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Costs force Rank to start cutting

The bingo and casino group will try and claw back £8m this year, although a group-wide restrucuturing could cost just as much
January 26, 2017

A moribund market coupled with higher costs meant it wasn't a full house for bingo and casino owner Rank Group (RNK). Adjusted operating profits dropped 9 per cent to £36.6m on a group wide basis, with the biggest pain felt at the Grosvenor Casino business where this measure was subject to a 16 per cent decline. Cost pressures in the first half (six months to 31 December) were clear to see thanks to the national living wage and higher property costs. A review of the business could result in £8m of savings in the second half, although costs linked to restructuring measures could conceivably cancel out any near-term benefits.

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Chief executive Henry Birch couldn't say definitively if further costs would be cut, but pointed to recent updates in its technology which could result in better efficiency overall. He suggested the leisure industry had a "pretty torrid time" in 2016, which was exacerbated by the "confusing period" following political events such as the EU referendum. This partly contributed to the 6 per cent fall in customer visits to its Grosvenor sites, which Mr Birch called "disappointing" but also an "anomoly". More stringent checks for would-be members had also cooled the numbers, he said.

Analysts at Edison trimmed forecasts and now predict pre-tax profit of £72.7m for the year to June 2017, leading to EPS of 14.2p, compared with £85.6m and 18.2p in FY2016.

 

RANK GROUP (RNK)
ORD PRICE:185.6pMARKET VALUE:£ 725m
TOUCH:185-185.8p12-MONTH HIGH:290pLOW: 181p
DIVIDEND YIELD:3.6%PE RATIO:13
NET ASSET VALUE:93p*NET DEBT:9%

Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201535342.710.61.8
201635535.47.22.0
% change+1-17-32+11

Ex-div:09 Feb

Payment:21 Mar

*Includes intangible assets of £404m, or 103p a share