Rank Group reinstates dividend after positive full-year results

Rank Group is resuming dividend payments after a gap of five years having achieved annual results that were slightly higher than market estimates.
It announced a full-year dividend of 0.85p per share, or a total of £4 million, and said that it would reinstate an interim dividend with its half-year results in January. Rank said that the resumption of initially “relatively modest” dividend payments reflected its confidence in its improved trading and financial position.
The Mecca Bingo and Grosvenor Casino owner swung back into the black in the year to the end of June. It made an annual pre-tax profit of £15.5 million, compared with a loss of £123.3 million the year before. On a like-for-like basis, underlying operating profit reached £46.5 million, slightly ahead of analysts’ expectations and double the previous year’s profit of £20.1 million.
Group underlying like-for-like net gaming revenue rose by 9 per cent to £734.4 million, with all businesses in growth. Its digital business led the way, reporting growth for the year of 12 per cent. Grosvenor was up 9 per cent, Mecca up 8 per cent and Enracha, its Spanish bingo outpost, up by 7 per cent.
“We’ve had a tricky few years, but we’re coming out the other side,” John O’Reilly, 64, Rank’s chief executive, said. “We’ve more than doubled profitability and are at the upper end of what the market thought we’d do.
“This is a business that, when it’s performing, throws off cash. We’re heading in that direction. We’re not there yet, but we are returning to form and are there or thereabouts with what the market expected.”
As well as paying dividends, Rank is using its strong cashflow to invest in its venues, including a £15 million project at the Victoria casino on Edgware Road, central London. Further investment will go into cashing in on recent gambling reforms, which will allow Rank to increase the number of gaming machines from 20 per venue to 80.
O’Reilly said that whereas Grosvenor’s casinos derived 29 per cent of their revenue from gaming machines, in Las Vegas the figure was 69 per cent.
He also expected Mecca Bingo to prosper. Having gone into lockdown with 82 clubs, Mecca now has 52, with one more closure due in a couple of weeks. “That will leave us with a strong, vibrant estate,” he said. “We’re not anticipating any more closures after that.”
Analysts at Shore Capital said the group’s present valuation, at five times full-year pre-tax earnings, “fails to capture the underlying momentum and the opportunity from proposed gambling reform, which could be a game-changer to the investment case”.
Shares in Rank, which is 60 per cent-owned by Quek Leng Chan, 82, the Malaysian billionaire, rose by 4½p, or 6.6 per cent, to 74½p.