Hollywood Bowl Group PLC (LSE:BOWL), the leisure company, has a solid reserve of cash for upcoming expansions and also a special dividend, according to analysts at Shore Capital Group (LSE:SGR).
The hospitality firm has plans to open three sites in 2023 and between 15 and 20 new centres a year in the pipeline until the 2025 financial year.
“We believe these expansions will add materially to long-term profitability and cash flows,” said Shore Capital.
Over the six months to March, the company invested £20mln in its estate, including opening two new venues in the UK and the £7mln acquisition of three Canada-based sites.
The group still has £44mln in net cash despite spending £20mln on dividends and capital expenditure coming in at £14mln. noted the broker.
Net cash is expected to increase to £56mln by the financial year end and with a £25mln revolving credit facility available, it means expansion is not expected to significantly chip away at available funds, Shore Capital added.
Adjusted earnings came in at £35.1mln for the six months to March 2023, 13% higher than in 2022 and 67% ahead of pre-Covid levels.
This allowed the group to hike its dividend by 9% year-on-year to 3.27p per share.
Shore Capital believe that because the Puttstars owner is “highly cash generative” it can return between 1p-2p per share in a special dividend at the year's end.
“This would imply a full-year payment of 12p per share and a dividend yield approaching 5%,” the capital markets company said.
The leisure group posted record half-year revenues of £110.2mln on Tuesday, up 20% from the year before.