22) has occurred at the beginning of the comparative year.
30 September 30 September
2016 2015
---------------------------------------- ------------ ------------
Basic and diluted
Profit for the year after tax (GBP'000) 1,187 3,592
Weighted average number of shares in
issue for the period (number) 105,843,170 100,880,334
Earnings per share (pence) 1.12 3.56
---------------------------------------- ------------ ------------
There are no dilutive share arrangements.
b). Adjusted underlying earnings per share
Adjusted earnings per share is calculated by dividing adjusted underlying earnings after tax by the weighted average number of shares issued during the year.
30 September 30 September
2016 2015
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax
(before exceptional costs and shareholder
interest) (GBP'000) 14,004 7,901
Weighted average number of shares in
issue for the period (number) 105,843,170 100,880,334
Adjusted earnings per share (pence) 13.23 7.83
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax is calculated as follows:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Profit before taxation 2,574 4,765
Exceptional items (Note 5) 5,163 (722)
Exceptional costs within finance expenses
(Note 9) 2,995 -
Shareholder interest (Note 9) 6,886 5,646
------------------------------------------- ------------ ------------
Adjusted underlying profit before taxation 17,618 9,689
------------------------------------------- ------------ ------------
Less taxation (3,614) (1,788)
------------------------------------------- ------------ ------------
Adjusted underlying earnings after tax 14,004 7,901
------------------------------------------- ------------ ------------
10. Property, plant and equipment
Plant,
Long Short machinery
leasehold leasehold and fixtures
property property and fittings Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ---------- ------------- --------
Cost
At 1 October 2014 1,224 4,518 26,886 32,628
Additions - 1,495 5,578 7,073
Disposals - (33) (1,521) (1,554)
------------------------- ----------- ---------- ------------- --------
At 30 September 2015 1,224 5,980 30,943 38,147
Additions - 2,674 7,483 10,157
On acquisition - 1,715 5,817 7,532
Disposals - (20) (4,476) (4,496)
------------------------- ----------- ---------- ------------- --------
At 30 September 2016 1,224 10,349 39,767 51,340
------------------------- ----------- ---------- ------------- --------
Accumulated depreciation
At 1 October 2014 5 106 511 622
Depreciation charge 59 1,560 6,139 7,758
Disposals - (33) (1,054) (1,087)
------------------------- ----------- ---------- ------------- --------
At 30 September 2015 64 1,633 5,596 7,293
Depreciation charge 46 1,688 7,582 9,316
Disposals - (10) (2,523) (2,533)
------------------------- ----------- ---------- ------------- --------
At 30 September 2016 110 3,311 10,655 14,076
------------------------- ----------- ---------- ------------- --------
Net book value
At 30 September 2016 1,114 7,038 29,112 37,264
At 30 September 2015 1,160 4,347 25,347 30,854
At 30 September 2014 1,219 4,412 26,375 32,006
------------------------- ----------- ---------- ------------- --------
11. Intangible assets
Goodwill Brand(1) Trademark Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------- -------- --------
Cost
At 1 October 2014 62,014 3,360 798 340 66,512
Additions - - - 221 221
Disposals - - - (17) (17)
------------------------- -------- -------- --------- -------- --------
At 30 September 2015 62,014 3,360 798 544 66,716
Additions - - - 357 357
On acquisition (Note 30) 13,020 - 4 154 13,178
Disposals - - - (15) (15)
------------------------- -------- -------- --------- -------- --------
At 30 September 2016 75,034 3,360 802 1,040 80,236
------------------------- -------- -------- --------- -------- --------
Accumulated amortisation
At 1 October 2014 - 12 4 23 39
Amortisation charge - 168 62 278 508
Disposals - - - (17) (17)
------------------------- -------- -------- --------- -------- --------
At 30 September 2015 180 66 284 530
Amortisation charge - 168 50 275 493
Disposals - - - (15) (15)
------------------------- -------- -------- --------- -------- --------
At 30 September 2016 - 348 116 544 1,008
------------------------- -------- -------- --------- -------- --------
Net book value
At 30 September 2016 75,034 3,012 686 496 79,228
At 30 September 2015 62,014 3,180 732 260 66,186
At 30 September 2014 62,014 3,348 794 317 66,473
------------------------- -------- -------- --------- -------- --------
1 This relates to the Hollywood Bowl brand only.
EU-IFRSs requires that, on acquisition, intangible assets are recorded at fair value. As explained in Note 32, the Group has not applied the requirements of IFRS 3 to acquisitions that occurred before 1 October 2012.
Impairment testing is carried out at the cash-generating unit (CGU) level on an annual basis.
The recoverable amount of the CGU has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the Board covering a 3-year period. Cash flows beyond this period are extrapolated using the estimated growth rates stated in the key assumptions. The key assumptions used in the value in use calculations are as follows:
2016 2015
-------------- ---- -----
Discount rate 9.8% 10.8%
Growth rate 2.0% 2.0%
-------------- ---- -----
Discount rates reflect management's estimate of return on capital employed required. This is the benchmark used by management to assess operating performance and to evaluate future capital investment proposals. These discount rates are derived from the Group's weighted average cost of capital. Changes in the discount rates over the years are calculated with reference to latest market assumptions for the risk free rate, equity market risk premium and the cost of debt.
The key assumptions are number of games and spend per game. Based on these assumptions there is no impairment required.
Goodwill is tested for impairment on at least an annual basis, or more frequently if events or changes in circumstance indicate that the carrying value may be impaired. In the years under review management's value in use calculations have indicated no requirement to impair.
Sensitivity to changes in assumptions
The estimates of the recoverable amounts associated with the CGU affords significant head room over the carrying value, consequently any reasonable possible changes in these key assumptions would not cause the Group to recognise an impairment loss.
12. Loans and borrowings
30 September 30 September
2016 2015
GBP'000 GBP'000
--------------------------------- ------------ ------------
Current
Bank loan - 1,009
--------------------------------- ------------ ------------
Borrowings (less than 1 year) - 1,009
--------------------------------- ------------ ------------
Non-current
--------------------------------- ------------ ------------
Bank loan 29,403 36,314
Other loans - 55,971
--------------------------------- ------------ ------------
Borrowings (greater than 1 year) 29,403 92,285
--------------------------------- ------------ ------------
Total borrowings 29,403 93,294
--------------------------------- ------------ ------------
At 30 September 2015, other loans comprised unsecured subordinated shareholder loan notes from Electra Investments Limited and members of Company management which should have been paid due for repayment in 2021. Interest of 10 per cent per annum was being charged on these notes which accrued in accordance with the provisions of the loan note instrument.
On 16 September 2016, the outstanding loan notes were exchanged for shares in Hollywood Bowl Group plc
Bank borrowings have the following maturity profile:
30 September 30 September
2016 2015
GBP'000 GBP'000
------------------------ ------------ ------------
Due in less than 1 year - 1,500
Less issue costs - (491)
------------------------ ------------ ------------
- 1,009
Due 2 to 5 years 30,000 12,750
Due over 5 years - 25,000
Less issue costs (597) (1,436)
------------------------ ------------ ------------
29,403 37,323
------------------------ ------------ ------------
The bank loans are secured by a fixed and floating charge over all assets. The loans carry interest at LIBOR plus a variable margin. The loans outstanding during FY2014 and FY2015 varied in accordance with the ratio of gross debt divided by EBITDA. During FY2014, FY2015 and FY2016 the margins were 4 per cent and 4.5 per cent.
On 21 September, the Group repaid the outstanding bank loans and entered into a GBP30m facility with Lloyds Bank plc. This facility is due for repayment in instalments over a 5-year period up to the expiry date of 20 September 2021. The first repayment of GBP0.75m is due 31 December 2017, and in 6 monthly instalments up to 31 December 2020. The remaining balance of GBP24.75m will be repayable at the expiry date of 20 September 2021. In addition, the Group had an undrawn GBP5m revolving credit facility and undrawn GBP5m capex facility. All loans carry interest at LIBOR plus a margin, which varies in accordance with the ratio of net debt divided by EBITDA. The margin at 30 September 2016 is 2.25 per cent.
13. Purchase of trade and assets
The Group acquired the entire share capital of Bowlplex Limited on 9 December 2015 for a total consideration, of GBP22,801,000. Acquisition related costs of GBP2,334,000 were also incurred and have been written off to the profit and loss account. The following table sets out the value of the net assets acquired.
Fair value
GBP'000
------------------------------------------ ----------
Intangible assets 158
Property, plant and equipment 7,532
Inventories 423
Trade receivables 5,019
Prepayments 1,707
Cash at bank and in hand 970
Trade payables and other payables (3,993)
Accruals (271)
Provisions(1) (1,764)
------------------------------------------ ----------
Net assets 9,781
Consideration paid 22,801
------------------------------------------ ----------
Goodwill 13,020
------------------------------------------ ----------
Consideration paid has been satisfied by:
Cash 22,801
------------------------------------------ ----------
1 This includes dilapidations and deferred tax.
IFRS 3 looks into the existence of any intangible assets that meet the identifiable criteria for recognition other than as goodwill. These include marketing-related (including brands), customer related, contract based and technology based intangible assets. Each was considered separately by the Board and it was concluded that no value is attributable to other intangibles.
The goodwill arising from this acquisition includes the various expected business synergies. The business was purchased with potential synergy cost benefits of circa GBP2.6m per annum (GBP2m from central support and the rest from contractual Group benefits). It was also identified that the potential within the Bowlplex sites is significant given their revenue performance vs the Hollywood Bowl site revenue performance.
For the period from acquisition to the year end, Bowlplex revenues were GBP15.6m and EBITDA was GBP3.7m.
14. Events subsequent to the year end
Pursuant to a resolution of the shareholders of the Company passed on 16 September 2016, The Company has completed a reduction of capital, cancellation of share premium account and cancellation of capital redemption reserve (the Reduction and Cancellation).
The Reduction & Cancellation was formally approved by the High Court of Justice on 9 November 2016. Following registration of the order of the High Order with Companies House, the Reduction & Cancellation became effective on 9 November 2016.
Following the Reduction & Cancellation the issued share capital of the Company consists of 150,000,000 Ordinary Shares of GBP0.01, as at 9 November 2016.
The effect of the Reduction & Cancellation is to create distributable reserves to support the Boards future dividend policy.
15. Dividend proposed
30 September
2016
GBP'000
---------------------------------------------------------------------------- ------------
Proposed for approval by shareholders at AGM (not recognised as a liability
at 30 September 2016)
Final dividend for 2016: 0.19p 286
---------------------------------------------------------------------------- ------------
16. Related party transactions
30 September 2016
During the period Electra Partners LLP, an associate of Electra Private Equity plc charged a management fee of GBP98,000 to the Kanyeco Group.
The Kanyeco Group subordinated shareholder loan notes together with accrued interest of GBP72,935,000 owed to Electra Investments Limited and members of management of the Kanyeco Group, was acquired by Hollywood Bowl Group plc in exchange for share capital.
30 September 2015
During the period Electra Partners LLP, an associate of Electra Private Equity plc charged a management fee of GBP105,000 to the Kanyeco Group.
The Kanyeco Group held outstanding subordinated shareholder loan notes together with accrued interest of GBP56,744,000 owed to Electra Investments Limited and members of management of the Kanyeco Group.
Responsibility statement of the directors
The following statement will be contained in the 2016 Annual Report and Accounts:
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
- the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
- We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.
On behalf of the Board
Stephen Burns Laurence Keen Chief Executive Officer Chief Financial Officer 13 December 2016 13 December 2016
EFFECTIVE RISK MANAGEMENT
The Board retains ultimate responsibility for the Group's risk management framework and annually reviews the Group's principal risks.
In order to gain a full understanding of the risk exposure of the Group we have reviewed each area of the business, and each member of the senior leadership team has classified the risk, taking into account the likelihood of their occurrence and the scale of the impact (both financial and reputational) on the business. Each department is responsible for evaluating current controls and drawing up plans to improve the controls and manage the risk where appropriate. Details of the risk and controls are recorded on the Group's risk register which is a working document and will be updated throughout the year and presented to the Board half-yearly.
The Board has carried out a robust assessment of the principal risks facing the Group, including those that would threaten the Group's business model, future performance, solvency and liquidity. The risk factors addressed below are those which we believe to be the most material to us in implementing our business model and strategy, and which could adversely affect the operations, revenue, profit, cash flow or assets of the Group. Additional risks and uncertainties currently unknown to us, or which we currently believe are immaterial, may also have an adverse effect on the Group.
Potential
Type of risk Risk effect Mitigation
------------- --------------------- ------------------ -------------------------------
Financial Adverse economic A decline The majority of sites
conditions in spend are based in high footfall
may have on discretionary areas that should stand
an effect leisure activity up against a recessionary
on Group could lead decline. The Board continually
results to a reduction reviews its revenue
in profits streams for opportunities
to enhance the customer
experience
------------- --------------------- ------------------ -------------------------------
Financial Adversely Covenant The Group has considerable
impacted breach headroom on current
by a failure facility with gross
to review debt significantly below
funding arrangements market opportunity for
when they funding. We prepare
become due, short-term and long-term
or a failure cash flow, EBITDA and
to meet banking covenant forecasts to
covenants ensure any risks are
identified early. Tight
controls exist over
the approval for capex
and expenses
------------- --------------------- ------------------ -------------------------------
Information Failure in Customers Systems are backed up
technology the stability not being to our Disaster Recovery
/operational or availability able to book Centre. The reservations
of information through the system also has an offline
through IT website or mode, so customers could
systems CCC, and still book but the CCC
inability and online booking facility
to collect would be down. A back-up
revenue system exists for CCC
to take credit card
payments offline. A
full audit process exists
for offline functionality
------------- --------------------- ------------------ -------------------------------
Operational Operational Unable to The Group has key suppliers
business provide customers in food and drink with
failures with a full tight SLAs stated in
from key experience contracts, with other
suppliers supplier options that
(non-IT) know our business and
could be introduced
if needed at short notice.
Centres hold between
14 and 21 days of food,
drink and amusement
product
------------- --------------------- ------------------ -------------------------------
Operational Any disruption Amusement Regular key supplier
which affects income meetings between our
Group relationship Head of Amusements,
with amusement and Namco and Gamestech.
suppliers Key issues are discussed
as well as future plans.
There are biannual meetings
between the Board and
Namco
------------- --------------------- ------------------ -------------------------------
Operational Loss of key Lack of direction The Company runs a Centre
personnel at centre Manager in Training
- Centre level and (CMIT) programme annually,
Managers therefore which identifies potential
effect on Centre Managers and
customers develops them into these
roles for the future.
At any one time, there
are 5-7 CMITs across
the Group who are able
to step into a Centre
Manager role if required.
The CMITs can run a
centre with support
from the Regional Support
Manager, as well as
from other more experienced
Centre Managers across
the region
------------- --------------------- ------------------ -------------------------------
Operational Inability Reduced CCC We hold regular CCC
to recruit capacity recruitment events,
CCC team and impact and our in-house recruitment
members or on head office team supports all Head
other head functional Office vacancies. We
office support delivery offer enhanced packages
functions to extend the recruitment
due to increased catchment area
local competition
or lack of
local skills
------------- --------------------- ------------------ -------------------------------
Technical Data protection Breach leading The Group's networks
breach to access are all protected by
of customer firewalls and secure
email addresses passwords. Security
and subsequent vulnerability scans
impact on are frequently run on
reputation firewalls to ensure
with customer they are secure. In
base addition, the Group
plans to move to a new
analytics system to
allow the IT team to
see real-time or historical
threat analytics
The Group does not hold
any customer financial
payment information
------------- --------------------- ------------------ -------------------------------
Regulatory Failure to Potential Expert opinion is sought
adhere to financial where relevant. We run
regulatory penalties employment and continuous
requirements and reputational training and development
such as Listing damage for appropriately-qualified
Rules, taxation, staff
health and
safety, planning The Board has oversight
regulations of the management of
and other regulatory risk and
laws ensures that each member
of the Board is aware
of their responsibilities.
Health and safety risk
assessments and audits
are carried out by the
internal audit team,
who provide recommendations
where necessary
------------- --------------------- ------------------ -------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KLLFFQLFXFBE
(END) Dow Jones Newswires
December 13, 2016 02:00 ET (07:00 GMT)
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