Stockopedia comments Graham Neary - RNK15 Aug 2024 12:40
Graham’s view
I’m very pleased to see that this one is playing out as hoped, although the share price remains near the bottom of its long-term range:
To my eyes, it looks like a potential opportunity: why is the market not giving Rank more credit already for the improvement in trading? With NGR up by another 10% at the beginning of the new financial year, I think investors can reasonably hope for another year of positive operational leverage leading to further acceleration in profits.
I promised to look into the adjustments that Rank made to its profit figures (to explain the difference between “underlying” profit of £46.5m, and actual operating profit of £29.4).
These adjustments are numerous, but the ones that really matter are impairment (a net charge of about £8m) and amortisation (£6.6m).
The impairments were driven by some Grosvenor/Mecca venues that failed to meet expectations. Some of these venues were shut down.
Amortisation relates to some websites and is a regular charge, not related to performance.
As always, it’s a matter of opinion how you wish to treat these charges. Personally, I would be inclined to look past the amortisation charge in this case, but I might not look past the impairment charge as it reflects poor trading at some of Rank’s sites.
Unadjusted after-tax net income, the strictest measure of profitability, comes in at just £12m. Of course the market cap of c. £350m implies that things are only going to get better from here, and I agree with that stance. I’m happy to maintain my positivity at the current valuation.
https://app.stockopedia.com/content/small-cap-value-report-thu-15-aug-2024-rnk-1005379?order=createdAt&sort=desc&mode=threaded
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