As the Gala Bingo financial problems seem to hit the headlines on a weekly scale Rank, the leisure group that owns Mecca Bingo, seems to be in a much better financial situation.  While both companies are likely to benefit from the Treasury decision earlier this week to reduce bingo tax by 2%, Rank is also favoured by investors.

Rank have announced that a tribunal has backed its claim in that it should be due a refund on VAT on machine revenues between 2002 and 2005.  The ruling follows an interim judgement in August 2008 and it is expected the gaming giant will seek £25.9m in the first quarter of 2010.  The company has submitted a £16m claim in relation to VAT on main stage bingo and the 2% tax reduction will result in £2.5m worth of benefits this year.

While the Government have appealed decisions in relation to the VAT which is expected to be heard in April 2010, investors are seeing this action as without merit.  While the shares had gained 2.15p to 80.25p today investors are seeing more than 50% rise in the price.  Panmure Gordon has a price target 124p and has a buy recomendation on the stock.  Analyst Simon French commented

"We think the likelihood of dividend repayments restarting has increased with the news flow over the past week and we retain our buy recommendation.  As a result of incorporating the £25.9m payment into our cash 2010 cash flow forecast our 2011 earnings per share forecast is increased from 8.6p to 8.8p and our sum-of-the-parts based price target increases from 117p to 124p."

It will be interesting to see whether or not the problems related to multiple bingo licenses will have an effect on the companies performance