Rank boosted by improved digital performance
Rank Group saw digital takings soar despite a fall in overall revenue and profits in the first half of the current financial year.
While chief executive John O’Reilly said he was “encouraged” by the performance, interim results for the six months ended December 31, 2018, show the Mecca Bingo and Grosvenor Casinos operator experienced a 2.5% dip in group like-for-like revenues and 24.6% drop in group operating profit.
The London-listed operator's group like-for-like revenues fell to £366.0m (€418.5m/$480.7m), with takings from venues falling 3.9% to £302.1m.
Rank said its performance continues to suffer from ‘venue declines’ as its Grosvenor properties adjust to a tougher UK retail back-drop, featuring tougher KYC checks and a reduced contribution from VIP players. However, it noted an improved second quarter performance after a year-on-year drop in like-for-like revenues of 4.7% in Q1.
The group will be encouraged by significant improvements in its digital offering – a key part of the transformation programme it launched towards the end of 2018 - with like-for-like revenue up 5.1% to £63.9m and total digital revenue up 15.8% to £70.4m.
Growth in the period was driven by Mecca and YoBingo!, the Spanish-facing bingo operator it acquired for an initial €23.1m in May 2018. YoBingo! performed “strongly” in the period with revenues up 41.0% and continued to grow its share of the Spanish digital bingo market, up 4.9ppts to 42.1%.
Group EBITDA was down 17.4% to £52.3m with group operating profit before exceptional items falling 27.3% to £30.3m. Group operating profit was at £25.8m.
Rank said lower revenues were the reason for a drop of more than 30% in total and like-for-like operating profit in its Grosvenor Casinos division.
Like-for-like operating profit in its digital segment fell by 1.9% following the increase in UK Remote Gaming Duty on customer bonuses, which resulted in £0.9m of incremental RGD in the period.
O’Reilly, who took over at Rank last May following the resignation of Henry Birch, said the business is already starting to see returns from the new four-part transformation strategy he unveiled last August.
“The first half of our financial year has been a tough trading period, I am however encouraged by the group’s improved performance in Q2,” said O’Reilly.
“The three-year transformation programme that we outlined at our Full Year results in August 2018 is now well underway with nearly 300 initiatives identified and tasked.
“The programme will gain further momentum in H2 2018/19 and the management team is positive about what can be achieved.
“While there is lots to be done to deliver the revenue improvements and cost efficiencies identified, I am confident in the outlook for Rank and excited about the opportunities that exist.”
The transformation plan, which is being led by chief transformation officer Jim Marsh, will see Rank seek to revive its Grosvenor and Mecca digital platforms with the introduction of an omni-channel service in the second half of the year. It is hoped it will finally give members who visit brick-and-mortar venues an “incentive” to play Rank’s games online.
It also has plans to increase marketing investment and new products. It will focus more on data-driven learning about its customers, while a new content management system will improve its real-time product and service offering.
In an update today, Rank said nearly 300 separate initiatives are already under way, with total cost savings for H2 2018/19 expected to be £10.0m. Of that £7.5m will come from employee changes in casinos, £2.0m from changes to support office functions and £0.5m from procurement efficiencies.
Rank added: “There will be a flow through of these costs savings into the next financial year and we expect the total net savings to be circa £19.0m for 2019/20.”