Rank swings back to a profit

Rank (RNK) is back in the black after its prior year was dragged down by chunky impairment charges, as the gambling operator posted growth across its divisions and attracted more customers through its doors. 

The surge in statutory profits was helped by a lack of charges this time around. The company put through net impairments of £95.4mn in the first half of its 2023 financial year because of trading weakness and the closure of some of its Grosvenor casinos and Mecca bingo halls.

Underlying operating profit this year came in at £21.7mn, up from £2.7mn last year, driven by Grosvenor's almost tripling of earnings in the half.

Top-line progress was made as customer visits rose, and spend per customer and active customer number trends were positive. Like-for-like net gaming revenue climbed 10 per cent at Grosvenor on an 8 per cent bump in visits. Revenue was up 9 per cent at Mecca, which saw a 2 per cent uptick in visits, and up 10 per cent at the small Spanish business Enracha where visits grew 9 per cent. 

Digital revenue rose 8 per cent, but management flagged that it expects UK growth "to be offset in the short term by the impact of new maximum online slot stakes and the impact of the statutory levy".  

Analysts at Shore Capital think Rank offers a "significant longer-term opportunity, especially from impending gambling reform" and think the share price could ultimately climb to 200p if the company can return operating profit to £100mn.

These results are definitely a step in the right direction, and Rank is the clear winner from regulatory reform in the UK despite short-term headwinds. The shares trade at 11 times forward consensus earnings, which does offer value, but there remain challenges ahead on the road to recovery. Hold. 

Last IC view: Hold, 91p, 17 Aug 2023