Rank Group has reported gains across all its operations, helping to drive strong operating profit in its 2023/24 preliminary results.
With the revenue increases in digital and venues, the group highlighted that it is “well placed for the planned legislative reforms for land-based bingo and casinos when they arrive” with further revenue growth opportunities.
Growth across Rank
For the last 12 months, ending 30 June 2024, Rank stated that it is delivering against its strategic plan with growth across all businesses, as underlying net gaming revenue rose by 9% year-over-year to £734.4m (2022/23: £671.4m).
Both venues and digital NGR improved year-over-year. Venue underlying NGR improved by 8% in comparison to the previous year to £508.4m (2022: £468.8m) while digital underlying NGR increased by 12% to £226m (2022: £202.6m). In Q4, NGR improved by 14% YoY.
As a result, underlying operating profit had a 131% uptick YoY to £46.5m (2022: £20.1m), which Rank says was “slightly ahead of analysts’ consensus” and reflected “significant operating leverage in the business”. Operating profit improved in H2 to £24.8m compared to £21.7m in H1.
Employment costs increased by 11% YoY too for the group due to “wage inflation and the reinstatement of colleague bonuses”. The firm expects this to continue to be a key headwind in 2024/25 and rise by a further 7%.
Rank noted that its strong balance sheet has enabled the continued investment in strategic transformation priorities and the resumption of dividends.
The group noted that its balance sheet position was supported by £120m in debt facilities, “comprising £30m Term Loan to October 2026 and £90m Revolving Credit Facility to January 2027”. The total undrawn RCF was £78.5m.
Net free cash flow stood at £26.6m (2022: £17.9m loss) and net cash pre-IFRS 16 was £20.9m (2022: £5.9m debt). Following investments in venues and proprietary technology, total capital expenditure was £46.7m, while the group expects the figure to be around £60m for 2024/25.
Rank added that it is making “good progress” with its ESG programme, with its “net zero plan well underway, key technology developments delivered in the year to further enhance protections for our customers, record colleague engagement scores recorded in the period and a continued strong focus” in its role in local communities.
CEO John O’Reilly commented: “This has been a year of strong financial, operational and strategic progress for Rank. We are continuing to rebuild profitability following the impact of lockdowns and the material inflationary pressures experienced in recent years.
“Trading continues to improve due to ongoing investment in our people, our products and the facilities within our venues businesses and the continued development of the proprietary technology which is driving the growth of our digital business.”
Venue brand performance
Per venue brand, Grosvenor NGR improved by 9% YoY to £331.3m (2022: £305m) across its 51 venues, with London rising by 10% to £108.1m (2022: £98m) and the rest of the UK increasing by 8% to £223.2m (2022: £207m).
Customer visits and active customers rose by 9% and 2% respectively, but spend per visit fell by 1%. Gaming product revenue across the board grew, with electronic roulette rising by 11%, gaming machines up by 9% and table games increasing by 9% as well.
Operating profit improved by 42% to £23.7m (2022: £16.7m) with total profit of £16.5m (2022: £35.4m loss). £6.4m was invested into new products and the operator stated that further investment could occur to broaden the variety of machines available following land-based legislative reforms. Meanwhile, £7.6m was invested into property facilities.
Rank noted that the growth reflects the recovery from lockdowns, the slow return of international customers and the tightening of affordability restrictions in recent years.
Mecca NGR grew by 8% YoY to £138.6m (2022: £127.9m), reflecting the “considerable rationalisation of the estate” that has taken place following the impact of the pandemic on customer numbers and visit frequency.
These factors led to casino closures, with the number of Mecca venues dropping from 82 in 2018/19 to 52 at the end of 2023/24. One more venue is expected to close in 2024/25, completing the rationalisation process.
Rank claims that the rationalisation process has created a “stronger and more competitive estate with higher liquidity, namely higher visits and therefore more attractive prize boards”.
Customer visits and spend per visit rose by 2% and 6% respectively. Rank added that 44% of its 187,000 new customers were under 35, which it says demonstrates the bingo’s strong appeal.
Main stage bingo NGR rose by 11% YoY while gaming machine revenues improved by 9%. Rank stated that further growth opportunities could occur in gaming machines once land-based legislative reforms are implemented, which will allow up to 50% of machines to be category B3 machines. Interval bingo increased by 7%, while food and beverage sales were up 6%.
Operating profit improved to £3.9m (2022: £5.6m loss), but Mecca venues had a total loss of £1.7m (2022: £74.1m).
Rank’s Spanish gaming brand, Enracha, saw its NGR increase across its nine venues by 7% YoY to £38.5m (2022: £35.9m) with customer visits and spend per visit undergoing a 6% and 1% uptick respectively.
Bingo revenues rose by 7% YoY while gaming machines revenue increased by 7%. The operator added that the business is “in a strong position” entering 2024/25.
O’Reilly stated: “We are well-positioned to take advantage of the much needed land-based reforms which will help to further modernise our casino and bingo propositions to better meet the expectations of today’s customers and we look forward to the Government confirming the timetable for the required secondary legislation.”
Digital downsizing
Across digital, UK operations rose by 11% YoY following the delivery of key technology developments including a new single content management system, operational efficiencies, front-end developments speed to market and faster webpage loading.
A new in-house developed app was launched in Q4 for its Grosvenor brand, while a new in-house app for its Mecca brand will be launched in 2024/25.
Mecca, Grosvenor and Yo Bingo/Enracha saw NGR improve YoY, but other proprietary brands, non-proprietary brands and Passion Gaming NGR fell.
Mecca NGR rose by 20% YoY to £86.9m (2022: £72.5m), Grosvenor improved by 21% to £69m (2022: £57.1m) and Yo/Enracha grew by 16% to £27.6m (2022: £23.8m), ahead of the Yo brand’s launch in Portugal during 2024/25.
Other proprietary brands NGR fell by 1% to £23.2m (2022: £23.4m), non-proprietary brands dropped by 21% to £15.5m (2022: £19.6m) and Indian rummy platform Passion Gaming declined by 39% to £3.8m (2022: £6.2m).
Rank noted that following its decision to exit the multi-brand (non-proprietary brands) business during the year, the sale should be completed in the coming months. The operator has also sold its 51% share in Passion Gaming to its founders in June 2024.
Operating profit improved by 79% to £23.4m (2022: £13.1m) while total profit rose to £16.2m (2022: £4.1m).
“With some important developments within our proprietary technology now in place, we are increasingly delivering a seamless and tailored cross-channel experience for our customers, leveraging our key area of competitive advantage,” stated O’Reilly.
Outlook
Looking ahead, Rank noted that it has already continued momentum into 2024/25, with NGR growing by 10% in the first six weeks. The group also intends to declare a 2024/25 interim dividend alongside its half-year results in January 2025.
In addition, Rank highlighted continued employment cost pressures but noted that there are opportunities to drive revenue growth across the business, while its strong cash position will allow for further investment in its strategic priorities.
The group stated as well that it is “well placed for the planned legislative reforms for land-based bingo and casinos when they arrive”.
O’Reilly concluded: “We have started the new financial year as we finished the previous one, with good momentum across all businesses. With inflation receding, disposable incomes improving, investment continuing to be made in the customer proposition and a strong pipeline of growth initiatives underway, we are confident in the future prospects of the Group.
“It would not be possible to deliver this improved performance without our excellent colleagues who continue to excite, entertain and protect their customers, support their local communities and contribute fully to the progress we are continuing to make.”