Casino and bingo operator Rank (RNK) said on Friday it would reopen 35 Mecca bingo venues from tomorrow (4 July) which is expected to reduce monthly cash burn to £7 million. The shares pushed up 2.3% to 148p on the news.

PHASED APPROACH

The company is planning to open another 30 bingo venues throughout July and August including in Scotland and Wales when their parliaments allow, with the remaining 12 staying closed until October.

These are being assessed for economic viability and may result in a restructuring of the cost base and renegotiation of rents.

The Grosvenor’s casino estate is yet to reopen with a date subject to ongoing negotiations between the Betting and Gaming Council and the government. Early signs from the reopening of the company’s Spanish Enracha clubs on 10 June showed revenues running at around 60% of pre-closure levels.

The board believes that once Grosvenor reopens and assuming revenues run at a similar level to the Enracha venues, the group will become cash flow positive.

DIGITAL DRIVE

While monthly cash burn has been in line with previous guidance, the company expects full year underlying operating profit to 30 June 2020 to be at the lower end of £40 million-to-£50 million due to the expensing of reopening costs.

Digital is a key part of the company’s growth ambitions and so it was pleasing to see digital revenues growing around 17% in the last quarter. This was despite growth being hampered by additional safer gambling and due diligence measures being implemented for the acquired Stride Gaming business.

Broker Shore Capital commented, ‘we estimate that with a 20% fall in Venues revenues in calendar year 2021 and only a modest cyclical recovery assumed thereafter, the stock could be worth some 250p per share.’

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Issue Date: 03 Jul 2020