“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in GBP
Last close As at 25/03/2023
GBP0.72
▲ −0.60 (−0.82%)
Market capitalisation
GBP341m
Research: Consumer
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.
Rank Group |
Weakness in Grosvenor affects EBIT |
Trading update |
Travel & leisure |
6 April 2018 |
Share price performance
Business description
Next events
Analysts
Rank Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
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.
Year |
Revenue* |
EBITDA** |
PBT** |
Dil. EPS** |
DPS |
P/E |
Yield |
06/16 |
753.0 |
128.2 |
77.4 |
15.4 |
6.5 |
11.7 |
3.6 |
06/17 |
755.1 |
128.8 |
79.3 |
16.2 |
7.3 |
11.1 |
4.1 |
06/18e |
754.0 |
120.0 |
73.9 |
14.7 |
7.8 |
12.2 |
4.3 |
06/19e |
774.8 |
125.0 |
78.0 |
15.7 |
8.4 |
11.5 |
4.7 |
06/20e |
793.9 |
127.5 |
81.5 |
16.4 |
8.7 |
11.0 |
4.9 |
Note: *Revenue is before customer incentives. **Normalised, excluding amortisation of acquired intangibles, one-off and exceptional items.
Q3 hit by bad weather and weaker consumer sentiment
Rank’s trading update highlighted that a variety of factors had caused a weaker trading environment in Q318: both Mecca and Grosvenor saw lower than expected visits, made worse by bad weather. In addition, Grosvenor experienced losses from VIP customers and did not see the expected recovery in visits at the two recently refurbished London casinos. On a like-for-like basis, Mecca saw a 2% y-o-y decline for the 40 weeks to 1 April and for the 13 weeks to 1 April; Grosvenor saw 3% and 9% declines respectively, and group revenues were flat and down 2% respectively. Trading for Digital remained strong with 17% growth over both periods.
Changes to forecasts
Management is cautious about consumer demand and expects this to have a negative impact on UK venues for the remainder of FY18 and into FY19. The company now expects clean operating profit of £76-78m for FY18, compared to consensus of c £83m. We have reduced our forecasts to reflect the lower end of this range, with the majority of the cut coming from Grosvenor. We have also reduced our revenue and operating profit forecasts for FY19 and FY20. We have assumed that the company is able to partially offset the lower revenues through cost cutting, which is already underway. Overall, we have reduced our normalised EPS forecasts by 9.2% for FY18, 10.6% for FY19 and 10.2% for FY20.
Valuation: 5.7x CY18e EV/EBITDA
Rank’s CY18 EV/EBITDA multiple of 5.7x is below the peer average of 10.2x. As evidenced by the decline in visitor numbers, Rank faces more retail challenges than its pure online peers, but it does have more digital upside. Despite economic and minimum wage pressures, the core business remains highly cash generative and Rank now has a net cash position of £4.0m. This underpins a solid dividend policy and provides the firepower for potential M&A.
Exhibit 1: Financial summary
£'m |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
||
June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue* |
|
|
707.7 |
738.3 |
753.0 |
755.1 |
754.0 |
774.8 |
793.9 |
Cost of Sales |
(409.2) |
(414.2) |
(418.8) |
(439.3) |
(434.3) |
(440.9) |
(451.7) |
||
Gross Profit |
298.5 |
324.1 |
334.2 |
315.8 |
319.7 |
333.8 |
342.2 |
||
EBITDA |
|
|
116.0 |
126.3 |
128.2 |
128.8 |
120.0 |
125.0 |
127.5 |
Operating Profit (before amort. and except.) |
72.4 |
84.0 |
82.4 |
83.5 |
76.4 |
80.0 |
82.5 |
||
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(46.5) |
2.1 |
9.3 |
1.0 |
(7.5) |
0.0 |
0.0 |
||
Operating Profit |
25.9 |
86.1 |
91.7 |
84.5 |
68.9 |
80.0 |
82.5 |
||
Net Interest |
(9.9) |
(9.9) |
(5.0) |
(4.2) |
(2.5) |
(2.0) |
(1.0) |
||
Other finance adjustments |
(1.6) |
(1.7) |
(1.1) |
(0.6) |
0.1 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
62.5 |
74.1 |
77.4 |
79.3 |
73.9 |
78.0 |
81.5 |
Profit Before Tax (FRS 3) |
|
|
14.4 |
74.5 |
85.6 |
79.7 |
66.5 |
78.0 |
81.5 |
Tax on norm PBT |
(13.9) |
(17.0) |
(17.4) |
(15.6) |
(16.1) |
(16.4) |
(17.1) |
||
Profit After Tax (norm) |
48.6 |
57.1 |
60.0 |
63.7 |
57.8 |
61.6 |
64.4 |
||
Profit After Tax (FRS 3) |
0.5 |
57.5 |
68.2 |
64.1 |
50.4 |
61.6 |
64.4 |
||
Average Number of Shares Outstanding (m) |
390.7 |
390.7 |
390.7 |
390.7 |
390.7 |
390.7 |
390.7 |
||
EPS - normalised (p) |
|
|
12.4 |
14.6 |
15.4 |
16.3 |
14.8 |
15.8 |
16.5 |
EPS - normalised diluted (p) |
|
|
12.4 |
14.6 |
15.4 |
16.2 |
14.7 |
15.7 |
16.4 |
EPS - (IFRS) (p) |
|
|
5.2 |
19.1 |
18.2 |
16.1 |
13.2 |
15.8 |
16.5 |
Dividend per share (p) |
4.5 |
5.6 |
6.5 |
7.3 |
7.8 |
8.4 |
8.7 |
||
Gross Margin (%) |
42.2 |
43.9 |
44.4 |
41.8 |
42.4 |
43.1 |
43.1 |
||
EBITDA Margin (%) |
16.4 |
17.1 |
17.0 |
17.1 |
15.9 |
16.1 |
16.1 |
||
Operating Margin (before GW and except.) (%) |
10.2 |
11.4 |
10.9 |
11.1 |
10.1 |
10.3 |
10.4 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
613.3 |
607.2 |
614.1 |
606.0 |
600.5 |
600.5 |
601.5 |
Intangible Assets |
390.2 |
395.7 |
404.3 |
411.5 |
412.5 |
413.5 |
414.5 |
||
Tangible Assets |
217.5 |
204.0 |
202.0 |
187.9 |
180.0 |
179.0 |
178.0 |
||
Deferred tax/other |
5.6 |
7.5 |
7.8 |
6.6 |
8.0 |
8.0 |
9.0 |
||
Current Assets |
|
|
87.9 |
123.4 |
100.5 |
107.4 |
109.0 |
102.7 |
125.0 |
Stocks |
3.1 |
2.8 |
2.9 |
2.8 |
3.2 |
3.4 |
3.4 |
||
Debtors |
37.7 |
31.0 |
36.6 |
25.6 |
33.0 |
35.0 |
35.0 |
||
Cash |
47.1 |
89.6 |
61.0 |
79.0 |
72.8 |
64.3 |
86.6 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(168.4) |
(309.4) |
(173.9) |
(186.2) |
(184.5) |
(189.0) |
(189.0) |
Creditors (incl provisions) |
(164.0) |
(184.5) |
(159.5) |
(151.6) |
(170.0) |
(174.0) |
(174.0) |
||
Short term borrowings |
(4.4) |
(124.9) |
(14.4) |
(34.6) |
(14.5) |
(15.0) |
(15.0) |
||
Long Term Liabilities |
|
|
(290.5) |
(126.8) |
(188.1) |
(136.6) |
(130.0) |
(90.0) |
(90.0) |
Long term borrowings |
(179.7) |
(17.6) |
(87.8) |
(57.0) |
(50.0) |
(20.0) |
(20.0) |
||
Other long term liabilities |
(110.8) |
(109.2) |
(100.3) |
(79.6) |
(80.0) |
(70.0) |
(70.0) |
||
Net Assets |
|
|
242.3 |
294.4 |
352.6 |
390.6 |
395.0 |
424.2 |
447.5 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
55.0 |
146.6 |
110.2 |
116.3 |
109.0 |
116.0 |
118.5 |
Net Interest |
(8.1) |
(7.5) |
(5.0) |
(3.0) |
(2.0) |
(1.5) |
(0.5) |
||
Tax |
(19.1) |
(2.2) |
(31.1) |
(14.7) |
(14.8) |
(15.6) |
(16.3) |
||
Capex |
(44.3) |
(31.9) |
(52.7) |
(42.7) |
(41.0) |
(45.0) |
(45.0) |
||
Acquisitions/disposals |
0.3 |
(1.0) |
16.2 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Financing |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Dividends |
(16.4) |
(18.6) |
(22.7) |
(26.0) |
(28.6) |
(30.9) |
(32.4) |
||
Net Cash Flow |
(32.6) |
85.4 |
14.9 |
29.9 |
22.6 |
23.0 |
24.3 |
||
Opening net debt/(cash) |
|
|
104.1 |
137.0 |
52.9 |
41.2 |
12.4 |
(8.3) |
(29.3) |
HP finance leases initiated |
(2.3) |
(3.1) |
(2.8) |
(1.3) |
(2.0) |
(2.0) |
(2.0) |
||
Other |
2.0 |
1.8 |
(0.4) |
0.2 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
137.0 |
52.9 |
41.2 |
12.4 |
(8.3) |
(29.3) |
(51.6) |
Source: Rank Group, Edison Investment Research *Note: Revenue is before customer incentives
|
|
Research: Investment Companies
Princess Private Equity Holding (PEY) offers investors access to the private equity and debt expertise of global manager Partners Group ($74bn AUM), as well as selected co-investments with third-party managers. It has followed a direct investment strategy since 2011, when it refocused away from third-party funds of funds, and has seen solid NAV and share price performance over most periods of five years and shorter. Partners Group’s differentiated global approach includes a highly selective process of deal sourcing (c 99% of potential investments are declined each year), and an in-house value creation team who can plan and implement initiatives to help investee companies achieve superior growth. PEY has a high dividend policy, targeting a payout of 5-8% of the opening NAV each year.
Get access to the very latest content matched to your personal investment style.
