- Strong rebound in first half like-for-like revenues
- Adjusted operating profit surges
- Group poised to benefit from gambling reforms
Casino and bingo operator Rank (RNK) demonstrated continued recovery with 9% like-for-like net gaming revenue growth in the first half to £362.6 million and a big improvement in operating profit to £21.7 million.
Investors welcomed the positive update with the shares gaining almost 4% to 73p. Over the last year the stock is down around 18% compared with a 2% fall in the FTSE All-Share.
HOW DID THE BUSINESS PERFORM?
Grosvenor venues notched-up 10% like-for-like net gaming revenue growth driven by an 8% increase in customer visits and 2% higher spending per visit.
Mecca bingo saw a 9% increase in like-for-like sales growth on the prior year with visits up 2% and spending up 7%. Mecca continues to benefit from rationalising of the estate with one additional closure made in the first half to 31 December 2023.
The digital businesses likewise saw good like-for-like sales growth of 8% while the Spanish venues recorded a 10% increase in net gaming revenues.
Group adjusted operating profit increased eight-fold from £2.7 million in the first half of 2022 to £21.7 million. The business has a high proportion of fixed costs which delivers high operating leverage when revenues grow.
Rank noted that both the venues and the digital businesses experienced a ‘busy’ trading period through Christmas and the New Year.
WHAT DID THE COMPANY SAY?
Chief executive John O’Reilly commented: ‘After what has been a very challenging few years for Rank due to a wide range of external macro factors, we are starting to build revenues and, with our strong operational leverage, we are improving our profitability, with the group delivering revenue and operating profit growth across all businesses.
‘We are well positioned to optimise the opportunities afforded by the UK Government’s planned land-based regulatory reforms which will hopefully be implemented through the passing of secondary legislation in the summer of 2024.
‘These reforms cannot come soon enough in enabling us to modernise our proposition to better meet our customers’ expectations.’
O’Reilly told Shares the land-based reforms are expected to be passed into law before parliament’s summer recess in July.
EXPERT VIEW
Greg Johnson, leisure analyst at Shore Capital, left his full year earnings estimates unchanged and sees a ‘significant’ longer term opportunity from the impending gambling reform.
‘We retain our FY24F EBIT estimate of £43.5 million, which is broadly consistent with annualised H2 FY23A operating profit adjusted for lower energy costs.
‘Conservatively, our full year estimates imply a second half in line with the H1 results, noting we would hope to see trends continue to build from current levels.’
