Hollywood Bowl : Interim Half Year Results Statement

Hollywood Bowl Group plc

("Hollywood Bowl", the "Company" or the "Group")

Interim Results for the Six Months Ended 31 March 2023

CONTINUED STRONG CUSTOMER DEMAND REFLECTING ATTRACTIVENESS OF OFFER AND

GREAT VALUE FOR MONEY PROPOSITION

Hollywood Bowl, the UK and Canada's largest ten-pin bowling operator, is pleased to announce its Interim Results for the six-month period ended 31 March 2023 ("H1 FY2023").

Financial highlights

			H1 FY2022	Movement
			(excluding VAT
			H1 FY2023 vs H1 FY2022 (excluding
	H1 FY2023	H1 FY2022	benefit on bowling)	VAT benefit on bowling))
Revenue	£110.2m4	£100.2m4	£91.3m	+20.7%
Gross profit	£91.3m	£86.5m	£77.7m	+17.5%
Gross profit margin	82.8%	86.4%	85.1%	-230bps
Administrative expenses	£60.0m	£48.9m	£48.7m	+23.2%
Group adjusted EBITDA1	£43.9m	£42.2m	£39.2m	+12.0%
Group adjusted EBITDA1 pre-IFRS 16	£35.1m	£34.0m	£31.0m	+13.2%
Group profit before tax	£26.7m	£33.4m	£24.8m	+7.7%
Group profit after tax	£20.9m	£27.0m	£20.4m	+2.5%
Group adjusted profit after tax2	£21.9m	£27.0m	£20.4m	+7.5%
Free cash flow3	£15.3m	£19.6m	£19.6m	-21.9%
Interim dividend per share	3.27p	3.00p	3.00p	+9.0%

Operational highlights

• Continued strong performance driven by demand for high-quality, great value for money offer

1. LFL revenue growth5 of 3.5% with a record first half Group revenue of £110.2m, up 9.7 per cent vs H1 FY20224. Excluding the effect of the reduced rate (TRR) of VAT in H1 FY2022, group revenues

were up 20.7 per cent vs H1 FY2022

1. Group adjusted EBITDA1 pre-IFRS 16 increased 13.2 per cent vs H1 FY2022 (excluding the TRR of VAT in H1 FY2022) to £35.1m

1. Interim dividend of 3.27 pence per share

• 1. Strong net cash position at 31 March 2023 of £44.1m; undrawn £25m revolving credit facility
• Active improvement of the quality of the estate through new centre openings and successful execution of our refurbishment strategy
• 1. Hollywood Bowl Speke and Puttstars Peterborough opened during the period and are trading ahead

of management's expectations

1. Currently on site in Hollywood Bowl Merry Hill which is due to open in Q4 FY2023 and expect to be on site on a combined Hollywood Bowl/Puttstars offering during H2 FY2023

1. Eight refurbishments (including three rebrands) completed in the half, with all trading in line with or above our return on investment expectations, with a further two underway

• 1. Four further centres had solar panels installed, bringing the total to 26 centres (38 per cent of UK estate)
• Relentless focus on innovation resulting in high customer satisfaction and strong LFL growth
• 1. Food LFL revenue up 9.0 per cent and drinks LFL revenue up 1.7 per cent following the introduction of a simplified food menu new 'snacks and sharers' lane offering and a new drinks range, all of

which are increasing dwell time and spend

1. Pins on Strings installed in seven centres during the period, bringing the total sites using the new

technology to 48 (75 per cent of the Group's UK bowling centres), with a further five planned before year end

• 1. Increased technology investment in CRM, website and core booking systems to enhance the digital customer journey
• Canada performing ahead of our expectations
• 1. Canadian business generated EBITDA of CAD: 5.0m (£3.1m)6 in the period

1. Three further entertainment centres in Calgary acquired in February which are trading in line with expectations.

1. Integration with Splitsville is progressing well

1. Exchanged on a new build bowling centre in Ontario due to open in H1 FY2024

• 1. Strong momentum and significant expansion potential supported by strong Group balance sheet
• Outlook - the Group remains well-placed to continue executing its growth strategy
• 1. Trading in line with the Board's expectations for FY2023

1. On track to meet target of 15-20 new centre openings by the end of FY2025 with strong new centre

pipeline for Hollywood Bowl and Puttstars brands, as well as Canadian Splitsville brand

1. Continued balance sheet strength and disciplined capital allocation policy supports ability to grow

and further invest and innovate for customers

1. Confident in resilient demand as customers look for value for money leisure experiences

1. Well-insulatedfrom inflationary pressures with electricity costs hedged to the end of FY2024

1. 1. Training and development programmes for team members progressing well; continued investment in people to retain and attract the best talent
2. 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, 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.
3. Group adjusted profit after tax is calculated as group profit after tax, adding back the acquisition fees of £0.5m (H1 FY2022: nil), the non-cash
   expense of £0.7m (H1 FY2022: nil) related to the fair value of the earn out consideration on the Teaquinn acquisition in May 2022 and
   removing the TRR of VAT benefit on bowling of £0.2m (H1 FY2022: £6.6m)
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.
5. Group revenue in H1 FY2022 included a total of £8.8m relating to the reduced rate (TRR) of VAT on bowling. £5.8m of this was in respect of prior years and £3.0m for H1 FY2022. H1 FY2023 includes £0.2m in respect of TRR of VAT on bowling parties.
6. Like-for-like(LFL) revenue growth is total revenue excluding any new centres and Canada. New centres are included in the LFL growth calculation for the period, after they complete the calendar anniversary of their opening date. LFL revenues in H1 FY2023 and H1 FY2022 exclude the impact of TRR of VAT on bowling.
7. Revenues in GBP based on an average foreign exchange rate over the relevant period of 1.62 CAD: 1 GBP.

Stephen Burns, Chief Executive, commented:

"I am delighted with our record performance in the first half, and I would like to thank our fantastic team members for all the hard work that goes into delivering excellent value for money, high quality experiences. It is clear from our high customer satisfaction scores that our continually evolving proposition appeals to all generations looking to enjoy affordable leisure activities together.

"We are looking forward to driving further growth in the UK and Canada, capturing the significant market opportunity ahead. Our resilience to inflationary pressures, strong balance sheet and cash-generative model gives us confidence in the future as we continue to invest so that our customers have the best experience possible in our centres."

Enquiries:
Hollywood Bowl Group PLC
Stephen Burns, Chief Executive Officer	Via Teneo
Laurence Keen, Chief Financial Officer
Mat Hart, Chief Marketing and Technology Officer
Teneo
Will Palfreyman	[e-mail]
James Macey White	[phone]
Laura Marshall
CHIEF EXECUTIVE REVIEW

I am delighted with the Group's financial performance in the first six months of the year. We continue to deliver sustainable, profitable growth, with total revenue of £110.2m, a 20.7 per cent growth to H1 FY2022 (excluding the reduced rate (TRR) of VAT benefit in H1 FY2022). Like-for-like (LFL) revenues grew by 3.5 per cent, underpinned by enhancements in margin and volume of games sold, in conjunction with the successful execution of our customer led operating model.

We remain focused on enhancing the customer experience and the overall quality of the estate, through new centre openings and acquisitions, both in the UK and in Canada, through our programme of refurbishments and rebrands as well as through product and service innovation and investments in technology.

During the half, we retired the AMF brand from the portfolio, after rebranding the final two centres to the Hollywood Bowl brand, we refurbished six existing Hollywood Bowl centres and opened two new centres in high quality locations in Speke and Peterborough. We are encouraged by the returns from the investments made and our programme remains on track with further refurbishments of our centres in the UK and Canada planned in the second half.

Adjusted profit after tax was £21.9m, which is up 7.5 per cent on prior period (H1 FY2022 (excluding TRR of VAT benefit): £20.4m). Statutory profit after tax was £20.9m in H1 FY2023.

Payment of the FY2022 final ordinary dividend, the special dividend and capital investments in the first half of this financial year, offset by the cash generation of the Group in the period, resulted in net cash of £44.1m at the end of the period, a reduction of £12.0m from 30 September 2022. In line with our progressive dividend policy, the Board has declared an interim dividend of 3.27 pence per share, representing 9 per cent growth on the comparable period last year.

We remain mindful of the wider economic environment and the resulting consumer headwinds but are confident that we will continue to deliver attractive returns for our shareholders by pursuing our proven strategy of delivering a sector leading leisure experience, at a great value for money price point, through our motivated and well rewarded teams.

Like-for-like growth

Against the exceptionally successful comparative period, LFL sales (which exclude TRR of VAT on bowling activities) grew by 3.5 per cent during the first half of the financial year, with the four main revenue lines all showing LFL sales growth on the comparative period in FY2022.

On a LFL basis game volumes grew by 0.6 per cent. LFL spend per game (excluding TRR of VAT on bowling activities), grew by 2.8 per cent.to £10.82 in the period, up from £10.53 in H1 FY2022. Our dynamic pricing technology has helped drive incremental volume and carefully controlled yield enhancement. Our wider pricing strategy has remained unchanged, and we still offer the best value for money product of all the branded UK bowling operators, with a family of four able to bowl at peak times for less than £25.

Food spend was also up in the year showing a 8.1 per cent LFL improvement in the first half. Our focus on speed, quality, consistency and value for money with our food offer has been well received by our customers. New menu items have been added in line with customer feedback and sales data, and although we have made some changes to price to mitigate the inflationary increases, the most popular menu items were still below their 2019 price point. Our drinks range has the same value for money proposition, for example a pint of Carling lager is still available for less than £4. Spend on drink grew on a per game LFL basis by 1.0 per cent, underpinned by further enhancements to the at lane ordering systems and the national roll out of a new drinks range.

Refurbishments and space optimisation projects, coupled with the expansion of contactless payment technology and new game formats, helped drive LFL sales growth of 6.3% in Amusements. The Amusement offer is an important part of the customer experience. In the main, we have kept the price to play at £1 despite the significant improvement in the gaming experience but are utilising new payment technology to enhance the yield on certain games where appropriate.

Growth strategy - investing in our UK estate and new centre openings

Our growth strategy remains unchanged, and we are pleased with the progress we have made growing our business during the period. Our new centre opening programme is on track in both the UK and Canada, and we continue to grow LFL revenue through the improvement of the existing estate and our refurbishment programme which continues to deliver above our returns hurdle rate.

FY2023 will be a record year of investment in the estate, and a very busy year for our property teams. In the first half, we have invested a total of £11.3m (excluding acquisitions costs), with two new centre openings, three rebrands and five full centre refurbishments completed in the UK. We will continue this investment led strategy in the second half with our new Hollywood Bowl in Merry Hill already on site, at least four more refurbishments and two space optimisation projects scheduled.

We remain confident in our ability to continue to deliver on our plan of an average of at least three new openings a year. As set out above, two new centres were opened in the first half, with Merry Hill, our new 24 lane 36,500 square foot centre, scheduled to open during the second half of the financial year.

Our two new centre openings in the first half took the total number of centres in the UK estate to 69. We opened our second Hollywood Bowl in Liverpool at the popular leisure and retail park in Speke, on 4 November 2022 for a

net capital spend of £2.7m. The centre is a key anchor tenant complementing the leisure offering of the scheme, alongside a well-established cinema, Ninja Warrior, and a good selection of restaurants. The 16-lane centre occupying just under 20,000 square feet has been very well received and is trading ahead of expectations.

We also opened Puttstars Peterborough on 11th November 2022 for a net capital spend of £1.8m. The state of the art 27-hole golf venue occupies 19,500 square feet, over two floors and boasts a large amusement offer, cloud- based scoring and a combined bar diner. This new-look Puttstars is located in the Queensgate shopping centre in the heart of the city, and part of a multimillion leisure development by the landlord.

Transformational refurbishments have continued, including bringing the very latest design innovations and technological improvements to our centres in Finchley, Milton Keynes (including the addition of one extra bowling lane), Poole Tower Park and Leeds City, with one amusement enlargement project at Watford Atria. All the refurbishments are delivering returns in line with expectation, with the last 12 projects averaging more than a 55 per cent return on investment.

The Pins on Strings roll out has continued, with a further seven centres benefiting from the cost saving and customer experience enhancing technology. 48 centres now have the machines (75% of the Group's UK's bowling centres), delivering a minimum 30 per cent return on invested capital, and we plan to install into a further eight centres during the second half of the financial year.

International expansion

In May 2022, we were delighted to announce the acquisition of our Canadian business (Teaquinn), comprising Splitsville, an operator of five ten-pin bowling centres, and Striker Bowling Solutions (Striker), a B2B supplier and installer of bowling equipment, for an initial consideration of CAD 17m (approximately £10.6m).

Since the acquisition, Teaquinn has traded ahead of our expectations. During the first half of this financial year it contributed CAD 18.4m (£11.3m) in revenue and just over CAD 5m (£3.1m) of EBITDA (on a pre-IFRS 16 basis). Our growth strategy in Canada is focused on four areas; (i) investing in the existing estate, (ii) acquiring existing businesses that complement the current estate, (iii) opening new centres and (iv) supporting the Canadian bowling market with Striker's products and services.

In February, the Group acquired three entertainment centres in Calgary (Project Owl), a strategically important location between British Columbia and Ontario. These sites are trading in line with our expectations and integration with Splitsville is going well, helped in part by the UK management expertise that has been seconded to the largest of the centres in Calgary. The pipeline for acquisitions continues to build with several centres in the diligence process and we will continue to update on any acquisitions once appropriate to do so.

The group recently exchanged contracts on a new build bowling centre in Ontario. The 43,000 square feet centre scheduled to open in FY2024, will feature 24 lanes and will be our first new build bowling centre in Canada.

The Canadian refurbishment programme continues to progress well, with one refurbishment completed during the half, while one rebrand and two refurbishments are scheduled on site for the second half of the financial year.

Our Striker business continues to grow as a result of increased investment into bowling centres across the country after re-opening following the COVID-19 lockdowns. Revenues in the first half were CAD 2.9m (£1.8m) and the order book is strong with several large installation and maintenance projects already agreed.

Growing sustainably

Running our business in a sustainable manner is a key focus for the Group and we have continued to make good progress delivering against our ESG strategy and the FY2023 and longer-term targets aligned to this. Highlights in the first half included improvements in our Scope 1 and 2 emissions intensity ratio and waste recycling percentages, more than 50 per cent of management appointments coming from internal candidates, and the establishment of a Board Corporate Responsibility Committee.

Outlook

As we navigate the current economic landscape, we understand that many of our customers are facing challenges such as rising living costs and higher interest rates. This is why we continue to focus on providing a high-quality leisure experience that offers great value for money. We are proud that families and friends are continuing to choose our inclusive

and affordable offerings for their leisure spending, and we are committed to maintaining this trend through the second half of the year.

To further enhance our business for the benefit of all of our stakeholders, we are fully committed to our ongoing investment programme across all areas. This, combined with our sustainable profitable growth strategy, gives the Board a strong sense of confidence in our future prospects. We are pleased to report that we are on track to meet our key strategic priorities for the year, and trading is in line with the Board's financial expectations. We are encouraged by the progress we have made so far and will continue to strive for excellence in all aspects of our business.

Stephen Burns

Chief Executive Officer

30 May 2022

CHIEF FINANCIAL OFFICER'S REVIEW

Group financial results

			H1 FY2022	Movement
			H1 FY2023 vs H1 FY2022
			(excluding VAT
			(excluding VAT benefit on
	H1 FY2023	H1 FY2022	benefit on bowling)	bowling))
Revenue	£110.2m4	£100.2m4	£91.3m	+20.7%
Gross profit	£91.3m	£86.5m	£77.7m	+17.5%
Gross profit margin	82.8%	86.4%	85.1%	-230bps
Administrative expenses	£60.0m	£48.9m	£48.7m	+23.2%
Group adjusted EBITDA1	£43.9m	£42.2m	£39.2m	+12.0%
Group adjusted EBITDA1 pre-IFRS 16	£35.1m	£34.0m	£31.0m	+13.2%
Group profit before tax	£26.7m	£33.4m	£24.8m	+7.7%
Group profit after tax	£20.9m	£27.0m	£20.4m	+2.5%
Group adjusted profit after tax2	£21.9m	£27.0m	£20.4m	+7.5%
Free cash flow3	£15.3m	£19.6m	£19.6m	-21.9%
Interim dividend per share	3.27p	3.00p	3.00p	+9.0%

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, 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.
2. Group adjusted profit after tax is calculated as group profit after tax, adding back the acquisition fees of £0.5m (H1 FY2022: nil), the non-cash
   expense of £0.7m (H1 FY2022: nil) related to the fair value of the earn out consideration on the Teaquinn acquisition in May 2022 and
   removing the TRR of VAT benefit on bowling of £0.2m (H1 FY2022: £6.6m)
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 (FY2022) 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 (H1 FY2022: £8.8m). H1 FY2023 includes £0.2m in respect of TRR of VAT on bowling parties.

Following the introduction of the lease accounting standard IFRS 16, the Group continues to maintain the reporting of Group adjusted EBITDA on a pre-IFRS 16 basis, as well as on an IFRS 16 basis. This is because the pre-IFRS 16 measure is consistent with the basis used for business decisions, as well as a measure that investors use to consider the underlying business performance. For the purposes of this review, the commentary will clearly state when it is referring to figures on an IFRS 16 or pre-IFRS 16 basis.

All LFL revenue commentary is compared to the same period in FY2022, excludes the impact of TRR of VAT on bowling as well as revenue relating to the Group's Canadian business, which was acquired in May 2022. New centres are included in the LFL revenue after they complete the calendar anniversary of their opening date.

Further details on the Alternative Performance Measures used is at the end of this report.

Revenue

On the back of an exceptionally strong FY2022, it was pleasing to see LFL growth of 3.5 per cent in H1 FY2023.