The Rank Group - chipping away

The Rank Group: The two main parts of the group are Grosvenor Casinos and Mecca bingo, whilst there is also a Spanish bingo based operation called Enracha. These full year numbers showed a recovery in the second half, after a poor first half and last October’s disappointment at losing their long-running VAT reclaim case. The next appeal in the VAT case is now scheduled for April 2015, so no one is holding their breath for that news. In the casinos business they are lobbying to be allowed more slot machines and the bingo side will benefit from the cut in duty from 20% to 10% effective June 2014, although the 15% remote gaming duty kicks in on 1^st December 2014. (As an aside, these results included the maiden contribution from the Gala casinos). A weakness that is being addressed is a poor digital presence as more and more gaming moves online, but it is too early to say if Rank have this right yet. Good news is that the balance sheet looks OK, with net debt to EBITDA of 1.18x (being net debt of £137m and EBITDA of £116m). The final dividend was 3.15p, making 4.4p for the year and a yield of 2.6% at 170p, up 10% and covered 2.75x by earnings. This all points to further dividend progress to come and with the underlying business looking more secure, the income stream should be attractive. However, many investors are put off because you would be a minority shareholder. The Malaysian conglomerate, Hong Leong Group hold 68.6% of the equity, so they set the odds and you have to trust that the rights of minority shareholders will be upheld. Indeed, Rank have had to apply to the FCA to be allowed to keep their premium listing on the LSE as their free float is below the 25% minimum now being enforced. Although the status quo should prevail, any loss of the premium listing could further reduce the interest of institutional investors.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.