Rank Group in talks over potential equity raise

Mecca Bingo owner Rank Group confirmed on Thursday that it is in talks over a potential equity raise.

Responding to recent press speculation, the company said in a brief statement: "The board continuously reviews the group's financial position and confirms it is in discussions with its advisers regarding a potential equity issuance of up to a maximum of 19.9% of its issued share capital.

"Such an equity issuance would be intended to strengthen Rank's balance sheet in this unprecedented trading environment. There can be no certainty that the equity issuance will proceed."

Rank said a further update will provided if and as appropriate.

Bingo halls are among the venues forced to close during the first and second national lockdowns.

Shore Capital analyst Greg Johnson said that such an equity raise would extend the company's liquidity profile well into the second half of calendar 2021. "As operations reopen, we would expect cash burn to moderate (we expect it was back to breakeven in September before 10pm curfew restrictions were imposed)," he said.

"We believe Rank can return to pre-Covid levels by FY2023, which we estimate would equate to earnings approaching circa 20p per share post any equity raise. With excellent management and a burgeoning digital position, Rank appears well positioned to survive and then build."

He reiterated his 'buy' stance on the shares.