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Hollywood Bowl (LON:BOWL)

Share price: 157.5p
No. shares: 150.0m
Market cap: £214.5m

Proposed placing to raise £10.9m

Hollywood Bowl (LON:BOWL) has reported that it is raising £10.9m at 145p per share via an accelerated book-building process.

The group says “had traded well in the five months to 29 February 2020 ahead of the prior year period” but now, of course, units are closed, the company “has implemented extensive cost saving initiatives”, and the H1 dividend payment has been scrapped.

The impressive news is that “as a result of these extensive cost saving initiatives, non-employee overheads (excluding property costs) are expected to reduce from approximately £1.1m to approximately £0.1m per month whilst centres remain closed.”

That really isn’t a lot so perhaps bowling alley operators like BOWL and TEG can hibernate quite effectively?

The group says:

As a result of these extensive cost saving initiatives, non-employee overheads (excluding property costs) are expected to reduce from approximately £1.1 million to approximately £0.1 million per month whilst centres remain closed. The Group expects a total monthly net cash burn of approximately £1.6 million whilst centres remain closed (once pre-COVID-19 liabilities have been paid). If all centres remain closed and the furlough arrangements under the Coronavirus Job Retention Scheme are available throughout the closure period, and including trade creditors unwind, the Group expects to maintain a positive cash balance until the end of October 2020.

That’s quite clear. Planning for no store openings until the end of October is prudent compared to some other Leisure and Retail operators that are banking on the lockdown getting lifted in June. This might be the most likely possibility, but planning for longer if possible would be very sensible.

For what it’s worth, BOWL’s trading was impressive before the lockdown: in the five months to 29 February 2020:

  • Total revenue was up 12.5% year-on-year,
  • Like-for-like sales were up 9.4% year-on-year (6.8% growth in game volumes and a 2.4% increase in spend per game to £10.08),
  • Group EBITDA was up 17.7% to £20.7m
  • Operating profit margin increased from 24.5% to 25.8%, and
  • Free cash flow during the Period was £9.03m.

The increase in average spend has been underpinned by the Group's focus on improvements and innovation in the customer experience, including the enhanced food…

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