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Bingo! Winning results for Rank 31/07/2009

Bingo hall and casino operator Rank is under the spotlight, surging to an 11-month high, as it becomes the latest UK company to report forecast-beating profits.

The shares have soared 11.8% to 78p after Rank's reassurances of a "strong trading performance in Grosvenor Casinos" and "continued stabilisation in Mecca Bingo". The shares are at their highest level since early Septmeber 2008.

Pre-tax profits for the first half surged 40% to £24.7m from £17.6m a year earlier. That was well clear of the £20.4m predicted by analysts in a Reuters poll. The group has also reported progress on its bid to attract new players to bingo with modernised clubs.

Chief executive Ian Burke tells shareholders: "Despite the economic uncertainty, we are encouraged by the progress we have made this year in terms of enhanced customer propositions, a stronger senior management team and the group's financial position. While we remain cautious in the near-term, we look forward with confidence in the long-term prospects for gaming and the success of the group's growth strategy."

While Rank concedes that bingo halls across the UK will continue to close over the medium term, its reports some encouraging signs from its first new-look bingo club in Nottingham.

Opened in May, the club has been designed around customer feedback and includes food and drink delivered straight to players' tables, more innovative games as well as traditional bingo and a "garden lounge" for smokers.

Rank said today: "We have been encouraged both by customer feedback on the club and by its early trading performance, with higher than average levels of customer visits. We have commissioned plans to remodel two existing clubs based upon the concept developed at Beeston and expect these to be launched during the first half of 2010."

Analyst Matthew Gerard at Investec says the interim results "are 10%-28% ahead of our estimates at the group level, driven by a very strong performance in casino and bingo, particularly on margins." He retains a "buy" recommendation on the shares.

Ivor Jones at Evolution Securities reiterates his "buy" recommendation and 120p price target. He comments:

"Rank saw the worst of its recession in 2007/08 and is now starting to recover. Competition in Bingo continues to reduce. The new Nottingham club shows how bingo can attract a wider audience with better product. G Casino; a year or so down the same road, having proved itself as a modern casino product it is being rolled out across the estate."