TIDMRNK
RNS Number : 6109W
Rank Group PLC
31 July 2009
?
31 July 2009
The Rank Group Plc
Half-year results for the six months ended 30 June 2009
Significant earnings progression despite challenging operating environment
Financial highlights
* Group revenue of GBP266.0m (2008: GBP257.0m; GBP263.8m on a comparable basis*)
* Group operating profit before exceptional items of GBP30.2m (2008: GBP28.9m;
GBP31.8m on a comparable basis*); after exceptional items GBP31.6m (2008:
GBP66.3m loss; GBP63.4m loss on a comparable basis*)
* Adjusted profit before tax** of GBP24.7m (2008: GBP17.6m)
* Adjusted earnings per share*** of 4.5p (2008: 3.0p)
* Basic earnings per share of 5.0p (2008: 13.0p loss per share)
* Net debt of GBP208.1m (GBP226.5m at 31 December 2008)
Review of key events
* Strong trading performance in Grosvenor Casinos; continued stabilisation in
Mecca Bingo
* Significant growth in adjusted earnings per share as a result of lower financing
charge
* Financial position strengthened through further reduction in net debt
* Capital investment stepped-up to support growth strategy
* Senior management team strengthened with appointment of Mark V. Jones as
managing director of Mecca Bingo
* Tax changes announced in the 2009 Budget expected to cost Group approximately
GBP9m on annualised basis (as announced previously)
Ian Burke, chief executive of The Rank Group said: "Rank performed well during
the first half of the year, achieving profitable revenue growth in a difficult
economic environment and further strengthening the Group's balance sheet through
debt reduction.
"We have set out a clear strategy for growth within the UK gaming market,
expanding our portfolio of G Casinos, delivering operational improvements in
Mecca Bingo and repositioning Rank Interactive to prioritise its gaming websites
and meccabingo.com in particular.
"The first half of the year has been marked by a number of positive changes to
gaming regulations, resulting from improved understanding between the bingo
industry and the Department for Culture Media and Sport ('DCMS'). However, the
volatile nature of HM Treasury's fiscal policy remains the principal challenge
for the Group. We are disappointed by the Government's decision to introduce a
significant increase in the taxation of bingo during this year's Budget and will
continue to give active support to the Bingo Association in its campaign to
achieve a fair deal for Britain's licensed bingo clubs.
"Despite the economic uncertainty, we are encouraged by the progress we have
made this year in terms of enhanced customer propositions, a stronger senior
management team and the Group's financial position. While we remain cautious in
the near-term, we look forward with confidence in the long-term prospects for
gaming and the success of the Group's growth strategy."
* Revenue and operating profit figures for Mecca Bingo and the Group for the
first half of 2008 are published on a revised basis within the Business Review,
to illustrate the effect of the non-payment or refunding of VAT on interval
bingo in 2008. See explanatory note below for analysis.
** Adjusted profit is calculated by adjusting profit or loss before tax from
continuing operations to exclude exceptional items, unwinding of discount in
disposal provisions, other financial gains or losses, amortisation of equity
component of the convertible bond and net return on defined benefit pension
asset.
*** A reconciliation of adjusted earnings per share is included in note 6 to the
Group financial information.
The Rank Group Plc
Dan Waugh, director of investor relations Tel: 01628 504053
FD
Ben Foster/Marc Cohen Tel: 020 7831 3113
Photographs available from www.rank.com
Analyst meeting, webcast and dial-in details:
Friday 31 July 2009
There will be an analyst meeting at Merrill Lynch Financial Centre, 2 King
Edward Street, London, EC1A 1HQ, starting at 9.30am. There will be a
simultaneous webcast for the meeting.
For the live webcast, please register at www.rank.com. A replay of the webcast
and a copy of the slide presentation will be made available on the website
later. The webcast will be available for a period of six months.
Forward-looking statements
This announcement includes 'forward-looking statements'. These statements
contain the words "anticipate", "believe", "intend", "estimate", "expect" and
words of similar meaning. All statements, other than statements of historical
facts included in this announcement, including, without limitation, those
regarding the Group's financial position, business strategy, plans and
objectives of management for future operations (including development plans and
objectives relating to the Group's products and services) are forward-looking
statements that are based on current expectations. Such forward looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance, achievements or
financial position of the Group to be materially different from future results,
performance, achievements or financial position expressed or implied by such
forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding the Group's operating performance, present and
future business strategies, and the environment in which the Group will operate
in the future. These forward-looking statements speak only as at the date of
this announcement. Subject to the Listing Rules of the UK Listing Authority, the
Group expressly disclaims any obligation or undertaking, to disseminate any
updates or revisions to any forward-looking statements, contained herein to
reflect any change in the Group's expectations, with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based. Past performance cannot be relied upon as a guide to future performance.
Explanatory note - changes to reporting & disclosure
There are a number of changes to our disclosure of first-half revenue and
operating profit, arising from changes in gambling taxation and segmental
reporting.
Reflecting these changes and in order to provide a comparable basis for analysis
of the reporting period, the Business Review shows prior year revenue and
operating profit for Mecca Bingo and the Group on a different basis from that
shown in the Group Income Statement. The table below sets out these differences.
2008 half-year results - changes in the Business Review
+--------------------+------------------+------------------+-----------------+
| GBPm | Group | Adjustment | Business Review |
| | Income Statement | | (comparable |
| | | | basis) |
+--------------------+------------------+------------------+-----------------+
| Revenue | | | |
+--------------------+------------------+------------------+-----------------+
| Mecca Bingo | 110.1 | 6.8 | 116.9 |
+--------------------+------------------+------------------+-----------------+
| Group | 257.0 | 6.8 | 263.8 |
+--------------------+------------------+------------------+-----------------+
| | | | |
+--------------------+------------------+------------------+-----------------+
| Operating profit | | | |
+--------------------+------------------+------------------+-----------------+
| Mecca Bingo | 19.8 | 2.9 | 22.7 |
+--------------------+------------------+------------------+-----------------+
| Group | 28.9 | 2.9 | 31.8 |
+--------------------+------------------+------------------+-----------------+
A fuller explanation of these changes, together with a reconciliation to the
Group's reported 2008 half-year results is contained within the Business Review.
Business Review - summary of results
Group revenue of GBP266.0m was 0.8% higher than in the first six months of 2008
with strong growth in Grosvenor Casinos offsetting weaker trading at Rank
Interactive. On a like-for-like basis, Group revenue declined by 0.6%.
Operating profit before exceptional items declined by 5.0% to GBP30.2m,
principally as a result of higher revenue taxes, with like-for-like costs held
in line with the same period last year (detailed disclosure of segmental and
Group operating costs is contained in note 2 to the Group financial
information).
+-------------------------+------------+------------+------------+------------+
| | Revenue | Operating profit |
+-------------------------+-------------------------+-------------------------+
| GBPm | 2009 | 2008 | 2009 | 2008 |
| | H1 | H1 | H1 | H1 |
| | | (restated) | | (restated) |
+-------------------------+------------+------------+------------+------------+
| Mecca Bingo* | 116.3 | 116.9 | 19.0 | 22.7 |
+-------------------------+------------+------------+------------+------------+
| Top Rank Espana | 18.1 | 17.7 | 2.7 | 4.1 |
+-------------------------+------------+------------+------------+------------+
| Grosvenor Casinos | 106.7 | 102.2 | 14.7 | 12.5 |
+-------------------------+------------+------------+------------+------------+
| Rank Interactive | 24.9 | 27.0 | 3.0 | 3.5 |
+-------------------------+------------+------------+------------+------------+
| Central costs | | | (9.2) | (11.0) |
+-------------------------+------------+------------+------------+------------+
| Group* | 266.0 | 263.8 | 30.2 | 31.8 |
+-------------------------+------------+------------+------------+------------+
* 2008 first-half revenue and operating profit for Mecca Bingo and Group
restated in the interests of comparability. See explanatory note above.
Grosvenor Casinos enjoyed a strong start to the year with 4.4% growth in revenue
while operating profit increased by 17.6% to GBP14.7m. This performance was
driven by increases in customer visits across our portfolio and in spite of a
lower than average win margin in our London casinos.
Revenue in Mecca Bingo was marginally lower than in the first half of 2008 while
operating profit declined by 16.3% to GBP19.0m. The GBP3.7m reduction in
operating profit was due in part to the benefit of a one-off GBP2.1m VAT refund
recognised in the first half of 2008. The business incurred GBP1.1m of
additional taxation as a result of changes in HM Government's Budget 2009
(the 'Budget'), but this was offset in the period by a one-off rebate of local
business rates.
First half revenue from Top Rank Espana was ahead of last year as a result of
the strength of the euro against Sterling (in euros, revenue declined).
Operating profit declined by 34.1% to GBP2.7m, due to the difficult market
conditions in Spain.
Revenue from Rank Interactive declined by 7.8% while operating profit of GBP3.0m
was down 14.3%. The business made a poor start to the year (due largely to the
performance of the Blue Square sportsbook) but showed some improvement during
the second quarter. Our bingo and games sites - principally meccabingo.com -
achieved strong growth in the six-month period.
We reduced central costs by GBP1.8m to GBP9.2m, reflecting the non-recurrence of
a number of one-off costs incurred during the first half of 2008 (as disclosed
previously).
The Group's net financing charge of GBP5.5m was GBP5.8m lower than in the
comparable period last year, reflecting lower interest rates and a substantial
reduction in average levels of net debt. As a consequence, adjusted earnings per
share of 4.5p was significantly higher than in the first half of 2008.
Financial position strengthened
i) Debt reduced
During the first half of 2009 we reduced net debt by GBP18.4m to GBP208.1m as a
result of positive operating cash flow.
During the next week, we expect to receive payment of GBP6.8m from Her Majesty's
Revenue and Customs ('HMRC'), representing the interest due on the GBP59.1m VAT
refund paid to the Group in November 2008.
In the near term, it remains our intention to achieve further reductions in net
debt whilst providing the level of investment necessary to support the Group's
growth strategy.
ii) Value Added Tax ('VAT')
In June 2009, the High Court upheld claims brought by Rank against HMRC for VAT
overpaid on interval games and on gaming machines. The High Court's ruling was
consistent with earlier rulings from the VAT & Duties Tribunal (the 'Tribunal')
that the inconsistent application of VAT to interval games and gaming machines
was in breach of the European Union's principle of fiscal neutrality.
Following the High Court's ruling, HMRC appealed the case to the Court of
Appeal. As yet, no date has been set for this further appeal hearing.
Last year, we received GBP59.1m relating to our VAT claim on interval bingo. We
have not yet received any repayment in respect of our GBP26.0m VAT claim on
gaming machines, which is subject to a second stage Tribunal, scheduled for the
final quarter of this year.
We have submitted a number of additional claims for overpaid VAT. Due to their
variety and complexity as well as the fact that some of the claims are subject
to ongoing litigation, we have not disclosed the aggregated amount claimed.
Management team strengthened
On 29 June 2009, Mark V. Jones was appointed as managing director of Mecca
Bingo. Mark has extensive experience of the leisure retail sector, including
roles as chief executive of Yates Group Plc and Pizza Hut UK Ltd (while at
Whitbread PLC) and executive chairman of Premium Bars and Restaurants plc.
Mark's appointment follows the Group's strategy of adding leisure retail and
technology expertise to our deep understanding of the gaming industry to help
broaden the consumer appeal of our businesses.
Over the course of the last 18 months, we have reshaped the Group's senior
management team with a range of new appointments to key positions.
Regulatory changes
During the first half of 2009, there were two important changes to gaming
machine regulations in British bingo clubs. These changes constituted a response
from DCMS to industry requests for more supportive regulation of bingo clubs and
gaming arcades, following a number of negative changes to legislation in recent
years.
In February, the maximum number of Category B3 jackpot machines (GBP1 maximum
stake/GBP500 maximum prize) permitted in a bingo club was increased from four to
eight; and in June, the maximum stakes and prizes on Category C machines were
increased from 50p and GBP35 to GBP1 and GBP70 respectively.
These new regulations enabled Mecca Bingo to enhance its product offer, which in
turn contributed to revenue growth from gaming machines.
The Budget
On 22 April 2009, we announced that, as a result of changes made in the
Budget to the taxation of bingo, player-to-player card games and gaming
machines, Rank's operating profit would be approximately GBP9m lower than
anticipated (on an annualised basis). The changes were introduced without prior
warning or consultation.
The estimated effect of the Budget on Group profits is analysed below.
+------------------+-------------------------------------+------------------+
| Revenue stream | Change | Net effect |
+------------------+-------------------------------------+------------------+
| Mecca Bingo | | |
+------------------+-------------------------------------+------------------+
| Bingo | Increase in bingo duty from 15% to | GBP(7.0)m |
| | 22%; exemption of main stage bingo | |
| | from VAT | |
+------------------+-------------------------------------+------------------+
| Gaming machines | 9% increase in amusement machine | GBP(0.4)m |
| | licence duty ('AMLD') | |
+------------------+-------------------------------------+------------------+
| | | |
+------------------+-------------------------------------+------------------+
| Grosvenor | | |
| Casinos | | |
+------------------+-------------------------------------+------------------+
| Poker | Subject to casino gaming duty of up | GBP(1.9)m |
| | to 50%; exemption from VAT | |
+------------------+-------------------------------------+------------------+
| Gaming machines | 9% increase in AMLD | GBP(0.1)m |
+------------------+-------------------------------------+------------------+
| | | |
+------------------+-------------------------------------+------------------+
| Total | | GBP(9.4)m |
+------------------+-------------------------------------+------------------+
Since the Budget, Rank and the Bingo Association have met with HM Treasury
officials and shadow Treasury officials on a number of occasions in an attempt
to have the increase in bingo duty reversed. Despite this - and in the face of
significant popular and political opposition - the Government refused to review
bingo taxation during the passage of the Finance Bill.
Rank believes that HM Treasury has taken no account of the damaging social and
economic consequences of its actions in the Budget and the Group will continue
to support the Bingo Association's campaign for fair taxation for bingo.
In addition, it was announced in the Budget that HM Treasury would consult on
the replacement of VAT and AMLD on gaming machines with a gross profits tax. The
consultation process was launched in July 2009 and is scheduled to conclude in
October. Rank will participate actively in this consultation process, both
directly and via relevant trade bodies. HM Treasury has stated that it intends
the new taxation regime to be revenue neutral for the Exchequer, although this
does not necessarily mean that its impact would be neutral for all businesses.
Current trading
Due to the nature of the gaming industry, short trading periods are not
necessarily a reliable guide to long-term performance. Nevertheless, Group
revenue growth has accelerated slightly since the start of the second half of
the year.
Growth in customer visits - both in London and the provinces - continued to
drive a strong revenue performance from Grosvenor Casinos.
In Mecca Bingo, revenue remained in line with the comparable period in 2008 with
increases in spend per visit offsetting decline in customer visits.
Average weekly revenue from Top Rank Espana was broadly in line with the first
half of the year in terms of euros. Sterling revenue was marginally lower than
in the comparable period in 2008 as a result of foreign exchange movements.
Rank Interactive continued to perform broadly in line with the first half, with
revenue decline in sportsbook partially offset by continued strong growth in
bingo and games, particularly meccabingo.com.
Outlook
We are encouraged by the Group's trading performance during the first half of
2009. Grosvenor Casinos performed ahead of our expectations while Mecca Bingo
delivered a creditable half-year result in spite of the challenging consumer
environment. We have improved the operational management of our businesses and
started to make progress in achieving closer working relationships between
online and offline channels.
The consumer outlook remains uncertain and the second half of the year will
prove more difficult for the Group with profits affected by a full six months of
the higher taxation rates (compared with just the final two months of the first
half).
Nevertheless, with improved consumer propositions, a stronger senior management
team and a firm financial position, the board remains confident in the prospects
for the Group.
Dividend
In December 2007, the board took the decision to suspend dividend payments in
the light of the difficult trading conditions that Rank had encountered during
the second half of that year.
Whilst Rank's financial position and trading performance have continued to
improve during 2009, the wider economic environments in the UK and in Spain
remain difficult. As a consequence, the board has decided not to recommend
payment of a dividend in respect of the first half of 2009. It remains the
board's intention to resume dividend payments in the future, once trading
conditions and market outlook improve.
Business Review - review of strategy
Strategic priorities
Our focus is on increasing the number of customers visiting our businesses by
developing gaming-based leisure experiences to appeal to a broader base of
customers.
As we set out at the time of the Group's annual results in February 2009, Rank's
strategy is built upon three key platforms:
1. Deepen customer understanding to shape product innovation, create service
differentiation and consistently deliver value for money propositions;
2. Strengthen position in Britain while assessing longer term growth opportunities
overseas;
3. Seek to work positively with government, the Gambling Commission and other
stakeholders to achieve the aims of the Gambling Act 2005 (the '2005 Act') and
to help shape a positive regulatory environment.
1. Deepen customer understanding
At the heart of our strategy is an ambition to become the most highly
recommended gaming business in Britain. To achieve this we have invested in data
collection and analysis to improve our understanding of customer expectations
and behaviours.
This approach drives our product and service innovation and is designed to
generate revenue growth through improved customer satisfaction and to reduce
operating costs through greater efficiency.
i) Sharper insight
During the first half of the year we established customer insight teams in Mecca
Bingo, Grosvenor Casinos and Rank Interactive. Through systematic evaluation of
market data together with quantitative and qualitative research these businesses
are refining their product offer and service standards to meet and exceed
customer expectations.
The development of customer rewards schemes and player tracking systems is a
component of our insight programme. We have installed our Play Points system in
five of our casinos, while Lucky Swipes has been extended to three Mecca Bingo
clubs. In Rank Interactive we have introduced an enhanced VIP programme. We will
continue to invest in this programme, gradually extending both Play Points and
Lucky Swipes over the next 12 months.
ii) Enhanced management information systems
During the first half of the year we extended the Play Safe gaming machines
management system to 66 of our Mecca Bingo clubs. The system provides us with
live inventory data on the performance of more than 3,900 gaming machines in
those clubs. We intend to extend the system to all Mecca Bingo clubs during the
second half of the year.
The enhanced EPOS system introduced to Mecca Bingo and Grosvenor Casinos during
the second half of 2008 has given us more detailed information on customer
preferences with regard to food and drink. This has enabled us to tailor our
product range to customer tastes and to drive efficiencies through improved
stock control.
iii) Product and service improvements
Electronic gaming - During the last 12 months we have made a range of
improvements to our electronic gaming products in both Mecca Bingo and Grosvenor
Casinos. These actions have helped to deliver significant increases in gaming
machine revenues in both businesses.
In Mecca Bingo, we have invested in the quality of service, environment and
games offered to customers in our amusement arcades. As a consequence of our
more active approach to machines management we were able to take immediate
advantage of the changes to gaming machine regulations introduced in the first
half of the year (see 'Regulatory changes').
In addition, we have developed the content available to customers on electronic
bingo terminals, including low-stakes amusements and roulette.
In Grosvenor Casinos, we have increased gaming machine revenue through improved
levels of service, the replacement of poor-performing games with more popular
machines and better machine layouts.
Food and drink - Following the success of last year's initiative to improve the
quality of Mecca Bingo's food and drink, we have this year launched a trial of
table service in our Leicester and Beeston clubs.
Initial customer feedback has been positive and both clubs are now generating
levels of spend per visit on food and drink substantially higher than the
business average. We will continue to evaluate the effect of these trials on
revenue and operating costs before considering further roll-out.
iv) Measurement - willingness to recommend
In 2008, we introduced the Net Promoter Score methodology to measure our success
in meeting and exceeding customer expectations across our businesses. Based upon
feedback from 8,000 customers every three months, Net Promoter Score tracks the
propensity of our customers to recommend us to their friends (subtracting
negative scores from positive scores to derive a net recommendation percentage).
Within the broader context of our insight programmes, the system enables us to
measure our progress and to identify ways to improve the quality of our products
and service.
During the first six months of 2009, we achieved improvements in our Net
Promoter Score in Mecca Bingo and Grosvenor Casinos; but Rank Interactive
experienced reductions in its scores across both gaming and sports betting. We
aim to achieve sustained improvements in Net Promoter Scores across each of
these businesses.
Net Promoter Scores - Q2 2009 vs Q1 2009
+-------------------------+-------------------------+-------------------------+
| | 2009 | 2009 |
| | Q2 | Q1 |
+-------------------------+-------------------------+-------------------------+
| Mecca Bingo | 39% | 35% |
+-------------------------+-------------------------+-------------------------+
| Grosvenor Casinos | 40% | 34% |
+-------------------------+-------------------------+-------------------------+
| Rank Interactive | 27% | 35% |
+-------------------------+-------------------------+-------------------------+
2. Selective investment to strengthen the Group's position in the UK and
explore growth opportunities overseas
Rank's capital spending priorities reflect the development needs and growth
opportunities in each of its businesses.
During the first six months of the year, Group capital expenditure totalled
GBP14.3m, representing a GBP3.0m increase on the first half of 2008. We forecast
that capital expenditure for the full year will be in the range of GBP35.0m to
GBP40.0m (2008: GBP28.2m), with the increase principally reflecting a number of
major projects to grow our G Casino brand.
i) Grosvenor Casinos
Insight
We believe that by giving customers more reasons to visit us, we may grow demand
for casinos in Britain from the 4% of adults identified in the British Gambling
Prevalence Survey 2007, a level significantly lower than in many other markets.
The success of the G Casino brand has demonstrated our ability to reach out to
non-traditional casino customers through improved food, drink and entertainment
offers, the creation of more attractive environments and the development of a
more inclusive service culture. Our G Casinos achieve average weekly customer
visits approximately 45% higher than in the rest of our provincial estate. In
the three locations where we have relocated a casino licence to create a G
Casino, we have doubled customer visits.
The current licensing regime in Britain means that the supply of casinos is
unlikely to increase significantly in the medium term. In more than half of the
local markets where we operate casinos, the number of competitors we face cannot
increase without legislative change.
There were two competitor casino openings (both predominantly electronic
casinos) during the period and one closure. We estimate that, at 30 July 2009,
there were a total of 144 casinos operating in Britain.
Development plans
The focus for investment in Grosvenor Casinos is the development of our G Casino
brand. We plan to increase the G Casino portfolio from seven units to ten units
by the end of the year and to more than 20 by the end of 2012.
Capital expenditure in Grosvenor Casinos totalled GBP3.9m during the first half
of 2009. We plan to step up investment during the second half of the year, with
forecast capital expenditure for the full year of between GBP16.0m and GBP18.0m.
New casinos - On 23 April 2009, we completed the GBP650,000 acquisition of the
casino at the Ricoh Arena in Coventry from Isle of Capri Limited. The club will
become our eighth G Casino when it is re-launched under the brand later this
summer.
In addition to our 34 operating casinos, we hold a further 12 casino licences
which are currently not being utilised.
Our intention is to use seven of these licences to develop G Casinos (subject
to availability of suitable sites). The first of these will be the G Casino in
Dundee, which is scheduled to open during the final quarter of this year.
We are in the process of developing a number of smaller format casinos, which
will allow us to utilise our remaining licences in markets where consumer demand
or site availability limits the scope for a G Casino. Earlier this month we
opened a small predominantly electronic casino in Leeds, adjacent to our
existing Grosvenor Casino.
Relocations - It is our intention to relocate a number of existing casinos to
improved sites under the G Casino brand. During the second half of this year we
will relocate our Sheffield casino, to re-open as a G Casino at an estimated
cost of GBP5.0m.
Rebranding and enhancement - A number of our Grosvenor Casinos are capable of
being converted to the G Casino brand through refurbishment. In April, we
re-launched the former Grosvenor Casino in Bolton under the G Casino brand after
an investment of GBP1.1m.
2005 Act casinos - At present we are working on bid proposals for a small number
of the new casino licences available under the 2005 Act.
It remains our view that few, if any, of the 2005 Act casinos will be
operational before 2012 and that some casinos may never be developed at all.
ii) Mecca Bingo
Insight
Bingo clubs offer the opportunity to provide an affordable, out of home social
gaming experience, aimed principally at women. We believe that there is an
opportunity to enhance the popularity of bingo clubs with a wider segment of
Britain's adult population through service and amenity improvements and through
the development of more varied and exciting games.
During the first half of the year, eight competitor clubs closed and there were
no competitor openings. A further nine competitor closures have been announced
since the start of the second half of the year. We estimate that following these
closures there will be fewer than 580 licensed bingo clubs in Britain; and we
expect this figure to decrease further in the medium term.
Development plans
The focus for investment in Mecca Bingo is the development and gradual extension
of our new concept Mecca club; and the general improvement of standards across
all of our clubs.
In May 2009, we opened a new concept Mecca club at Beeston in Nottingham. The
club design is based upon our programme of customer insight and reflects what
existing customers, lapsed customers and non-customers told us that they wanted
from a gaming-based leisure venue. Key features of the club are:
* Club exterior is bright, vibrant and welcoming;
* Entrance is welcoming and non-intimidating, with the bar and dining area near
the front door;
* Food and drink represents good quality and good value and is delivered directly
to the customer's table;
* Zoning allows us to create different experiences in different parts of the club;
* Games provide entertainment for a range of tastes, from traditional bingo to
more innovative games;
* The amusements arcade is comfortable and attractive, features a range of
machines from old favourites to the latest in server-based games and offers
customer service from a dedicated amusements team;
* The garden lounge offers an attractive open-air space for smokers and
non-smokers alike.
We have been encouraged both by customer feedback on the club and by its early
trading performance, with higher than average levels of customer visits. We have
commissioned plans to remodel two existing clubs based upon the concept
developed at Beeston and expect these to be launched during the first half of
2010.
Capital expenditure in Mecca Bingo totalled GBP8.1m during the first half of
2009; and we forecast that full-year capital expenditure will be in the range of
GBP12.0m to GBP14.0m.
iii) Top Rank Espana
Insight
Despite the very difficult economic circumstances in Spain, we believe that the
long-term prospects for the gaming industry are positive. This assessment is
based upon the Group's experience of 15 years operating bingo clubs in Spain,
the cultural position occupied by gaming within the country (Spain is one of the
largest gaming markets in Europe) and a number of opportunities for regulatory
progression.
Development plans
In the near term, our focus remains the preservation of capital, control of
costs and gains in market share.
In the medium term, we believe that there may be opportunities to enhance our
portfolio as a result of improved gaming regulations and targeted investment.
Capital expenditure in Top Rank Espana totalled GBP0.5m during the first half of
2009; and we forecast that full year capital expenditure will be in the range of
GBP1.0m to GBP2.0m.
iv) Rank Interactive
Insight
Rank's opportunity within the highly competitive remote gaming market is to
exploit the brand strengths of its land-based gaming businesses and to offer
customers an integrated online/offline gaming opportunity.
Our focus in the current year is on strengthening the position of meccabingo.com
in the online bingo market and to establish a more effective presence in the
online casinos market, through GCasino.com.
Development plans
During the first half of the year, we re-launched meccabingo.com, improving
customer registration, site navigation and game content; and aligning the site
more closely with the brand standards set across Mecca Bingo's clubs.
We plan to launch GCasino.com during the third quarter of 2009, following a
major project to overhaul the architecture of our online casino product. The
launch of GCasino.com is part of Rank's strategy to make G Casino the number one
brand in the British casino gaming market.
In the Blue Square sports betting business, we have focused our efforts on
improving our risk management processes, expanding and enhancing our
betting-in-running product and establishing a more effective customer rewards
programme.
We continued to achieve growth from a low base in our Spanish-language websites,
bingouniversal.com and apuestauniversal.com; and we are actively monitoring
regulatory developments in a small number of other European markets.
Capital expenditure in Rank Interactive totalled GBP1.6m during the first half
of 2009. We forecast that full-year capital expenditure will be in the range of
GBP4.0m to GBP5.0m.
3. Shaping the wider environment
In recent years, we have made significant progress in terms of the Group's
operational performance.
However, operational improvements have too often been undermined by negative
changes to the way that our markets are taxed and regulated. In particular,
policy changes announced in HM Treasury's 2007 and 2009 Budget statements have
collectively reduced Group pre-tax profits by more than GBP15.0m on an
annualised basis (roughly equal to 40% of Rank's 2008 pre-tax profits).
We recognise our responsibility to our shareholders and our employees to address
the effects of taxation and regulation on our businesses. As a consequence, the
Group invests significant time and resources in engaging with the organisations
that shape our operating environment. The aim of this programme is to ensure
that policy decisions affecting our businesses are based upon a clear
understanding of their likely consequences.
During the first six months of 2009, Rank met with 35 Members of Parliament,
including four ministers and seven shadow ministers and participated in a number
of regulatory workshops with the Gambling Commission.
In spite of these efforts, the 2009 Budget resulted in the 'soft gaming'
activities of bingo and player-to-player card games becoming two of the most
heavily taxed forms of gaming in Britain (see 'The Budget').
Nevertheless, the period also comprised a number of positive developments,
achieved partly as a result of our programme of engagement:
* Reinvigoration of the Bingo Association, despite the withdrawal of its largest
member;
* Improved relationship between the bingo industry and DCMS, leading to positive
changes to gaming machine regulations (see 'Regulatory changes') and DCMS
support for the industry on the question of tax reform;
* Sympathetic response from the Conservative Party front-bench and numerous Labour
back-benchers on the increase in bingo duty from 15% to 22%;
* Explicit support from the Liberal Democrats and the Scottish National Party for
reversal of bingo duty to 15%.
During the second half of the year, we will maintain this programme of
engagement. Earlier this month, Rank's chief executive, Ian Burke met with the
leader of Her Majesty's Opposition, the Rt. Hon. David Cameron MP to discuss the
issue of fair taxation for Britain's bingo clubs.
Business Review - operating review
Mecca Bingo
After a couple of difficult years, Mecca Bingo maintained its stabilisation as
gains in spend per visit offset a continued decline in customer visits.
Operating profit declined as a result of increased taxation and the
non-recurrence of last year's one-off VAT refund (relating to prior years) of
GBP2.1m.
Revenue & operating profit - Mecca Bingo
+---------------+---------------+---------------+---------------+---------------+
| | Revenue | Operating profit |
+---------------+-------------------------------+-------------------------------+
| GBPm | 2009 | 2008 | 2009 | 2008 |
| | H1 | H1 | H1 | H1 |
+---------------+---------------+---------------+---------------+---------------+
| | 116.3 | 116.9 | 19.0 | 22.7 |
+---------------+---------------+---------------+---------------+---------------+
Revenue from Mecca Bingo of GBP116.3m was 0.5% lower than in the first six
months of 2008, with a 4.8% rise in spend per visit largely off-setting a 5.1%
decline in customer visits. Operating profit declined by 16.3% to GBP19.0m.
The business's financial performance was affected by changes to bingo taxation
implemented in the Budget. The removal of VAT resulted in a slight benefit to
revenue but combined with the increase in bingo duty from 15% to 22%, it
resulted in a net GBP1.1m reduction in operating profit. This was offset by a
GBP1.2m one-off rebate of local business rates.
Key performance indicators - Mecca Bingo
+---------------+---------------+---------------------------+---------------+---------------+
| | 2009 | 2008 | Change | Like-for-like |
| | H1 | H1 | | change |
+---------------+---------------+---------------------------+---------------+---------------+
| Customer | 7,491 | 7,893 | (5.1)% | (5.2)% |
| visits (000s) | | | | |
+---------------+---------------+---------------------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------------------+---------------+---------------+
| Spend/visit | 15.53 | 14.82 | 4.8% | 4.6% |
| (GBP) | | | | |
+---------------+---------------+---------------------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------------------+---------------+---------------+
| Revenue | 116.3 | 116.9 | (0.5)% | (0.8)% |
| (GBPm) | | | | |
+---------------+---------------+---------------------------+---------------+---------------+
On a like-for-like basis, revenue from Mecca Bingo decreased by 0.8% with spend
per visit up 4.6% and customer visits down 5.2%.
Active membership of 912,000 (moving annual total or 'MAT') was 1.6% higher than
at 31 December 2008, largely reflecting the positive effect of our new club in
Beeston.
Revenue analysis - Mecca Bingo
+------------------+------------------+------------------+------------------+
| GBPm | 2009 | 2008 | Change |
| | H1 | H1 | |
+------------------+------------------+------------------+------------------+
| Main stage bingo | 20.2 | 19.0 | 6.3% |
+------------------+------------------+------------------+------------------+
| Interval games | 52.4 | 56.0 | (6.4)% |
+------------------+------------------+------------------+------------------+
| Gaming machines | 32.7 | 30.5 | 7.2% |
+------------------+------------------+------------------+------------------+
| Food & | 11.0 | 11.4 | (3.5)% |
| drink/other | | | |
+------------------+------------------+------------------+------------------+
| Total | 116.3 | 116.9 | (0.5)% |
+------------------+------------------+------------------+------------------+
Main stage bingo - revenue from main stage bingo increased by 6.3% to GBP20.2m.
Excluding the benefit of VAT exemption, revenue declined by 0.4% as a result of
reduced customer visits.
Interval games - revenue from interval bingo games declined by 6.4% to GBP52.4m
as a result of reduced customer visits. There was no year-on-year benefit from
VAT exemption for interval games.
Gaming machines - revenue from gaming machines increased by 7.2% to GBP32.7m.
This performance reflected the improvements we have made to our product and
service levels as well as an increase in the number of the popular Category B3
jackpot gaming machines we have been able to offer.
As a result of changes to regulations (see 'Regulatory changes') and Rank's
programme of adult gaming centre development, we increased the total number of
B3 machines deployed across our clubs from 524 at 30 June 2008 (and 711 at 31
December 2008) to 1,043 at 30 June 2009.
Food & drink - revenue from food and drink declined by 3.5% as a result of
reduced customer visits. Despite a reduction in pricing, we managed to achieve a
slight increase in spend per visit, reflecting the improvements we have made to
the quality of our dining offer.
Portfolio changes
During the six-month period we opened a new club at Beeston in Nottingham,
representing a major step forward in the evolution of the bingo club.
There were no club closures during the period. At 30 June 2009, Mecca Bingo
operated 103 clubs across Britain.
Top Rank Espana
Our Spanish bingo clubs business, Top Rank Espana, delivered a creditable
performance against a backdrop of high unemployment, economic decline and weak
consumer confidence. While the business experienced declines in revenue and
operating profit, it continued to grow its share of the Spanish bingo clubs
market.
Revenue & operating profit - Top Rank Espana
+---------------+----------------------------+----------------------------+---------------+---------------+
| | Revenue | Operating profit |
+---------------+---------------------------------------------------------+-------------------------------+
| GBPm | 2009 | 2008 | 2009 | 2008 |
| | H1 | H1 | H1 | H1 |
+---------------+----------------------------+----------------------------+---------------+---------------+
| | 18.1 | | 2.7 | 4.1 |
| | | 17.7 | | |
+---------------+----------------------------+----------------------------+---------------+---------------+
Revenue from Top Rank Espana increased by 2.3% to GBP18.1m as a result of the
strength of the euro against Sterling. In euros, revenue declined by 10.6% with
a 6.1% decline in customer visits and a 4.8% decline in spend per visit.
Operating profit declined by 34.1% to GBP2.7m.
Key performance indicators - Top Rank Espana
+---------------+---------------+---------------+---------------+---------------+
| | 2009 | 2008 | Change | Like-for-like |
| | H1 | H1 | | change |
+---------------+---------------+---------------+---------------+---------------+
| Customer | 1,130 | 1,203 | (6.1)% | (6.1)% |
| visits (000s) | | | | |
+---------------+---------------+---------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------+---------------+---------------+
| Spend/visit | 16.02 | 14.71 | 8.9% | 8.9% |
| (GBP) | | | | |
+---------------+---------------+---------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------+---------------+---------------+
| Revenue | 18.1 | 17.7 | 2.3% | 2.3% |
| (GBPm) | | | | |
+---------------+---------------+---------------+---------------+---------------+
Active membership of 316,000 (MAT) was 2.2% lower than at 31 December 2008.
Revenue analysis - Top Rank Espana
+------------------+------------------+------------------+------------------+
| GBPm | 2009 | 2008 | Change |
| | H1 | H1 | |
+------------------+------------------+------------------+------------------+
| Bingo | 11.9 | 11.9 | 0.0% |
+------------------+------------------+------------------+------------------+
| Gaming machines | 4.2 | 3.9 | 7.7% |
+------------------+------------------+------------------+------------------+
| Food & | 2.0 | 1.9 | 5.3% |
| drink/other | | | |
+------------------+------------------+------------------+------------------+
| Total | 18.1 | 17.7 | 2.3% |
+------------------+------------------+------------------+------------------+
There were no changes to the portfolio in the period and at 30 June 2009, Top
Rank Espana operated 11 bingo clubs across Catalonia, Madrid, Galicia and
Andalucia.
Grosvenor Casinos
Grosvenor Casinos enjoyed a strong first half performance with growth in revenue
and operating profit in spite of adverse tax changes announced in the Budget.
Revenue & operating profit - Grosvenor Casinos
+---------------+---------------+---------------+---------------+---------------+
| | Revenue | Operating profit |
+---------------+-------------------------------+-------------------------------+
| GBPm | 2009 | 2008 | 2009 | 2008 |
| | H1 | H1 | H1 | H1 |
+---------------+---------------+---------------+---------------+---------------+
| London | 41.2 | 44.1 | 5.3 | 5.7 |
+---------------+---------------+---------------+---------------+---------------+
| Provinces | 57.3 | 50.4 | 8.9 | 5.8 |
+---------------+---------------+---------------+---------------+---------------+
| Belgium | 8.2 | 7.7 | 0.5 | 1.0 |
+---------------+---------------+---------------+---------------+---------------+
| Total | 106.7 | 102.2 | 14.7 | 12.5 |
+---------------+---------------+---------------+---------------+---------------+
Revenue from Grosvenor Casinos increased by 4.4% to GBP106.7m with customer
visits up by 8.2% and spend per visit down by 3.5%. Operating profit grew by
17.6% to GBP14.7m, despite the GBP0.3m impact of the increase in card room poker
taxation announced in the Budget. In addition, we incurred GBP0.9m of net
redundancy costs in our London casinos but we anticipate that this will be
self-funding in the full-year. The GBP1.3m of legal costs incurred in the
first-half of 2008 were not repeated.
On a like-for-like basis, revenue grew by 1.5% with customer visits up by 2.6%
and spend per visit down 1.1%.
Revenue analysis - Grosvenor Casinos (Britain only)
+------------------+------------------+------------------+------------------+
| GBPm | 2009 | 2008 | Change |
| | H1 | H1 | |
+------------------+------------------+------------------+------------------+
| Table games | 72.4 | 72.5 | (0.1)% |
+------------------+------------------+------------------+------------------+
| Gaming machines | 16.1 | 13.8 | 16.7% |
+------------------+------------------+------------------+------------------+
| Poker | 3.6 | 2.3 | 56.5% |
+------------------+------------------+------------------+------------------+
| Food & | 6.4 | 5.9 | 8.5% |
| drink/other | | | |
+------------------+------------------+------------------+------------------+
| Total | 98.5 | 94.5 | 4.2% |
+------------------+------------------+------------------+------------------+
The majority of the business's revenue growth was generated by our gaming
machines and resulted from our decision last year to move to direct supply
agreements. In addition, there was strong growth from card room poker, although
the profitability of this activity was undermined by the change in card room
taxation (see 'The Budget').
Active membership of 842,000 (MAT) was 8.6% higher than at 31 December 2008.
Key performance indicators - Grosvenor Casinos
+---------------+---------------+---------------+---------------+---------------+
| | 2009 | 2008 | Change | Like-for-like |
| | H1 | H1 | | change |
+---------------+---------------+---------------+---------------+---------------+
| Customer | | | | |
| visits (000s) | | | | |
+---------------+---------------+---------------+---------------+---------------+
| London | 453 | 429 | 5.6% | 5.6% |
+---------------+---------------+---------------+---------------+---------------+
| Provinces | 1,678 | 1,526 | 10.0% | 2.3% |
+---------------+---------------+---------------+---------------+---------------+
| Belgium | 139 | 143 | (2.8)% | (2.8)% |
+---------------+---------------+---------------+---------------+---------------+
| Total | 2,270 | 2,098 | 8.2% | 2.6% |
+---------------+---------------+---------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------+---------------+---------------+
| Spend/visit | | | | |
| (GBP) | | | | |
+---------------+---------------+---------------+---------------+---------------+
| London | 91.07 | 102.74 | (11.4)% | (11.4)% |
+---------------+---------------+---------------+---------------+---------------+
| Provinces | 34.09 | 33.02 | 3.2% | 6.0% |
+---------------+---------------+---------------+---------------+---------------+
| Belgium | 59.24 | 54.04 | 9.6% | 9.6% |
+---------------+---------------+---------------+---------------+---------------+
| Total | 47.00 | 48.72 | (3.5)% | (1.1)% |
+---------------+---------------+---------------+---------------+---------------+
| | | | | |
+---------------+---------------+---------------+---------------+---------------+
| Revenue | 106.7 | 102.2 | 4.4% | 1.5% |
| (GBPm) | | | | |
+---------------+---------------+---------------+---------------+---------------+
London - in our five London casinos revenue declined by 6.6% to GBP41.2m and
operating profit fell 7.0% to GBP5.3m. We achieved 5.6% growth in customer
visits but spend per visit declined by 11.4% on a lower win percentage.
Provinces - revenue from our provincial casinos increased by 13.7% to GBP57.3m
while operating profit was up 53.4% to GBP8.9m. Customer visits increased by
10.0% and spend per visit was up by 3.2%.
Belgium - revenue from our two Belgian casinos increased by 6.5% to GBP8.2m but
operating profit of GBP0.5m was 50.0% lower than in the first half of 2008.
The revenue performance resulted from the strength of the euro against Sterling.
In euros, revenue was down 6.3% with a 2.8% decrease in customer visits and a
3.5% fall in spend per visit as the business absorbed the impact of a partial
smoking ban.
Portfolio changes
On 23 April 2009, we completed the GBP650,000 acquisition of the casino at the
Ricoh Arena in Coventry from Isle of Capri.
At 30 June 2009, we operated 33 casinos in Britain and two casinos in Belgium.
We added a 34th casino in Britain with the opening of a predominantly electronic
casino in Leeds on 17 July 2009.
Rank Interactive
Rank Interactive experienced a difficult start to the year in spite of continued
growth from meccabingo.com. Revenue from the Blue Square sportsbook declined,
largely as a result of a lower than expected win margin.
Revenue & operating profit - Rank Interactive
+---------------+---------------+---------------+---------------+---------------+
| | Revenue | Operating profit |
+---------------+-------------------------------+-------------------------------+
| GBPm | 2009 | 2008 | 2009 | 2008 |
| | H1 | H1 | H1 | H1 |
+---------------+---------------+---------------+---------------+---------------+
| | 24.9 | 27.0 | 3.0 | 3.5 |
+---------------+---------------+---------------+---------------+---------------+
Revenue from Rank Interactive declined by 7.8% to GBP24.9m, while operating
profit was down 14.3% to GBP3.0m. There was strong growth in daily bet volumes
but average stakes and average win margin were both lower than in the first half
of 2008.
Revenue analysis - Rank Interactive
+------------------+------------------+------------------+------------------+
| GBPm | 2009 | 2008 | Change |
| | H1 | H1 | |
+------------------+------------------+------------------+------------------+
| Bingo/Games | 16.4 | 14.7 | 11.6% |
+------------------+------------------+------------------+------------------+
| Casino | 2.4 | 2.6 | (7.7)% |
+------------------+------------------+------------------+------------------+
| Poker | 1.7 | 2.0 | (15.0)% |
+------------------+------------------+------------------+------------------+
| Sportsbook | 4.4 | 7.7 | (42.9)% |
+------------------+------------------+------------------+------------------+
| Total | 24.9 | 27.0 | (7.8)% |
+------------------+------------------+------------------+------------------+
Our online bingo sites - principally meccabingo.com - increased revenue by 11.6%
to GBP16.4m as a result of significant growth in active customers and frequency.
Revenue from our casino and poker sites declined by 7.7% and 15.0% respectively.
During the second half of the year, we plan to launch GCasino.com to complement
the development of the G Casino brand. It is our intention to make GCasino.com
our flagship casino site in Britain.
Revenue from the Blue Square sportsbook declined by 42.9% to GBP4.4m on lower
than historic win margin. The decline in win margin was predominantly due to
adverse Premiership football results.
Explanatory note - changes to reporting & disclosure
Segmental profit - as we announced on 29 June 2009, Rank has modified its
disclosure relating to segmental operating profit. Certain operating costs
previously reported within 'shared services' have been allocated to operating
profit for Mecca Bingo, Grosvenor Casinos and Rank Interactive. The remaining
shared services costs have been aggregated with items previously reported as
'other' under the category of 'central costs'.
Effects of non-payment or refunding of VAT - In 2008, revenue and operating
profit for both the Group and Mecca Bingo benefited from the non-payment or
refunding of VAT on interval games. These benefits had not been recognised at
the time of Rank's first-half results but were subsequently recognised at the
time of its annual results. Within this Business Review, we have revised upwards
our revenue and operating profit disclosures for the first half of 2008 by
GBP6.8m and GBP2.9m respectively. We have done this in the interests of
comparability, to show how the Group's financial results would have been
reported had the non-payment of VAT on interval games been recognised at the
time.
Reconciliation of previously reported results
+-------------------+--------------+---------+---------------+-----------------+
| GBPm | 2008 | VAT | Reallocation | 2008 |
| | H1 | benefit | of shared | H1 |
| | (as | | services | (comparable |
| | reported) | | | basis) |
+-------------------+--------------+---------+---------------+-----------------+
| Revenue | | | | |
+-------------------+--------------+---------+---------------+-----------------+
| Mecca Bingo | 110.1 | 6.8 | - | 116.9 |
+-------------------+--------------+---------+---------------+-----------------+
| Top Rank Espana | 17.7 | - | - | 17.7 |
+-------------------+--------------+---------+---------------+-----------------+
| Grosvenor Casinos | 102.2 | - | - | 102.2 |
+-------------------+--------------+---------+---------------+-----------------+
| Rank Interactive | 27.0 | - | - | 27.0 |
+-------------------+--------------+---------+---------------+-----------------+
| Group | 257.0 | 6.8 | - | 263.8 |
+-------------------+--------------+---------+---------------+-----------------+
| | | | | |
+-------------------+--------------+---------+---------------+-----------------+
| Operating profit | | | | |
+-------------------+--------------+---------+---------------+-----------------+
| Mecca Bingo | 21.6 | 2.9 | (1.8) | 22.7 |
+-------------------+--------------+---------+---------------+-----------------+
| Top Rank Espana | 4.1 | - | - | 4.1 |
+-------------------+--------------+---------+---------------+-----------------+
| Grosvenor Casinos | 14.5 | - | (2.0) | 12.5 |
+-------------------+--------------+---------+---------------+-----------------+
| Rank Interactive | 5.3 | - | (1.8) | 3.5 |
+-------------------+--------------+---------+---------------+-----------------+
| Shared services | (11.2) | - | 11.2 | - |
+-------------------+--------------+---------+---------------+-----------------+
| Central costs | (5.4) | - | (5.6) | (11.0) |
+-------------------+--------------+---------+---------------+-----------------+
| Group | 28.9 | 2.9 | - | 31.8 |
+-------------------+--------------+---------+---------------+-----------------+
Like-for-like revenue - the structural nature of the changes to bingo and poker
taxation contained within the Budget causes some distortion in comparing revenue
between the 2008 and 2009 financial years. As a consequence, we have redefined
the Group's definition of like-for-like revenue, which is now based upon:
* Comparable clubs - those bingo clubs and casinos operational for at least one
full year prior to 1 January 2009.
* Comparable sales tax treatment - in the Budget, player-to-player card games
(principally poker) and all games of bingo were made exempt from VAT. The effect
of this change is excluded in calculating like-for-like revenue.
SUMMARY OF RESULTS
For the period ended 30 June 2009
(from continuing operations)
+--------------------+--------+-----------+-----+--------+----------+--------+----------+
| | Revenue | Operating profit |
+--------------------+--------------------------+---------------------------------------+
| | | | Before | After |
| | | | exceptionals | exceptionals |
+--------------------+--------+-----------------+-------------------+-------------------+
| | 2009 | 2008 | 2009 | 2008* | 2009 | 2008* |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Mecca Bingo | 116.3 | 110.1 | 19.0 | 19.8 | 20.4 | 23.8 |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Top Rank Espana | 18.1 | 17.7 | 2.7 | 4.1 | 2.7 | 4.1 |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Grosvenor Casinos | 106.7 | 102.2 | 14.7 | 12.5 | 14.7 | 12.5 |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Rank Interactive | 24.9 | 27.0 | 3.0 | 3.5 | 3.0 | 3.5 |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Central costs | | | (9.2) | (11.0) | (9.2) | (110.2) |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Continuing | 266.0 | 257.0 | 30.2 | 28.9 | 31.6 | (66.3) |
| operations | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Net interest | | | (5.5) | (11.3) | (5.5) | (11.3) |
| payable | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Adjusted profit | | | 24.7 | 17.6 | 26.1 | (77.6) |
| (loss) before | | | | | | |
| taxation | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Amortisation of | | | (0.3) | (1.8) | (0.3) | (1.8) |
| equity component | | | | | | |
| of convertible | | | | | | |
| bond | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Unwinding of | | | (0.1) | (0.6) | (0.1) | (0.6) |
| discount in | | | | | | |
| disposal | | | | | | |
| provisions | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Net return on | | | - | 3.6 | - | 3.6 |
| defined benefit | | | | | | |
| pension asset | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Other financial | | | 1.3 | (0.2) | 1.3 | (0.2) |
| gains (losses) | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Profit (loss) | | | 25.6 | 18.6 | 27.0 | (76.6) |
| before taxation | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| | | | | | | |
+--------------------+--------+-----------------+--------+----------+--------+----------+
| Basic earnings (loss) per share - | | 4.6p | 3.0p | 5.0p | (14.3)p |
| continuing operations | | | | | |
+-----------------------------------------+-----+--------+----------+--------+----------+
| Adjusted earnings per share (note 6) | | 4.5p | 3.0p | | |
+--------------------+--------+-----------+-----+--------+----------+--------+----------+
* As detailed in note 1 and note 2 to the Group financial information, the
analysis of 2008 operating profit by segment has been reallocated following the
implementation of IFRS 8, 'Operating segments'.
Group revenue rose by GBP9.0m, driven by the increases at Mecca Bingo and
Grosvenor Casinos. As noted earlier, revenue benefited from the exemption of
bingo and poker in casinos from VAT. This was offset by a decline in revenue
from Rank Interactive.
Group operating profit before exceptional items was GBP1.3m higher than 2008.
This reflects the benefit from the VAT tribunal ruling on interval bingo,
benefits from cost saving actions taken in 2008 and operational improvements in
a number of areas. This was partly offset by the unexpected increases in
taxation introduced in the Budget. In addition, 2008 included a number of
one-off items:
* Grosvenor Casinos incurred GBP1.3m in legal costs following the unsuccessful
case against the National Bank of Abu Dhabi in relation to unpaid cheques.
* Mecca Bingo benefited from GBP2.1m of reclaimed VAT on participation fees
relating to prior years.
* Central costs included redundancy costs for three former members of the senior
management team and professional fees for the VAT claims on interval bingo and
gaming machines.
The net interest charge was GBP5.8m lower than in 2008. Net interest payable
reduced due to lower interest rates as well as reduced debt levels.
Adjusted Group profit before tax and exceptionals rose by GBP7.1m versus last
year.
The effective tax rate on adjusted profit is 28.9% (2008: 34.3%). The tax charge
is in line with the continuing Group's anticipated effective tax rate, which is
now expected to be in the region of 28% to 33%.
Adjusted earnings per share of 4.5p (2008: 3.0p) reflects the higher adjusted
pre-tax profit on an unchanged weighted average number of ordinary shares.
As explained above, the board of directors has decided not to pay a dividend in
respect of the first six months to 30 June 2009 (2008: Nil).
Exceptional items
During the first half of 2009, the Group sold one non-trading freehold site for
GBP1.5m and the profit on disposal, net of disposal costs, totalled GBP1.4m.
Exceptional items in the first half of 2008 included the transfer of the Group's
defined benefit pension plan to Rothesay Life Limited. The transfer resulted in
a pre-tax loss on transfer of GBP99.2m after transaction costs. As a result of
the transfer the Group has no further liabilities in respect of the plan.
Additionally, GBP5.0m was released from disposal provisions for discontinued
businesses following expiration of warranties provided in the Hard Rock sale
agreement.
Further details are provided in note 3 to the Group financial information.
Disposal provisions
At 30 June 2009, the Group held GBP18.5m in provisions for disposed businesses,
a reduction of GBP3.7m since the year-end. The provisions predominantly relate
to outstanding insurance claims, warranty provisions for potential claims,
property related costs and costs of winding up the tax and legal affairs where
Rank remains responsible. The exact timing and amounts of the expenditure are
uncertain.
The major expenditures in the period comprised GBP1.2m on property related
costs, GBP1.7m on legal and professional costs (predominantly relating to the
Paramount legal claim set out in note 12 to the Group financial information) and
GBP0.3m on insurance claims.
Further details are provided in note 7 to the Group financial information.
Cash flow and net debt
+---------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Cash inflow from operations | 41.3 | 39.8 |
+---------------------------------------------------+-----------+-----------+
| Capital expenditure | (14.3) | (11.3) |
+---------------------------------------------------+-----------+-----------+
| Fixed asset disposals | 1.6 | 5.6 |
+---------------------------------------------------+-----------+-----------+
| Operating cash inflow | 28.6 | 34.1 |
+---------------------------------------------------+-----------+-----------+
| Acquisitions and disposals | (0.3) | 25.2 |
+---------------------------------------------------+-----------+-----------+
| Net (payment) receipt in respect of provisions | (12.5) | 2.0 |
| and exceptional items | | |
+---------------------------------------------------+-----------+-----------+
| | 15.8 | 61.3 |
+---------------------------------------------------+-----------+-----------+
| Net interest, hedge and tax payments | (7.9) | (15.5) |
+---------------------------------------------------+-----------+-----------+
| Other (including foreign exchange translation) | 10.5 | (2.3) |
+---------------------------------------------------+-----------+-----------+
| Decrease in net debt | 18.4 | 43.5 |
+---------------------------------------------------+-----------+-----------+
| Opening net debt | (226.5) | (316.9) |
+---------------------------------------------------+-----------+-----------+
| Closing net debt | (208.1) | (273.4) |
+---------------------------------------------------+-----------+-----------+
At the end of June 2009, net debt was GBP208.1m compared with GBP273.4m at the
end of June 2008. The net debt comprised bank debt of GBP230.7m, GBP8.7m in
fixed rate Yankee bonds, GBP13.1m in finance leases and GBP9.6m in overdrafts,
partially offset by cash at bank and in hand of GBP42.5m and short term bank
deposits of GBP11.5m.
Financial structure and liquidity
The Group banking facilities comprise a syndicated multi-currency GBP250.0m
revolving credit facility and GBP150.0m term loan, which were arranged in April
2007 and mature in April 2012. These facilities require the maintenance of a
minimum ratio of earnings before interest, tax, depreciation and amortisation
(EBITDA) to net interest payable and a maximum ratio of net debt to EBITDA, both
of which are tested bi-annually, at June and December.
In addition, the Group has uncommitted borrowing facilities of GBP28m, repayable
on demand but which are available for general use.
In January 2009, the Group repaid its remaining GBP158.2m convertible bonds from
cash and existing bank facilities, without recourse to the capital markets.
The Group's facilities are provided by a panel of banks with no single bank
providing more than 10% of the facility. The Group treasury function sets
counterparty limits for the lending banks with which it trades and regularly
monitors their credit ratings to minimise risk of financial loss.
Capital expenditure
+---------------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Mecca Bingo | 8.1 | 4.4 |
+---------------------------------------------------+-----------+-----------+
| Top Rank Espana | 0.5 | 0.8 |
+---------------------------------------------------+-----------+-----------+
| Grosvenor Casinos | 3.9 | 3.3 |
+---------------------------------------------------+-----------+-----------+
| Rank Interactive | 1.6 | 2.5 |
+---------------------------------------------------+-----------+-----------+
| Central | 0.2 | 0.3 |
+---------------------------------------------------+-----------+-----------+
| Total | 14.3 | 11.3 |
+---------------------------------------------------+-----------+-----------+
Capital expenditure for Mecca Bingo included GBP4.3m spent completing the
development of our latest bingo club in Beeston (opened in May 2009), GBP0.4m on
energy saving equipment, GBP0.5m on various works connected with amusement
machines and electronic gaming, GBP0.8m on club refurbishment and the balance on
minor capital works.
In Grosvenor Casinos, GBP0.9m was spent on the re-branding of Bolton to a G
Casino, GBP0.6m on the new G Casino in Dundee (opening late 2009) and GBP0.3m on
electronic gaming. The balance of the expenditure was on minor capital works. In
the second half of 2009, Grosvenor Casinos plans to relocate and rebrand the
Sheffield casino as a G Casino, complete the re-branding of Coventry as a G
Casino and open the G Casino in Dundee.
Total capital expenditure for 2009 is expected to be in the order of
GBP35.0m-GBP40.0m, although expenditure continues to be carefully phased to
allow quick reductions in the overall level of capital expenditure, should
business conditions deteriorate. The commitment to develop the G Casino in
Dundee is not impacted by this policy.
The only significant capital commitment at 30 June 2009 was GBP2.0m relating to
the new G Casino in Dundee. The major expenditure planned for the remainder of
the year is GBP2.0m to complete the G Casino in Dundee, GBP5.0m for the
relocation at Sheffield and GBP1.0m for the re-branding at Coventry.
Principal risks
The principal risks and uncertainties faced by the Group have not changed from
those set out on page 13 of The Rank Group Plc Annual Report and Financial
Statements for the year ended 31 December 2008, available from the Group website
www.rank.com. These risks are:
* Further increases in taxation, in particular gaming machine taxation as
described in the Business Review
* Regressive changes to the regulatory environment for gambling
* Increasing competition
* Further deterioration in consumer spending
* Absence or withdrawal of financing facilities
In addition, the risks and uncertainties are further discussed within the
Business Review section of the 2008 Annual Report and Financial Statements on
pages 14 to 23 inclusive.
Going concern
In adopting the going concern basis for preparing the Group financial
information the directors have considered the issues impacting the Group during
2009 and have reviewed the Group's projected compliance with its banking
covenants detailed above. Based on the Group's cash flow forecasts and operating
budgets, which take into account management's actions on capital expenditure,
cost control, dividend suspension and assuming that trading does not deteriorate
considerably from current levels, the directors believe that the Group will
generate sufficient cash to meet its borrowing requirements for at least the
next 12 months and comply with its banking covenants. Accordingly the adoption
of the going concern basis remains appropriate.
Group Balance Sheet
At 30 June 2009
(unaudited)
+---------------------------------------------------+-----------+-----------+
| | At | At |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 31.12.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Assets | | |
+---------------------------------------------------+-----------+-----------+
| Non-current assets | | |
+---------------------------------------------------+-----------+-----------+
| Intangible assets | 178.1 | 183.2 |
+---------------------------------------------------+-----------+-----------+
| Property, plant and equipment | 176.0 | 179.6 |
+---------------------------------------------------+-----------+-----------+
| Deferred tax assets | 28.6 | 43.3 |
+---------------------------------------------------+-----------+-----------+
| Trade and other receivables | 1.8 | 1.9 |
+---------------------------------------------------+-----------+-----------+
| | 384.5 | 408.0 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Current assets | | |
+---------------------------------------------------+-----------+-----------+
| Financial assets | | |
+---------------------------------------------------+-----------+-----------+
| - derivative financial instruments | - | 11.2 |
+---------------------------------------------------+-----------+-----------+
| - cash and cash equivalents | 54.0 | 111.7 |
+---------------------------------------------------+-----------+-----------+
| Inventories | 3.1 | 3.8 |
+---------------------------------------------------+-----------+-----------+
| Current tax receivable | - | 3.9 |
+---------------------------------------------------+-----------+-----------+
| Trade and other receivables | 39.9 | 34.3 |
+---------------------------------------------------+-----------+-----------+
| | 97.0 | 164.9 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Total assets | 481.5 | 572.9 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Liabilities | | |
+---------------------------------------------------+-----------+-----------+
| Current liabilities | | |
+---------------------------------------------------+-----------+-----------+
| Financial liabilities | | |
+---------------------------------------------------+-----------+-----------+
| - loan capital and borrowings | (10.3) | (168.9) |
+---------------------------------------------------+-----------+-----------+
| - derivative financial instruments | - | (14.5) |
+---------------------------------------------------+-----------+-----------+
| Trade and other payables | (106.7) | (114.4) |
+---------------------------------------------------+-----------+-----------+
| Current tax liabilities | (8.6) | (6.6) |
+---------------------------------------------------+-----------+-----------+
| Provisions for other liabilities and charges | (16.2) | (13.0) |
| (note 7) | | |
+---------------------------------------------------+-----------+-----------+
| | (141.8) | (317.4) |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Net current liabilities | (44.8) | (152.5) |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Non-current liabilities | | |
+---------------------------------------------------+-----------+-----------+
| Financial liabilities | | |
+---------------------------------------------------+-----------+-----------+
| - loan capital and borrowings | (250.4) | (170.9) |
+---------------------------------------------------+-----------+-----------+
| Deferred tax liabilities | (6.1) | (6.9) |
+---------------------------------------------------+-----------+-----------+
| Other non-current liabilities | (38.4) | (38.8) |
+---------------------------------------------------+-----------+-----------+
| Provisions for other liabilities and charges | (35.4) | (43.3) |
| (note 7) | | |
+---------------------------------------------------+-----------+-----------+
| | (330.3) | (259.9) |
+---------------------------------------------------+-----------+-----------+
| Total liabilities | (472.1) | (577.3) |
+---------------------------------------------------+-----------+-----------+
| Net assets (liabilities) | 9.4 | (4.4) |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Capital and reserves attributable to the | | |
| Company's equity shareholders | | |
+---------------------------------------------------+-----------+-----------+
| Ordinary shares | 54.2 | 54.2 |
+---------------------------------------------------+-----------+-----------+
| Share premium | 98.2 | 98.2 |
+---------------------------------------------------+-----------+-----------+
| Capital redemption reserve | 33.4 | 33.4 |
+---------------------------------------------------+-----------+-----------+
| Exchange translation reserve | 12.2 | 18.4 |
+---------------------------------------------------+-----------+-----------+
| Equity component of convertible bond | - | 0.3 |
+---------------------------------------------------+-----------+-----------+
| Retained losses | (188.6) | (208.9) |
+---------------------------------------------------+-----------+-----------+
| Total shareholders' equity (deficit) | 9.4 | (4.4) |
+---------------------------------------------------+-----------+-----------+
Group Income Statement
For the period ended 30 June 2009
(unaudited)
+-------------------------+-----------+--+-------------+---------+-------------+--+-----------+---------+
| | 2009 | 2008 |
+-------------------------+--------------------------------------+--------------------------------------+
| | Before | Exceptional | Total | Before | Exceptional | Total |
| | exceptional | items | | exceptional | items | |
| | items | (note 3) | | items | (note 3) | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Continuing operations | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Revenue | 266.0 | - | 266.0 | 257.0 | - | 257.0 |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Cost of sales | (141.7) | - | (141.7) | (134.8) | - | (134.8) |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Gross profit | 124.3 | - | 124.3 | 122.2 | - | 122.2 |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Other operating (costs) | (94.1) | 1.4 | (92.7) | (93.3) | (95.2) | (188.5) |
| income | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Group operating profit | 30.2 | 1.4 | 31.6 | 28.9 | (95.2) | (66.3) |
| (loss) | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Financing: | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - finance costs | (6.2) | - | (6.2) | (13.0) | - | (13.0) |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - finance income | 0.7 | - | 0.7 | 1.7 | - | 1.7 |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - amortisation of | (0.3) | - | (0.3) | (1.8) | - | (1.8) |
| equity component of | | | | | | |
| convertible bond | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - unwinding of discount | (0.1) | - | (0.1) | (0.6) | - | (0.6) |
| in disposal provisions | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - net return on defined | - | - | - | 3.6 | - | 3.6 |
| benefit pension asset | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| - other financial gains | 1.3 | - | 1.3 | (0.2) | - | (0.2) |
| (losses) | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Total net financing | (4.6) | - | (4.6) | (10.3) | - | (10.3) |
| charge | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Profit (loss) before | 25.6 | 1.4 | 27.0 | 18.6 | (95.2) | (76.6) |
| taxation | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Taxation (note 4) | (7.5) | - | (7.5) | (7.0) | 27.8 | 20.8 |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Profit (loss) for the | 18.1 | 1.4 | 19.5 | 11.6 | (67.4) | (55.8) |
| period from continuing | | | | | | |
| operations | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Discontinued operations | - | - | - | - | 5.0 | 5.0 |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Profit (loss) for the | 18.1 | 1.4 | 19.5 | 11.6 | (62.4) | (50.8) |
| period | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| | | | | | | |
+-------------------------+--------------+-------------+---------+-------------+--------------+---------+
| Earnings (loss) per share attributable to equity shareholders (note 6) |
+-------------------------------------------------------------------------------------------------------+
| - basic | 4.6p | 0.4p | 5.0p | 3.0p | (16.0)p | (13.0)p |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| - diluted | 4.6p | 0.4p | 5.0p | 3.0p | (16.0)p | (13.0)p |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| | | | | | | |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| Earnings (loss) per share - continuing operations (note 6) |
+-------------------------------------------------------------------------------------------------------+
| - basic | 4.6p | 0.4p | 5.0p | 3.0p | (17.3)p | (14.3)p |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| - diluted | 4.6p | 0.4p | 5.0p | 3.0p | (17.3)p | (14.3)p |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| | | | | | | |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| Earnings (loss) per share - discontinued operations (note 6) |
+-------------------------------------------------------------------------------------------------------+
| - basic | - | - | - | - | 1.3p | 1.3p |
+-------------------------+-----------+----------------+---------+----------------+-----------+---------+
| - diluted | - | - | - | - | 1.3p | 1.3p |
+-------------------------+-----------+--+-------------+---------+-------------+--+-----------+---------+
Group Statement of Comprehensive Income
For the period ended 30 June 2009
(unaudited)
+-----------------------------------------------------------------+-----------+----------+
| | 6 months | 6 months |
| | to | to |
+-----------------------------------------------------------------+-----------+----------+
| | 30.06.09 | 30.06.08 |
+-----------------------------------------------------------------+-----------+----------+
| | GBPm | GBPm |
+-----------------------------------------------------------------+-----------+----------+
| Profit (loss) for the period | 19.5 | (50.8) |
+-----------------------------------------------------------------+-----------+----------+
| Exchange adjustments net of tax and hedging | (6.2) | 3.2 |
+-----------------------------------------------------------------+-----------+----------+
| Actuarial loss on defined benefit pension scheme net of tax | - | (5.5) |
+-----------------------------------------------------------------+-----------+----------+
| Total comprehensive income (expense) for the period | 13.3 | (53.1) |
+-----------------------------------------------------------------+-----------+----------+
Group Statement of Changes in Equity
For the period ended 30 June 2009
(unaudited)
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| | 6 months to 30 June 2009 |
+-------------------------+---------------------------------------------------------------------+
| | Share | Share | Capital | Exchange | Other* | Total |
| | capital | premium | redemption | translation | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| At 1 January 2009 | 54.2 | 98.2 | 33.4 | 18.4 | (208.6) | (4.4) |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Total comprehensive | - | - | - | (6.2) | 19.5 | 13.3 |
| income (expense) for | | | | | | |
| the period | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Transactions with | | | | | | |
| owners: | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Credit in respect of | - | - | - | - | 0.5 | 0.5 |
| employee share schemes | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| At 30 June 2009 | 54.2 | 98.2 | 33.4 | 12.2 | (188.6) | 9.4 |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| | 6 months to 30 June 2008 |
+-------------------------+---------------------------------------------------------------------+
| | Share | Share | Capital | Exchange | Other* | Total |
| | capital | premium | redemption | translation | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| At 1 January 2008 | 54.2 | 98.2 | 33.4 | (0.3) | (198.8) | (13.3) |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Total comprehensive | - | - | - | 3.2 | (56.3) | (53.1) |
| (expense) income for | | | | | | |
| the period | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Transactions with | | | | | | |
| owners: | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| Credit in respect of | - | - | - | - | 0.3 | 0.3 |
| employee share schemes | | | | | | |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
| At 30 June 2008 | 54.2 | 98.2 | 33.4 | 2.9 | (254.8) | (66.1) |
+-------------------------+---------+-----------+------------+-------------+---------+----------+
*Other reserves at 30 June 2009 comprise retained losses of GBP188.6m. At 30
June 2008 other reserves comprised retained losses of GBP253.3m, the equity
component of the convertible bond of GBP2.1m and a GBP(0.6)m fair value loss
reserve.
Group Statement of Cash Flows
For the period ended 30 June 2009
(unaudited)
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Cash flows from operating activities | | |
+---------------------------------------------------+-----------+-----------+
| Cash generated from operations (note 9) | 28.8 | 41.8 |
+---------------------------------------------------+-----------+-----------+
| Interest received | 1.0 | 1.5 |
+---------------------------------------------------+-----------+-----------+
| Interest paid | (8.8) | (14.3) |
+---------------------------------------------------+-----------+-----------+
| Net payments in respect of hedges | (5.2) | (1.6) |
+---------------------------------------------------+-----------+-----------+
| Tax received (paid) | 5.1 | (1.1) |
+---------------------------------------------------+-----------+-----------+
| Net cash from operating activities | 20.9 | 26.3 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Cash flows from investing activities | | |
+---------------------------------------------------+-----------+-----------+
| Acquisition of businesses including deferred | (0.3) | (3.2) |
| consideration (note 10) | | |
+---------------------------------------------------+-----------+-----------+
| Net proceeds from transfer of defined benefit | - | 28.4 |
| pension asset | | |
+---------------------------------------------------+-----------+-----------+
| Purchase of intangible assets | (1.4) | (2.1) |
+---------------------------------------------------+-----------+-----------+
| Purchase of property, plant and equipment | (12.9) | (9.2) |
+---------------------------------------------------+-----------+-----------+
| Proceeds from sale of property, plant and | 1.6 | 5.6 |
| equipment | | |
+---------------------------------------------------+-----------+-----------+
| Net cash (used in) from investing activities | (13.0) | 19.5 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Cash flows from financing activities | | |
+---------------------------------------------------+-----------+-----------+
| Drawdown on syndicated facilities | 91.2 | 25.0 |
+---------------------------------------------------+-----------+-----------+
| Repayment of US Dollar borrowings | - | (50.8) |
+---------------------------------------------------+-----------+-----------+
| Repayment of Sterling borrowings | (158.2) | - |
+---------------------------------------------------+-----------+-----------+
| Finance lease principal repayments | (0.4) | (0.5) |
+---------------------------------------------------+-----------+-----------+
| Net cash used in financing activities | (67.4) | (26.3) |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Effect of exchange rate changes | (0.9) | 0.6 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Net (decrease) increase in cash, cash equivalents | (60.4) | 20.1 |
| and bank overdrafts | | |
+---------------------------------------------------+-----------+-----------+
| Cash, cash equivalents and bank overdrafts at | 104.8 | 68.6 |
| beginning of period | | |
+---------------------------------------------------+-----------+-----------+
| Cash, cash equivalents and bank overdrafts at end | 44.4 | 88.7 |
| of period | | |
+---------------------------------------------------+-----------+-----------+
| Bank overdrafts | 9.6 | 7.4 |
+---------------------------------------------------+-----------+-----------+
| Cash and cash equivalents | 54.0 | 96.1 |
+---------------------------------------------------+-----------+-----------+
Notes to the Group Financial Information
For the period ended 30 June 2009
(unaudited)
1. General information, basis of preparation and accounting policies
General information
The Company is a limited liability company incorporated and domiciled in the UK.
The address of its registered office is Statesman House, Stafferton Way,
Maidenhead SL6 1AY. The Company is listed on the London Stock Exchange.
This condensed consolidated interim financial information was approved for issue
on 30 July 2009.
This condensed consolidated interim financial information does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2008 were approved by the
board of directors on 25 February 2009 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain a statement made
under Section 237 of the Companies Act 1985.
This condensed consolidated interim financial information has been reviewed but
not audited.
Basis of preparation
This condensed consolidated interim financial information for the six months
ended 30 June 2009 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS 34 'Interim
financial reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December 2008, which have
been prepared in accordance with IFRSs as adopted by the European Union.
Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the annual financial statements for the year ended 31 December 2008, as
described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would
be applicable to expected total annual earnings.
The following new standards and amendments to standards are mandatory for the
first time for the financial year beginning 1 January 2009.
* IAS 1 (revised), 'Presentation of financial statements'. The revised standard
prohibits the presentation of components of income and expenses (that is
'non-owner changes in equity') in the statement of changes in equity. All
'non-owner changes in equity' are required to be shown in a performance
statement. Entities can choose whether to present one performance statement (the
statement of comprehensive income) or two statements (the income statement and
statement of comprehensive income). The Group has elected to present two
statements: an income statement and a statement of comprehensive income. The
condensed consolidated interim financial information has been prepared under the
revised disclosure requirements.
1. General information, basis of preparation and accounting policies
(continued)
* IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It
requires a 'management approach' under which segment information is presented on
the same basis as that used for internal reporting purposes. Although there is
no overall impact on operating profit this has resulted in a reduction in the
number of reportable segments presented, as the previously reported gaming
shared services segment has been combined and allocated into the central costs
reported segment. Further details are provided in note 2 to the Group financial
information.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the executive
committee that makes strategic decisions. The composition of the executive
committee is set out on page 33 of the annual financial statements for the year
ended 31 December 2008, except for the replacement of Simon Wykes by Mark V.
Jones.
The following new standards, amendments to standards and interpretations are
mandatory for the first time for the financial year beginning 1 January 2009,
but are either not currently relevant or material for the Group.
* IFRS 2 (amendment), 'Share based payments'
* IFRIC 13, 'Customer loyalty programmes'
* IFRIC 14, 'The limit on a defined benefit pension asset, minimum funding
requirements and their interaction'
* IFRIC 15, 'Agreements for the construction of real estate'
* IFRIC 16, 'Hedges of a net investment in a foreign operation'
* IAS23, 'Borrowing costs (revised)'
* IAS 39 (amendment), 'Financial instruments: Recognition and measurement'
The following new standards, amendments to standards and interpretations have
been issued, but are not effective for the financial year beginning 1 January
2009 and have not been early adopted:
* IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS
27, 'Consolidated and separate financial statements', IAS 28, 'Investments in
associates' and IAS 31, 'Interests in joint ventures'. The standard and
amendments are effective prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after 1 July 2009. The Group will apply IFRS 3 (revised)
to all business combinations from 1 January 2010, subject to endorsement by the
EU.
* IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual
periods beginning on or after 1 July 2009. This is not currently applicable to
the Group, as it has not made any non-cash distributions.
* IFRIC 18, 'Transfers of assets from customers', effective for transfers of
assets received on or after 1 July 2009. This is not relevant to the Group, as
it has not received any assets from customers.
2. Segment information - continuing operations
+--------------------+--------+----------+-----------+-------------+---------+--------+
| | Six months to 30 June 2009 |
+--------------------+----------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Segment revenue | 116.3 | 18.1 | 106.7 | 24.9 | - | 266.0 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Operating pro?t | 19.0 | 2.7 | 14.7 | 3.0 | (9.2) | 30.2 |
| (loss) before | | | | | | |
| exceptional items | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Exceptional | 1.4 | - | - | - | - | 1.4 |
| operating profit | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Segment result | 20.4 | 2.7 | 14.7 | 3.0 | (9.2) | 31.6 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Finance costs | | | | | | (6.2) |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Finance income | | | | | | 0.7 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Amortisation of | | | | | | (0.3) |
| equity component | | | | | | |
| of convertible | | | | | | |
| bond | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Unwinding of | | | | | | (0.1) |
| discount in | | | | | | |
| disposal | | | | | | |
| provisions | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Net return on | | | | | | - |
| defined benefit | | | | | | |
| pension asset | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Other financial | | | | | | 1.3 |
| gains | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Profit before | | | | | | 27.0 |
| taxation | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Taxation | | | | | | (7.5) |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Profit for the | | | | | | 19.5 |
| period from | | | | | | |
| continuing | | | | | | |
| operations | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| |
+-------------------------------------------------------------------------------------+
| | Six months to 30 June 2008 (reallocated) |
+--------------------+----------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Segment revenue | 110.1 | 17.7 | 102.2 | 27.0 | - | 257.0 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Operating pro?t | 19.8 | 4.1 | 12.5 | 3.5 | (11.0) | 28.9 |
| (loss) before | | | | | | |
| exceptional items | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Exceptional | 4.0 | - | - | - | (99.2) | (95.2) |
| operating profit | | | | | | |
| (loss) | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Segment result | 23.8 | 4.1 | 12.5 | 3.5 | (110.2) | (66.3) |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Finance costs | | | | | | (13.0) |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Finance income | | | | | | 1.7 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Amortisation of | | | | | | (1.8) |
| equity component | | | | | | |
| of convertible | | | | | | |
| bond | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Unwinding of | | | | | | (0.6) |
| discount in | | | | | | |
| disposal | | | | | | |
| provisions | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Net return on | | | | | | 3.6 |
| defined benefit | | | | | | |
| pension asset | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Other financial | | | | | | (0.2) |
| losses | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Loss before | | | | | | (76.6) |
| taxation | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Taxation | | | | | | 20.8 |
+--------------------+--------+----------+-----------+-------------+---------+--------+
| Loss for the | | | | | | (55.8) |
| period from | | | | | | |
| continuing | | | | | | |
| operations | | | | | | |
+--------------------+--------+----------+-----------+-------------+---------+--------+
2. Segment information - continuing operations (continued)
As detailed in note 1, the analysis of 2008 operating profit by segment has been
reallocated following the implementation of IFRS 8, 'Operating segments'.
Although there is no overall impact on operating profit, the 2008 comparatives
have been reallocated with costs from the previously reported gaming shared
service segment being allocated to operating divisions wherever possible. Costs
that cannot be directly allocated are combined within Central costs. The
allocated costs relate to those functions that directly support the segment, but
not those whose activities are shared.
A reconciliation from the segment profit before exceptional items reported in
2008 to the reallocated 2008 comparatives included above is set out below.
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| | Six months to 30 June 2008 | |
+-----------------+----------------------------------------------------------------+-------+
| | Mecca | Top | Grosvenor | Rank | Gaming | Central | Total |
| | Bingo | Rank | | Interactive | shared | costs | |
| | | Espana | Casinos | | services | | |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| | | | | | | | |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| Segment profit* | 21.6 | 4.1 | 14.5 | 5.3 | (11.2) | (5.4) | 28.9 |
| (reported) | | | | | | | |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| Reallocate | (1.8) | - | (2.0) | (1.8) | 11.2 | (5.6) | - |
| gaming shared | | | | | | | |
| services | | | | | | | |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
| Segment profit* | 19.8 | 4.1 | 12.5 | 3.5 | - | (11.0) | 28.9 |
| (reallocated) | | | | | | | |
+-----------------+--------+--------+-----------+-------------+----------+---------+-------+
* Before exceptional items
The chief operating decision-maker has been identified as the executive
committee. This committee reviews the Group's internal reporting in order to
assess performance and allocate resources. Management has determined the
operating segments based on these reports. The committee considers the business
from an organisational perspective. The reported segments are Mecca Bingo, Top
Rank Espana, Grosvenor Casinos and Rank Interactive. Central costs not allocated
to the segments have been presented as a separate column within the segment
information.
The executive committee assesses the performance of the operating segments based
on a measure of operating profit. This measurement basis excludes the effects of
exceptional items from the operating segments, such as gains or losses on the
disposal of assets, impairments of the carrying value of assets and associated
onerous lease provisions, costs of club closures, onerous lease provisions on
vacant properties, disposal of businesses and VAT refunds (net of gross profits
tax and associated costs) relating to previous periods.
2. Segment information - continuing operations (continued)
To increase transparency, the Group has decided to include an additional
voluntary disclosure analysing total costs by type and segment. A reconciliation
of total costs by type and segment was as follows:
+-----------------+--------+-----+-----+-----+-----+-------+-------+-----+-----+-----+-------+
| | Six months to 30 June 2009 |
+-----------------+--------------------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Employment | 28.2 | 7.5 | 42.0 | 3.8 | 5.6 | 87.1 |
| costs | | | | | | |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Taxes and | 16.3 | 0.3 | 21.6 | 0.2 | 0.3 | 38.7 |
| duties | | | | | | |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Direct costs | 11.4 | 1.5 | 5.0 | 7.3 | - | 25.2 |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Property costs | 12.0 | 1.5 | 8.2 | 0.4 | 0.5 | 22.6 |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Marketing | 11.4 | 0.4 | 3.1 | 7.8 | - | 22.7 |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Depreciation | 4.9 | 1.4 | 4.0 | 1.8 | 0.4 | 12.5 |
| and | | | | | | |
| amortisation | | | | | | |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Other | 13.1 | 2.8 | 8.1 | 0.6 | 2.4 | 27.0 |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| Total costs | 97.3 | 15.4 | 92.0 | 21.9 | 9.2 | 235.8 |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| | | | | | | |
+-----------------+--------+-----------+-----------+---------------+-----------+-------------+
| | Six months to 30 June 2008 |
+-----------------+--------------------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Employment | 26.1 | 6.6 | 38.6 | 3.9 | 7.4 | 82.6 |
| costs | | | | | | |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Taxes and | 10.2 | 0.3 | 21.7 | 0.4 | 0.2 | 32.8 |
| duties | | | | | | |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Direct costs | 10.7 | 1.3 | 3.7 | 8.2 | - | 23.9 |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Property costs | 14.0 | 1.3 | 7.6 | 0.4 | 0.5 | 23.8 |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Marketing | 12.2 | 0.4 | 2.5 | 8.1 | - | 23.2 |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Depreciation | 5.2 | 1.2 | 4.4 | 1.8 | 0.5 | 13.1 |
| and | | | | | | |
| amortisation | | | | | | |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Other | 11.9 | 2.5 | 11.2 | 0.7 | 2.4 | 28.7 |
+-----------------+--------------+-----------+-------------+-------------+-----------+-------+
| Total costs | 90.3 | 13.6 | 89.7 | 23.5 | 11.0 | 228.1 |
+-----------------+--------+-----+-----+-----+-----+-------+-------+-----+-----+-----+-------+
A reconciliation of total assets by segment was as follows:
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| | At 30 June 2009 |
+-----------------+-----------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Total segment | 105.7 | 51.9 | 172.0 | 64.8 | 4.5 | 398.9 |
| assets | | | | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Unallocated | | | | | | 82.6 |
| assets | | | | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Total assets | | | | | | 481.5 |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| |
+-----------------------------------------------------------------------------------+
| | At 31 December 2008 |
+-----------------+-----------------------------------------------------------------+
| | Mecca | Top Rank | Grosvenor | Rank | Central | Total |
| | Bingo | Espana | | Interactive | costs | |
| | | | Casinos | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Total segment | 101.4 | 59.8 | 170.7 | 64.8 | 6.1 | 402.8 |
| assets | | | | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Unallocated | | | | | | 170.1 |
| assets | | | | | | |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
| Total assets | | | | | | 572.9 |
+-----------------+--------+-----------+-----------+-------------+---------+--------+
Unallocated assets comprise deferred tax, current tax, derivative financial
instruments and cash and cash equivalents.
3. Exceptional items
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Exceptional items relating to continuing | | |
| operations | | |
+---------------------------------------------------+-----------+-----------+
| Loss on transfer of defined benefit pension asset | - | (99.2) |
| (see below) | | |
+---------------------------------------------------+-----------+-----------+
| Net profit on disposal of property less | 1.4 | 4.0 |
| associated closure costs | | |
+---------------------------------------------------+-----------+-----------+
| Exceptional items before taxation relating to | 1.4 | (95.2) |
| continuing operations | | |
+---------------------------------------------------+-----------+-----------+
| Taxation | - | 27.8 |
+---------------------------------------------------+-----------+-----------+
| Exceptional items relating to continuing | 1.4 | (67.4) |
| operations | | |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Exceptional items relating to discontinued | | |
| operations | | |
+---------------------------------------------------+-----------+-----------+
| Hard Rock | - | 5.0 |
+---------------------------------------------------+-----------+-----------+
| Exceptional items relating to discontinued | - | 5.0 |
| operations | | |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Total exceptional items | 1.4 | (62.4) |
+---------------------------------------------------+-----------+-----------+
Continuing operations
During the period, the Group disposed of one previously closed Mecca Bingo
property at Welling. The resulting profit on disposal of the property, net of
costs, was GBP1.4m (2008 - GBP4.0m).
On 30 June 2008, the Group completed the transfer of the assets and liabilities
of the Rank Pension Plan, a defined benefit scheme, to Rothesay Life (an FSA
regulated insurance company and wholly owned subsidiary of Goldman Sachs).
Details of the exceptional loss which arose on the transfer are disclosed in the
table below:
+---------------------------------------------------+-----------+-----------+
| | | 6 months |
| | | to |
+---------------------------------------------------+-----------+-----------+
| | | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | | GBPm |
+---------------------------------------------------+-----------+-----------+
| Proceeds | | 29.0 |
+---------------------------------------------------+-----------+-----------+
| Costs associated with transfer | | (1.0) |
+---------------------------------------------------+-----------+-----------+
| Curtailment gain on closure of scheme to future | | 10.5 |
| contributions | | |
+---------------------------------------------------+-----------+-----------+
| Carrying value of defined benefit pension asset | | (137.7) |
| at transfer | | |
+---------------------------------------------------+-----------+-----------+
| Exceptional loss before taxation | | (99.2) |
+---------------------------------------------------+-----------+-----------+
| Exceptional taxation arising on transfer | | 27.8 |
+---------------------------------------------------+-----------+-----------+
| Total exceptional loss arising on transfer after | | (71.4) |
| taxation | | |
+---------------------------------------------------+-----------+-----------+
Discontinued operations
In the first half of 2008, the Group released GBP5.0m from the disposal
provision following the expiration of warranties provided in the Hard Rock sale
agreement.
4. Taxation
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year.
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Current income tax on continuing operations | | |
+---------------------------------------------------+-----------+-----------+
| Current tax - overseas | (1.2) | (2.5) |
+---------------------------------------------------+-----------+-----------+
| Current tax on exceptional items | - | (7.8) |
+---------------------------------------------------+-----------+-----------+
| Amounts over provided in previous year | 1.2 | - |
+---------------------------------------------------+-----------+-----------+
| Total current tax | - | (10.3) |
+---------------------------------------------------+-----------+-----------+
| Deferred tax on continuing operations | | |
+---------------------------------------------------+-----------+-----------+
| Deferred tax - UK | (7.5) | (4.5) |
+---------------------------------------------------+-----------+-----------+
| Deferred tax on exceptional items | - | 35.6 |
+---------------------------------------------------+-----------+-----------+
| Total deferred tax | (7.5) | 31.1 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Tax (charge) credit in the income statement on | (7.5) | 20.8 |
| continuing operations | | |
+---------------------------------------------------+-----------+-----------+
In 2008, tax on exceptional items within continuing operations includes a tax
credit of GBP27.8m relating to the transfer of the defined benefit pension
asset.
The tax effect of items within other comprehensive income was as follows:
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Deferred tax (charge) credit on exchange | (7.4) | 2.3 |
| movements offset in reserves | | |
+---------------------------------------------------+-----------+-----------+
| Deferred tax credit on actuarial movement on | - | 2.2 |
| defined benefit pension scheme | | |
+---------------------------------------------------+-----------+-----------+
| Total tax (charge) credit in reserves | (7.4) | 4.5 |
+---------------------------------------------------+-----------+-----------+
5. Dividends
The directors have not proposed an interim dividend in respect of the six months
ended 30 June 2009 (2008 - Nil).
6. Earnings (loss) per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period, excluding ordinary shares purchased by the
Company and held as treasury shares.
+---------------------------------------+-------------+-------------+-----------+
| | 6 months to 30.06.09 |
+---------------------------------------+---------------------------------------+
| | Before | | |
+---------------------------------------+-------------+-------------+-----------+
| | exceptional | Exceptional | |
+---------------------------------------+-------------+-------------+-----------+
| | items | items | Total |
+---------------------------------------+-------------+-------------+-----------+
| Profit attributable to equity | | | |
| shareholders | | | |
+---------------------------------------+-------------+-------------+-----------+
| Continuing operations | GBP18.1m | GBP1.4m | GBP19.5m |
+---------------------------------------+-------------+-------------+-----------+
| Discontinued operations | - | - | - |
+---------------------------------------+-------------+-------------+-----------+
| Total | GBP18.1m | GBP1.4m | GBP19.5m |
+---------------------------------------+-------------+-------------+-----------+
| | | | |
+---------------------------------------+-------------+-------------+-----------+
| Weighted average number of ordinary | 389.5m | 389.5m | 389.5m |
| shares in issue | | | |
+---------------------------------------+-------------+-------------+-----------+
| | | | |
+---------------------------------------+-------------+-------------+-----------+
| Basic earnings per share | | | |
+---------------------------------------+-------------+-------------+-----------+
| Continuing operations | 4.6p | 0.4p | 5.0p |
+---------------------------------------+-------------+-------------+-----------+
| Discontinued operations | - | - | - |
+---------------------------------------+-------------+-------------+-----------+
| Total | 4.6p | 0.4p | 5.0p |
+---------------------------------------+-------------+-------------+-----------+
+---------------------------------------+-------------+-------------+------------+
| | 6 months to 30.06.08 |
+---------------------------------------+----------------------------------------+
| | Before | | |
+---------------------------------------+-------------+-------------+------------+
| | exceptional | Exceptional | |
+---------------------------------------+-------------+-------------+------------+
| | items | items | Total |
+---------------------------------------+-------------+-------------+------------+
| Profit (loss) attributable to equity | | | |
| shareholders | | | |
+---------------------------------------+-------------+-------------+------------+
| Continuing operations | GBP11.6m | GBP(67.4)m | GBP(55.8)m |
+---------------------------------------+-------------+-------------+------------+
| Discontinued operations | - | GBP5.0m | GBP5.0m |
+---------------------------------------+-------------+-------------+------------+
| Total | GBP11.6m | GBP(62.4)m | GBP(50.8)m |
+---------------------------------------+-------------+-------------+------------+
| | | | |
+---------------------------------------+-------------+-------------+------------+
| Weighted average number of ordinary | 389.5m | 389.5m | 389.5m |
| shares in issue | | | |
+---------------------------------------+-------------+-------------+------------+
| | | | |
+---------------------------------------+-------------+-------------+------------+
| Basic earnings (loss) per share | | | |
+---------------------------------------+-------------+-------------+------------+
| Continuing operations | 3.0p | (17.3)p | (14.3)p |
+---------------------------------------+-------------+-------------+------------+
| Discontinued operations | - | 1.3p | 1.3p |
+---------------------------------------+-------------+-------------+------------+
| Total | 3.0p | (16.0)p | (13.0)p |
+---------------------------------------+-------------+-------------+------------+
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue to assume conversion of all dilutive
potential ordinary shares. Following the redemption of the convertible debt in
2009, share options are the only category of dilutive potential ordinary shares.
For share options, a calculation is made to determine the number of shares that
could have been acquired at fair value (determined as the average annual market
share price of the Company's shares) based on the monetary value of the
subscription rights attached to outstanding share options. The number of shares
calculated is compared with the number of shares that would have been issued
assuming exercise of the share options. The convertible debt was not dilutive in
2008. 6. Earnings (loss) per share (continued)
There is no difference in the profit (loss) or the weighted average number of
shares used to determine diluted earnings per share from that used to determine
basic earnings per share above. Accordingly there is no difference between
diluted earnings per share and basic earnings per share disclosed above in
either period.
(c) Adjusted earnings per share
Adjusted earnings is calculated by adjusting profit attributable to equity
shareholders to exclude discontinued operations, exceptional items, other
financial gains or losses, the net return on the defined benefit pension asset,
unwinding of the discount in disposal provisions, amortisation of the equity
component of the convertible bond and the related tax effects. Adjusted earnings
is one of the business performance measures used internally by management to
manage the operations of the business. Management believes that adjusted
earnings assists in providing a view of the underlying performance of the
business.
Adjusted net earnings attributable to equity shareholders is derived as follows:
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Profit (loss) attributable to equity shareholders | 19.5 | (50.8) |
| | | |
+---------------------------------------------------+-----------+-----------+
| Discontinued operations | - | (5.0) |
+---------------------------------------------------+-----------+-----------+
| Exceptional items after tax on continuing | (1.4) | 67.4 |
| operations | | |
+---------------------------------------------------+-----------+-----------+
| Amortisation of equity component of convertible | 0.3 | 1.8 |
| bond | | |
+---------------------------------------------------+-----------+-----------+
| Unwinding of discount in disposal provisions | 0.1 | 0.6 |
+---------------------------------------------------+-----------+-----------+
| Net return on defined benefit pension asset | - | (3.6) |
+---------------------------------------------------+-----------+-----------+
| Other financial (gains) losses | (1.3) | 0.2 |
+---------------------------------------------------+-----------+-----------+
| Taxation on adjusted items | 0.3 | 1.0 |
+---------------------------------------------------+-----------+-----------+
| Adjusted net earnings attributable to equity | 17.5 | 11.6 |
| shareholders | | |
+---------------------------------------------------+-----------+-----------+
| Weighted average number of ordinary shares in | 389.5m | 389.5m |
| issue | | |
+---------------------------------------------------+-----------+-----------+
| Adjusted earnings per share | 4.5p | 3.0p |
+---------------------------------------------------+-----------+-----------+
7. Provisions
+----------------------------------------+-----------+------------+------------+
| | Onerous | Disposal | |
+----------------------------------------+-----------+------------+------------+
| | leases | provisions | Total |
+----------------------------------------+-----------+------------+------------+
| | GBPm | GBPm | GBPm |
+----------------------------------------+-----------+------------+------------+
| At 1 January 2009 | 34.1 | 22.2 | 56.3 |
+----------------------------------------+-----------+------------+------------+
| Currency translation adjustment | - | (0.6) | (0.6) |
+----------------------------------------+-----------+------------+------------+
| Utilised in year | (1.6) | (3.2) | (4.8) |
+----------------------------------------+-----------+------------+------------+
| Unwinding of discount | 0.6 | 0.1 | 0.7 |
+----------------------------------------+-----------+------------+------------+
| At 30 June 2009 | 33.1 | 18.5 | 51.6 |
+----------------------------------------+-----------+------------+------------+
| Current | 3.3 | 12.9 | 16.2 |
+----------------------------------------+-----------+------------+------------+
| Non-current | 29.8 | 5.6 | 35.4 |
+----------------------------------------+-----------+------------+------------+
| Total | 33.1 | 18.5 | 51.6 |
+----------------------------------------+-----------+------------+------------+
8. Loan capital and borrowings to net debt reconciliation
Under IFRS, accrued interest and unamortised facility fees are classified as
loan capital and borrowings. A reconciliation of loan capital and borrowings
disclosed in the balance sheet to the Group's net debt position is provided
below:
+---------------------------------------------------+-----------+-----------+
| | At | At |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 31.12.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Total loan capital and borrowings | (260.7) | (339.8) |
+---------------------------------------------------+-----------+-----------+
| Less: accrued interest | 0.6 | 4.0 |
+---------------------------------------------------+-----------+-----------+
| Less: unamortised facility fees | (2.0) | (2.4) |
+---------------------------------------------------+-----------+-----------+
| | (262.1) | (338.2) |
+---------------------------------------------------+-----------+-----------+
| Add: Cash and cash equivalents | 54.0 | 111.7 |
+---------------------------------------------------+-----------+-----------+
| Net debt | (208.1) | (226.5) |
+---------------------------------------------------+-----------+-----------+
In January 2009, the Group repaid GBP158.2m of convertible bonds at par from
cash and existing bank facilities, without recourse to the capital markets.
9. Cash generated from operations
Reconciliation of operating profit to cash generated from operations:
+---------------------------------------------------+-----------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+-----------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+-----------+-----------+
| Continuing operations | | |
+---------------------------------------------------+-----------+-----------+
| Operating profit (loss) | 31.6 | (66.3) |
+---------------------------------------------------+-----------+-----------+
| Exceptional items | (1.4) | 95.2 |
+---------------------------------------------------+-----------+-----------+
| Operating profit before exceptional items | 30.2 | 28.9 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Depreciation and amortisation | 12.5 | 13.1 |
+---------------------------------------------------+-----------+-----------+
| Increase in working capital | (1.6) | (1.6) |
+---------------------------------------------------+-----------+-----------+
| Other | 0.2 | (0.6) |
+---------------------------------------------------+-----------+-----------+
| | 41.3 | 39.8 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Net cash (payment) receipt in respect of | (12.5) | 2.0 |
| provisions and exceptional items | | |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| Cash generated from operations | 28.8 | 41.8 |
+---------------------------------------------------+-----------+-----------+
10. Acquisitions
+---------------------------------------------------+---------------------+-----------+
| | 6 months | 6 months |
| | to | to |
+---------------------------------------------------+---------------------+-----------+
| | 30.06.09 | 30.06.08 |
+---------------------------------------------------+---------------------+-----------+
| | GBPm | GBPm |
+---------------------------------------------------+---------------------+-----------+
| Purchase consideration | (0.7) | - |
+---------------------------------------------------+---------------------+-----------+
| Less: deferred consideration | 0.4 | - |
+---------------------------------------------------+---------------------+-----------+
| Less: cash and cash equivalents acquired | 0.1 | - |
+---------------------------------------------------+---------------------+-----------+
| Acquisition of casino | (0.2) | - |
+---------------------------------------------------+---------------------+-----------+
| Deferred consideration paid in respect of | (0.1) | (3.2) |
| acquisitions in prior years | | |
+---------------------------------------------------+---------------------+-----------+
| Acquisition of businesses including deferred | (0.3) | (3.2) |
| consideration | | |
+---------------------------------------------------+---------------------+-----------+
On 23 April 2009, the Group completed the acquisition of the casino at the Ricoh
Arena in Coventry from Isle of Capri for a purchase consideration of GBP0.7m. No
goodwill arose on the acquisition.
11. Contingent assets
The Group has lodged a claim for the repayment of VAT alleging that the tax
treatment of gaming machines was inconsistently applied and therefore breached
the European Union's principle of fiscal neutrality. In August 2008, the VAT &
Duties Tribunal ruled that from November 2003 at least, the VAT treatment of
certain types of gaming machine was inconsistent with the European Union's
principle of fiscal neutrality. This is an interim decision and a second stage
is due to be heard at the VAT & Duties Tribunal in October 2009. This interim
ruling was appealed by HM Revenue and Customs ('HMRC') but the High Court ruled
in June 2009 in favour of Rank. HMRC have appealed the High Court decision and
final resolution may take a number of years. The claim may be worth as much as
GBP26m plus interest, depending on certain factors still to be determined.
The Group has lodged a number of claims following the House of Lords decision in
the Conde Nast/Fleming cases on the applicability of the three year cap that
HMRC introduced to limit VAT reclaims and whether the transitional provisions
were acceptable. These claims, which had to be submitted by March 2009, are
based on management's best estimates from the information available and the
Group expects the valuation of each claim to be reviewed by HMRC before
settlement. In a number of cases, the Conde Nast claims are subject to
successful outcomes of other claims for the repayment of VAT (including the
claim in the preceding paragraph), whose outcome is not certain.
The Group has not recognised any gain in its financial information at 30 June
2009 in respect of the above items.
12. Contingent liabilities
On 10 November 2008, the Group received GBP59.1m in overpaid VAT from HMRC,
following the VAT and Duties Tribunal's ruling in May 2008 that the application
of VAT to some games of interval bingo contravened the European Union's
principle of fiscal neutrality. HMRC appealed the ruling of the Tribunal at a
High Court hearing in March 2009 but the judgement found in favour of Rank. The
benefit from the ruling on interval bingo continued to be recognised in the
accounts for the first 17 weeks of 2009, covering the period to 26 April 2009
when bingo became exempt from VAT. HMRC lodged an appeal to the Court of Appeal
on 6 July 2009 but no date has been set for the hearing. In the event of an
adverse ruling, Rank would be required to repay the GBP59.1m plus amounts not
paid over for the period from July 2008 to 26 April 2009 plus interest.
The Group is facing legal proceedings in the US brought by Paramount Home
Entertainment. The case alleges that Deluxe Media (a discontinued business)
breached a "most favoured nation" pricing obligation contained in a duplication
agreement guaranteed by Rank. The claim is being vigorously defended as Rank
does not accept any breach of obligation and the case is now expected to go to
court in September 2009. Provision has been made for the legal costs associated
with the claim but no provision has been made for the damages claimed, which are
a maximum of US$30.2m including pre-trial interest.
Responsibility statement
The interim management report complies with the Disclosure and Transparency
Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of
the requirement to produce a half-yearly financial report. The interim report is
the responsibility of, and has been approved by, the directors. The directors
confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in accordance with
IAS 34;
- the interim management report includes a fair review of the important events
during the first six months and description of the principal risks and
uncertainties for the remaining six months of the year, as required by DTR
4.2.7R; and
- the interim management report includes a fair review of disclosure of related
party transactions and changes therein, as required by DTR 4.2.8R.
The directors of The Rank Group Plc are unchanged from those listed on pages 32
to 33 of The Rank Group Plc Annual Report and Financial Statements for the year
ended 31 December 2008.
Independent review report to The Rank Group plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2009, which comprises the income statement, balance sheet, statement of changes
in equity, statement of comprehensive income, cash flow statement and related
notes. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the Company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2009 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
30 July 2009
1
Embankment Place, London, WC2N 6RH
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR CKKKKABKDFON
|