(Alliance News) - Grosvenor Casinos operator Rank Group PLC on Monday said it has furloughed around 90% of its workforce and a combination of cost cuts and financial help has slashed monthly expenses.
Rank shares were 5.9% higher at 176.88 pence each in London on Monday morning, making it one of the best performers in the FTSE 250 index.
Gambling firm Rank, which also owns the Mecca Bingo brand, said roughly 7,000 of its 7,600 strong workforce have been furloughed, as it bids to weather the "economic turmoil" caused by the Covid-19 outbreak.
"Where relevant, Rank has topped up the UK government's coronavirus job retention scheme so that all colleagues in furlough will receive 80% of their salary. The executive and non-executive directors have volunteered a 20% reduction in salaries and fees with effect from April 1 for as long as our colleagues are in furlough."
The UK government measures, and similar schemes in Spain and Belgium, will pocket Rank about GBP8 million per month.
Rank added it has a "small number of long running VAT claims". Rank requested a GBP25.2 million payment from the UK tax office HMRC, after a tribunal ruled in favour of the FTSE 250 firm.
HMRC has appealed the verdict and, should it be successful, Rank would be forced to repay the GBP25.2 million.
"In that scenario, we do not expect any repayment to be made for at least 12 months. In addition, we have reached agreement with HMRC to defer circa GBP40 million of tax and duty that was due to be paid in April 2020, initially until June 30, 2020," Rank added.
All UK businesses have been granted a payment holiday for second-quarter VAT, as part of government support measures during the Covid-19 lockdown.
Rank ruled out paying a dividend in October.
"Immediately prior to lockdown measures in the UK we estimated that during a period of full closure of all venues, monthly cash outflow before mitigation was GBP25 million and would be reduced to GBP17 million with mitigating actions within our control," Rank said. "As a result of the HM Treasury's support measures and further progress on our own mitigations, we now estimate that our monthly cash outflow rate will be reduced to approximately GBP10 million from May 2020."
Rank reported a mixed third-quarter trading performance. In the three months ended March 31, net gaming revenue rose 5% annually, though fell 4% on a like-for-like basis.
Newly-acquired Stride had a 3% like-for-like rise in the third quarter.
Rank completed the acquisition of Stride Gaming PLC for GBP116.0 million in October 2019.
Rank predicts full-year underlying operating profit between GBP48 million and GBP58 million, assuming all venues remain closed until its financial year concludes on June 30.
"As a result, we expect the group to meet all its bank covenants at June 30, 2020," Rank said.
Chief Executive John O'Reilly said: "We have established a robust financial position to address and withstand an extended period of economic turmoil. Given the uncertainty we face and continued social distancing measures likely to be in place for some time to come, we continue to work to protect cash and to prepare for the reopening of our venues in as safe a way as possible."
By Eric Cunha; ericcunha@alliancenews.com
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Rank (RNK)