Rank Group — Recovery potential and operational gearing

Rank Group (LSE: RNK)

Last close As at 20/05/2024

73.00

0.80 (1.11%)

Market capitalisation

GBP342m

More on this equity

Research: Consumer

Rank Group — Recovery potential and operational gearing

Rank Group has faced numerous external challenges since 2020: the ravages of the COVID-19 pandemic and tighter regulatory requirements, in particular the negative effects of required affordability restrictions, have been followed by the recent cost of living crisis and higher inflation. These external challenges have masked the group’s underlying transformation, which is extending and improving the product offer, while making the organisation more efficient to drive future growth and innovations. With revenues at key assets well below pre COVID-19 levels, Rank Group has the potential to demonstrate rapid revenue and profit growth on a normalisation of demand and costs pressures, before the potential for easing regulation is considered. Based on consensus EV/sales, Rank Group’s valuation is at a significant discount to its own historical multiples.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Consumer

Rank Group

Recovery potential and operational gearing

Update post H123 results

Travel and leisure

28 February 2023

Price

88.4p

Market cap

£414m

Net cash (£m) at 31 December 2022 pre IFRS 16 liabilities (IFRS 16 liabilities £169m)

10.9

Shares in issue

468.4m

Free float

44%

Code

RNK

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.5)

(3.5)

(43.6)

Rel (local)

(1.2)

(8.4)

(45.7)

52-week high/low

159.8p

52.4p

Business description

Rank Group is the UK’s largest multi-channel casino operator (Grosvenor) and the second largest multi-channel bingo operator (Mecca). It is also the fourth largest bingo operator in Spain. Management seeks to grow its online exposure while improving the performance of offline brands.

Next events

Q323 trading update

April 2023

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

Rank Group is a research client of Edison Investment Research Limited

Rank Group has faced numerous external challenges since 2020: the ravages of the COVID-19 pandemic and tighter regulatory requirements, in particular the negative effects of required affordability restrictions, have been followed by the recent cost of living crisis and higher inflation. These external challenges have masked the group’s underlying transformation, which is extending and improving the product offer, while making the organisation more efficient to drive future growth and innovations. With revenues at key assets well below pre COVID-19 levels, Rank Group has the potential to demonstrate rapid revenue and profit growth on a normalisation of demand and costs pressures, before the potential for easing regulation is considered. Based on consensus EV/sales, Rank Group’s valuation is at a significant discount to its own historical multiples.

Year
end

NGR*
(£m)

EBIT**
(£m)

EPS**
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/21

329.6

(84.5)

(20.1)

0.0

N/A

N/A

06/22

644.0

39.8

4.3

0.0

20.6

N/A

06/23e***

681.7

14.0

0.3

0.0

315.7

N/A

06/24e***

745.5

44.0

5.1

1.6

17.2

1.8

Note: *NGR = net gaming revenue. **EBIT and EPS exclude the amortisation of acquired intangibles and exceptional items. ***Consensus estimates (source: Refinitiv) include two brokers, Goodbody and Peel Hunt.

H123: Low revenue growth and high-cost inflation

The full effects of the pressures on UK consumer income, tighter affordability restrictions and high cost inflation were evident in H123, with year-on-year underlying like-for-like revenue growth of 2% to c £337m and an underlying operating profit decline of 83% to £4.2m. Venues’ revenue has not recovered as quickly as management anticipated, primarily at the company’s most significant asset, Grosvenor, which has been negatively affected by the impact of affordability restrictions, cost of living pressures and fewer overseas visitors than expected. Elsewhere, Rank’s Digital and Enracha divisions continued to recover strongly.

FY23 profit guidance reiterated

Management reiterated its recently downgraded profit guidance for FY23, with like-for-like underlying operating profit of £10–20m (FY22: £40m). Consensus mean estimates (source: Refinitiv) forecast continued revenue growth in FY23 and FY24, and a strong profit recovery in FY24.

Valuation: Significant discount to historical multiples

The share price has made a strong recovery from the recent low in November 2022 and the dip after the new FY23 profit guidance in December 2022. However, the prospective EV/sales multiples (pre IFRS 16 liabilities) of 0.6x for FY23e and 0.5x for FY24e remain well below its long-term average of 1.2x (since FY10) suggesting significant upside potential on a normalisation of revenue and cost pressures. The publication of the long-delayed gambling review White Paper, hopefully in the next few weeks, could be a catalyst.

Market-leading, multi-channel gaming operator

Rank is the UK’s largest casino operator with 51 Grosvenor casinos, and the second-largest bingo operator with 64 Mecca bingo clubs. Enracha is the second-largest bingo operator in Spain with nine venues. Post the Stride acquisition in October 2019, management estimates its current online bingo market share is approximately 1.2%, and its overall share in Spain is approximately 3%. In FY22, the UK represented 91% of revenue, Continental Europe a further 8% and India was c 1%.

Rank’s gaming businesses are fully regulated, with high barriers to entry due to the requirement for licences, and are either market leaders or have strong market positions, but are still trading below pre-pandemic levels and are being negatively affected by the economic slowdown. Broadly, management believes the greater growth opportunity for venues is casinos versus bingo, which is in structural decline, in the absence of desired regulatory changes. In the digital world, Rank has successfully leveraged its leading venue brands online and has complemented these with other brands. Digital was a key driver of growth in H123, with revenue increasing by 9%, and represented 30% of Rank’s total revenue.

Exhibit 1: Split of net gaming revenue (NGR, £m)

Exhibit 2: Split of normalised EBIT (£m)

Source: Rank Group, Edison Investment Research

Source: Rank Group, Edison Investment Research

Exhibit 1: Split of net gaming revenue (NGR, £m)

Source: Rank Group, Edison Investment Research

Exhibit 2: Split of normalised EBIT (£m)

Source: Rank Group, Edison Investment Research

The gambling industry is dependent on the level of consumer spending, which in turn depends on the strength of the economy, consumer confidence and unemployment levels. UK domestic revenues, particularly in the London-based casinos, are also sensitive to changes in international travel, which can be affected by changes in foreign exchange rates, as well as by travel restrictions and changes in work patterns.

Rank’s operations were relatively unaffected by the last significant downturn, the global financial crisis in 2008/09. For example, Grosvenor benefited from internal initiatives, which increased demand and spend, and followed the prior years’ negative effects of the introduction of the smoking ban. In its November 2022 Economic and fiscal outlook, the Office for Budget Responsibility (OBR) painted a bleak outlook for the UK economy, particularly consumer spending. With respect to real household disposable income per person, the OBR forecasts a cumulative fall of 7.1% from 2021/22 to 2023/24, which includes two years of declines, each year being greater than any prior period since records began in 1956/57. This suggests that Rank’s UK-based revenues are likely to face greater pressures than during the global financial crisis, notwithstanding the internal self-help provided by the ongoing plan, Transformation 2.0. The likely greater revenue pressures are being compounded by significant cost inflation and therefore profitability will be more difficult to sustain than in prior downturns. Rightly, management has a cautious outlook for the business in aggregate.

Grosvenor Casinos (45% of H123 NGR)

Grosvenor is the largest operator of land-based casinos in the UK with 51 casinos (operating 71 licences and has an additional seven non-trading licences). The eight London casinos are recreational rather than high-end casinos (where trading is more volatile) but do attract a more internationally diverse and higher-spending customer base than provincial casinos.

Strict UK rules on granting new casino licences represent a considerable barrier to entry, but at the same time limit venue expansion, although we note that Rank does have seven non-trading licences. Apart from the Luton Casino, which operates under a 2005 licence, all Rank’s UK casinos are licensed under the Gaming Act 1968 and are only allowed a maximum of 20 gaming machines, regardless of size. Slot machines are categorised with respect to maximum stake (from 10p/£1 to £5) and pay-out (£5 to £10,000). Greater flexibility in the numbers and types of machines by venue size and the wider offer, as proposed by management for the new gambling regulations, would provide attractive incremental revenues for Grosvenor.

From a revenue perspective the transformation plans have focused on: selective investment in refurbishing casinos; renewing the gaming offer; and enhanced customer gaming protection. The introduction of Grosvenor’s single wallet provides benefits including a seamless experience for players online and in-venue, with improved marketing and personalisation opportunities.

Grosvenor’s revenue peaked at c £394m in 2015, since when venue closures, the introduction of more stringent customer due diligence requirements following published advice from the Gambling Commission, and the effects of COVID-19 have led to revenue declines. FY22’s reported revenue of c £297m was 12% below FY19’s c £338m, suggesting strong recovery potential.

As reported in the H123 results, the recovery in Grosvenor’s revenue has been slower than management anticipated. Visitor growth was strong (5%), but average spend per visit declined by 9% due to affordability restrictions on higher spending customers and the negative effects of the cost of living crisis. H123’s like-for-like revenue of £153m was 5% below H122 and remains at 22% below the H120 pre COVID-19 level. Following a good recovery in Q123 (14% up on Q422), sequential growth slowed in Q223 (4% up on Q123) due to the cold weather, the FIFA World Cup and the slow return of overseas visitors. However, weekly average NGR showed some improvement and Grosvenor enjoyed a stronger Christmas and New Year, which continued into January. The lower revenue and inflationary cost pressures led to H123 operating profit declining by 86% y-o-y to £4.3m (see Exhibit 3).

Digital (30% of H123 NGR)

Digital includes the online assets of Grosvenor, Mecca, Enracha/Yo, and Stride Gaming. Over the past two years Rank’s UK brands have been transitioned to its proprietary platform, RIDE, which provides it with greater agility in future online development.

Through a combination of organic growth, including leveraging the UK’s legacy venue brands, and M&A, the division has grown from 10% of group revenue in FY12 to 28% in FY22, albeit the latter is flattered by the lower venue-based revenues due to COVID-19 related disruption.

Following a lacklustre performance in FY21 due to new affordability restrictions affecting customer spend and the lower conversion of customers from offline as venues were closed because of the pandemic, Digital revenues grew by 4% in FY22 and staged a strong recovery in H123 with revenue growth of 9% (Exhibit 3). This produced strong operational leverage and the operating margin improved from 1.2% in H122 to 7.3% in H123. This remains well below historical levels, in part due to some central overheads now being allocated to the divisions.

Mecca (20% of H123 NGR)

Mecca is the second largest UK land-based bingo operator with 64 clubs at end H123, down from 71 at the end of FY22. Mecca generates revenue from multiple sources including main stage bingo, interval bingo, amusement machines and food and beverages.

Bingo is a pari-mutuel game (pool betting) and the club charges a participation fee; hence there is limited gaming risk for the operator. In a declining industry with a female C2DE (lower social/economic) demographic skew, the perennial difficulty has been to innovate and update the clubs to attract younger players while retaining the loyal older age group.

The transformation plan has focused on: improving the gaming machine offer and delivering additional value to customers, for example lengthening non-peak sessions; trialling new concepts for the venues; and improving the omni-channel offering. Costs continue to be tightly controlled with savings delivered through more efficient staff rotas and promotional costs.

In absolute terms, Mecca’s revenue has declined in every year since FY12, except FY22 due to the soft FY21 comparative due to COVID-related restrictions. The long-term revenue decline is solely attributable to the gradual reduction in venue numbers (97 in FY12 to 64 in H123), and revenue per venue marginally increased prior to COVID-19.

Mecca performed better in H123 than Grosvenor, with year-on-year like-for-like revenue growth of 4% (total growth of 2%) but was still slower than management expected. H123 revenue remained 20% below pre-COVID levels on 28% fewer customer visits, implying the transformation has helped grow revenue per visit.

The strong management of the cost base is evident in a stable operating margin pre-COVID. However, Mecca moved into loss in FY21, due to the pandemic, and remains loss-making. The H123 operating loss increased by 13% to £5.9m as inflationary cost pressures compounded the slower-than-expected revenue growth.

Enracha (5% of H123 NGR)

Rank’s international land-based exposure is through its nine large Enracha gaming venues in Spain. It is the second-largest Spanish operator (by venues), and the clubs offer bingo, poker, slots and other games as well as food and entertainment.

Rank’s transformation plan has focused on new revenue from investment in new machines, investment in venues and the future development of an omni-channel offering.

Enracha was also badly affected by the pandemic, but it remained profitable and revenues recovered strongly in FY22 (jumping 89% to £30.1m, not far off pre-pandemic levels). It continued to recover strongly in H123 with like-for-like revenue growth of 25% and operating profit growth of 18%. Management’s successful development of the product offer is demonstrated by H123 like-for-like revenue being 11% ahead of pre-pandemic levels, despite customer visits being down 14%.

UK gaming industry regulation

Regulation – change ‘can’t come soon enough’

The industry continues to wait for the UK government to publish a White Paper for the proposed changes to gambling regulation. The review of the industry was first announced in December 2020 and was originally expected to be published before the end of 2021 but has been delayed due to the numerous changes in prime minister and at the Department for Digital, Culture, Media and Sport (DCMS). The publication will be followed by a series of consultations with the Gambling Commission and the DCMS, suggesting some ongoing lack of clarity.

Paul Scully, appointed as Parliamentary Under Secretary of State at the DCMS in October 2022 but now moved to a different department in the government’s February 2023 cabinet reshuffle, recently spoke at the Betting and Gaming Council’s AGM. He acknowledged the importance of the entertainment sectors in local economies, that online businesses provide highly skilled jobs, and millions of customers are choosing to spend their money on a leisure product they enjoy. However, he pointed out that too many failings in customer protection with respect to gambling continue to occur. He was clear that it is not the role of government to tell people how much customers are allowed to spend on gambling, and that operators must use all the information they have on customers and their wider risk profile to inform the right interventions with their customers. New regulations will provide greater operating certainty to the gaming operators and while financial risk checks are likely to be a negative for online operators (although most have already introduced some affordability measures), the reform of outdated regulations for land-based operators – notably around machine numbers – is expected to be helpful to future revenue growth.

The previous 2005 Gambling Act created new licences for casinos that provided more liberal regulations for casinos that operate under those licences, versus those that operate under the previous regulations, the 1968 Gaming Act.

As part of its consultation submission, management recommended the government considers regulatory changes that would provide the ability to offer the below, supported by safer gambling considerations:

More appropriate provision of gaming machines (ie a sliding scale for the number of slot machines based on size of venue). Casinos operating under the 1968 Act are allowed to provide just 20 machines, but those that operate under the 2005 Act may provide up to 80 machines depending on space and space allocation requirements. In total, 50 of Grosvenor’s 51 casinos operate under the 1968 Act.

Electronic table games based on random number generation rather than a physical event (ie a broader range of lower stakes table games).

Sports betting, which is currently prohibited.

The opportunity for customers to access cashless gaming in way that recognises the society wide shift away from cash.

For bingo clubs, management would like restrictions on the ratios of types of machines that are permitted in each location to be relaxed, as well as other restrictions that impinge the ability to innovate the experience, such as cashless gaming.

Financials

H123 interim results

In its December 2022 trading update, management indicated that it now expected FY23 like-for-like underlying operating profit to be between £10–20m, a year-on-year decline of 50–75% from FY22’s reported operating profit of £40m. Management reiterated its guidance with the publication of the H123 results. With H123 like-for-like underlying operating profit of £4.2m, this implies a significant improvement in profitability in H223. The reported strong Christmas and New Year trading, which continued into the first three weeks of January 2023, including continued growth in digital, is encouraging and supportive of management’s expectation of improved profitability in H223.

Exhibit 3: Summary of reported H123 results

£m

H122

H123

Growth y-o-y

Revenue

333.7

338.9

2%

– Grosvenor

161.6

153.4

(5)%

– Mecca

65.9

67.0

2%

– Digital

92.1

100.8

9%

– Enracha

14.1

17.7

26%

Like-for-like underlying operating profit

24.9

4.2

(83%)

Venue openings, closures and forex

(1.8)

(1.0)

(44%)

Operating profit

23.1

3.2

(86)%

– Grosvenor

29.9

4.3

(86)%

– Mecca

(5.2)

(5.9)

13%

– Digital

1.1

7.4

573%

– Enracha

2.6

3.9

50%

– Central costs

(5.3)

(6.5)

23%

Clean PBT

16.6

(2.8)

(117)%

Exceptional costs

79.3

(104.2)

(231)%

Reported PBT

101.5

(107.1)

(206)%

Source: Rank Group

H123’s like-for-like underlying profit of £4.2m was 83% lower than H122’s £24.9m, due to the slower rate of revenue growth than expected from Grosvenor and Mecca, compounded by increasing cost pressures. The key drivers to the change in profitability were £10.5m of incremental staff costs (average wage increase of 8%), incremental energy costs of £4.5m, and the absence of COVID-19 support (furlough income and rates relief) versus £4.9m in the prior year. Energy costs are now expected to be £31m in FY23 (100% hedged in Q3 and 75% hedged in Q4) and £26m in FY24m (with some electricity hedging already in place) versus £23m in FY22.

From H123, management has changed the divisional disclosure so that the majority (£13m of £19.5m in H123) of central costs are now allocated to the operating divisions. Prior to COVID-19, central costs of £37.4m compared to divisional profits of £76.4m.

One-off expenses such as venue closure costs, impairment charges, restructuring and integration costs have been a persistent feature of Rank’s income statement as management has evolved the shape of the group. From FY12–22 the expenses, cash and non-cash, totalled c £157m versus normalised operating profit over that period of £614m. In H123, a further c £100m of exceptional items were expensed including impairment charges for Grosvenor and Mecca of £95m, which mostly reflected lower expected future profitability.

Prior to COVID-19, Rank regularly paid a dividend; the last dividend proposed was the interim dividend for FY20. Rank’s board was unable to propose a dividend during the pandemic due to banking covenants, but this restriction is no longer in place. It expects to recommence dividend payments as soon as circumstances permit, given the current difficult trading environment and pipeline of investment opportunities. We note the reported loss, mainly due to the new impairments for Grosvenor and Mecca, reduced shareholders’ funds to c £326m from £425m at the end of FY22.

Cash flow and balance sheet

Prior to COVID-19, Rank’s free cash flow generation was strong and, relative to revenue, was improving gradually, with improvements in working capital while the operating margin and fixed and intangibles investment varied.

The onset of the pandemic led to negative free cash flow of £54m in FY21, followed by a strong inflow of £115m in FY22 as trading recovered, which was boosted by proceeds from a longstanding claim for a VAT refund of £77m. In H123, despite the drop in profitability, Rank generated £14m of free cash flow due to more favourable working capital, which is expected to unwind in H223.

In the depths of the COVID-19 related restrictions, Rank Group raised gross proceeds of £70m from an equity placing at 90p/share by issuing 77.7m new shares, equivalent to 19.9% of the prior number of shares in issue.

Management has guided to FY23 investment in tangible and intangible assets of c £40m, which compares with annual spend pre COVID-19 of £34–53m, 5–7% of historical revenue.

At the end of H123 the group had net cash, pre IFRS 16 liabilities, of £10.9m, a reduction from H122’s c £53.6m and end FY22’s £19.1m. IFRS 16 liabilities of c £169m take the total net debt position to c £158m at the end of December 2022.

Valuation

Rank Group’s share price is currently trading well below its historical multiples. In Exhibit 4 below we show the prospective EV/sales (current EV) multiples for FY23 and FY24 using consensus estimates from Refinitiv versus historic high, average and low multiples in those years. We exclude IFRS 16 liabilities from our calculation of EV so that it is comparable across time.

Exhibit 4: EV/sales (NGR) multiple

Source: Rank Group, Refinitiv, Edison Investment Research

The prospective multiples of 0.6x for FY23e and 0.5x for FY24e are well below Rank’s long-term average of 1.2x. With respect to EV/EBIT, the prospective multiple of 9.3x for FY24e using consensus estimates compares favourably with the long-term average of 10.1x. We believe a return to a more normal operating environment with lower operating cost pressure will be supportive of a re-rating from its discounted valuation.


Exhibit 5: Financial summary

£m

2018

2019

2020

2021

2022

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Net gaming revenues (NGR)

 

691.0

695.1

629.7

329.6

644.0

Operating costs

(570.8)

(578.5)

(505.9)

(342.7)

(536.5)

EBITDA

 

120.2

116.6

123.8

(13.1)

107.5

Normalised EBIT

 

77.2

74.6

48.3

(84.3)

40.1

Amortisation of acquired intangibles

0.0

0.0

(9.6)

(11.8)

(11.7)

Exceptionals

(26.9)

(33.5)

(18.0)

3.4

54.0

Share-based payments

(0.2)

1.1

0.8

(0.2)

(0.3)

Reported operating profit

50.1

42.2

21.5

(92.9)

82.1

Net Interest

(2.8)

(2.8)

(13.4)

(14.4)

(13.4)

Exceptionals

(0.6)

(1.6)

5.3

0.0

5.6

Profit Before Tax (norm)

 

74.4

71.8

34.9

(98.7)

26.7

Profit Before Tax (reported)

 

46.7

37.8

13.4

(107.3)

74.3

Reported tax

(10.8)

(7.0)

(5.2)

10.4

(16.9)

Profit After Tax (norm)

58.7

59.8

25.1

(88.6)

20.3

Profit After Tax (reported)

35.9

30.8

8.2

(96.9)

57.4

Minority interests

0.0

0.0

0.4

(0.1)

0.0

Discontinued operations

0.0

1.5

1.2

24.9

8.8

Net income (normalised)

58.7

59.8

25.5

(88.7)

20.3

Net income (reported)

35.9

32.3

9.8

(72.1)

66.2

Basic average number of shares outstanding (m)

391

391

391

437

468

EPS - basic normalised (p)

 

15.0

15.3

6.5

(20.3)

4.3

EPS - diluted normalised (p)

 

15.0

15.3

6.5

(20.3)

4.3

EPS - basic reported (p)

 

9.2

8.3

2.5

(16.5)

14.1

Dividend (p)

7.45

7.65

2.80

0.00

0.00

Revenue growth (%)

(2.3)

0.6

(9.4)

(47.7)

95.4

EBITDA Margin (%)

17.4

16.8

19.7

(4.0)

16.7

Normalised Operating Margin (%)

11.2

10.7

7.7

(25.6)

6.2

BALANCE SHEET

Fixed Assets

 

638.2

617.0

811.6

754.2

709.7

Intangible Assets

459.1

447.8

521.0

504.6

493.6

Tangible Assets

171.5

161.5

289.7

246.0

214.7

Investments & other

7.6

7.7

0.9

3.6

1.4

Current Assets

 

82.1

92.3

108.5

98.8

142.5

Stocks

2.5

2.7

2.0

2.0

2.3

Debtors

29.2

27.2

19.6

16.3

34.2

Cash & cash equivalents

50.4

61.8

73.6

69.6

97.9

Other

0.0

0.6

13.3

10.9

8.1

Current Liabilities

 

(225.6)

(222.0)

(169.8)

(174.2)

(176.1)

Creditors

(153.1)

(145.2)

(142.6)

(126.3)

(131.1)

Tax and social security

(10.3)

(7.2)

(2.5)

(3.1)

(4.2)

Short term borrowings

(54.2)

(54.7)

(21.7)

(39.4)

(33.9)

Other

(8.0)

(14.9)

(3.0)

(5.4)

(6.9)

Long Term Liabilities

 

(98.2)

(89.3)

(150.9)

(115.8)

(73.8)

Long term borrowings

(5.5)

(5.3)

(107.4)

(77.7)

(44.1)

Other long term liabilities

(92.7)

(84.0)

(43.5)

(38.1)

(29.7)

Net Assets

 

396.5

398.0

599.4

563.0

602.3

Minority interests

0.0

0.0

(0.2)

(0.1)

(0.1)

Shareholders' equity

 

396.5

398.0

599.2

562.9

602.2

CASH FLOW

Op Cash Flow before WC and tax

120.2

116.6

123.8

(13.1)

107.5

Working capital

(9.5)

10.4

18.9

(9.7)

(6.2)

Exceptional & other

(8.3)

(14.4)

29.2

7.5

70.0

Tax

(14.4)

(10.2)

(14.0)

(1.4)

(9.9)

Net operating cash flow

 

88.0

102.4

157.9

(16.7)

161.4

Capex

(37.0)

(34.0)

(50.7)

(22.2)

(40.6)

Acquisitions/disposals

(16.5)

(24.2)

(87.8)

25.2

8.2

Net interest

(2.4)

(2.3)

(15.6)

(14.9)

(6.3)

Equity financing

0.0

0.0

0.0

68.1

0.0

Dividends

(29.1)

(29.1)

(32.4)

0.0

0.0

Other

(31.5)

(1.2)

41.2

(40.5)

(94.3)

Net Cash Flow

(28.5)

11.6

12.6

(1.0)

28.4

Opening cash

 

76.5

47.7

58.7

71.1

69.6

Closing cash

 

47.7

58.7

71.1

69.6

97.9

Closing net debt/(cash) excluding IFRS 16

 

9.3

(1.8)

57.0

49.8

(19.1)

Closing net debt/(cash) including IFRS 16

 

9.3

(1.8)

297.5

256.7

162.6

Source: Company reports, Edison Investment Research


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This report has been commissioned by Rank Group and prepared and issued by Edison, in consideration of a fee payable by Rank Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Rank Group and prepared and issued by Edison, in consideration of a fee payable by Rank Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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