Hollywood Bowl Group's EPS Miss: A Blip or a Trend?

Hollywood Bowl Group plc (LSE: BOWL) reported its full-year earnings for the period ended 30 September 2024, with earnings per share (EPS) missing analyst expectations. The company's EPS came in at £0.1742, compared to the expected £0.1992, marking a 12.66% decrease from the previous year's EPS of £0.1992. This miss has raised questions about the company's financial performance and its ability to maintain its growth trajectory.

The company's revenue for the year was £230.4 million, up 7.12% from the previous year's £215.08 million. However, the company's net income decreased by 12.42% to £29.91 million, compared to the previous year's £34.15 million. This decrease in net income, coupled with the EPS miss, has led to concerns about the company's profitability and its ability to maintain its dividend payout.



One of the main factors contributing to the EPS miss was the £5 million impairment on the company's mini-golf operations. This impairment hit the company's profits and contributed to the decrease in net income. Additionally, the company faced a £1.2 million hit from extra taxes introduced in the last Budget, which further impacted its profits.

Another factor contributing to the EPS miss was the company's decision to keep prices affordable for customers despite facing cost-of-goods inflation. This strategy allowed the company to maintain its value for money pricing and retain customers, but it also reduced the company's ability to pass on increased costs to consumers, which negatively impacted its profit margin.

Despite the EPS miss, Hollywood Bowl Group remains optimistic about its future prospects. The company expects to report EBITDA pre-IFRS 16 ahead of market expectations and in excess of £65.0 million. This optimism is driven by the company's successful rollout of its new customer reservation system, which has resulted in increased usability, reliability, speed, and sales conversion rates. Additionally, the company's ability to insulate itself from ongoing cost pressures, with over 70% of revenue not subject to cost-of-goods inflation, has enabled it to maintain its value for money pricing while continuing to invest in the customer experience.

In conclusion, Hollywood Bowl Group's EPS miss is a concern, but it may not be a trend. The company's revenue growth and optimism about its future prospects suggest that the EPS miss may be a blip rather than a sign of underlying financial weakness. However, investors should monitor the company's financial performance closely to ensure that it can maintain its growth trajectory and dividend payout in the face of cost-of-goods inflation and other challenges.