Strong like-for-like sales growth at Mecca Bingo and Grosvenor Casino owner Rank (RNK) sends shares in the £923.5 million cap up 4.3% to 247.5p.
Revenue grew by 3% in the 19 weeks to 8 May, which is encouraging given the 5% growth achieved in the same period last year.
The star performer is Grosvenor Casino, where digital revenues are up 35% following the division’s migration onto the new Bede gaming platform. Venue spend per visit and venue revenue both grew by 2%, driven by a strong performance in London.
Like-for-like sales at Mecca are up 1% as a result of a 3% rise in spend per visit and venue revenues. A 5% drop in digital revenue is disappointing, but Rank says this is because the migration to the Bede platform caused disruption and is incomplete.
The platform is expected to be bedded down in the first quarter of Bede’s 2017 financial year (July to September 2016) and lead to a return to digital revenue growth soon after.
The Kambi sports platform is due a soft launch prior to the European Championships and a harder push in time for the next Premier League season. ‘We would expect further upside from sports cross-selling opportunities across the digital divisions,’ says Peel Hunt analyst Ali Naqvi.
The stockbroker reckons there is more to come from the Bede platform integration, as the group adds greater functionality and content.
‘There are a number of near-term catalysts that could rerate the stock further, notably the potential benefits of the Bede platform and M&A opportunities,’ Naqvi says.
Peel Hunt’s price target is 292p, implying 18% upside.