Overview
Rank Group Plc (RNK) is an entertainment brand based on gaming. The company has its operations in Spain, Belgium and Britain. The company’s main focus is to become the UK’s leading game operator. The company divided its operations into five reportable segments being Mecca Venues, International Venues, Digital, Grosvenor Venues and Central Costs. The company provides table games under the brand name Grosvenor Casinos, Mecca brand provides community games to the customers and Enracha provides community games to the customers in the Spanish market.

Financial Highlights – H1 FY2019 (Continuing Operations £, million)

(Source: Semi-Annual Report, Company Website)
 
For the First Half for the Financial year 2019 ending December 31st, 2018, the company’s reported Revenue was £348.2 million against £354.2 million for H1 FY2018. There was a marginal decrease of 1.7 per cent due to a decrease in revenue from Grosvenor venues, Mecca venues and International venues segments in the current period. The gross profit for H1 FY2019 dipped by 4.41 per cent to £155.9 million from £163.1 million in H1 FY2018. The company’s operating profit declined by £8.4 million to £25.8 million in H1 FY2019 from £34.2 million in H1 FY2018. The Profit before taxation was £22.8 million for H1 FY2019 against £32.8 million for H1 2018. The profit for the period (attributableto the shareholders) stood at £18.7 million for H1 FY2019as compared to £25.1 million for H1 FY2018. The company’s Basic and diluted Earnings per share (continuing operations) was 4.8 pence for H1 FY2019 against 6.4 pence in H1 FY2018. The company’s operating cash flow declined by 9.5 per cent to £56 million in H1 FY2019 from £61.9 million in H1 FY2018. The Net cash for H1 FY2019 was £7.7 million against £4 million in H1 FY2018. The Dividend per share stood flat at 2.15 pence for the current period.
 
Share Price Performance

Daily Chart as at May-02-19, after the market closed(Source: Thomson Reuters)

On 02^nd May 2019, (after the market closed), Rank Group Plcshares ended at GBX 160.8, up by 1.13 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 195.40/GBX 129.20. The outstanding market capitalisation was around £628.22 million with a dividend yield of 4.69 per cent.

Valuation Methodology


Conclusion
In H1 2018/2019, the management main focus was on the development of the company’s transformation programme. The new programme will have a focus on revenue growth, cost reduction and development of technology. Despiteweek financial performance, the company is determined to improve its operational efficiency and had taken the necessary steps to improve it.The company hadsimplified the management of casinos and reduced the labour hours. This will help the company to save labour costs by £7.5 million approximately.  The company had acquired YoBingo! which had let the company to had strong and secure digital bingo presence in Spanish Gaming market and will result in higher growth and with the well-regulated gaming market. The company is looking for a strategic partnership to expand its operations in the foreign markets as a part of the development plan. Based on the strong growth perspective and the valuation done using the above method, we have given a Speculative BUY recommendation at the closing price of GBX 160.8 (as on 02nd May 2019) with single-digit upside potential based on 14.35x NTM Price/Cash Flow (approx.) on FY19E cash flow per share.
 
*All forecasted figures have been taken from Thomson Reuters.

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