Rank Group: Mecca Digital Picking Up Growth
Edison | Oct 19, 2017 05:22AM ET
The 19% growth in digital revenue is the key highlight in Rank Group’s (LON:RNK) trading update (16 weeks to 15 October). Grosvenor digital was up 34% and, encouragingly, Mecca digital has moved to double-digit growth (up 11% vs 2% in FY17). In a continuation of previous trends, Venues l-f-l revenues declined by 1%, leading to a 2% l-f-l growth in total group revenues. Notwithstanding the decline in Venues, the core business is highly cash generative, enabling progressive dividends, as well as potential M&A. Rank Group does not face any B2 FOBT risk from the triennial review and may even benefit if it is allowed more machines. Despite this, the stock trades at c 6.8x EV/EBITDA for CY18e. Management reiterated its expectations for the full year and our estimates remain unchanged.
19% digital growth is the highlight
Rank Group is beginning to reap the rewards from the online potential in the business, with 34% growth in Grosvenor digital and 11% growth in Mecca digital. This compares to 43.9% and 2.1% in FY17 respectively. The growth in Mecca digital is particularly encouraging, after the difficult start to this business in 2016. For the full year, we forecast total digital growth of 18.7% to £132.4m, equating to 16.9% of total revenues. The launch of the single wallet is expected in mid-2018.
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