Hollywood Bowl beats forecasts and Royal Mail expands in Canada with acquisition

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“On Friday the FTSE 100 consolidated its gains from yesterday but investors appeared to be marking time ahead of the key US jobs report later,” says AJ Bell investment director Russ Mould.

“A really weak number might just put the US Federal Reserve off tapering its support for the economy as expected in November.

“However, its scope to do so is being rapidly narrowed as inflation rises more quickly than expected, driven by soaring energy costs and post-pandemic shortages, and also proves to be more entrenched than the consistent message from central banks about ‘transitory’ inflationary pressures suggested.

“UK travel stocks made gains as the number of red-list countries under the Government’s traffic light system was slashed, the exception being TUI which is in the midst of its €1.1 billion rights issue.”

Hollywood Bowl

Hollywood Bowl has posted a strike with its latest trading update. Boosted by people taking their holidays in the UK during a somewhat soggy summer, revenue has notably beaten pre-covid levels by a sizeable margin since the chain reopened in May.

“Thanks to a tight control on costs, profitability is also significantly improved, and this provides the impetus to press ahead with a plan to add 14 to 18 new sites by 2024, supported by a strong cash position.

“It seems ten-pin bowling is an activity people feel safe doing as we emerge from the pandemic. Despite being indoors, it is a well-controlled environment with a decent amount of space to observe social distancing.

“It has been a key part of the Hollywood Bowl story to bring its venues up to scratch by refurbishing seating, carpets and the diner and bar areas to make its venues attractive places to visit.

“Bowling is also a relatively inexpensive leisure activity and could therefore demonstrate some resilience as a brewing cost of living crisis in the UK starts to bite.

“Hollywood Bowl has done an impressive job of managing its cost base, however there is a risk that it gets overwhelmed on this front as a shortage of people to staff its lanes leads to wage inflation.”

Royal Mail

“On a day when Royal Mail launched a drive to take on 20,000 Christmas workers in the UK the group also signalled its ambitions closer to Santa Claus’ neck of the woods with a sizeable acquisition in Canada.

“The deal to pick up freight carrier Rosenau looks to fill in the gaps in its Canadian business and should help with realising growth ambitions for its GLS international logistics arm.

“Arguably this is the part of the group with the most potential and it is not faced with the same level of structural issues as its UK-based business.

“Royal Mail has outlined plans to double GLS profit to €500 million from the 2020 financial year to the 2025 financial year.

“As GLS becomes an increasingly significant part of the business the case for demerging it from the UK letters and parcels operation may gather strength.

“While the UK arm has benefited from covid and an increase in the volume of parcels being sent due to the e-commerce boom, it is lumbered with a structurally challenged letters operation, large pension liabilities and substantial cost base.

“Costs are likely to see upwards pressure in the near-term as the company launches its seasonal recruitment drive, with the business impacted by wider staffing shortages in the economy.”

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