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Growth optionality and strong cash returns make an attractive combination

Hollywood Bowl (BOWL) 225p

Gain to Date: 2.5%

Original entry Point: Buy at 219.5p, 20 December 2018

We picked leisure group Hollywood Bowl (BOWL) as one of our top stocks for 2019 in the belief that it would be a resilient business and make money whatever the economic backdrop. That has proven to be the case.

Its latest trading update reveals total sales up 7.7% and like-for-like growth of 5.5% for the year to 30 September.

Promisingly the company also says it expects to report growth in pre-tax profit ‘in excess of 10%’ which is ahead of previous market expectations.

The company has seven new centres in the pipeline which are expected to be delivered by the 2023 financial year, in line with its guidance of two per year. In addition, the group is set to test three further golf centres, which are due to open in the current financial year.

Hollywood Bowl is considering returning additional capital to shareholders as it has done in the prior two years. Broker Shore Capital has pencilled in a 4.3p special dividend, worth around £6.5m, on top of the ordinary dividend of 6.9p, which together equates to a yield of 5% at the current share price.

SHARES SAYS: The company’s affordable pricing model and consumer preferences for spending on ‘experiences’ puts the business in a good position to capture growth and continue to deliver strong cash flow. Keep buying.

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