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FTSE crash! With £2,000 I’d invest in this fallen growth stock poised for recovery

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Today’s half-year results report from Hollywood Bowl (LSE: BOWL) has given the market more information to chew over during the FTSE stock market crash.

It really is quite an incredible story for many firms. Who would have imagined just a few short months ago that growing businesses like Hollywood Bowl would have to shutter up and stop their trading completely? Indeed, share prices plunged, as we all know, and we’ve been waiting to see who the survivors will be.

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Surviving the FTSE crash

And I reckon the UK’s “leading” ten-pin bowling operator has been doing a decent job of surviving. Today, the directors explained how the company has been preparing for business recovery as lockdowns continue to ease.

Prior to the crisis, the business had been trading and growing well. But all the centres were closed on 20 March. The directors stopped all discretionary spending, including the interim shareholder dividend. And, on 17 April, the company raised £10.5m net from a placing. Meanwhile, the firm put almost 99% of employees on furlough.

And after discussions with the firm’s landlords, there’ll be a “significantly” lower rent payment in the June quarter, “with minimal amounts being deferred.”  However, despite all the actions the directors have taken, they still expect a monthly cash burn of £1.2m while the bowling centres remain closed. The clock’s ticking, we might say!

But looking ahead, Hollywood Bowl has what it describes as a “robust reopening strategy.” Plans include using alternate lanes, queue control measures, and increasing distance between other attractions, such as bars, diner tables and amusements machines.

There’ll also be a visual guidance campaign to educate and encourage customer distancing. Plans also include “comprehensive” safety, cleaning, and operational protocols, as well as daily health monitoring for employees.

The firm intends to reduce opening hours for off-peak periods and revise staff rotas to support new operational measures. And the directors will reduce the food and drink menu to simplify operational delivery.

Poised for recovery

When the government gives permission for operators such as Hollywood Bowl to reopen, the company plans to support sales with a re-launch marketing programme. And chief executive Stephen Burns said in today’s report he’s “very confident” about the business model.

He reckons Hollywood Bowl is well placed to re-open its centres in a capacity-restricted environment. Beyond that, as the UK emerges more fully from the crisis, he thinks the company will capitalise on the “pent up demand” for out-of-home leisure experiences, and “return to a growth trajectory.” 

For what it’s worth, today’s half-year figures for the period to the 31 March – largely before the lockdown – show revenue increased by 3.3% compared to the prior-year figure. And earnings per share slipped back by almost 8%. Prior to the coronavirus crisis, the company had generated a decent record of growth in revenue earnings, cash flow, and shareholder dividends.

Meanwhile, at 176p, the share price remains almost 45% below its pre-crisis peak achieved earlier this year. And weighing up the probabilities, I’d invest in this fallen growth stock because it looks poised for recovery.

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While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Hollywood Bowl. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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