Rank brings back the dividend

25th Feb 2010 08:38

Investors are betting on a recovery at Rank after the bingo and gaming group resumed dividend payments and said its Grosvenor Casinos business continues to drive growth in 2010.The unit reported a 20% jump in revenue and 14% leap on a like for like basis for the eight weeks to 21 February thanks to a rise in customer visits and above average win margin in its London casinos.Group revenue during the two months improved by 11% and 5% like for like, although January's cold snap kept punters away from Mecca Bingo halls, knocking like for like revenue there by 3%.That news came as full-year profit before tax and exceptional items rose to £49.2m from £38.2m in 2008, while an overall profit of £52m compared with a £26.1m loss in 2008 following a £64.3m one-off charge.Revenue grew by 3.4% to £540m, reflecting the contribution from new casinos and bingo clubs and a 0.8% like-for-like increase.Grosvenor Casinos and Mecca Bingo, the company's two largest businesses, delivered revenue growth of 6.7% and 2.4% respectively in 2009."We are stepping up investment to support our expansion strategy having strengthened our financial position through a substantial reduction in net debt," said chief executive Ian Burke."Whilst consumer conditions remain challenging, we have stabilised our businesses and we remain confident in our long-term growth strategy. Consequently, the board has determined to recommend the reinstatement of dividend payments from May 2010."Shareholders will receive a final dividend of 1.35p a share in May and Rank says it will set dividends in order to achieve dividend cover of around 3 times over the medium-term.Panmure Gordon keeps its 'buy' rating and ups its target to 141p, while KBC Peel Hunt thinks the shares continue to look "good value".Broker Daniel Stewart is unimpressed though."Our bearish stance is driven by the bingo performance that remains relatively weak (weather-permitting)," says equity analyst James Hollins."With the shares trading at 12.6x FY10E EPS (6.5x EV/EBITDA), we see the shares are marginally overvalued and retain our Sell stance and 75p price target."