TIDMRNK
RNS Number : 5565W
Rank Group PLC
20 August 2015
20 August 2015
The Rank Group Plc ("Rank" or the "Group")
Full-year results for the 12 months ended 30 June 2015
Strong progress made in 2014/15
Financial highlights in the 12 months ended 30 June 2015
2014/15 2013/14 Change
---------------------------------- ------------ ------------- --------
Group revenue GBP738.3m GBP707.7m 4%
---------------------------------- ------------ ------------- --------
Statutory revenue GBP700.7m GBP678.5m 3%
---------------------------------- ------------ ------------- --------
Group EBITDA before exceptional
items GBP126.3m GBP116.0m 9%
---------------------------------- ------------ ------------- --------
Group operating profit before
exceptional items GBP84.0m GBP72.4m 16%
---------------------------------- ------------ ------------- --------
Adjusted profit before tax GBP74.1m GBP62.5m 19%
---------------------------------- ------------ ------------- --------
Adjusted earnings per share 14.6p 12.4p 18%
---------------------------------- ------------ ------------- --------
Net debt GBP(52.9)m GBP(137.0)m 61%
---------------------------------- ------------ ------------- --------
Dividend per share 5.60p 4.50p 24%
---------------------------------- ------------ ------------- --------
Key highlights
-- Operating profit up 16% with all brands in growth
-- Group revenue up 4%, with like-for-like revenue for Grosvenor
Casinos and Mecca up 8% and 2% respectively
-- Strong digital growth with revenue up 21% and operating
profit up 14% despite the introduction of Remote Gaming Duty
('RGD') from 1 December 2014
-- Migration to new Bede digital platform underway with go-live planned for Q3 2015/16
-- Robust balance sheet with cash flow from operations up 44% and net debt reduced by 61%
-- Significant progress made towards our five strategic objectives
-- Strong dividend growth with dividend per share of 5.60p, up 24% year-on-year
-- Adjusted EPS up 18%
Henry Birch, Chief Executive of The Rank Group Plc said:
"I am delighted to be announcing a significant improvement in
our performance with a strong set of results and profit growth
across all our brands. Our 16% profit growth has translated into
18% adjusted EPS growth and a 24% increase in our annual dividend
which is reflected in a strong balance sheet and lower debt.
Alongside our strong operating performance, we have made good
progress on our strategic objectives that we outlined 12 months
ago, and we have a clear strategy for delivering sustainable
profitable growth across all our brands.
We are particularly pleased that the strong digital growth we
reported at our interims continues and we remain on track to
implement a new digital platform in early 2016. Our market-leading
Grosvenor Casinos business continues to deliver consistent growth
with like-for-like revenue up 8% and operating profit up 17%. Mecca
has had a significantly improved year with like-for-like revenues
up 2% and operating profit up 16%, driven by good digital growth,
stable like-for-like revenues in our venues and lower operating
costs benefiting from a reduction in bingo duty. And after several
years of tough trading conditions, Enracha, our Spanish bingo
business, has reported euro profits up 240%.
We firmly believe that alongside growth in digital gambling,
there will continue to be sustained demand for venue-based gambling
in bingo clubs and casinos which offer an experience that cannot be
digitised. Moreover, we believe that consumer trends will
increasingly favour companies that can offer services across
digital and retail channels and successfully offer a joined-up
experience to our customers.
Trading in the short seven-week period to 16 August 2015 has
continued in line with the trends seen in 2014/15 and is in line
with management's expectations.
Following our strong performance in the year, the board is
pleased to recommend a significant increase to the dividend,
delivering strong returns to shareholders and reflecting our
continued confidence for the future."
Ends
Definition of terms:
-- Group revenue is before adjustment for free bets, promotions and customer bonuses;
-- Group EBITDA is Group operating profit before exceptional
items, depreciation and amortisation;
-- Adjusted profit before tax is profit from continuing
operations before taxation adjusted to exclude exceptional items,
the unwinding of discount in disposal provisions and other
financial gains or losses;
-- Adjusted earnings per share is calculated by adjusting profit
attributable to equity shareholders to exclude discontinued
operations, exceptional items, other financial gains or losses,
unwinding of the discount in disposal provisions and the related
tax effects;
-- "2014/15" refers to the audited 12-month period to 30 June
2015 and "2013/14" refers to the audited 12-month period to 30 June
2014; and
-- Like-for-like excludes the effect of club openings, closures,
relocations, and discontinued operations.
Enquiries
The Rank Group Plc
Sarah Powell, investor relations Tel: 01628 504303
FTI Consulting
Ed Bridges Tel: 020 3727 1067
Alex Beagley Tel: 020 3727 1045
Photographs available from www.rank.com
Analyst meeting and webcast details:
Thursday 20 August 2015
There will be an analyst meeting at 9.30am, admittance to which
is by invitation only. There will also be a simultaneous webcast of
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 Financial Conduct
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.
Chief executive's review
In August 2014 we set out our strategy to generate long-term
sustainable growth across the Group by creating a compelling
multi-channel offer; building a strong digital capability;
investing in our brands and marketing; continuing to develop our
venues; and harnessing technology to improve our customer
experience and drive operating efficiency.
We firmly believe that alongside growth in digital gambling,
there will continue to be sustained demand for venue-based gambling
in bingo clubs and casinos which offer an experience that cannot be
digitised. Moreover, we believe that consumer trends will
increasingly favour companies that can offer services across
digital and retail channels and successfully offer a joined-up
experience.
We are pleased that in the last 12 months, alongside delivering
a very strong operating performance across our businesses, we have
made significant progress towards these strategic objectives.
Summary of financial results
The Group achieved 4% growth in revenue; with 2% growth in
venues and 21% in digital (online and mobile). Like-for-like
revenue for the Group grew by 5%.
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
Group operating profit increased by 16% with the benefit from
increased revenue and lower bingo duty being partly offset by the
introduction of Remote Gaming Duty ("RGD"). On a constant tax basis
(i.e. removing impact of RGD and the net benefit from the reduction
in bingo duty) Group profits were up 10%.
GBPm Revenue* Operating profit**
-------------------- -------------------- ----------------------
2014/15 2013/14 2014/15 2013/14
-------------------- --------- --------- ---------- ----------
Grosvenor Casinos 423.4 391.2 66.5 56.8
Venues 401.1 377.7 63.4 57.7
Digital 22.3 13.5 3.1 (0.9)
-------------------- --------- --------- ---------- ----------
Mecca 289.6 288.2 43.0 37.0
Venues 224.4 229.3 28.9 21.1
Digital 65.2 58.9 14.1 15.9
-------------------- --------- --------- ---------- ----------
Enracha 25.3 28.3 2.6 0.8
Venues 25.3 28.3 3.1 1.2
Digital - - (0.5) (0.4)
-------------------- --------- --------- ---------- ----------
Central costs (28.1) (22.2)
-------------------- --------- --------- ---------- ----------
Total 738.3 707.7 84.0 72.4
-------------------- --------- --------- ---------- ----------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items
Revenue from Grosvenor Casinos increased by 8% to GBP423.4m,
driven by an improved London performance in H2 and a 65% increase
in digital revenue. Operating profit rose by 17% to GBP66.5m.
Mecca's revenue was flat year-on-year as good growth in digital
was offset by lower venues revenue following the closure of six
underperforming venues. Like-for-like revenue for Mecca venues
however was flat in the year following two years of like-for-like
revenue declines. Despite the introduction of RGD from 1 December
2014 operating profit rose by 16% to GBP43.0m driven by the
reduction in bingo duty and other operating costs.
Enracha's euro like-for-like revenue increased by 9% driven by a
7% increase in like-for-like admissions. Sterling operating profit
increased by 225%, following the closure or disposal of two loss
making venues in the last two financial years.
Central costs increased by 27% to GBP28.1m due to higher IT,
management incentivisation costs, employee bonus and redundancy
costs.
On a cash basis, Rank invested GBP31.9m of capital across the
Group during the year.
The Group's adjusted net financing charge of GBP9.9m was in line
with the prior period.
Adjusted earnings per share increased by 18% to 14.6p.
Exceptional items relating to continuing operations were a
profit of GBP2.1m in the year and further detail can be found in
note 3.
Dividend
The Board targets a progressive and sustainable dividend. This
dividend policy reflects the strong cash flow characteristics and
long-term earnings potential of the Group, whilst allowing it to
retain sufficient capital to fund on-going operating requirements,
investment and balance sheet management. The board is recommending
a final dividend of 4.00 pence per share to be paid on 21 October
2015 to shareholders on the register at 11 September 2015. This
will take the full year dividend to 5.60 pence per share, a 24%
increase on last year. The Group's dividend cover has as a result
reduced to 2.6 times from 2.8 times in the prior year.
Operating responsibly
The Rank Board is fully committed to upholding the licensing
objectives, as set out in the Gambling Act 2005, with the aim of
ensuring that all our customers enjoy our products responsibly.
Following two specific cases, the UK Gambling Commission brought to
our attention deficiencies in the application of our policies and
procedures relating to anti-money laundering and responsible
gambling. We are taking remedial actions and have commissioned an
externally-led review of our responsible gambling and anti-money
laundering controls to provide us with further assurance that we
are taking all appropriate steps in these areas. We will continue
to aim for the highest standards, in keeping with our commitment to
upholding the licensing objectives.
National living wage
The introduction of the national living wage will impact the
last quarter of 2015/16. In common with other leisure operators,
the Group has a number of employees who will benefit from its
introduction. This will result in additional operating costs but we
believe a majority of these can be mitigated over time.
Taxation
From 30 June 2014, bingo duty was reduced from 20% to 10% and
resulted in a GBP11.3m tax reduction in the year. This duty cut
funded a reduction in prices to our customers, the recommencement
of a venues refurbishment programme and an increase in Mecca's
capital investments in product and technology.
From 1 December 2014, RGD at 15% was applied to all online
gambling revenues generated by customers in the UK. The cost to the
Group in the year was GBP6.6m.
VAT claims
Following the Court of Appeal decision regarding claims for
overpaid VAT on certain types of amusement machines, Rank applied
for leave to appeal to The Supreme Court. Rank was granted
permission and the appeal was heard on 21 April 2015. On 8 July
2015, The Supreme Court issued its decision in favour of HMRC,
which concludes this line of litigation. Rank repaid GBP25.2m of
the GBP30.7m received in connection with these claims to HMRC in
May 2014 and has fully provided for the remainder. As a
consequence, the decision has no impact on Rank's financial
performance or balance sheet strength in 2014/15 or future
periods.
Listing Rules
On 7 July 2014, the Company made a formal submission to the UK
Listing Authority ("UKLA") requesting it to modify LR 6.1.19 R, so
that it could continue to be a premium listed company with a
slightly lower free float percentage than 25%. On 27 August 2014,
the UKLA formally agreed to modify LR 6.1.19 R to accept a free
float of 23%.
On 18 February 2015, GuoLine Overseas Limited ("GuoLine"), a
subsidiary of Hong Leong Company (Malaysia) Berhad ("Hong Leong"),
sold 50 million ordinary shares in Rank, thereby reducing Hong
Leong's interest in Rank's shares to approximately 56.09%. As a
result the Group now has a free float of greater than 25% and is no
longer in breach of LR 6.1.19 R.
Board changes
On 1 June 2015, Chris Bell joined Rank's board as the senior
independent director and also serves on Rank's audit committee.
Chris brings with him extensive experience of the gambling industry
and considerable corporate experience and is an excellent addition
to the board.
On 1 September 2015, Susan Hooper will join our board and she
will seek election by shareholders at our forthcoming annual
general meeting on 15 October 2015. Details of her background and
experience can be found in our notice of annual general meeting.
Shaa Wasmund will not be seeking re-election at our annual general
meeting and we would like to take this opportunity to thank her for
her contribution to the board.
Management team changes
On 23 September 2014, Colin Cole-Johnson joined Rank as group
director of digital and cross-channel services. Colin has over 15
years international digital gaming experience and is responsible
for the integration and delivery of Rank's multi-channel offer.
During 2014/15, Phil Urban left the Group after serving six
years as managing director of Grosvenor Casinos and has been
succeeded by Mark Jones (formerly managing director of Mecca).
On 5 January 2015, Martin Pugh joined Rank as managing director
of Mecca. Martin has a wealth of experience in marketing, gambling
and multi-site leisure, having previously run Virgin Active UK and
Camelot's UK business.
On 9 September 2015, Paul Richardson will join the Group's
management team as group director of strategy and corporate
development. Paul is a former investment banker and corporate
lawyer, who has worked both in an advisory and management capacity
in the gaming sector. Most recently he was a senior vice president
of international development at Galaxy Entertainment Group, one of
the largest casino operators in Macau.
Management incentivisation
On 22 April 2015, a general meeting was held where two
resolutions were put to the Company's shareholders for
consideration and approval. The first was regarding proposed
amendments to the Group's Long-Term Incentive Plan for its
employees and executive directors. The second resolution was
regarding proposed amendments to the director's remuneration
policy. Both resolutions proposed were approved by the Company's
shareholders and further detail can be found on the Company's
corporate website at www.rank.com/general_meeting.
Current trading and outlook
Trading in the short seven-week period to 16 August 2015 has
continued in line with the trends seen in 2014/15 and is in line
with management's expectations.
Rank remains in a strong financial position, possesses market
leading brands and has a clear strategy for long-term growth.
Our strategy
Rank's aim is to be the UK's leading multi-channel gaming
operator. In order to achieve this, we are focussed on building
engaging brands with the ability to deliver them via whichever
channels customers prefer - whether venues, online or mobile. We
will focus in particular on building engagement with customers
across multiple channels, where our analysis indicates we are
likely to generate more durable and valuable customer
relationships. Our strategy is focussed on five inter-related
initiatives to drive long-term sustainable growth in profits.
1: Creating a compelling multi-channel offer
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
In the markets where we operate, Rank is one of the few gaming
companies in a position to offer customers a genuine multi-channel
gaming offer. We have a number of key assets, including a portfolio
of more than 150 venues, our membership-based model with
approximately three million members, our loyalty and rewards
programmes and the high levels of engagement that our team members
enjoy with customers.
We will build on this position by investing in a range of
improvements designed to make it simpler, more convenient and more
rewarding for customers to engage with us across multiple channels.
These improvements include the development of a single customer
account, a single customer wallet and a single customer rewards
programme, as well as a number of other content and
technology-related initiatives. These are large and complex
programmes which will take time to deliver, but which we believe
will give Rank an important competitive advantage.
Activity in 2014/15
-- Grosvenor Casinos services app: A new app, My Casino, was
launched in Q4 2014/15. The app provides customers with information
on all our UK casino venues from location and directions to virtual
tours of every casino.
-- Tri-channel launch of content: Grosvenor Casinos had its
first simultaneous tri-channel game launch. Prowling Panther was
launched across retail, mobile and desktop supported by a
cross-channel promotion. Revenues for each channel exceeded typical
levels.
-- Progress towards a new digital platform: In January 2015, we
announced that we would be working with Bede Gaming to develop a
new platform for our digital business. As part of the selection
process, we conducted an extensive technical and business
evaluation of a number of platform providers and Bede was chosen on
the basis of the quality of its product, its open architecture
allowing a linking of systems and multiple sources of games content
and its willingness to enter into a collaborative partnership which
gives Rank the ability to own its technology in the future should
it choose to do so. A more modern and functional digital gaming
platform will drive additional digital revenue and will be a key
component in creating a multi-channel offer.
-- Bring Your Own Device ('BYOD') trial in Mecca: Four venues
took part in offering customers Mecca Max content on both customer
and club Android devices. The trial has provided Mecca with clarity
over where investment and further development is required prior to
a programme being rolled out across the remaining retail
estate.
-- Grosvenor Casinos loyalty scheme: During the year Grosvenor
Casinos' loyalty scheme, Play Points, was rolled out across a
further 14 venues taking the total venues participating to 46. This
was in addition to the previous year's roll out across its digital
channel to create the Group's first cross-channel rewards
programme.
-- Grosvenor Casinos Black & Gold cards: During 2014/15,
both card schemes were launched targeting higher spending
customers. The scheme provides improved customer benefits and aims
to improve customer spend, retention and visit frequency.
Priorities for 2015/16
-- Digital platform migration: Preparation for the migration of
meccabingo.com and grosvenorcasinos.com websites is underway and
the Group is targeting a full migration to Bede Gaming's platform
by Q3 FY 2015/16.
-- Mecca services app: During the 2015/16 year we plan to launch
a Mecca version of the My Casino app to bring the same useful tool
to our Mecca customers.
-- Progress towards single account and single wallet: Work will
start on upgrading and integrating Grosvenor Casinos and Mecca
retail management systems.
2: Building digital capability
Rank has built strong positions in venue-based gaming which we
seek to replicate across our digital channels (online and mobile).
In 2014/15, our digital operations generated 12% of Group revenue
whereas digital channels now represent around 30% of Great
Britain's gambling market (excluding National Lottery), presenting
a significant growth opportunity. We recognise that we need to
enhance our capability in this area if we are to meet the changing
needs of our customers and to capture a greater share of the
digital market.
Activity in 2014/15
-- Bede appointment: Please see 'Creating a compelling multi-channel offer' section above.
-- New Mecca website with a single responsive and adaptive front
end for desk top, tablet and mobile devices: Through Mecca's
insight into customer behaviour and preferences, Mecca was able to
design, create and launch one of the UK's first responsive,
adaptive and customisable gaming websites consistent across all
digital channels.
-- Continued focus on digital customer acquisition conversion
and retention: This contributed to digital revenue increasing by
21% and now accounts for 12% of Group revenue.
-- Single teams across marketing, mobile, design and user
experience: Following the appointment of Colin Cole-Johnson as
group director of digital and cross-channel services, a shared
service digital team was created across our brands to develop
centres of expertise and remove unnecessary duplication.
-- Expansion of talent: In addition to building a stronger
cross-brand team the Group has hired a number of individuals with
specific functional experience who have been involved in growing
and transforming digital gaming businesses.
-- Decision to move Enracha to Bede: As with Mecca and Grosvenor
Casinos, it is important that Enracha's online operations are
hosted on a suitable platform and cost efficiencies are realised.
Therefore during the year the decision was also made to migrate
Enracha's digital operations to Bede Gaming. Enracha's digital
channel is planned to be re-launched by 2016/17.
Priorities for 2015/16
-- Digital poker product development: As the UK's leading
land-based poker operator we are looking to upgrade and improve our
digital poker offer. Work will commence on this in 2015/16.
-- Sports betting product: Rank is looking to complement its
leading gaming offer with a sports betting product via a third
party partnership. We do not see this as a significant revenue
opportunity for the Group, but believe it will improve our offer to
customers and can be achieved without significant cost.
-- New digital brands: Work will commence on creating additional
brands for our digital channels. These new brands will provide an
opportunity to attract customers who are looking for something
different to Mecca and Grosvenor Casinos.
3: Developing our venues
Our casinos and bingo venues remain the bedrock of Rank's
business, providing entertainment for millions of customers each
year and generating the majority of the Group's revenue and pro ts.
By continuing to invest in our venues (in terms of product,
environment and service) and by creating new ones, we are
constantly evolving and enhancing the experiences that we offer to
customers, and in doing so growing our revenue.
Activity in 2014/15
-- New casino opened in Southend: In September 2014 Grosvenor
Casinos opened a new 26.5k sq. ft. venue in Southend at a capital
cost of GBP6.1m comprising table gaming, slots and poker with a
restaurant and bar outside the licensed gambling floor. Initial
trading has been slower than expected since opening, but in recent
months we have seen an improvement in trading.
-- Refurbishment of the Gloucester Road casino: During the year
our successful Gloucester Road casino in London was refurbished at
a capital cost of GBP0.5m. This investment enabled us to protect
one of our key venues within the competitive London casino
market.
-- Oldbury casino licence: As part of the Group's strategy to
fully utilise its existing assets, a previously non-trading casino
licence was opened in December 2014 alongside Mecca's Oldbury
venue.
-- Refurbishment of our Bournemouth casino: GBP1.4m was spent in
the year on refurbishing the Bournemouth casino which was one of
the 19 acquired from Gala Coral.
-- Luton 2005 Act: Following Rank's successful bid for the 2005
Act casino licence in Luton, works are underway to refurbish and
extend the current Luton casino to accommodate the permitted
additional product. The total capital cost will be approximately
GBP4.8m and is due to be completed by September 2015.
-- Light refurbishments of eight Mecca venues: Capital
investment into our Mecca venues was increased in the year
following the reduction in bingo duty to 10%, with eight venues
undergoing refurbishments at a total capital cost of GBP1.3m.
-- Enracha rebrand: During the year a further three venues in
Spain were rebranded to Enracha at a capital cost of GBP0.6m.
Priorities for 2015/16
-- Commitment to three new bingo venues: In line with our
continuing commitment following the reduction in bingo duty, Mecca
will continue to develop its venues offer with at least one new
format venue to be opened in 2015/16.
-- Expansion of key casino sites: As part of Grosvenor Casinos'
on-going refurbishment programme and dependent on planning, we
expect to upgrade three to five existing casinos within the next
financial year. As with previous casino refurbishments, the aim
will be to provide our customers with more modern product and an
enhanced gaming experience. These upgrades will include our London
Park Tower, Coventry and Nottingham casinos.
-- Grosvenor 'sparkles': 18 Grosvenor Casinos venues will be
enhanced in the year at a total estimated cost of GBP4.5m. Each
'sparkle' will comprise numerous low cost investments ranging from
new uniforms and carpets to upgrades of smoking terraces in each
venue.
-- Light refurbishment of eight Mecca venues: The increased
capital investment in Mecca's venues will continue into 2015/16
with an additional eight venues receiving a refurbishment in the
year at an estimated total capital cost of GBP2.1m.
4: Investing in brands and marketing
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
The development of a group of well-de ned, relevant and resonant
brands is critical for the success of our ambition. At Rank, we
enjoy ownership of a number of well-known brands with strong levels
of af nity amongst customers. We intend to invest more in the
development of our brands and in the marketing support required to
release their potential.
Activity in 2014/15
-- A single cross-brand digital marketing team: Please refer to
the 'Building digital capability' section above.
-- New Mecca marketing director appointed: Anna Shirley joined
Mecca in August 2015 as marketing director for Mecca with
responsibility for both Mecca's retail and digital channels. Anna
brings a wealth of experience of both national and local marketing
from some of the UK's leading brands such as Sainsbury's and
Freemans.
-- New advertising agency appointed across both brands: This
will result in a more productive and efficient relationship.
-- New Mecca and Grosvenor Casinos TV adverts: New adverts were
aired in the period promoting both our digital and retail
channels.
-- New Grosvenor Casinos logo design: Following consultation
with our customers we took the step to simplify the Grosvenor
Casinos logo to improve its recognition and better accommodate its
digital format.
-- Increased VIP teams in Grosvenor Casinos: During the year VIP
managers were deployed across our London venues. The managers are
focused on improving both customer care levels and VIP customer
retention.
-- Increased marketing spend: Total marketing spend, including
free-bets, increased by 19% to GBP75.5m in the year with a
particular focus on TV advertising to promote multi-channel.
Priorities for 2015/16
-- Continue to incrementally increase marketing spend: Overall
marketing expenditure will increase but will be in keeping with
revenue increases and ensuring a return on marketing
investment.
-- Review of our customer relationship management ('CRM'),
business intelligence ('BI'), and insights capability: The Group
has access to a significant amount of data on how our customers
interact with each of its brands. We will start work on
implementing new ways of storing, accessing and interrogating this
data, thus enabling us to react better to our customers' needs and
behaviours.
-- Review sponsorship opportunities: The Group will look at
further opportunities in the coming year to build on the
sponsorship activity carried out in 2014/15 which contributed to
improved brand awareness and in-club events.
5: Using technology to drive efficiency and improve customer
experience
The customer is at the heart of our focus on increasing the use
of technology in our businesses and driving ef ciency. By speeding
up processes we can remove customer frustrations and by removing
costs we can offer better value. Together, these will create
important competitive advantages. We have identi ed a number of
opportunities to harness technological developments to offer our
customers more engaging experiences and to achieve sustainable
growth in operating margins.
Activity in 2014/15
-- Server-based slots roll out in Mecca: 1,000 new and 1,315
upgraded server-based machines were rolled out across 81 Mecca
venues in the year, representing 44% of Mecca's gaming machine
estate. These provide an enhanced customer experience with high
definition screens offering a wide choice of content and access to
promotional features. These machines have Ticket In Ticket Out
(TiTo) functionality to reduce cash handling costs.
-- Mecca Max roll out: Mecca Max is a key component in the delivery of improved efficiency and profitability within Mecca's venues. By increasing capacity more customers have the opportunity for electronic bingo therefore reducing cash handling costs. 5,600 units were purchased in the year of which 2,200 units were incremental.
-- Bring Your Own Device ('BYOD') trial: Please refer to the
'Creating a compelling multi-channel offer' section above.
-- Labour scheduling in Grosvenor Casinos venues: A central rota
system for Grosvenor Casinos was implemented in the year. The
system enables management to monitor labour scheduling per venue
and hence optimise allocation of labour resources.
Priorities for 2015/16
-- iBeacon trial: iBeacon technology enables us to communicate
with our customers via their mobile devices on entering one of our
venues. A low-cost trial will be carried with an initial focus on
establishing how many of our customers' devices are open to this
method of communication.
-- Improved electronic roulette: To increase spin rates and
improve table choice, the Group is looking at ways to broadcast
electronic roulette game play from one casino to another.
-- Cashless systems in our venues: Mecca will be looking at ways
to further reduce the amount of cash that is handled within its
venues to decrease cash handling costs and meet our customers'
growing needs.
-- Launch of progressive Blackjack jackpot: We are rolling out a
new progressive jackpot across our UK casino estate.
Business review
Grosvenor Casinos
Grosvenor Casinos has performed strongly in the year across both
channels. Total and like-for-like revenue was up 8%.
2014/15 2013/14 Change
--------------------------- --------- ---------- --------
Total revenue* (GBPm) 423.4 391.2 8%
--------------------------- ---------
Venues 401.1 377.7 6%
--------------------------- ---------
Digital 22.3 13.5 65%
--------------------------- ---------
Total EBITDA** (GBPm) 91.7 80.9 13%
--------------------------- --------- ---------- --------
Venues 87.1 79.8 9%
--------------------------- --------- ---------- --------
Digital 4.6 1.1 318%
--------------------------- --------- ---------- --------
Total operating profit**
(GBPm) 66.5 56.8 17%
--------------------------- ---------
Venues 63.4 57.7 10%
--------------------------- --------- ---------- --------
Digital 3.1 (0.9) 444%
--------------------------- --------- ---------- --------
Like-for-like revenue 8%
--------------------------- ---------
Venues 6%
--------------------------- ---------
Digital 65%
--------------------------- ---------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items,
A recovery in win margin in the second half of the year,
bringing the full year back to a normal win margin, contributed to
a 6% growth in venues revenue for the year. Operating profit grew
by 10% principally due to an improved London performance despite a
GBP1.4m increase in irrecoverable VAT (GBP0.8m relating to the
prior year) and higher operating costs.
Following a successful bid, Grosvenor Casinos was awarded the
2005 Act casino licence for Luton in June 2014. The existing Luton
casino will house the 2005 Act licence and as result is currently
undergoing refurbishment and extension works to accommodate the
additional permitted product. The total capital cost will be
approximately GBP4.8m with works due to be completed by September
2015.
On 25 September 2014, a new casino in Southend was opened at a
capital cost of GBP6.1m. Initial trading has been slower than
expected since opening, but in recent months we have seen an
improvement in trading.
As part of our estate rationalisation programme aimed at
improving long-term profitability, we closed two of our
under-performing casinos. Our New Brighton casino was closed in
July 2015 following a disappointing trading performance since its
opening in April 2012. We also closed our smaller Osborne Road
casino in Portsmouth in August 2015 and plan to transfer the
licence to our highly successful Portsmouth casino at Gunwharf
Quays. Subject to planning permission the additional licence will
be operating in H1 2015/16.
Digital continues to deliver strong revenue growth with revenues
up 65% in the year. The brand maintained its focus on developing
and improving its digital offer with 167 games launched in the year
and its first multi-channel game launch. RGD was introduced from 1
December 2014 and despite this additional cost of GBP1.7m, the
digital channel delivered a profit for the year after being loss
making in prior periods.
Key performance indicators
2014/15 2013/14 Change
--------------------------- --------- --------- --------
Total customers (000s)** 1,817 1,745 4%
--------------------------- --------- --------- --------
Venues * 1,743 1,721 1%
--------------------------- --------- --------- --------
Digital * 114 50 128%
--------------------------- --------- --------- --------
Cross channel customer
cross over*** 2.3% 1.5% 0.8ppt
--------------------------- --------- --------- --------
Total customer visits
(000s) 8,900 8,579 4%
--------------------------- --------- --------- --------
Venues 8,233 8,139 1%
--------------------------- --------- --------- --------
Digital 667 440 52%
--------------------------- --------- --------- --------
Total spend per visit
(GBP) 47.57 45.60 4%
--------------------------- --------- --------- --------
Venues 48.72 46.41 5%
--------------------------- --------- --------- --------
Digital 33.43 30.68 9%
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
--------------------------- --------- --------- --------
Total net promoter score 40% 41% (1)ppt
--------------------------- --------- --------- --------
Venues 40% 44% (4)ppt
--------------------------- --------- --------- --------
Digital 18% 7% 11ppt
--------------------------- --------- --------- --------
* Customers shown on a moving annual total ('MAT') basis;
**cross-over customers included only once and 2013/14 brand
customer numbers have been restated to remove duplication relating
to the acquired casinos;
*** percentage of venues customers who are also digital
customers
Venues customers grew by 1% in the year driven by the London
venues.
Digital customers and visits numbers continued to grow in the
year, up 128% and 52% respectively. Mobile customers grew very
strongly, up 132%, driven by investments, upgrades and the launch
of a mobile app for our successful live casino.
Venues regional analysis
The casinos estate is split into three key areas - London,
Provinces and Belgium. To better illustrate the differences across
the estate the following analysis has been provided.
Customer visits Spend per visit Revenue Operating profit
(000s) (GBP) (GBPm) (GBPm)
------------ -------------------- -------------------- -------------------- --------------------
2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14
------------ --------- --------- --------- --------- --------- --------- --------- ---------
London 1,468 1,452 101.02 90.56 148.3 131.5 34.0 27.9
------------ --------- --------- --------- --------- --------- --------- --------- ---------
Provinces 6,506 6,406 36.83 36.17 239.6 231.7 28.6 29.4
------------ --------- --------- --------- --------- --------- --------- --------- ---------
Belgium 259 281 50.97 51.60 13.2 14.5 0.8 0.4
------------ --------- --------- --------- --------- --------- --------- --------- ---------
Total 8,233 8,139 48.72 46.41 401.1 377.7 63.4 57.7
------------ --------- --------- --------- --------- --------- --------- --------- ---------
London performed strongly in the year with revenues up 13%
driven by a stronger win margin and major player activity in H2.
During the year Grosvenor Casinos' top 50 customers contributed
approximately GBP4.6m of additional revenue compared to the average
recorded over the last four years (including 2014/15). Operating
profit grew by 22%.
Provincial revenue grew by 3% in the year driven by a 2%
increase in customer visits. Excluding the impact from the opening
of Southend, visits were broadly flat against last year which is in
line with the latest available data for the UK casino market. This
lack of visit growth was disappointing and will be a focus for the
coming year. Comparable revenue was up 2% driven by increased spend
per visit offset by a lower win margin. Disappointingly operating
profit fell by 3% in the year due to higher irrecoverable VAT,
start-up losses at Southend, a lower win margin and other one-off
costs.
Venues revenue analysis - Great Britain only
GBPm 2014/15 2013/14 Change
--------------------- --------- --------- --------
Casino games 263.5 247.5 6%
--------------------- --------- --------- --------
Gaming machines 79.4 72.9 9%
--------------------- --------- --------- --------
Card room games 15.7 14.7 7%
--------------------- --------- --------- --------
Food & drink/other 29.3 28.1 4%
--------------------- --------- --------- --------
Total 387.9 363.2 7%
--------------------- --------- --------- --------
Gaming machine revenue grew strongly in the year, up 9%, driven
by product improvements in the prior period, particularly in the 19
acquired casinos. The London Poker Room (opened November 2013) was
the key driver of the 7% increase in card room revenue.
Mecca
Mecca's like-for-like revenue rose by 2% in the year, with
venues revenue flat and digital revenue up 11%.
2014/15 2013/14 Change
--------------------------- --------- --------- --------
Total revenue* (GBPm) 289.6 288.2 0%
--------------------------- ---------
Venues 224.4 229.3 (2)%
--------------------------- ---------
Digital 65.2 58.9 11%
--------------------------- ---------
Total EBITDA** (GBPm) 57.2 53.2 8%
--------------------------- --------- --------- --------
Venues 41.6 34.9 19%
--------------------------- --------- --------- --------
Digital 15.6 18.3 (15)%
--------------------------- --------- --------- --------
Total operating profit**
(GBPm) 43.0 37.0 16%
--------------------------- ---------
Venues 28.9 21.1 37%
--------------------------- --------- --------- --------
Digital 14.1 15.9 (11)%
--------------------------- --------- --------- --------
Like-for-like revenue 2%
--------------------------- ---------
Venues 0%
--------------------------- ---------
Digital 11%
--------------------------- ---------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items
Like-for-like venues revenue benefited from an increase in spend
per visit, driven by product enhancements, but this was offset by a
3% fall in like-for-like customer visits. This like-for-like
revenue performance is pleasing as it follows two years of revenue
declines. Total venues revenue fell in the period by 2% driven by
the closure of six under-performing venues in the year. Operating
profit increased by 37% due to lower operating costs, predominantly
due to lower bingo duty and lower labour costs.
Investment in bingo
In line with the Group's commitments following the reduction in
bingo duty to 10% the Group has invested in the following
programmes in the year:
Investment in facilities
-- Venue refurbishment programme recommenced: Total capital
expenditure of GBP1.3m on refurbishing eight venues during the
year, with a further eight refurbishments planned for 2015/16.
-- New bingo venues: The Group remains committed to opening
three new bingo venues. A new format club is currently in
development and is planned to open in 2015/16. It will form part of
Mecca's sustainable investment model and will leverage off Mecca's
popular electronic bingo product offer.
-- Increased maintenance expenditure: An additional GBP1.1m was
spent in the year, a 85% increase on last year.
-- WiFi upgrade: As part of the brand's drive to improve
customer experience WiFi trials were carried out in our venues in
the year.
Improved value to customers
-- Reduced main stage bingo pricing: GBP3.4m of the bingo duty
saving was allocated to reduce the price of bingo books in the
year.
-- Enhanced customer prizes: GBP1.5m was spent on new in-venue events with enhanced prizes.
Improvement in product
-- Mecca Max units: GBP2.2m was spent in the year on 5,600 hand
held Mecca Max units of which 2,200 were incremental.
Digital performed strongly in the year with revenues up 11%
driven by an increase in customer numbers and improved customer
retention. Operating profit fell by 11% following the introduction
of RGD on 1 December 2014, costing GBP4.9m in the year.
Key performance indicators
2014/15 2013/14 Change
--------------------------- --------- --------- --------
Total customers (000s)** 1,141 1,096 4%
--------------------------- --------- --------- --------
Venues* 961 937 3%
--------------------------- --------- --------- --------
Digital* 267 229 17%
--------------------------- --------- --------- --------
Cross channel customer
cross over*** 9.1% 7.5% 1.6ppt
--------------------------- --------- --------- --------
Total customer visits
(000s) 17,248 17,429 (1)%
--------------------------- --------- --------- --------
Venue 12,035 12,607 (5)%
--------------------------- --------- --------- --------
Digital 5,213 4,822 8%
--------------------------- --------- --------- --------
Total spend per visit
(GBP) 16.79 16.54 2%
--------------------------- --------- --------- --------
Venues 18.65 18.19 3%
--------------------------- --------- --------- --------
Digital 12.51 12.21 2%
--------------------------- --------- --------- --------
Total net promoter score 57% 43% 14ppt
--------------------------- --------- --------- --------
Venues 62% 47% 15ppt
--------------------------- --------- --------- --------
Digital 30% 21% 9ppt
--------------------------- --------- --------- --------
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
* Customers shown on a moving annual total ('MAT') basis;
**cross-over customers included only once; ***percentage of venues
customers who are also digital customers
Venues continued to increase the number of customers in the
year, up 3%. Total visits fell by 5% due to the continued decline
in visit frequency. However, following the closure of
under-performing venues in the year, the like-for-like visits
decline was lower at 3%. As highlighted in our interim
announcement, the rate of decline in visits has slowed compared to
the 7% decline seen in the prior year.
Six loss-making venues were closed in the year as part of
Mecca's drive to create a more profitable and sustainable venues
estate. The impact on operating profit of these closures is small
however management time savings are more significant. Two further
venues were closed after the year end and one further closure is
planned for 2015/16.
Digital customers numbers grew by 17% in the year following a
successful TV campaign and a more competitive sign up bonus. During
the year significant investment was made into mobile product to
support the brand's increasing number of mobile customers, up 49%,
who now account for 70% of Mecca's digital customer base.
Venues revenue analysis
GBPm 2014/15 2013/14 Change
--------------------- --------- --------- --------
Main stage bingo 31.4 35.1 (11)%
--------------------- --------- --------- --------
Interval games 92.9 94.7 (2)%
--------------------- --------- --------- --------
Amusement machines 73.5 73.8 0%
--------------------- --------- --------- --------
Food & drink/other 26.6 25.7 4%
--------------------- --------- --------- --------
Total 224.4 229.3 (2)%
--------------------- --------- --------- --------
The roll out of the 1,000 server-based gaming machines was
completed in the year along with the conversion of 1,315 machines
to TiTo functionality.
Enracha
Our Spanish brand, Enracha, has performed well in the year, with
like-for-like euro revenue up 9%.
2014/15 2013/14 Change
--------------------------- --------- --------- --------
Revenue (EURm) 33.4 34.0 (2)%
--------------------------- ---------
Revenue (GBPm) 25.3 28.3 (11)%
--------------------------- ---------
EBITDA* (GBPm) 4.1 2.9 41%
--------------------------- --------- --------- --------
Operating profit* (EURm) 3.4 1.0 240%
--------------------------- --------- --------- --------
Operating profit* (GBPm) 2.6 0.8 225%
--------------------------- --------- --------- --------
* before exceptional items
Operating profit continues to benefit from tax de-regulation and
tight cost control. Enracha's Sterling revenue fell by 11% in the
year due to the adverse exchange rate and the reduction in the
number of venues.
Enracha's venue in Girona continues to benefit from reduced
competition and, due to the sustained improvement in profitability,
a GBP1.6m impairment reversal has been recognised in the year.
During the year three more venues were converted to the Enracha
brand at a capital cost of GBP0.6m. Enracha will look to re-launch
its digital channel by 2016/17 following its migration onto the
Bede digital platform.
Key performance indicators
2014/15 2013/14 Change
------------------------- --------- --------- --------
Customers (000s)* 269 260 3%
------------------------- --------- --------- --------
Customer visits (000s) 1,844 1,945 (5)%
------------------------- --------- --------- --------
Spend per visit (EUR) 18.11 17.48 4%
------------------------- --------- --------- --------
Spend per visit (GBP) 13.72 14.55 (6)%
------------------------- --------- --------- --------
Net promoter score 91% 86% 5ppt
------------------------- --------- --------- --------
* Customers shown on a moving annual total ('MAT') basis
Venues revenue analysis
EURm 2014/15 2013/14 Change
--------------------- --------- --------- --------
Bingo 19.1 20.3 (6)%
--------------------- --------- --------- --------
Amusement machines 11.7 10.8 8%
--------------------- --------- --------- --------
Food & drink/other 2.6 2.9 (10)%
--------------------- --------- --------- --------
Total 33.4 34.0 (2)%
--------------------- --------- --------- --------
Financial review
Group revenue for the 12-month period from continuing operations
rose by 4% to GBP738.3m while Group operating profit before
exceptionals of GBP84.0m was 16% higher than the prior period.
Adjusted net interest payable for the 12 months was in line with
the prior period.
Adjusted earnings per share was up 18% year on year at
14.6p.
Taxation
The Group's effective corporation tax rate on continuing
operations was 22.9% (2013/14: 22.2%) based on a tax charge of
GBP17.0m on adjusted profit before taxation and a tax credit on
exceptionals of GBP1.3m. The Group's effective corporation tax rate
for 2015/16 is expected to fall within the range of 21% to 23% as a
result of the reduction of UK corporation tax rates.
The Group had a cash tax rate of 3.0% on adjusted profits
following refunds received in the year. These arose following
submission of the 2012/13 tax returns which included the amusement
machines VAT repayment to HMRC. Taking into account this refund,
the adjusted cash tax rate of 15.6% reflects the utilisation of
capital allowances and losses in the Group (16.7% in the year ended
30 June 2014). This adjusted cash tax rate was in line with
management's expectations. The Group is expected to have a cash tax
rate of 17.5% to 20.0% in 2015/16, excluding any tax payable on the
resolution of a number of legacy issues. This is lower than the
Group's effective corporation tax rate due to the utilisation of
capital allowances and losses in the Group.
Rank's appeal regarding claims for overpaid VAT on certain types
of amusement machines was heard at the Supreme Court on 21 April
2015. The Supreme Court's decision, which is final, was then
subsequently released on 8 July 2015 in favour of HMRC. Rank repaid
GBP25.2m of the GBP30.7m received in connection with these claims
to HMRC in May 2014 and has fully provided for the remainder. As a
consequence, the decision has no impact on Rank's financial
performance or balance sheet strength in 2014/15 or future
periods.
As highlighted in last year's report the Group previously
participated in a disclosed tax avoidance scheme. The scheme will
be litigated through the courts and the case is expected to be
heard in December 2016. Under new tax rules implemented last year,
HMRC can request payment of the amounts under dispute in advance of
any Tax Tribunal. The Group has still not yet received any request
for payment, with the amounts at dispute worth up to GBP21.7m
excluding any interest due.
Exceptional items
In order to give a full understanding of the Group's financial
performance and aid comparability between periods, the Group
reports certain items as exceptional to normal trading.
Full details of the Group's exceptional items are provided in
note 3.
Cash flow
2014/15 2013/14
GBPm GBPm
Continuing operations
Cash inflow from operations 154.5 107.2
Capital expenditure (31.9) (44.3)
Fixed asset disposals 1.5 0.3
Operating cash inflow 124.1 63.2
Discontinued operations - (0.6)
Net acquisitions and disposals (0.1) 1.1
Net cash payments in respect of provisions
and exceptional items (7.9) (6.7)
--------------------------------------------- --------- ---------
116.1 57.0
Net interest and tax payments (9.7) (15.5)
Settlement of legacy tax issues - (56.6)
Dividends paid (18.6) (16.4)
New finance leases - (2.3)
Convertible loan payment (2.4) -
Other (including foreign exchange
translation) (1.3) 0.9
--------------------------------------------- --------- ---------
Cash inflow / (outflow) 84.1 (32.9)
Opening net debt (137.0) (104.1)
--------------------------------------------- --------- ---------
Closing net debt (52.9) (137.0)
--------------------------------------------- --------- ---------
Financial structure and liquidity
At 30 June 2015, net debt was GBP52.9m compared with net debt of
GBP137.0m at 30 June 2014. The net debt comprised GBP120.0m in bank
term loans in respect of the acquisition of the former Gala
casinos, GBP8.6m in fixed rate Yankee bonds, GBP11.8m in finance
leases and GBP2.1m in overdrafts offset by cash at bank and in hand
of GBP89.6m.
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
The Group's banking facilities comprise two GBP60.0m bi-lateral
term loans (reduced from GBP70.0m in the year) and four GBP20.0m
bi-lateral revolving credit facilities with its relationship banks
totalling GBP200.0m. These facilities require the maintenance of a
minimum ratio of earnings before interest, tax, depreciation and
amortisation ('EBITDA') to net interest payable; a minimum ratio of
EBITDA plus operating lease charges to net interest payable plus
operating lease charges and a maximum ratio of net debt to EBITDA,
tested quarterly and biannually depending on the facility. The
Group has complied with its banking covenants.
The Group's term loans and revolving credit facilities are due
to expire in May 2016 and January 2017 respectively. The Group has
been working with its relationship banks and anticipates
replacement facilities will be signed shortly.
The Group's balance sheet continued to strengthen in the year
with leverage falling from 1.2 times to 0.4 times at 30 June
2015.
Capital expenditure
2014/15 2013/14
GBPm GBPm
---------------------------- --------- ---------
Cash:
Continuing operations
Grosvenor Casinos 15.9 35.5
Mecca 9.5 5.9
Enracha 0.9 1.3
Central 5.6 1.6
---------------------------- --------- ---------
31.9 44.3
Finance leases:
Mecca - 2.3
---------------------------- --------- ---------
Total capital expenditure 31.9 46.6
---------------------------- --------- ---------
During 2014/15, Rank invested GBP8.8m in making improvements to
its Grosvenor Casinos venues, this included GBP4.0m to complete the
new Southend casino that opened in September 2014, GBP1.4m on a
major refurbishment of its Bournemouth casino (ex-Gala Coral),
GBP0.5m to modernise its London Gloucester Road casino and GBP0.9m
on works to extend and refurbish its Luton casino to accommodate
the awarded 2005 Act casino licence. Grosvenor Casinos also spent
GBP1.3m on rolling out the brand's loyalty scheme, Play Points,
across the acquired venues from Gala Coral, GBP2.3m on a variety of
IT upgrades, and GBP0.9m on developing its digital channel with the
balance on minor capital works.
Mecca increased its level of investment into its venues estate
in line with its commitment to HM Treasury following the 10%
reduction in bingo duty. A total of GBP9.5m was spent in the year
which included GBP1.3m on venue refurbishments and GBP2.2m on Mecca
Max units. GBP1.9m was also invested in the brand's digital channel
with a majority spent on re-designing the meccabingo.com website
and app development.
Central capital expenditure of GBP5.6m included GBP3.4m on
migrating the Group's digital business to its new platform
provider, Bede Gaming.
During 2015/16, we plan to spend approximately GBP50m.
Total capital committed at 30 June 2015 was GBP2.8m of which
GBP1.4m related to completing the extension and refurbishment of
Grosvenor's Luton casino and GBP1.0m related to the new online
gaming platform.
Going concern
In adopting the going concern basis for preparing the financial
information the directors have considered the issues impacting the
Group during the period as detailed in the business review above
and have reviewed the Group's projected compliance with its banking
covenants. The Group is in advanced stages of negotiating
replacement bank facilities and based on the Group's cash flow
forecasts and operating budgets, the directors believe that the
Group will generate sufficient cash to meet its borrowing
requirements for at least 12 months from the date of approval of
the financial statements and comply with its banking covenants.
Principal risk and uncertainties
Regulatory and tax
-- Regulation
Adverse regulatory changes in legislation continue to represent
a significant risk. Changes in political and social attitudes to
gambling in our key markets and negative publicity surrounding the
gambling industry could influence regulators' perception of
gambling and could lead to increased gambling regulation.
Impact
Regulatory changes could increase the cost of doing business or
limit the products and services we can offer.
Mitigation
We participate actively in trade bodies' representations to
Government and opposition parties, and work to enable stakeholders
to understand our business and its positive contribution to the
economy and community. We continue to work hard to promote the Keep
it Fun brand and website to customers, regulators and the public to
de-mystify the perception of casinos, promote a safe environment to
play and illustrate the Company's position in leading the industry
in this field.
Direction of travel - risk increasing
-- Taxation
Adverse changes in fiscal regulation continue to be a
significant risk. From December 2014 we have been required to pay
UK Remote Gaming Duty at a rate of 15% for the digital gaming
business.
Impact
Any increases in the levels of taxation or levies to which we
are subject, or the implementation of any new taxes or levies to
which we will be subject, could have a material adverse effect on
our business, financial condition and results of operations.
Mitigation
Rank is a leading participant in its relevant trade
organisations and takes an active part in all relevant
consultations by Government.
Direction of travel - stable
Operational risk
-- New online gaming platform - transition and implementation
The Group is in the process of replacing its online gaming
platform, which is of significant strategic importance and
represents the largest IT project underway. A supplier, Bede
Gaming, has been selected. The key risks for this project include
failure to: (a) specify correctly the Group's requirements with the
result that the platform is not fit for purpose; (b) deliver the
project on time and on budget; (c) conduct adequate testing to
ensure that the platform is effective; (d) manage adequately the
transition from the existing platform; and (e) provide for an
appropriate exit strategy.
Impact
This project is a key strategic enabler, so any failures in the
delivery of the project risk having an adverse effect on the
ability to optimise the digital platform and its associated
business, consequently impacting profitability.
Mitigation
The project is now in the software development stage and has
engaged appropriate experienced resources internally to support its
delivery. The selected supplier is expert in its field and a
professional project management and governance structure is in
place to ensure that the schedule, budget and deliverables are
tracked and monitored.
Direction of travel - risk increasing
-- Volatility of gaming win
Win percentages for gambling activities can vary over a short
period of time, although they will stabilise over a longer period.
The business is also vulnerable to the potential impact of a small
number of customers who can create volatility from the level of
their gaming win. Win percentages may also be affected by
misfeasance or any other problems with the accurate running of the
game.
Impact
Gaming win margin directly impacts profitability.
Mitigation
Gaming limits are actively used to manage the exposure of the
business at all times.
Programmes are in place to manage high staking VIP customers
through a dedicated VIP team and reward programmes exist to manage
and incentivise loyalty.
Resources, including a security team, are in place to review and
detect misfeasance and any other operational difficulties with game
play.
Direction of travel - stable
-- Loss of licences
Rank's gaming licenses are fundamental to its operation. In the
British venues part of the business there is a requirement to hold
an operator's licence from the Gambling Commission (the body
responsible for regulating commercial gambling in Great Britain) in
respect of each of the licensed activities undertaken.
Additionally, it is necessary to hold premises licences from the
relevant local authority in which each venue is situated, one for
gambling activities and one for the sale of alcohol. Our UK
customer facing remote gaming activities require licences from both
the UK Gambling Commission and the Alderney Gambling Control
Commission. Our operations in Spain and Belgium are also subject to
licensing requirements in the jurisdictions and local areas in
which they operate.
Impact
The loss of licences could have an adverse effect on our
business and profitability and prevent us from providing gambling
services.
Mitigation
Rank has a dedicated compliance function that is independent of
operations and a separate internal audit function that is
independent of both operations and the compliance function. Rank
maintains a strong and open relationship with the UK Gambling
Commission and the other relevant regulatory bodies in all
jurisdictions in which we operate.
Direction of travel - stable
-- Business continuity and disaster recovery
Due to the venues based nature of much of the business, the
Group's significant reliance on technology, and the criticality of
staff in serving customers and running the business, serious
disruptive events such as building fire, pandemic or serious
technology failure may cause an interruption to the ability to
operate elements of the business if business continuity and
disaster recovery plans failed to operate successfully.
Impact
If business continuity and disaster recovery plans failed to
operate successfully the business would experience delays in
recovering critical revenue-generating activities or operational
processes, such as financial reporting, causing both financial and
reputational damage.
Mitigation
(MORE TO FOLLOW) Dow Jones Newswires
August 20, 2015 02:00 ET (06:00 GMT)
A Group business continuity plan is in place and regularly
reviewed. Departmental plans are required for all critical
departments and premises, and managed by the director of security.
IT plans were reviewed in light of the transfer of risk arising
through the engagement of IT outsourced supplier Tata Consultancy
Services and suitable plans are in place for their operations.
Direction of travel - stable
-- Wage rise inflation
We employ a large number of employees at or just above the
minimum wage. Significant increases to the national minimum wage,
national living wage or other significant changes to employment
regulation could have an adverse impact on the Group's results.
Impact
Changes generating significant employment cost inflation could
negatively impact the Group's profitability.
Mitigation
Rank continually monitors the regulatory environment for changes
with a view to ensuring that appropriate compensatory productivity
improvements can be implemented and the additional costs
minimised.
Direction of travel - stable
Information technology risk
-- Reliance on technology
The Group is highly dependent on complex technology and advanced
information systems with many interfaces and a significant number
of separate suppliers. The pace of business change and development
means that IT changes such as new software coding, systems
enhancements and new software application integrations are
undertaken continually and consequently these systems are
inherently vulnerable to experiencing malfunctions, failures, or
cyber attacks such as viruses or hacker intrusion. Comprehensive
technology resilience and systems protection measures are in place
but it is difficult to detect all threats and vulnerabilities in
order to prevent all service interruptions and problems.
Impact
If our prevention measures for technology attacks should fail
our reputation may be harmed and customers deterred from using our
services which may in turn have a material adverse effect on our
financial performance. Failures in service provision could also
render the Group unable to serve customers during such service
interruptions, again having an adverse effect on revenue and
profit.
Mitigation
The IT outsourcing to Tata Consultancy Services has
substantially enhanced the resources for providing business support
and resilience around key systems. Over the past year a substantial
amount of investment has been put into enhancing the security,
network and application infrastructure and further work will
continue into the coming year.
Direction of travel - stable
Directors' Responsibility Statement
Each of the directors named below confirm that to the best of
his or her knowledge:
-- the financial statements, prepared in accordance with the
financial statements under International Financial Reporting
Standards (IFRSs) as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the risks and uncertainties
that they face.
The directors of The Rank Group Plc are:
Chris Bell
Henry Birch
Ian Burke
Clive Jennings
Lord Kilmorey
Owen O'Donnell
Tim Scoble
Shaa Wasmund MBE
Signed on behalf of the board on 19 August 2015
Henry Birch Clive Jennings
Chief Executive Finance Director
Group Financial Information
Group Income Statement
For the year ended 30 June 2015
Year ended 30 June 2015 Year ended 30 June 2014
-------------------------------------------- ---------------------------------------
Before Exceptional Before Exceptional
exceptional items exceptional items
(note (note
items 3) Total items 3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Continuing operations
Revenue before adjustment
for free bets, promotions
and customer bonuses 738.3 - 738.3 707.7 - 707.7
Free bets, promotions
and customer bonuses (37.6) - (37.6) (29.2) - (29.2)
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Revenue 700.7 - 700.7 678.5 - 678.5
Cost of sales (376.6) - (376.6) (380.0) - (380.0)
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Gross profit 324.1 - 324.1 298.5 - 298.5
Other operating costs (240.1) 2.1 (238.0) (226.1) (46.5) (272.6)
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Group operating profit
(loss) 84.0 2.1 86.1 72.4 (46.5) 25.9
Financing:
- finance costs (10.4) (1.3) (11.7) (10.1) (4.3) (14.4)
- finance income 0.4 - 0.4 0.1 1.8 1.9
- other financial
(losses) gains (0.3) - (0.3) 1.0 - 1.0
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Total net financing
charge (10.3) (1.3) (11.6) (9.0) (2.5) (11.5)
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Profit (loss) before
taxation 73.7 0.8 74.5 63.4 (49.0) 14.4
Taxation (16.8) 1.3 (15.5) (10.6) 13.6 3.0
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Profit (loss) for
the year from continuing
operations 56.9 2.1 59.0 52.8 (35.4) 17.4
Discontinued operations
- profit - 15.8 15.8 - 2.8 2.8
Profit (loss) for
the year 56.9 17.9 74.8 52.8 (32.6) 20.2
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Attributable to:
Equity holders of
the parent 56.9 17.9 74.8 52.8 (32.6) 20.2
----------------------------- ------------- ------------------ --------- ------------- ------------- ---------
Earnings (loss) per share attributable to equity shareholders
- basic 14.6p 4.5p 19.1p 13.5p (8.3)p 5.2p
- diluted 14.6p 4.5p 19.1p 13.5p (8.3)p 5.2p
Earnings (loss) per share - continuing operations
- basic 14.6p 0.5p 15.1p 13.5p (9.0)p 4.5p
- diluted 14.6p 0.5p 15.1p 13.5p (9.0)p 4.5p
Earnings per share - discontinued operations
- basic - 4.0p 4.0p - 0.7p 0.7p
- diluted - 4.0p 4.0p - 0.7p 0.7p
Group Statement of Comprehensive Income
For the year ended 30 June 2015
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
--------------------------------------------------- ------------ ------------
Comprehensive income:
Profit for the year 74.8 20.2
Other comprehensive income:
Items that may be reclassified subsequently to
profit or loss:
Exchange adjustments net of tax (4.7) (2.4)
Items that will not be reclassified to profit
or loss:
Actuarial loss on retirement benefits net of tax (0.4) (0.3)
Total comprehensive income for the year 69.7 17.5
--------------------------------------------------- ------------ ------------
Attributable to:
Equity holders of the parent 69.7 17.5
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--------------------------------------------------- ------------ ------------
Group Statement of Changes in Equity
For the year ended 30 June 2015
Capital Exchange Retained
Share Share redemption translation earnings
capital premium reserve reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- ------------ ------------- ---------- --------
At 1 July 2013 54.2 98.4 33.4 16.1 39.8 241.9
Comprehensive income:
Profit for the year - - - - 20.2 20.2
Other comprehensive income:
Exchange adjustments net of
tax - - - (2.4) - (2.4)
Actuarial loss on retirement
benefits net of tax - - - - (0.3) (0.3)
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive (expense)
income for the year - - - (2.4) 19.9 17.5
Transactions with owners:
Dividends paid to equity holders
(see note 6) - - - - (16.4) (16.4)
Debit in respect of employee
share schemes including tax - - - - (0.7) (0.7)
At 30 June 2014 54.2 98.4 33.4 13.7 42.6 242.3
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Comprehensive income:
Profit for the year - - - - 74.8 74.8
Other comprehensive income:
Exchange adjustments net of
tax - - - (4.7) - (4.7)
Actuarial loss on retirement
benefits net of tax - - - - (0.4) (0.4)
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive (expense)
income for the year - - - (4.7) 74.4 69.7
Transactions with owners:
Dividends paid to equity holders
(see note 6) - - - - (18.6) (18.6)
Credit in respect of employee
share schemes including tax - - - - 1.0 1.0
At 30 June 2015 54.2 98.4 33.4 9.0 99.4 294.4
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Group Balance Sheet
At 30 June 2015
As at As at
30 June 30 June
2015 2014
GBPm GBPm
----------------------------------------------- --------- ---------
Assets
Non-current assets
Intangible assets 395.7 390.2
Property, plant and equipment 203.4 217.5
Deferred tax assets 2.2 2.5
Other receivables 5.3 3.1
----------------------------------------------- --------- ---------
606.6 613.3
Current assets
Inventories 2.8 3.1
Other receivables 29.3 31.1
Income tax receivable 1.7 6.6
Cash and short-term deposits 89.6 47.1
----------------------------------------------- --------- ---------
123.4 87.9
Assets held for sale 0.6 -
Total assets 730.6 701.2
----------------------------------------------- --------- ---------
Liabilities
Current liabilities
Trade and other payables (147.0) (113.2)
Income tax payable (28.0) (40.3)
Financial liabilities - loans and borrowings (125.5) (4.4)
Provisions (8.9) (10.5)
----------------------------------------------- --------- ---------
(309.4) (168.4)
Net current liabilities (186.0) (80.5)
----------------------------------------------- --------- ---------
Non-current liabilities
Trade and other payables (37.6) (40.5)
Financial liabilities - loans and borrowings (17.6) (179.5)
Deferred tax liabilities (23.1) (18.1)
Provisions (44.7) (49.0)
Retirement benefit obligations (3.8) (3.4)
----------------------------------------------- --------- ---------
(126.8) (290.5)
Total liabilities (436.2) (458.9)
----------------------------------------------- --------- ---------
Net assets 294.4 242.3
----------------------------------------------- --------- ---------
Capital and reserves attributable to the
Company's equity shareholders
Share capital 54.2 54.2
Share premium 98.4 98.4
Capital redemption reserve 33.4 33.4
Exchange translation reserve 9.0 13.7
Retained earnings 99.4 42.6
----------------------------------------------- --------- ---------
Total shareholders' equity 294.4 242.3
----------------------------------------------- --------- ---------
Group Cash Flow Statement
For the year ended 30 June 2015
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
---------------------------------------------------- ------------ ------------
Cash flows from operating activities
Cash generated from operations 146.6 61.6
Interest received 0.3 0.1
Interest paid (7.8) (8.2)
Tax paid (2.2) (19.1)
Discontinued operations - (6.6)
Net cash from operating activities 136.9 27.8
---------------------------------------------------- ------------ ------------
Cash flows from investing activities
(Disposal) acquisition of subsidiaries including
deferred consideration (net of cash disposed
or acquired) (0.1) 1.1
Purchase of intangible assets (10.5) (13.5)
Purchase of property, plant and equipment (21.4) (30.8)
Proceeds from sale of property, plant and
equipment 1.5 0.3
Purchase of convertible loan note (2.4) -
Net cash used in investing activities (32.9) (42.9)
---------------------------------------------------- ------------ ------------
Cash flows from financing activities
Dividends paid to equity holders (18.6) (16.4)
(Repayment) drawdown on revolving credit
facilities (20.0) 20.0
Repayment of term loans (20.0) -
Repurchase of bonds (0.4) -
Finance lease principal payments (3.1) (3.2)
Net cash (used in) from financing activities (62.1) 0.4
---------------------------------------------------- ------------ ------------
Net increase (decrease) in cash, cash equivalents
and bank overdrafts 41.9 (14.7)
Effect of exchange rate changes (0.7) (0.6)
Cash and cash equivalents at start of year 46.3 61.6
---------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of year 87.5 46.3
---------------------------------------------------- ------------ ------------
1. General information, basis of preparation and accounting policies
General information
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The Company is a public limited company which is listed on the
London Stock Exchange and is incorporated and domiciled in England
and Wales under registration number 03140769. The address of its
registered office is Statesman House, Stafferton Way, Maidenhead,
SL6 1AY.
This condensed consolidated financial information was approved
for issue on 19 August 2015.
This condensed consolidated financial information does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The statutory accounts for the year ended
30 June 2015 were approved by the board of directors on 19 August
2015, but have not yet been 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 498 of the Companies
Act 2006. The statutory accounts for the year ended 30 June 2014
have been delivered to the Registrar of Companies.
Basis of preparation
The financial information attached has been extracted from the
audited financial statements for the year ended 30 June 2015. The
financial information has been prepared in accordance with IFRS as
adopted by the European Union.
Going concern
In adopting the going concern basis for preparing the financial
information the directors have considered the issues impacting the
Group during the period as detailed in the business review above
and have reviewed the Group's projected compliance with its banking
covenants. The Group is in advanced stages of negotiating
replacement bank facilities and based on the Group's cash flow
forecasts and operating budgets, the directors believe that the
Group will generate sufficient cash to meet its borrowing
requirements for at least 12 months from the date of approval of
the financial statements and comply with its banking covenants.
Accounting policies
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for the
year ended 30 June 2014, as described in those financial
statements.
The following new standards, amendments and interpretations of
existing standards are mandatory for the first time for the
financial period beginning 1 July 2014:
-- IFRS 10 Consolidated Financial Statements
-- IFRS 11 Joint Arrangements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IAS 27 Separate Financial Statements (Revised)
-- IAS 28 Investments in Associates and Joint Ventures (Revised)
-- IAS 32 Financial Instruments: Presentation - Offsetting
Financial Assets and Liabilities (Amendment)
-- IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Amendment)
-- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Amendment)
-- IFRIC 21 Levies
The Group has not been materially impacted by the adoption of
any of these standards, amendments or interpretations.
The Group has not early adopted any other standard, amendment or
interpretation that was issued but is not yet effective.
2. Segment information - continuing operations
Year ended 30 June 2015
------------------------------------------------------------------------------------
Grosvenor Casinos Mecca Enracha Central
Venues Digital Venues Digital Venues Digital costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Continuing operations
Group revenue
reported in internal
information 401.1 22.3 224.4 65.2 25.3 - - 738.3
Free bets, promotions
and customer bonuses (6.7) (5.1) (13.7) (12.1) - - - (37.6)
--------- ---------- -------- --------- --------
Segment revenue 394.4 17.2 210.7 53.1 25.3 - - 700.7
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Operating profit
(loss) before
exceptional items 63.4 3.1 28.9 14.1 3.1 (0.5) (28.1) 84.0
Exceptional profit - - 1.0 - 1.1 - - 2.1
Segment result 63.4 3.1 29.9 14.1 4.2 (0.5) (28.1) 86.1
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Finance costs (11.7)
Finance income 0.4
Other financial
losses (0.3)
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Profit before
taxation 74.5
Taxation (15.5)
Profit for the
year from continuing
operations 59.0
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Year ended 30 June 2014
------------------------------------------------------------------------------------
Grosvenor Casinos Mecca Enracha Central
Venues Digital Venues Digital Venues Digital costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Continuing operations
Group revenue
reported in internal
information 377.7 13.5 229.3 58.9 28.3 - - 707.7
Free bets, promotions
and customer bonuses (3.7) (3.1) (12.5) (9.9) - - - (29.2)
--------- ---------- -------- --------- -------- --------- ---------
Segment revenue 374.0 10.4 216.8 49.0 28.3 - - 678.5
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Operating profit
(loss) before
exceptional items 57.7 (0.9) 21.1 15.9 1.2 (0.4) (22.2) 72.4
Exceptional loss (12.5) - (25.3) - (8.7) - - (46.5)
--------- ---------- -------- --------- -------- --------- --------- --------
Segment result 45.2 (0.9) (4.2) 15.9 (7.5) (0.4) (22.2) 25.9
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Finance costs (14.4)
Finance income 1.9
Other financial
gains 1.0
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
Profit before
taxation 14.4
Taxation 3.0
Profit for the
year from continuing
operations 17.4
------------------------ --------- ---------- -------- --------- -------- --------- --------- --------
2. Segment information - continuing operations (continued)
To increase transparency, the Group has decided to include
additional disclosure analysing total costs by type and segment. A
reconciliation of total costs on continuing operations, before
exceptional items, by type and segment is as follows:
Year ended 30 June 2015
-----------------------------------------------------------------------------------
Grosvenor Casinos Mecca Enracha Central
Venues Digital Venues Digital Venues Digital costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Employment
and related
costs 138.9 3.2 54.8 6.7 12.3 0.2 17.0 233.1
Taxes and
duties 84.6 1.8 35.3 5.0 1.7 - 1.9 130.3
Direct costs 16.9 4.8 22.6 14.4 2.1 0.2 - 61.0
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Property costs 30.0 0.2 27.0 0.3 1.6 - 1.0 60.1
Marketing 14.6 2.2 10.5 9.7 0.9 - - 37.9
Depreciation
and amortisation 23.7 1.5 12.7 1.5 1.5 - 1.4 42.3
Other 22.3 0.4 18.9 1.4 2.1 0.1 6.8 52.0
---------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Total costs
before exceptional
items 331.0 14.1 181.8 39.0 22.2 0.5 28.1 616.7
---------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Cost of sales 376.6
Operating
costs 240.1
---------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Total costs
before exceptional
items 616.7
---------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Year ended 30 June 2014
-------------------------------------------------------------------------------------
Grosvenor Casinos Mecca Enracha Central
Venues Digital Venues Digital Venues Digital costs Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------------ --------- -------- --------- -------- --------- --------- -------
Employment
and related
costs 137.7 2.0 55.2 6.5 13.4 0.2 15.2 230.2
Taxes and
duties 78.1 - 48.1 0.4 2.1 - 2.0 130.7
Direct costs 15.6 3.9 21.0 14.5 2.5 0.1 - 57.6
Property costs 29.9 0.2 27.6 0.7 2.5 - 0.9 61.8
Marketing 13.2 2.6 10.4 7.0 0.9 - - 34.1
Depreciation
and amortisation 22.1 2.0 13.8 2.4 2.1 - 1.2 43.6
Other 19.7 0.6 19.6 1.6 3.6 0.1 2.9 48.1
---------------------- ------------ --------- -------- --------- -------- --------- --------- -------
Total costs
before exceptional
items 316.3 11.3 195.7 33.1 27.1 0.4 22.2 606.1
---------------------- ------------ --------- -------- --------- -------- --------- --------- -------
Cost of sales 380.0
Operating
costs 226.1
---------------------- ------------ --------- -------- --------- -------- --------- --------- -------
Total costs
before exceptional
items 606.1
---------------------- ------------ --------- -------- --------- -------- --------- --------- -------
3. Exceptional items
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
------------------------------------------------ ------------ ------------
Exceptional items relating to continuing
operations
Impairment charges (1.2) (12.9)
Impairment reversals 3.1 1.5
Net charge to provisions for property leases (1.5) (6.6)
Closure of venues 1.7 (0.7)
Acquisition and integration costs - (1.7)
Net charge to provision for indirect taxation - (26.1)
------------------------------------------------ ------------ ------------
Exceptional operating income (costs) 2.1 (46.5)
Finance costs (see note 4) (1.3) (4.3)
Finance income (see note 4) - 1.8
Taxation (see note 5) 1.3 13.6
Exceptional items relating to continuing
operations 2.1 (35.4)
------------------------------------------------ ------------ ------------
Exceptional items relating to discontinued
operations
Finance costs (see note 4) (0.4) (0.3)
Finance income (see note 4) - 0.3
Taxation (see note 5) 16.2 2.8
------------------------------------------------ ------------ ------------
Exceptional items relating to discontinued
operations 15.8 2.8
------------------------------------------------ ------------ ------------
Total exceptional items 17.9 (32.6)
------------------------------------------------ ------------ ------------
Continuing operations - year ended 30 June 2015
Impairment charges
The Group recognised impairment charges of GBP1.2m of which
GBP0.6m relates to a Grosvenor Casinos venue and GBP0.6m to two
Mecca venues. Performance at these venues has not been in line with
expectations.
Impairment reversals
The Group reversed previous impairment charges of GBP0.7m in the
UK, GBP0.3m of which related to a Grosvenor Casinos venue and
GBP0.4m of which related to a Mecca venue. The reversal was in
respect of venues where changes in the commercial environment had
led to improvements in performance.
A further reversal of GBP0.8m was made in respect of a casino in
Belgium which has shown continued improved performance above
expectations.
A further reversal of GBP1.6m was recognised in respect of an
Enracha venue which has shown continued improved performance
following a competitor closure.
Net charge to provisions for property leases
The Group recognised a net charge of GBP1.5m in relation to
provision for property leases in the year. This included a charge
of GBP1.1m in two Grosvenor Casinos venues and GBP1.0m in respect
of a Mecca venue for unavoidable dilapidations costs and where
expected income no longer exceeds the unavoidable costs associated
with these sites.
In addition a reversal of GBP0.6m has been made in respect of a
Grosvenor Casinos venue where the provision has been reduced due to
expected sublet income.
Further movements in the property lease provision are explained
under closure of venues below.
Closure of venues
During the year the Group has closed, or committed to close,
twelve venues. Nine of these venues are in Mecca, two are in
Grosvenor Casinos and one is in Enracha. The credit in the period
includes a reduction in the property lease provision required at
two of these venues of GBP2.3m, an increase in the restructuring
provision of GBP0.5m at three venues which are due to close in
early 2015/16, an increase in the property lease provision for
dilapidations of GBP0.7m at a single venue, and a profit on
disposal of a freehold property of GBP0.6m.
4. Financing
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
----------------------------------------------- ------------ ------------
Continuing operations:
Finance costs:
Interest on debt and borrowings (5.7) (6.4)
Amortisation of issue costs on borrowings (2.5) (1.5)
Interest payable on finance leases (0.9) (1.0)
Unwinding of discount in property lease
provisions (1.2) (1.1)
Unwinding of discount in disposal provisions (0.1) (0.1)
----------------------------------------------- ------------ ------------
Total finance costs (10.4) (10.1)
Finance income:
Interest income on short term bank deposits 0.2 0.1
Interest income on direct taxation 0.2 -
----------------------------------------------- ------------ ------------
Total finance income 0.4 0.1
Other financial (losses) gains (0.3) 1.0
Total net financing charge for continuing
operations before exceptional items (10.3) (9.0)
Exceptional finance costs (1.3) (4.3)
Exceptional finance income - 1.8
Total net financing charge for continuing
operations (11.6) (11.5)
----------------------------------------------- ------------ ------------
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Discontinued operations:
Exceptional finance costs (0.4) (0.3)
Exceptional finance income - 0.3
Total net financing charge for discontinued
operations (0.4) -
----------------------------------------------- ------------ ------------
Total net financing charge (12.0) (11.5)
----------------------------------------------- ------------ ------------
Exceptional finance costs recognised in continuing operations in
the year of GBP1.3m are in respect of tax balances provided
for.
Exceptional finance costs recognised in discontinued operations
in the year of GBP0.4m relate to the cost of a letter of credit
held in respect of taxation balances on disposed entities.
A reconciliation of total net financing charge for continuing
operations before exceptional items to adjusted net interest
included in adjusted profit is disclosed below:
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
----------------------------------------------- ------------ ------------
Total net financing charge for continuing
operations before exceptional items (10.3) (9.0)
Adjust for :
Unwinding of discount in disposal provisions 0.1 0.1
Other financial losses (gains) - including
foreign exchange 0.3 (1.0)
Adjusted net interest payable (9.9) (9.9)
----------------------------------------------- ------------ ------------
5. Taxation
Year ended 30 June 2015
---------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
------------------------------------- ------------- -------------- --------
Current income tax
Current income tax - UK (10.0) - (10.0)
Current income tax - overseas (2.7) - (2.7)
Current income tax on exceptional
items 1.1 0.1 1.2
Amounts over provided in previous
period 0.7 - 0.7
Amounts over provided in previous
period on exceptional items 0.4 16.1 16.5
Total current income tax (charge)
credit (10.5) 16.2 5.7
------------------------------------- ------------- -------------- --------
Deferred tax
Deferred tax - UK (3.7) - (3.7)
Deferred tax - overseas (0.1) - (0.1)
Restatement of deferred tax due
to rate change 0.2 - 0.2
Deferred tax on exceptional items (0.2) - (0.2)
Amounts under provided in previous
period (1.2) - (1.2)
Total deferred tax charge (5.0) - (5.0)
------------------------------------- ------------- -------------- --------
Tax (charge) credit in the income
statement (15.5) 16.2 0.7
------------------------------------- ------------- -------------- --------
Year ended 30 June 2014
---------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
------------------------------------- ------------- -------------- --------
Current income tax
Current income tax - UK (12.4) - (12.4)
Current income tax - overseas (0.4) - (0.4)
Current income tax on exceptional
items 7.8 - 7.8
Amounts over provided in previous
period 5.0 2.8 7.8
Amounts over provided in previous
period on exceptional items 2.3 - 2.3
Total current income tax credit 2.3 2.8 5.1
------------------------------------- ------------- -------------- --------
Deferred tax
Deferred tax - UK (1.3) - (1.3)
Deferred tax - overseas (0.3) - (0.3)
Restatement of deferred tax due
to rate change 2.6 - 2.6
Deferred tax on exceptional items 3.5 - 3.5
Amounts under provided in previous
period (3.8) - (3.8)
Total deferred tax credit 0.7 - 0.7
------------------------------------- ------------- -------------- --------
Tax credit in the income statement 3.0 2.8 5.8
------------------------------------- ------------- -------------- --------
Tax on exceptional items - continuing operations
The taxation impacts of continuing exceptional items are
disclosed below:
Year ended 30 June Year ended 30 June
2015 2014
------------------------------ ------------------------------
Current Current
income Deferred income Deferred
tax tax Total tax tax Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- ---------- ------- --------- ---------- -------
Impairment charges - 0.1 0.1 - 3.1 3.1
Impairment reversals - (0.6) (0.6) - - -
Net charge to provisions
for property leases 0.3 - 0.3 0.9 0.4 1.3
Acquisition and integration
costs - - - 0.1 - 0.1
Closure of venues 0.5 0.3 0.8 0.1 - 0.1
Net charge to provision
for indirect taxation - - - 5.9 - 5.9
Exceptional finance
costs 0.3 - 0.3 1.0 - 1.0
Exceptional finance
income - - - (0.2) - (0.2)
Amounts over provided
in respect of previous
years 0.4 - 0.4 2.3 - 2.3
Tax credit (charge)
on exceptional items
- continuing operations 1.5 (0.2) 1.3 10.1 3.5 13.6
------------------------------ --------- ---------- ------- --------- ---------- -------
Tax on exceptional items - discontinued operations
The taxation impacts of discontinued exceptional items are
disclosed below:
Year ended 30 June Year ended 30 June
2015 2014
------------------------------ ------------------------------
Current Current
income Deferred income Deferred
tax tax Total tax tax Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- ---------- ------- --------- ---------- -------
Tax refunds arising
on previously disposed
subsidiary undertakings - - - - 2.8 2.8
Net release of provisions
relating to overseas
tax audits 16.1 - 16.1 - - -
Exceptional finance
costs 0.1 - 0.1 - - -
---------------------------- --------- ---------- ------- --------- ---------- -------
Tax credit on exceptional
items - discontinued
operations 16.2 - 16.2 - 2.8 2.8
---------------------------- --------- ---------- ------- --------- ---------- -------
The GBP16.1m exceptional tax credit in discontinued operations
in respect of provisions relating to overseas tax audits consists
of the release from income tax payable of GBP16.9m following the
successful resolution of a transfer pricing dispute, offset by
income tax payable of GBP0.8m in relation to an overseas audit of a
disposed entity.
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Tax effect of items within other comprehensive income
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
------------------------------------------------------- ------------ ------------
Current income tax charge on exchange movements
offset in reserves (0.4) (0.2)
Deferred tax credit on actuarial movement
on retirement benefits 0.1 0.1
------------------------------------------------------- ------------ ------------
Total tax charge on items within other comprehensive
income (0.3) (0.1)
------------------------------------------------------- ------------ ------------
The credit in respect of employee share schemes included within
the Statement of Changes in Equity includes a deferred tax credit
of GBPnil (year ended 30 June 2014: charge of GBP0.3m on the debit
in respect of employee share schemes).
Factors affecting future taxation
UK corporation tax is calculated at 20.75% (year ended 30 June
2014: 22.5%) of the estimated assessable profit for the period.
Taxation for overseas operations is calculated at the local
prevailing rates.
On 20 March 2013, the Chancellor of the Exchequer announced the
reduction in the main rate of UK corporation tax to 21% with effect
from 1 April 2014 and a further 1% reduction to 20% from 1 April
2015. These changes were substantively enacted in July 2013.
On 20 June 2014, the Spanish Government announced the reduction
in the corporation tax rate in Spain from 30% to 28% for financial
years beginning in 2015 and to 25% for financial years beginning in
2016. These changes were substantively enacted in November
2014.
6. Dividends
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
------------------------------------------------ ------------ ------------
Dividends paid to equity holders
Final dividend for 2012/13 paid on 23 October
2013 - 2.85p per share - 11.1
Interim dividend for 2013/14 paid on 21 March
2014 - 1.35p per share - 5.3
Final dividend for 2013/14 paid on 22 October
2014 - 3.15p per share 12.3 -
Interim dividend for 2014/15 paid on 20 March
2015 - 1.60p per share 6.3 -
------------------------------------------------ ------------ ------------
18.6 16.4
------------------------------------------------ ------------ ------------
A final dividend in respect of the year ended 30 June 2015 of
4.00p per share, amounting to a total dividend of GBP15.6m, is to
be recommended at the annual general meeting on 15 October 2015.
The financial information does not reflect this dividend
payable.
7. 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, unwinding of
the discount in disposal provisions 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 the adjusted earnings measure assists in
providing a view of the underlying performance of the business.
Adjusted net earnings attributable to equity shareholders is
derived as follows:
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
----------------------------------------------- ------------ ------------
Profit attributable to equity shareholders 74.8 20.2
Adjust for:
Discontinued operations (net of taxation) (15.8) (2.8)
Exceptional items after tax on continuing
operations (2.1) 35.4
Other financial losses (gains) 0.3 (1.0)
Unwinding of discount in disposal provisions 0.1 0.1
Taxation on adjusted items and impact of
reduction in tax rate (0.2) (3.3)
----------------------------------------------- ------------ ------------
Adjusted net earnings attributable to equity
shareholders (GBPm) 57.1 48.6
Adjusted earnings per share (p) - basic 14.6p 12.4p
Adjusted earnings per share (p) - diluted 14.6p 12.4p
----------------------------------------------- ------------ ------------
8. Provisions
Property
Indirect
lease Disposal Restructuring tax
provisions provisions provisions provision Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------ ------------ --------------- ----------- -------
At 1 July 2014 52.8 4.6 0.9 1.2 59.5
Exchange adjustments (0.1) 0.2 - - 0.1
Unwinding of discount 1.2 0.1 - - 1.3
Charge to the income
statement - exceptional 2.8 - 0.5 - 3.3
Release to the income
statement - exceptional (2.9) - - - (2.9)
Utilised in year (6.2) (0.6) (0.9) - (7.7)
--------------------------- ------------ ------------ --------------- ----------- -------
At 30 June 2015 47.6 4.3 0.5 1.2 53.6
--------------------------- ------------ ------------ --------------- ----------- -------
Current 6.2 1.0 0.5 1.2 8.9
Non-current 41.4 3.3 - - 44.7
--------------------------- ------------ ------------ --------------- ----------- -------
Total 47.6 4.3 0.5 1.2 53.6
--------------------------- ------------ ------------ --------------- ----------- -------
Further details of the exceptional charge and release to the
income statement are provided in note 3.
9. Borrowings to net debt reconciliation
Under IFRS, accrued interest and unamortised facility fees are
classified as loans and borrowings. A reconciliation of loans and
borrowings disclosed in the balance sheet to the Group's net debt
position is provided below:
As at As at
30 June 30 June
2015 2014
GBPm GBPm
------------------------------------ ---------- ----------
Total loans and borrowings (143.1) (183.9)
Less: accrued interest 0.7 1.1
Less: unamortised facility fees (0.1) (1.3)
------------------------------------ ---------- ----------
(142.5) (184.1)
Add: cash and short-term deposits 89.6 47.1
------------------------------------ ---------- ----------
Net debt (52.9) (137.0)
------------------------------------ ---------- ----------
10. Cash generated from operations
Year ended Year ended
30 June 30 June
2015 2014
GBPm GBPm
---------------------------------------------------- ------------ ------------
Continuing operations
Operating profit 86.1 25.9
Exceptional items (2.1) 46.5
---------------------------------------------------- ------------ ------------
Operating profit before exceptional items 84.0 72.4
Depreciation and amortisation 42.3 43.6
Share based payments 1.1 (0.5)
Loss on disposal of property, plant and equipment 0.3 0.3
Loss on disposal of intangible assets 0.5 -
Impairment of property, plant and equipment 0.5 -
Decrease in inventories 0.3 0.2
Decrease (increase) in other receivables 1.8 (1.1)
Increase (decrease) in trade and other payables 23.7 (7.7)
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