Land-based struggles continue to hamper Rank despite digital optimism

Grosvenor Casino Blackpool, Rank Group.

A series of struggles through the six months ending December 31, 2022, have been reported by Rank Group, with a “severe impact” on UK gaming venues seeing statutory group operating loss swing to £101m from a profit of £102.4m one year earlier.

On a statutory basis, revenue increased two percentage points to £338.9m (2021: £333.7m), with the same uplift felt on like-for-like reporting to close at £337.4m (2021: 3330.5m). Net debt has increased 11 per cent to £153.8m (2021: £142.7m).

Underlying LFL operating profit closed the sixth months at £4.2m (2021: £24.9m), with the company pointing to a £15m impact in incremental energy costs and wage inflation.

John O’Reilly, Chief Executive of The Rank, cited a slower than anticipated recovery in hampering the group’s Grosvenor and Mecca estates following the pandemic, with a slew of headwinds also highlighted.

These include an increase in energy costs, high wage inflation, slow return of overseas visitors to London and increasing pressure on consumer’s income, as well as a tightening of the regulatory environment.

Energy costs are expected to be £31m for the current reporting period, up from £24m and £13m for the two proceeding time frames, with average wage increases hitting eight per cent.

A number of initiatives, including energy efficiency programmes, changes to opening hours, renegotiating leases and other contracts, are mitigating some of the impact of the group’s cost increases, it was said.

Underlying LFL net gaming revenue across the group’s venues dropped one per cent to £236.6m (2021/22: £238.2m), with Grosvenor dropping five per cent year-on-year from £161.1m to £153.4m.

Compared to the pre-pandemic 12 months ending December 31, 2019, the casinos’ NGR was down 22 per cent from £197.4m. Total losses stood at £42.2m (2021/22: +£68m). 

The facilities saw customer visit volumes grow by five per cent on the past year, with active customers up four per cent, However, a nine per cent decline in spend per visit is aligned to the cost of living crisis

Mecca saw YoY NGR rise four per cent to £65.5m (2021: £62.9m), but drop 20 per cent from FY19 from £81.6m. Total losses came in at £61.8m (2021/22: +£39.9m). 

Customer visits are up four per cent from 2021/22 but down 29 per cent from the pre-pandemic period, with this largest downfall reported as coming from the “older cohort of customers”.

“The impact of the pandemic has been severe on the land-based bingo sector,” Rank noted. “Whilst customer volumes are growing, the rate of growth is slow and from a much lower base than prior to the pandemic.”

The Spanish Enracha business is said to have continued to “recover strongly from the enforced temporary closures and subsequent restrictions during the height of the pandemic”. Revenue is up 25 per cent YoY to £17.7m (2021/22: £14.2m) and 11 per cent from FY19’s £16m.

It is in the digital domain that Rank expresses much optimism, with all group brands now operating on Rank’s proprietary technology platform and said to be “continuing to perform well”.

LFL NRG through the six months stood at £100.8m, up nine per cent YoY from £92.3m, with increases felt across board. Compared to FY19 this uptick stands at one per cent from £100m. Total profit was £2.7m (2021/22: -£6.1m).

Mecca took the lion’s share with £36.1m (2021/22: £34.9m), ahead of Grosvenor’s £27.8m (2021/22: £25.8m), Enracha/Yo with £11.6m (2021: £10.6m) and legacy Stride brands’ £25.3m (2021: £21m).

“We are very well placed to drive strong growth on the back of further improvements to our platforms and enhanced customer experiences both online and cross-channel,” O’Reilly noted.

“We are now in control of our future from a technology standpoint and have the vision and capability to deliver a market leading cross-channel customer experience in both Grosvenor and Mecca alongside strong and growing support brands in the UK and internationally.”

Looking ahead, Rank has reported strong trading during the Christmas and new year period through to the first three weeks of January, however, acknowledgement is given to a potentially “challenging” few months ahead. This comes as cost pressures continue to weigh heavily on customers.

Digital is said to be trading positively with an expectation of “strong growth” stressed”, however, despite a good start to H2, Rank has reiterated FY LFL profit guidance of £10m-£20m due to the macroeconomic environment.

“We are driving efficiencies across our business whilst always ensuring that we are well placed in terms of the quality of our customer offering and the talent within the group for the challenges and opportunities that lie ahead,” O’Reilly continued.

“We continue to look forward to the publication of the UK government’s gambling review white paper. Casino and bingo venues are in need of long overdue modernisation of outdated regulation which heavily restricts the customer proposition. 

“This appears to be widely recognised within the debate surrounding the government’s review and we are hopeful of a positive policy outcome followed by the much-needed rapid implementation of new regulation.”