Imagine turning a £5,000 investment into £260 of passive income annually—sounds too good to be true, right? But here’s where it gets interesting: a FTSE 250 leisure stock is making this a reality, and it’s not just any company—it’s Hollywood Bowl (LSE:BOWL), the UK’s leading tenpin bowling operator. While many associate it with family fun, its potential as an income-generating investment is often overlooked. Let’s dive into why this stock might deserve a spot in your diversified portfolio—and why it’s sparking debate among investors.
The FTSE 250 is a treasure trove of stocks offering attractive passive income opportunities, spanning diverse industries with a growing global footprint. Among them, Hollywood Bowl stands out not just for its nostalgic appeal but for its strategic expansion and financial resilience. And this is the part most people miss: it’s not just about bowling anymore. With 77 UK centres and 15 Canadian locations under the Splitsville brand, the company is diversifying its offerings to include food, drinks, e-darts, mini-golf, and even go-karting in select spots. This isn’t your childhood bowling alley—it’s a modern leisure hub.
In FY25, Hollywood Bowl reported an 8.8% revenue jump to £250.7 million, with post-tax profits soaring 15.7% to £34.6 million. The company opened a record seven new sites (five in the UK, two in Canada) and refurbished 12 existing ones. Even more impressive? Spend per game rose 9.8%, with a staggering 14.8% increase in Canada. This suggests the company is successfully replicating its UK model abroad, a bold move that could redefine its growth trajectory.
But here’s where it gets controversial: while management innovations like allowing players to wear their own shoes in Canada might seem minor, they could attract younger, trend-conscious audiences. Remember those uncomfortable rental shoes? This small change could be a game-changer for customer experience. Meanwhile, the company’s share buyback program and £15.2 million net cash balance signal financial strength, though some critics argue this could limit future expansion funds.
CEO Stephen Burns highlights the company’s resilience amid industry challenges, but the backdrop isn’t all rosy. Last year’s 13.3p dividend per share is expected to rise 6% to 14p next year, yielding 5.2%—well above the FTSE 250 average of 3.2%. However, this forecast assumes stable trading conditions, which is far from guaranteed. Modest like-for-like sales growth (1.1% last year) and competition from theme parks and zoos, especially as inflation eases, could threaten this outlook.
Here’s the bold question: Is Hollywood Bowl’s growth sustainable, or is it overvalued after a 25% stock drop since May 2024? Its forward earnings multiple of 11.3 looks cheap, but expansion plans for 130 locations by 2035 (including 35 in Canada) hinge on global demand for affordable family entertainment. While the concept is universally appealing, execution risks in new markets like Europe could derail progress.
So, is this stock a hidden gem or a risky bet? Its £260 passive income potential on a £5,000 investment is enticing, but the debate rages on. What’s your take? Do you see Hollywood Bowl as a resilient income play or a speculative gamble? Let’s discuss in the comments—I’m eager to hear your thoughts!
