Rank Group Plc, the U.K.’s biggest venue-based bingo and casino operator, reported full-year earnings that beat expectations as a reduction in bingo duty and surging digital revenues boosted sales.
Operating profit excluding exceptional items increased 16 percent to 84 million pounds ($131.7 million), ahead of an average analyst estimate of 80.4 million pounds, the company said in a statement Thursday. Digital revenues for the year to June -- including sales through online gambling via PC, mobile and tablet -- were 21 percent higher.
Rank, a former U.K. cinema and leisure giant that owns the Mecca Bingo and Grosvenor Casinos brands, is focusing on digital under Chief Executive Officer Henry Birch, a former head of William Hill Plc’s online business who joined the company last year. Digital customers now represent 12 percent of group revenue.
“We believe consumer trends will increasingly favor companies that can offer services across digital and retail channels,” Birch said in an e-mailed statement.
The shares rose 3 percent in London at 8:07 a.m. to 258.1 pence, giving the company a one billion pound market value. The shares have risen 61 percent in the past year.
Rank increased its dividend per share to 5.6 pence from 4.5 pence a year earlier and statutory revenue rose 3 percent to 700.7 million pounds from 678.5 million pounds.
Birch said in May he wasn’t ruling out any acquisitions in the digital sector, as competitors 888 Holdings Plc vies and GVC Holdings Plc vie with each other to buy Bwin.party Digital Entertainment Plc. He said the company had a “strengthening balance sheet” and digital provided good opportunities for growth.
Pressures from a new point-of-consumption tax, high marketing costs and the threat of a regulatory clampdown on profitable gaming terminals are pushing consolidation in the gambling industry, said Sophie Blandford, an analyst at Daniel Stewart Securities, in an interview ahead of the results.
“You have to go online these days but Rank are not ahead of the curve by any means,” she said.
Ladbrokes Plc has also agreed to merge with competitor Coral Group, a move which, if completed, would give it the biggest U.K. online betting market share.
“The only way to survive with more tax coming is to get bigger,” Blandford said.