Rank Group (LSE: RNK) has been under the weather in recent months because of falling footfall at its bingo halls and casinos. Latest trading details this week revealed the extent of the problem, group like-for-like revenues having fallen 2.4% between July and December because of a 3.9% drop in corresponding sales across its venues.
Four-fifths of group revenues are generated at its physical sites, and consequently adjusted pre-tax profit at Rank dropped 27.6% year-on-year to £29.1m. Particularly disappointing was news that performance at its Grosvenor casinos deteriorated because of “reduced contribution from major players, a weather-impacted first quarter and [a] challenging consumer backdrop.”
On the plus side…
However, there were two big pieces of news that sent investors piling back into the share following Thursday’s results, firstly news that business picked up in the final quarter of the interim period and helped the FTSE 250 firm reiterate its full-year guidance.
And secondly, the release showed that its online services continue to go from strength to strength. Like-for-like sales among Rank’s digital operations leapt 5.1% in the six months, with customer volumes at both Mecca and Grosvenor rising in the period. Including the contribution of its recently-acquired Spanish bingo arm YoBingo! total digital turnover rose 15.8%.
In light of these two factors, City analysts expect Rank to bounce from an estimated 6% earnings drop in the 12 months to June 2019 with a 5% increase in fiscal 2020. And this encourages the Square Mile to anticipate that Rank will have the confidence to keep growing dividends too.
Last year’s 7.45p per share dividend is predicted to rise to 7.7p in the current period and to 8.1p next year. Consequently Rank carries big, big yields of 4.8% and 5% for fiscal 2019 and 2020 respectively.
Another big dividend star
Clearly performance at the company’s venues remain problematic and could still yet throw up some nasties in the months ahead. In my opinion, though, these troubles are baked into the firm’s low valuation, a forward P/E ratio of 11.5 times. Indeed, I reckon this low base could provide more share price strength should Rank carry over the better momentum of the second quarter.
Now Victrex (LSE: VCT) may not be packing the same sort of value as Rank — the firm carrying a prospective P/E multiple of 17.9 times — though I believe that it’s still a name worthy of investment. And not just because of a predicted 124p per share dividend for the year to September 2019, a projection which yields a giant 5.4%.
The plastics manufacturer never recovered from the October share market sell-off after a blistering first nine months of 2018, a drop which I consider a prime buying opportunity. Indeed, while conditions have been difficult for its Automotive and Consumer Electronics units of late, these are expected to swing back into action during the latter half of the current fiscal year.
On top of this, there are some lucrative sales opportunities for Victrex’s Gears and Aerospace divisions, helped by its new aero facility in the States as well as the likely creation of additional long-term alliances with aerospace OEMs. The earnings outlook is very strong at the FTSE 250 firm, then, and I think that this should keep translating into great dividend growth.
