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The disruption caused due to the Covid-19 pandemic is impacting the global economy and has resulted in fall of major indices globally. The industries across multiple geographic locations are impacted due to travel restrictions and lockdown imposed by the Governments of multiple countries to contain the spread of the Virus. Today, we will be discussing two FTSE listed stocks from Travel and Leisure Sector, which is one of the most dented sectors in these uncertain times. The stocks which will be under limelight today - Rank Group Plc, a gaming service provider and On The Beach Group Plc, an online travel agent.
Rank Group Plc (LON:RNK)
The Rank group works with the motive of creating exciting environments as per the changing needs of its colleagues and customers. The group deliver entertaining experiences all the time through its multiple brands. The group has divided its operations into three businesses being Grosvenor Casinos, Mecca and Enracha.
Grosvenor Casinos
- UK multi-channel casino operator offering casino table games such as poker, baccarat, blackjack and roulette.
- Also includes other casino games like a slot machine and electronic roulette.
- The business has 53 clubs including 1 in Belgium with Venues revenue of GBP 353.2 million and digital revenue of GBP 51.1 million as on 30th June 2019.
Mecca
- The business operates in bingo clubs and other slot games based in the British Market.
- The business has 82 clubs with Venues revenue of GBP 202.1 million and digital revenue of GBP 79.7 million as on 30th June 2019.
Enracha
- It offers community-based gaming in Spain.
- The business has 82 clubs with Venues revenue of GBP 35.3 million and digital revenue of GBP 15.5 million as on 30th June 2019 (including YoBingo).
Impact of Covid-19 and Measures undertaken
- In the last three weeks, the group observed a decline in the trading performance in venues across the UK, and in a few past days, the fall in the performance was sudden.
- The group has temporarily terminated employees in Spain and Belgium, and the government issued an advisory to avoid going to leisure venues.
- The operations from digital business are running as normal and have enabled work from home access to its employees.
- The closure will result in an approximate net cash cost before mitigating actions of £25 million and £ 17 million after mitigating actions on a monthly basis.
- The group has a robust balance sheet with net debt and cash of £32 million and £163 million at the end of February, while the Revolving Credit Facilities stood at £85 million.
(Source: Company Report)
Robust Financial Performance for the Six Months Period ending 31st December 2019
- The underlying NGR (net gaming revenue) increased by 10 per cent to £377.5 million in H1 FY2020 versus £342.4 million in H1 FY2019. The increase was driven by an increased in the underlying NGR from Venues and digital. The Reported NGR went up by 14 per cent from £348.2 million in H1 FY2019 to £397.4 million in H1 FY2020.
- The underlying operating profit surged by 87 per cent to £59.8 million in H1 FY2020 from £31.9 million in H1 FY2019. The reported operating profit surged by 117 per cent to £56.1 million in H1 FY2020 from £25.8 million in H1 FY2019.
- The profit after tax stood at £39.8 million in the first half of the financial year 2020 versus £ 18.7 million in H1 FY2019. The basic earnings per share increased by 113 per cent to 10.2 pence H1 FY2020 from 4.8 pence in H1 FY2019.
- The cash flow from operations increased by 95 per cent from £56 million in H1 FY2019 to £109.3 million in H1 FY2020. The dividend per share surged by 30 per cent to 2.8 pence in H1 FY2020 versus 2.15 pence in H1 FY2019.
Share price: On 9th April 2020, shares of Rank Group Plc closed at GBX 174.4, down by 2.35% from the previous day closing price. Annual dividend yield stood at around 4.76 per cent.
Outlook – Strong financial performance impacted by Outbreak
The group has shown improved financial performance in the H1 of the financial year 2020. The performance has been good in the first few months of the H2 FY2020. Before the impact of outbreak increased its impact, the group expected its full-year adjusted operating profit between GBP 113 million to GBP 115 million. The group was making progress in integrating Stride and expect cost synergies in line with the expectations. The group has a sharp decline in the performance in recent few days trading and has withdrawn its full-year outlook and will provide an update once the situation stabilises.
On The Beach Group Plc
On The Beach Group Plc is a retailer of beach holidays having online operations. The group has sent more than 1.5 million customers on beach holiday per year. The group has innovative, flexible and scalable online technology, low-cost base and strong value proposition for customers. The group has cash generative and asset-light model.
Covid-19 Update and available Banking Facilities
- The group is taking the required measures to manage working capital and preserve cash. The company has minimised its marketing costs to nil and reduced its unnecessary costs less than £2 million.
- The group is not much dependent on forward bookings for its trading activities. At present, the company is not able to measure the impact of coronavirus pandemic and has withdrawn outlook and will provide update once the situation stabilises.
- The company has decided not to pay any dividend and will be giving reduced fees and salaries to its management team. The group’s Revolving Credit Facility stood at £50 million to oversee working capital needs.
Trading Update and a decline in the Outlook for FY2020
- The group witnessed a small but noticeable decline in the demand for 2020 Summer, which resulted in a reduction in marketing spend.
- The group’s board expects not to achieve payback on its outlined strategic marketing investment in the current fiscal year and expect its full-year results in 2020 to be below market expectations, due to disruption caused by COVID-19.
- The company based on its asset-light business model, tight cost and cash controls and low inventory risk show resilience against the volatile market environment and will return to profit after market conditions normalise.
Share price: On 9th April 2020, shares of On The Beach Group Plc closed at GBX 275.00, up by 7.84% from the previous day closing price. Annual dividend yield stood at around 1.20 per cent.
Outlook – Resilient Business Model with tight Cost Control
With the decline in the demand due to coronavirus outbreak, the financial performance got adversely impacted. The group, with its resilient asset-light business model and tight costs, was able to tackle the volatile market environment. The group expect its trading performance to improve as the market conditions normalise. The group has been amongst the strongest players in the travel and tour business and with promising business outlook. The group aims to become the leading beach holidays retailer in the European region, and a strong pipeline will help it in achieving the aim.
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The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.
