Casino and bingo operator Rank (RNK) experienced a strong rebound in the first half to 31 December as it operated with fewer restrictions allowing it to report an operating profit of £23.7 million compared with a loss of £42 million last year.
The company narrowed its guidance range for full-year operating profit to be between £55 million and £65 million, increasing the bottom end by £5 million and reducing the top end by £10 million.
This seemed to please investors, with the shares gaining 2.2% to 152.2p.
CASINOS LEADING THE RECOVERY
The biggest contributor to growth came from the Grosvenor estate which saw revenues jump 275%to £161 million which generated a 265% gain in operating profit to £24.9 million. Revenues remain 18% below pre-pandemic levels.
Growth reflected the reopening of venues without material restrictions and past investments which helped to drive operating improvements and a return to strong profitability.
Provincial venues recovered faster and were back to pre-pandemic trading activity by October while London lagged in the first quarter but caught up quickly once travel restrictions were lifted.
While reaching 87% of pre-pandemic trading in October London was hit particularly hard by Omicron in early December.
SLOWER BINGO RECOVERY
The Mecca bingo estate saw a muted recovery impacted by its older cohort of customers who were slower to return to venues. Revenues increased 71% to £65.7 million but fell short of pre-pandemic revenues by 24%.
The underlying operating loss of £1.3 million was an improvement on the £5.3 million last year, while the business was also impacted by a £3.3 million increase in energy costs. Prior to the pandemic the division made a first half underlying profit of £13.7 million.
IMPROVED BALANCE SHEET
Rank reported a roughly £100 million improvement in liquidity compared with the June year end and closed the first half with net cash of around £55 million.
The large swing reflected a VAT repayment of £83 million and cash generated from operations excluding the VAT claim was £56.5 million compared with an outflow of £17.5 million.
EXPERT VIEW
Greg Johnson, leisure guru at Shore Capital commented: ‘Adjusting for the successful VAT claim (£67 million net of corporate tax), Rank Group is valued at under 5x historic EBITDA (we use the 12 months to December 2019).
‘With a robust and building cash position and the potential to build profitability beyond historic levels, we would expect, as trading recovers, the stock to re-rate accordingly.’
