Rank Group shares dive after Mecca Bingo owner issues second profit warning in three months on weak recovery in UK trade
- Rank expects to post about £40m in LFL underlying operating earnings this year
- The firm also blamed rising cost pressures as behind the downgrade in profits
Mecca Bingo’s parent company saw shares tumble on Monday after the group lowered its annual profit forecast again, following weak trade at its UK venues.
Rank Group shares had dived 16.9 per cent to 82.4p when trading closed on Monday, making it the worst faller among all London-listed businesses, ahead of troubled gold producer Petropavlovsk.
The Maidenhead-based gambling firm told investors that while its Grosvenor Casinos division had witnessed an improvement in performance since April, it had been ‘considerably weaker than expected.’
Slow recovery: Rank Group said that while its Grosvenor Casinos division had witnessed an improvement in performance since April, it had been ‘considerably weaker than expected’
It primarily blamed this on a lack of higher-spending overseas tourists visiting these establishments, as well as weak visitor numbers across Britain and a ‘poorer-than-average’ casino win margin so far this quarter.
Due also to cost pressures, it now anticipates underlying operating earnings of about £40million for the current financial year, having previously estimated in April that it would make between £47million and £55million.
That latter forecast was itself a downgrade from the £58million to £65million profit prediction made back in January when publishing its interim results.
Rank nonetheless expects to rebound to profit after plunging to a £67million loss last year when Covid-related restrictions forced the group to temporarily close its venues for most of the trading period.
As these outlets were responsible for around 80 per cent of total trade, net gaming revenues dived by £300million as a consequence, with approximately two-thirds of the drop coming from the fall in sales at Grosvenor Casinos.
At the height of the UK lockdown, the company said it was losing £15million per month even after counting the financial support it was receiving, such as business rates relief and the Coronavirus Job Retention Scheme.
Closures: The Mecca Bingo owner expects to rebound to profit after plunging to a £67million loss last year when lockdown restrictions forced it to temporarily close venues
Following the loosening of lockdown curbs, trade bounced back strongly, especially in seaside towns like Blackpool and Bournemouth, as continuing restrictions on cross-border travel encouraged more Britons to take domestic holidays.
In the first three months of 2022, Rank reported revenues of £156.4million, a 221 per cent jump on the prior year when its UK outlets were shut for the entire period, and its Spanish sites were operating under stringent capacity limits.
Since then, the leisure company said trading across its various operations, which additionally include Spanish gaming sites Enracha and YoBingo, has been ‘broadly in line with management’s expectations,’ with the exception of Grosvenor Casinos.
For the upcoming financial year, Shore Capital analyst Greg Johnson believes the ‘crux will be a return in higher-spending international customers over the summer, and we now see a pick-up from July.’
He suggested that part of this rebound in trade will be due to the United Arab Emirates soon finishing the 40-day mourning period following the death of its late president and former ruler of Abu Dhabi, Sheikh Khalifa bin Zayed Al Nahyan.
Shore Capital has reduced its pre-tax profit forecast for Rank by £8million for next year, yet the financial services business has maintained its recommendation that investors buy stock in the group.