The resolution of a prolonged takeover battle last year has left
Even after stripping out the £128m exceptional gain from VAT refunds last year, underlying operating profits rose 3 per cent to £64.1m. Across its operating divisions, Grosvenor Casinos delivered the greatest sales growth in the mature estate, up 4.4 per cent to £249m. However, with better marketing after a relaxation on local advertising bans, profits rose by 12.8 per cent to £40.6m.
The Mecca Bingo halls benefited from a wide-ranging re-fit programme to install new games and services, with profit growth running double that of sales at 4.4 per cent to £31m. Rank interactive took advantage of increasing smart phone use to increase sales by 24.4 per cent to £71.8m, with profits 15.2 per cent higher at £9.1m. Management was cautious about the outlook for consumer spending this year, but chief executive Ian Burke noted an increase in bingo spend and a general shift towards younger players that could allow Rank to open more halls, alongside a mooted takeover of Gala Casinos.
Broker Investec forecasts normalised pre-tax profits of £62.4m and EPS of 11.4p in 2012 (from £56.7m and 10.3p last year).
|RANK GROUP (RNK)|
|ORD PRICE:||138p||MARKET VALUE:||£539m|
|TOUCH:||138-139p||12-MONTH HIGH:||163p||LOW: 109p|
|DIVIDEND YIELD:||1.5%||PE RATIO:||4|
|NET ASSET VALUE:||56p*||NET CASH:||£25m|
Rank is doing well, but a reduced dividend, a forecast PE ratio of 12 that incorporates a takeover premium and a dominant shareholder means there are few attractions for private investors. Sell.
Last IC View: Fairly priced, 147p, 28 July 2011
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