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UK – Rank’s revenues savaged by closures but non-London casinos back at 98 per cent of pre-pandemic levels

By - 20 August 2021

With 79 per cent of the Rank Group’s revenue being derived from its venues businesses, closures imposed in the Government’s response to the pandemic amounting to 59 per cent of available operating days together with capacity constraints, and reduced opening hours have seen revenues fall by 50 per cent, giving an operating loss of £67m.

The Group suffered monthly cash losses of £15m, net of the Government’s support through the CJRS scheme and business rates relief, during the long periods in which its
venues were closed, resulting in net cash outflow from operations of £21.2m in the year.

A strong focus on preserving cash during the pandemic, together with the £70m proceeds from the equity raise, the sale of Casino Blankenberge in Belgium for £25.2m
and a £13.3m payment from HMRC relating to a Supreme Court case taken by another taxpayer on the gaming duty treatment of free gaming chips have resulted in a closing cash and available facilities of £98.0m as at 30 June 2021. Since the year end, Rank has added a further £25m of available facilities through a new two-year Revolving Credit Facility (‘RCF’).

Revenue in Grosvenor venues in the 13-week period to 15 August has been 19 per cent below the same 13-week period of 2019 (pre-pandemic), with average weekly revenue of £5.7m ahead of cash breakeven level of £4.4m. Since restrictions were eased on 19 July, average weekly revenue has been £6m.

In Mecca, revenue over the same 13-week period was 21% below 2019, with average weekly revenue of £2.6m marginally ahead of the cash breakeven level of £2.4m. Since restrictions were eased on 19 July, average weekly revenue has been £2.7m.

Digital trading has been in line with expectations since the start of the new financial year, supported by the increasing flow of omni-channel customers through from Rank’s venues following reopening.

Revenue in Grosvenor venues outside of London and Scotland is at 98 per cent of 2019 levels and continues to improve with the additional removal of restrictions on 19 July 2021. In London, the company’s nine casinos which historically have accounted for 42 per cent of Grosvenor’s revenue, have seen revenue down 40% on 2019 levels and remain challenged by the lack of international tourism, significantly reduced numbers of office workers and the ongoing late night travel challenges for the city’s consumers. In Scotland, Grosvenor’s five venues have been heavily impacted by the imposition of curfew, trading 43 per cent below 2019 revenue levels since reopening.

Across the Mecca estate, recovery has been slightly slower with revenue down 21 per cent per cent on the same 13-week period in 2019 since reopening on 17 May. Visits are down 34 per cent, partly offset by spend per visit increasing 20 per cent. Since reopening, average weekly revenue has been £2.6m, slightly ahead of our
breakeven level of £2.4m. Improvements to the customer proposition including more emphasis on the mainstage bingo game at the expense of interval games, an improved food and beverage offering and a stronger gaming machine estate with a renewal of some of the category B3 and C machines have helped drive this increase in expenditure per visit. The challenge for Mecca is the confidence levels amongst our older customer cohorts to return to indoor hospitality whilst pandemic case
numbers remain high and vaccine protection levels remain uncertain.

John O’Reilly, Chief Executive of The Rank Group Plc said: “The year to 30 June 2021 was exceptionally challenging for the Group and, frankly, we are delighted it is over. We are now well into a new financial year with our venues open and trading positively. Good progress is being made in our digital businesses and there is a renewed sense of confidence as we focus on the growth initiatives within our clearly defined transformation programme. Rank was delivering strong revenue and profit growth before the pandemic and the steps we have taken over the last 18 months, particularly in carefully managing our liquidity and developing the transformation plans, will enable the Group to return to that growth trajectory as the impact of the pandemic reduces and consumer confidence for indoor leisure experiences grows.

“I have been hugely impressed by the commitment and character of colleagues right across the Group in supporting each other, providing amazing support to our local communities, front line workers and those who are vulnerable during lockdowns, taking tough decisions where required to protect liquidity and preparing for the gradual removal of pandemic related restrictions.

“Our venues have been performing ahead of our expectations following the easing of restrictions on the UK hospitality sector on 17 May and we anticipate further growth as travel restrictions eventually ease and tourism returns, particularly to London.

“This has been a year of transition for our UK facing digital business. Revenue has disappointed but we have been making good progress with the development of our proprietary technology platform and we will complete the migration of the Rank brands during 2021/22, freeing up development capability to enable much greater agility and speed to market for new and enhanced products, services and digital customer experiences.

“Our long-standing promise to excite and to entertain our customers and to do so safely remains our core purpose. The Government’s current review of gambling legislation provides a once in a generation opportunity to deliver the much needed modernisation of existing land-based gambling regulations which date back over fifty years and impose unnecessary restrictions on our ability to meet the needs of today’s consumers.

“Cleary there is still some uncertainty how the pandemic will impact our businesses over the next few months, however we are confident that with our leading bingo and casino brands, supported by a proven transformation programme and strengthened balance sheet, we are competitively well placed to benefit as the hospitality sector and its consumers emerge from the pandemic.”

Commenting on the results, Russell Pointon, Director, Edison Group added: “Following a very challenging year to the end of June 21, there will be most focus on how the businesses are recovering post the end of lockdowns with UK venues re-opening on 17 May. Trading over this period is described as ‘encouraging’ with revenue in the most recent 13 weeks of Grosvenor at 19 per cent below pre-pandemic levels, and Mecca 21 per cent below pre-pandemic levels, which are both ahead of their respective cash breakeven levels. Revenue increased further in the most recent weeks since restrictions were eased on 19 July, weekly revenue in those weeks increased by a further 4-5 per cent for both Grosvenor and Mecca versus the average over the whole 13-week period. Digital’s most recent trading is described as in line with expectations.”

“Looking forward the next phase of the transformation process is well underway, which was generating improving results prior to COVID. In FY21 Grosvenor and Mecca land-based activities traded under normal conditions for zero days, were fully closed for 66 per cent and 58 per cent of days respectively, and the balance of the days had some form of operating restrictions. As a result, underlying LFL revenue declined by 50 per cent and it moved to an underlying LFL operating loss of £ 67m versus s a profit of c £48m in the prior year. Digital has performed poorly relative to the peers (revenue -6 per cent LFL) due to Rank being ‘stringent’ on the application of affordability restrictions to ensure responsible gaming by customers, and closure of land-based activities affecting the flow of customers to digital.

“From a financial perspective the group expects to meet all future liquidity and financial covenant tests, net debt of including IFRS 16 lease liabilities c £257m was below the prior year’s £298m, excluding lease liabilities net debt of c £50m compares with FY20’s £57m.”

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