- 2023 profit expected to halve
- Slower than expected recovery at casinos
- Recent weakness seen at Mecca Bingo
Casino and bingo operator Rank Group (RNK) issued a profit warning on Friday sending the shares skidding 9% lower to 73.1p and taking the year’s losses to more than 50%.
Weaker than expected trading at its Grosvenor casinos flagged in October has continued into the year-end driven by lower customer spending.
Chief executive John O’Reilly commented: ‘Weak consumer confidence and pressure on disposable income is resulting in a tougher than expected trading environment for our UK venues businesses, particularly in Grosvenor where we are seeing customers spending less per visit.
‘Whilst we expect these challenges to continue to impact our recovery into the second half of the financial year, we have implemented a series of measures to deliver incremental cost savings and to drive revenues.’
WHAT IS THE FINANCIAL IMPACT?
The company said it expected like for like operating profit for the year ending 30 June 2023 to be between £10 million and £20 million, or half the level generated in the prior year.
Rank warned that high operating leverage (high relative fixed costs) at Grosvenor Casinos and its ‘relative importance’ to the group meant movements in its net gaming revenues would have a ‘significant impact on group operating profit for the year.
Shore Capital had lowered its 2023 operating profiting profit forecast to £30 million following weak first quarter trading. Today’s update implies a further halving of estimates, taking the middle point of the new guidance range.
SLOWER THAN EXPECTED RECOVERY
Group like-for-like sales for the five months to 30 November were up 1% year-on-year with growth at the Mecca bingo group and Spanish trading arm Enracha offset by declines at Grosvenor.
Management had expected Grosvenor to continue the recovery seen in the first quarter into the second half, but this has failed to materialize.
In addition, the company noted a ‘slight weakening’ in recent Mecca weekly average net gaming revenues due to lower visits, which management attributed to the colder weather, cost of living pressures and the football World Cup.
With Spanish customers being less impacted by cost-of-living pressures Rank said it expected Enracha venues to continue to perform strongly for the remainder of fiscal 2023.
