Strong results pre-COVID-19 shows efficacy of new strategy with strong community initiatives during pandemic
Rank (LSE: RNK) has announced its preliminary results for the 12 months ended 30 June 2020, with a strong Performance pre-COVID-19, for the eight-month pre-COVID-19 period to 29 February 2020 The Group entered lockdown with significant momentum to revenues and profits driven by its transformation strategy, a tightly controlled cost base and a strong balance sheet
Highlights include LFL Underlying NGR up 11% and LFL underlying operating profit up 61%. Divisional underlying operating profit: Grosvenor venues up 121%; Digital up 15%, International up 29%; Mecca down 4%
Rank also took successful actions taken during COVID-19 pandemic, with immediate focus of preserving cash during lockdown, the strength of the balance sheet and lower cost base resulting from transformation initiatives implemented in the prior year helped navigate the crisis and prepare for reopening of our venues
The company also delivered numerous local community initiatives which provided support to key workers and vulnerable residents during the COVID-19 pandemic
As at 30 June 2020, net debt before IFRS 16 was £63.2m. Debt comprised £128.1m in bank loans, £6.2m in finance leases and £2.5m in overdrafts, offset by cash at bank and in hand of £73.6m, with encouraging progress since venues were allowed to reopen in July and August
Grosvenor casinos revenue is running at 60% of the prior year’s levels since reopening on 15 August, which is in line with our base case scenario modelling, while Mecca, which has been open for a longer period, is running at 70% of prior year, slightly ahead of our base case scenario modelling. In Spain, Enracha venues are running at 65% of prior year
Other Rank operational highlights include the acquisition of Stride which was completed 4 October 2019 and comprehensive integration plan is on track. Also, strong performance from Rank’s legacy digital brands, up 23%; however, Stride’s performance reduced pro forma Digital growth to 11% in the year
Seeing robust returns from investments into product, technology and facilities, Rank has preparation for the next phase of the Group’s transformation with new three-year plans being developed for each business unit aimed at driving revenue growth and delivering further cost and ways of working efficiencies
Significant progress made regarding the embedding of safer gambling across the Group including the first bingo operator to add safer gambling controls for time and spend to our gaming machines
In light of the COVID-19 pandemic and its subsequent material impact on the business the Board will not be proposing a final year dividend. The Board is committed to paying a dividend when circumstances permit, and this will be kept under regular review
John O’Reilly, Chief Executive of The Rank Group Plc said: “With positive momentum from the transformation programme, Rank performed very strongly during the first part of the year and into the second half. Despite continued good growth in our digital brands, with our venues closed from mid-March, the impact of the COVID-19 pandemic on the Group has been significant. However, with the huge commitment and dedication of our colleagues, very tight cost control across the business and the support we have received from Government, we have carefully navigated the past few months and are now beginning to successfully emerge. We know the recovery will take time, but the underlying strength of our business provides us with confidence that we are well equipped to return to full strength.
“We’ve been encouraged by the first few weeks of trading following reopening and whilst the supply-side constraints, including social distancing and changes to the way we operate table gaming, are going to be challenging over the coming months, the response from customers to the extensive safety measures we have in place has been very positive.
“The need to deliver on Rank’s long-standing promise to excite and to entertain our customers has never been more important. The post-lockdown expectations of customers who are looking for ways to safely enjoy their leisure time and spend will be higher than ever, and we are determined to ensure our brands are well-positioned to benefit from this shift. Our venues, in particular, are ultra-safe and invariably benefit from being large in size. This gives us extra opportunities to offer something special to our casino and bingo customers within a COVID-19 safe environment and we are looking forward to welcoming more of our customers back.”
Current Trading and Outlook
“Our Mecca venues have been reopening over the course of July and August. 72 of our 77 venues have now reopened with venues typically achieving 70% of prior year revenue and with visit numbers now typically at 55% of prior year levels. As a result, Mecca achieved cash break even in August. With Grosvenor’s casinos in England only being permitted to reopen from 15 August there is more limited trading experience. Venues outside of London are typically achieving 75% of prior year revenue levels and consequently are cash positive. In common with other hospitality businesses, trading in our London venues is weak, with revenue at around 40% of prior year levels. With 49 Grosvenor venues now open, Grosvenor is likely to be cash generative from September. Enracha venues are operating at approximately 65% of prior year levels and are cash generative.
“Building on the double-digit revenue growth at the year end, our Digital businesses are performing broadly in line with expectations. Mecca, Yo and the Stride non-proprietary brands are performing well. The Stride proprietary brands continue to perform below expectations following harmonisation of safer gambling controls across the Digital businesses. Grosvenor revenue has also softened reflecting the lengthy closure of our venues and the consequent impact on the benefits available to multichannel customers. With cost reduction measures being applied across the business, and assuming no material disruptions, we expect the Group to be at cash breakeven or above in September before the impact of repaying deferred duty and rent. “We expect to rebuild our revenues through the year with an increase in footfall expected once social distancing and other supply constraints reduce and customer confidence returns. The pace at which revenues return will determine our ability to restore the dividend and invest in the transformation of Rank.”
