Rank Group to beat Q4 profit expectations

Rank Group’s full-year profits could outperform market expectations by 13%, according to the operator’s January trading update.

The Maidenhead-based firm is guiding 2019 underlying operating profits of between £105m and £115m, ahead of market expectations due to positive trading in its digital, Grosvenor Casinos and international venues businesses.

Analysts had previously estimated the group’s underlying profits to reach between £93m and £103m.

Rank also said the high underlying profits have been underpinned by cost savings resulting from its digital transformation programme.

The three-year initiative, which began in 2018, has seen the business pivot increasingly towards digital with the aim of becoming a £1bn-revenue operator by 2023.

In May 2019, Rank agreed a £115m deal to acquire fellow operator Stride Gaming, augmenting its digital business.

Shore Cap analyst Greg Johnson said of the results: “We believe the upgrade reflects an ongoing robust trading performance, with group LFL revenue ahead 10% in Q1 against our full-year expectations of 6%, and we understand that the ‘win margin’ remains consistent with long-term trends.”

Peel Hunt analyst Ivor Jones said the “comprehensive operational changes” and investments made in Rank’s core business were “paying off at the bottom line”.

“The Digital strategy has further to go post the acquisition of Stride. Rank is bucking the trend in the UK gambling sub-sector. We have increased our target price to 340p from 240p and reiterate our ‘Buy’ recommendation,” Jones added.