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The Rank Group’s share price has fallen 8.4% this morning (21 April) after a trading update showed the operator’s revenue during the first three months of 2022 remained below pre-Covid levels.

An update covering Rank’s 2021-22 financial year’s third quarter – or the three months ended 31 March 2022 – showed that net gaming revenue across the business totalled £156.4m, consisting of £111.2m in land-based revenue and £45.2m from online.

The operator’s Grosvenor Casino venues generated £69.1m of the total, representing a 14% revenue reduction from the same period in 2019, which Rank selected as the comparative period. 

Mecca Bingo venues saw revenue, which totalled £34.1m this quarter, reduced by 25% against the same comparative period.

As all of Rank’s UK-based venues remained closed during the first three months of 2021, and were also affected by the onset of the Covid-19 pandemic in the early months of 2020, figures from 2019 provide the most recent comparable period unaffected by the pandemic.

Rank said that during the most recent quarter: “For both our UK venues businesses there was a softness in visits at the end of the quarter consistent with the rise in new Covid-19 cases reported across the UK.”

The operator’s Spanish Enracha business reported a less significant revenue reduction, however, with NGR down just 2% compared to the first three months of 2019.

“While the recovery is taking time, we believe that in the medium term there remains a strong path to recovery to the pre-Covid-19 levels,” the firm said.

Rank CEO John O’Reilly: “The performance of our venues softened in March and this has continued into the first few weeks of Q4, impacting our current expectations for our full year performance.”

Of the operator’s £45.2m in digital NGR, the vast majority at £40m came from the UK.

This represents a 1% reduction in UK digital revenue, Rank said, as 3% growth across its Grosvenor digital brand failed to offset a reduction of 11% in Mecca digital revenue, caused as a result of its migration onto Rank’s proprietary RIDE platform in January.

Rank said its other digital brands displayed mixed performance, as NGR from its other brands operating on the RIDE platform grew by 42%, which was partly offset by a 25% revenue decline in non-proprietary brands on the platform.

Elsewhere, International digital NGR dropped 5% to £5.2m.

Rank has entered the current quarter with visitor numbers down, in a traditionally low seasonal period for its Grosvenor Casino venues.

The operator expects an improvement in performance after April, it said: “It remains to be seen how the trends in the rate of return of office workers to city centres and overseas customers to London will develop towards the summer.”

Given the uncertainty around the future performance of its land-based businesses, Rank has updated its previously guided EBIT range of between £55m and £65m for the year ending 30 June 2022, to between £47m and £55m.

“The performance of our venues softened in March, and this has continued into the first few weeks of Q4, impacting our current expectations for our full-year performance,” said Rank CEO John O’Reilly. 

“We recognise the pressures on UK consumers but are confident that the improvements we are continuing to make to the customer proposition and the investments in our venues, alongside the gradually reducing impact of the pandemic and, with it, the return of overseas customers, position us well for the year ahead.”

Despite the downturn in revenue throughout the pandemic period, Peel Hunt reiterated its Buy rating for Rank and 220p target price.

While the investment bank’s forecast for full-year 2021-22 EBIT has now been reduced by 9%, from £55m to £50m, analyst Icor Jones said: “We see no reason to expect a cross-infection into our FY23E forecasts, which we are not changing today.”

According to a note sent to investors, an uptick in Rank’s performance later this year will depend on a bounce back in demand through May and June as international and domestic tourism continue to recover.

Peel Hunt disclosed in the note that Rank is one of its corporate clients, and that it holds more than 5% in Rank’s business.

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