Rank Group

LN: RNK

£601.7m market cap

154p last close

Rank is a gaming-based leisure and entertainment company. Its Grosvenor and Mecca brands are market leaders in UK multi-channel gaming and it also has operations in Spain and Belgium. In FY17, 85% of revenues came from its venues and 15% from its digital operations.

Investment summary

Rank’s trading update (13 weeks to 1 April) showed 17% growth in Digital, but the core Venues disappointed, with Mecca down 2% and Grosvenor down 9% on a like-for-like basis. The shortfall was largely due to fewer customer visits, as well as a lower gross win margin from VIPs. The company expects the weaker consumer environment to continue and has now guided to FY18 clean EBIT of £76-78m vs previous consensus of £83m. We have adjusted our forecasts to the lower end of guidance. The stock has dropped sharply on the news and trades at 5.7x EV/EBITDA and 11.8x P/E for CY18e, which is a meaningful discount to peers.

Y/E Jun
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2016A 753.0 128.2 77.4 15.4 10.0 5.5
2017A 755.1 128.8 79.3 16.2 9.5 5.2
2018E 754.0 120.0 73.9 14.7 10.5 5.2
2019E 774.8 125.0 78.0 15.7 9.8 4.8
Sector
Consumer
Share price graph
Balance sheet
Forecast net cash (£m) 8.3
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (0.5) (7.8) (36.3)
Relative* (1.7) 0.0 (32.8)
52-week high/low 248.5p/151.0p
*% relative to local index
Key management
Ian Burke Chairman
Henry Birch CEO
Clive Jennings FD
Paul Richardson Group Director - Strategy & Development
Sarah Powell Head of Treasury & Investor Relations