Ten-pin bowling operator Hollywood Bowl (BOWL:AIM) has raised £30 million of equity via a placing of 13 million new shares at 230p per share, an 8% discount to yesterday’s closing price. The shares dropped 3.4% to 241p on Friday.
The rationale for the placing is a combination of shoring up finances ahead of reopening and accelerating the growth strategy to ‘capitalise on the number of high-quality opportunities available to the company’.
Greg Johnson at Shore Capital commented: ‘Unsurprisingly, the pandemic is creating additional opportunities for ten-pin bowling and mini-golf in “prime” locations in the UK.’
In addition to an existing pipeline of seven new ten-pin bowling sites, Hollywood Bowl has nine centres currently going through the legal process.
The company could be on-site at three of these sites before the end of 2021, requiring a capital investment of approximately between £7-and-£8.5 million.
Hollywood Bowl stopped its refurbishment programme as part of its Covid-19 cost saving plans. The money now raised will allow the firm to complete refurbishments in Stevenage and Basildon prior to reopening in May as well as an additional four sites during 2021.
‘Given the historic high return on investment delivered from such projects would expect to be materially accretive on completion (subject to reopening)’, added Johnson.
LIQUIDITY BOOST
Cash burn before the sites reopen on 17 May is expected to be around £3.6 million with deferred rent payments of £5.8 million. At 28 February the group had net debt of £17.9 million.
The equity raise will therefore provide additional flexibility should there be a delay to reopening as well as making it easier to negotiate a new lending facility later in the year.
Hollywood Bowl believes the placing will strengthen the balance sheet resulting in a lower cost of debt and provide it with a ‘stronger’ competitive negotiating position with lenders.
Today’s actions look very sensible and place Hollywood Bowl in a stronger position to continue its growth strategy and add value to the business.
When sites could open last summer, the firm experienced strong customer demand with the majority of sites trading at maximum capacity at weekends and during holidays.
