Rank Share News (RNK)

(Sharecast News) - Mecca Bingo and Grosvenor Casinos owner Rank Group said on Friday that it has raised £70m in an equity placing to strengthen its balance sheet.
The company placed 77.7m shares at 90p each, which is 4.3% premium to the closing share price on Thursday.

Rank said it entered the Covid-19 lockdown period with significant momentum to revenues and profits driven by its transformation strategy, a tightly controlled cost base and a strong balance sheet.

For the eight-month, pre-Covid period to 29 February 2020, like-for-like underlying operating profit was up 61% compared to the same period a year ago. However, the lockdown had a material impact on the business, as venues comprise a significant proportion of profits.

"Throughout the Covid-19 pandemic, the company has taken decisive action to preserve cash and protect its balance sheet," it said. "Despite the challenging trading environment, following the phased reopening of venues starting in July and August, the company had begun to see encouraging performance."

However, the curfew, the lockdown and other government measures, alongside a deterioration in consumer confidence caused by the pandemic, are expected to continue to dent Rank's liquidity position in the coming months. As a result, it is not expecting to achieve monthly positive cash generation from its venues while the lockdown remains in place.

"The company is, therefore, looking to further strengthen its balance sheet through the fundraise, in order to maintain appropriate liquidity covenant headroom on its debt facilities under various trading scenarios, provide ample working capital to operate through this challenging environment, and enable the company to continue to deliver on its transformation 2.0 programme."

Announcing the fundraise late on Thursday, Rank said that its lending banks had agreed to extend the £50m minimum liquidity test until March 2022, conditional on the fundraise.

At 0815 GMT, the shares were up 6.6% at 92p.

Shore Capital analyst Greg Johnson said: "Having been dealt an unfair hand with regards the late reopening and subsequent 10pm curfew, the equity raise means Rank effectively enters lockdown 2.0 in a broadly net debt neutral position, with significant liquidity now to manage an extended lockdown and emerge in a position of strength to take advantage of the attractive opportunities that the crisis will undoubtedly present."