Rank hit by revenue drop despite digital growth

Rank Group saw its share price tumble further this morning as digital gains failed to prevent an overall decline in group revenue.

In a trading update issued today (Thursday), Rank reported that group revenue dropped almost 5% year-on-year in the 16 weeks to October, mainly due to declines within its venue business, where revenue was down around 6%.

Revenue from Rank’s Grosvenor Casinos venues fell just over 7%, driven by a reduction in handle and margin from high spending customers, while a drop in visitors led to a 5% revenue drop from Mecca venues.

However, the situation was different for Rank’s digital platforms where it saw overall revenue growth of 1.7%, driven by a 6.4% climb in revenue from its Mecca digital channel.

Grosvenor’s digital channel was hit by what Rank described as “more stringent customer due diligence” implemented from September 2017, which contributed to a 5.2% drop in revenue.

Rank’s share price was down by around 2% at one point this morning, and has fallen almost 6% in the last week.

The firm also highlighted a positive performance by YoBingo, the Spanish digital bingo operation that it acquired in May of this year. This was excluded from the like-for-like digital revenue figures.

Rank reported that YoBingo enjoyed a 46% year-on-year jump in revenue and had this been included in the results, overall digital revenue would have jumped 13.5%.

The trading update comes after new Rank chief executive John O’Reilly in August pledged to change the fortunes of the company, saying its performance “isn’t good enough”.

O’Reilly was speaking as Rank announced its full-year results for the 12 months to June 30, 2018, revealing a fall in revenue, profits and other key indicators.

The former Ladbrokes and Gala Coral executive, who only took the job in April, called for a “stronger operational focus”, and the firm has seemingly stuck to this pledge, revealing potential cost savings in today’s trading update.

The update said: “The transformation programme has identified some early cost savings for the full year which, in part, are expected to mitigate Grosvenor Casinos venues’ revenue shortfall in the 16-week period.”

The transformation programme, announced earlier this year, is aimed at delivering revenue growth, greater cost efficiency and improved organisational effectiveness. The company has identified increased focus on the customer, digital growth, cost efficiencies and organisational capability as four key areas of improvement.

Rank was recently slapped with a £500,000 (€569,600/$655,500) fine by the UK Gambling Commission for breaching problem gambling rules, after a customer lost £1m in a single 24-hour period.