It will come as little surprise that Hollywood Bowl has endured a bruising pandemic. Thanks to a five-month closure of its estate during the first Covid-19 lockdown and a restricted opening from mid-August, the tenpin bowling operator’s pre-tax profits were almost wiped out in the year to September 30.
While it managed to reopen around 60 per cent of its locations at the beginning of December, the group’s centres across England, Scotland and Wales have once again closed their doors.
Against that backdrop, chief people officer Melanie Dickinson has sold £181,420-worth of shares “for the purpose of settling personal tax liabilities”. This follows chief executive Stephen Burns, chief financial officer Laurence Keen, and their spouses offloading a little over £800,000-worth of shares at the beginning of the month. Those share sales were also said to be for tax purposes and to cover property-related expenses.
It is never supportive of the market value when multiple company directors offload shares within a short space of time, and at 191p, Hollywood Bowl’s share price is now below where they cashed out. However, somewhat reassuringly, they have all retained stakes in the company, and this is the first time Mr Burn and Mr Keen have sold any shares since Hollywood Bowl first listed back in September 2016.
Before the pandemic, the shares had been steadily rising since initial public offering, reaching as high as 316p last year. While they remain depressed in the wake of the “Corona crunch”, momentum may return once the Covid-19 vaccines are more widely distributed, lockdown restrictions are lifted, and pent-up leisure demand is unleashed. Hollywood Bowl is the UK’s largest tenpin bowling operator, and this is an affordable leisure activity for consumers during leaner economic times.
The group’s expansion plans demonstrate its confidence in its long-term outlook — it plans to open an average of two new centres per year from its 2022 financial year — and once this crisis passes, Hollywood Bowl should return to strong cash generation and high margins. With the shares changing hands at 14 times consensus 2022 earnings, they look like an attractive pandemic recovery play.
Founder and chief executive Andy Walters has sold down his stake in Quartix for the first time since the company went public more than six years ago, to make room for growing demand from institutional investors.
“I hadn’t necessarily thought there was enough demand for there to be some kind of placing,” Mr Walters said. “But we were approached by a buyer in December, and they were extremely interested in taking up a position in Quartix.” It is little wonder: the company, which sells vehicle-tracking software, has seen its share price rebound by 81 per cent since its nadir last year in March, and at 410p is currently trading not far off its all-time high from 2016. The new buyer expressed interest again after the update, according to Mr Walters, although he noted that there has been a “steady level” of institutional demand over the past year.
It is easy to appreciate why interest is growing. Last week, a trading update for the 2020 financial year revealed that its core vehicle subscription base had increased by more than a tenth. Supported by growth across all of its geographical markets, the company flagged that this year it would invest a larger proportion of its profits on sales and marketing initiatives, likely around £1m. And in an additional sign of confidence, Quartix also repaid the government support that it received in 2020 — including the coronavirus job retention scheme and VAT payment deferrals.
Mr Walters, his wife and their trust have sold £28.8m-worth in shares, or around 15 per cent of the company’s market value. But after 20 years at the helm, the chief executive emphasised that he took particular interest in the nature of the new investor and whether they made a good fit for Quartix. Mr Walters and his family still have a 22.2 per cent holding, and while he may have surrendered some influence, we think that the addition of a trusted institutional investor could have benefits from a corporate governance perspective.