Operator News

UK – Rank returns to profit but London casino performance a cause for concern

By William - 19 August 2022

Rank Group has reported an underlying operating profit of £40.4m for the financial year, up from a loss of £82.4m in 2020/21, albeit a year heavily impacted by the pandemic with venues closed at various points.

Second half performance was adversely impacted by ‘difficult trading conditions’ in Grosvenor venues, particularly in London, which led to a reset of operating profit guidance for the full year.

“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, said John O’Reilly, Chief Executive.

“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. 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.”

Underlying venues NGR was up 209 per cent year-on-year but down 19 per cent on 2019, reflecting the ‘continued impact of, and gradual recovery from, the pandemic’. Underlying Digital NGR grew four per cent year-on-year supported by a 178 per cent growth in active cross-channel customers.

There was a six-fold increase in underlying digital operating profit year-on-year to £18.7m as further synergies realised from the technology integration following the Stride acquisition in October 2019.

“Performance in our digital business continues to improve against a difficult market backdrop. 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,” explained John.

Underlying venues operating profit included energy costs of £23.0m, up significantly on the CY 2019 cost of £13m. Energy costs for FY23 would be approximately £46m based on current market prices

Mecca is being reshaped to return to profitability with seven venues closed in Q1 2022/23. The Group’s strong cash position has enabled the acceleration of its ‘Transformation 2.0’ programme which is focused on improving the customer offer and growing customer numbers, delivering good returns from the £6.2m Grosvenor investment into new product and £5.3m casino refurbishments.

Issuing an update on the Group’s ESG programme, there have been ‘significant developments’ introduced throughout the year to further enhance customer safety including a new online markers of harm model, a new risk model across Grosvenor casinos and the rolling out of a new machine management system in Mecca.

The Group added the whilst the delay to the publication of the UK Government’s gambling review white paper is ‘disappointing’, they continue to build support for a programme of modest reforms for the land-based casino and bingo sectors.

“We were disappointed by the delay to the publication of the UK Government’s white paper on gambling regulation.

“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,” said John.

In the first seven weeks of 2022/23, Group underlying NGR is running three per cent ahead of the prior year in the first seven weeks of 2022/23. Underlying Digital NGR has grown 12 per cent in the seven weeks, with venues down one per cent.

Grosvenor venues NGR is down four per cent year-on-year but with average weekly NGR in the seven weeks 11 per cent ahead of Q4, with the gradual return of overseas customers to London casinos more than offsetting the softer trading conditions outside of London. Mecca is seeing visits up eight per cent and NGR up two per cent.