Shares in casino and bingo operator Rank Group (RNK) spun 4% higher to 171p after it slashed monthly cash burn by £7m to £10m by furloughing employees, cutting executive salaries by 20% and passing on the dividend.
The company admitted it had limited visibility and is preparing for difficult trading conditions even after opening its venues. Discussions with landlords and suppliers are ongoing.
The firm has initiated a charity initiative, in collaboration with Blue Light Card, providing free meals to key workers from some of its kitchens.
TAXING TIMES
The firm will benefit from the government rates holiday by around £1m a month and management has reached an agreement with HMRC to defer approximately £40m of tax and duty to 30 June 2020.
In terms of the long-running VAT claims, Rank was paid £25.2m in early April in relation to slot machine revenue between 2002 and 2005. If HMRC appeals this verdict and wins, management believe the payment wouldn’t be payable for at least a year.
It looks highly likely that venues will remain closed until the end of the company’s financial year-end at the end of June. Under this scenario the firm expects underlying operating profit to be between £48m and £58m, and to be operating within the debt limits set by the banks.
The group has £166m of available cash and credit facilities, which means it has plenty of headroom should the lockdown remain in place beyond the end of June.
Chief executive John O’Reilly commented, ‘given the uncertainty we face and continued social distancing measures likely to be in place for some time to come, we continue to work to protect cash and to prepare for the reopening of our venues in as safe a way as possible’.
THIRD-QUARTER TRADING
Like-for-like revenues were down 4% for the quarter ended 31 March 2020, while total revenues were up 5%, and 14% in the first-half.
Digital continued to grow at pace with Grosvenor recording 27% higher revenues for the third-quarter, driven by new and returning players. Multi-channel players continued to increase and now represent 44% of revenues. Mecca digital also performed strongly, registering 20% growth.
Weaker trading was seen towards the end of February and into early March and all international venues were closed from 14 March while in the UK all Grosvenor and Mecca venues were closed from 20 March.
