Hollywood Bowl Group plc Annual report and accounts 2023 ## Enhancing ## performance ## through focused ## investment Hollywood Bowl Group plc Annual report and accounts 2023 ## Enhancing ## performance ## through focused ## investment ### Our unique purpose-led culture and ### proven investment-led strategy are ### enabling us to capitalise on the ### significant growth opportunities in ### the markets we operate in. Highlights # Our financial performance **+4.5%** LFL revenue growth¹ (2022: +28.3%) **£215.1m** Revenue (2022: £193.7m) **£34.2m** Profit after tax (2022: £37.5m) **19.92p** Earnings per share (2022: 21.91p) **£36.8m** Adjusted profit after tax¹ (2022: £39.4m) **21.48p** Adjusted earnings per share¹ (2022: 23.07p) **+11.0%** Total revenue growth (2022: +169.5%) **£82.7m** Group adjusted EBITDA¹ (2022: £77.5m) **8.54p** Final ordinary dividend per share **2.73p** Special dividend per share ¹ Definitions for these measures are in the key performance indicators section (pages 34 and 35). A reconciliation between key adjusted and statutory measures, as well as notes on alternative performance measures, is provided in the Chief Financial Officer's review (pages 36 to 41). Management believes providing these specific financial highlights gives valuable supplemental detail regarding the Group's results, consistent with how management and investors evaluate the Group's performance. ## Strategic report 1 Highlights 2 Strategic roadmap 3 Investment case 4 At a glance 6 Chairman's statement 10 Our growth story 12 Our brands 18 Chief Executive Officer's review 24 Our market environment 26 Business model 28 Strategy 34 Key performance indicators 36 Chief Financial Officer's review 42 Section 172 43 Stakeholder engagement 46 Sustainability overview 60 TCFD 70 Risk management 71 Principal risks 76 Going concern and viability statement 77 Non-financial and sustainability information statement ## Governance report 78 Chairman's introduction to governance 80 Board of Directors 82 Corporate governance report 88 Report of the Nomination Committee 93 Report of the Audit Committee 97 Report of the Corporate Responsibility Committee 98 Report of the Remuneration Committee 102 Annual report on remuneration 115 Directors' report 118 Statement of Directors' responsibilities ## Financial statements 120 Independent auditor's report 128 Consolidated income statement and statement of comprehensive income 129 Consolidated statement of financial position 130 Consolidated statement of changes in equity 131 Consolidated statement of cash flows 132 Notes to the financial statements 158 Company statement of financial position 159 Company statement of changes in equity 159 Company statement of cash flows 160 Notes to the Company financial statements 166 Company information Strategic report Hollywood Bowl Group plc Annual report and accounts 2023 1 ### Strategic roadmap ## Our purpose ## Bringing families and friends together for ## affordable fun and safe, healthy competition. ## Our strategy… Delivering Actively Developing new Focusing on Leveraging our like-for-like refurbishing centres and our people indoor leisure revenue growth our assets acquisitions experience Read more on pages 28 to 33 ## is underpinned by our commitment to sustainable growth… Safe and inclusive Outstanding Sustainable leisure destinations workplaces centres Read more on pages 46 to 59 ## and strong market fundamentals… Growth of competitive Low market Combined retail and Sector consolidation socialising penetration leisure experiences opportunities Read more on pages 24 to 25 ## enabling us to create value for our stakeholders Continually enhancing our Building energetic and Maintaining support of customers’ experience engaging teams who share our investors to help us grow our values and are proud the business and consistently to be part of our culture deliver returns Read more on pages 26 to 27 Hollywood Bowl Group plc ## 2 Annual report and accounts 2023 ### Investment case Strategic report ## Reasons to invest ### Hollywood Bowl Group is the UK’s established market leader with national scale, and the ### second largest operator of ten-pin bowling centres in the world. We operate a high-quality, ### well-invested estate with diverse revenue streams and multiple levers, including our ### expansion into Canada, to drive further growth. ## People and leadership ## #12 Our highly motivated and engaged operational teams | deliver our customer-focused experiences, and are led | Our 2023 ranking in the | | --- | --- | | by a stable and experienced management team who are | UK’s ‘Best Big Companies | | committed to sustainable growth | to Work For’ awards | Read more on pages 50 to 51 ## Balance sheet strength ## £52.5m By driving revenues, achieving healthy margins and maintaining a strong balance sheet, we continue to invest Net cash at year end appropriately in enhancing and scaling our business Read more on pages 18 to 23 ## Market opportunities ## 6 As the leader in the UK ten-pin bowling and competitive socialising markets, and the Canadian ten-pin bowling Centres added to the market, we are best placed and have the experience to Group estate in FY2023 capitalise on the growth opportunities available Read more on pages 24 to 25 ## Exciting growth pipeline ## 15 Alongside our ongoing centre refurbishment programme, we are targeting more new centres for our Hollywood Target of new openings Bowl and Splitsville brands, which is backed by our before end of FY2025 rigorous and disciplined location selection process Read more on pages 10 to 11 ## Customer focus ## 64% Our ten-pin bowling and mini-golf centres provide fun and safe environments for customers of all ages, with their UK net promoter score experiences being enhanced by research led insight and +3%pts versus FY2022 a culture of continuous improvement Read more on pages 12 to 17 Hollywood Bowl Group plc ## Annual report and accounts 2023 3 ### At a glance ## Great value entertainment ## experiences ### Through our customer focus and insight-led service, product and technological ### innovation, we are on a mission to continually enhance our customers’ experience of the ### inclusive competitive socialising activities of ten-pin bowling and indoor mini-golf. ### Our centres offer bowling lanes or mini-golf courses, a licensed bar, a diner and an ### amusements zone featuring the latest games designed to keep everyone entertained. ## Our brands ## UK market leader in ten-pin bowling Our UK ten-pin bowling brand, with centres typically offering 24 bowling lanes, situated in prime locations on leisure or retail parks. Centres ## Read more on pages 12 and 13 65 ## Canadian market leader in ten-pin bowling Our Canadian ten-pin bowling brand with centres typically offering 29 bowling lanes, located in standalone locations or co-located with retail or leisure units. Centres ## Read more on pages 14 and 15 9 ## UK brand in the indoor mini-golf market Our mini-golf brand with centres offering mini-golf courses, situated in locations on leisure or retail parks. Centres ## Read more on pages 16 and 17 5 Hollywood Bowl Group plc ## 4 Lorem ipsum Annual report and accounts 2023 Strategic report ## 79 Centres at the end of FY2023 ## 3 New centres opened between 1 October 2023 and 16 December 2023 ## Our locations ## UK Canada Hollywood Bowl is the UK’s largest ten-pin bowling brand Splitsville is our first overseas ten-pin bowling brand with 66 centres nationwide. Puttstars is our indoor and was acquired by the Group in May 2022 mini-golf brand, which opened its first centre in 2020 Splitsville: 9 Hollywood Bowl: 65 Central support office: 1 Puttstars: 5 Read more on pages 14 and 15 Central support office: 1 Read more on pages 12, 13, 16 and 17 Hollywood Bowl Group plc ## Annual report and accounts 2023 5 ### Chairman’s statement ## Taking us to ## the next level ### I continue to be impressed ### by the clarity of purpose and ### single-minded pursuit of ### excellence consistently ### demonstrated by all of ### our team members.” Peter Boddy, Non-Executive Chairman Hollywood Bowl Group plc ## 6 Annual report and accounts 2023 ![img-0.jpeg](img-0.jpeg) Hollywood Bowl Group has once again achieved another outstanding performance in FY2023. We started the financial year with real momentum, following on from an exceptional FY2022, and we have built on this to deliver another record revenue year. This has been achieved in spite of the many and varied challenges experienced by UK businesses during the year, demonstrating the strength of our customer offer, resilience to inflationary pressures, robust balance sheet and cash-generative business. I continue to be impressed by the clarity of purpose and single-minded pursuit of excellence consistently demonstrated by all of our team members in executing the Group strategy which has led to our track record of sustained profitable growth. The Group's financial performance in FY2023 exceeded the Board's expectations, driven by our focus on enhancing the customer experience and investment in improving the quality of our estate through our ongoing refurbishment programme. We continue to expand our footprint, through new centre openings and acquisitions both in the UK and Canada. Our planned investments in technology have supported centres' sales and yield growth, while also improving our customers' digital journey. Our operating model drove like-for-like sales growth across our four main revenue streams and our relatively fixed cost base helped deliver another year of strong profits. We were also able to take advantage of favourable conditions in July and August, where the unseasonable wet weather encouraged more families to seek out indoor leisure and entertainment activities, leading to our busiest ever month in the UK in August. In light of our performance, the Board is pleased to declare a final ordinary dividend of 8.54 pence per share as well as a special dividend of 2.73 pence per share. Furthermore, given our robust financial position, prospects and cash generation, as well as the Board's focus on delivering shareholder returns and capital efficiency, the Board has extended the Group's capital allocation policy around excess cash to include share buybacks of up to £10m in FY2024, alongside special dividends. The Board determined that share buybacks can provide flexibility to achieve an optimal use of cash to deliver value for shareholders and can represent an attractive investment opportunity for the Company. #### **Affordable fun, safe and healthy competition** We know that across, the UK families are facing cost of living challenges and so we work hard to ensure our customer offer remains compelling and to deliver our core purpose of bringing families and friends together for affordable fun and safe, healthy competition. A family of four can still enjoy an outing with us for as little as £25 during peak times – the best value for money of all the branded UK bowling operators. Our amusement machines can still be enjoyed for as little as £1 but operational improvements in the year have enabled us to drive yield growth. Our simplified menus focus on speed, quality, consistency and value for money and although higher food and beverage costs meant we introduced some modest price increases, our most popular items haven't changed in price since 2019. Our value-for-money customer proposition has attracted more visits over the year from new and returning customers who are choosing to spend more time in our centres, boosting the spend per game. #### **Further investment in the UK estate** We opened three new centres in the UK during the year in Speke, Peterborough and Merry Hill, all of which are performing in line with expectations. Our refurbishment programme saw 13 centres receive successful upgrades including some centres which are on their second or third refurbishment. Post the year end, we were also pleased to announce the acquisition of Lincoln Bowl on 2 October, which included the long leasehold. The centre meets our strict investment criteria and has 20 lanes with a bar, diner and amusements, and will be rebranded as a Hollywood Bowl in the first half of FY2024. #### **A new growth market** Canada is an exciting growth opportunity for the Group and we have made excellent progress since we acquired Splitsville, comprising five centres, and Striker Bowling Solutions in May 2022. We were quick to add a sixth centre, Kingston, in July 2022 and this year we acquired three bowling centres in Calgary, a strategically important location between our current centres in British Columbia and Ontario. Post the year end, we acquired a further two centres, and have recently started a new build in Ontario, due to open in FY2024. We have also commenced our refurbishment programme in Canada, based on our UK model, with one centre completed during the year and one currently on site due to complete in H1FY2024. The rebranded and refurbished centre in Richmond Hill has been extremely well received, attracting a broader customer base, more diverse revenue streams and higher yields, underpinning our belief in the long-term opportunity of the Canadian market. Hollywood Bowl Group plc Annual report and accounts 2023 7 ## Chairman's statement continued ### A new growth market continued Our initial strategic rationale for entering Canada is being reaffirmed the more we learn. The market, whilst very well established, remains highly fragmented and often under-invested, with many centres single-owned or small-group-owned businesses, providing an excellent runway for growth. The Canadian market shares many similarities with the UK and in FY2023, we undertook a large customer research project to understand fully how we should adapt our UK operating model for the Canadian market. The results solidified our view that our operating model would be very well received and that customers are open to our high-quality family-friendly offering to sit alongside competitive bowling leagues. Where differences exist, we are able to tailor our offering accordingly. For example, there are more opportunities for the corporate offering due to a higher expectation of frequent socialising amongst work colleagues, and for school-age students in the winter months where cold weather encourages activities indoors. Integration with the wider Group is going well with the ongoing sharing of knowledge and innovation between our UK and Canadian colleagues. Both sides make regular visits to gain greater understanding of the differing operating models, and how we can introduce 'best practice' whilst maintaining the entrepreneurial spirit that initially attracted us. We have been developing a new Centre Manager pipeline and putting the structures in place to allow rapid development in Canada, including transferring four of our UK team members, one to help introduce our training and development programmes, two Centre Managers and one of our UK Regional Managers who started as Director of Operations in October 2023. ### Board changes In July 2023, we appointed Rachel Addison to the Board as a Non-Executive Director and as a member of the Audit, Remuneration and Nomination Committees. With c.30 years of finance and operational management experience, Rachel has held a number of senior leadership and board positions across media and technology businesses, bringing financial and operational experience, including in digital media, which will be of great value to the Group Rachel's appointment comes at a time of change for the Board and is part of our succession planning programme. Nick Backhouse, who has been a member of the Board and Chair of the Audit Committee since the Group's listing in 2016, is due to retire by rotation at our Annual General Meeting (AGM) in January 2024. He has been a real asset to the Group and his consistent, steady advice, as well as his wise counsel, has been of great value to Hollywood Bowl Group's development. ### Sustainable growth In recognition of the importance we place on environmental and social considerations in our decision making, in FY2023 the Board formed a Corporate Responsibility Committee (CRC) consisting of Board and Executive Committee members, and chaired by Non-Executive Director Ivan Schofield. During the year the CRC established its terms of reference and worked with the long-standing Corporate Responsibility Steering Group to set the Group's net zero strategy. Having already made an early start to how we manage our direct environmental impacts – we have reduced our UK direct emissions by 62 per cent since 2016 – this year we report on our indirect Scope 3 emissions for the first time, which we estimate makes up around 90 per cent of our total emissions. It is from this baseline year that we will set science-based targets in our commitment to reach net zero by 2050. Our pathway to net zero strategy will see us build on our progress to date and continue to make sustainability-led improvements across the Group. We look forward to working closely with our UK and Canadian colleagues, and our suppliers, to make our plan a reality. ### Investing in our people Our People team has worked extremely hard this year to develop our next generation of Centre Managers, senior leaders and technicians, doubling the number of our industry-leading training and development programmes. I was delighted when the Group was once again recognised as one of The UK's 25 Best Big Companies to Work For in 2023, rising up the ranks to 12th position, and that our Hemel Hempstead support centre was given the highest 3rd standard for workplace engagement. ### Exciting growth opportunity Like all businesses, we have experienced a number of external challenges in recent years, however, the Group has emerged stronger than ever and I am excited about the opportunities ahead. Our operating model, multiple revenue streams and strong balance sheet, which includes no debt, gives us plenty of headroom to keep investing in our growth strategy. Although we are not immune from inflationary pressures, we are well insulated given our relatively fixed cost base with over 72 per cent of Group revenues not subject to cost of goods inflation. Our unwavering focus is on keeping our leisure experiences fresh, relevant and affordable to our customers and on generating further attractive returns through investment in our customer experience. Technology continues to play a big part in this, and I am looking forward to seeing the launch of our new self-developed customer booking system later in the coming year. FY2024 will see further investment in growing and improving the quality of our estate in the UK and Canada, enhancing the customer experience through refurbishments and investment in our proprietary technology that will support the next stages of growth across both countries. I would like to thank all our team members, suppliers, landlords, partners and investors for their support and contributions to delivering yet another outstanding year, and I look forward to sharing in our continued success. **Peter Boddy** Non-Executive Chairman 17 December 2023 8 Hollywood Bowl Group plc Annual report and accounts 2023 Strategic report ## Q&A ## with Peter ## We ask Chairman Peter Boddy about his highlights ## of FY2023 and ambitions for the coming year. Q What has made you most proud this year? Q How much room is there for further growth? I say it every year, but without a doubt our team members We have strong growth ambitions, both in the UK and A continue to make me most proud. Their hard work has led A Canada. The pace in the UK will continue as it has for the to this outstanding performance and I am pleased that last few years. In Canada, the situation is slightly different they are able to share in our success through generous as it is still a very fragmented and under-invested market. performance-related bonuses. We have a strong pipeline of opportunities and the priority is to pick our locations wisely and make sure that whatever A great deal of this is also down to the efforts of our we buy or build meets our strict returns hurdle rate. People team who have worked tirelessly on training and Overall, we plan to add an average of five new centres development to build our talent pipeline as we continue to each year across the Group. grow. One big piece of work was to refresh our employer branding, which has had great success in communicating our employer value proposition and significantly What are your priorities for the Group for Q increasing the number of job applicants and attracting the future? manager level candidates. There is very much a sense that Our biggest priority is to continue to stay relevant to our A we have entered a new phase in our corporate customers by offering affordable fun and safe, healthy development amongst our team members, and that we competition. The impact of the rising cost of living is are all pulling together towards the same purpose. playing on many people’s minds; therefore, it is important that we keep offering high-quality experiences in great environments with outstanding customer service, all the Q What are your key achievements in the year? while maintaining an affordable price point. We launched our net zero strategy which will determine A environmental initiatives over the coming years. This was a To do this we need to keep innovating and maintain our considerable undertaking as we want to ensure that the entrepreneurial spirit throughout the business. We believe goals we set are both realistic and achievable. in empowering all our people to make decisions and innovate, and our very flat structure helps us to do that. We have also achieved considerable progress in Canada While our leadership team gives us direction and strategy, where we now have 11 sites. What is particularly pleasing it is the front-line team members that are the drivers of our is that the Canadian site that has undergone a UK-style performance, so maintaining our unique corporate culture makeover, has performed well above expectations and rewarding results is key. since reopening. Hollywood Bowl Group plc ## Annual report and accounts 2023 9 ### Record growth ## Our growth story ### The Group was formed with 41 centres in 2010 and Number of centres Hollywood Bowl ### over the following 13 years has significantly grown its Puttstars ### presence in the markets it operates in. Splitsville 140 130 ### 120 We are confident that our unique blend ### of inclusive leisure experiences provides ### significant growth opportunities in the UK 110 ### and Canadian markets.” Stephen Burns, Chief Executive Officer 100 90 from 80 Launch of Puttstars Group lists on Main UK mini-golf brand Market of LSE 70 Acquisition of 11 Bowlplex centres 3 Group formed from the merger 60 Centres of selected sites of the AMF 61 and Hollywood Bowl brands 54 50 40 43 41 30 20 10 0 FY2010 FY2015 FY2016 FY2020 Hollywood Bowl Group plc ## 10 Annual report and accounts 2023 Strategic report ## 130 centres ### The Group’s target scale for the UK ### and Canada by 2035, reflecting the ### growth opportunity in these markets. 31 ## 79 ### centres ### at end of 24 ### FY2023 5 Acquisition of Splitsville 14 94 - a Canadian ten-pin bowling operator 5 84 5 9 75 6 5 4 65 63 FY2022 FY2023 FY2030FY2025 FY2035 Hollywood Bowl Group plc ## Annual report and accounts 2023 11 ### Our brands ## The UK’s market ## leading brand | 1,515 | 17.1m | | --- | --- | | Bowling lanes | Games bowled | | (FY2022: 1,492) | (FY2022: 16.6m) | | 65 | 64% | | --- | --- | | Centres | Net promoter score | | (FY2022: 63) | (FY2022: 61%) | ## £9.4m ### Expansionary capital in FY2023 Hollywood Bowl Group plc ## 12 Annual report and accounts 2023 Strategic report The market-leading brand Ten-pin bowling is part of the UK’s diverse ‘out-of-home’ leisure sector. Its popularity is based around offering an inclusive, fun, affordable and sociable experience for friends, families or work colleagues, appealing to a broad range of consumers. Hollywood Bowl is the market leader in the UK and is our most recognised brand. We specialise in operating large, high-quality bowling centres which are predominantly located in prime ‘out-of-town’ multi-use leisure parks alongside cinemas and casual dining sites. Experiences our customers value When refurbishing centres, we also consider We believe that customer service is a true point of reconfiguring floor areas to maximise revenue and differentiation in a competitive leisure market. We focus centre yields. For example, we introduced mini-golf in on four critical customer satisfaction drivers: value for our Hollywood Bowl Leeds centre resulting in an money, cleanliness, team friendliness and service speed. enhanced customer experience and more reasons to Our customer experience programmes provide valuable stay with us for longer. insights into our customers’ preferences, by digitally capturing satisfaction levels following each visit. As well Driving performance through digital investment as understanding what our customers want and value, Our investment in technology continues to enhance the we monitor our customer satisfaction and net promoter digital customer journey from pre-booking to in-centre scores carefully and are always ready to react quickly to experience to post-booking communications. We have any operational issue or respond to customer feedback. evolved our digital brand and content, social media activity, sales activation and CRM campaigns, which has Team members’ bonuses are linked to the customer resulted in an increase in website visits and sales, with satisfaction drivers, improving centre performance, online bookings now accounting for 60 per cent of revenues and yields. bowling revenue. We drive yields through dynamic pricing and targeted digital sales and marketing. We increase engagement ## 8.5m and dwell time in our centres with digital content like our Visitors to Hollywood Bowl website in FY2023 hugely popular live leaderboards, and we vary-in-centre content during the day to target specific customers. For example, daytime content is more family focused compared to evenings. ## 11.8% In FY2024 we will be launching our new in-house developed booking system which we are creating to Growth in amusement revenue vs FY2022 meet the needs of our increasingly larger and more diverse business. Our investment in this modern and The complete entertainment experience flexible technology platform is significant, supporting the Alongside bowling, we offer food, drink and future development and growth of the Group. amusements. By offering a complete entertainment experience, we give customers more reasons to visit, FY2023 revenue mix increase dwell time and secondary spend. We offer excellent value and speed of service when it comes to food and drink. Our popular and simplified at lane menu offers good quality snacks and sharer 46.6% Bowling, golf and other options, alongside at lane drink ordering. 26.3% Food and drink The family-friendly games and amusements areas are 27.0% Amusements constantly evolving with innovations and new product development. A rolling centre refurbishment programme allows us to improve the space optimisation of our amusements offering, as well as improve the quality of our machines. The majority of our amusements can be played for as little as £1. Nayax ‘tap to play’ provides the option of digital coin credit as well as cash payments. Hollywood Bowl Group plc ## Annual report and accounts 2023 13 ### Our brands continued ## Expanding our ## Canadian brand ## 254 #1 ### Bowling lanes Splitsville is now the largest branded ### ten-pin bowling operator in Canada ## 9 15.1% ### Large-format centres in highly Increase in LFL revenue ### populated locations ## £2.2m ### Refurbishment capital ### in FY2023 Hollywood Bowl Group plc ## 14 Annual report and accounts 2023 Strategic report Expanding the Splitsville estate The performance of Richmond Hill is testament to this Splitsville is made up of nine large family entertainment strategy, which has exceeded revenue and profitability centres (at the end of FY2023) spread across the expectations since being refurbished and relaunching country, with six centres in Ontario, two in British under the Splitsville brand. Columbia and three in Alberta. All the centres have Foundations for growth ten-pin bowling lanes, a large bar and diner and an We are enhancing our technology and digital marketing amusements area, with some offering American pool, to improve the online customer journey and have laser tag and indoor mini-golf. introduced a refreshed brand communications In February 2023, the Group acquired three centres in framework and new logo. Calgary, Alberta, providing a strategic location between We are also putting the structural foundations in place to Ontario and British Columbia. These centres are all support a fast-growing business, including a new senior leasehold properties and established businesses and, leadership team, and upskilling the Centre Managers to having been relaunched in their markets under the drive revenues and yields. Splitsville brand, provide the Group with a foundation for further growth in this key market. With over 190 single-owned or multi-site group-owned bowling centres across Canada, the Group has a healthy Post FY2023 year end, the Group has completed two development and acquisition pipeline. acquisitions, one in Ontario and the other in British Columbia. Both have been relaunched in their markets The opportunity for consolidation in the market is under the Splitsville brand, taking the estate to 11 centres significant and through the growth of the estate in as at 16 December 2023.. FY2023, Splitsville is already the largest branded ten-pin bowling operator in the country. Insight led refurbishment programme We are currently on site at one new build in Ontario and Our refurbishment programme has begun with Richmond negotiating on several other new build sites. All Hill completed during the year and Kingston due to acquisitions and developments are subject to the complete in FY2024. We also have two further same return on investment hurdle rate. refurbishments planned for FY2024. The renovations are introducing many features already established in the UK. Our Striker Bowling Solutions operation continues to support the industry as a supplier and installer of The refurbishment concepts are backed by extensive bowling equipment, as well as supporting our own customer-research, which affirmed that the Canadian expansion requirements. market is ready for an upgraded, branded, family- friendly leisure proposition similar to Hollywood Bowl’s Its established national network is providing us with UK customer-orientated operating model. access to a large section of the Canadian market and an unmatched insight into the changes that are taking place in the industry. ## 3 New centres added in FY2023 ## 31 Target Splitsville centre estate size by 2035 Hollywood Bowl Group plc ## Annual report and accounts 2023 15 ### Our brands continued ## Our UK indoor ## mini-golf brand ## 135 603k ### Mini-golf holes Rounds played ### (FY2022: 490k) ## 91.6% £9.18 ### Customers highly satisfied Spend per round (FY2022: £8.27) ### or satisfied Hollywood Bowl Group plc ## 16 Annual report and accounts 2023 Strategic report Diversifying our revenue streams We also introduced a new mobile-based scoring system, We operate five Puttstars indoor mini-golf centres that an upgraded website and an updated brand appeal to a broad range of consumers. The market communication framework and new logo for the centres. remains highly fragmented with more than 1,000 indoor The enhancements from Peterborough have been adapted and outdoor locations in the UK, where independent and introduced into the other four Puttstars locations. operators manage the vast majority. In addition to the upgraded mini-golf proposition first Each of our Puttstars centres offers a diverse seen in Peterborough, we have further evolved the entertainment experience, including nine-hole courses, Puttstars customer offer (and optimised the space bar, diner, and amusements area. returns) by extending the amusements area in Harrow Technology and digital channels form an integral part and adding duck-pin bowling lanes in Leeds, to look to of the Puttstars customer journey and marketing enhance the revenues and customer experience. approach. We have a bespoke digital-scoring system An extra offer in selected bowling centres and our in-centre screen installations provide centre-wide Whilst bowling centres remain the Group’s first choice leaderboard information, promoting friendly competition when entering new locations due to their heightened and heightened customer participation. returns, the market opportunity for indoor mini-golf Evolving the brand experience remains strong. Our newest centre at the Queensgate Shopping Centre, We have introduced a mini-golf course into our Peterborough, opened in November 2022 and incorporated Hollywood Bowl centre in Leeds and plan to include two several enhancements following some extensive courses in our new Hollywood Bowl centre in Colchester customer research. which will open in FY2024. These included greater variation in course difficulty, for We are also considering adding mini-golf as an example the introduction of larger holes and club heads additional offer in other centres where space for junior players and more defined course designs. configuration allows. Hollywood Bowl Group plc ## Annual report and accounts 2023 17 ### Chief Executive Officer’s review ## Sustainable, ## profitable growth ### Our results reflect the success of ### our customer-focused operating ### model as well as our clear and ### consistent strategy.” Stephen Burns, Chief Executive Officer Hollywood Bowl Group plc ## 18 Annual report and accounts 2023 ![img-1.jpeg](img-1.jpeg) Strategic report ## A record performance I am delighted with the Group's excellent performance in FY2023, a year in which we continue to strengthen our position as a UK market leader in competitive socialising and as one of the largest operators of ten-pin bowling centres in the world. Hollywood Bowl Group continues to deliver sustainable, profitable growth, with total revenue of £215.1m, 11.0 per cent growth on FY2022 (16.2 per cent excluding the reduced rate (TRR) of VAT on bowling activities in FY2022) and Group like-for-like (LFL) revenue growth of 4.5 per cent. Our results reflect the success of our customer-focused operating model as well as our clear and consistent strategy in delivering sustainable profit growth and shareholder returns while maximising favourable trading conditions. We offer fantastic value-for-money family-friendly entertainment experiences and the efforts of all our team members ensure our customers enjoy consistent positive experiences, as reflected by our excellent customer service scores. Our strong financial position allows us to invest in growing our high-quality portfolio domestically and internationally with new centre openings, acquisitions and our rolling refurbishment programme and rebrands. We also continue to invest in innovation and technology as a key driver of the customers' digital journey and experience. Group adjusted profit after tax was £36.8m, adjusting for acquisition fees of £0.7m and the non-cash expense of £2.0m related to the fair value of the earn out consideration on the Canada acquisition in May 2022. Statutory profit after tax was £34.2m. Free cash flow of £29.5m demonstrates our cash generative business model, and net cash of £52.5m at the end of FY2023 enables our continued investment in the business. ## Growth in all revenue lines Against an exceptionally successful prior year, UK LFL revenue (which excludes TRR of VAT on bowling activities in FY2022) grew by 4.1 per cent, with our main revenue lines – bowling, food, drink and amusements – all showing LFL growth. Whilst our trading levels were helped by some very favourable weather in the UK, it is due to our unrelenting customer-focused operating model that we were able to take advantage of this and deliver a record year. We saw UK LFL game volumes grow by 0.7 per cent and spend per game (excluding TRR of VAT on bowling activities in FY2022) by 3.4 per cent to £11.06, up from £10.69 in FY2022. Our dynamic pricing technology, which allows us to offer better value for customers at non-peak periods, helped drive incremental volume and carefully controlled yield enhancement, yet we still offer the best value for money and best invested product of all the branded UK bowling operators. Food spend in the UK was up in the year showing a 9.9 per cent improvement, with our focus on speed, quality, consistency and value-for-money driving this growth. New menu items have been added in line with customer feedback and sales data, and although we have made some small changes to price to mitigate food inflationary increases, the most popular menu items were still below their 2019 price points. Our drinks range also offers excellent value-for-money. Spend on drink in the UK grew on a per game basis by 2.3 per cent, underpinned by further enhancements to the at lane ordering systems and the national rollout of a new drinks range. Refurbishments and space optimisation projects, coupled with the expansion of contactless payment technology and new game formats, helped drive LFL sales growth of 7.3 per cent in amusements in UK centres. We have kept the price to play at £1 for the majority of our machines despite the significant improvement in the gaming experience but are utilising new payment technology to enhance the yield on certain games where appropriate. We are very encouraged by the performance of our Canadian business in the first full trading year since the acquisition in May 2022. LFL revenue increased by 15.1 per cent on a constant currency basis. This underpins our belief that there is significant longer-term opportunity to add further value through leveraging our customer-led operating model, technology and digital marketing experience. Hollywood Bowl Group plc Annual report and accounts 2023 19 ## Chief Executive Officer's review continued ### Growth strategy – investment and innovation Our growth strategy remains unchanged. The new centre opening programme is on track in both the UK and Canada. We continue to grow LFL revenue through the improvement of the existing estate and our refurbishment programme continues to deliver above our 33 per cent returns hurdle rate. FY2023 was a record year of investment in the estate and a very busy time for our property teams. In total, we invested £30.3m (excluding professional fees on acquisitions) on new centre openings, refurbishments and acquisitions. In the UK, we were pleased to open three new centres in the year, Hollywood Bowl Speke, Hollywood Bowl Merry Hill, and Puttstars Peterborough. Lincoln Bowl was acquired on 2 October bringing our total UK estate to 71 centres. We remain confident in our ability to deliver on our plan of an average of three new openings a year. At present we are on site at another new location and are planning to commence development at three others in early Q2 FY2024. This year will see the opening of our long-anticipated centre at the £70m Northern Gateway leisure complex development in Colchester, combining 26 bowling lanes, mini-golf, bar, diner and an amusement offer. # 13 New Pins on Strings UK installations # 13 UK refurbishments completed We completed 13 UK centre refurbishments, introducing the very latest design innovations and technological improvements to the sites. These refurbishments included retiring the AMF brand from the portfolio after rebranding the final two centres and space optimisation programmes at three centres: increasing amusement space at Puttstars Harrow, creating a six-lane duck-pin bowling area aimed at younger families and corporates at Puttstars Leeds and incorporating a nine-hole Puttstars in underutilised space at Hollywood Bowl Leeds. Combining offers at centres where space configuration makes it possible, is proving popular with customers, keeps our offering fresh and supports centre yield increases. All the refurbishments are delivering returns in line with expectations, with the last 13 projects averaging more than a 40 per cent return on investment. We expect to carry out between eight and ten refurbishments in FY2024. The Pins on Strings rollout in the UK has continued, with a further 13 centres benefiting from this cost saving technology which also enhances our customer experience by significantly reducing games per stop. 54 centres now have the machines installed (83 per cent of the Group's UK bowling estate), delivering a minimum 30 per cent return on invested capital. We plan to install this technology in at least eight centres in FY2024. Investment in the digital customer journey has continued, as we refine our sales and marketing activity and online booking systems. Online sales conversions, centre yields and capacity utilisation have improved through targeted marketing and dynamic pricing. In FY2023 we have been developing our own bespoke booking system. # £11.06 UK LFL SPG +3.4% vs FY2022 # £30.3m Total capital expenditure, including acquisitions, in FY2023 # 20 Hollywood Bowl Group plc Annual report and accounts 2023 ![img-2.jpeg](img-2.jpeg) **$37.3m** Revenue (CAD) from Canadian operations **30+** Splitsville centres target opportunity ![img-3.jpeg](img-3.jpeg) As our business has evolved and grown, we have become aware of the limitations of current third-party platforms and have decided to make the investment in a new modern and flexible technology platform that can evolve and support our next stage of growth. Built by our in-house development team, the open-source, multi-channel technology will integrate with our current CRM tools and improve the booking experience for our customers and team members. Now nearing completion, the new system will be launched in Q3 FY2024 in the UK and rolled out to Canada at a later date. **Canada – expansion and acquisitions** Our Canadian operations traded ahead of expectations, contributing CAD 37.3m (£22.5m) in revenue and over CAD 7.4m (£4.5m) of EBITDA on a pre-IFRS 16 basis. We have made good progress with our growth strategy in Canada, focused on four areas: 1. investing in the existing estate; 2. acquiring existing businesses that complement the current estate; 3. opening new centres; and 4. supporting the Canadian bowling market with Striker's products and services. The refurbishment programme is also progressing well, with one major refurbishment and rebrand to Splitsville completed and one on site. The newly refurbished centre has been very well received by customers with returns on investment performing well above our hurdle rate in Canada. Post completion, LFL revenue growth at this centre has been over 30 per cent. This performance in Canada has been supported by insights gained from detailed customer research carried out in FY2023, which in many ways echoes the UK's customer needs. Although there are some variances, such as a greater corporate and educational emphasis, the research confirmed that our UK customer focused operating model will translate well for the Canadian market where there are significant opportunities for sector consolidation and growth. Our pipeline of new site opportunities and acquisitions is building with several centres in the diligence process. In February 2023, we acquired three new centres in Calgary. We also exchanged contracts on a 43,000 square feet new build in Ontario featuring 24 lanes, scheduled to open in FY2024. Post the year end, we have acquired two further centres, one in Ontario and one in Vancouver, bringing us to 11 centres in Canada at the time of writing. The Striker business continues to grow as a result of increased investment into bowling centres across the country. Revenues totalled CAD 7.1m (£4.3m) and the order book is strong with several large installation and maintenance projects signed to commence in FY2024. We continue to share ideas between the businesses, adapting the UK operating model to a Canadian audience whilst maintaining the entrepreneurial spirit of the local management. In order to share best practice across the Group, we were able to sponsor four UK team members to take up permanent roles in Canada – one to head up talent development, which will be vital to growing our operations and evolving the business culture, two Centre Managers and the Director of Operations. As the Canadian operations develop, we plan to offer more opportunities for team member exchanges. Hollywood Bowl Group plc Annual report and accounts 2023 21 ## Chief Executive Officer's review continued ### An outstanding team We have an excellent reputation for our positive working culture and creating outstanding workplaces is one of the three pillars of our sustainability strategy. In FY2023, we refreshed our employer brand aimed at improving communications in our business, attracting a more diverse team and answering the key question of why a candidate might want to work with us. The initial insight study highlighted areas of improvement and we have been taking action to address this. The response since launch has been fantastic with significant improvements in team member engagement, social media and website traffic and job applications. For the second year running we rank amongst one of the Top 25 UK's Best Big Companies to Work For in 2023. Our Hemel Hempstead office was awarded the top 3* rank for its working practices, placing us amongst a select few businesses. Our UK net promoter score has also increased against the previous year. Our team members continue to impress, supported by our industry-leading in-house training and development programme. Although there continues to be considerable competition for labour in the leisure market, our exposure has been cushioned somewhat by our low exposure to the London area. Furthermore, our refreshed employer brand launched during the year has made a significant difference to our ability to attract talent. It is important that we remain competitive and therefore we increased average hourly pay for team members by over 9 per cent and Centre Manager and Assistant Centre Managers have seen salary increases of over 5 per cent during the year. For FY2023, we will pay out over £2.6m in centre level management bonuses, with Centre Managers on average receiving over 64 per cent base pay and Assistant Centre Managers receiving over 14 per cent of base pay. Also, more than half of our hourly rate team members received bonuses measured against financial, environmental and customer satisfaction criteria, equating to £0.6m in total. ### Sustainable growth Running our business in a sustainable manner is a key focus for the Group and is integral to our decision making. Good progress was made across all sustainability metrics and we met our key FY2023 targets across our three sustainability pillars. The solar panel rollout bringing the total to 27 centres, further reducing our reliance on purchased electricity. Our indirect Scope 3 emissions are published for the first time this year, which has helped us to develop our pathway to the net zero strategy and enabled us to set science-based targets (SBTs) from FY2024, using FY2023 as a baseline year. Over the next two years, we will be aligning our Canadian operations with our UK sustainability strategy so that from FY2025 we can collectively report our environmental and social progress across the Group. ### Outlook After another year of exceptional performance, we remain focused on sustainable profitable growth and continued investment across all areas of the business. It is anticipated that the increases to national minimum (living) wage rates, which were announced in the Autumn Statement, will be c. £0.6m for H2 FY2024 (c. £1.2m annualised), whilst the other changes, such as business rates, are expected to have minimal impact. We are confident that our high-quality leisure experience offers great value for money, which is why families and friends are continuing to choose our inclusive and affordable offerings for their leisure spending. With a strong balance sheet and a highly cash generative business model, we see the potential in the future to grow our business to at least 130 centres in the UK and Canada. I would like to thank all our team members in the UK and Canada for their continued dedication to our customers and Hollywood Bowl Group and look forward to another successful and exciting year ahead. **Stephen Burns** Chief Executive Officer 17 December 2023 ![img-4.jpeg](img-4.jpeg) Strategic report ## Q&A ## with Stephen ## We ask CEO Stephen Burns about the Group’s ## performance in FY2023 and future growth opportunities. With another record year, what challenges Where do you see the future growth of the Q Q has the Group faced in FY2023? UK business? UK business has experienced a number of challenges this We now have 71 centres in the UK, and believe there is still A A year with cost inflation and a cost-of-living crisis. Although significant room for long-term sustainable growth. We we haven’t been immune to these challenges, our success have an exciting pipeline of new centres and are on track this year has demonstrated the strength of demand for to deliver an average of three new centre openings a year fun, affordable family-friendly leisure activities and the by the end of FY2026. We are an attractive tenant so while resilience of our business model to rising costs. we see a large number of opportunities for new centres, we remain very selective and focus on quality locations that meet our clear returns policy. Are you finding it hard to attract and retain talent? Q Our growth also comes from our refurbishment programme It’s always a challenge to find and keep good people but we and by improving our existing operations and customer perform well above the hospitality and leisure industry A experience, increasing our revenue streams. Technology average thanks to our people strategies. Our approach is a key driver of this, and I am excited about our new cuts across all areas of HR. We have a strong employer booking system due to launch in FY2024 which will value proposition and work culture, and have thought improve our customers’ digital journey and forms a key carefully about a candidate’s journey – from first contact, part of our wider digital transformation programme. through to training and development and onto our talent management programmes. We pride ourselves on the range of employment opportunities, whether flexible, part What are you excited about next year? Q time or full time, to suit individual needs and offer excellent I am extremely excited about the opportunity in Canada. benefits regardless of what type of contract you are on. Our research indicates that there are a large number of A similarities between the Canadian and UK markets which What is the future of Puttstars? gives us confidence that applying our UK model, with some Q minor adjustments, will work well. We have started to It is still at an early stage in its journey and we continue to introduce Hollywood Bowl Group ways of working and have test and develop new ways to evolve the offer, including A seen impressive results so far. The market itself is highly introducing duck-pin bowling into our Leeds centre. It’s fragmented and under-invested and we have a clear that the business doesn’t offer the same returns that solid foundation of 11 centres from which to continue to roll we can achieve from comparable bowling centres, but it out the established Splitsville brand across our growing demonstrates our ability to apply our customer-led pipeline of excellent new site opportunities and acquisitions. operating model to new indoor leisure activities. We have also started to introduce mini-golf courses into bowling centres where we have underutilised floor areas, giving customers reasons to spend more time with us. Hollywood Bowl Group plc ## Annual report and accounts 2023 23 ### Our market environment ## Responding to an ## evolving landscape Our position as the established ten-pin bowling and competitive socialising market leader in the UK, and now the ten-pin bowling market leader in Canada, enhances our ability to respond to evolving market dynamics. There are a number of market trends and opportunities which are important for the Group. ## Macro trends Consumers are Opportunity ## Popularity of increasingly preferring to The ‘competitive socialising market’ evolved due to ## competitive create and share social strong consumer appetite for unique and inclusive experiences rather than experiences, including updated takes on traditional ## socialising accumulating material activities such as bowling, mini-golf, table tennis items, which is shaping and bingo. how they allocate their discretionary budgets Response and leisure time. With our active refurbishment programme and the introduction of innovations like our scoring systems, leaderboards and mini-golf concepts, we continue to set the standard for competitive socialising in the UK, enabling us to successfully compete with increased numbers of new entrants attracted to the market. Link to strategy 1 2 3 4 5 High street, and Opportunity ## Combined retail out-of-town, traditional Numerous retail property landlords and developers ## and leisure retail outlets and are responding to this by looking to expand their development schemes leisure offering and create a wider destination ## experiences are under increasing customer experience to increase footfall and pressure from online extend dwell time. channels and the rise of the ‘experience economy’. Response Our strong record of successful partnerships with landlords and our unique customer experiences, mean we are considered key existing and potential new anchor tenants alongside cinema and casual dining operators in the UK. We are also starting to gain good traction with landlords in Canada. Link to strategy 1 2 3 4 5 Hollywood Bowl Group plc ## 24 Annual report and accounts 2023 Key to strategy Strategic report | 1 | Driving like-for-like revenue growth | | --- | --- | | 2 | Actively refurbishing our assets | | 3 | Developing new centres and acquisitions | | 4 | Focusing on our people | | 5 | Leveraging our indoor leisure experience | See our strategy on pages 28 to 33 ## Market opportunities In the UK, ten-pin bowling Outlook ## Low UK market has historically been a In the UK, the activities of ten-pin bowling and relatively low-frequency mini-golf enjoy a wide demographic appeal and high ## penetration activity, and with fewer level of participation interest when compared to than 350 centres, has other offerings in the competitive socialising sector. lower levels of location accessibility when Response compared to cinema. We continue to work closely with agents and landlords to further strengthen our new centre pipeline which will enable us to accelerate the expansion of our market coverage into prime locations for the Hollywood Bowl brand. Link to strategy 1 2 3 4 5 | | Well-capitalised businesses | Opportunity | | --- | --- | --- | | Canadian sector | like Hollywood Bowl Group | This trend and the associated opportunities | | | can increase their share of | accelerated due to the COVID-19 pandemic and the | ## consolidation the leisure market as subsequent trading and liquidity pressures financially challenged experienced by many operators in the leisure and operators become less hospitality sectors. competitive and seek to exit the market. Response The wider Canadian leisure market remains highly fragmented with many independent operators in existence. Within the bowling sector there are more than 190 centres. With 11 centres, Splitsville is already the largest branded operator in Canada. Link to strategy 1 2 3 4 5 Hollywood Bowl Group plc ## Annual report and accounts 2023 25 ### Business model ## Our business model creates value by ## continually investing in enhancing the ## customer experience ## What sets us apart What we do Successful brands Our centres offer a complete entertainment experience for customers of all ages. We operate an extensive portfolio of Alongside our core offer of bowling or mini-golf, they can also enjoy amusements bowling and mini-golf centres across and food and drink. These additional offerings not only enhance their experience the UK and Canada, under our and increase reasons to visit, but also increase dwell time and secondary spend. Hollywood Bowl, Splitsville and ## Puttstars brands. Multiple revenue streams High-quality estate Bowling Amusements Our centres are predominantly in prime locations, in out-of-town, multi-use leisure and retail parks, alongside cinema and casual dining sites. Motivated and engaged teams Our teams are the face of our business and are focused on delivering the best brand experience for our customers. Food Beverages Landlord relationships Excellent relationships with developers, agents and landlords ensure that we maintain a strong pipeline of potential new high-quality sites. Strong balance sheet By driving revenues, continuing to achieve healthy margins and maintaining a strong balance sheet, we are able to invest appropriately in all Mini-golf areas of our business and create value for our stakeholders. Hollywood Bowl Group plc ## 26 Annual report and accounts 2023 Strategic report ## What we do Where we invest Value creation Investment Our customers We strive to deliver the best possible Customer experience experience through exceptional service, in unique, contemporary, safe • Safe and secure environments and exciting environments, at a highly • Technology to enhance the wider customer journey accessible price point. • Centre maintenance and upgrades • Centre refurbishments and reconfigurations Our people • Customer insight programmes Our team members are highly focused on commercial, satisfaction and Link to strategy sustainability measures to ensure our 1 Delivering like-for-like revenue growth customers enjoy the best possible 2 Actively refurbishing our assets experience whilst we minimise our impact on the environment. Management programmes are in place People to attract, retain and nurture top talent. • Attracting and retaining the best people in the leisure industry • A fair deal for our team members with comprehensive bonus and Our partners incentive schemes We support a wide ecosystem of • Extensive training and development partners and suppliers through • Team engagement and wellbeing programmes commercial arrangements designed to build mutually beneficial Link to strategy long-term relationships. 4 Focusing on our people Our communities Growth The inclusive nature of bowling and • New centre developments mini-golf makes them an important • Broadening the appeal to new and existing customers through digital contributor to social wellbeing. We offer marketing programmes and environment upgrades subsidised access for concessionary • Acquisitions users and educational groups. • UK and international market expansion Our investors Link to strategy We are focused on sustainable, 3 Developing new centres and acquisitions profitable growth by driving revenues, 5 Leveraging our indoor leisure experience and managing our margins and cash position to provide attractive returns. Hollywood Bowl Group plc ## Annual report and accounts 2023 27 ### Strategy ## Our proven ## growth strategy ## Driving like-for-like Actively refurbishing ## 1 revenue growth 2 our assets ## Focusing on our people Developing new centres ## 3 4 ## and acquisitions Key to risks Management recruitment 1 Economic environment 7 and retention | 2 | Covenant breach | 8 | Food safety | | --- | --- | --- | --- | | 3 | Expansion and growth | 9 | Cyber security and GDPR | | 4 | Core systems | 10 | Compliance | | 5 | Food and drink suppliers | 11 | Climate change | | 6 | Amusement supplier | | | ## Leveraging our indoor ## 5 See our risks on pages 70 to 75 ## leisure experience See our markets on pages 24 and 25 Hollywood Bowl Group plc ## 28 Annual report and accounts 2023 Strategic report ## Drivinglike-for-like ## 1 ## revenue growth ### We grow our LFL revenue by attracting new customers and increasing the ### frequency of existing customer visits and stimulating higher spend per game. We do this by • Refined our value snacks and sharers food menu, increasing at • Focusing on sales, service and safety superiority, and improving lane food and beverage orders centre yields • Carried out space optimisation to add extra bowling lanes and • Providing an outstanding customer experience focusing on four extend amusement areas where possible critical customer satisfaction drivers of value for money, What’s next? cleanliness, team friendliness and service speed • Continue refurbishment programme in the UK (c. 33 per cent ROI) • Increasing dwell time through a diverse entertainment experience and Canada (c. 25 per cent ROI) • Investing in technology and improving the digital customer journey • Continue to focus on innovation and investment in technology to drive sales and engagement • Launch our new in-house developed booking system, which will • Maximising customer awareness and engagement through support further business growth in the UK and Canada targeted digital marketing to a variety of customer groups • Improving food and beverage menus and removing barriers Links to risks to ordering 1 Economic environment • Enhancing the amusement offering, making it affordable and 6 Amusement supplier accessible to all 7 Management recruitment and retention • Minimising bowling-lane downtime due to mechanical failure through the rollout of Pins on Strings technology What we achieved in FY2023 • Net promoter score of 64.4 per cent • 60.4 per cent of customers were highly satisfied • Linked team member bonus schemes to our four critical customer satisfaction drivers • Improved engagement rates and revenue generation through our customer data platform, using insights to improve the effectiveness of digital marketing • Refined our website and booking engine functionality to simplify the customer journey, and improve the presentation of products, promotions and dynamic pricing ## 4.1% UK LFL revenue growth ## 15.1% Canada LFL revenue growth ## 4.5% Group LFL revenue growth Hollywood Bowl Group plc ## Annual report and accounts 2023 29 ### Strategy continued ## Actively refurbishing ## 2 ## ourassets ### Investment in our centres improves the customer experience and drives sales and profitability. ### Our upgrades attract new customers, enhance customer satisfaction and increase revenues. We do this by What we achieved in FY2023 • Running a five-to seven-year centre refurbishment programme • Completed the refurbishment or rebrand of 15 centres – 13 in the with an average spend of c. £400k, keeping our centres looking UK and two in Canada, investing £6.3m on improvements their best, optimising space and introducing innovations • Added extra amusements space during refurbishments – creating • Reconfiguring centres to optimise space and drive revenues and on average eight new machine places and adding a total of 86 new yields, for example combining the bar and diner areas to create amusement pieces in our refurbished centres more amusement space and introducing mini-golf courses into • Continued to rollout our in-centre digital installations with underutilised spaces enhanced content – now in 36 centres • Increasing the space, density and quality of family games and • Continued to rollout Nayax ‘tap to play’ amusement machines, driving ancillary revenues • Completed rollout of Pins on Strings in 13 more centres – now in • Upgrading in-centre digital content systems to improve customer 54 centres at end of FY2023 engagement, and encourage food and beverage spend • Installed solar panels at five centres to bring the total to 27 centres • Investing in solar panels to reduce our impact on the environment • Retired the AMF brand, with all bowling centres in the UK now and our exposure to energy price increases rebranded to Hollywood Bowl • Rebranded all new Canadian centres to the Splitsville brand What’s next? • At least eight refurbishments to be completed in FY2024 • Continued rollout of Pins on Strings to improve games per stop (GPS) • Ongoing negotiation with landlords to continue solar panel rollout Links to risks | 1 Economic environment | | --- | | 6 Amusement supplier | | 11 Climate change | ## 15 Centres refurbished or rebranded in FY2023 ## 17.4% LFL spend growth in first year after refurbishment ## 50%+ Average ROI on UK refurbishment capital expenditure Hollywood Bowl Group plc ## 30 Annual report and accounts 2023 Strategic report ## Developing newcentres ## 3 ## andacquisitions ### We actively explore growth opportunities in new markets through the build of new centres ### and via the acquisition of existing sites or leisure operators. We do this by Links to risks • Focusing on quality openings and setting minimum 19 per cent 2 Covenant breach ROI on net capital expenditure 3 Expansion and growth • Looking to international markets that are fragmented and 7 Management recruitment and retention under-invested, and ripe for consolidation • Seeking acquisitions meeting strict investment criteria, overseas or in the UK, where we can add value and where there is significant potential for sustainable, profitable growth What we achieved in FY2023 • Opened two new Hollywood Bowl centres and one new Puttstars centre • Acquired three centres in Calgary, Canada • Commenced construction on a new build centre in Ontario What’s next? • At least ten further centres scheduled to open in the UK and Canada by the end of FY2025 • Continue to leverage our customer-led operating model, technology and digital marketing experience to add value to the Canadian business • Continue to develop a pipeline of new Canadian site opportunities, with more than ten additional sites or acquisitions planned in the next five years ## 3 New centres opened in UK ## 3 Centres acquired in Calgary, Canada ## 10+ New Group centres targeted by end of FY2025 Hollywood Bowl Group plc ## Annual report and accounts 2023 31 ### Strategy continued ## Focusing on ## 4 ## ourpeople ### Our dedicated, dynamic and diverse teams enable us to deliver on our ### Group purpose. Attracting and retaining top talent is a priority. We do this by • Launched the new employer brand aimed at attracting the best • Having a positive, fun, high-performance Group culture talent, a more diverse workforce and increasing the number of job applicants • Having a clear purpose that is well understood and that underpins the way our teams work • Launched a new careers website • Providing industry-leading training and development programmes • Developed our employer social media strategy • Giving all team members the opportunity to progress and develop • Increased the number of Assistant Centre Manager in Training their careers and Centre Manager in Training programmes, and held talent programmes for our technicians and contact centre teams • Offering highly competitive pay, benefits, and bonus schemes to all our team members • Enrolled 14 team members onto the Senior Leadership Development Programme • Engaging and communicating with all team members • Filled 45 per cent of management vacancies from our internal What we achieved in FY2023 talent pipeline • Increased salaried teams’ remuneration by over five per cent • Recognised as the number 12 ranked UK’s Top 25 Best Big • Rewarded more than 50 per cent of our hourly paid team Companies to Work For in 2023 members with performance-related bonuses What’s next? • Developed our employer value proposition which guides how we • Continue to run market-leading incentive schemes for our teams talk about the Group as an employer and what it means to work with us • Welcome our first cohort of graduates onto our Graduate Training Programme • Extend our employer brand across the Group Links to risks 4 Core systems 7 Management recruitment and retention ## 45% Of management vacancies filled from internal talent pool ## 52%+ Of hourly paid team members received performance- related bonuses ## £3.3m Bonuses paid to centre teams Hollywood Bowl Group plc ## 32 Annual report and accounts 2023 Strategic report ## Leveraging our indoor ## 5 ## leisure experience ### We believe there are potential sustainable and profitable growth ### opportunities in the indoor leisure sector in international markets. We do this by What’s next? • Conducting extensive research into leisure market opportunities • Leverage our customer-led operating model, technology and digital marketing experience to add value to the Canadian business • Applying strict investment criteria before entering new markets • Continue to develop a pipeline of new Canadian site • Conducting trials to test centre environments and opportunities, with more than ten additional sites or acquisitions customer propositions planned in the next five years • Insight-led brand positioning • Continue to evaluate opportunities for further international What we achieved in FY2023 market expansion through the acquisitions of indoor leisure • Acquired a well operated, asset backed Canadian business operators with high-quality locations in FY2022 that provides the Group with a strategic platform Links to risks for growth 2 Covenant breach • Extended the Splitsville brand from five to eleven centres (two added post FY2023 year end) to become the largest branded 3 Expansion and growth ten-pin bowling operator in the Canadian market 4 Core systems • Customer research project completed to enhance the customer proposition and centre environments to drive customer satisfaction and sales • Launched a new brand framework and logo • Refurbished our largest centre and rebranded all new centres • Completed the formation of a new senior leadership team and ongoing upskilling programme of Centre Managers • UK team members recruited to support roles in Canadian team to facilitate cross-learnings and ways of working ## 3 New Canadian centres acquired in FY2023 ## 30+ Target size of Canadian estate by 2035 ## #1 Splitsville is now the market leading ten-pin bowling brand in Canada Hollywood Bowl Group plc ## Annual report and accounts 2023 33 ### Key performance indicators 1 ### We monitor our performance by regularly reviewing KPI metrics . ### We use these to gain a thorough understanding of the drivers of ### our performance, of our operations and of our financial condition. ## Financial KPIs | Revenue (£m) | Revenue generating capex (£m) | Group adjusted EBITDA (£m) | | --- | --- | --- | | +11.0% | +10.2% | +6.8% | |   |   |   | |   |   |    | |   |     | | |   |     | | | Definition | Definition | Definition | | Revenue is generated from customers | Capital expenditure on refurbishments, | Group adjusted EBITDA is calculated as | | visiting our centres to bowl or play mini-golf, | rebrands and new centres (excluding | operating profit before depreciation, | | and spending money on one of the ancillary | maintenance capex). | impairment, amortisation, loss on disposal | | offers, amusements, diner or bar. It also | | of property, plant, equipment and software | Comment | includes revenue generated by our Striker | | and exceptional items. A reconciliation | | --- | --- | --- | | Installations business in Canada. | Revenue generating capex increased by | between Group adjusted EBITDA and | | | 10.2 per cent, to £13.8m, due to a higher spend | statutory operating profit is on page 39. | | Comment | on refurbishments in the year, up £3.4m | | | Revenue increased by 11.0 per cent, to | compared to FY2022, that was partially | Comment | | £215.1m, driven through LFL growth, new | offset by lower spend on new centres. | Group adjusted EBITDA increased by | | centre performance and the full-year effect | | £5.2m to £82.7m, largely due to revenue | | of our Canadian business, Teaquinn. | | growth as well as the Canadian business | being owned for the full financial year. | Profit before tax (£m) | | Like-for-like revenue growth (%) | Net cash/(debt) (£m) | | | --- | --- | --- | --- | --- | | -3.4% | | +4.5%pts | -6.4% | | |   | |   | |   | |    | |   | |   | |  |  |   | |   | |  |   |  | ()  | | | Definition | | Definition | Definition | | | Profit before tax as shown in the financial | | LFL revenue growth is total revenue | Net cash/(debt) is defined as cash and cash | | | statements. | | excluding any new centres and closed | equivalents (£52.5m) less borrowings from | | | | | centres. New centres are included in the | bank facilities (£nil) excluding issue costs. | | Comment LFL revenue growth calculation for the Profit before tax decreased to £45.1m due in Comment period after they complete the calendar | the main to TRR of VAT amount of £8.6m | anniversary of their opening date. | The Group is in a net cash position as at | | --- | --- | --- | | received in FY2022, offset in part by LFL | | year end due to the strong trading during the | | revenue growth and the performance of the | Comment | year and tight cost controls. | | Canadian centres. | LFL revenue has increased 4.5 per cent (on | | a constant currency basis) when compared to FY2022. Hollywood Bowl Group plc ## 34 Annual report and accounts 2023 Strategic report | Adjusted gross profit margin (%) | Group adjusted operating cash flow (£m) | Group operating profit margin (%) | | --- | --- | --- | | -2.2%pts | -6.9% | -3.5%pts | |   |   |   | |   |   |   |             Definition Definition Definition Adjusted gross profit margin is calculated as Group adjusted operating cash flow is Operating profit margin is calculated as revenue minus the cost of good sold (COGS) calculated as Group adjusted EBITDA less operating profit per the Financial Statements and any irrecoverable VAT, divided by working capital, maintenance capital divided by revenue. revenue. COGS excludes any labour costs. expenditure and corporation tax paid. A Comment | This is how gross profit margin is reported | reconciliation of Group adjusted operating | | | --- | --- | --- | | monthly by the Group and how Centres are | cash flow to net cash flow is provided on | Operating profit margin decreased year on | | managed. | page 40. | year to 25.4 per cent, due in the main to | TRR of VAT amount of £8.8m received in | Comment | Comment | FY2022 (4.8 per cent of Group revenue) | | --- | --- | --- | | Adjusted gross profit margin decreased | Group adjusted operating cash flow | compared to only £0.2m in FY2023 (0.1 per | | year on year due to a combination of higher | decreased due to a combination of higher | cent of Group revenue). | | LFL revenue growth in amusements than | corporation tax payments and a negative | | | other revenue lines and TRR of VAT in | movement in working capital. | | FY2022, as well as the lower margin in the Canadian business as guided on acquisition. Group adjusted EBITDA margin (%) Total average spend per game (£) 1 Some of the measures described are not financial measures under Generally -1.5%pts +1.4% Accepted Accounting Principles (GAAP), including International Financial Reporting     Standards (IFRS), and should not be considered in isolation or as an     alternative to the IFRS Financial     Statements. These KPIs have been chosen as ones which represent the     underlying trade of the business and which are of interest to our shareholders. Definition Definition Group adjusted EBITDA margin is Total average spend per game is defined calculated as Group adjusted EBITDA as total revenue in the year, excluding any divided by total revenue. exceptional items, divided by the number of bowling games and golf rounds played Comment in the year. Group adjusted EBITDA margin was 38.5 per Comment cent, in line with management expectations. Group adjusted EBITDA margin on a Average spend per game increased by pre-IFRS 16 basis was 30.2 per cent. 1.4 per cent, to £10.82, due to customers continuing to spend more during their visits. Hollywood Bowl Group plc ## Annual report and accounts 2023 35 ### Chief Financial Officer’s review ## Delivering growth ## and strong returns ### On the back of record revenues ### in FY2022, it was pleasing to see ### continued growth for our UK and ### Canadian operations.” Laurence Keen, Chief Financial Officer Hollywood Bowl Group plc ## 36 Annual report and accounts 2023 ## Group financial results | | FY2023 | FY2022 | FY2022 (excluding TRR of VAT on bowling)^{1} | Movement FY2023 vs FY2022 (excluding TRR of VAT on bowling) | | --- | --- | --- | --- | --- | | Revenue | **£215.1m**^{5} | £193.7m^{5} | £185.0m | +16.2% | | Adjusted gross profit^{1} | **£177.6m** | £164.3m | £155.6m | +14.0% | | Adjusted gross profit margin^{1} | **82.6%** | 84.8% | 84.1% | -150bps | | Administrative expenses | **£123.5m** | £108.9m | £108.8m | +13.5% | | Group adjusted EBITDA^{2} | **£82.7m** | £77.5m | £74.5m | +11.1% | | Group adjusted EBITDA^{2} pre-IFRS 16 | **£64.9m** | £60.6m | £57.6m | +12.7% | | Group profit before tax | **£45.1m** | £46.7m | £37.9m | +19.0% | | Group profit after tax | **£34.2m** | £37.5m | £30.9m | +10.7% | | Group adjusted profit before tax^{3} | **£47.8m** | £48.7m | £39.9m | +19.8% | | Group adjusted profit after tax^{3} | **£36.8m** | £39.4m | £32.8m | +12.2% | | Free cash flow^{4} | **£29.5m** | £34.8m | £34.8m | -15.4% | | Total dividend per share | **14.54p** | 14.53p | 14.53p | +0.0% | 1 Adjusted gross profit margin is calculated as revenue less directly attributable cost of goods sold and excludes any payroll costs. 2 Group adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is calculated as statutory operating profit plus depreciation, amortisation, impairment, loss on disposal of property, right-of-use assets, plant and equipment and software and any exceptional costs or income, and is also shown pre-IFRS 16 as well as adjusted for IFRS 16. These adjustments show the underlying trade of the overall business which these costs or income can distort. The reconciliation to operating profit is set out on page 39. 3 Adjusted group profit before / after tax is calculated as group profit before / after tax, adding back acquisition fees of £0.7m (FY2022: £1.6m) and the non-cash expense of £2.0m (FY2022: £0.4m) related to the fair value of the earn out consideration on the Teaquinn acquisition in May 2022. Also, in FY2022 it included the deduction of the non-cash credit in relation to the Teaquinn bargain purchase of £39,075. 4 Free cash flow is defined as net cash flow pre-exceptional items, cost of acquisitions, debt facility repayment, ROF drawdowns, dividends and equity placing. 5 Group revenue in FY2022 included a total of £8.8m relating to the reduced rate (TRR) of VAT on bowling, £5.8m of this was in respect of prior years and £3.0m for FY2022. FY2022 includes £0.3m in respect of TRR of VAT. 6 FY2022 consolidated income statement included the following in respect of TRR of VAT on bowling in the UK: Revenue £8.8m, gross profit £8.8m, administrative expenses £0.1m, Group adjusted EBITDA £3.0m, Group profit before tax £8.8m, Group profit after tax of £6.6m and Group adjusted profit after tax of £6.6m. 7 Revenues in GBP based on an actual foreign exchange rate over the relevant period, unless otherwise stated. Following the introduction of the lease accounting standard IFRS 16, the Group continues to maintain the reporting of Group adjusted EBITDA on a pre-IFRS 16 basis, as well as on an IFRS 16 basis. This is because the pre-IFRS 16 measure is consistent with the basis used for business decisions, as well as a measure that investors use to consider the underlying business performance. For the purposes of this review, the commentary will clearly state when it is referring to figures on an IFRS 16 or pre-IFRS 16 basis. All LFL revenue commentary excludes the impact of TRR of VAT on bowling. New centres in the UK and Canada are included in LFL revenue after they complete the calendar anniversary of their opening date. Further details on the alternative performance measures used are at the end of this report. ## Revenue On the back of record revenues in FY2022, it was pleasing to see continued growth, with UK LFL growth of 4.1 per cent in FY2023. UK LFL revenue growth was a combination of spend per game growth of 3.4 per cent, taking LFL average spend per game to £11.06, as well as LFL game volume growth of 0.7 per cent. The LFL growth, alongside the performance of the new UK centres, resulted in record UK revenues of £192.4m and growth of 7.6 per cent compared to the underlying revenues in FY2022 (excluding the impact of TRR of VAT on bowling of £8.8m in FY2022). It is worth noting that UK centres benefited from the unseasonable wet weather in July and August, with both months recording strong revenue and August achieving a record month (£20.2m). Canadian LFL revenue growth, when reviewing in Canadian Dollars to allow for disaggregating the foreign currency effect, was 15.1 per cent. Total statutory revenue for FY2023 was £215.1m, 11.0 per cent growth on FY2022 (16.2 per cent growth excluding TRR of VAT on bowling in FY2022). Hollywood Bowl Group plc Annual report and accounts 2023 37 Strategic report ## Chief Financial Officer's review continued ### Adjusted gross profit Adjusted gross profit is calculated as revenue less directly attributable cost of good sold and does not include any payroll costs. Gross profit was £177.6m, 8.1 per cent growth on FY2022 (14.0 per cent growth excluding TRR of VAT on bowling in FY2022), with gross profit margin at 82.6 per cent. Adjusted gross profit for the UK business was £161.2m with a margin of 83.7 per cent. The trend of amusements growing at a higher rate than bowling continued, producing a higher gross profit overall, albeit at a reduced gross profit margin (amusements has a lower gross profit margin). Adjusted gross profit for the Canadian business was in line with expectations at CAD 27.2m (£16.4m), with a margin of 73.1 per cent. The lower margin rate when compared to the UK business is as expected due to the lower gross profit margin of the Striker bowling equipment and installations business, the higher food and drink mix in the Canadian bowling centres and the lower contractual amusement gross profit margin. Splitsville centres contributed CAD 25.2m (£15.2m) of gross profit. ### Administrative expenses Following the adoption of IFRS 16 in FY2020, administrative expenses exclude property rents (turnover rents are not excluded), and include the depreciation of property right-of-use assets. Total administrative expenses on a statutory basis were £123.5m. On a pre-IFRS 16 basis, administrative expenses were £130.0m, compared to £114.1m in FY2022. Employee costs in centres increased to £40.7m, an increase of £7.0m when compared to FY2022, due to a combination of salary increases and the impact of higher LFL revenues, new UK centres, as well as the full-year effect of employee costs in Canadian centres, which resulted in an increase of CAD 7.0m (£4.1m). Total property-related costs, accounted for under pre-IFRS 16, were £36.6m, with £33.9m for the UK business (FY2022: £33.3m). Rent costs in the UK accounted for £17.6m in FY2023, an increase of £0.4m compared to the prior year. Underlying business rates in the UK increased year on year by £1.6m as the COVID-19 concessions were removed during FY2023. However, due to business rate reduction claims made in respect of the 2015 revaluation finally being agreed, the Group received £2.3m in refunds (net of professional fees), resulting in an overall decrease in UK business rates of £0.7m. Total property costs in the UK increased by £1.1m, with new centre costs increasing by £0.9m. Canadian property centre costs were in line with expectations at CAD 4.5m (£2.7m). Our current UK electricity hedge runs out at the end of FY2024. We are therefore pleased to have agreed a new hedge up to the end of FY2027, with FY2025 seeing a modest increase of 33 per cent (£1.0m) compared to our current FY2024 hedge rate, whilst we would still be able to take advantage of lower costs should such market conditions prevail during this period. At the end of FY2023, we had 27 centres with solar panels installed, resulting in over 38 per cent of our UK estate benefiting from this technology, which aids in the Group's ESG strategy as well as some level of protection against higher energy costs. Total property costs, under IFRS 16, were £39.6m, including £10.4m accounted for as property lease assets depreciation and £9.8m in implied interest relating to the lease liability. Corporate costs include all central costs as well as the out-performance bonus for centres. Total corporate costs increased by £3.2m to £25.3m when compared to FY2022. UK corporate costs increased by £1.3m to £22.8m with the main driver of this being increased marketing spend. As we continue to build out our support team in Canada for growth, this, combined with a full year of ownership, resulted in corporate costs increasing by CAD 3.3m to CAD 3.9m (£2.3m). The additional people in Canada included a Director of Operations as well as leaders in marketing, people and property. The statutory depreciation, amortisation and impairment charge for FY2023 was £26.1m compared to £25.7m in FY2022. Excluding property lease assets depreciation, this charge in FY2023 was £14.9m. This is due to the continued capital investment programme, including new centres and refurbishments, as well as the full year impact of Canada. We undertook detailed impairment testing which resulted in an impairment charge in the year of a total of £2.2m (FY2022: £4.3m). The discount rate used for the weighted average cost of capital (WACC) was 12.7 per cent pre-tax (FY2022: 16.0 per cent). See note 12 to the Financial Statements for more information. ### Canadian performance Following the Teaquinn acquisition in May 2022, the Group has continued to grow its footprint in Canada. During FY2023 the Group acquired three entertainment centres in Calgary, with one new build in Ontario signed and due to open in early 2024. The business continues to trade in line with expectations, with total revenues in Canada of CAD 37.3m (£22.5m), and just over CAD 7.4m (£4.5m) of EBITDA on a pre-IFRS 16 basis. Of this, Striker, the bowling equipment and installations business, contributed CAD 7.1m (£4.3m) of revenue and CAD 0.9m (£0.8m) of EBITDA. On a LFL basis revenue grew by 15.1 per cent. Adjusted gross profit (which excludes payroll costs) was in line with expectations at CAD 27.2m (£16.4m), with a margin of 73.1 per cent. The lower margin rate when compared to the UK business is in line with expectations because of the lower gross profit margin of the Striker bowling equipment and installations business, higher food and drink mix and the lower contractual amusement gross profit margin. ### Exceptional costs Exceptional costs relate in the main to two areas. The first is the acquisition costs in relation to the acquisition of three entertainment centres in Calgary and acquisitions in progress at year end, which totalled £0.7m. The second is the earn out consideration for Teaquinn President Pat Haggerty, which is an exceptional cost of £2.0m in FY2023 (of which £1.8m is in administrative expenses and £0.2m is in interest expenses). See the table on page 39 for exceptional items included in the Group adjusted EBITDA and operating profit reconciliation. As noted in the FY2022 full-year results, the earn out consideration is considered a post-acquisition employment expense and not in the scope of IFRS 3, but instead is accounted for under IAS 19. The earn out has a cost impact in the following financial years up to and including at least FY2025. More detail on these exceptional costs is shown in note 5 to the Financial Statements. 38 Hollywood Bowl Group plc Annual report and accounts 2023 Strategic report ### Group adjusted EBITDA and operating profit Group adjusted EBITDA pre-IFRS 16 increased to a record £64.9m and includes a contribution of £4.5m (CAD 7.4m) from the Canadian business. Compared to FY2022 pre-IFRS 16, this was an increase of 7.1 per cent. When excluding the impacts of TRR of VAT (£3.0m in FY2022) this increase is 12.7 per cent. | | FY2023 £'000 | FY2022 £'000 | | --- | --- | --- | | Operating profit^{1} | **54,085** | 55,449 | | Depreciation | **25,317** | 25,052 | | Amortisation | **820** | 624 | | Loss on property, right-of-use assets, plant and equipment and software disposal | **306** | 18 | | Exceptional items | **2,203** | (3,688) | | Group adjusted EBITDA under IFRS 16 | **82,731** | 77,455 | | IFRS 16 adjustment | **(17,799)** | (16,850) | | **Group adjusted EBITDA pre-IFRS 16** | **64,932** | 60,605 | $^{1}$ IFRS 16 adoption has an impact on EBITDA, with the removal of rent from the calculation. For Group adjusted EBITDA pre-IFRS 16, it is deducted for comparative purposes and is used by investors as a key measure of the business. The IFRS 16 adjustment is in relation to all rents that are considered to be non-variable and of a nature to be captured by the standard. The increase is primarily due to the strong LFL revenue performance, the new UK centre performance, the Group's relatively fixed cost base, and the Canadian business. The reconciliation between statutory operating profit and Group adjusted EBITDA on both a pre-IFRS 16 and under-IFRS 16 basis is shown in the table above. ### Share-based payments During the year, the Group granted further Long-Term Incentive Plan (LTIP) shares to the senior leadership team as well as starting a new save as you earn scheme (SAYE) for all team members. The LTIP awards vest in three years providing continuous employment during the period, and attainment of performance conditions relating to earnings per share (EPS), as outlined on page 103 of the Annual Report. The Group recognised a total charge of £1.2m (FY2022: £0.9m) in relation to the Group's share-based arrangements. Share-based costs are not classified as exceptional costs. ### Financing Finance costs increased to £9.0m in FY2023 (FY2022: £8.8m) comprising mainly of implied interest relating to the lease liability under IFRS 16 of £9.8m. Bank interest costs in relation to the Group's undrawn revolving credit facility of £0.2m were offset by the interest received (£1.4m) on the Group's bank balances. The Group's bank borrowing facilities are a revolving credit facility (RCF) of £25m at a margin rate of 1.75 per cent above SONIA and an agreed accordion of £5m. The loan term runs to the end of December 2024, and the RCF remains fully undrawn. ### Cash flow and liquidity The liquidity position of the Group remains strong, with a net cash position of £52.5m as at 30 September 2023, compared to £56.1m at 30 September 2022. Detail on the cash movement in the year is shown in the table on page 40. ### Capital expenditure During the financial year, the Group invested net capex of £30.3m, including £7.4m on the acquisition of three centres in Calgary. A total of £7.0m was invested into the refurbishment programme, with 15 UK centres and two Canadian centres, some of which were still be completed at the end of FY2023. This included a rebrand of Splitsville Richmond Hill, Canada and the final two rebrands of AMF to Hollywood Bowl, in Torquay and Worthing. Despite inflationary pressures, returns on the UK refurbishments continue to exceed the Group's hurdle rate of 33 per cent. New UK centre capital expenditure was a net £6.8m. This relates, in the main, to three centres opened in the year – Hollywood Bowl in Speke and Merry Hill Birmingham and Puttstars Peterborough. The Group's strong balance sheet ensures that it can continue to invest in profitable growth with plans to open more locations during FY2024 and beyond. The Group spent £9.1m on maintenance capital in the UK, including continued spend on the rollout of Pins on Strings technology and solar panel installations. At the end of FY2023, Pins on Strings were in 56 centres and solar panels on 27 centres. Technology investment was £0.8m as we continue to enhance the digital customer journey ahead of the launch of our in-house core reservations platform in FY2024. We also upgraded the website, payment platform and customer data platform, and maintained a continued focus on our cyber security. Considering the rolling refurbishment programme, maintenance capital, and the new centres in the UK and Canada, we expect capital expenditure, including acquisitions to be in the region of £35m to £40m in FY2024. Hollywood Bowl Group plc Annual report and accounts 2023 39 Chief Financial Officer's review continued # Cash flow and net debt | | FY2023 £'000 | FY2022 £'000 | | --- | --- | --- | | Group adjusted EBITDA under IFRS 16 | **82,731** | 77,455 | | Movement in working capital | **(1,103)** | 8,814 | | Maintenance capital expenditure | **(9,072)** | (9,323) | | Taxation | **(9,100)** | (6,616) | | Payment of capital elements of leases | **(11,419)** | (14,450) | | **Adjusted operating cash flow (OCF)^{1}** | **52,037** | 55,881 | | **Adjusted OCF conversion** | **62.9%** | 72.2% | | Expansionary capital expenditure^{2} | **(13,786)** | (12,508) | | Disposal proceeds | **10** | 2 | | Net bank interest received/(paid) | **1,008** | (104) | | Lease interest paid | **(9,808)** | (8,452) | | **Free cash flow (FCF)^{3}** | **29,462** | 34,819 | | Exceptional items | **(343)** | 4,091 | | Acquisition of Teaquinn Holdings Inc | — | (8,099) | | Cash acquired in Teaquinn Holdings Inc | — | 415 | | Acquisition of Calgary centres | **(7,716)** | — | | Cash acquired in Calgary centres | **319** | — | | Dividends paid | **(25,338)** | (5,132) | | Equity placing (net of fees) | **6** | 30 | | **Net cash flow** | **(3,610)** | 26,124 | 1 Adjusted operating cash flow is calculated as Group adjusted EBITDA less working capital, maintenance capital expenditure, taxation and payment of the capital element of leases. This represents a good measure for the cash generated by the business after considering all necessary maintenance capital expenditure to ensure the routine running of the business. This excludes exceptional items, net interest paid, debt drawdowns and any debt repayments. 2 Expansionary capital expenditure includes refurbishment and new centre capital expenditure. 3 Free cash flow is defined as net cash flow pre-exceptional items, cost of acquisitions, debt facility repayment, debt drawdowns, dividends and equity placing. # Taxation The Group's tax charge for the year is £10.9m arising on the profit before tax generated in the period. The increase in the Group's effective rate of tax to 24.2 per cent is a combination of the increase in the UK corporation tax rate from 19 per cent to 25 per cent from April 2023 as well as the effect of the disallowable element, for tax purposes, of the earn out provision charged in FY2023. # Earnings Statutory profit before tax for the year was £45.1m and 3.4 per cent lower than FY2022. It is worth noting that FY2022 included a profit before tax benefit of £8.6m due to TRR of VAT. The Group delivered profit after tax of £34.2m (FY2022: £37.5m) and basic earnings per share was 19.92 pence (FY2022: 21.91 pence). Group adjusted profit before tax is £47.8m, whilst Group adjusted profit after tax is £36.8m. The adjustments are made to reflect the underlying trade of the Group. These adjustments are adding back acquisition fees of £0.7m and the non-cash expense of £2.0m related to the fair value of the earn out consideration on the Canadian acquisition in May 2022. For more detail see note 5 to the Financial Statements. # Dividend and capital allocation policy The Group's highly cash generative business model and strong balance sheet mean the business is well placed to continue to invest in its customer-led, UK and international growth strategy and to take advantage of opportunities as they arise, while delivering attractive shareholder returns. The Board has reviewed its capital allocation policy with the updated priorities for cash as follows: - capital investment into the existing centres through an effective maintenance and refurbishment programme; - investments into new centre opportunities, including expansion in both the UK and Canada; - to pay and grow the ordinary dividend in line with adjusted profit after tax. Given the Group's continued strong performance and the cash balance, the ordinary dividend will be based on a payout of 55 per cent of adjusted profit after tax; - any excess cash will be available for distribution to shareholders as the Board deems appropriate, without impacting on investment in the growth of the business. The FY2023 ordinary dividend will be based on a payout of 55 per cent of adjusted profit after tax, in line with the revised capital allocation policy and reflecting the Board's confidence in the Group's strategy, strong balance sheet and focus on delivering shareholder returns. 40 Hollywood Bowl Group plc Annual report and accounts 2023 Strategic report Therefore, the Board has declared a final ordinary dividend of 8.54 pence per share, based on an adjusted profit after tax of £36.8m (adjusted earnings per share of 21.48 pence). In line with the Group's capital allocation policy, the Board has proposed a special dividend of 2.73 pence per share be paid to shareholders alongside the ordinary dividend, bringing the full-year dividend to 14.54 pence per share (FY2022: 14.53 pence per share). Furthermore, given the surplus cash at the end of FY2023, the Group announces a share buyback programme of up to £10m, which is intended to commence shortly after the AGM. The Board will periodically assess the progress of this share buyback programme in light of the Group's capital allocation needs. Investing in the Group's profitable growth remains the priority use of cash and any future returns to shareholders will be subject to operational capital requirements, financial performance and other available strategic growth opportunities. Subject to approval from shareholders at the AGM, the ex-dividend date is 1 February 2024, with a record date of 2 February 2024 and a payment date of 23 February 2024. ### Going concern As detailed in note 2 to the Financial Statements, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report. ### Post-year-end events We were pleased to complete three acquisitions in early FY2024. In the UK, on 2 October, we purchased the assets, including the long leasehold, of Lincoln Bowl for total consideration of £44m. In Canada we completed two acquisitions. The first is the acquisition of a successful family entertainment centre in Guelph, Ontario called Woodlawn Bowl Inc, for CAD 4.71m, which on a proforma EBITDA pre-IFRS 16 basis, generated CAD 1.07m. The second is the acquisition of the assets and lease of a family entertainment centre in Vancouver, called Lucky 9 Bowling Centre Limited as well as its associated restaurant and bar, Monkey 9 Brewing Pub Corp, for a total consideration of CAD 425,000. **Laurence Keen** Chief Financial Officer 17 December 2023 ### Note on alternative performance measures (APMs) The Group uses APMs to enable management and users of the financial statements to better understand elements of the financial performance in the period. APMs referenced earlier in the report are explained as follows. **UK like-for-like (LFL)** revenue for FY2023 is calculated as: - Total Group revenues £215.1m, less - New UK centre revenues for FY2022 and FY2023 that have not annualised £6.3m, less - VAT rebates of £0.3m relating to prior periods, less - Canada revenues for FY2023 of £22.5m New centres are included in the LFL revenue after they complete the calendar anniversary of their opening date. LFL UK comparatives for FY2022 are £178.7m. **Adjusted gross profit margin** is calculated as total revenue less directly attributable cost of goods sold. Management do not consider it helpful to include any payroll costs in the gross margin because although these costs do vary to some extent with volume, it is in no way linear. These amounts are presented separately on the consolidated income statement. **Group adjusted EBITDA** (earnings before interest, tax, depreciation and amortisation) reflects the underlying trade of the overall business. It is calculated as statutory operating profit plus depreciation, amortisation, impairment, loss on disposal of property, right-of-use assets, plant and equipment and software and any exceptional costs or income, and is also shown pre-IFRS 16 as well as adjusted for IFRS 16. The reconciliation to operating profit is set out in this report. **Free cash flow** is defined as net cash flow pre-dividends, exceptional items, acquisition costs, bank funding and any equity placing. Useful for investors to evaluation cash from normalised trading. **LFL spend per game** is defined as LFL revenue in the year excluding any revenues relating to TRR of VAT for prior years (£5.8m) and TRR of VAT for FY2022 (£3.0m) divided by the number of bowling games and golf rounds played. **Adjusted operating cash flow** is calculated as Group adjusted EBITDA less working capital, maintenance capital expenditure, taxation and payment of the capital element of leases. This represents a good measure for the cash generated by the business after considering all necessary maintenance capital expenditure to ensure the routine running of the business. This excludes exceptional items, net interest paid, debt drawdowns and any debt repayments. **Expansionary capital expenditure** includes all capital on new centres, refurbishments and rebrands only. Investors see this as growth potential. **Adjusted profit after tax** is calculated as statutory profit after tax, adding back the acquisition fees in Canada of £0.6m and the non-cash expense of £2.0m related to the fair value of the earn out consideration on the Canadian acquisition in May 2022. This adjusted profit after tax is also used to calculate adjusted earnings per share. **Constant currency exchange rates** are the actual periodic exchange rates from the previous financial period and are used to eliminate the effects of the exchange rate fluctuations in assessing certain KPIs and performance. Hollywood Bowl Group plc Annual report and accounts 2023 41 ### Section 172 ## Working with ## ourstakeholders As part of this, the Board must always consider how decisions ### Effective engagement and collaboration with balance the needs of our different stakeholders, as well as the ### all of our stakeholder groups. consequences on long-term performance. The nature of operating Considering all of our stakeholders is a vital part of the Board’s a large-scale business means it is not always possible to provide strategic decision making. Engaging our stakeholders in a way positive outcomes for every stakeholder. In these situations, the that aligns with our culture and supports our goal of remaining an Board has to make decisions despite competing stakeholder priorities. industry leader is fundamental to the long-term sustainable success Our stakeholder engagement processes allow us to better of the Group. understand what matters to stakeholders, consider all relevant Section 172 of the Companies Act 2006 requires directors to always factors and select the best course of action for the Group’s act in good faith and in a way that would most likely promote the long-term business success. success of the company for the benefit of its stakeholders. S172(1) statement: How we engage with In accordance with section 172(1) of the our key stakeholders ## Our key | | Companies Act 2006, a director of a | Here, we outline the Board and | | --- | --- | --- | | stakeholders | company must act in the way he or she | Group’s approach to considering and | | | considers, in good faith, would be most likely | engaging with our key stakeholder groups. | to promote the success of the Group for the As well as our ongoing engagement The Board considers the Group’s key benefit of its members as a whole and, in activities, we also regularly receive and stakeholders to be: doing so, have regard, amongst other respond to specific feedback as well as matters, to: • Team members (employees) provide updates on important issues to • Customers a. the likely consequences of any decision our stakeholders. in the long term; • The communities in which it operates However, the Board does reserve certain • The environment b. the interests of the Group’s employees; matters for its own decision making. These are outlined on page 82. • Investors c. the need to foster the Group’s business • Suppliers, partners and relationships with customers and suppliers; In response to COVID-19 we took steps to lending banks increase our communication, collaboration d. the impact of the Group’s operations on and information sharing with stakeholders the community and the environment; regarding our actions and the potential Read more on the Business model e. the desirability of the Group maintaining impacts on them, as well as the information on pages 26 and 27 a reputation for high standards of we have considered. business conduct; and We have continued this approach in the UK Read more on Sustainability on pages 46 to 59 f. the need to act fairly between members and are looking to extend these engagement Read more on Governance on pages 78 to 87 of the Group. and collaboration methods to our Canadian operations as our Group ways of working The following disclosure describes how the become more embedded in this business. Directors of the Group have taken account | of the matters set out in section 172(1) (a) to | Here are the details of the activities we | | --- | --- | | (f) and forms the Directors’ statement | undertook in FY2023 and the outcomes of | | required under section 172 of the | the engagement with our stakeholder groups. | Companies Act 2006. Hollywood Bowl Group plc ## 42 Annual report and accounts 2023 ### Stakeholder engagement Strategic report ## Our team Our customers Our team members are key to our business success and the Providing a great experience every time our customers visit is a driving force behind our fun-filled customer experiences. core focus for the Board. Ongoing feedback remains our best indicator for whether we are delivering on this. What is important to them What is important to them • Regular, relevant and clear communication • A great value visit every time • Engagement with all levels of management • A clean and safe environment • Opportunities to provide feedback • Excellent customer service from friendly team members • Career and skills development options • Fully working, fault-free equipment • Attractive salary, benefits and opportunities to share in the success How the Board considers the interests of the of the Group stakeholder group • An inclusive employer who embraces diversity at all levels • The Board reviews customer satisfaction scores at every meeting How the Board considers the interests of the • Customer satisfaction scores form part of all bonus schemes from team stakeholder group members to senior leadership • All Directors visit multiple new, refurbished and existing centres each year • The senior leaders use customer feedback to identify improvements • Attendance at the annual management conference to ways of working and ongoing investments into new centres and refurbishments • Bi-annual feedback sessions between management and team members • Diversity is a key consideration of the Board’s succession planning How we engaged with them during FY2023 • Post-visit customer satisfaction surveys How we engaged them during FY2023 • Qualitative market research programmes • Fourth Engage in the UK enables us to communicate key messages instantly, with the opportunity for the team to interact (there were over 10k • Quantitative market research programmes posts in the year), and we have also used the platform to deliver wellbeing • Social media and customer queries submitted via the contact centre initiatives to support our team • Regular feedback and monitoring ensured safety standards and • We have undertaken employee engagement surveys and pulse surveys expectations were being met • The Company has a Whistleblowing policy in place, which enables Outcomes of engagement during FY2023 employees to raise concerns on any areas of the business. All cases are • We saw improved overall satisfaction scores from our UK customer visits reported on at every Board meeting compared to FY2022 • We publish our Gender Pay Gap report once a year • Enhancements to the Hollywood Bowl and Puttstars brand and Outcomes of engagement during FY2023 service propositions • Fourth Engage enabled us to deliver our internal training and wellbeing • Enhancements to the Splitsville brand and service proposition initiatives to support our team • We have updated our learning platform to include more user-generated content and encourage self-led learning. This content has also been shared through Fourth Engage • The outputs of the engagement surveys were considered by the Board and senior leadership team, resulting in actions being identified and put in place • We were delighted to be recognised as one of the UK’s Top 25 Best Big Companies to Work For in 2023, the second year in succession Hollywood Bowl Group plc ## Annual report and accounts 2023 43 ### Stakeholder engagement continued ## Our communities and ## Our investors ## the environment We our proud to be an active part of our communities, with Our investors are an important source of feedback on our school outreach programmes, concession discounts and business model and plans for future growth. charity fundraising. What is important to them We always take into account the short and longer-term • Relevant and timely information on Group performance and strategic plans environmental impacts of business operations and strategy. • Regular engagement with management • Growth of share price and dividend returns data What is important to them • Our capital allocation policy • A positive contribution to local communities through employment and • Information on ESG strategy and performance amenity provision • Information on Remuneration policy • Energy efficiency, and minimising environmental impacts • Sustainable working practices How the Board considers the interests of the • Ongoing support for local and national charities stakeholder group • The Board receives feedback from shareholder meetings and through the How the Board considers the interests of the Group’s brokers, Investec and Berenberg stakeholder group • The Board welcomes questions from our shareholders at any time • The Board considers the longer-term impact of its operations as part of its • The Remuneration Committee Chair continues to consult shareholders sustainability strategy on any future major changes to its Policy. The Report of the Remuneration • The Board continues to focus on improving its energy efficiency Committee can be found on pages 98 to 114 How we engaged with them during FY2023 • The Board remains focused on the Group’s ESG initiatives; • Our Sustainability report details our ESG strategy, activities undertaken the Sustainability report is on pages 46 to 59 and the Corporate and future initiatives. This can be found on pages 48 and 49 governance report is on pages 78 to 87 Outcomes of engagement during FY2023 How we engaged with them during FY2023 • We continued with our investment into solar panels, with five installations • The AGM was held in January 2023 completed or nearing completion • Investor relations during the year consisted of meetings with our current • 83 per cent of UK bowling centres now have energy efficient Pins on and prospective shareholders and presentations given to shareholders Strings technology installed upon the release of annual or interim results • Increase in uptake of UK concessionary discount rates versus FY2022 • Attendance and presentations given at investor conferences • Support for Barnardo’s as our UK national charity partner and other • Disclosure of our climate reduction performance via CDP community-based charities Outcomes of engagement during FY2023 • We have made further progress in our ESG strategy and initiatives (read • The Board’s view on dividends is outlined in the Chief Financial Officer’s more on pages 46 to 55) review on pages 40 and 41 • The Group’s capital allocation policy is outlined on pages 40 to 41 • We have made further progress in our ESG strategy and initiatives including the publication of our climate transition plan on pages 58 and 59 • Investor Relations Society Best Practice Award Winner - Small Cap PLC Website Hollywood Bowl Group plc ## 44 Annual report and accounts 2023 Strategic report ## Our suppliers and partners Our lending banks Our partnerships are concentrated on a number of key Our lending banks provide funds for growth and working suppliers we have for IT services, amusements, food and capital as required. beverages and also encompass our landlords. What is important to them What is important to them • Regular monthly reporting, including rolling 12-month forecasts • Clear and concise communication to our suppliers and partners that • Regular invitations to new openings and refurbishment launches shows integrity and reliability at all times How the Board considers the interests of the • Strong listed covenant stakeholder group • Acting as a responsible tenant • Bank representatives are able to attend half-year and full-year How the Board considers the interests of the results presentations stakeholder group • Forward-looking forecasts are provided at every monthly Board meeting • The Board is committed to high standards of ethics to ensure covenant compliance • We expect high ethical standards from every supplier and partner we How we engaged with them during FY2023 work with • We provided regular monthly updates on Company performance and • Executive Directors hold regular discussions directly with our main suppliers reported on debt covenant look forwards • The Board takes a zero-tolerance approach to bribery, corruption and Outcomes of engagement during FY2023 modern slavery and reviews supplier and partner policies in these areas • The £25m revolving credit facility (RCF) remains in place for the Group How we engaged with them during FY2023 until December 2024 • The Executive Directors continued to closely engage with landlords to agree extensions and revised terms as required • We actively manage our supplier relationships and have worked with our major suppliers to carefully manage costs and supply chain disruption • We publish our Payment Practices Report twice a year • Our suppliers are audited annually on their compliance with modern slavery and human trafficking legislation Outcomes of engagement during FY2023 • We maintained positive relationships with our major suppliers and landlords throughout FY2023 Hollywood Bowl Group plc ## Annual report and accounts 2023 45 ### Sustainability overview ## Sustainability is embedded ## in everything we do ### Hollywood Bowl Group is a people-focused business with social aims and responsibility at its heart. ### We have a key focus on employment and the communities where our centres are located. We also ### aim to reduce our environmental impact, both at a local level and in the context of our contribution ### to climate change. ## e ## v ## i ## s O ## u ## l s u ## c w ## n t ## n o o s ## i i t ## t r ## k a ## d a ## p n ## n n ## i l d ## a t a ## i ## s c n ## e ## f e e g ## a Our purpose: ## d s ## S ### Bringing families ### and friends together ### for affordable fun ### and safe, healthy ### competition ## S ## u l e ## s t a a b ## i n ## c e ## n t r e s ### Safe and inclusive destinations Outstanding workplaces Sustainable centres We bring friends and families together in our We focus on developing and training our The centres we operate for playing, working welcoming centres where we prioritise team members, supporting their wellbeing and socialising are increasingly more energy health and safety, a responsible approach to and maintaining a diverse and inclusive efficient, low-emission, sustainably sourced eating and drinking, accessibility for all and Company culture in which they can thrive. and recycling-orientated places. positive local community relations. Read more on pages 48 and 49 Read more on pages 50 and 51 Read more on pages 52 and 53 Hollywood Bowl Group plc ## 46 Annual report and accounts 2023 Strategic report ## Highlights ## Oversight and strategy • The Board established a Corporate Responsibility Committee (CRC) which reviewed performance and set targets across our three sustainability pillars • The Group has developed a UK pathway to net zero transition plan and associated targets (see pages 58 and 59) • Our sustainability strategy is starting to be introduced into our Canadian operations and we will be reporting on progress in FY2024 This sustainability report refers to UK operations only, unless where stated ## Safe and inclusive leisure destinations • Our centre teams raised over £58,000 for our national charity ## 963,000 partner Barnardo’s Concessionary discount games • More than 50 per cent of the soft were played drinks we sold were zero sugar • 98.5 per cent of our centres successfully met our food and drink audit standards ## Outstanding workplaces • 2,454 team members attended face to face academy learning courses ## 269 • 65 team members were internally Team members took part in top talent promoted to management positions development programmes • We refreshed our employer brand and redesigned our careers website ## Sustainable centres • We met our target for on-site renewable electricity generation with ## 12,749 27 centres now with solar panels Solar panels now installed across 27 of • 100 per cent of our directly our UK centres purchased electricity now comes from renewable sources • We calculated our baseline Scope 3 emissions for the UK Hollywood Bowl Group plc ## Annual report and accounts 2023 47 ### Sustainability overview continued ## Safe and ## inclusive ## destinations Priority issues: Accessibility, wellbeing and community relations • Accessibility, wellbeing and community relations We provide inclusive and sociable activities that enable families and • Health and safety friends of all ages and abilities to spend quality time together, in an • Responsible food and beverage environment that is fun and welcoming, while actively promoting wellbeing. We work hard to make bowling accessible to everyone. All of our centres have disabled access, moveable ramps to access Supports strategic objectives: lanes and to aid bowling, and disabled toilet facilities. We foster 1 Delivering like-for-like revenue growth excellent community relations through concessionary discounts and local community engagement which includes charity fundraising 2 Actively refurbishing our assets events and school partnerships. 4 Focusing on our people We continued to support the children’s charity Barnardo’s as our national charity partner, with team members and Centre Managers 5 Leveraging our indoor leisure experience raising a record £58,000 through their own centres and our central support centre for this worthy cause. Helps mitigate principal risks: Health and safety Food safety and compliance The health and safety of our teams and customers is an ongoing priority, and we demonstrate our commitment to this area by Stakeholder value for: measuring and monitoring performance across all centres and Customers, people, communities and investors locations. Ensuring healthy and safe environments is critical to our business performance and the experience we offer our customers, Links to SDGs and is integral to our promise to deliver an outstanding workplace. We continue to refresh and reinforce our policies and practices, and comply with all safety legislation and act on all reported incidents. As part of our internal audit reviews, we undertake safety audits, and any incident reports are reviewed by the Board on a monthly basis. Hollywood Bowl Group plc ## 48 Annual report and accounts 2023 Strategic report Responsible food and beverage Target progress We consider the impact of the food and drink options we offer and are committed to clearly providing customers with the facts they need, including allergen information, so they can make fully informed choices. ## £58,000 We collaborate with our suppliers to offer healthier alternatives as part of our range, which may include reducing the salt and sugar content Raised for national charity of the food and beverages we serve. We actively promote a range of partner Barnardo’s sugar-free soft drinks, with fresh water readily available. FY target  Last year we removed 4,500 food and drink deliveries by consolidating FY  our suppliers and moving away from single item suppliers. Health and safety is strictly embedded in our daily operations, and our team members must complete food safety and allergen ## awareness training. Our centres are audited regularly, often on an 963,000 unannounced basis, by internal food safety auditors or environmental Concessionary discount health officers, and we consistently achieve high food hygiene ratings. games played FY target   FY  ## 98.5% Of centres passed food and drink audits FY target  FY  Inclusivity in action ## 50.5% IBSA World Games Of soft drinks sold were sugar free The games were held from 18-27 August 2023, based at the FY target  University of Birmingham. The games are the largest FY  high-level international event for athletes with visual impairments, with more than 1,000 competitors from more than 70 nations. Hollywood Bowl Broadway Plaza proudly hosted the ten-pin ## 98% bowling element of the games, with competitors from all over Of team members completed the world participating. food safety and allergen training The country representatives battled it out in a highly FY target  competitive, supercharged atmosphere. The general public was able to attend and watched in awe at the incredible talent FY  on display. Read more online at hollywoodbowlgroup.com Image credit: Richard Hall Hollywood Bowl Group plc ## Annual report and accounts 2023 49 ### Sustainability overview continued ## Outstanding ## workplaces Talent attraction and retention Our team members are the lifeblood of our business and are key to our success. Our people initiatives are designed to attract and retain Priority issues: the best talent in a competitive labour market. While recruitment and retention continue to be a challenge in our sector, our industry-leading • Talent attraction and retention training programmes, and limited exposure to EU labour and the • Training and development London market enable us to perform better than our hospitality and • Team wellbeing leisure peers in terms of staff turnover rates. • Diversity and inclusion Our team members have been instrumental to our outstanding performance in FY2023. We have a high-performance and purpose- Supports strategic objectives: led culture that recognises individuals. A generous perks and benefits programme includes team member discounts, top talent development 1 Delivering like-for-like revenue growth programmes and performance-related pay. In FY2023, we paid out 4 £600k in bonuses to centre teams and 52 per cent of our hourly paid Focusing on our people team members received an extra 50 pence per hour bonus in recognition of excellence. Helps mitigate principal risks: With inflation putting a squeeze on team members’ finances, we Employee retention and compliance increased average pay in April for our salaried team members by 9.2 per cent and by 5.3 per cent for our Centre Managers and Assistant Stakeholder value for: Centre Managers. We are committed to paying a living wage to our Customers, people, communities and investors hourly-rate team members. Training and development Links to SDGs Working with us is more than ‘just a job’ – it is a high-performance culture, where teams are nurtured through exceptional training and where defined behaviours are rewarded. With many roles filled internally in FY2022, coupled with new centre openings, we increased the number of Assistant Manager in Training and Centre Manager in Training programmes. Consequently, 45 per cent of management vacancies were filled internally. We also sponsored three team members to take up HR and Centre Manager roles in our Canadian business – something we hope to offer more in the future. We believe anyone with the right drive and training can become a Centre Manager, and have launched a graduate training programme which will see 11 graduates joining in October 2023. This fast-track programme aims to develop graduates into Centre Managers within three years of joining. In addition, our Senior Leadership Development Programme (SLDP), which provides future leaders with the management skills and business knowledge to become a member of the senior leadership team, currently has 14 colleagues enrolled. Team wellbeing Team wellbeing is of vital importance to us and we have well established initiatives in place. This includes five Mental Health First Aiders, regular communications on Fourth Engage (our internal social media platform) to highlight events such as World Mental Health Day, wellbeing modules in our training programmes, and our Employee Assistance Programme (EAP) which provides a free support service and ideas for physical and mental health, wellbeing, financial, legal or bereavement issues. Hollywood Bowl Group plc ## 50 Annual report and accounts 2023 Diversity and inclusion Strategic report Difference is valued and celebrated, reflecting the people and communities we serve and ensuring we provide experiences that are relevant, accessible and welcoming. We promote a culture that fosters diversity and inclusion and commit to no one being discriminated against on the grounds of gender, race, ethnicity, religious belief, political affiliation, sexual orientation, age or disability. Our new careers website is designed to reach and appeal to a broad range of talent. In FY2023, we hosted focus groups to make our business more attractive to a diverse workforce. We invited team members to join Target progress and lead these groups, resulting in highly productive sessions focused on age, gender, heritage, ethnicity, the LGBTQ+ community ## and culture. Feedback from these sessions is helping us to evolve 45% our diversity strategy and we have appointed representatives for Of our management appointments each group. Next year we will also introduce groups focused on from internal candidates those with disabilities. FY target  We continue to encourage women to apply for senior roles by FY  offering flexibility in working structures, and enhanced maternity, paternity or shared parental leave. Our approach has resulted in a significant increase in females on our talent programme, with 106 Assistant Managers in Training, six Centre Managers in Training and ## 11% four on our SLDP. Of our team members participating in development programmes FY target  FY  ## 94% Of our team completing online development modules FY target  FY  Our new employer brand – Let’s Roll In FY2023, we refreshed our employer brand, updating it to reflect what Hollywood Bowl Group stands for as an ## 5.29 employer. The new look and feel builds on everything that is (Out of 7) in our team wellbeing survey great about our business, giving us a new way to current and FY target  future team members why they want to work with us. FY  We developed a compelling employer value proposition (EVP) set around four pillars which exemplifies our culture. We are: experience-makers, opportunity-explorers, growth-leaders, and team-supporters. ## 1 star The EVP has shaped our new dynamic careers website, Rating in Best Companies team improving a candidate’s journey. We have seen more than a survey, ranking us #12 in the Top 400 per cent increase in users in the first seven months, a 25 Big UK Companies To Work For 7,000 increase in the number of job applications, a decrease in time to hire, and a reduction in our reliance on agencies. FY target  star This was supported by a social media strategy which focuses FY  star on three key recruitment objectives: awareness, consideration and conversion. Since launching Let’s Roll we have seen a 3 per cent increase in our Best Companies ‘Be Heard’ employee engagement score. Read more online at hollywoodbowlgroup.com Hollywood Bowl Group plc ## Annual report and accounts 2023 51 Sustainability overview continued ![img-5.jpeg](img-5.jpeg) Priority issues: - Waste management - Energy efficiency - Greenhouse gas emissions - Climate change Supports strategic objectives: 1 Talent attraction and retention 4 Training and development Helps mitigate principal risks: Compliance and climate change Stakeholder value for: Environment, customers, people, communities, investors, partners and suppliers Links to SDGs ![img-6.jpeg](img-6.jpeg) # Sustainable centres UK waste management We continue to improve waste reduction and recycling through behavioural change incentives including aligning waste management to team members' bonus allocations. Over time we have increased the percentage of waste recycled, in the centres where we control waste, from 67.3 per cent in FY2019 to 82.7 per cent in FY2023 with 100 per cent of this diverted from landfill. Overall we have also reduced the amount of waste produced, and this year we have a calculated our waste 'intensity' as the total amount of waste per number of centres, which has fallen by 22 per cent since FY2017. We have a good track record in reducing food and drink wastage, targeting less than 1 per cent food and drink waste as a percentage of revenue. In FY2023 we were pleased to achieve 0.65 per cent, highlighting our progress. Energy efficiency Our strategy for reducing the environmental impact of our business focuses on increasing on-site generation of renewable electricity and improving energy efficiency. To reduce our usage, we are: - driving behaviour change within our teams; - rolling out energy efficient air handling systems; and - installing more solar panels on centre roofs. In FY2023, we installed solar panels in five more UK centres, with 38 per cent of our centres now generating 4,923 kWp of solar and generating 5,518,817 kWh per year. 12 per cent of our electricity used was generated from our own renewable sources (FY2022: 8.2 per cent). 83.1 per cent of our bowling centres are now using energy efficient Pins on Strings technology (FY2022: 65 per cent). The number of solar panel installations fell short of our FY2023 target due to planning restrictions on several target centres. We continue to negotiate with landlords where we believe there is an opportunity and we are planning to add extra panels where possible to centres where we already have installations. ![img-7.jpeg](img-7.jpeg) 52 Hollywood Bowl Group plc Annual report and accounts 2023 Target progress Greenhouse gas emissions Strategic report UK Scope 1 and 2 emissions 68 per cent (441.88 tCO e) of our Scope 1 emissions are from natural 2 ## 82.7% gas used for heating, hot water and cooking. All refrigerant (F) gas losses were from the UK and amounted to 205.57 tCO e. We do not 2 Of waste generated was recycled, have any ICE company cars in the UK. with 100 per cent diverted from landfill | Scope 2 emissions in FY2023 were made up of electricity (3,460.87 | | | FY target  | | --- | --- | --- | --- | | tCO | e), electric vehicles (UK only) 7.52 tCO | e, and a saving of 91.4 | | | | 2 | 2 | | FY   tCO e from electricity exported to the grid from our solar arrays. 2 A key target for FY2023 was to transition all the electricity we directly purchased in the UK to 100 per cent from renewable ## 0.65% resources, which we have achieved. Food and drink wastage as a percentage We reduced our emissions intensity for Scope 1 and 2 by 0.7 per cent of revenue to 61 tCO e/centre in FY2023, in pursuit of our target to bring our 2 intensity ratio down to 55.0 tCO e/centre by the end FY2025. FY target  2 Canada Scope 1 and 2 emissions FY  In the first full year of reporting our Canadian operation, our Scope 1 emissions were 473.76 tCO e and Scope 2 emissions were 402.64 2 tCO e equating to an intensity ratio of 97.4 tCO e/centre. 2 2 ## 12% UK Scope 3 emissions Of our electricity generated from For the first time in FY2023 we calculated our Scope 3 indirect onsite renewables emissions. This showed our baseline to be 40,760.7 tCO e, with an 2 intensity ratio of 590.7 tCO e/centre. Scope 3 makes up 91 per cent FY target  2 of our total greenhouse gas emissions, of which 76 per cent is FY  generated from the purchased goods and services category. Climate change and net zero Details of climate-related risk and mitigations under TCFD are shown ## 100% on pages 60 to 69. Our UK climate transition plan is outlined on pages 58 and 59. ‘Net zero’ is defined in this report as the point where the Of directly purchased electricity in the UK Group is able to reduce its net GHG emissions to zero. In the case from renewable sources where is it not feasible to abate Scope 1, 2 and 3 emissions completely FY target  by 2050, the Group would look to offset the residual emissions FY through actions like carbon removals or ecosystem restoration. ## 27 Of UK centres with solar arrays installed FY target  FY  ## 83% Building sustainable centres Of the UK estate using energy efficient Pins on Strings technology FY target  Our development teams have long taken a sustainable-first approach to estate additions and upgrades and have well-established FY  partnerships with contractors to help deliver greener and more efficient buildings. The challenge to reach net zero places an ever greater focus on us to build better, from taking a re-use, re-cover and recycle approach wherever we can, to fitting carbon neutral carpets ## and 100 per cent recycled vinyl flooring in our refurbishments. 61 When it comes to new builds we fit out all our new centres using 100 UK Intensity ratio Scope 1 and 2 emissions per cent renewable energy, take a fabric-first approach to make our properties as energy efficient as possible and improve our EPC FY Target  ratings, and install technologies which help reduce our longer-term FY  environmental impacts. Read more online at hollywoodbowlgroup.com Hollywood Bowl Group plc ## Annual report and accounts 2023 53 ### Sustainability overview continued ## UK performance against targets Safe and inclusive leisure destinations FY FY FY FY FY actual target actual vs target target Concessionary discount games played      Funds raised for national charity partner     * Centres passed food and drink audit    —  Soft drinks sold that are sugar free    pts  Team in food and drink-related roles to have completed food safety and allergen training within three months of passing probation    pts  * FY2024 target includes an additional £5,000 for other fundraising. Outstanding workplaces FY FY FY FY FY actual target actual vs target target Management appointments from internal candidates    —  Team members participating in development programmes    pts  Team members completing online development modules    -pts  Rating in Best Companies team survey * * * — * Annual team wellbeing survey score out of     pts  Outstanding workplaces - background data Male  Female  Board   Senior managers   Centre managers   Assistant managers/technicians   Contact centre team   Team members   Total   Sustainable centres FY FY FY FY FY actual target actual vs target target Waste recycled percentage with  diversion from landfill    pts  Food and drink wastage as a percentage of food and drink revenue    -pts  Number of centres with solar arrays    -  Electricity usage generated from on-site renewables    —  Directly purchased electricity from renewable sources    —  UK estate percentage of bowling centres with Pins on Strings    -pts N/A by FY Scopes  and  intensity ratio (tCO e/number of centres)    -pts   by FY Sustainable centres – background data UK waste General waste Recycled waste Total waste Percentage of total Waste intensity tonnes tonnes tonnes waste recycled (total waste/centre) FY*      FY*      FY      FY      FY      Waste data is supplied by Biffa for the UK only and excludes data from centres where the landlord manages waste streams. * Impacted by COVID-19 shutdowns. Hollywood Bowl Group plc ## 54 Annual report and accounts 2023 UK and Canada greenhouse gas emissions Solar export: Strategic report Shown below is the electricity and gas data used for Scopes 1 and 2 441,370.7 kWh electricity exported back to the grid as a result of the emissions calculations. solar arrays on our roofs. This equates to a saving of 91.4 tCO e. 2 Electricity excludes solar generated electricity exported to the grid. Total Scope 2: Data from centres where the landlord supplies electricity/gas has Emissions = 3,377 tCO e. 2 been excluded. Total Scope 1 and 2: UK electricity UK gas Emissions = 4,024.44 tCO e. 2 kWh kWh Greenhouse gas (GHG) emissions for FY2023 have been measured FY   as required under the Large and Medium-sized Companies and FY*   Groups (Accounts and Reports) Regulations 2008 as amended in FY*   2013. The GHG Protocol Corporate Accounting and Reporting FY   Standards (revised edition) and the electricity and gas consumption FY   data have been provided by Schneider Electric, IMServ and Total. Conversion factors are taken from https://www.gov.uk/government/ Canada Canada publications/greenhouse-gas-reporting-conversion-factors-2023. electricity gas kWh kWh FY   UK Scope 3 emissions FY   Scope  Intensity ratio tCO e tCO e/centre   UK Scope 1 and 2 emissions FY baseline   Scope  Scope  Scope  and  Intensity ratio tCO e tCO e tCO e tCO e/centre     All relevant categories were measured (excluding categories, 8, 9, 10, FY     13, 14 and 15). Data analysis for category 1 (purchased goods and FY*     services) and 2 (capital goods) is based on SIC codes against FY*     current spend. | FY |     | | | | | | | --- | --- | --- | --- | --- | --- | --- | | FY     | | Canada Scope 1 and 2 emissions | | | | | | | | | Scope  | Scope  | Scope  and  | Intensity ratio | * Impacted by COVID-19 shutdowns. tCO e tCO e tCO e tCO e/centre     This is made up of natural gas, company cars (no company cars in FY     UK), refrigerant gas losses (F gas losses), electricity, electric FY     company vehicles and solar export. Total natural gas consumption = 245,416 m³. Natural gas: Emissions = 473.76 tCO e. Total natural gas consumption = 2,415,585 kWh. 2 Total Scope 1: Emission factor = 0.182928926 kgCO e per kWh. 2 Emissions = 473.76 tCO e. 2 Emissions = 441.88 tCO e. 2 Electricity (location based): F gas losses: Total electricity consumption = 3,619,113 kWh Emissions = 205.57 tCO e. 2 Emissions = 402.64 tCO e. 2 Total Scope 1: Total Scope 2: Emissions = 647.45 tCO e. 2 Emissions = 402.64 tCO e. 2 Electricity (location based): Total Scope 1 and 2: Total electricity consumption = 16,713,202 kWh. Emissions = 876.4 tCO e. 2 Emission factor = 0.207074289 kgCO e per kWh. In the 2023 GNEZ 2 Greenhouse gas conversion factors update, the UK electricity CO e FY 2 factor has increased by 7 per cent (compared to the 2022 update) Total (Scope  and Scope ) (tCO e)   due to an increase in natural gas use in electricity generation and a Number of centres  decrease in renewable generation. Intensity ratio (tCO e per centre)   | Emissions = 3,460.87 tCO | e. | | | | | --- | --- | --- | --- | --- | | | 2 | | Emissions data for our Canadian centres includes data from post | | | Electric company vehicles: | | | purchase in May 2022. Note that Canadian data for emissions is | | | | | | provided in CO | for gas and no data is provided that makes up the | | Total mileage is 203,631 miles x 0.03692133 kgCO | | e per mile = | | 2 | 2 other greenhouse gases so this number is also used as CO e. The 7.52 tCO e. 2 2 conversion factors for Canada are taken from Emission Factors and Reference Values – Canada.ca. Hollywood Bowl Group plc ## Annual report and accounts 2023 55 ### Sustainability overview continued ## Climate transition plan ## Our ambition The Group is dedicated to achieving net zero by 2050 in the UK and Canada, to align with the climate change net zero target year commitments made by both of these countries. We plan to reach this goal by reducing GHG emissions through our new centre design and refurbishment programmes, enhancing energy efficiency in our operations, continuing to transition to self-generated and renewable energy sources, and collaborating with our supply chain partners to reduce GHG emissions in their operations. Hollywood Bowl Group plc ## 56 Annual report and accounts 2023 Strategic report As part of our journey to net zero, we are committed to achieving science based targets (SBTs) based on the 1.5°C pathway from our 2023 baseline, and delivering intensity-based reductions across all our direct and indirect sources of GHG emissions across our value chain, contributing to the mitigation of climate change impacts. We will continue to document our progress in relation to our transition plan in our annual reports. We will record alterations to our comprehension of climate change risks, our methodologies, the data we can access, and the actions we are implementing. We will reassess our transition plan in FY2024 as we integrate our Canadian operations, and then at a minimum of every five years to ensure it aligns with our evolving understanding and reflects any factors that could impact its deliverability, including changes to wider political and regulatory frameworks, technology developments and consumer preferences and demands. We do not foresee significant changes to our existing business model in order to fulfil our net zero commitments. ### Metrics and targets Our stated UK targets are shown on pages 58 and 59. Progress against these targets is tracked on an ongoing basis via the CRSG and CRC. Using a science-based approach, we aim to reduce our Scope 1, 2 and 3 emissions intensity ratios by 42 per cent by 2030 (from a 2023 baseline) and 90 per cent by 2045. In FY2024, we will be looking to commit to science based target initiative (SBTi) and obtaining validation of our FY2023 baseline and future intensity ratio targets, ensuring that our efforts align with what is required to prevent a temperature rise greater than 1.5°C. We will monitor and report our progress against our intensity ratio targets, which are the key measures of performance in our climate transition plan, on an annual basis. In FY2025, we will set targets for our Canadian operations to enable us to create a combined Group pathway to net zero transition plan. ### Opportunities and initiatives We believe that reducing emissions in our own operations is the most effective way to lead by example in combating climate change. We began the de-carbonisation process of our UK operations in 2016 and have since reduced our own emissions intensity ratio by 62 per cent. As referenced in the energy sources, carbon taxes and cost of transition to net zero opportunities outlined in our TCFD statement, and the initiatives outlined on page 58, we aim to achieve further reductions in Scopes 1 and 2 by adhering to a science-based reduction pathway and continuing to implement our internal operations strategy in both the UK and Canadian operations, which focuses on team member behavioural change (focused on minimising energy usage and recycling), investment in energy-saving equipment like Pins on Strings, phasing out gas heating and cooking equipment by 2030 in the UK and renewable source energy procurement. As an integral part of our net zero goal for 2050, we will also address emissions from our upstream supply chain by ensuring that our purchased goods and services (Scope 3 category 1, which represents 76 per cent of our Scope 3 emissions), align with the transition to a low-carbon economy. Meeting targets in this area is the biggest factor in the Group's ability to deliver the wider climate transition plan. To assess the current alignment of our supplier base, we have calculated the percentage of our suppliers with science-based targets based on our spend with them. Our plan is to increase this percentage in the coming years with the majority of our spend going to a limited number of key suppliers where we have greater influence, and which are aligned to climate transition commitments in line with current UK government targets. In the short term, we will focus on establishing a supplier engagement programme to promote the adoption of science-based targets and climate transition plans amongst our suppliers. This will encourage the wider adoption of GHG emissions measurement and reduction strategies across our supply chain, which we expect will improve data availability and data quality from our suppliers in the coming years. We also work closely with UK Hospitality's Sustainability Committee to ensure we collaborate with the wider sector on carbon reduction initiatives. We do not envisage significant changes to our product sales mix in order to fulfil our net zero commitments. Investments in climate initiatives like solar panel installation and energy-saving technology are included in our financial planning and outlined in the Financial Statements (see page 136). Further financial modelling relating to the delivery of the transition plan will be undertaken in FY2024, alongside analysis of our Canadian business, with the ambition to have Canadian climate targets integrated into a Group transition plan for FY2025. ### Governance Sustainability in our business operations and minimising our impact on the environment are embedded in our culture and are key commitments for the Group. The governance structure we have established for climate-related topics allows the Board and senior management to integrate climate-related risks and opportunities into strategy, decision making, operational processes and remuneration policy. The Board is accountable for the transition plan and its delivery, and delegates responsibility for oversight of the transition plan and associated risks to the Group Corporate Responsibility Committee (CRC) (see page 97). The efforts required for us to become a net zero company by 2050 involve different parts of the Group executing and monitoring emissions reduction activities. To achieve this, the CRC is supported by the Corporate Responsibility Steering Group (CRSG). This group is made up of executive members from all the relevant Group functions including our in-house Energy Manager and Energy Analyst, and provides updates to the CRC on a bi-annual basis. Hollywood Bowl Group plc Annual report and accounts 2023 57 All text and images to be supplied ### Sustainability overview continued ## Pathway to net zero ### The Group is committed to achieving net zero by 2050 in the UK and Canada. ### Our transition plan outlines our targets and initiatives to reduce Scope 1, 2 and 3 emissions. What we’ve achieved so far | 2016 | | 2019 | | 2022 | | --- | --- | --- | --- | --- | | • In-house Energy Manager appointed | | • 67.3 per cent of waste recycled | | • 77.7 per cent of waste recycled | | • Eco-efficiency programme launched for | | • Solar panel install programme started | | • Climate performance linked to executive | | | centre teams - reduced energy consumption | • Capital expenditure programme aligned to | | compensation via intensity ratio targets | | | through behavioural change | | Scope 1 and 2 emissions reduction plan | • 22 centres with solar panels | | • Commenced annual reporting on progress | | • CR steering group established | | • In-house Energy Analyst appointed | | | | • No gas supply in new build centres | | • First TCFD disclosure | | | | • Gas equipment (heating, water, cooking) | | • Third-party climate consultants engaged | | | | | phasing out programme commences | • EV car scheme for support team members | • Waste recycling targets included in centre manager incentive scheme 2023 – 2025: FY2023 performance and short-term targets ## 70 Scope 1 and 2 (UK operations) 2023 2024 2025 60 | | | • CR Board Committee | | • Commitment to SBTI and | | • Combined Group reporting of Scope | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | established | | validation of 1.5°C pathway | | 1 and 2 emissions for UK and Canadian | | 50 | 100% | | | | | | | | | | • 27 centres with | | | targets from 2023 baseline | | bowling centre operations* | Renewable electricity solar panels • Solar panel rollout continues 40 • First CDP disclosure • Extended centre manager ## 83% • EV car scheme eco-efficiency incentive scheme 30 extended to • Increased efficiency of plant in Of waste recycled centre managers new builds Per Centre intensity 20 • Carbon neutrality achieved (based on market-based 10 intensity ratio) 0 ## Scope 3 (UK operations) 2023 2024 2025 • Measured all relevant categories (excluded 8, 9, • Commitment to SBTi and 700 10, 13, 14 and 15) validation of 1.5°C pathway ## 50% • This initial data analysis for categories 1 and 2 has targets from 2023 baseline 600 been based on SIC codes against current UK • Launch supplier engagement Target of UK supplier spend to supplier spend programme to encourage suppliers committed to SBTi pathway 500 increased participation in SBTi or have net zero climate transition • We estimate that 91 per cent of our total emissions 400 and commitments to net zero plans in place are from Scope 3 sources transition plans • 92 per cent of our Scope 3 emissions are in • Combined Group reporting of Scope 300 the purchased goods and services and capital 3 emissions for UK and Canadian Per Centre intensity goods categories bowling centre operations* 200 100 * Striker Bowling Solutions will be reported separately due to the different nature of this business. 0 Hollywood Bowl Group plc ## 58 Annual report and accounts 2023 Strategic report Our Canadian operation We will employ similar initiatives related to eco-efficiency, emissions reduction and waste management in Canada, as we have implemented in our UK operations. | 2024 | | 2025 | | | --- | --- | --- | --- | | • Eco-efficiency programme launched for centre | | • Commitment to ‘Canada Net Zero’ initiative and | | | | teams, targeting reduced energy consumption | | targets (in line with SBTi) | | | through behavioural change | • Combine Scope 1 and 2 targets with | | | • LED lighting upgrades | | | UK operations | | • Enhanced energy usage and reporting tools | | • Scope 3 baseline established and targets set | | | • Energy efficient Pins on Strings rollout | | • Launch supplier engagement programme to | | | • Energy procurement strategy defined | | | encourage increased participation in SBTs and | commitment to climate transition plans • Scope 3 analysis 2026 – 2050: medium and long-term ambitions ## Scope 1 and 2 (UK operations) 2026 2030 2045 2050 ## 100% Zero 90% Net zero Renewable gas Gas usage in estate Target reduction versus Achieved 2023 base ## 100% 42% UK centres with Pins on Strings Target reduction versus 2023 base ## Scope 3 (UK operations) 2026 2030 2045 2050 • Anticipated improved supplier data availability - ## 42% 90% Net zero review historic data with Target reduction versus Target reduction versus Achieved restatement of baseline year 2023 base 2023 base • Offsetting activity to mitigate residual emissions ## 59 ### TCFD ## Task Force on ## Climate-related Financial ## Disclosures statement In accordance with the LSE Listing Rule 9.8.6R(8), and the Companies (Strategic report) (Climate-related Financial Disclosure) Regulations 2022, we present our 2023 TCFD compliance statement and confirm that we have made climate-related financial disclosures for the year ended 30 September 2023 which are: a) consistent with the following TCFD recommendations and b) partially consistent with the following TCFD recommendations recommended disclosures: and recommended disclosures: – governance – (a) and (b); – strategy – (b); – strategy – (a) and (c); – metrics and targets (b) and (c). – risk management (a), (b) and (c); A summary of our TCFD compliance statement is set out in the – metrics and targets (a); and following table. Further details regarding how we have aligned to the TCFD recommendations are set out in the subsequent pages and in relevant sections of this Annual Report. Hollywood Bowl Group plc ## 60 Annual report and accounts 2023 Summary of our TCFD compliance statement Strategic report TCFD recommended Summary of compliance Cross-reference for the disclosure response and next steps disclosure in the report Governance a) Board oversight The Group has introduced an updated process and Page 62 framework for the Board to set the Group’s transition plan strategy and to monitor and oversee progress against targets to mitigate climate-related issues b) Management’s role Consistent with TCFD recommendation Page 62 Risk management a) Risk identification and assessment Consistent with TCFD recommendation Page 63 process b) Risk management process Consistent with TCFD recommendation Pages 63 and 70 c) Integration into overall risk Consistent with TCFD recommendation Pages 63 and 70 management Strategy a) Climate-related risks and Consistent with TCFD recommendation Pages 64 to 68 opportunities b) Impact on the Company’s businesses, The Group’s UK Scope 1 and 2 reduction initiatives i.e., Pages 64 to 68 strategy, and financial planning solar panels and Pins on Strings, are built into the financial plans and future cash flow forecasts. As our Canadian Scope 1 and 2 reduction initiatives become fully defined, we will include these in our financial plans alongside Scope 3 transition plan financial impacts for the Group c) Resilience of the Company’s strategy Consistent with TCFD recommendation Pages 63 to 68 Metrics and targets a) Climate-related metrics in line with Consistent with TCFD recommendation Page 69 strategy and risk management process b) Scope 1 and 2, (and 3) GHG metrics Partially compliant with TCFD recommendation Pages 65 to 69 and the related risks c) Climate-related targets and The CRC met in May 2023 to review progress against Page 69 performance against targets FY2023 targets and approved the UK transition plan and related FY2024 metrics and targets, in September 2023 Hollywood Bowl Group plc ## Annual report and accounts 2023 61 TCFD continued # Governance ## Board oversight The Board has overall responsibility for climate-related matters and gives full and close consideration of ESG factors, including climate-related factors, when assessing the impact of decisions it makes. The CRC, chaired by Non-Executive Director Ivan Schofield (see page 97) is responsible for updating the Board on climate issues on a bi-annual basis. The first Board meeting with 'climate change' as a standing agenda item was held on 21 October 2022, and the Board discussed climate change topics, including progress against relevant pre-existing goals (e.g., renewable energy sources) and future planned activities and targets. As part of the bi-annual 'climate change' agenda item at the Board meeting on 22 June 2023, the Board considered whether strategic decisions needed to be made as a result of climate scenario analysis performed in FY2022 on the most significant climate risks to the business, namely changing customer behaviour, business interruption and damage to assets, carbon taxes, cost of transitioning operations to net zero and energy sources. It was agreed, that based on the findings of the scenario analysis, that the Group had limited short-term risk exposure at this time but agreed to keep this under periodic review. The cost of transitioning to net zero risk was discussed and it was agreed that this would stay under closer review in line with greater future visibility provided by the ongoing Scope 3 emissions analysis and the development of a Group transition plan. The first CRC meeting was held on 4 May 2023 where updates were given on half-year performance against FY2023 metrics and targets and progress with the ongoing analysis of Scope 3 emissions. Discussions also took place on the progress of the creation of UK and Group transition plans. An extensive Board member workshop and training session, delivered by external consultants, took place on 22 May 2023 to upskill all Board members on climate change alongside other ESG areas. The second CRC meeting was held on 27 September 2023, where the Committee discussed and agreed the Group's pathway to net zero transition plan strategy, associated targets and alignment with SBTi targets. The pathway is outlined on pages 58 and 59. The Committee also reviewed the progress against its FY2023 targets. The Chair of the CRC provides updates to the main Board on the discussions, decisions and actions arising at its meetings. Minutes of the meetings are also made available to all Board members through our electronic Board portal. A climate-related target is included in our Long Term Incentive Plans, relating to the achievement of UK emission intensity ratios for Scope 1 and 2. For more detail see pages 103 and 114. ## Priorities for FY2024 - On the basis of materiality, the Group's Canadian business did not form part of the scenario analysis conducted in FY2022 and the initial development of the transition plan in FY2023. - However, as the Canadian operation expands, the Board will review Canadian climate-related matters and conduct a qualitative scenario analysis as well as agree targets for inclusion in a combined Group transition plan. - Board review of cost of transitioning to net zero in line with outputs of planned financial modelling and agree any strategic changes required. - Board review and approval of FY2025 combined Group transition plan and associated targets. ## Management's role Responsibility for climate change issues at a management level sits with our Chief Marketing and Technology Officer, Mathew Hart, who chairs the Corporate Responsibility Steering Group (CRSG). Members of the CRSG also include the Chief Operating Officer, Chief People Officer, Energy & Safety Manager and relevant heads of department. The CRSG is responsible for the identification, management and reporting of climate-related risks and opportunities. The CRSG meets on a quarterly basis to discuss environmental and social strategies and performance against targets, including climate change, and updates the CRC on a bi-annual basis. Good progress was made in the year against our climate-related operational and capital investment targets for the UK business and in delivering increasingly energy efficient new centre builds. We completed our initial UK Scope 3 emissions analysis which has helped shape our transition plan. We have started to gather climate-related data for our Canadian operations, which at its current estate size was not material to the Group business in FY2023. It is planned to grow in the coming years, and resultantly will form a greater part of the CRSG priorities in FY2024 with Canadian management attending the CRSG from Q2 FY2024. ## Priorities for FY2024 - Detailed analysis of our Canadian business including Scope 3 emissions, and qualitative risk and opportunity analysis with the ambition to have Canadian climate targets integrated into the Group transition plan for FY2025. - Launch an operational behavioural change programme for our Canadian team members and continue to roll out energy efficient Pins on Strings technology. - Validation of our UK transition plan targets from SBTi. - Additional financial modelling to include Canada, the cost of transitioning to net zero and linkages to our pathway to net zero transition plan. - Launch an engagement programme to promote the adoption of science-based targets among our suppliers. - Further analysis of Scope 3 emissions data as more supplier primary data becomes available. ## Organisation and reporting structure for climate governance ![img-8.jpeg](img-8.jpeg) 62 Hollywood Bowl Group plc Annual report and accounts 2023 ## Risk management Strategy Strategic report The Board is ultimately responsible for ensuring that a robust risk Climate-related risks and opportunities have the potential to impact management process is in place and that it is being adhered to, our business over the short, medium and long term. In considering including for climate risk. The significance of climate risk is aligned our climate risks and opportunities, we define short, medium and with other risks, given climate risk is identified and assessed in line long-term horizons as follows: with the existing risk processes and is included in our principal risks • Short term (0–5 years): aligns to the Group’s financial planning register. More information on our risk management process is and modelling horizon available in the Risk management section on pages 70 to 75. • Medium term (5–15 years): represents the interim period between the Group’s financial planning horizon and the longest Identifying, assessing and managing climate-related centre leases risks and opportunities • Long Term (15+ years): aligns with the longest time frame for the In FY2022 we conducted a detailed climate risk assessment, Group’s leasing agreements for properties across our UK business. Climate scenario analysis was performed on selected potentially material climate risks and We face potential physical risks including extreme weather events opportunities to assess the potential quantitative financial as well as risks resulting from the transition to a lower carbon impact on the UK business. economy including the cost of transitioning products and services to lower emissions options. External experts, PwC, were engaged to support and assist us with this process; however, we retained ownership over the The following climate risks and opportunities have been identified to assessment, process and output. be those that had the potential to be material for the UK business over the short, medium and long term. This climate risk assessment has been complemented by subsequent horizon scanning to identify external trends, such as legal and regulatory developments, and emerging science/ expert opinion. Following a presentation from the CRSG at the Board meeting in June 2023, the Board determined that as there had been no material changes to the business since the scenario analysis was undertaken, the climate risk profile identified in FY2022 was still relevant to the Group and could therefore be relied on for FY2023 reporting. Our recently acquired Canadian business was not considered material in FY2023, but due to its planned expansion in FY2024 and beyond, we will undertake a qualitative scenario analysis in FY2024 before including Canadian operations in a Group-wide quantitative scenario analysis in FY2025. The Board reviews identified risks and impacts (including climate) on a bi-annual item basis. The Group plans to update its climate scenario analysis on a three-yearly basis, with the next assessment planned for FY2025. Priorities for FY2024 Review the identified climate risks and opportunities and transition plan and update where necessary. This will be done in line with our wider risk management and monitoring processes. Integrate Canadian operations into climate risks and opportunities analysis, given its materiality, and develop an ongoing processes for monitoring specific risks relating to the Canadian business. In the next TCFD report, we will report on how the Canadian business is considered in both our governance and risk management processes. Hollywood Bowl Group plc ## Annual report and accounts 2023 63 ### TCFD continued Climate-related risks and opportunities The climate risk profile identified for the UK in FY2022 is still relevant to the business and therefore continues to be relied on for FY2023 reporting. Our Canadian business was not considered material in FY2023, but due to its planned expansion, we will identify its climate- related risks and opportunities in FY2024. TCFD Description and potential impact Our response/actions we are Time Risk/opportunity category on the business taking/how it is managed horizon Changing customer Chronic Based on observed historical trends Scenario analysis was conducted to behaviours within data held by the Group, warmer assess the extent to which changing in reaction to weather has the potential to result in customer behaviours, as a result of increasingly warmer reduced footfall changing weather patterns caused by summers and climate, will impact revenue As the UK begins to experience drier potential resultant weather in the spring and summer It was found that the impacts of this growth of outdoor months, customer behaviours may climate risk were relatively low across leisure market change, spending less time on all scenarios Metric – revenue indoor leisure In FY2023 revenues were boosted due to reduction in This could lead to a loss in revenue as a prolonged unseasonable period of wet high-temperature footfall decreases, or a reduction in profit weather in the school summer holidays, periods | | margins if the price of bowling is reduced | but the Group holds the current view that | | --- | --- | --- | | No material revenue | to drive footfall | on a rolling basis the impacts of | | impacts identified in | | unseasonable wet or hot weather present | | FY2023 | | a low risk as identified in the scenario | analysis We will continue to monitor this risk going forward and our annual financial planning will take these findings into account Business Acute While the type and severity of hazards will Scenario analysis was conducted to interruption and vary by location and season, and change assess the extent to which our UK sites damage to assets over time, it is expected that the are at risk of business interruption and due to increased frequency and severity of events such as damage as a result of extreme events frequency and flood events will increase. These extreme such as flooding severity of extreme events may impact the Group in three Overall, it was found that only a low weather events ways: number of sites were assessed to be at (e.g. flooding/ 1) physical damage to operating sites risk of flooding under a 4°C scenario extreme heat) which require repair; These sites will continue to be monitored Metric – proportion 2) disruption to business operations and further assessments will be of revenue located due to temporary closure; and conducted to explore mitigation options in areas subject to flooding 3) inability of customers to get to Furthermore, our wide location base limits the sites the scale of exposure caused by No flood impacts in localised events | FY2023 and no new | These events may also have further | | | --- | --- | --- | | centres opened in | financial impacts, for example, via | In FY2023 no centres suffered business | | flood risk areas | increased insurance premiums | interruption or damage due to flood | events and no new UK centres were developed in areas of high flood risk Key to time horizon: Short Medium Long Hollywood Bowl Group plc ## 64 Annual report and accounts 2023 TCFD Description and potential impact Our response/actions we are Time Strategic report Risk/opportunity category on the business taking/how it is managed horizon Carbon taxes Policy and While the scope and level of carbon We continue to address our operational increasing costs due legal pricing to date have had little impact on emissions through our investments in to pricing of GHG the Group, it is possible that future energy efficient equipment, the emissions being increases in scope for the UK Emissions installation of solar panels where possible applied to own Trading Scheme could impact our at our sites and renewable energy operations and operations and supply chain by: contracts embodied carbon in 1) increasing energy and other We have undertaken analysis of our UK supply chain and operating costs; Scope 3 emissions and established a transportation/ baseline for FY2023 distribution 2) leading the Group to retire assets or investment to reduce emissions; and We are working with suppliers to further Metric – % of total UK reduce the emissions of our supply chain electricity generated 3) increasing supply chain costs as and are launching an engagement from on-site carbon prices are passed on programme in FY2024 to encourage renewables by suppliers more of our major partners to adopt SBTi Target – 12% by end or develop transition plans of FY2023 Our regular schedule of contract Achieved 12% in renewals and reviews allows us the FY2023 opportunity to benchmark and adjust suppliers based on their carbon intensity Metric – % of energy and stated transition plans if appropriate purchased from renewable sources Target – 100% by end of FY2025 | Cost of transitioning | Technology The UK’s commitment to reach net zero | | The Group is committed to operating | | --- | --- | --- | --- | | operations to net | | emissions by 2050 has several | sustainably and to finding ways, over time, | | zero in order to be | | implications for the Group | to reduce our carbon emissions. In | | compatible with the | | | FY2023, we undertook analysis of our UK | Namely, as regulations and standards are UK’s net zero carbon Scope 3 emissions adopted to support this ambition, there targets | | may be direct and indirect impacts on | Our purchased goods and services | | --- | --- | --- | | Metric – Scope 1 and | our operations | (Scope 3 category 1) accounts for 76 per | | 2 emissions intensity | | cent of our Scope 3 emissions and it is | These include increased operational ratio essential that we align this supply chain costs associated with upgrading buildings with the required transition to a low Target – 55 by end of and assets to incorporate more energy carbon economy, as demonstrated with FY2025 efficient technology our target of suppliers committed to a Achieved 61 in We are working towards developing a SBTi pathway or a net zero transition plan FY2023 Group transition plan in FY2024 which will This Scope 3 analysis has enabled us to include our Canadian operations | Metric – % of goods | develop a pathway to net zero transition | | --- | --- | | for resale supply | plan and we have agreed 2050 as the | | chain expenditure | target year to achieve net zero. Further | | that have a carbon | details of the targets and initiatives to help | | reduction plan and | us achieve this are outlined on pages 56 | | net zero target | to 59. | defined We will continue to gather Scope 3 data | Target – 50% of | as more detailed primary data becomes | | --- | --- | | supplier spend to | available from our suppliers and update | | suppliers committed | our targets and financial modelling | | to SBTi pathway or | including the requirement for residual | | with net zero | offsetting in meeting our long-term | | transition plans in | ambitions | place by end of FY2025 Key to time horizon: Short Medium Long Hollywood Bowl Group plc ## Annual report and accounts 2023 65 ### TCFD continued | | TCFD | Description and potential impact | Our response/actions we are | Time | | --- | --- | --- | --- | --- | | Risk/opportunity | category | on the business | taking/how it is managed | horizon | | Energy sources: | Energy | As the UK shifts to a low-carbon | We have installed operational solar panels | | | increased investment | source | economy and transitions away from fossil | in 27 of our UK sites and were pleased to | | | in and use of lower | | fuels, it is expected that prices for these | achieve our on-site renewable target of 12 | | | emission sources of | | energy sources will increase with the | per cent in FY2023 | | | energy, reducing | | introduction of carbon taxes and become | | | We are working hard to achieve our target exposure to volatility more volatile of 30 solar panel installations (and adding in fossil fuel and As we continue our investment extra panels to existing installations where energy prices, and programme in solar installations, this is an possible) in our UK estate by the end of future carbon taxes | | opportunity to reduce reliance on fossil | FY2024 and contracting 100 per cent | | --- | --- | --- | | Metric – % of total UK | fuels and therefore reduce exposure to | renewable energy (electricity and gas) by | | electricity generated | fluctuating energy prices, reducing | the end of FY2025 | | from on-site | operational costs and emissions | | renewables Target – 12% by end of FY2023 Achieved 12% in FY2023 Metric – % of energy purchased from renewable sources Target – 100% by end of FY2025 Scenario analysis The results described below relate to the assessment carried out in FY2022. Additional analysis has not been performed in FY2023 as there have been no significant changes to the climate risk profile Following our assessment of climate-related risks and opportunities, three were selected for further quantitative assessment via scenario analysis based on their assessed potential materiality These climate risks and opportunities were evaluated across a range of climate scenarios to understand how they could evolve under certain situations, helping us to assess and improve our climate resilience Publicly available scenarios, sourced from the Network for Greening the Financial System (NGFS) and the Intergovernmental Panel on Climate Change (IPCC), were selected for our analysis as outlined below Climate risk/opportunity Scenarios Data sources Transition risk/opportunity 1 Energy sources NGFS scenarios: IEA – Carbon intensities 2 Scenario 1: Early action NGFS – Carbon prices Scenario 2: Late action Scenario 3: No additional action Physical risk Business interruption and damage IPCC pathways: We obtained localised climate data to a 90m2 resolution to assets based on the latest IPCC CMIP6 global climate models, Scenario 1: SSP1 - 2.6 (<2°C) providing projections for each of our scenarios and time Scenario 2: SSP2 - 4.5 (2–3°C) horizons for flood exposure Key to time horizon: Short Medium Long Hollywood Bowl Group plc ## 66 Annual report and accounts 2023 Strategic report | Changing customer behaviours | **Scenario 3:** SSP5 - 8.5 (>4°C) | World Meteorological Organization^{3} – temperature, wind speed and precipitation (historical data) Climate Analytics^{4} – temperature, wind speed and precipitation (scenario data) | | --- | --- | --- | 1 International Energy Agency (2022), Global Energy and Climate Model, IEA, Paris https://www.iea.org/reports/global-energy-and-climate-model, Licence: CC BY 4.0. 2 Network for Greening the Financial System (NGFS) (2021), NGFS Scenario Data Downscaled National Data V2.0, https://www.ngfs.net/ngfs-scenarios-portal. 3 World Meteorological Organization (2022), https://public.wmo.int/en. 4 Climate Analytics (2022), Climate Impact Explorer, https://climate-impact-explorer.climateanalytics.org. The scenarios were selected due to their prominence within climate change discourse. This enables the selected risks and opportunities to be assessed in line with scenarios that represent the collective market's understanding of the range of possible outcomes as a result of the effects of climate change and society's response. ### Changing customer behaviours The relative impacts of chronic weather events on revenue were examined for three IPCC scenarios (RCP2.6, RCP 4.5 and RCP 8.5). A statistical model that was developed to identify how weather (wind, temperature and precipitation) has historically impacted daily revenue at each of the 67 sites was used to forecast relative changes in sales under climate scenarios, compared to a baseline of 2018 to 2020 for the time periods 2030 to 2050. #### Key assumptions, outputs and sensitivities - Analysis is based on existing UK sites and does not allow for the addition of sites in the future - The historical relationship between weather and sales will continue to be observed in the future - No adjustments were made to revenue during modelling to account for growth or inflation - Historical sales data was selected to remove any potential impacts of COVID-19 While all chronic weather events, particularly increasing temperatures, were found to result in some changing customer behaviours across all examined scenarios, the impacts of these changing behaviours on revenue were not found to be significant and no clear seasonal trends were identified. #### Scenario analysis continued ### Business interruption and damage to assets Scenario analysis modelled the potential exposure to business interruption and resulting financial impact due to fluvial and coastal flooding on each of our UK sites. #### Key assumptions, outputs and sensitivities - Analysis is based on existing UK centres - The historical relationship between weather and sales is assumed to continue - All sites located on the ground floor/basement floors are exposed to both refurbishment and access downtime. Sites located on the first floor and above are only exposed to access downtime where floodwaters exceed 3m. Property and equipment damage are not included in this analysis - Flood defences, including regional flood defences, are assumed to remain unchanged from 2022 until 2050 The analysis found that the potential impact from floods increases over time across all of the scenarios examined. The impacts under RCP 8.5, as represented in the 95th percentile, were found to be the largest and reflect the most challenging scenario examined. Under this scenario, our UK sites located in Brighton, Norwich and Basingstoke are the most at risk, with an additional six sites expected to be at risk of flooding between 2022–2050. The impacts of the potential exposure to flooding was not found to be significant in the context of the overall business. ### Energy sources Scenario analysis was performed to understand the potential carbon tax savings as a result of existing and planned future solar panel installations, compared to sourcing all electricity from the national grid. In FY2022, 22 of our UK sites had solar panels, with further installations planned for FY2023. The potential carbon cost savings resulting from these sites were examined over the period of 2022–2050 by applying IEA carbon intensities (tCO₂/MWh) associated with three different scenarios ('early action', 'late action', and 'no additional action') and NGFS carbon prices (£/tCO₂) to internal energy consumption data. Hollywood Bowl Group plc Annual report and accounts 2023 67 ### TCFD continued Key assumptions, outputs and sensitivities • The average percentage of electrical consumption drawn from solar panels across all installed sites was applied (32.9 per cent) • Electricity consumption of each site remains static until 2050 • As IEA carbon intensity figures are provided in five-year increments, a linear interpolation is assumed to provide an annual view 5 • The analysis assumes the implementation of either new or more stringent carbon prices on the consumption of fossil fuel-based electricity from 2023 as outlined below 5 NGFS carbon prices. All carbon prices are expressed in £2010. IEA carbon prices were converted from USD to GBP using an exchange rate of 1.2658. Scenario 2030 (£/tCO ) 2040 (£/tCO ) 2050 (£/tCO ) 2 2 2 Early action £122 £186 £568 Late action £0 £198 £747 No additional action £0 £2 £4 Under the most challenging scenario, the NGFS ‘early action’ scenario, the aggregate carbon savings realised from the 32 sites between 2023–2050, represent a significant financial impact. However, there also remains a significant exposure to carbon taxes from purchased electricity during this period. In response, we have put in place the following mitigation: by the end of FY2023, we purchased 100 per cent renewable electricity in centres where we directly contract, and by the end of FY2025 all of our purchased gas will also be from renewable sources. Therefore, our expected carbon emissions exposure, and carbon tax exposure, from purchased energy, is zero. Priorities for FY2024 • Further priorities for FY2024 include advancing data gathering activities for those risks and opportunities that were not able to be quantitatively assessed via scenario analysis at this stage • We will look to re-evaluate our scenario analysis results in response to significant events that may affect business strategy (i.e., in the case of a major acquisition) as recommended by the TCFD • Our climate risk assessment was performed for the UK business. We will look to assess the impacts and materiality of climate-related risks and opportunities across our Canada business in the future, at the point it becomes material in size Hollywood Bowl Group plc ## 68 Annual report and accounts 2023 ## Metrics and targets Strategic report The Group has a range of UK climate-related metrics and targets in the table below. Due to the estate growth plans of the Group, we set our GHG emissions targets on an intensity ratio basis allowing a meaningful comparison of performance on a centre level basis. Two new measures have been introduced this year following the analysis of Scope 3 emissions and the development of our transition plan for the UK business. These are Scope 3 emissions intensity ratio and % of supplier spend with suppliers committed to SBTi pathways or which have transition plans in place. Progress will be reported on these in FY2024. Metrics and targets for our Canadian business are being developed to allow us to set Group targets from FY2025. Climate-related metrics | TCFD cross- | Unit of | | Metric Metric target set and reported? Linked to identified | | | | --- | --- | --- | --- | --- | --- | | industry metric | measure | | | | climate risks and | | category | | | | | opportunities | | GHG emissions Total tCO | | e/ | UK average carbon energy intensity | Yes – 55 by end of FY2025 | Carbon taxes and | 2 centre ratio by centre cost of transitioning 61 achieved in FY2023 operations to net zero GHG emissions tCO e NEW UK Scope 3 emissions Yes – reductions in line with SBTi Carbon taxes and 2 intensity ratio pathway, leading to net zero in 2050. cost of transitioning 42% reduction from FY2023 baseline operations to net zero by 2030, 90% reduction by 2045 GHG emissions % of spend NEW % of supplier spend with Yes – 50% by end of FY2025 Carbon taxes and with suppliers suppliers committed to SBTi cost of transitioning Will report on progress in FY2024 | | of good and | pathway or have net zero transition | | operations to net zero | | --- | --- | --- | --- | --- | | | services | plans in place | | | | Transition risks % % of total UK directly purchased | | | Yes – 100 % of total UK directly | Energy sources | | | | electricity from renewable sources | purchased electricity from renewable | | sources by end of FY2023 Target met in FY2023 Transition risks % % of total UK electricity generated Yes – 15% of total UK electricity Energy sources from onsite renewable sources generated from on-site renewable sources by end of FY2024 Target met in FY2023 (12%) Transition risks % % of total gas directly purchased in Yes – 100% renewable gas purchased in Energy sources the UK from renewable sources UK by end of FY2025 Transition risks kWh Gas usage in the UK Yes – zero by end of FY2030 Energy sources Transition risks % % of UK estate using energy efficient Yes – 100% by end of FY2028 Cost of transitioning Pins on Strings technology operations to net zero 83% achieved in FY2023 Physical risks % of annual % of UK revenue located in an area No – periodic monitoring to feed into Business interruption revenue subject to high risk of flooding risk assessment process and damage to assets Hollywood Bowl Group plc ## Annual report and accounts 2023 69 ### Risk management Our approach to risk We consider both short and long-term risks and split them into the The Board and senior management take their responsibility for risk following groups: financial, social, operational, technical, governance management and internal controls very seriously, and for reviewing and environmental risks. their effectiveness at least bi-annually. An effective risk management Risk appetite process balances the risks and rewards as well as being dependent This describes the amount of risk we are willing to tolerate as a on the judgement of the likelihood and impact of the risk involved. business. We have a higher appetite for risks accompanying a clear The Board has overall responsibility for ensuring there is an effective opportunity to deliver on the strategy of the business. risk management process in place and to provide reasonable assurance that it is fully understood and managed. We have a low appetite for, and tolerance of, risks that have a downside only, particularly when they could adversely impact health and When we look at risk, we specifically consider the effects it could safety or our values, culture or business model. have on our business model, our culture and therefore our ability to deliver our long-term strategic purpose. Read more on pages 26 and 27 Our risk management process The Board is ultimately responsible for ensuring that a robust risk management process is in place and that it is being adhered to. The main steps in this process are: ## 1 2 3 Department heads The Executive team The Board Each functional area of the Group maintains The Executive team reviews each departmental The Board challenges and agrees the an operational risk register, where senior risk register. Any risks which are deemed to have Group’s key risks, appetite and mitigation management identifies and documents the risks a level above our appetite are added to/retained actions at least twice yearly and uses its that their department faces in the short term, as on the Group risk register (GRR) which provides findings to finalise the Group’s principal well as the longer term. A review of these risks an overview of such risks and how they are being risks. The principal and emerging risks are is undertaken on at least a bi-annual basis to managed. The GRR also includes any risks the taken into account in the Board’s compile the department risk register. They Executive team is managing at a Group level. consideration of long-term viability as consider the impact each risk could have on the The Executive team determines mitigation outlined in the Viability statement. department and overall business, as well as the plans for review by the Board. mitigating controls in place. They assess the Read more on pages 76 and 77 likelihood and impact of each risk. Financial risks Risk management activities High 1 – Economic environment Risks are identified through operational reviews | | 1 | 2 – Covenant breach | | --- | --- | --- | | by senior management; internal audits; control | | 3 – Expansion and growth | | environments; our whistleblowing helpline; | | Operational risks | 4 – Core systems and independent project analysis. 5 – Food and drink suppliers 7 The internal audit team provides independent 6 – Amusement supplier assessment of the operation and effectiveness of 7 – Management retention and recruitment the risk framework and process in centres, including 8 – Food safety the effectiveness of the controls, reporting of risks Likelihood Technical risks 4 5 6 8119 and reliability of checks by management. 9 – Cyber security and GDPR We continually review the organisation’s risk profile Regulatory risks to verify that current and emerging risks have 10 – Compliance been identified and considered by each head 10 3 2 11 – Climate change of department. Low Each risk has been scaled as shown on the risk Impact heat map. Hollywood Bowl Group plc ## 70 Annual report and accounts 2023 ### Principal risks ### The Board has identified 11 principal risks which are set out on page 70. These are the risks Strategic report ### which we believe to be the most material to our business model, which could adversely affect ### the revenue, profit, cash flow and assets of the Group and operations, which may prevent ### the Group from achieving its strategic objectives. ### We acknowledge that risks and uncertainties of which we are unaware, or which we currently ### believe are immaterial, may have an adverse effect on the Group. Key to risk change Increasing Decreasing Unchanged | Key to strategy | | 1 | Driving like-for-like revenue growth | 2 | Actively refurbishing our assets | 3 | Developing new centres and acquisitions | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 4 | Focusing on our people | 5 | Leveraging our indoor leisure experience | | | | | | | | | | 1. Economic environment Links to strategy: | | | | | | | 1 | 2 | 3 | 4 | 5 | Risk and impact Mitigating factors Risk change • Change in economic conditions, • There is still a risk of a contraction on disposable income levels, in particular a recession, as well as impacting consumer confidence and discretionary income. The inflationary pressures and the war Group has low customer frequency per annum and also the lowest in Ukraine. price per game of the branded operators in the UK. Therefore, ### Financial risks whilst it would suffer in such a recession, the Board is comfortable • Adverse economic conditions, that coupled with the low price point, the majority of centre including but not limited to, locations are based in high-footfall locations which should better increases in interest rates/inflation withstand a recessionary decline. may affect Group results. • Along with appropriate financial modelling and available liquidity, • A decline in spend on a focus on opening new centres and acquiring sites in high-quality discretionary leisure activity could locations only with appropriate property costs, as well as capital negatively affect all financial as contributions, remains key to the Group’s new centre-opening strategy. well as non-financial KPIs. • We have an unrelenting focus on service, costs and value, along with electricity hedged in the UK until September 2027. Plans are developed to mitigate many cost increases, as well as a flexible labour model, if required, in an economic downturn. 2. Covenant breach Links to strategy: 1 2 3 Risk and impact Mitigating factors Risk change • The banking facility, with Barclays • Financial resilience has always been central to our decision making Plc, has quarterly leverage and will remain key for the foreseeable future. covenant tests which are set at a • The current RCF is £25m, margin of 175bps above SONIA as well level the Group is comfortably as an accordion of £5m. Net leverage covenants are 1.75x and forecasting to be within. are tested quarterly. The facility is currently undrawn, which under • Covenant breach could result in the agreement results in a cost of less than £200k per annum. a review of banking arrangements • Net cash position was £52.5m at the end of September 2023. and potential liquidity issues. • Appropriate financial modelling has been undertaken to support the assessment of the business as a going concern. The Group has headroom on the current facility with leverage cover within its covenant levels, as shown in the monthly Board packs. We prepare short-term and long-term cash flow, Group adjusted EBITDA (pre-IFRS 16) and covenant forecasts to ensure risks are identified early. Tight controls exist over the approval for capital expenditure and expenses. • The Directors consider that the combination of events required to lower the profitability of the Group to the point of breaching bank covenants is unlikely. Hollywood Bowl Group plc ## Annual report and accounts 2023 71 ### Principal risks continued 3. Expansion and growth Links to strategy: 1 2 3 4 5 Risk and impact Mitigating factors Risk change • Competitive environment for new • The Group uses multiple agents to seek out opportunities across New centres results in less new Group the UK and Canada. centre openings. • We met with the top five landlords in Canada in July 2023 with Financial risksOperational risks • New competitive socialising positive feedback and a number of opportunities in negotiation. concepts could appear more • Continued focus with landlords on initial investment, innovation, attractive to landlords. as well as refurbishment and maintenance capital. • Higher rents offered by short-term • Strong financial covenant provides forward-looking landlords private groups. with both value and comfort. 4. Core systems Links to strategy: 1 2 3 4 5 Risk and impact Mitigating factors Risk change • Failure in the stability or availability • All core UK systems (non-cloud based) are backed up to our of information through IT systems disaster recovery centre. could affect Group business • The reservation systems, provided by a third party, are hosted and operations. by Microsoft Azure Cloud for added resilience and performance. • Customers not being able to book This also has full business continuity provision and scalability for through the website is a bigger risk peak trading periods. given the higher proportion of • Our new Compass reservations system will be rolled out to the online bookings compared to Group estate from FY2024 Q3. This system has been built in house prior years. and will have improved performance, resilience and future • Inaccuracy of data could lead development flexibility compared to the existing system. It will also to incorrect business decisions remove the reliance on an external partner. being made. • The CRM/CMS and CDP system is hosted by a third party utilising cloud infrastructure with data recovery contingency in place. • Our core Canadian systems are still server based and moving towards cloud based over the next 12 months in line with the platforms adopted by our UK operation. • All Group technology changes which affect core systems are subject to authorisation and change control procedures with steering groups in place for key projects. 5. Food and drink suppliers Links to strategy: 1 2 3 Risk and impact Mitigating factors Risk change • Operational business failures from • The Group has key food and drink suppliers under contract with key suppliers. tight service level agreements (SLAs). Alternative suppliers that know our business could be introduced, if needed, at short notice. • Unable to provide customers with UK centres hold between 14 and 21 days of food and drink product. a full experience. Canadian centres hold marginally more food and drink stock due to their supplier base and potential for missed deliveries. • Regular reviews and updates are held with external partners to identify any perceived risk and its resolution. This process was updated in November 2022 with substitute products available in all scenarios. A policy is in place to ensure the safe procurement of food and drink within allergen controls. • Regular reviews of food and drink menus are also undertaken to ensure appropriate stockturn and profitability. • Splitsville uses Xtreme Hospitality (XH), a group buying company, and Molson Coors, to align itself with tier one suppliers in all service categories including food and drink. If XH is unable to provide a service or product, Splitsville is able to source directly itself. Hollywood Bowl Group plc ## 72 Annual report and accounts 2023 6. Amusement supplier Links to strategy: 1 2 3 4 5 Strategic report Risk and impact Mitigating factors Risk change • Any disruption which affects • Regular key supplier meetings between our Head of Amusements, Group relationship with and Namco. There are half-yearly meetings between the CEO, CFO amusement suppliers. and the Namco UK leadership team. • Customers would be unable to • Namco is a long-term partner that has a strong UK presence Operational risks utilise a core offer in the centres. and supports the Group with trials, initiatives and discovery visits. • Namco also has strong liquidity which should allow for a continued relationship during or post any consumer recession. • The Canadian supplier is Player 1 which is a subsidiary of Cineplex Inc. which is listed on the Canadian stock market. Quarterly meetings are held with Player 1. 7. Management retention and recruitment Links to strategy: 1 2 3 4 5 Risk and impact Mitigating factors Risk change • Loss of key personnel – • The Group runs Centre Manager In Training (CMIT) and Assistant centre managers. Manager In Training (AMIT) programmes annually in the UK, which identify centre talent and develop team members ready for these • Lack of direction at roles. Centre managers in training run centres, with assistance centre level with effect from their regional support manager as well as experienced centre on customer experience. managers from across the region, when a vacancy needs to be • More competitive recruitment filled at short notice. landscape due to Brexit impact • The bonus schemes were reviewed for the estate reopening in of reduced hospitality May 2021 and again at the end of FY2022, to ensure they were still worker availability. a strong recruitment and retention tool. The management bonuses • More difficult to execute business were introduced into the Canadian business for FY2023 and we plans and strategy, impacting are reviewing how to implement a team member hourly scheme on revenue and profitability. in Canada for FY2024. • The hourly scheme has paid out to an average of c.52 per cent of the UK team in each month in FY2023. 8. Food safety Links to strategy: 1 2 3 4 5 Risk and impact Mitigating factors Risk change • Major food incident including • Food and drink audits are undertaken in all centres based upon allergen or fresh food issues. learnings of prior year and food incidents seen in other companies. • Loss of trade and reputation, • UK – allergen awareness is part of our team member training potential closure and litigation. matrix which needs be completed before team members can take food or drink orders. Information is regularly updated and remains a focus for the centres. This was enhanced further in the latest menu, along with an online allergens list which is available for all customers. A primary local authority partnership is in place with South Gloucestershire covering health and safety, as well as food safety. • In conjunction with the supply chain risk the Allergen Control Policy has been reviewed and updated (May 2023). • All food menus have an allergen disclaimer. • All food menus have a QR code linking the customer to up-to-date allergen content for each product, updated through the ‘Nutritics’ system. • Canada – all food menus have an allergen disclaimer. Allergen checks are undertaken with all customers when they order and are also audited. An Allergen Control Policy is being drafted in line with the launch of the new menu and with the new Head of Food and Drink. This will be reviewed by the UK before going live. Hollywood Bowl Group plc ## Annual report and accounts 2023 73 ### Principal risks continued 9. Cyber security and GDPR Links to strategy: 1 2 3 4 5 6 Risk and impact Mitigating factors Risk change • Risk of cyber-attack/terrorism • The area is a key focus for the Group and it adopts a multi-faceted could impact the Group’s ability approach to protecting its IT networks through protected firewalls to keep trading and prevent and secure two-factor authentication passwords, as well as the Technical risks customers from booking online. frequent running of vulnerability scans to ensure the integrity of the firewalls. • Non-accreditation can lead to the acquiring bank removing • An external Security Operations Centre is in place to provide transaction processing. 24/7/365 monitoring and actioning of cyber security alerts and an additional retained service to work with the Group on a priority • Data protection or GDPR breach. basis should a breach occur. Theft of customer email addresses and impact on brand • Advancements in the internal IT infrastructure have resulted in a reputation in the case of a breach. more secure way of working. By leveraging Microsoft technologies such as AI threat intelligence and NCSC recommended baselines, our overall IT estate utilises widely accepted security solutions and configurations. The Group website is hosted in Amazon Web Services which enforces a high level of physical security to safeguard its data centres, with military grade perimeter controls. • The website and booking site are protected by Cloudflare WAF with DDoS (Distributed Denial of Service) protection. • There is active protection of the network against a DDoS attack. • Payment systems have been upgraded to use P2PE payment devices, greatly reducing PCI DSS risks with cardholder present transactions in centres. New payment technology for ecommerce ensures that no card data passes through Group networks. 98 per cent of transactions operate in a PCI DSS secure environment. There are plans to address the remaining 2 per cent of transactions that occur through the contact centre by implementing pay-by-link. • Quarterly vulnerability scanning is being implemented against the PCI standard. Annual penetration testing is conducted through a third-party cyber security company. • Advanced data loss protection is also now in place to limit unauthorised, undisclosed, or unidentified migration or movements of data outside of our control on unsecured and unmanaged devices, including mobile phones. • Cyber Essentials certification has been achieved and was successfully externally audited in September 2023. • A Data Protection Officer has been in position for a number of years in the UK and we have a dedicated Cyber Security Manager who oversees our strategy, applications and activity in this area with periodic updates given to the Board. • A training course on GDPR awareness is on STARS (online training tool) and all team members have to complete this before being able to work on shift. • In FY2024 we are continuing to upgrade the IT infrastructure and networks in our Canadian business to move from centre-based operations to centrally hosted and managed services. Hollywood Bowl Group plc ## 74 Annual report and accounts 2023 10. Compliance Links to strategy: 1 2 3 4 5 Strategic report Risk and impact Mitigating factors Risk change • Failure to adhere to regulatory • Expert opinion is sought where relevant. We run regular training requirements such as listing rules, and development for appropriately qualified staff. taxation, health and safety, • The Board has oversight of the management of regulatory Regulatory risk planning regulations and risk and ensures that each member of the Board is aware other laws. of their responsibilities. • Potential financial penalties • Compliance documentation for centres to complete for health and and reputational damage. safety, and food safety, are updated and circulated twice per year. Adherence to Company/legal standards is audited by the internal audit team. 11. Climate change Links to strategy: 1 2 3 4 5 Risk and impact Mitigating factors Risk change • Increasing carbon taxes. • Significant progress already made with solar panel installations and transitioning energy contracts to renewable sources. • Business interruption and damage to assets. • The CRC monitors and reports on climate-related risks and opportunities. • Cost of transitioning operations to net zero. • Our TCFD disclosure includes scenario planning which was undertaken to understand materiality of risks. This did not identify any material short to mid-term risks for the Group. • The range of climate-related targets has been extended for FY2024. • The Group’s UK net zero transition plan and milestone targets are on pages 58 and 59. Hollywood Bowl Group plc ## Annual report and accounts 2023 75 # Going concern and viability statement ## Going concern In assessing the going concern position of the Group for the consolidated financial statements for the year ended 30 September 2023, the Directors have considered the Group's cash flow, liquidity, and business activities, as well as the principal risks identified in the GRR. As at 30 September 2023, the Group had cash balances of £52.5m, no outstanding loan balances and an undrawn ROF of £25m, giving an overall liquidity of £77.5m. The Group has undertaken a review of its liquidity using a base case and a severe but plausible downside scenario. The base case is the Board approved budget for FY2024 as well as the first three months of FY2025 which forms part of the Board approved five-year plan. Under this scenario there would be positive cash flow, strong profit performance and all covenants would be passed. It should also be noted that the ROF remains undrawn. Furthermore, it is assumed that the Group adhere to its capital allocation policy as outlined on pages 40 and 41. The most severe downside scenario stress tests for reasonably adverse variations in the economic environment leading to a deterioration in trading conditions and performance. Under this severe but plausible downside scenario, the Group has modelled revenues dropping by three per cent and four per cent for FY2024 and FY2025 respectively from the assumed base case, and inflation continues at an even higher rate than in the base case, specifically around cost of labour. The model still assumes that investments into new centres would continue, whilst refurbishments in FY2024 would be reduced. These are all mitigating factors that the Group has in its control. Under this scenario, the Group will still be profitable and have sufficient liquidity within its cash position to not draw down the ROF, with all financial covenants passed. Taking the above and the principal risks faced by the Group into consideration, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, the Group and Parent Company continue to adopt the going concern basis in preparing these Financial Statements. ## Viability statement In accordance with the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Group over a period significantly longer than 12 months and have made this assessment over a five-year period to 30 September 2028. The Directors have determined that a five-year period, as opposed to the three-year period previously adopted, is an appropriate period over which to assess viability, as it aligns with the Group's investment plans and gives a greater certainty over the forecasting assumptions used. The Directors are mindful of the uncertainty driven by external factors such as a rise in inflation and slowing GDP growth impacting all areas of the business, and accept that forecasting across this time frame remains challenging and have, therefore, also focused on understanding the level of headroom available before the Group reaches a position of financial stress. In making this viability statement, the Directors have reviewed the overall resilience of the Group and have specifically considered a robust assessment of the impact, likelihood and management of principal risks facing the Group, as at 30 September 2023 and looking forward over the next five-year period, including consideration of those risks that could threaten its business model, future performance, liquidity or sustainability. The assessment of viability has specifically considered risks that could threaten the Group's day to day operations and existence. This assessment considered how risks could affect the business now and how they may develop and impact the Group's financial forecasts over five years. The Group's business model and strategy are central to an understanding of its prospects, with further details found in the Strategy section of the Annual Report. ## Context The Group established a base case model of financial performance over the five-year assessment period and a viability scenario upon which the Board has made its assessment of the Group's ongoing viability, and which reflects prudent expectations of future customer demand and the successful execution of the Group's strategic plans. The Group undertook a review of the previously approved financial plan and forecasts in light of the uncertainty caused by the increase in inflation and slowing GDP growth and the potential impact on our businesses in the UK and Canada. This would have a negative impact on the forecasts included in the base case. ## Assessment process The Directors subsequently made a robust consideration of the key risks and uncertainties that could impact the future performance of the Group and the achievement of its strategic objectives, as discussed on pages 28 to 33 of this Annual Report. Particular regard was paid to the potential impacts of a rise in inflation and slowing GDP growth in FY2024 and FY2025. When considering climate scenario analysis, and modelling severe but plausible downside scenarios, we have used the NQFS 'Early Action' scenario as the most severe case for climate transition risks, and the IPCC's SSP5-8.5 as the most severe case for physical climate risk. Whilst these represent situations where climate could have a significant effect on the operations, these do not include our future mitigating actions which we would adopt as part of our strategy. The quantifications do not therefore represent a likely financial forecast and are not directly incorporated into any projections of our long-term cash flows. The viability scenario also takes into account the principal risks and uncertainties facing the Group across the five-year period in order to assess its ability to withstand multiple challenges. The impacts of a rise in inflation and slowing GDP growth have been built into the scenario, but the impact of further one-off events that cannot be reasonably anticipated has not been included. ## Key assumptions The base case forecast, which is prepared on a prudent basis, assumes low single-digit LFL revenue increases for FY2024 and FY2025 compared with FY2024. The process undertaken considers the Group's adjusted EBITDA, capital spend, cash flows and other key financial metrics over the projection period. The base case assumes no significant change in gross margin percentage and that dividend payments will continue into FY2024, in line with the Group's dividend policy. 76 Hollywood Bowl Group plc Annual report and accounts 2023 Assessment of viability offset partially by a reduction in the number of hours worked due to lower revenues. Strategic report Although the viability scenario reflects the Board’s best estimate of the future prospects of the Group, the Board has also tested Whilst the assumptions of an increase in inflation and slowing the potential impact of a severe but plausible downside scenario, by economic growth in this scenario is plausible, it does not represent quantifying the financial impact and overlaying this on the detailed our view of the likely out-turn in the FY2024 and FY2025 base case financial forecasts in place. scenario. However, the results of this scenario help to inform the This severe but plausible downside scenario includes a reduction in Directors’ assessment of the viability of the Group. revenue of three and four percentage points on the base case for Viability statement FY2024 and FY2025 respectively and an increase in operating The Board has a reasonable expectation that the Group will be able costs to reflect higher inflation. It is then forecasted that revenue will to continue in operation and meet its liabilities as they fall due, retain return to base case forecasts for FY2026, FY2027 and FY2028. sufficient available cash and not breach any covenants under any The impact of inflation in FY2024 and FY2025 is a one percentage drawn facilities over the remaining term of the current facilities. point increase in operating costs, with higher labour costs per hour Non-financial and sustainability information statement The Group has complied with the requirements of sections 414CA and 414CB of the Companies Act 2006 by including certain non-financial information within the Strategic report. The following table constitutes our non-financial information and sustainability statement, and includes cross references to where more detailed disclosures of non-financial information can be found. Reporting requirement Principal locations in this Annual Report Page Summary of relevant policies Business model Business model 26-27 An explanation of the Group’s business model is given on pages 26 and 27 Principal risks Principal risks and uncertainties 70-75 The Board has a process for considering the principal risks as outlined on pages 70-75 Non-financial KPIs Strategic report 1-77 The Board approves relevant non-financial KPIs against which operational performance is measured. These are disclosed in the Strategic report | Environmental and climate-related | Sustainability overview | 52-59 | Our environmental strategy and climate transition | | --- | --- | --- | --- | | financial disclosures | | | plan is set out on pages 52-59 | | | TCFD disclosure statement | 60-69 | | | Employees Chief Executive Officer’s statement | | 18-22 | Our employee related policies and procedures | which include our privacy notice and all work- S172 statement/stakeholder engagement 42-43 related policies, are available to all employees on Sustainability overview 50-51 HAPI (our intranet) Principal risks and uncertainties 73 Our social sustainability strategy is set out on pages 46-51 | Human rights, anti-corruption | Sustainability overview | 46-59 | Our Anti-Bribery and Corruption policy and Modern | | --- | --- | --- | --- | | and anti-bribery | | | Slavery policy set out relevant policies and expected | | | S172 statement/stakeholder engagement | 42-45 | | standards. The Group has a zero-tolerance approach to human rights abuses, bribery and corruption We also have a Whistleblowing policy Social matters Sustainability overview 46-51 Our social sustainability strategy is set out on pages 46-51 S172 statement/stakeholder engagement 42-45 Hollywood Bowl Group plc ## Annual report and accounts 2023 77 ### Chairman’s introduction to governance ## A year of strong ## performance ### Our continued focus on ### high standards of corporate ### governance supports this strategic ### delivery and the long-term success ### of the Group ” Peter Boddy, Non-Executive Chairman Read full biography on page 80 Hollywood Bowl Group plc ## 78 Annual report and accounts 2023 Governance report ## Dear shareholders, On behalf of the Board, I am pleased to present our Corporate governance report for the year ended 30 September 2023. This section of the Annual Report describes how we have applied the principles of the Code, and highlights the key activities of the Board and its Committees in the period. FY2023 has been another year of strong performance for the business, as we continue to deliver against our key strategic pillars (which are the subject of regular monitoring and discussion by the Board). We have delivered positive like-for-like revenue growth, made good progress on the integration (and expansion) of our Canadian business, while continuing to invest in and develop our UK estate, and maintained our focus on our team (as evidenced through maintaining our 1st rating in the Best Companies Survey). Our continued focus on, and promoting of, high standards of corporate governance supports this strategic delivery and the long-term success of the Group. We are not complacent. The Board recognises that the regulatory and governance environment in which we operate continues to develop, and therefore our governance framework must also develop to ensure we can continue to meet and exceed the required standards. During FY2023, key areas of focus in terms of our governance framework have included: - continued development of our ESG approach with the constitution of our Corporate Responsibility Committee, increased focus on future energy usage, and review of our climate-related disclosures (including TCFD and our net zero pathway); - progressing our Board succession plans with the appointment of Rachel Addison as a Non-Executive Director and to succeed Nick Backhouse as Chair of our Audit Committee and Senior Independent Director (SID); and - implementing actions arising from our first externally facilitated Board performance evaluation. The culture and values of our business are key drivers of success. The Board continues to receive regular reports from the Executive team around team members, customer engagement and supplier and stakeholder relationships. These reports, coupled with the Board's direct interaction with team members, form the basis by which we monitor how our culture is embedded across the business. A positive and high-performance culture permeates the Group, and is reflected in the way we conduct ourselves as a Board. We reported last year on our first externally facilitated Board evaluation, which was conducted in the Autumn of 2022. The Board has reflected on the output from that process, which generally validated our view that our Board operates effectively and encourages open participation and debate. Our FY2023 Board evaluation was conducted internally by way of a questionnaire, and is described in more detail on page 86. I'm pleased that the responses were again positive, indicating good relationships at Board level and an environment where constructive challenge is encouraged and well received. There was also positive feedback on some of the actions arising from the 2022 evaluation, including subtle changes to our meeting processes to support increased time to discuss and debate strategic and other key topics. We report for the first time this year against the Listing Rules diversity targets (see the Nomination Committee report on page 93 for more detail). I'm pleased to note that we have made good progress in terms of gender diversity through our Board succession plans, will achieve the target of 40 per cent women on our Board and also have a female SID, following our 2024 AGM. The need to continue to promote diversity (and not just gender diversity) in future Board recruitment and succession planning is a key consideration for the Nomination Committee. As noted above, we have conducted a successful NED recruitment process (described in detail in the Nomination Committee report on page 90) during the year as the second phase of our NED succession plan. We were delighted to welcome Rachel Addison to the Board in September 2023. Rachel has been provided with a tailored induction programme to get her up to speed with the business (see page 92 for more detail), and has been working with Nick Backhouse to ensure a smooth handover of Audit Committee Chair and SID responsibilities. Nick will not seek re-election at the 2024 AGM, and on behalf of the Board I would like to place on record our thanks for his service to the Group since our IPO in 2016. **Peter Boddy** Non-Executive Chairman 17 December 2023 Hollywood Bowl Group plc Annual report and accounts 2023 79 ### Board of Directors ### Peter Boddy Stephen Burns Laurence Keen Melanie Dickinson Non-Executive Chief Executive Chief Financial Officer Chief People Officer Chairman Officer N CR CR CR | Appointment | Appointment | Appointment | Appointment | | --- | --- | --- | --- | | Peter joined the Group as | Stephen joined the Group as | Laurence joined the Group | Melanie joined the Group as | | Non-Executive Chairman | Business Development Director | as Finance Director in 2014. | Talent Director in October 2012. | | in 2014. | in 2011. He was promoted to | | | Managing Director in 2012 and became Chief Executive Officer in 2014. | Skills and experience | Skills and experience | Skills and experience | Skills and experience | | --- | --- | --- | --- | | Peter has extensive non-executive | Before joining the Group, | Laurence has a first-class | Melanie has over 20 years of | | experience at board level, | Stephen worked within the | degree in business, | HR experience across the | | including roles at Thwaites plc | health and fitness industry, | mathematics and statistics | leisure and hospitality sectors. | | (SID and Chair of Remuneration | holding various roles within | from the London School of | | Starting her career in retail Committee 2007–2015), Novus Cannons Health and Fitness Economics and Political operations before moving into Ltd (Chairman 2015–2018), Limited from 1999. He became Science. He qualified as a HR, Melanie has held HR roles Xercise4less (Chairman Sales and Client Retention Chartered Accountant in 2000 at Pizza Express, Holmes Place 2013–2019) and the Harley Director in 2007 upon the and has been an ICAEW Fellow Health Clubs and Pizza Hut UK, Medical Group (Chairman acquisition of Cannons Health since 2012. Previously, Laurence as well as obtaining a 2012–2019). Previously, he held and Fitness Limited by Nuffield was UK Development Director postgraduate diploma in the position of CEO or Managing Health, and became Regional for Paddy Power from 2012. Personnel and Development. | Director in a number of successful | Director in 2009. In 2011, | He has held senior retail | | | --- | --- | --- | --- | | private equity-backed leisure | Stephen was appointed to the | and finance roles for | Most recently, she headed | | sector companies including | operating board of MWB | Debenhams plc, Pizza Hut (UK) | the People function at Zizzi | | Fitness First UK, Megabowl Group | Business Exchange, a public | Limited and Tesco plc. He was | Restaurants, part of the | | Limited and Maxinutrition Limited. | company specialising in | also a Non-Executive Director | Gondola group. | | He is currently Chair of Impact | serviced offices, meeting | of Tortilla Mexican Grill PLC | | Top bowling score Food Group (a school caterer) and conference rooms, from its IPO until May 2023. ## and a Non-Executive Director and virtual offices. 144 Top bowling score of Just Pay Ltd (a payments Stephen is Chairman of the Inn ## aggregator). Peter has a degree 191 Collection Group. in economics from De Montfort University and an MBA from Top bowling score Warwick Business School. ## 189 Top bowling score ## 220 Committee key A Audit committee N Nomination committee R Remuneration committee CR Corporate Responsibility committee Committee chair Hollywood Bowl Group plc ## 80 Annual report and accounts 2023 ### Rachel Addison Nick Backhouse Julia Porter Ivan Schofield Independent Senior Independent Independent Independent Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Governance report A AA A N NN NR RR R CR CR | Appointment | Appointment | Appointment | Appointment | | --- | --- | --- | --- | | Rachel joined the Group as an | Nick joined the Group as Senior | Julia joined the Group as an | Ivan joined the Group as an | | Independent Non-Executive | Independent Non-Executive | Independent Non-Executive | Independent Non-Executive | | Director in September 2023. | Director in June 2016. | Director in September 2022. | Director in October 2017. | | Skills and experience | Skills and experience | Skills and experience | Skills and experience | | --- | --- | --- | --- | | A member of the Institute | Nick has extensive experience | Julia has more than 30 years | Ivan has extensive experience in | | of Chartered Accountants in | at board level. He is currently | experience encompassing | the leisure sector in the UK and | | England and Wales, Rachel has | Chairman of the Giggling Squid | executive and non-executive | across Continental Europe. He | | held senior financial, operational | restaurant group and the Senior | roles in advertising, media and | held a number of senior roles for | | and board level roles throughout | Independent Director of | the technology sectors in the | Yum Brands Inc. over 15 years, | | her career. She was Chief | Loungers plc. He has previously | UK and globally. She has held | notably as Managing Director of | | Financial Officer at both Future | held positions as Senior | executive director roles in a | KFC France and Western Europe | | plc and TI Media Limited; | Independent Director of Hyve | number of businesses including | and more recently as CEO of | | Managing Director for Reach | Group plc (2019–2023) and | IPC Magazines, Getty Images | itsu. Prior to this, he held roles at | | Regionals; both CFO and Chief | Guardian Media Group plc | and ITV plc. Most recently, | Unilever and LEK Consulting. | | Operating Officer for Local | (2007–2017) and was Non- | Julia was Director of Consumer | Ivan runs his own executive | | World Limited and Northcliffe | Executive Director of Marston’s | Revenues at Guardian News & | coaching and leadership | | Media Limited; and Head of | PLC (2012–2018) and All3media | Media where she developed and | development business and | | Risk Management at Boots | Limited (2011–2014). In his | delivered their subscriptions and | is also Non-Executive Director | | the Chemist. | executive career, Nick was the | customer data strategies as | of Thunderbird Fried Chicken | | | Deputy Chief Executive Officer | well as a major subscriptions | Limited. Ivan holds a BSc in | Rachel is currently a of the David Lloyd Leisure Group technology project. economics with econometrics Non-Executive Director of and was previously Group from the University of Bath and Marlowe plc, a business-critical Julia is a Trustee at Worldwide Finance Director of NCP, Chief an MBA from INSEAD and is a services and software provider; Cancer Research. Previously Financial Officer of the Laurel graduate of the Meyler Campbell Watkin Jones plc, a housing she has been a Non-Executive Pub Company and CFO of Business Coaching Programme. developer and manager of Director of Freeview (the UK’s Freeserve PLC. Prior to that, he student and build-to-rent largest free to air digital TV Top bowling score was a Board Director of Baring | accommodation; Gamma | | platform), Safestyle Plc and | | | --- | --- | --- | --- | | | Brothers International. Nick is a | | 165 | | Communications plc, a leading | | Origin Housing. She holds | | Trustee of Chichester Harbour supplier of Unified an MBA from London Trust and a fellow of the Institute Communications (UCaaS) as a Business School. of Chartered Accountants in Service into Western European England and Wales. He has an Top bowling score markets; Wates Group, the MA in economics from ## UK’s leading family-owned 139 Cambridge University. development, building and property services company; Top bowling score and Florida-based Mango ## 203 Publishing Group. Top bowling score ## 130 Hollywood Bowl Group plc ## Annual report and accounts 2023 81 ### Corporate governance report UK Corporate Governance Code – Compliance statement and ensuring that this is embedded throughout the Group. The Board As a company with a premium listing on the London Stock continuously monitors the culture of the Group, through interactions Exchange, Hollywood Bowl Group plc is required under the FCA with team members (during site visits and through attendance at Listing Rules to comply with the provisions of the UK Governance events such as the Company conference), regular reports to the Code (the Code) (a copy of which can be found on the website of Board on team member and stakeholder engagement, and specific the Financial Reporting Council, www.frc.org.uk). For the financial updates on team culture and development from the Chief Operations year ended 30 September 2023, and as set out in the following Officer and Chief People Officer. The Board remains satisfied that this report, the Company has applied the principles, and complied approach to monitoring culture is appropriate and effective, that the with all relevant provisions, of the Code. key elements of the desired culture (dynamic, inclusive, positive, fun, high performance) are embedded across the Group, and that the Governance framework and responsibilities culture is aligned with our purpose of bringing families and friends The Board is responsible for promoting the long-term success of the together for affordable fun and safe, healthy competition. business for the benefit of shareholders, developing and overseeing The Board has formally delegated certain governance responsibilities the development of the Group’s strategic aims and objectives to its committees (as outlined in the illustration of our governance (including monitoring financial and operational performance against framework below), with those responsibilities set out clearly in the agreed plans and targets), and ensuring an appropriate system of committees’ terms of reference. The terms of reference and formal governance (including a robust system of internal controls and Schedule of Matters Reserved to the Board (which are available to a sound risk management framework) is in place. view on the Group’s website, www.hollywoodbowlgroup.com), as well The Group’s business model and strategy (as developed and as Group policies and procedures which address specific risk areas, approved by the Board) are set out on pages 26 to 33 and detail how are core elements of the Group’s governance framework. These are the Group strategy generates value in the long term, and our reviewed annually by the Board and Committees to ensure that they contribution to wider society. remain appropriate to support effective governance processes. Matters outside of the Schedule of Matters Reserved or the The Board is also responsible for establishing our purpose and values, Committees’ terms of reference fall within the responsibility and and providing leadership in setting the desired culture of the business authority of the CEO, including all executive management matters. Governance framework Board Key responsibilities: • Overall leadership of the Group • Set strategy, purpose, values and culture • Approving, and reviewing performance • Promoting strong corporate governance • Oversight of systems of internal control and against, business plans and budgets • Approving financial statements and risk management • Approving major contracts and material dividend policy capital expenditure Corporate Responsibility Audit Committee Remuneration Committee Nomination Committee Committee Key responsibilities Key responsibilities Key responsibilities Key responsibilities • Review integrity of annual and • Set Remuneration Policy • Board appointments • Develop and recommend interim financial statements • Determine Executive • Succession planning Group ESG strategy • Review accounting policies, Director and senior • Promotes diversity • Monitor performance against financial reporting and management remuneration and inclusion agreed ESG KPIs regulatory compliance • Approve measures and targets • Review material risks (including • Monitors NED independence • Review internal financial controls for annual and long-term and time commitments climate related) associated with and monitor effectiveness of risk incentive schemes ESG strategy • Reviews size and composition management and internal • Monitor workforce pay and • Approve ESG disclosures of Board and Committees control systems conditions (including TCFD) Nomination Committee report • Oversee relationship with Directors’ Remuneration report pages 88 to 92 Corporate Responsibility external auditor pages 98 to 101 Committee report page 97 Audit Committee report pages 93 to 96 Executive Committee Composition: Chief Executive Officer, Chief Financial Officer, Chief People Officer, Chief Marketing & Technology Officer, Chief Operations Officer, President and Managing Director-Canada. Reporting to the CEO, the Executive Committee is responsible for the day to day operations of the Group and implementing the strategy agreed by the Board. Monitors performance against financial and operational KPIs, and manages risk through the development and implementation of controls, policies and procedures. Hollywood Bowl Group plc ## 82 Annual report and accounts 2023 Individual Board roles and responsibilities ## Executive Committee There is a clear division of responsibilities between the Chairman and Chief Executive Officer. The key responsibilities of members of the Board are set out below. Biographies of each Director, which ### Mathew Hart describe the skills and experience he or she brings to the Board, Chief Marketing and Technology Officer can be found on pages 80 and 81. Top bowling score ## Non-Executive Chairman 151 Peter Boddy Peter is responsible for the leadership and overall effectiveness of Mathew joined the Group as Commercial Director in the Board and for upholding high standards of corporate governance January 2015. He has over 25 years of commercial, marketing, throughout the Group and particularly at Board level. In line with the e-commerce and general management experience across culture promoted throughout the business, the Chairman encourages the travel, leisure and healthcare sectors. Governance report open debate and discussion in the interaction of the Board, and Mathew has held executive positions at Holiday Autos facilitates the effective contribution of the Non-Executive Directors. (Managing Director), Lastminute.com (Group Marketing Chief Executive Officer (CEO) Director), Cannons Health Clubs (Group Marketing and Stephen Burns Commercial Director), Nuffield Health (Group Marketing Director) and Encore Tickets (Group Marketing Director). Stephen is responsible for all executive management matters, including: performance against the Group’s strategy and objectives; leading the executive leadership team in dealing with the day to day operations of the Group; and ensuring that the culture, values ### Darryl Lewis and standards set by the Board are embedded throughout Chief Operating Officer the organisation. Top bowling score Senior Independent Director (SID) ## 187 Nick Backhouse The SID provides a valuable sounding board for the Chairman and Darryl joined the Group as Regional Director in September leads the Non-Executive Directors’ annual appraisal of the Chairman. 2013. He has over 25 years’ experience in key operational roles The SID is available to shareholders if they have concerns which are across the leisure sector, including cinemas and theme parks. not resolved through the normal channels of the CEO or Chairman, or where such contact is inappropriate. Darryl worked in general management, film and content planning and senior operational support roles in the cinema Chief Financial Officer (CFO) industry for 20 years with Showcase Cinemas, Warner Bros, Laurence Keen International Theatres and Vue. Laurence works with the CEO to develop and implement the Group’s strategic objectives. He is also responsible for the financial performance of the Group and the Group’s property interests and supports the ### CEO in all investor relations activities. Pat Haggerty President and Managing Director Canada Chief People Officer (CPO) Top bowling score Melanie Dickinson ## 214 Melanie works with the CEO and executive leadership to develop and implement the Group’s strategic objectives, with a particular focus on people strategy and team member development. Melanie Pat joined the Group in May 2022 upon the acquisition of his is responsible for the Group’s HR function, including pay and reward, business. He has over 30 years of experience in the bowling culture, training and team engagement. industry. In 2000 Pat became the exclusive distributor for Brunswick in Canada and in 2005 he began building and Non-Executive Directors operating his own bowling centres under the Splitsville brand, Rachel Addison, Nick Backhouse, Julia Porter and Ivan Schofield growing the estate to five centres at the time of the acquisition Rachel, Nick, Julia and Ivan provide objective and constructive by Hollywood Bowl Group. challenge to management and help to develop proposals on The Board and Executive Committee strategy. They also scrutinise and monitor financial and operational The Board and Executive Committee work closely together to performance, and support the executive leadership team, drawing ensure the robust governance of the business and successful on their background and experience from previous roles. execution of our strategy. Hollywood Bowl Group plc ## Annual report and accounts 2023 83 ### Corporate governance report continued Board independence In addition to the Chief Executive and Chief Financial Officer, The Board consists of eight Directors (including the Chairman), and in line with our established practice, the Chief Marketing and four of whom are considered to be independent as indicated in the Technology Officer and Chief Operating Officer were present at table below: Board meetings during the year, and the President and Managing Director Canada also attended Board meetings on three occasions Non-Independent during FY2023. Peter Boddy (Chairman) Where Non-Executive Directors are unable to attend a Board or Stephen Burns (Chief Executive Officer) Committee meeting, they are encouraged to submit any comments or questions on the matters to be discussed to the Chairman (or Laurence Keen (Chief Financial Officer) Committee Chair, as appropriate) in advance to ensure that their Melanie Dickinson (Chief People Officer) views are recorded and taken into account. The Non-Executive Directors remain in regular contact with the Independent Chairman, whether in face-to-face meetings or by telephone, to Rachel Addison (appointed 1 September 2023) discuss matters relating to the Group without the executives present. Nick Backhouse (SID) Information and support Julia Porter Agendas and accompanying papers are distributed to the Ivan Schofield Board and Committee members well in advance of each Board or Committee meeting via an electronic Board paper system for Board and Committee attendance efficiency and security purposes. These include reports from The Board met formally on eight occasions during FY2023. The Executive Directors, other members of senior management and table below shows the attendance (in person or by video conference) external advisers. The Non-Executive Directors are also in regular of each Director at the formal scheduled meetings of the Board contact with the Executive Directors and other senior executives and of the Committees of which they are a member: outside of formal Board meetings. All Directors have direct access to senior management should they Membership and attendance of Board and Committees require additional information on any of the items to be discussed. Corporate Audit Remuneration Nomination Responsibility The Board and the Audit Committee receive regular and specific Director Board Committee Committee Committee Committee reports to allow the monitoring of the adequacy of the Group’s Peter Boddy* / N/A N/A / / systems of internal controls (described in more detail in the Audit Stephen Burns / N/A N/A N/A / Committee report on page 95). Laurence Keen / N/A N/A N/A N/A Appointment and election Melanie Each Non-Executive Director is expected to devote sufficient Dickinson / N/A N/A N/A / time to the Group’s affairs to fulfil his or her duties. Their letter of appointment anticipates that they will need to commit a minimum Rachel of two days per month to the Group, specifying that more time may Addison / / / / N/A be required. This time commitment was reviewed and confirmed as Nick appropriate by the Nomination Committee during the year, and each Backhouse / / / / N/A of the Non-Executive Directors has confirmed that they continue to Julia Porter** / / / / / be able to devote sufficient time to discharge their duties effectively as a Director of the Company. Ivan Schofield / / / / / Claire Tiney / / / / N/A The Board is satisfied that each of the Directors continues to contribute effectively and is committed to their role. The Board * Peter Boddy was unable to attend the Board meeting held in June 2023 at short is therefore pleased to recommend the election of Rachel Addison, notice due to the sudden death of an executive at one of Peter’s other businesses. and the re-election of all other Directors (with the exception of Nick Nick Backhouse stood in as Chair of the meeting. Backhouse who will step down from the Board at the AGM) at the ** Julia Porter was unable to attend the Board meeting held in October 2022 due to a Company’s AGM on 29 January 2024. All of the Directors have a prior commitment which was known to the Board at the time of Julia’s appointment as a Non-Executive Director. service agreement or a letter of appointment, with details of their notice periods and unexpired terms of office set out on page 109. A formal Non-Executive Director recruitment process was conducted during the year, and resulted in the appointment of Rachel Addison as a Non-Executive Director with effect from 1 September 2023. A detailed summary of the process is set out in the Nomination Committee report on page 90. Hollywood Bowl Group plc ## 84 Annual report and accounts 2023 ## Activity during the year The Board approves an annual calendar of agenda items to ensure that all matters are given due consideration and are reviewed at the appropriate point in the regulatory and financial cycle. The activity of the Board during FY2023 is shown in the table below: Board agenda for year to  September  Oct Dec Jan Mar Apr May Jun Sep Corporate governance Directors’ conflicts of interest Board, Director and Committee performance evaluation Review Schedule of Matters Reserved to the Board ESG strategy and updates Governance report Board diversity policy NED recruitment updates/fees Compliance and risk Reviewing the principal risks and uncertainties affecting the Group Risk register and risk heat map Risk deep-dives Going concern review and approval of long-term viability statement Review and approval of Modern Slavery and Human Trafficking Statement Review of Gender Pay Gap reporting Review of Disclosure Policy, Insider List & Share Dealing Code Delegated authorities Group insurances Operations, customers and suppliers Reviewing customer experience measures Customer research feedback (Canada) Utilities/energy review People Review results of team engagement survey Team member incentives review Support centre structure Performance Approval of full-year results, the Annual Report and Accounts, half-year results, the Notice of Annual General Meeting and dividends Budget Review of dividend policy/dividend proposals Strategy IT projects update Review of progress on strategic projects Hollywood Bowl Group plc ## Annual report and accounts 2023 85 ### Corporate governance report continued Induction All new Directors appointed to the Board undertake a tailored induction programme, the purpose of which is to help new Directors develop a sound understanding and awareness of the Group, focusing on its culture, operations and governance structure. Rachel Addison’s induction programme commenced shortly after her appointment to the Board, and in addition to the provision of relevant documentation included a combination of meetings with Executive Committee, senior management and other team members, attendance at Company events and site visits. Rachel’s induction is summarised below: Operations and Company Financial reporting Board process and Strategy and culture events and risk management corporate governance CEO meeting (covering strategy, Support centre town hall meeting CFO meeting (covering Company Secretary meeting business plan and new business) external auditor relationship, (covering Board procedures, Audit Committee process, terms of reference, activity internal controls, internal audit schedules and governance and risk management) policies) CPO meeting (organisation, CMIT graduation Head of Finance meeting CMTO meeting (covering Group culture and HR policies) (covering non-audit services, supporting functions, office business planning, management network structure, IR and reporting and tax) communications programme) Cultural induction Company conference Centre visit with Head of Internal Audit Wheel roadshow Centre visits with the COO, and Regional Support Manager Board strategy day Performance evaluation As reported last year, our FY2022 Board evaluation process was externally facilitated by Parsons Talent Consulting (led by Annabel Parsons), with feedback presented to our Board meeting in December 2022. The Board discussed specific findings, and agreed certain actions to take forward in FY2023, at our meetings in January and March 2023. Some of the actions identified and how they have been implemented are summarised in the table below. Our FY2023 Board evaluation process was internally facilitated and conducted by way of detailed questionnaires completed by all Board members and regular attendees. Some of the questions were designed to gather feedback on the impact of the implementation of actions arising from the FY2022 evaluation (summary feedback noted in the table below). Overall, the feedback from both the externally facilitated (FY2022) and internal (FY2023) Board evaluations was that the Board is effective and performing well. The culture of the business is evidenced in the Board’s interactions, and internal relationships are strong. | Action (from FY2022 externally | | Impact (feedback from FY2023 | | --- | --- | --- | | facilitated evaluation) Implementation in FY2023 | | internally facilitated evaluation) | | Increase time spent discussing strategic | Additional time added to all Board meetings | Rebalanced agendas and longer meetings | | matters through: | from March 2023 onwards | have been well received, with the Board | agreeing that focus on strategic matters • Additional time allotted for Agendas weighted and reordered in favour has increased Board meetings of strategic items • Balancing agendas in favour of strategic rather than operational matters | Provide opportunity to reflect | From March 2023, meetings are concluded | The focus on ongoing review has improved | | --- | --- | --- | | on effectiveness of Board meetings | with a discussion to review the meeting | effectiveness of meetings, and provided an | | on an ongoing basis | | open forum for suggestions to drive | continuous improvement Develop a mentoring programme for Senior management below Executive N/A executives and managers Committee level have been assigned an Executive Committee mentor Increase frequency of Non-Executive Intend to increase from one meeting per N/A Director meetings (without executives year to two from FY2024 onwards present) Introduce KPIs to help to measure KPIs agreed around number of Company Promotes Non-Executive Director time in the discharge of Non-Executive Director time and competitor site visits to be conducted business, engagement with team members, commitment by Non-Executive Directors per annum and monitoring of culture Hollywood Bowl Group plc ## 86 Annual report and accounts 2023 The evaluation of individual Director performance was conducted Stakeholder engagement by the Chairman, who has established a programme of regular Engagement with the workforce one-to-one meetings with all Directors. As well as discussing wider The Chairman and the Non-Executive Directors frequently visit the business matters, these sessions also include discussion around Group’s centres, including attending new or refurbished centre individual Director development, additional knowledge/training openings, accompanied by regional support managers and centre requirements (whether at an individual or Board level), and time management teams. At those centre visits, the Non-Executive spent in the business. Through a combination of the individual Directors take the opportunity to engage directly with team evaluation, and specific questions in the Board evaluation process, members at all levels, allowing them to assess the understanding of all individual Directors were shown to be contributing effectively. the Group’s culture across the business. Our team members are encouraged to engage openly with all colleagues, and as a result the The evaluation of the Chairman’s performance in FY2023 was led by Non-Executives are able to effectively gauge the views of the Senior Independent Director (SID), and conducted by way of a the workforce. questionnaire completed by each Non-Executive and follow up discussions. The review found that the Chairman continues to The Board receives regular presentations from the Chief Operating Governance report perform well in his role, leads the Board effectively, and promotes an Officer on the output and feedback from centre management and open environment whereby all individuals are able to contribute and team member listening sessions. The Chairman and Non-Executive provide constructive challenge where appropriate. Directors are also invited to attend the annual conference, which provides further opportunity to engage with team members. In line with the approach established in recent years, it is anticipated that the FY2024 Board performance evaluation will be led by the The Board has assessed the various methods by which the Chairman and conducted by way of one-to-one interviews with all Directors engage with the wider workforce and continues to be Board members and regular attendees. of the view that the combination of the methods described above ensures that the Board is appropriately informed about, and Conflicts of interest and external appointments understands, workforce views. The Board therefore believes that In accordance with the Board-approved procedure relating to this approach appropriately addresses the requirement to engage Directors’ conflicts of interest, all Directors have confirmed that they with the workforce under provision 5 of the Code and does not did not have any conflicts of interest with the Group during the year. currently intend to adopt one of the three workforce engagement In accordance with our established policy, and provision 15 of the methods suggested in that provision. The Board will, of course, Code, Board approval is required before any Director takes on a new continue to keep its stakeholder engagement mechanisms external appointment. Such approval was sought and granted in under review. relation to new external appointments taken on by Stephen Burns and Peter Boddy during the year. Given that Stephen Burns stepped Relations with shareholders down from his role at The Club Company prior to taking up the As part of its ongoing investor relations programme, the Group Non-Executive Director position at Inn Collection Group, the Board aims to maintain an active dialogue with its shareholders, including was satisfied that the role would not impact Stephen’s focus and institutional investors, to discuss issues relating to the performance commitment to the Company. The Board was similarly satisfied that of the Group. Communicating and engaging with investors means Peter Boddy’s appointment as Chair of Impact Food Group, and the Board can express clearly its strategy and performance and Non-Executive Director of Just Pay Ltd, would not restrict his time receive regular feedback from investors. It also gives the Board the commitment to the Company. opportunity to respond to questions and suggestions. The Non-Executive Directors are available to discuss any matter Whistleblowing Policy shareholders might wish to raise and to attend meetings with The Group has adopted procedures by which employees may, in investors and analysts, as required. Investor relations activity is a confidence, raise concerns relating to possible improprieties in standing item on the Board’s agenda and ensuring a satisfactory matters of financial reporting, financial control or any other matter. dialogue with shareholders, and receiving reports on the views of The Whistleblowing Policy applies to all employees of the Group, shareholders, is a matter reserved to the Board. who are required to confirm that they have read the policy and are aware of how the procedure operates as part of an ongoing internal The Company’s AGM will be held on Monday 29 January 2024 at training programme. The Board receives regular updates with 30 Gresham Street, London, EC2V 7QP. Electronic proxy voting will respect to the whistleblowing procedures during the year, with all be available to shareholders through both our registrar’s website and incidents reported to the Board having been addressed under the CREST service. Voting at the AGM will be conducted by way of a appropriate Group HR policies and procedures. poll and the results will be announced through the Regulatory News Service and made available on the Group’s website. More information on AGM arrangements is included in the AGM Notice which will be distributed to shareholders and made available on the Group’s website. Hollywood Bowl Group plc ## Annual report and accounts 2023 87 ### Report of the Nomination Committee ## Report of the ## NominationCommittee Role and responsibilities The role of the Nomination Committee is set out in its terms of reference, which are reviewed annually and are available on the Group’s website. The Committee’s primary purpose is to develop and maintain a formal, rigorous and transparent procedure for identifying appropriate candidates for Board appointments and reappointments, and to make recommendations to the Board. Activity during the year The Nomination Committee met twice during the year and has met once since the year end. Committee meetings have focused on the matters set out in the table below: Activities of the Committee during the year to  September  ### Peter Boddy Nomination Committee Chair Board succession Review of Non-Executive succession planning planning matrix Read full biography on page 80 Identified need to start process to recruit Audit Committee Chair successor Nomination Committee Reviewed Executive and senior Chair Peter Boddy  management succession plans Committee members Rachel Addison Nick Backhouse Board appointments Oversaw search process for new NED Julia Porter and Audit Committee Chair successor Ivan Schofield (described in detail below) Number of meetings Recommended the appointment held in the year  of Rachel Addison 1 Appointed as a member of the Committee with effect from 1 September 2023. Diversity Policy Reviewed Board Diversity policy Specific duties of the Committee include: Reviewed Board diversity, and • regularly reviewing the structure, size and composition discussed approach to diversity (including the skills, knowledge, experience and diversity) in succession planning of the Board and making recommendations to the Board Discussed internal initiatives to promote with regard to any changes; diversity and equality • keeping under review the leadership needs of the Board and Committee Review of composition of the Board organisation, both Executive and Non-Executive, with composition a view to ensuring the continued ability of the organisation Review of Non-Executive Directors’ to compete effectively in the marketplace; and independence • reviewing annually the time commitment required Review of time commitment requirements, of Non-Executive Directors. including each Director’s external interests The Nomination Committee is also responsible for Performance Review of results from Committee keeping Board succession plans under review, monitoring evaluation performance evaluation and discussion compliance with the Company’s Board Diversity Policy, on related actions and making recommendations on the composition of the Review of the Committee’s terms of reference Board Committees. Hollywood Bowl Group plc ## 88 Annual report and accounts 2023 Board composition and tenure Governance report Gender Diversity Independence (exc. Chair) NED Tenure (at year end) Male Female Independent Non-Independent  to  years  to  years  to  years Succession planning The Non-Executive succession plan is designed on the assumption A previously reported, the Nomination Committee has established that no Non-Executive Director will serve on the Board for longer a Non-Executive succession planning matrix as a tool to support than nine years, but retains flexibility such that tenure beyond consideration of the timing for future appointments, and to identify nine years may be accepted if considered to be in the best interests key search criteria (including skills, experience and diversity). The of the Company at the time, and the overall independence of the matrix is reviewed at each meeting of the Committee, and I regularly Board is not compromised. discuss Board succession with the other Non-Executive Directors We have continued to review Executive and senior management between meetings to ensure alignment on plans and timings. succession plans, with the aim of ensuring that the Group’s future Our agreed Non-Executive Director succession plan is designed to leadership will have the qualities necessary to support the delivery ensure a managed approach to the timing of Non-Executive Director of our strategic objectives. The Executive Team maintains a detailed changes given our initial cohort were all appointed at the same time succession planning matrix identifying potential internal successors, (in connection with the Company’s IPO). In accordance with that and potential gaps in skills and experience which may need to be plan, the Committee agreed it was appropriate to commence the addressed through development programmes or external recruitment. search for a new Non-Executive Director, specifically with audit Through the Board’s annual programme of activity, we aim to make committee experience, as a potential successor to Nick Backhouse sure that potential executive successors are given opportunities who will step down from the Board at the AGM in January 2024. The to meet and present to the Board on their areas of expertise and search process, and subsequent appointment of Rachel Addison, to further their development. We also received regular updates on is described in more detail below. We were delighted to welcome other team member development initiatives across the Group, with Rachel to the Board in September 2023, and her induction has such development (through our Assistant and Centre Manager included a detailed handover process with Nick for the Chair of training programmes, and our senior leadership development Audit Committee role which Rachel will assume from that programme) being a key area of focus for our management teams. Committee’s first meeting in 2024. The Board has also agreed that Rachel will succeed Nick as Senior Independent Director from the date of the 2024 AGM. Hollywood Bowl Group plc ## Annual report and accounts 2023 89 ### Report of the Nomination Committee continued Appointment of Rachel Addison As noted above, through its succession planning process the Committee identified the need to commence a search for a new Non-Executive Director and Audit Committee Chair successor during the year. The table below summarises the process, and key considerations at each step in the NED search which ultimately led to the appointment of Rachel Addison as a Non-Executive Director on 1 September 2023. Step Key considerations/decisions Develop role/candidate profile • Recent, up-to-date and relevant financial experience • PLC board experience, ideally as a Non-Executive Director and Audit Committee Chair • Commercial background • Character aligned with the culture of the Company • The need to continue to promote gender diversity at Board level Identify and engage external • Ensuring access to a diverse pool of appropriately experienced candidates, beyond established networks search agency/service • The Committee agreed to engage Women on Boards (which is not an executive search firm, but provides services to support the identification of a diverse pool of Non-Executive Director candidates) to support the search process. Women on Boards does not have any other connection with the Company or any individual Directors Shortlisting candidates • Women on Boards provided a shortlist of candidates matching the role/candidate profile • The Chair and Audit Committee Chair reviewed and interviewed shortlisted candidates, identifying a reduced shortlist of four candidates • A summary of shortlisted candidates was discussed with Nomination Committee members Interviews • The Chair and CEO met the shortlisted candidates • Preferred candidates were interviewed by the Audit Committee Chair and CFO Recommendation and • Having discussed preferred candidates, the members of the Nomination Committee agreed appointment to recommend to the Board that Rachel Addison be appointed • The Board formally approved Rachel Addison’s appointment as a Non-Executive Director and as a member of the Audit, Remuneration and Nomination Committees, with effect from 1 September 2023 Diversity The Committee reviews the Board Diversity Policy on an annual basis and continues to be responsible for monitoring compliance with the objectives of that Policy. The Policy recognises the benefits of greater diversity, including gender diversity and sets out the Board’s commitment to ensuring that the Company’s Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives to their role. Given the size of the Board, and the fact that all Non-Executives are members of each of the Audit, Remuneration and Nomination Committees, the Diversity Policy does not contain any specific diversity objectives relating to the composition of the Board’s Committees. In addition to a requirement that at least two members of the Board are female, the Diversity Policy also sets out longer-term aspirations to achieve no less than 40 per cent female representation on the Board, and at least one Director being from a non-white ethnic minority background. The policy recognises this balance may not be achieved through our first cycle of Non-Executive Director succession (i.e. the succession of the Non-Executive Directors appointed at IPO), and that periods of change in Board composition may result in periods when the desired balance is not met. Progress against that and the other objectives during the year is set out in the policy is summarised below: Objective/responsibility Progress/activity in FY Maintain a balance such that: At least two members of the Board have been female throughout FY2023. The current proportion of women on the Board is 38 per • At least two members of the Board are female, with a long-term cent. This will increase to 43 per cent when Nick Backhouse steps aspiration to achieve no less than 40 per cent women on the down at the 2024 AGM. Board Both the gender and ethnic diversity objectives were considered as • In the longer term, at least one Director to be from a non-white part of the recruitment process for Rachel Addison, and will continue ethnic minority background to form an important consideration in our NED succession planning. In the recruitment process, encourage diversity in the candidates by: Women on Boards is not a traditional executive search firm, and therefore is not a signatory to the Voluntary Code of Conduct. • Only engaging executive search firms that are signatories to the However the Committee felt that Women on Boards was able to Executive Search Firms’ Voluntary Code of Conduct offer the broadest and most diverse pool of candidates. • Ensuring that the search firm engaged is briefed to include an A suitably detailed briefing was provided to Women on Boards to appropriate emphasis on diversity considerations ensure that identified candidates met our key criteria. – Ensure that non-executive shortlists include at least 50 per Given the important role of the Audit Committee Chair, the cent female candidates Committee agreed it would not be appropriate to consider – Consider candidates who may not have previous board candidates with no previous board experience on this occasion. experience in executive and non-executive directorship leadership roles Hollywood Bowl Group plc ## 90 Annual report and accounts 2023 Review regularly the structure, size, and composition of the Board This is an annually recurring item on the Committee’s agenda and (including the balance of skills, knowledge, and experience), taking was reviewed by the Committee at a meeting in September 2023. into account this Policy, and make recommendations to the Board Although the Committee is comfortable that the current size of for any changes. the Board is appropriate, the potential to increase independent Non-Executive representation (to support breadth of experience, future succession planning, and diversity considerations) is under review. When considering Board succession planning, have regard to the The NED succession planning matrix highlights current diversity Board Diversity Policy. statistics on the Board and will continue to be considered against the Board Diversity Policy. The need to promote diversity in Board appointments is considered in all of the Committee’s succession planning discussions. Governance report Review the Board Diversity Policy annually, assessing its The policy is reviewed annually, and was reviewed by the Committee effectiveness and recommending any changes to the Board. in September 2023 with no changes proposed. As at 30 September 2023, the Board did not meet the diversity targets set out in Listing Rule 9.8.6(9), as less than 40 per cent of the Board Directors were women, none of the roles of the Chair, CEO, CFO or Senior Independent Director were held by a woman, and we did not have a Director from a minority ethnic background. There have been no changes to the Board between the financial year end and the date of the Annual Report which change this position, however we will exceed the 40 per cent target, and have a female SID, following our 2024 AGM (when Nick Backhouse steps down as a Director and is succeeded by Rachel Addison as SID). As described above in relation to succession planning and the application of the Board Diversity Policy, we are in the process of a cycle of Non-Executive Director succession planning. As part of our succession plans, and Non-Executive Director recruitment processes, the Committee is aware of the need to promote gender and ethnic diversity. We have made good progress in improving gender diversity at Board level. We have specified a desire to see candidates from ethnic minority backgrounds in our recent search processes, and will continue to do so going forwards. As required under Listing Rule 9.8.6(10), the breakdown of the gender identity and ethnic background of the Company’s Directors and executive management (the Executive Committee) as at 30 September 2023 is set out in the tables below. Each Director and Executive Committee member was asked to complete a survey in order to compile this data. Any new appointees to the Board or Executive Committee in the future will be asked to provide this information. Number of Number in Percentage Number of Percentage senior positions executive of executive Gender identity: Board members of the Board on the Board* management management Men      Women   —   Not specified/prefer not to say — — — — — Number of Number in Percentage Number of Percentage senior positions executive of executive Ethnic background: Board members of the Board on the Board* management management White British or other white      Mixed/multiple ethnic groups — — — — — Asian/Asian British — — — — — Black/African/Caribbean/Black British — — — — — Other ethnic group — — — — — Not specified/prefer not to say — — — — — * Includes CEO, CFO, Chair and SID. Overall gender diversity across the business is good with the Committee and the Executive team recognising the need to support the development of women into senior management roles. Hollywood Bowl Group plc ## Annual report and accounts 2023 91 ### Report of the Nomination Committee continued Annual Review of Board and Committee composition Annual evaluation In accordance with its terms of reference, the Committee The Committee has monitored progress against actions identified reviews annually the composition of the Board and its Committees, in the 2022 externally facilitated Board evaluation process during and the independence of the Non-Executive Directors. The review the year (as described more fully on page 86). Some of these was conducted in September 2023, and therefore took account of actions were further assessed through specific questions in our Rachel Addison’s recent appointment to the Board and each of the internally facilitated Board evaluation process in 2023 (also Committees. The Committee is satisfied that each of the described on page 86). Non-Executive Directors continues to be independent in thought The Committee has reviewed its own performance in 2023 by way and judgement, and when assessed against the circumstances likely of a questionnaire completed by Committee’s members and other to impair independence set out in provision 10 of the Code. Taking attendees, with the results discussed at the Committees’ meetings account of the continued independence of the Non-Executive in December 2023. In general, the evaluation confirmed that the Directors, the Committee is also satisfied that the composition of Nomination Committee continues to operate effectively and that the the Board and its Committees remains appropriate having agreed succession plan is progressing well. considered the objectives of the Board Diversity Policy and the balance of skills, experience and diversity of thought required for those bodies to operate effectively. All of these factors will of course Peter Boddy continue to be considered through our succession planning and Chair of the Nomination Committee Board recruitment processes. 17 December 2023 Hollywood Bowl Group plc ## 92 Annual report and accounts 2023 ### Report of the Audit Committee ## Report of the ## AuditCommittee Role and responsibilities The Audit Committee’s duties and responsibilities are set out in full Governance report in its terms of reference, which are available on the Company’s website. The terms of reference were reviewed by the Committee during the year and no changes were proposed. Dear shareholders, On behalf of the Board, I am pleased to present the Audit Committee report for the year ended 30 September 2023. As you will have read in the Strategic report, the business has delivered another year of strong financial performance in FY2023 showing LFL revenue growth of 4.5 per cent versus FY2022. We have continued to expand and improve our estate in the UK, and ### Nick Backhouse to integrate and develop our business in Canada following the Audit Committee Chair Teaquinn acquisition in FY2022. Read full biography on page 81 The activity of the Committee during FY2023 is described in the report that follows. Our key role is in monitoring the integrity of Audit Committee annual and half-year financial statements, and in particular ensuring that appropriate consideration is given to key accounting judgements Chair Nick Backhouse  and estimates. In that context, we have reviewed the accounting Committee members Rachel Addison treatment for the acquisition of additional Canadian centres in Julia Porter Calgary, as well as the accounting policy for revenue recognition in Ivan Schofield relation to Striker Bowling Solutions (which supplies and installs Number of meetings bowling equipment across Canada). We have also considered the held in the year 4 accounting policy for IT cost capitalisation in connection with Group 1 Appointed as a member of the Committee with effect from 1 September 2023. digital initiatives. Specific duties of the Committee include: We have continued to review and monitor potential asset impairment. At the half year end, we again concluded that there • monitoring the integrity of the annual and interim was no need for a full impairment review at the half year end given financial statements; the positive trading performance of our centres in the first half. Prior • keeping under review the internal financial control to the financial year end, the Committee reviewed the impairment systems; and model and underlying assumptions, and in line with required • overseeing the relationship with the internal and external accounting standards a full impairment review has been conducted audit functions. at the year end. The Committee has an established formal schedule of annual activity which ensures that we consider all relevant matters within our remit at the appropriate time during the year. In accordance with that activity schedule, we have continued to regularly review our documented internal controls matrix (challenging management to gain assurance over the effectiveness of those controls), and to receive six-monthly updates from our Internal Audit function (as described in the report below). Hollywood Bowl Group plc ## Annual report and accounts 2023 93 ### Report of the Audit Committee continued We have reviewed the effectiveness of the FY2023 external audit and capable colleague. The Committee has comprised wholly of process (also described in more detail below) and assessed KPMG’s independent Directors throughout the year, and the Board has continuing independence. The Committee continues to be comfortable confirmed that it is satisfied that both Rachel Addison and I have that KPMG is independent and that the audit service provided is recent and relevant financial experience as recommended under effective, and we have recommended to the Board that a resolution the Code by virtue of our qualification as Chartered Accountants, to reappoint KPMG as our external auditor be proposed at our our executive background in finance roles, and our experience as 2024 AGM. audit committee chairs in other non-executive positions. As all members of the Committee have experience as Directors of other The Audit Committee has again evaluated its own performance by companies in the retail and leisure sector, the Board is also satisfied way of questionnaires completed by each member of the Committee that the Audit Committee as a whole continues to have competence and other regular attendees. We discussed the outcome of the relevant to the sector in which the Group operates. evaluation at our meeting in December 2023, and I’m pleased to report that the findings indicate that the Committee continues to operate effectively. Nick Backhouse Chair of the Audit Committee We were pleased to welcome Rachel Addison as a member of 17 December 2023 the Committee on her appointment as a Non-Executive Director in September. Rachel will succeed me as Chair of the Committee when I step down from the Board at the 2024 AGM, and I am delighted to be able to hand over the reins to such an experienced Meetings and attendees The Committee’s terms of reference provide that it should meet at least three times per year, and the Committee met on four occasions during FY2023. The names of the attendees of the Audit Committee meetings are set out in the table on page 93. The external auditor has the right to attend meetings, and the Chair of the Board, Chief Executive Officer, Chief Financial Officer and Head of Finance typically attend by invitation. Outside of the formal regular meeting programme, the Audit Committee Chair maintains a dialogue with key individuals involved in the Group’s governance, including the Chairman, Chief Executive Officer, Chief Financial Officer and external audit lead partner. Activity during the year The Committee’s activity in FY2023 included the topics set out below: Activities of the Committee during the year to  September  Dec Mar May Sept Financial statements and reports Review and recommendation to the Board of full-year results, the Annual Report and Accounts and half-year results Going concern assessment Fair, balanced and understandable assessment Review of significant accounting policies Risk register review External audit External audit plan, engagement, fees External auditor reports to the Committee (including full-year reports) Assessment of external auditor effectiveness Independence confirmation and review of non-audit services, spend and policy Internal controls Annual review of internal audit function requirement Review of risk management and internal controls Internal audit reports Assessment of internal audit effectiveness Other Review of results from Committee performance evaluation and discussion of related actions Review of the Committee’s terms of reference Hollywood Bowl Group plc ## 94 Annual report and accounts 2023 The key areas of focus of the Committee are discussed in more detail in the rest of this report. Significant issues considered in relation to the financial statements Significant issues and accounting judgements are identified by the finance team and the external audit process and are reviewed by the Audit Committee. The significant issues considered by the Committee in respect of the year ended 30 September 2023 are set out in the table below: Significant issues and judgements How the issues were addressed Valuation of property, plant and The Committee reviewed and challenged the calculations and assumptions (including revenue growth equipment and right-of-use assets and discount rates applied) underlying the tests to identify potential impairment of PPE and ROU assets at the Group’s cash generating units (CGUs). The Committee agreed with management’s judgement in estimating the recoverable amount of PPE and ROU assets, and that the impairment charge recognised of £2.2m (£1.4m for PPE and £0.8m for ROU assets) was appropriate. Valuation of acquisition-related The Committee reviewed the calculation methodology to support the valuation of intangible assets Governance report intangible assets arising from the acquired in relation to the acquisition of additional centres in Canada during FY2023. The Committee was acquisition of assets in Canada. comfortable with the approach adopted by management, which included engaging an external specialist to determine the fair value of the separately identifiable intangible assets. Risk management and internal controls risk linked to new centre openings, supply chain, cyber security and The Board has overall responsibility for setting the Group’s risk targeted IT threat risks, and climate-related risks (including the risk appetite and ensuring that there is an effective risk management of business interruption, and net-zero transition). The deep dive framework to maintain appropriate levels of risk. The Board has, approach continues to be effective in promoting more focused however, delegated responsibility for review of the risk management discussion and debate around the risks and associated controls. methodology, and the effectiveness of internal controls, to the The process by which the Audit Committee has monitored and Audit Committee. reviewed the effectiveness of the system of internal controls and risk The Group’s system of internal controls comprises entity-wide, management during the year has included: high-level controls, controls over business processes and centre- • regularly reviewing the detailed internal controls matrix which level controls. Policies and procedures, including clearly defined addresses and tracks actions against items such as control levels of delegated authority, have been communicated throughout deficiencies identified by KPMG; the Group. Internal controls have been implemented in respect of • receiving updates from the Group’s Internal Audit function on the key operational and financial processes of the business. These reviews of key processes and controls; policies are designed to ensure the accuracy and reliability of • conducting an annual review of the Group’s control systems and financial reporting and govern the preparation of the financial their effectiveness; and statements. The Board is ultimately responsible for the Group’s system of internal controls and risk management and discharges • reporting and updating the Board on the risk and control culture its duties in this area by: within the Group. • holding regular Board meetings to consider the matters reserved Internal audit for its consideration; As previously reported, the remit of the Group’s Internal Audit • receiving regular management reports which provide an function (which was originally focused primarily on monitoring and assessment of key risks and controls; supporting compliance with in-centre processes and controls) has • scheduling annual Board reviews of strategy including reviews evolved over time and now covers other operational processes such of the material risks and uncertainties (including emerging risks) as supplier on-boarding, employee expenses, the issuance of facing the business; customer refunds, and any other areas that the Audit Committee or management identify as being appropriate for review (often • ensuring there is a clear organisational structure with defined informed by the internal controls matrix). Specific areas covered in responsibilities and levels of authority; the Internal Audit function’s reports to the Audit Committee during • ensuring there are documented policies and procedures in FY2023 have included a review of team member loyalty benefits, place; and zero deposit bookings in centre and through our customer contact • reviewing regular reports containing detailed information regarding centres, internal security and team member safety (CCTV coverage financial performance, rolling forecasts, actual and forecast and access), and centre-based audits around food hygiene covenant compliance, and financial and non-financial KPIs. and safety. During FY2023 the Board’s established programme of deep dive In accordance with the established centre audit programme, the presentations on specific risks has continued. The programme of internal audit function performs regular testing of the detailed deep dives is informed through the wider review of the Group risk processes and controls required to be applied by centre teams. register and the principal risks and uncertainties facing the Group, Findings are presented to the relevant centre manager and the Chief with the schedule of topics agreed early in the financial year. The Financial Officer for review, with a focus on ensuring that centre deep dives have assisted in developing a broader understanding of management and team members are supported to meet the the risks, any change in risk level, and the mitigations and controls required standards. Detailed summaries of centre performance implemented (and an assessment of their effectiveness). Specific against the required standards are presented to the Audit risks covered by these deep dives in FY2023 included Committee twice per year. concentration risk relating to amusements suppliers, the expansion Hollywood Bowl Group plc ## Annual report and accounts 2023 95 Report of the Audit Committee continued Internal audit continued A member of the internal audit team attends Audit Committee meetings at least once per year to provide updates on the activities of the internal audit function. The internal audit team has also begun to work with our Canadian business to assist in the development of an appropriate centre-based audit programme in Canadian centres. The Committee has conducted its annual review and assessment of the internal audit function, and has concluded that it continues to operate effectively and provides appropriate assurance over key areas of business risk. As part of the assessment, the Committee also considered the other methods by which it receives assurance on the effectiveness of risk management and internal controls. The Committee remains satisfied that it receives appropriate assurance through a combination of the Internal Audit function's activities, and its own review and challenge of the internal control and risk management systems. External auditor The Audit Committee is responsible for overseeing the Group's relationship with its external auditor, KPMG. During the year, the Audit Committee has discharged this responsibility by: - agreeing the scope of the external audit and negotiating the remuneration of the external auditor; - receiving regular reports from the external auditor, including with regard to audit strategy and year-end audits; - regularly meeting the external auditor without management present; and - assessing the auditor's independence and the effectiveness of the external audit process. External audit effectiveness review The Committee reviewed the effectiveness of the external audit process following completion of the FY2022 audit. In accordance with our established practice, a report was prepared by the finance team summarising its view of KPMG's effectiveness based on interactions during the audit and set out under three headings: 'Mindset and Culture', 'Skills, Character and Knowledge', and 'Quality Control'. The report was discussed at the Committee's meeting in May 2023, and in making its assessment the Committee also took into account its own interactions with the external auditor. The report noted that the FY2022 audit process had been effective, with improvements over the prior year, and highlighted opportunities to further improve the process in FY2023, in particular by bringing forward the audit timetable. The Committee concluded that the external audit process had been effective, noting in particular that KPMG continued to provide an independent and objective approach to the audit, and to demonstrate an appropriate level of professional scepticism. The Committee was also satisfied that KPMG had made appropriate judgements around materiality, had identified the key areas of audit risk, and had made reliable evaluations of audit evidence. Non-audit services The engagement of the external audit firm to provide non-audit services to the Group can impact on the independence assessment. The Company has a policy (which is reviewed annually) which requires Audit Committee approval for any non-audit services which exceed £25,000 in value. The engagement of the external auditor to provide any non-audit services for less than £25,000 (with the exception of the issuance of turnover certificates and financial covenant tests, for which authority was delegated to the Chief Financial Officer to approve where the fee is less than £5,000 per certificate) must be discussed with the Audit Committee Chair in advance. All requests to use the external auditor for non-audit services must be reviewed by the Chief Financial Officer. The policy recognises that certain non-audit services may not be carried out by the external auditor. During the year ended 30 September 2023, KPMG was engaged to provide permitted non-audit services relating to EBITDA certification and turnover rent certificates for a fee of £7.5k, representing 1.8 per cent of the total audit fee. This is shown in further detail in note 6 to the Financial Statements. The Committee is satisfied that the level of non-audit fees and services provided by KPMG does not impact on its independence. Appointment and tenure KPMG was first appointed as the Group's external auditor in 2007. Matt Radwell was appointed as lead audit partner for the FY2022 audit, and in line with KPMG's policy on lead partner rotation (and absent any change in auditor as a result of a tender process) would be required to rotate off the Group's audit after the FY2025 audit. The Audit Committee continues to be satisfied with the scope of the external auditor's work and the effectiveness of the external audit process, and that KPMG continues to be independent and objective. The Committee is therefore pleased to recommend that KPMG be reappointed as the Group's auditor at the 2024 AGM. During the year, the Committee considered the appropriate timing for putting the external audit contract out to tender in the context of the requirement to do so at least every ten years (commencing from the date of the Group's IPO, at which point it became a 'public interest entity' for the purpose of audit tendering requirements). The Committee remains mindful of the requirement to tender the audit no later than FY2026 and of the benefits of audit rotation. However, given the Committee's assessment of KPMG's performance to date, and the recent rotation of the lead audit partner, it has concluded that there is no need to conduct an audit tender at this time. Nick Backhouse Chair of the Audit Committee 17 December 2023 96 Hollywood Bowl Group plc Annual report and accounts 2023 ### Report of the Corporate Responsibility Committee ## Report of the Corporate ## Responsibility Committee Dear shareholders, In recognition of the importance that we place on environmental and Governance report social considerations in our decision making, we established a Corporate Responsibility Committee (CRC) consisting of fellow Board members, Executive Committee members and me. I was pleased to chair the first two CRC meetings in FY2023. These meetings highlighted the pivotal role that the Committee will have in supporting the Board in setting ESG strategies, and providing oversight to the long-established Corporate Responsibility Steering Group in driving change in our business. Our sustainability strategy is based on three pillars: operating safe and inclusive leisure destinations, creating outstanding workplaces ### Ivan Schofield and operating sustainable centres. The Group has made good Chair of the Corporate Responsibility Committee progress this year and has taken some significant steps forward in Read full biography on page 81 many areas including community accessibility, team member attraction and retention, team wellbeing, diversity and inclusion, solar panel rollout and energy efficiency. Further details of our Corporate Responsibility Committee achievements can be found on pages 48 to 55. Chair Ivan Schofield High on the CRC’s agenda this year was the sharpening of the Committee members Peter Boddy Group’s net zero strategy and UK transition plan which is set out on Julia Porter pages 58 and 59. Until now, our focus had been on reducing carbon Stephen Burns emissions over which we have direct control (Scopes 1 and 2), with Melanie Dickinson clear strategies and targets to achieve this. We have made excellent Mathew Hart progress in this area with our UK emission intensity ratio falling by 62 Number of meetings per cent since we began reporting in 2016 and using a market-based held in the year  measurement approach, due to our procurement of renewable electricity and self-generated energy sources, we are close to Specific duties of the Committee include: achieving carbon neutrality for Scopes 1 and 2. • reviewing, challenging, and overseeing the content of and approach to, the ESG strategy and to ensure that it is However, we were aware that in order to achieve net zero, we considered as part of the setting of the overall strategy of the needed to turn our attention towards our indirect value chain Group by the Board; emissions – Scope 3 – which we estimate make up approximately 91 per cent of our total emissions. • reviewing and approving KPIs and related targets in line with the ESG strategy; We publish our Scope 3 emissions here for the first time, giving us a • reviewing material risks and liabilities (including climate risks) FY2023 baseline to set reduction goals from FY2024. We have also to the Group in relation to ESG strategy; disclosed our environment and climate impact through the CDP, which runs a global disclosure system for investors, companies, • considering material regulatory and technical developments cities, states, and regions to manage their environmental impacts. in the field of ESG; and • keeping up to date with ESG best practice and thought Looking forward, we are starting work to overlay our ESG strategy in leadership, keeping under review the Group’s external our Canadian business so that all of our operations will be fully reporting of relevant ESG performance (including the aligned with consistent sustainability reporting. Company’s application of the recommendations of the Task We will continue to drive our sustainability agenda across all of our Force on Climate-related Financial Disclosures (TCFD). operations as we continue to evolve and push forward with our Group net zero strategy. Ivan Schofield Chair of the Corporate Responsibility Committee 17 December 2023 Hollywood Bowl Group plc ## Annual report and accounts 2023 97 Report of the Remuneration Committee # Report of the Remuneration Committee ![img-9.jpeg](img-9.jpeg) Julia Porter Remuneration Committee Chair Read full biography on page 81 Remuneration Committee | **Chair** | Julia Porter | | --- | --- | | **Committee members** | Rachel Addison^{1} Nick Backhouse Ivan Schofield | Number of meetings held in the year 4 1 Appointed as a member of the Committee with effect from 1 September 2023. Specific duties of the Committee include: - setting the Remuneration Policy for Executive Directors, Chairman and senior management; - determining individual pay awards within the terms of the agreed Policy; and - ensuring that the Remuneration Policy operates to align the interests of management with those of shareholders. The Committee also has responsibility for reviewing pay and conditions across the Group, and the alignment of incentives and rewards with culture. Role and responsibilities The role of the Remuneration Committee is set out in its terms of reference, which are available on the Group's website. The Committee's primary purpose is to develop and determine the Group's Remuneration Policy for the Executive Directors, Chairman and senior management. Dear shareholders, On behalf of the Remuneration Committee, I am pleased to present the Directors' Remuneration Report for the year ended 30 September 2023, my first having succeeded Claire Tiney as Remuneration Committee Chair when she stepped down from the Board at our 2023 AGM. This report, prepared in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, The Companies (Directors' Remuneration Policy and Directors' Remuneration Report) Regulations 2019, the FCA Listing Rules and the Code, sets out how the Policy has been applied during FY2023. The report consists of: - my annual statement as the Chair of the Remuneration Committee; - the annual report on remuneration, which sets out payments made to the Directors and details the link between Company performance and remuneration for FY2023. The annual report on remuneration is subject to an advisory shareholder vote at the 2024 AGM; and - a summary of the Policy, including how the Committee intends to implement it in 2024. Performance in FY2023 and remuneration outcomes As detailed in the Strategic report, the Group delivered another very strong year of financial and operational performance, with LFL revenue growth of 4.5 per cent and Group adjusted EBITDA pre-IFRS 16 of £64.9m. The Group's financial performance in FY2023 exceeded the Board's expectations, particularly on the back of an exceptional FY2022. We have made good progress in both integrating and expanding our Canadian business, which traded ahead of expectations in FY2023, and our UK centres have continued to deliver strong operational performance against both financial and non-financial metrics (including customer satisfaction and waste recycling). FY2023 was also a record year of investment in the estate and we opened three new centres in the UK. Our refurbishment programme saw 13 centres receive successful upgrades and are delivering above our return hurdle rate. In addition to financial and operational performance, running our business in a sustainable manner is a key focus for the Group and is integral to our decision making. Good progress was made across all key metrics and we met our key FY2023 targets across our three sustainability pillars. 98 Hollywood Bowl Group plc Annual report and accounts 2023 As set out earlier in this Annual Report, the Group will be paying a final ordinary dividend of 8.54 pence per share and a special dividend of 2.73 pence per share, as well as commencing a £10m share buyback programme in FY2024. Across the wider workforce, we have continued to ensure that we offer competitive pay levels, supporting the recruitment and retention of key talent. The average rate of hourly pay increases across the Group was 9.2 per cent, and for salaried team members was 5.3 per cent. We continue to incentivise team members through our centre management bonus schemes, with metrics aligned to those that apply for the Executive Directors. In FY2023, we paid out over £2.6m in centre level bonuses (with Centre Managers receiving over 64 per cent base of pay and Assistant Managers receiving over 14 per cent base of pay) and over £600k in hourly team member bonuses. We have also maintained our reputation for our positive working environment, evidenced by our rank amongst one of 'The UK's 25 Best Big Companies to Work For' again in 2023. The FY2023 bonus opportunity for the Executive Directors was up to 100 per cent of salary, with 80 per cent based on Group adjusted EBITDA pre-IFRS 16 targets, and the remaining 20 per cent split equally on performance against the non-financial KPIs of Overall Blended Index (OBI) and waste recycling. A detailed breakdown of the measures is set out on page 105. All targets were met in full, resulting in a bonus out-turn of 100 per cent of salary for each of the Executive Directors. Our Executive Directors each received an award under the Long-Term Incentive Plan (LTIP) in July 2021, which vests by reference to Group adjusted, diluted EPS performance in FY2023. Our strong performance in FY2023 resulted in an adjusted EPS out-turn of 21.48 pence per share, exceeding the maximum target and therefore the awards will vest in full in July 2024, followed by a two-year holding period. As is our usual practice, the Committee considered the formulaic outcomes for the annual bonus and LTIP in the context of overall business performance and the shareholder experience. In particular, we took into account the very strong financial performance, share price performance including the share price increase following the trading update in October 2023, the level of dividends proposed to be paid to shareholders including the special dividend, the approach to wider workforce pay, the integration and development of the Canadian business, and the continued operational focus on delivering a fantastic product for our customers (evidenced through continually positive customer engagement scores). In addition, Hollywood Bowl delivered a shareholder return of more than 27 per cent over FY2023, outperforming the FTSE Small Cap index (which delivered c.0.1 per cent return during the period). Over the three-year performance period under the 2021 LTIP award, Hollywood Bowl delivered a shareholder return of more than 69 per cent, again outperforming the FTSE Small Cap index (which delivered a c.32 per cent return in the same period). Taking all of this into account, the Committee determined that the outcomes are appropriate and that no discretion would be applied. The Committee can confirm that the Remuneration Policy operated as intended in the year under review. ## FY2024 remuneration ### Salary and benefits The Committee reviewed Executive Director salaries during the year, and in doing so was mindful of the need to ensure that any decisions relating to Executive Director pay were taken in the context of the experience of our wider workforce. As noted above, the overall average pay increase for the wider workforce in FY2023 was 7.4 per cent. The Committee also recognises the need to continue to motivate and retain our high-performing team of Executive Directors to support the delivery of our strategy and generation of shareholder value. Having taken these factors into account, the Committee approved base salary increases of 5.0 per cent for the Executive Directors. The resulting salaries all remain below the FTSE SmallCap median. ### FY2024 variable pay There are no proposed changes to the maximum bonus opportunity and LTIP award level for Executive Directors in FY2024, with the bonus opportunity remaining at 100 per cent of salary and the LTIP award level at 150 per cent of salary for the CEO and CFO and 100 per cent for the CPO. There are also no proposed changes to the performance measures, further detail of which is set out later in this report. The Committee will review the remuneration framework during FY2024 ahead of a new Policy being put forward to a shareholder vote at the 2025 AGM, in line with the normal three-year cycle. This review will cover all aspects of the remuneration package to ensure that it continues to be aligned to our business strategy and culture. We will consult with shareholders on the new Policy ahead of the 2025 AGM. ### Stakeholder engagement The Committee is regularly updated on the pay and benefits arrangements for team members across the Group, and takes into account colleague remuneration as part of its review of executive remuneration. Engagement with the workforce on remuneration matters, including to explain how executive pay is aligned with the wider company pay policy, is conducted through engagement sessions led by the CEO and COO and the wider team engagement survey. ### Annual General Meeting On behalf of the Board, I would like to thank shareholders for their continued support. I am always happy to hear from the Company's shareholders. You can contact me via the Company Secretary if you have any questions on this report or more generally in relation to the Group's Remuneration Policy. **Julia Porter** Chair of the Remuneration Committee 17 December 2023 Governance report Hollywood Bowl Group plc Annual report and accounts 2023 99 ### Report of the Remuneration Committee continued As part of its oversight of the application of the Remuneration Policy during the year, the Committee has considered the factors set out in provision 40 of the Code. In our view, the Policy addresses those factors as set out below: Factor How addressed Clarity – remuneration arrangements We aim to ensure that our remuneration disclosures are clear and transparent. should be transparent and promote Remuneration outcomes are set out in a consistent format each year, with detail on effective engagement with shareholders bonus and LTIP performance measures and targets. Our full Remuneration Policy was and the workforce. set out in our FY2021 Annual Report (which is available on the Company’s website, with a summary of key points set out on pages 110 and 111). Simplicity – remuneration structures should Our remuneration structure is comprised of fixed and variable remuneration, with the avoid complexity and their rationale and performance conditions for variable elements clearly communicated to, and understood operation should be easy to understand. by, participants. The LTIP provides a clear mechanism for aligning Executive Director and shareholder interests, and the diversity of measures in both the annual bonus and LTIP scheme allows for clear alignment with our strategic pillars, rather than reliance solely on earnings-based measures. Non-financial measures within the annual bonus also ensure our Executive Directors and wider team members are incentivised based on key operational KPIs across the Group. Risk – remuneration arrangements should The Remuneration Policy and relevant scheme rules provide discretion to the ensure reputational and other risks from Committee to reduce award levels, and awards are subject to malus and clawback excessive rewards, and behavioural risks decisions. The Committee also has overriding discretion to reduce awards where that can arise from target-based incentive out-turns are not a fair and accurate reflection of business performance. plans, are identified and mitigated. Predictability – the range of possible The Remuneration Policy outlines the threshold, target and maximum levels of pay that values of rewards to individual Directors, Executive Directors can earn in any given year over the three-year life of the approved and any other limits or discretions, should Remuneration Policy. be identified and explained at the time of approving the Policy. Proportionality – the link between Variable, performance-related elements represent a significant proportion of the total individual awards, the delivery of strategy, remuneration opportunity for our Executive Directors. The Committee considers the and the long-term performance of the appropriate financial and non-financial performance measures each year to ensure Company should be clear. Outcomes that there is a clear link to strategy. The Committee is able to exercise discretion to should not reward poor performance. reduce awards if necessary to ensure that outcomes are a fair and accurate reflection of holistic business performance. Alignment to culture – incentive schemes The Committee seeks to ensure that performance measures under the annual bonus should drive behaviours consistent with the scheme incentivise behaviours consistent with the Group’s culture, purpose, and values. Group’s purpose, values, and strategy. The LTIP clearly aligns the Executive Directors’ interests with those of shareholders, ensuring a focus on delivering against strategy to generate long-term value for shareholders. Hollywood Bowl Group plc ## 100 Annual report and accounts 2023 The Remuneration Committee met on four occasions during the year and has met twice since the year end, and discussed the topics set out in the table below: Activities of the Committee during the year to  September  Nov Dec Mar Sep Review of FY2022 performance and the formulaic bonus outcome, and approval of Directors’ bonuses for FY2022 Review/approval of Directors’ bonus KPIs/targets for FY2023 and FY2023 pay Review/agree 2023 LTIP performance targets Agree approach to FY2024 bonus targets Agree approach to FY2024 LTIP performance targets Approve FY2024 Executive Director salaries Governance report Review/agree share plan awards, vestings and dilution Review of Directors’ Remuneration Report (including to ensure compliance with the Remuneration Reporting Regulations) Consideration of engagement and feedback from shareholders Consideration of pay and conditions across the Group Update on market practice Review of 2023 AGM and proxy advisory comments Review of the Committee’s terms of reference Discussion of Committee evaluation results Hollywood Bowl Group plc ## Annual report and accounts 2023 101 Annual report on remuneration ## Single total figure of remuneration (audited) ### Executive Directors (audited) The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of FY2023. Comparative figures for FY2022 have been provided. Figures provided have been calculated in accordance with the UK disclosure requirements. | Name | | Salary £'000 | Benefits^{1} £'000 | Pension £'000 | Bonus £'000 | LTIP £'000^{2, 3} | Total £'000 | Total fixed pay £'000 | Total variable pay £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Stephen Burns** | **2023** | **443.2** | **29.5** | **22.5** | **443.2** | **412.7** | **1,351.1** | **495.2** | **855.9** | | | 2022 | 412.3 | 30.0 | 20.6 | 412.3 | 350.7 | 1,225.9 | 462.9 | 763.0 | | **Laurence Keen** | **2023** | **290.5** | **27.3** | **14.5** | **290.5** | **268.0** | **890.8** | **332.3** | **558.5** | | | 2022 | 267.8 | 27.0 | 13.4 | 267.8 | 227.7 | 803.7 | 308.2 | 495.5 | | **Melanie Dickinson** | **2023** | **172.0** | **7.6** | **8.6** | **172.0** | **144.7** | **504.9** | **188.2** | **316.7** | | | 2022 | 151.4 | 5.5 | 8.0 | 160.0 | 123.0 | 447.9 | 164.9 | 283.0 | 1 Benefits include private medical insurance and car allowance. 2 The 2022 LTIP figures were calculated based on the three-month average share price to the end of FY2022. The 2022 LTIP figure in the table above has therefore been adjusted to reflect the actual share price of 261.5 pence (being the closing share price on 3 February 2023, the trading day before the vesting date of 6 February 2023). 3 The 2023 LTIP figures were calculated based on the three-month average share price to 30 September 2023 (2353 pence), plus the value of dividend equivalents for the period from the 2021 LTIP grant to 30 September 2023. No amount of the value disclosed in the single figure table above is attributable to share price appreciation. The actual value that vests, based on the closing price on the vesting date, will be disclosed in next year's Annual Report. ### Non-Executive Directors (audited) The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director: | Name | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Fees £'000 | Taxable benefits £'000 | Total £'000 | Fees £'000 | Taxable benefits £'000 | Total £'000 | | Peter Boddy – Chairman | **141.7** | — | **141.7** | 135.3 | — | 135.3 | | Rachel Addison^{1} | **4.2** | — | **4.2** | — | — | — | | Nick Backhouse, Senior Independent Director; Chair – Audit Committee | **55.9** | — | **55.9** | 53.6 | — | 53.6 | | Julia Porter^{2} | **50.9** | — | **50.9** | 4.1 | — | 4.1 | | Ivan Schofield | **50.9** | — | **50.9** | 47.8 | — | 47.8 | | Claire Tiney^{3} – Chair – Remuneration Committee | **16.9** | — | **16.9** | 48.6 | — | 48.6 | 1 Rachel Addison was appointed as a Director with effect from 1 September 2023. Therefore, only her remuneration from that date is shown in the table above. 2 Julia Porter was appointed as a Director with effect from 1 September 2022. Therefore, only her remuneration from that date is shown in the table above. 3 Claire Tiney stepped down as a Director with effect from the AGM on 30 January 2023. Therefore, only her remuneration to that date is shown in the table above. ### Bonus awards (audited) Each of the Executive Directors was eligible to earn a bonus in respect of FY2023 of up to 100 per cent of base salary. 80 per cent of the award was based on Group adjusted EBITDA pre-IFRS 16 targets, with the remaining 20 per cent split equally between the non-financial key performance indicators of average overall customer satisfaction (OBI) scores for the year, and the percentage of waste sent to recycling (both of which are structured in the same way as for the wider employee population). Details of the measures, and performance against them, is set out in the table below: | Metric | Weighting | Performance targets | | | Actual | % vesting | % of max bonus opportunity | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Threshold (25% of max) | On target (50% of max) | Maximum | | | | | Group adjusted EBITDA pre-IFRS 16 | **80%** | **£46.99m** | **£49.46m** | **£51.94m** | £64.93m | 100% | 80% | | Average Group OBI | **10%** | — | — | **66%** | 68.8% | 100% | 10% | | Waste recycling | **10%** | — | — | **72%** | 82.4% | 100% | 10% | | **Total** | | | | | | 100% | 100% | The Committee considers that the targets were set at stretching levels taking into account the business plan, market conditions at the time the targets were set and the fact that FY2022 was an exceptional trading year for the Group coming out of the COVID-19 pandemic. The Committee committed to reviewing the level of payout in the context of wider Group performance and the shareholder and wider stakeholder experience. As set out in the Annual Statement from the Remuneration Committee Chair, the Committee is comfortable that the formulaic outcome is fair and appropriate in this wider context. As a result, total bonuses awarded to the Executive Directors in respect of FY2023 and reflected in the single figure of remuneration table above were £443,260 to Stephen Burns, £290,509 to Laurence Keen and £172,000 to Melanie Dickinson. 102 Hollywood Bowl Group plc Annual report and accounts 2023 Governance report ### Long-Term Incentive Plan vesting of 2021 awards The LTIP values included in the single total figure of remuneration table for 2023 relate to the 2021 LTIP award. Awards with a face value of 100 per cent of salary were granted to the Executive Directors on 22 July 2021 and, following a three-year performance period ending on 30 September 2023, are due to vest on 22 July 2024. The performance targets are set out below: | Adjusted EPS for the final year of the performance period | Vesting | | --- | --- | | 13.91 pence | 25% | | 13.91 pence – 15.37 pence | Vesting determined on a straight-line basis | | 15.37 pence | 100% | Actual performance achieved was 21.48 pence (audited); therefore, based on performance at the end of the vesting period, the awards will vest in full. No discretion was used by the Remuneration Committee, as the outcome is considered appropriate in the context of overall business performance, further detail of which is set out in the Annual Statement from the Remuneration Committee Chair. ### Long-term incentives awarded in 2023 (audited) Awards were made under the LTIP scheme on 31 January 2023. The following share awards were granted in the form of nil-cost options in accordance with the Remuneration Policy: | Director | Position | Basis of award | Face value | Number of share awards granted | Performance period | | --- | --- | --- | --- | --- | --- | | Stephen Burns | Chief Executive Officer | 150% of salary | £664,890 | 255,825 | 01/10/2022 to 30/09/2025 | | Laurence Keen | Chief Financial Officer | 150% of salary | £435,763 | 167,665 | 01/10/2022 to 30/09/2025 | | Melanie Dickinson | Chief People Officer | 100% of salary | £172,000 | 66,179 | 01/10/2022 to 30/09/2025 | A five-day average share price prior to grant of 259.9 pence was used to calculate the number of awards granted. The following performance targets, which were disclosed in the Directors' Remuneration Report last year, apply to the FY2023 LTIP awards: | Measure | Description | Weighting | Threshold | Target^{1} | Max | | --- | --- | --- | --- | --- | --- | | Adjusted EPS^{1} | Adjusted EPS for the final year of the performance period – FY2025 | 70% | 18.11p (25% payout) | 19.06p (62.5% payout) | 20.01p (100% payout) | | Return on centre invested capital | 20% return on all centre invested capital (refurbs and new centres, excluding maintenance) | 10% | 18% return (50% payout) | 20% return (75% payout) | 22% return (100% payout) | | UK emissions ratio for Scope 1 and Scope 2 | UK intensity ratio (IR) of under 50 | 10% | IR under 58 (50% payout) | IR under 55 (75% payout) | IR under 50 (100% payout) | | UK team member development | 5% of UK team members progressed through internal development programmes | 10% | 4% (50% payout) | 5% (75% payout) | 6% (100% payout) | $^{1}$ Adjusted EPS is defined as stated in the Group's accounts and is subject to such adjustments as the Board, in its discretion, determines are fair and reasonable. $^{2}$ Vesting on a straight-line basis between threshold and target, and target and max performance. ### Payments to past Directors (audited) No payments were made to past Directors in the year under review. ### Payments for loss of office (audited) No payments were made for loss of office in the year under review. Hollywood Bowl Group plc Annual report and accounts 2023 103 ### Annual report on remuneration continued ## Statement of Directors’ shareholdings and share interests (audited) The number of shares of the Company in which current Directors had a beneficial interest, and details of long-term incentive interests as at 30 September 2023, are set out in the table below:  Outstanding scheme interests  September  Beneficially owned shares Total of all scheme Unvested LTIP Scheme interests Vested but Total shares interests and interests subject not subject to unexercised subject to As at As at shareholdings at to performance performance scheme outstanding  October  September  September   conditions measures interests scheme interests    Executive Directors  Stephen Burns   —      Laurence Keen   —     Melanie Dickinson   —     Non-Executive Directors  Peter Boddy — — — —    Rachel Addison — — — — — — — Nick Backhouse — — — —    Julia Porter — — — — — — —  Ivan Schofield — — — —     Claire Tiney — — — —  — — 1 Sharesave awards that have not vested, and deferred bonus shares subject to holding period. 2 LTIP awards that have vested but remain unexercised. 3 Share interests of Stephen Burns, Laurence Keen, Peter Boddy and Ivan Schofield include shares held by their spouses. 4 Stepped down as a Director with effect from 30 January 2023. ## Directors’ share ownership guidelines (audited) Shareholding requirements in operation at the Company are currently 200 per cent of base salary. Executive Directors are required to build their shareholdings over a five-year period from appointment. Upon departure, individuals will be required to retain 100 per cent of their shareholding requirement (or full actual holding if lower) for a period of two years post cessation. Non-Executive Directors are not subject to a shareholding requirement. Beneficially Shareholding Current owned shares requirement shareholding held as at (percentage of (percentage  September Shareholding  Director salary) of salary)  requirement met? Stephen Burns    Yes Laurence Keen    Yes Melanie Dickinson    Yes 1 The share price of 247.5 pence as at 30 September 2023 has been used to calculate the current shareholding as a percentage of salary. Unvested LTIP shares and options do not count towards satisfaction of the shareholding guidelines. Hollywood Bowl Group plc ## 104 Annual report and accounts 2023 Governance report ## Executive Directors' share plan interest movements during FY2023 (audited) The tables below set out the Executive Directors' interests in the LTIP scheme and the Sharesave scheme. Awards under the Sharesave scheme are not subject to any performance conditions (other than continued employment on the vesting date). Deferred shares are not subject to any performance conditions or continued employment. The LTIP awards are subject to performance conditions as set out in the table on pages 103 and 114. Face values for LTIP awards are calculated by multiplying the number of shares granted during FY2023 by the average share price for the five business days preceding the awards. Face value for the Sharesave scheme is calculated by reference to the exercise price of options granted in 2023. | | Date of award | Vesting, exercise or release date^{1} | No. of shares/ awards held as at 1 October 2022 | Awarded | Exercised/ vested | Lapsed | No. of shares/ awards held as at 30 September 2023 | Grant/award price in pence (exercise price for Sharesave) | Face value of awards granted during FY2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Stephen Burns** | | | | | | | | | | | LTIP | 06/02/2018 | 06/02/2023 | 105,507 | — | 105,507 | — | — | — | — | | | 06/02/2020 | 06/02/2023 | 134,118 | — | 134,118 | — | — | — | — | | | 22/07/2021 | 22/07/2024 | 165,696 | — | — | — | 165,696 | — | — | | | 04/02/2022 | 04/02/2025 | 164,015 | — | — | — | 164,015 | — | — | | | 31/01/2023 | 31/01/2026 | — | 255,825 | — | — | 255,825 | 259.9 | £664,890 | | Sharesave | 05/02/2020 | 01/02/2023 | 1,250 | — | — | 1,250 | — | — | — | | | 08/02/2022 | 01/02/2025 | 1,265 | — | — | — | 1,265 | — | — | | | 08/02/2023 | 01/02/2026 | — | 1,481 | — | — | 1,481 | 243.0 | £3,600 | | **Laurence Keen** | | | | | | | | | | | LTIP | 06/02/2018 | 06/02/2021 | 71,744 | — | 71,444 | — | — | — | — | | | 06/02/2020 | 06/02/2023 | 87,090 | — | 87,090 | — | — | — | — | | | 22/07/2021 | 22/07/2024 | 107,594 | — | — | — | 107,594 | — | — | | | 04/02/2022 | 04/04/2025 | 106,503 | — | — | — | 106,503 | — | — | | | 31/01/2023 | 31/01/2023 | — | 167,665 | — | — | 167,665 | 259.9 | £435,763 | | Sharesave | 05/02/2020 | 01/02/2023 | 1,250 | — | — | 1,250 | — | — | — | | | 08/02/2022 | 01/02/2025 | 1,265 | — | — | — | 1,265 | — | — | | | 08/02/2023 | 01/02/2025 | — | 1,777 | — | — | 1,777 | 243.0 | £4,320 | | **Melanie Dickinson** | | | | | | | | | | | LTIP | 06/02/2018 | 06/02/2021 | 46,423 | — | 46,423 | — | — | — | — | | | 06/02/2020 | 06/02/2023 | 47,028 | — | 47,028 | — | — | — | — | | | 22/07/2021 | 22/07/2024 | 58,101 | — | — | — | 58,101 | — | — | | | 04/02/2022 | 04/02/2025 | 63,643 | — | — | — | 63,643 | — | — | | | 31/01/2023 | 31/01/2026 | — | 66,179 | — | — | 66,179 | 259.9 | £172,000 | | Sharesave | 08/02/2022 | 01/02/2025 | 1,898 | — | — | — | 1,898 | — | — | | | 08/02/2023 | 01/02/2026 | — | 2,222 | — | — | 2,222 | 243.0 | £5,400 | 1 LTIP awards from 2019 onwards are subject to a post-vesting holding period pursuant to which the shares acquired on exercise (other than any shares sold to satisfy any tax or national insurance liability) must be retained for a period of two years following the vesting date. LTIPs awarded in February 2020 were exercised by the Executive Directors in February 2023. Due to an administrative error, each Executive Director sold the shares acquired on exercise. In order to rectify this administrative error they have agreed in writing that an amount of their own beneficial shareholding equivalent to the number of shares that should have been subject to the two-year holding period will be subject to the same restrictions and terms and conditions as would have applied under the original holding period. The LTIP awarded in 2021 vested on the basis of adjusted EPS performance measured in the final year of the performance period. As noted on page 103, the EPS target for the award made in 2021 has been met, and therefore the awards will vest in full on 22 July 2024. The targets that apply to the award made in 2023 are shown on page 103. Hollywood Bowl Group plc Annual report and accounts 2023 105 Annual report on remuneration continued ## Chief Executive Officer historical remuneration The table below sets out the total remuneration delivered to the Chief Executive Officer over the last seven years since IPO, valued using the methodology applied to the single total figure of remuneration. The Remuneration Committee does not believe that the remuneration paid in earlier years as a private company bears any comparative value to that paid in its time as a public company and, therefore, the Remuneration Committee has chosen to disclose remuneration only for the seven most recent financial years: | Chief Executive Officer | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | --- | --- | --- | --- | --- | --- | --- | --- | | Total single figure (£'000) | **1,351.1** | 1,225.9 | 414.8 | 623.2 | 1,061.1 | 536.1 | 514.6 | | Annual bonus payment level achieved (percentage of maximum opportunity) | **100%** | 100% | 0% | 0% | 74.3% | 68.1% | 100% | | LTIP vesting level achieved (percentage of maximum opportunity) | **100%** | 100% | 0% | 81% | 100% | N/A | N/A | ## Performance graph The graph below shows the total shareholder return (TSR) performance of an investment of £100 in Hollywood Bowl Group plc's shares from its listing in September 2016 to the end of the year under review, compared with £100 invested in the FTSE Small Cap Index over the same period. The FTSE Small Cap Index was chosen as a comparator because it represents a broad equity market index of which the Company is a constituent. ![img-10.jpeg](img-10.jpeg) 106 Hollywood Bowl Group plc Annual report and accounts 2023 Governance report ## Change in remuneration of Directors compared to Group employees The table below sets out the percentage change in salary, taxable benefits and annual bonus set out in the single figure of remuneration tables (on page 106) paid to each Director in respect of FY2021, FY2022 and FY2023, compared to that of the average change for employees in the Group as a whole. | | Change % (FY2022 to FY2023) | | | Change % (FY2021 to FY2022) | | | Change % (FY2020 to FY2021) | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Salary and fees | Taxable benefits | Annual bonus | Salary and fees | Taxable benefits | Annual bonus | Salary and fees | Taxable benefits | Annual bonus | | **Executive Directors** | | | | | | | | | | | Stephen Burns | 7.5 | (1.7) | 7.5 | 5.0 | 1,100 | 100 | 0.2 | (9.1) | — | | Laurence Keen | 8.5 | 1.1 | 8.5 | 5.3 | 1,074 | 100 | 0.2 | (2.4) | — | | Melanie Dickinson^{2} | 13.6 | 38.2 | 7.5 | — | — | — | — | — | — | | **Non-Executive Directors** | | | | | | | | | | | Peter Boddy | 4.7 | N/A | N/A | 11.3 | — | — | (1.6) | — | — | | Rachel Addison | N/A | N/A | N/A | — | — | — | — | — | — | | Nick Backhouse | 4.3 | N/A | N/A | 11.1 | — | — | (1.6) | — | — | | Julia Porter | N/A | N/A | N/A | — | — | — | — | — | — | | Ivan Schofield | 6.5 | N/A | N/A | 11.3 | — | — | (1.6) | — | — | | Claire Tiney (until 30 January 2023) | 3.7 | N/A | N/A | 11.5 | — | — | (1.6) | — | — | | **All Group employees^{1}** | **7.4** | **50.5** | **(28.2)** | **10.9** | **(25.0)** | **392.4** | **4.2** | **(2.5)** | **496.7** | 1 For FY2022 and FY2021 this reflects the change in average pay for all UK Group employees employed in both years. For FY2023 this reflects all UK Group employees employed during FY2023. 2 Melanie Dickinson was appointed as an Executive Director with effect from 21 October 2021, therefore the fixed pay increases are impacted by not being an Executive Director for the whole of FY2022. ## CEO pay ratio The table below shows the ratio between the single total figure of remuneration of the CEO for FY2023 and the lower quartile, median and upper quartile pay of UK employees. | | Methodology | 25th percentile ratio | 50th percentile ratio | 75th percentile ratio | | --- | --- | --- | --- | --- | | Year ended 30 September 2023 | Option A | 72 | 69 | 55 | | Year ended 30 September 2022 | Option A | 68 | 63 | 41 | | Year ended 30 September 2021 | Option A | 27 | 25 | 22 | | Year ended 30 September 2020 | Option A | 50 | 44 | 38 | ### Total UK employee pay and benefits figures used to calculate the CEO pay ratio | | 25th percentile pay £'000 | Median pay £'000 | 75th percentile pay £'000 | | --- | --- | --- | --- | | Salary | 18.5 | 19.1 | 23.0 | | Total employee pay and benefits | 19.3 | 20.2 | 25.5 | #### Notes 1 The Group has chosen the Option A methodology to prepare the CEO pay ratio calculation, as this is the most statistically robust method, and is in line with the general preference of institutional investors. 2 As ratios could be unduly impacted by joiners and leavers who may not participate in all remuneration arrangements in the year of joining and leaving, the Committee has excluded any employee not employed throughout the financial year. 3 Employee pay data is based on full-time equivalent (FTE) pay for UK employees as at 30 September 2023. For each employee, total pay is calculated in line with the single figure methodology (i.e. fixed pay accrued during the financial year and the value of performance-based incentive awards vesting in relation to the performance year). Leavers and joiners are excluded. Employees on maternity or other extended leave are included pro-rata for their FTE salary, benefits and short-term incentives. No other calculation adjustments or assumptions have been made. 4 CEO pay is per the single total figure of remuneration for 2023, as set out in the table on page 106. Hollywood Bowl Group plc Annual report and accounts 2023 107 ### Annual report on remuneration continued ## CEO pay ratio continued Supporting information for the CEO pay ratio The calculations used to determine these figures are reflective of the Group’s pay proposition across the workforce, as all pay elements have been included to ensure equal comparisons. The pay ratio has increased slightly this year primarily due to the majority of the CEO’s package being linked to performance related pay with the LTIP value being linked to share price performance. There has been no trend over the 4 years being reported with the pay ratio increasing in some years and decreasing in others. The Committee believes that the pay ratio is consistent with the pay, reward, and progression policies for the UK employees taken as a whole. ## Relative importance of the spend on pay The table below sets out the relative importance of the spend on pay in FY2022 and FY2023 compared with other disbursements. All figures provided are taken from the relevant Company accounts. Disbursements Disbursements from profit in from profit in FY FY Percentage m m change Profit distributed by way of dividend    Overall spend on pay including Executive Directors    ## Shareholder voting at General Meetings The following table shows the results of the advisory vote on the Directors’ Remuneration Report at our 2023 AGM, and the binding vote on our current Remuneration Policy, at our 2022 AGM: Approval of the Directors’ Remuneration Report Approval of the Directors’ Remuneration Policy ( AGM) ( AGM) Total number of votes  of votes cast Total number of votes  of votes cast For (including discretionary)     Against     Votes withheld  N/A  N/A ## External board appointments Where Board approval is given for an Executive Director to accept an outside non-executive directorship, the individual is entitled to retain any fees received. Stephen Burns is Non-Executive Chairman of The Inn Collection for which he receives an annual fee of £70,000. Laurence Keen served as a Non-Executive Director (and Senior Independent Director and Chair of the Audit Committee) of Tortilla Mexican Grill plc until 16 May 2023, for which he received an annual fee of £40,000. ## Service agreements and letters of appointment Each of the Executive Directors’ service agreements is for a rolling term, and may be terminated by the Company or the Executive Director by giving six months’ notice. The Remuneration Committee’s policy for setting notice periods is that a six-month period will apply for Executive Directors. The Remuneration Committee may in exceptional circumstances arising on recruitment allow a longer period, which would in any event reduce to six months following the first year of employment. Notice period by Company Notice period by Director Name Position Date of service agreement (months) (months) Stephen Burns CEO  June    Laurence Keen CFO  June    Melanie Dickinson CPO  October    The Non-Executive Directors of the Company (including the Chairman) do not have service contracts; rather they are appointed by letters of appointment. Their terms are subject to their re-election by the Company’s shareholders at the AGM scheduled to be held on 29 January 2024 and to re-election at any subsequent AGM at which the Non-Executive Directors stand for re-election. In line with our agreed Non-Executive Director succession plans, Nick Backhouse will not seek re-election at the 2024 AGM. Hollywood Bowl Group plc ## 108 Annual report and accounts 2023 Service agreements and letters of appointment continued The details of each Non-Executive Director’s current terms are set out below: Unexpired term as at Name Date of appointment Commencement date of current term  December  Peter Boddy  June   September   year,  months Rachel Addison  September   September   years,  months Nick Backhouse  June   June   year,  months Julia Porter  September   September   year,  months Ivan Schofield  October   October   years,  months ## Composition and terms of reference of the Remuneration Committee Governance report The Board has delegated to the Remuneration Committee, under the agreed terms of reference, responsibility for the Remuneration Policy and for determining specific remuneration packages for the Chairman, Executive Directors and such other senior employees of the Group as the Board may determine from time to time. The terms of reference for the Remuneration Committee were reviewed during the year, and are available on the Company’s website, www.hollywoodbowlgroup.com, and from the Company Secretary at the registered office. All members of the Remuneration Committee are Non-Executive Directors. The Remuneration Committee receives assistance from the Chairman, CEO, CFO, CPO and Company Secretary, who attend meetings by invitation, except when issues relating to their own remuneration are being discussed. The Remuneration Committee met four times during the year. All members attended each meeting. ## Advisers to the Remuneration Committee During the financial year, the Committee received advice from Deloitte on all aspects of the Remuneration Policy for the Executive Directors and members of the executive team. The Remuneration Committee is satisfied that the advice received from Deloitte during the year was objective and independent. Deloitte is a member of the Remuneration Consultants Group, with the voluntary code of conduct of that body designed to ensure that objective and independent advice is given to remuneration committees. During the year to 30 September 2023, fees of £30,900 were paid to Deloitte for its advice to the Committee. Other than in its role as remuneration adviser, Deloitte has no other connection with the Company or any individual Directors. ## Consideration of conditions elsewhere in the Company The Remuneration Committee considers pay and employment conditions across the Company when reviewing the remuneration of the Executive Directors and other senior employees. In particular, the Remuneration Committee considers the range of base pay increases across the Group, further detail of which is set out in the Remuneration Committee Chair’s letter. The Committee supports the Board’s initiative to ensure employee views and concerns are taken into account in its decision making and has a clear understanding of pay and benefits at all team member levels in the Group. This includes decisions relating to the remuneration arrangements for senior management, the Executive Directors and centre managers. ## Consideration of shareholder views The Remuneration Committee considers shareholder feedback received in relation to the AGM each year and guidance from shareholder representative bodies more generally. The Committee has not had cause to engage directly with shareholders on executive remuneration matters during FY2023. Our Directors’ Remuneration Policy is due to be submitted to shareholders for approval at our 2025 AGM. The Committee will review the Policy during FY2024, and will engage with shareholders in the event that any material changes are proposed. Hollywood Bowl Group plc ## Annual report and accounts 2023 109 ### Annual report on remuneration continued ## Summary of Remuneration Policy and Implementation in FY2024 The key features of the Directors’ Remuneration Policy approved by shareholders at our 2022 AGM, and the intended implementation of the policy in FY2024, are summarised below. The full Policy can be found on the Company’s website, www.hollywoodbowlgroup.com, in the ‘Investors’ section, under ‘Reports and presentations’, in our FY2021 Annual Report. Salary Executive Director salaries Provides a base level of remuneration to support the recruitment and retention of Executive Directors with the necessary experience and expertise to deliver the Company’s strategy. Operation Salaries are normally reviewed annually and any changes are effective from 1 October. When determining an appropriate level of salary, the Remuneration Committee considers: • remuneration practices within the Company; • the performance of the individual Executive Director; • the individual Executive Director’s experience and responsibilities; • the general performance of the Company; • salaries within the ranges paid by companies in the comparator group used for remuneration benchmarking; and • the economic environment. Opportunity Base salaries will be set at an appropriate level with a comparator group of comparably sized companies and will normally increase with increases made to the wider employee workforce. Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below the targeted Policy level until they become established in their role. In such cases subsequent increases in salary may be higher than the average until the target positioning is achieved. Performance metrics None. used, weighting and time period applicable Chairman and Non-Executive Director fees Provides a level of fees to support recruitment and retention of Non-Executive Directors with the necessary experience to advise and assist with establishing and monitoring the Company’s strategic objectives. Operation The Board as a whole is responsible for setting the remuneration of the Non-Executive Directors, other than the Chairman, whose remuneration is considered by the Remuneration Committee and recommended to the Board. Non-Executive Directors are paid a base fee. An additional payment is paid to the Senior Independent Director in respect of the additional duties of this role. No additional fees are paid to Non-Executive Directors or the Chairman of the Company for the membership or chairmanship of Committees. Fees are reviewed annually, based on equivalent roles in an appropriate comparator group used to review salaries paid to the Executive Directors. Non-Executive Directors do not participate in any variable remuneration or benefits arrangements. Opportunity The base fees for Non-Executive Directors are set with reference to the market rate. In general, the level of fee increase for the Non-Executive Directors will be set taking account of any change in responsibility and will take into account the general rise in salaries across the UK workforce. The Company will pay reasonable expenses incurred by the Chairman and Non-Executive Directors. Performance metrics None. used, weighting and time period applicable Hollywood Bowl Group plc ## 110 Annual report and accounts 2023 FY2024 implementation The Executive Director salaries, and Non-Executive Director fees, for FY2024 (effective from 1 October 2023) are set out below. The rationale for these increases is set out in the Annual Statement from the Remuneration Committee Chair: Salary Percentage Name   change Stephen Burns    Laurence Keen    Melanie Dickinson    The Board approved the increase of fees for the Non-Executive Directors by 5.0 per cent with effect from 1 October 2023, with this increase being below the average increase for the wider workforce. The Committee approved an increase to the Chairman’s fee of Governance report 5.0 per cent, also with effect from 1 October 2023. Chairman fee  Senior Independent Director fee  Base fee  Chair of Audit Committee fee No additional fee Chair of Remuneration Committee fee No additional fee Benefits and pension Benefits Provides a competitive level of benefits. Operation The Executive Directors receive benefits which include, but are not limited to, family private health cover, death in service life assurance, income protection insurance, car allowance, and travel expenses for business-related travel (including tax if any). The Remuneration Committee recognises the need to maintain suitable flexibility in the determination of benefits that ensure it is able to support the objective of attracting and retaining employees. Accordingly, the Remuneration Committee would expect to be able to adopt benefits such as relocation expenses, tax equalisation and support in meeting specific costs incurred by the Directors. Opportunity The maximum will be set at the cost of providing the benefits described. Performance metrics None. used, weighting and time period applicable Pensions Provides market competitive retirement benefits. Operation The Committee retains discretion to provide pension funding in the form of a salary supplement or a direct contribution to a pension scheme. Any salary supplement would not form part of the salary for the purposes of determining the extent of participation in the Company’s incentive arrangements. Opportunity The current Executive Directors receive pension funding equal to 5 per cent of base salary. Future incoming Executive Directors will receive pension funding in line with the level received by the wider employee workforce. Performance metrics None. used, weighting and time period applicable FY2024 implementation No changes are proposed to benefits or pension. Hollywood Bowl Group plc ## Annual report and accounts 2023 111 ### Annual report on remuneration continued ## Summary of Remuneration Policy and Implementation in FY2024 ## continued Annual bonus plan Annual bonus plan Provides a significant incentive to the Executive Directors linked to achievement in delivering goals that are closely aligned with the Company’s strategy and the creation of value for shareholders. Provides market competitive retirement benefits. Operation The Remuneration Committee will determine the bonus payable after the year end based on performance against objectives and targets. Bonus payments per individual will be both proportionate to the overall size of the bonus pot and each individual’s performance versus their personal objectives. Annual bonuses are paid part in cash and part in shares deferred for two years. The maximum proportion of an annual bonus which may be paid in cash is 65 per cent. It should be noted that the Remuneration Committee has taken the view that due to their considerable shareholdings in the Company, automatic deferral of annual bonuses into shares is unnecessary for the current Executive Directors. As such the Remuneration Committee intends to pay annual bonuses to the current Executive Directors in cash, but will retain the ability to apply an appropriate level of deferral following any material sell down to ensure that shareholding requirements continue to be met. On change of control, the Remuneration Committee may pay bonuses on a pro-rata basis measured on performance up to the date of change of control. Malus and clawback provisions will apply to enable the Company to recover sums paid or withhold the payment of any sum in the event of a material misstatement resulting in an adjustment to the audited consolidated accounts of the Company or action or conduct which, in the reasonable opinion of the Board, amounts to employee misbehaviour, fraud or gross misconduct. Opportunity The maximum bonus opportunity is 100 per cent of base salary. Performance metrics The annual bonus outcomes will be determined based on achievement of a scorecard of financial and strategic targets, used, weighting and with at least half of the bonus being based on financial performance. time period applicable The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance measures part-way through a performance year if there is a significant and material event which causes the Remuneration Committee to believe that the original measures, weightings and targets are no longer appropriate. Discretion may also be exercised in cases where the Remuneration Committee believes that the bonus outcomes are not a fair and accurate reflection of business performance. The Remuneration Committee considers that the detailed performance targets used for the annual bonus awards are commercially sensitive and that disclosing precise targets for the annual bonus plan in advance would not be in shareholder interests. Actual targets, performance achieved, and awards made will be disclosed at the end of the performance period so that shareholders can fully assess the basis for any payouts under the annual bonus plan. FY2024 implementation The maximum bonus opportunity for the Executive Directors will remain at 100 per cent of salary. Annual bonus outcomes will again be based on a scorecard of financial and non-financial performance targets which are aligned to the business strategy. The agreed measures and weightings for the FY2024 annual bonus are as follows: Metric Weighting Group adjusted EBITDA  Average Group OBI  Waste recycling  The Remuneration Committee considers that the detailed performance targets for the FY2024 annual bonus awards are commercially sensitive and that disclosing precise targets for the annual bonus plan in advance would not be in shareholder interests. Actual targets, performance against them, and the resulting awards will be disclosed in the FY2024 Annual Report so that shareholders can fully assess the basis for any payouts under the annual bonus plan. Hollywood Bowl Group plc ## 112 Annual report and accounts 2023 Long-Term Incentive Plan (LTIP) Incentivises the Executive Directors to maximise total shareholder returns by successfully delivering the Company’s long-term objectives and to share in the resulting increase in total shareholder value. Operation Awards are granted annually in the form of nil-cost options or conditional awards of shares. These will vest at the end of a three-year period subject to: • the Executive Directors’ continued employment at the date of vesting; and • satisfaction of the performance conditions. A further two-year holding period will apply post vesting. Governance report The Remuneration Committee may award dividend equivalents on awards to the extent that these vest. Malus and clawback provisions will apply to enable the Company to recover sums paid or withhold the payment of any sum in the event of a material misstatement resulting in an adjustment to the audited consolidated accounts of the Company or action or conduct which, in the reasonable opinion of the Board, amounts to employee misbehaviour, fraud or gross misconduct. Opportunity Award maximum of 150 per cent of base salary. Performance metrics The majority of awards will be subject to financial performance targets, with the balance based on strategic metrics. used, weighting and time period applicable The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance measures part-way through a performance period if there is a significant and material event which causes the Remuneration Committee to believe the original measures, weightings and targets are no longer appropriate. Discretion may also be exercised in cases where the Remuneration Committee believes that the vesting outcome is not a fair and accurate reflection of business performance. Hollywood Bowl Group plc ## Annual report and accounts 2023 113 ### Annual report on remuneration continued FY2024 implementation Awards will be made in FY2024 under the LTIP. The LTIP awards for the Executive Directors will be as follows: • CEO 150 per cent of salary; • CFO 150 per cent of salary; and • CPO 100 per cent of salary. These awards will vest three years after grant and will be subject to a further two-year holding period. The following performance targets will apply to the FY2024 LTIP awards: Measure Description Weighting Threshold Target Max  Adjusted EPS Adjusted EPS for the final year of the   pence  pence  pence performance period – FY ( payout) ( payout) ( payout) Return on centre  return on all centre invested   return  return  return invested capital capital (refurbs and new centres) ( payout) ( payout) ( payout) UK emissions ratio for UK intensity ratio (IR) of under   IR at  IR at  IR at  Scope  and Scope  ( payout) ( payout) ( payout) UK team member  of UK team members     development progressed through internal ( payout) ( payout) ( payout) development programmes 1 Adjusted EPS is defined as stated in the Group’s accounts and is subject to such adjustments as the Board, in its discretion, determines are fair and reasonable. Vesting occurs on a straight-line basis between threshold and target, and target and max performance. The Committee believes these targets to be stretching in the context of the business plan, analyst consensus forecasts and the wider economic environment. As disclosed last year, the Committee moved from cliff vesting to a threshold to maximum range for the return on centre invested capital, intensity ratio and team member development measures so that additional stretch could be built in and reducing the pay-out for target performance. The Committee is of the view that retaining the current structure, measures and weightings is appropriate for the 2024 LTIP, but will review this as part of the wider Remuneration Policy review next year. On behalf of the Board Julia Porter Chair of the Remuneration Committee 17 December 2023 Hollywood Bowl Group plc ## 114 Annual report and accounts 2023 ## Directors' report The Directors present their report for the year ended 30 September 2023. Additional information which is incorporated by reference into this Directors' Report, including information required in accordance with the Companies Act 2006 and the Listing Rule 9.84R of the UK Financial Conduct Authority's Listing Rules, can be located as follows: | Disclosure | Location | | --- | --- | | Future business developments | Strategic report – pages 2 to 45 | | Greenhouse gas emissions | Sustainability – page 55 | | People, culture and employee engagement | Sustainability – pages 50 and 51 | | Financial risk management objectives and policies (including hedging policy and use of financial instruments) | Note 30 to the Financial Statements – pages 155 and 156 | | Exposure to price risk, credit risk, liquidity risk and cash flow risk | Details can be found on pages 70 to 77 of the Strategic report and note 30 to the Financial Statements | | Statement of compliance with 2018 UK Corporate Governance Code | Corporate Governance report page 82 | | Details of long-term incentive schemes | Annual report on remuneration – pages 102 to 114 | | Directors' responsibilities statement | Page 118 | | Directors' interests | Details can be found on pages 104 and 105 of the Annual Report on Remuneration | | s172 Statement | Details can be found on pages 42 to 45 of the Strategic report | | Stakeholder engagement in key decisions | Details can be found on pages 42 to 45 | ### Directors The Directors of the Company who held office during the year are: | Peter Boddy | (Chairman) | | --- | --- | | Stephen Burns | (Chief Executive Officer) | | Laurence Keen | (Chief Financial Officer) | | Melanie Dickinson | (Chief People Officer) | | Rachel Addison | (Non-Executive Director) (appointed 1 September 2023) | | Nick Backhouse | (Senior Independent Director) | | Julia Porter | (Non-Executive Director) | | Ivan Schofield | (Non-Executive Director) | | Claire Tiney | (Non-Executive Director) (stepped down on 30 January 2023) | The roles and biographies of the Directors in office as at the date of this report are set out on pages 80 and 81. There have been no changes to the Directors between the year end and the date of this report. The appointment and replacement of Directors is governed by the Company's Articles of Association (as detailed below), the UK Corporate Governance Code and the Companies Act 2006. ### Articles of Association The rules governing the appointment and replacement of Directors are set out in the Company's Articles of Association. The Articles of Association may be amended by a special resolution of the Company's shareholders. A copy of the Articles of Association can be found on the Company's website: www.hollywoodbowlgroup.com/investors/corporate-governance. ### Results and dividend The results for the year are set out in the Consolidated income statement on page 128. The Directors recommend the payment of a final dividend of 8.54 pence per share and a special dividend of 2.73 pence per share on 23 February 2024 (with a record date of 2 February 2024) subject to approval at the AGM on 29 January 2024. Governance report Hollywood Bowl Group plc Annual report and accounts 2023 115 ## Directors' report continued ### Share capital Details of the Company's share capital, including changes during the year, are set out in note 23 to the Financial Statements. As at 30 September 2023, the Company's share capital consisted of 171,712,357 ordinary shares of one pence each. Ordinary shareholders are entitled to receive notice of, and to attend and speak at, any general meeting of the Company. On a show of hands, every shareholder present in person or by proxy (or being a corporation represented by a duly authorised representative) shall have one vote, and on a poll every shareholder who is present in person or by proxy shall have one vote for every share of which he or she is the holder. The Notice of Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies. Other than the general provisions of the Articles of Association (and prevailing legislation), there are no specific restrictions on the size of a holding or on the transfer of the ordinary shares. The Directors are not aware of any agreements between holders of the Company's shares that may result in the restriction of the transfer of securities or of voting rights. No shareholder holds securities carrying any special rights or control over the Company's share capital. Shares held by the Company's Employee Benefit Trust rank pari passu with the shares in issue and have no special rights, but voting rights and rights of acceptance of any offer relating to the shares rest with the plan's Trustees and are not exercisable by employees. ### Authority for the Company to purchase its own shares Subject to authorisation by shareholder resolution, the Company may purchase its own shares in accordance with the Companies Act 2006. Any shares which have been bought back may be held as treasury shares or cancelled immediately upon completion of the purchase. At the Company's AGM held on 30 January 2023, the Company was generally and unconditionally authorised by its shareholders to make market purchases (within the meaning of section 693 of the Companies Act 2006) of up to a maximum of 17,107,009 of its ordinary shares. The Company has not repurchased any of its ordinary shares under this authority, which is due to expire at the AGM to be held on 29 January 2024, and accordingly has an unexpired authority to purchase up to 17,107,009 ordinary shares with a nominal value of £171,070.09. ### Directors' interests The number of ordinary shares of the Company in which the Directors were beneficially interested as at 30 September 2023 are set out in the Annual Report on Remuneration on page 104. ### Directors' indemnities The Company's Articles of Association provide, subject to the provisions of UK legislation, an indemnity for Directors and officers of the Company and the Group in respect of liabilities they may incur in the discharge of their duties or in the exercise of their powers. ### Directors' and officers' liability insurance Directors' and officers' liability insurance cover is maintained by the Company and is in place in respect of all the Company's Directors at the date of this report. The Company reviews its level of cover on an annual basis. ### Compensation for loss of office The Company does not have any agreements with any Executive Director or employee that would provide compensation for loss of office or employment resulting from a takeover except that provisions of the Company share schemes may cause options and awards outstanding under such schemes to vest on a takeover. Further information is provided in our Directors' Remuneration Policy approved by shareholders at the 2022 AGM, and can be found on page 78 of our FY2021 Annual Report which is available on our website. ### Significant interests The table below shows the interests in shares (whether directly or indirectly held) notified to the Company in accordance with the Disclosure Guidance and Transparency Rules as at 30 September 2023 and 15 December 2023 (being the latest practicable date prior to publication of the Annual Report): | Name of shareholder | At 30 September 2023 | | At 15 December 2023 | | | --- | --- | --- | --- | --- | | | Number of ordinary shares of 1 pence each held | Percentage of total voting rights held | Number of ordinary shares of 1 pence each held | Percentage of total voting rights held | | Aggregate of abrdn plc affiliated investment management entities with delegated voting rights on behalf of multiple managed portfolios | 29,059,165 | 16.92% | 29,074,520 | 16.93% | | Slater Investments Limited | 9,897,058 | 5.79% | 9,897,058 | 5.79% | | Schroders plc | 9,092,419 | 5.32% | 9,092,419 | 5.32% | | Ameriprise Financial, Inc. and its group (Columbia Threadneedle) | 8,611,524 | 5.03% | 8,611,524 | 5.03% | | JP Morgan Asset Management Holdings Inc. | 8,602,007 | 5.03% | 8,602,007 | 5.03% | | Invesco Ltd | 8,532,674 | 4.98% | 8,532,674 | 4.98% | | AXA Investment Managers | 8,515,529 | 4.98% | 8,515,529 | 4.98% | 116 Hollywood Bowl Group plc Annual report and accounts 2023 Governance report ## Employee involvement and policy regarding disabled persons The Group actively encourages employee involvement and consultation and places emphasis on keeping its employees informed of the Group's activities and financial performance by such means as employee briefings and publication (via the Group's intranet) to all staff of relevant information and corporate announcements. The Group also publishes a weekly staff bulletin. Regular updates on team member engagement activity are provided to the Board by the Chief Executive Officer, Chief People Officer and Chief Operating Officer. These included feedback from regular team member engagement sessions, operational training and induction sessions. Further information about employees, including how they are incentivised, can be found in the Sustainability section on pages 50 and 51. Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of a member of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a disabled member of staff should, as far as possible, be identical to that of other employees. ## Branches outside the UK The Company has 9 centres outside of the UK, in Canada as at 30 September 2023. ## Political donations The Company did not make any political donations during the year. ## Change of control – significant agreements There are a number of agreements that may take effect after, or terminate upon, a change of control of the Company, such as commercial contracts, bank loan agreements and property lease arrangements. None of these are considered to be significant in terms of their likely impact on the business as a whole. ## Audit information Each of the Directors at the date of the approval of this report confirms that: - so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and - the Director has taken all the reasonable steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of the information. The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. ## Auditor KPMG has indicated its willingness to continue in office and a resolution seeking to reappoint KPMG will be proposed at the forthcoming AGM. ## Annual General Meeting The 2024 AGM of the Company will be held on 29 January 2024 at 9:30am. The notice convening the meeting, together with details of the business to be considered and explanatory notes for each resolution, will be published separately and will be available on the Company's website and distributed to shareholders who have elected to receive hard copies of shareholder information. The Strategic report on pages 2 to 77, the Corporate governance report on pages 78 to 118 and this Directors' Report have been drawn up and presented in accordance with, and in reliance upon, applicable English company law and any liability of the Directors in connection with these reports shall be subject to the limitations and restrictions provided by such law. By order of the Board **Laurence Keen** Chief Financial Officer 17 December 2023 Hollywood Bowl Group plc Annual report and accounts 2023 117 ### Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant, reliable and prudent; • for the Group Financial Statements, state whether they have been prepared in accordance with UK-adopted international accounting standards; • for the Parent Company Financial Statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Parent Company Financial Statements; • assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions, and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors’ report, Directors’ remuneration report and corporate governance statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements will form part of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation. The Auditor’s report on these financial statements provides no assurance over the ESEF format. Responsibility statement of the Directors in respect of the annual financial report We confirm that to the best of our knowledge: • the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. We consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. By order of the Board Stephen Burns Laurence Keen Chief Executive Officer Chief Financial Officer 17 December 2023 17 December 2023 Hollywood Bowl Group plc ## 118 Annual report and accounts 2023 ## Financial statements 120 Independent auditor’s report 128 Consolidated income statement and statement of comprehensive income 129 Consolidated statement of financial position 130 Consolidated statement of changes in equity 131 Consolidated statement of cash flows 132 Notes to the financial statements 158 Company statement of financial position 159 Company statement of changes in equity 159 Company statement of cash flows 160 Notes to the Company financial statements 166 Company information Hollywood Bowl Group plc ## Annual report and accounts 2023 119 Independent auditor’s report To the members of Hollywood Bowl Group plc 1. Our opinion is unmodified Overview We have audited the financial statements of Hollywood Bowl Group Materiality: m (: m) plc (“the Company”) for the year ended 30 September 2023 which Group financial statements  (: ) of adjusted comprise the Consolidated Income Statement and Statement of as a whole profit before tax Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement Coverage  (: ) of group profit of Cash Flows, Company Statement of Financial Position, Company before tax Statement of Changes in Equity, Company Statement of Cash Flows, Key audit matters vs  and the related notes, including the accounting policies in note 2. Recurring risks Valuation of property, plant In our opinion: and equipment and right of use assets relating to the • the financial statements give a true and fair view of the state of the golfing centres Group’s and of the parent Company’s affairs as at 30 September 2023 and of the Group’s profit for the year then ended; Recoverability of parent company investment in • the Group financial statements have been properly prepared in subsidiaries / amounts accordance with UK-adopted international accounting standards; due from group entities • the parent Company financial statements have been properly Event driven New: Valuation of acquisition- prepared in accordance with UK accounting standards, including related intangible assets FRS 102, The Financial Reporting Standard applicable in the UK arising from the current year and Republic of Ireland; and acquisition in Canada • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 2. Key audit matters: our assessment of risks Basis for opinion of material misstatement We conducted our audit in accordance with International Standards Key audit matters are those matters that, in our professional on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities judgement, were of most significance in the audit of the financial are described below. We believe that the audit evidence we have statements and include the most significant assessed risks of obtained is a sufficient and appropriate basis for our opinion. Our material misstatement (whether or not due to fraud) identified by us, audit opinion is consistent with our report to the audit committee. including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the We were first appointed as auditor by the directors on 2 June 2016. efforts of the engagement team. We summarise below the key audit The period of total uninterrupted engagement is for the eight financial matters, in decreasing order of audit significance, in arriving at our years ended 30 September 2023. We have fulfilled our ethical audit opinion above, together with our key audit procedures to responsibilities under, and we remain independent of the Group in address those matters and, as required for public interest entities, accordance with, UK ethical requirements including the FRC Ethical our results from those procedures. These matters were addressed, Standard as applied to listed public interest entities. No non-audit and our results are based on procedures undertaken, in the context services prohibited by that standard were provided. of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. Hollywood Bowl Group plc ## 120 Annual report and accounts 2023 2. Key audit matters: our assessment of risks of material misstatement continued The risk Our response Valuation of property, plant and Forecast based valuation: We performed the detailed tests below rather equipment and right of use assets The Group has significant property, plant and than seek to rely on any of the group’s controls relating to the golfing centres equipment (PPE), and right of use assets held because our knowledge of the design of these Carrying amount of golfing centres on its consolidated balance sheet. controls indicated that we would not be able to within property, plant and equipment of obtain the required evidence to support reliance The estimated recoverable amount is £2.2m (2022: £3.5m) and right of use on controls. subjective due to the inherent uncertainty assets of £1.7m (2022: £3.2m) involved in forecasting and discounting future Our procedures included: Included within impairment charge: cash flows. The key assumptions used in the • Assessing principles: We evaluated whether Impairment charge related to golfing value in use (“VIU”) calculations for estimating the inputs used in the Group’s assessment of centres of £1.6m for property, plant and the recoverable amount are expected revenues impairment indicators were suitable, through equipment (2022: £2.5m) and £1.3m for and costs in the short-term cash flow forecasts, discussions with management, our own right of use assets (2022: £1.8m). the long-term growth rate and the discount rate. knowledge of the business and market, | Refer to page 95 (Audit Committee | The golfing centres have performed below | | inspection of Board minutes and other | | --- | --- | --- | --- | | Report), page 137 (accounting policy), | budget for the year and future economic | | management information. | | pages 145 and 148 (financial disclosures). | forecasts, characterised by high consumer | • Re-performance: We re-performed the | | | | price inflation, high interest rates and the | | calculations that management performed for | | | consequent erosion of real disposable | | the initial trigger test in determining the VIU of | | | incomes, increases this risk further. | | each cash generating unit and compared data | used in the model against source information, The effect of these matters is that, as when applicable. part of our risk assessment for audit planning purposes, we determined that the VIU of the • Our experience: For the golfing centres Financial statements golfing centres had a high degree of estimation where indications of impairment existed, uncertainty, with a potential range of reasonable we evaluated the assumptions used in the outcomes greater than our materiality for forecasts and plans by management, in the financial statements as a whole. particular those relating to EBITDA growth for the centres. We also challenged management as to the achievability of their forecasts and business plan, taking into account the historical accuracy of previous forecasts, wider market factors (such as market expectation of the Group’s performance) and other specific evidence to support the assumptions. • Benchmarking assumptions: We compared management’s assumptions to externally derived data in relation to key inputs such as projected economic growth, cost inflation and discount rates. • Sensitivity analysis: We performed sensitivity analysis to stress test the assumptions noted above. • Assessing disclosures: We also assessed whether the Group’s disclosures about the sensitivity of the outcome of the impairment assessment to changes in key assumptions reflected the risks inherent in the carrying amount of PPE and right of use assets in its golfing centre cash generating units. Our results We found the carrying amount of PPE and right of use assets in the golfing centre cash generating units to be acceptable (2022: acceptable). Hollywood Bowl Group plc ## Annual report and accounts 2023 121 Independent auditor’s report continued To the members of Hollywood Bowl Group plc 2. Key audit matters: our assessment of risks of material misstatement continued The risk Our response | Valuation of acquisition-related | Subjective estimate: | We performed the detailed tests below rather | | --- | --- | --- | | intangible assets arising from the | During the year, the Group acquired 100% of | than seek to rely on any of the group’s controls | | current year acquisition in Canada | the issued share capital of HLD Investments Inc. | because our knowledge of the design of these | | Acquisition-related intangible assets: | (operating as YYC Bowling & Entertainment), | controls indicated that we would not be able to | | £0.5m | Mountain View Bowl Inc and Wong and Lewis | obtain the required evidence to support reliance | | | Investments Inc. (operating as Let’s Bowl), based | on controls. | Refer to page 95 (Audit Committee in Canada, for total consideration of £7.7m. Report), page 136 (accounting policy), Our procedures included: pages 148 and 157 (financial disclosures). The determination of the fair value estimate • Inspection: We inspected the purchase for the valuation of the separately identifiable, agreement for the transaction. acquisition-related intangible assets involves • Assessing the assumptions: With assistance subjective estimates or uncertainties, which from our corporate finance valuation specialists, requires special audit consideration because we assessed the valuation of the intangible assets of the likelihood and potential magnitude acquired and challenged the appropriateness of misstatements relating to the valuation of of key assumptions and the appropriateness intangible assets and subsequent valuation of any cash flow forecasts used in calculating of goodwill. the fair value of the intangible assets identified The effect of these matters is that, as part of our by management. risk assessment for audit planning purposes, we • Sensitivity analysis: We performed sensitivity determined that the measurement of identified analysis on the key assumptions within the intangible assets had a high degree of cash flow forecasts used to support the estimation uncertainty. intangible assets recognised. This included sensitising the cash flow forecasts in the model. We critically assessed the extent to which a change in these assumptions both individually or in aggregate would result in an adjustment to fair values and considered the likelihood of such events occurring. • Assessing transparency: Assessing whether the group’s disclosures in relation to the acquisition and associated balances are appropriate. Our results We found the acquisition accounting in respect of the current year acquisition in Canada to be acceptable. Hollywood Bowl Group plc ## 122 Annual report and accounts 2023 ## 2. Key audit matters: our assessment of risks of material misstatement continued | | The risk | Our response | | --- | --- | --- | | **Recoverability of parent company's investment in subsidiaries / amounts due from group entities** £143m (2022: £135m), consisting of £69.7m within Investments and £73.2m within Trade and other Receivables *Refer to page 160 (accounting policy) and page 162 (financial disclosures).* | **Low Risk – High value:** The carrying amount of the parent company investments in subsidiaries and amounts due from group entities represent 85% (2022: 74%) of the parent company's total assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgement. However due to their materiality in the context of the parent company financial statements, this is considered to be the area that had the greatest effect on our overall parent company audit. | We performed the detailed tests below rather than seek to rely on any of the company's controls because our knowledge of the design of these controls indicated that we would not be able to obtain the required evidence to support reliance on controls. Our procedures included: - **Tests of detail:** Comparing the carrying amount of investments and amounts due from group entities to the net assets of the relevant subsidiaries included within the Group consolidation, to identify whether the net asset value, being an approximation of their minimum recoverable amount, was in excess of their carrying amount of investments and amounts due from group entities and assessing whether those subsidiaries have historically been profit-making. - **Comparing valuations:** Where carrying amount of investments and -amounts due from group entities exceeded the net asset value of the relevant subsidiary, comparing the carrying amount of investments and amounts due from group entities with the expected value of the business based on a value in use model for the subsidiary.**Our results** We found the Group's assessment of the recoverability of the parent company's investment in subsidiaries and amounts due from group entities to be acceptable (2022: acceptable). | ## 3. Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £2.2m (2022: £2.0m), determined with reference to a benchmark of profit before tax adjusted for the items described below, of £1.8m, of which it represents 4.6% (2022: £2m determined with reference to adjusted profit before tax, of which it represents 4.3%). The items we adjusted for in 2023 were the impairment of property, plant and equipment and right of use assets disclosed in notes 12 and 13 respectively, acquisition-related costs from the current year acquisition in Canada disclosed in note 32, and the one-off income associated with the VAT reclaim relating to the prior year disclosed in note 5. Materiality for the parent company financial statements as a whole was set at £1.1m (2022: £1m), determined with reference to a benchmark of parent company total assets (2022: parent company total assets) of which it represents 0.65% (2022: 0.5%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2022: 75%) of materiality for the financial statements as a whole, which equates to £1.65m (2022: £1.5m) for the group and £0.825m (2022: £0.75m) for the parent company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £110,000 (2022: £100,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the group's 12 reporting components (2022: 16) we subjected 2 to full scope audits for group purposes and 2 to specific risk-focused audit procedures, as the latter 2 components were not individually financially significant enough to require a full scope audit for group purposes, but did present specific individual risks that needed to be addressed (2022: 2 to full scope audits for group purposes and 1 to specified risk-focused audit procedures). The components within the scope of our work accounted for the percentages illustrated opposite. The remaining 3% (2022: 3%) of total group revenue, 4% (2022: 2%) of total profits and losses that made up Group profit before tax and 1% (2022: 4%) of total group assets is represented by 8 (2022: 13) reporting components, none of which individually represented more than 1% (2021: 2%) of any of total group revenue, total profits and losses that made up Group profit before tax or total group assets. For these components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these. Hollywood Bowl Group plc Annual report and accounts 2023 123 Financial statements Independent auditor’s report continued To the members of Hollywood Bowl Group plc Adjusted group Group materiality 3. Our application of materiality and an overview profit before tax £2.2m (2022: £2.0m) of the scope of our audit continued £47.7m (2022: £47.0m) The work on all components (2022: all components) was performed £2.2m ##  Whole financial statements materiality by the Group team, including the audit of the parent company. The (2022: £2.0m) Group team performed procedures on the items excluded from £1.65m Group adjusted profit before tax. The scope of the audit work Whole financial statements performed was predominately substantive as we placed limited performance materiality (2022: £1.5m) reliance upon the Group’s internal control over financial reporting. £1.98m Range of materiality at 4 4. The impact of climate change on our audit components (£0.625m–£1.98m) In planning our audit, we have considered the potential impact (2022: £0.5m to £1.8m at 3 components) of risks arising from climate change on the Group’s business and its financial statements. The Group has set out its ambition for reducing £110,000 the environmental impact of its operations, including increasing Misstatements reported to the on site generation of renewable electricity and driving energy use audit committee (2022: £100,000) efficiency throughout its operations. Further information is provided in the Group’s Sustainability Overview on pages 46 to 59 and the Normalised PBT Task Force and Climate-related Financial Disclosure Statement Group materiality on pages 60 to 69. Climate change risks could have an impact on the Group’s business and operations, including changing customer behaviours, business Group revenue Group profit before tax interruption, introduction of costs of carbon taxes, transitioning to reduced energy usage and changing energy sources. As part of our audit, we have made enquiries of management 1 to understand the potential impact of climate change risk on the 7 Group’s financial statements and the Group’s preparedness for this. 9 We have performed a risk assessment of how the impact of climate change may affect the financial statements and our audit. There was ## 97% 96% no significant impact of this on our key audit matters. Based on the (2022: 97%) (2022: 98%) procedures performed, we did not identify any significant risk of climate change having a material impact on the Group’s accounting 89 | | | | | 95 | estimates in this period. | | --- | --- | --- | --- | --- | --- | | | 97 | |  | | | | | 90 | | | | We have also read the Group’s disclosures of climate related | |  | |  | | | | information in the front half of the annual report, as set out on pages 46 to 68. We have not been engaged to provide assurance over the accuracy of these disclosures. Group total assets 5. Going concern The directors have prepared the financial statements on the going 7 concern basis as they do not intend to liquidate the Group or the parent company or to cease their operations, and as they have concluded that the Group’s and the parent company’s financial position means that this is realistic. They have also concluded that ## 99% there are no material uncertainties that could have cast significant (2022: 96%) doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). ##  96 92 We used our knowledge of the Group, its industry, and the general ##  economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Full scope for group audit purposes 2023 parent company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely Specified risk-focused audit procedures 2023 to adversely affect the Group’s and parent company’s available financial resources is the demand for the Group’s services being Full scope for group audit purposes 2022 adversely impacted by current economic forecasts, characterised Specified risk-focused audit procedures 2022 by high consumer price inflation and high interest rates, and the potential consequent erosion of real disposable incomes. Residual components Hollywood Bowl Group plc ## 124 Annual report and accounts 2023 5. Going concern continued 6. Fraud and breaches of laws and regulations – We considered whether these risks could plausibly affect the ability to detect liquidity in the going concern period by assessing the degree Identifying and responding to risks of material misstatement of downside assumption that, individually and collectively, could due to fraud result in a liquidity issue, taking into account the Group’s current To identify risks of material misstatement due to fraud (“fraud risks”) and projected cash and facilities (a reverse stress test). we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. We considered whether the going concern disclosure in note 2 Our risk assessment procedures included: to the financial statements gives a full and accurate description of the Directors’ assessment of going concern, including the identified • Enquiring of directors, the audit committee, internal audit and risks and, dependencies, and related sensitivities. inspection of policy documentation as to the Group and the parent company’s high-level policies and procedures to prevent Our conclusions based on this work: and detect fraud, including the internal audit function, and the • we consider that the directors’ use of the going concern basis Group and the parent company’s channel for “whistleblowing”, as of accounting in the preparation of the financial statements well as whether they have knowledge of any actual, suspected or is appropriate; alleged fraud. • we have not identified, and concur with the directors’ assessment • Reading Board minutes. that there is not, a material uncertainty related to events or • Considering remuneration incentive schemes and performance conditions that, individually or collectively, may cast significant targets for management including the EPS target for management doubt on the Group’s or parent company’s ability to continue as remuneration under the Long Term Investment Plan scheme. a going concern for the going concern period; • Using analytical procedures to identify any unusual or unexpected • we have nothing material to add or draw attention to in relation to relationships. the directors’ statement in note 2 to the financial statements on the use of the going concern basis of accounting with no material We communicated identified fraud risks throughout the audit team uncertainties that may cast significant doubt over the Group and and remained alert to any indications of fraud throughout the audit. Financial statements parent company’s use of that basis for the going concern period, As required by auditing standards, and taking into account possible and we found the going concern disclosure in note 2 to be pressures to meet profit targets, we perform procedures to address acceptable; and the risk of management override of controls, in particular the risk • the related statement under the Listing Rules set out on page 76 that Group and component management may be in a position to is materially consistent with the financial statements and our make inappropriate accounting entries and the risk of bias in audit knowledge. accounting estimates and judgements such as assumptions used in impairment testing. On this audit we do not believe there is a fraud However, as we cannot predict all future events or conditions and as risk related to revenue recognition because of the limited subsequent events may result in outcomes that are inconsistent with opportunity due to the high correlation to cash. judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the parent We also identified a fraud risk related to the valuation of property, company will continue in operation. plant and equipment and right of use assets relating to the golfing centres, in response to possible pressures to present an optimistic outlook for the Group. Further detail in respect of the valuation of property, plant and equipment and right of use assets relating to the golfing centres is set out in the key audit matter disclosures in section 2 of this report. We also performed procedures including: • Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included revenue and cash journals posted to unusual or unexpected accounts, postings containing the names or initials of senior management, and assessed individuals who typically do not make journals entries or are not authorised to post journals. • Assessing significant accounting estimates for bias. Hollywood Bowl Group plc ## Annual report and accounts 2023 125 Independent auditor’s report continued To the members of Hollywood Bowl Group plc 6. Fraud and breaches of laws and regulations – 7. We have nothing to report on the other information ability to detect continued in the Annual Report Identifying and responding to risks of material misstatement The directors are responsible for the other information presented in due to non-compliance with laws and regulations the Annual Report together with the financial statements. Our opinion We identified areas of laws and regulations that could reasonably on the financial statements does not cover the other information be expected to have a material effect on the financial statements and, accordingly, we do not express an audit opinion or, except as from our general commercial and sector experience and through explicitly stated below, any form of assurance conclusion thereon. discussion with the directors and other management (as required Our responsibility is to read the other information and, in doing by auditing standards), and discussed with the directors and other so, consider whether, based on our financial statements audit work, management the policies and procedures regarding compliance the information therein is materially misstated or inconsistent with with laws and regulations. the financial statements or our audit knowledge. Based solely on We communicated identified laws and regulations throughout our that work we have not identified material misstatements in the team and remained alert to any indications of non-compliance other information. throughout the audit. Strategic report and directors’ report The potential effect of these laws and regulations on the financial Based solely on our work on the other information: statements varies considerably. • we have not identified material misstatements in the strategic Firstly, the Group is subject to laws and regulations that directly report and the directors’ report; affect the financial statements including financial reporting • in our opinion the information given in those reports for the legislation (including related companies legislation), distributable financial year is consistent with the financial statements; and profits legislation and taxation legislation and we assessed the • in our opinion those reports have been prepared in accordance extent of compliance with these laws and regulations as part of with the Companies Act 2006. our procedures on the related financial statement items. Directors’ remuneration report Secondly, the Group is subject to many other laws and regulations In our opinion the part of the Directors’ Remuneration Report to be where the consequences of non-compliance could have a material audited has been properly prepared in accordance with the effect on amounts or disclosures in the financial statements, for Companies Act 2006. instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: data Disclosures of emerging and principal risks and longer-term viability protection, health and safety, employment law, food safety and We are required to perform procedures to identify whether there is a licensing (Licensing Act and Gaming Act) recognising the nature of material inconsistency between the directors’ disclosures in respect the Group’s activities. of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Based on those procedures, we have nothing material to add or directors and inspection of regulatory and legal correspondence, draw attention to in relation to: if any. • the directors’ confirmation within the viability statement on page 76 Therefore if a breach of operational regulations is not disclosed to that they have carried out a robust assessment of the emerging and us or evident from relevant correspondence, an audit will not detect principal risks facing the Group, including those that would threaten that breach. its business model, future performance, solvency and liquidity; We discussed with the audit committee other matters related • the Principal Risks disclosures describing these risks and how to actual or suspected fraud, for which disclosure is not necessary, emerging risks are identified, and explaining how they are being and considered any implications for our audit. managed and mitigated; and • the directors’ explanation in the viability statement of how they Context of the ability of the audit to detect fraud or breaches have assessed the prospects of the Group, over what period they of law or regulation have done so and why they considered that period to be appropriate, Owing to the inherent limitations of an audit, there is an unavoidable and their statement as to whether they have a reasonable risk that we may not have detected some material misstatements in expectation that the Group will be able to continue in operation the financial statements, even though we have properly planned and and meet its liabilities as they fall due over the period of their performed our audit in accordance with auditing standards. For example, assessment, including any related disclosures drawing attention the further removed non-compliance with laws and regulations is from to any necessary qualifications or assumptions. the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing We are also required to review the viability statement, set out on standards would identify it. page 76 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent In addition, as with any audit, there remained a higher risk of with the financial statements and our audit knowledge. non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of Our work is limited to assessing these matters in the context of only internal controls. Our audit procedures are designed to detect the knowledge acquired during our financial statements audit. As we material misstatement. We are not responsible for preventing cannot predict all future events or conditions and as subsequent non-compliance or fraud and cannot be expected to detect events may result in outcomes that are inconsistent with judgements non-compliance with all laws and regulations. that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and parent company’s longer-term viability. Hollywood Bowl Group plc ## 126 Annual report and accounts 2023 7. We have nothing to report on the other information 9. Respective responsibilities in the Annual Report continued Directors’ responsibilities Corporate governance disclosures As explained more fully in their statement set out on page 118, the We are required to perform procedures to identify whether there is a directors are responsible for: the preparation of the financial material inconsistency between the directors’ corporate governance statements including being satisfied that they give a true and fair disclosures and the financial statements and our audit knowledge. view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material Based on those procedures, we have concluded that each of the misstatement, whether due to fraud or error; assessing the Group following is materially consistent with the financial statements and and parent company’s ability to continue as a going concern, our audit knowledge: disclosing, as applicable, matters related to going concern; and using • the directors’ statement that they consider that the annual report the going concern basis of accounting unless they either intend to and financial statements taken as a whole is fair, balanced and liquidate the Group or the parent company or to cease operations, understandable, and provides the information necessary for or have no realistic alternative but to do so. shareholders to assess the Group’s position and performance, Auditor’s responsibilities business model and strategy; Our objectives are to obtain reasonable assurance about whether the • the section of the annual report describing the work of the Audit financial statements as a whole are free from material misstatement, Committee, including the significant issues that the Audit whether due to fraud or error, and to issue our opinion in an auditor’s Committee considered in relation to the financial statements, and report. Reasonable assurance is a high level of assurance, but does how these issues were addressed; and not guarantee that an audit conducted in accordance with ISAs (UK) • the section of the annual report that describes the review of will always detect a material misstatement when it exists. Misstatements the effectiveness of the Group’s risk management and internal can arise from fraud or error and are considered material if, control systems. individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the We are required to review the part of the Corporate Governance financial statements. Statement relating to the Group’s compliance with the provisions of Financial statements the UK Corporate Governance Code specified by the Listing Rules A fuller description of our responsibilities is provided on the FRC’s for our review and to report to you if a corporate governance website at www.frc.org.uk/auditorsresponsibilities. statement has not been prepared by the Company. We have nothing The Company is required to include these financial statements in an to report in these respects. annual financial report prepared using the single electronic reporting Based solely on our work on the other information described above: format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report • with respect to the Corporate Governance Statement disclosures has been prepared in accordance with that format. about internal control and risk management systems in relation to financial reporting processes and about share capital structures: 10. The purpose of our audit work and to whom we owe – we have not identified material misstatements therein; and our responsibilities – the information therein is consistent with the financial This report is made solely to the Company’s members, as a body, in statements; and accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the • in our opinion, the Corporate Governance Statement has been Company’s members those matters we are required to state to them prepared in accordance with relevant rule of the Disclosure in an auditor’s report and for no other purpose. To the fullest extent Guidance and Transparency Rules of the Financial Conduct Authority. permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as 8. We have nothing to report on the other matters a body, for our audit work, for this report, or for the opinions we on which we are required to report by exception have formed. Under the Companies Act 2006, we are required to report to you if, in our opinion: Matthew Radwell (Senior Statutory Auditor) • adequate accounting records have not been kept by the parent for and on behalf of KPMG LLP, Statutory Auditor Company, or returns adequate for our audit have not been Chartered Accountants received from branches not visited by us; or 20 Station Road, • the parent Company financial statements and the part of the Cambridge, Directors’ Remuneration Report to be audited are not in CB1 2JD agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law 17 December 2023 are not made; or • we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. Hollywood Bowl Group plc ## Annual report and accounts 2023 127