Casino Operator Rank Group Lowers Financial Expectations on Softer Performance
Rank Group may be wondering if it timed a recent expansion project correctly. The company behind Grosvenor Casinos and Mecca Bingo just realized that it isn’t as financially healthy as it previously thought.
Rank Group reported that Grosvenor Casinos saw an uptick in performance in May. However, the month was weaker than the company expected. This was primarily due to a shortage of high-spending tourists from overseas visiting the Grosvenor establishments.
In addition, lower visitor numbers across Britain and a “poorer-than-average” casino win margin in the current quarter contributed to the decline. As a result, Rank Group saw its share price fall 16.9% to $1.018. This is the second time this year that it lowered its guidance.
Re-Crunching the Numbers
Rank Group estimated in April that it would earn between £47 million and £55 million (US$57.67 to $67.48 million). However, this is significantly lower than the £58 million to £65 million (US$71.17 million and $79.76 million) profit forecast from January. The company now anticipates underlying operational earnings of approximately £40 million (US$49.07 million), also due to cost pressures.
However, Rank believes it can rebound to profit despite a £67-million (US$82.19 million) drop last year. That came as a result of COVID-19 restrictions that forced the company to temporarily shutter all of its operations. In 2020, it furloughed over 7,000 employees because of COVID-19.
Grosvenor venues were responsible for approximately 80% of the company’s gross revenue. As a result, net gaming revenue plummeted by £300 million (US$368.16 million). About two-thirds was due to the decline of Grosvenor, which operates 52 properties throughout the UK.
The company disclosed that it was losing £15 million (US$18.4 million) monthly when the UK COVID-19 lockdown was in place. That was even when it took into account the financial assistance it received, such as tax relief and the UK’s Job Retention Scheme.
Grosvenor just announced that it is spending £3.5 million (US$4.27 million) to renovate and update its casino in Merchant City in Glasgow. That project is close to completion, with an anticipated launch of the new operations set for July 2.
Short Rise, Sudden Fall
Trade boomed after the lifting of lockdowns. In addition, the continued restrictions on international travel also encouraged more Brits to enjoy domestic vacations.
Rank previously thought the company would start to see gains following Ramadan, the Muslim holiday that ran from April 1 to May 1. However, the end of the period didn’t bring the gains it predicted.
Rank reported revenues of £156.4 million (US$191.15 million) during the first quarter of 2022. This represents a 221% jump from the previous year. However, its UK venues remained closed and its Spanish locations had to adhere to strict operating limits.
Since then, the company has said that activity across its operations (including Spanish online gaming sites Enracha & YoBingo) has been, to a degree, meeting management’s expected results. The exception, however, was Grosvenor.
Shore Capital analyst Greg Johnson believes that the current fiscal year will bring a return of higher-spending foreign customers, starting this summer. In addition, he expects the industry will see gains starting next month.
He suggested that the United Arab Emirates (UAE) is the catalyst behind the recent rebound. The UAE is ending its 40-day mourning period following the death of its former president, Sheikh Khalifa Al Zayed Al Nayan.
Shore Capital has reduced its pretax profit forecasts for Rank of £8 million (US$9.82 million) for the next fiscal year. However, the financial firm has maintained its recommendation for investors to back the company’s stock.
The post Casino Operator Rank Group Lowers Financial Expectations on Softer Performance appeared first on Casino.org.