Rank revises £1bn business ambitions as Grosvenor leads FY charge

Grosvenor Casino Blackpool, Rank Group.

Rank has revised its ambitions of becoming a £1bn international gaming business by next year, a goal it now states is “unachievable” after encountering a “challenging year” for UK businesses.

The company updated that following the publication of the UK’s much anticipated white paper, a “better understanding of our future trajectory” will be known and medium to long-term aims will be restated.

Despite tracking revenue increases across all core divisions to record a group-wide 98 per cent uptick to £644m (2021: £325.3m) for the year ending June 30, 2022, it is noted that the time frame was distorted by significant periods of closure, curfews and regional restrictions.

In comparison to the last 12 month period that was unaffected by such measures, that being the year ending December 31, 2019, revenue is down ten per cent.

The firm also cites concerns at inflationary pressures impacting its retail venues, with energy prices through FY 2023 expected to come in at £46m. With exposure to market volatility beyond September, Rank is to implement a number of mitigation initiatives, such as energy efficiency programmes.

Gross profit swelled to £257.5m (2021: -£25.8m), with profit for the year down to £20m (2021: £46.2m). Net debt dropped to £162.6m from £256.7m.

“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,” commented John O’Reilly, Chief Executive of Rank. 

“Our nine London casinos … have seen very weak customer volumes”

Grosvenor witnessed a 275 per cent revenue increase year-on-year to £296.6m (2021: 79.2m) but a 19 per cent drop when compared to 2019, with concern expressed at the performance of the London estate.

Despite tracking a significant increase to £101.6m (2021: 26.5m), visitor numbers across the capital, where nine venues are housed that account for 38 per cent of revenue “in a normal year,” are reports as remaining “very weak” until late June.

The rest of the UK’s facilities report revenue of £195m (2021: 52.7m) with staycation hotspots such as Brighton, Blackpool and Bournemouth driving the charge.

“Our nine London casinos, which account for over 38 per cent 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,” O’Reilly continued. 

“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 benefited from our accelerated capital investment programme.”

With the impact on the bingo sector reported as being severe “given the importance of an older cohort of customers to visitor numbers,” Mecca has endured a “slow recovery” from the pandemic.

“Performance in our digital business continues to improve against a difficult market backdrop”

Despite revenue being up 149 per cent YoY to £134m (2021: £53.8m) that figure represents a 32 per cent downfall from 2019, with visitor numbers also down 33 per cent from that time.

In Spain, Enracha is said to have “recovered strongly” with a 89 per cent YoY revenue uptick to £30.1m (2021: £15.9m), which is down five per cent from 2019.

Across the digital division, which will see Grosvenor become the final brand to migrate to the RIDE platform by the end of Q1 2022/23, revenue closed up three percentage points at £183.3m (2021: £177.4m).

A three per cent Mecca decrease to £66.9m (2021: £68.7m), was offset by increases of seven per cent at Grosvenor to £49.8m (2021: £46.5m), Enracha/Yo which remained consistent at £21m and other, including Stride legacy brands, increased 11 per cent to £45.6m (2021: £41.1m).

“Performance in our digital business continues to improve against a difficult market backdrop,” O’Reilly noted.

“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.”

Amid the aforementioned delay’s to the UK government’s review of gambling regulation, Rank has witnessed a three per cent increase YoY during the first seven weeks of operation through 2022/23.

Digital NGR is up 12 per cent but venues and down a single point, with Grosvenor dropped four per cent despite a gradual return of overseas customer to London and Mecca down two per cent.

“We were disappointed by the delay to the publication of the UK government’s white paper on gambling regulation,” closed O’Reilly. 

“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.”