O’Reilly: “The trading environment across the UK is likely to remain difficult in the months ahead”
Rank (LSE: RNK) is pleased to announce its preliminary results for the 12 months ended 30 June 2022, detailing an overview of results with underlying operating profit1 for the full year to June 2022 at £40.4m, (US$48.6m) in line with guidance of £40m provided in June 2022.
However, second half performance in the financial year was adversely impacted by difficult trading conditions in Grosvenor venues, particularly in London, which led to a reset of operating profit guidance for the full year. Underlying venues NGR1 up 209% year-on-year but down 19% on CY 2019-2 reflecting the continued impact of, and gradual recovery from, the pandemic Underlying Digital NGR grew 4% year-on-year supported by a 178% growth in active cross-channel customers
Six-fold increase in underlying digital operating profit year-on-year to £18.7m as further synergies realised from the technology integration following the Stride acquisition in October 2019
Mecca digital business successfully migrated to the RIDE platform in January 2022 with the final brand, Grosvenor, migrating across by end of Q1 2022/23 Underlying venues operating profit1 included energy costs of £23.0m, up significantly on the CY 2019 cost of £13.0m. Energy costs for FY23 would be approximately £46m based on current market prices. Mecca being reshaped to return to profitability with seven venues closed in Q1 2022/23
The strong cash position has enabled the acceleration of the Group’s Transformation 2.0 programme, which is focused on improving the customer offer and growing customer numbers, has delivered good returns from the £6.2m Grosvenor investment into new product and £5.3m casino refurbishments
Progression of the Group’s ESG programme continues with significant developments introduced throughout the year to further enhance customer safety including a new online markers of harm model, a new risk model across Grosvenor casinos and the rolling out of a new machine management system in Mecca
Whilst the delay to the publication of the UK Government’s gambling review white paper is disappointing, we continue to build support for a programme of modest reforms for the land-based casino and bingo sectors
Current trading and outlook
Overall, Rank Group underlying NGR is running 3% ahead of the prior year in the first seven weeks of 2022/23. Underlying Digital NGR has grown 12% in the seven weeks, with venues down 1%. Grosvenor venues NGR is down 4% year-on-year but with average weekly NGR in the seven weeks 11% ahead of Q4, with the gradual return of overseas customers to our London casinos more than offsetting the softer trading conditions outside of London. Mecca is seeing visits up 8% and NGR up 2%.
Trading conditions are likely to remain challenging in the months ahead with high inflation hitting consumer discretionary expenditure and inflationary cost pressures, particularly the further rise in energy prices in recent weeks, continuing to impact operating margins. However, the successful migration to proprietary technology within the digital business and the investment into the venues estate, result in us being able to compete strongly in the coming year. Moreover, the strong balance sheet enables continued investment in our Transformation 2.0 programme which positions the Group well both for growth and for the anticipated regulatory reform to land-based gaming following the outcome of the UK Government’s review of gambling regulation.
John O’Reilly, Chief Executive of The Rank Group Plc said: “It was a challenging year for our UK venues businesses, with unexpectedly softer trading across the Grosvenor estate in the second half of the year. Our nine London casinos, which account for over 38% of Grosvenor’s revenue in normal trading conditions, have seen very weak customer volumes with overseas visitors few in number, and only starting to return in the final few weeks of the year. The lower-than-expected Grosvenor trading in H2 led us to reset full year operating profit expectations as announced in Q4.
“Whilst we have been seeing improvements in London in recent weeks, the trading environment across the UK is likely to remain difficult in the months ahead with inflationary pressures squeezing consumer discretionary expenditure and cost increases, particularly in energy prices, putting pressure on profit margins. However, we are taking actions to drive further efficiencies in the venues businesses, and we are seeing strong revenue growth in properties which have recently benefitted from our accelerated capital investment programme.
“Performance in our digital business continues to improve against a difficult market backdrop. The transfer of the Rank brands to our proprietary technology platform is supporting revenue growth and a strong improvement to operating margins which we expect to accelerate with the migration of the Grosvenor brand in the coming weeks.
“We were disappointed by the delay to the publication of the UK Government’s white paper on gambling regulation. The land-based casino and bingo sectors are in need of long overdue modernisation of the regulations which govern their operation, something which the Government recognised in its objectives for the review. We expect Rank to be well positioned to benefit from the review when it concludes. Thank you to my colleagues across the Group who continue to excite, entertain and protect our customers, provide strong support to our local communities and contribute to the ongoing progress we are making with the transformation of Rank.”
