TIDMRNK
RNS Number : 4373D
Rank Group PLC
29 January 2015
29 January 2015
The Rank Group Plc ("Rank" or the "Group")
Half-year results for the six months ended 31 December 2014
Financial highlights in the six months ended 31 December
2014
H1 2014/15 H1 2013/14 Change
(unaudited) (unaudited)
---------------------------------- -------------- -------------- --------
Group revenue GBP361.7m GBP352.4m 3%
---------------------------------- -------------- -------------- --------
Statutory revenue GBP343.3m GBP337.0m 2%
---------------------------------- -------------- -------------- --------
Group EBITDA before exceptional
items GBP62.1m GBP54.2m 15%
---------------------------------- -------------- -------------- --------
Group operating profit before
exceptional items GBP40.8m GBP32.7m 25%
---------------------------------- -------------- -------------- --------
Adjusted profit before tax GBP35.8m GBP27.7m 29%
---------------------------------- -------------- -------------- --------
Adjusted earnings per share 7.1p 5.3p 34%
---------------------------------- -------------- -------------- --------
Cash inflow from operations GBP72.8m GBP49.7m 46%
---------------------------------- -------------- -------------- --------
Net debt GBP94.9m GBP135.1m 30%
---------------------------------- -------------- -------------- --------
Dividend per share 1.60p 1.35p 19%
---------------------------------- -------------- -------------- --------
Key highlights
-- H1 operating profit up 25% with all brands improving period-on-period
-- Strong digital growth with revenue up 16% and operating profit up 75%
-- Improving performance across both Grosvenor Casinos and Mecca
-- New digital platform provider Bede Gaming appointed
-- New management team in place
-- Bingo duty reduction enabled investment into Mecca venues and customer prizes
-- Substantial deleveraging in the period with cash inflow from operations up 46%
-- Strong dividend growth with interim dividend of 1.60p, up 19% on 2013/14
-- Adjusted EPS up 34%
Henry Birch, chief executive of The Rank Group Plc said:
"I am very pleased to be announcing a strong set of results with
operating profit (before exceptional items) up 25%, following
improvements across all parts of the business which has driven a
19% increase in our interim dividend. We have continued our focus
on improving our digital business and this strategy has resulted in
a 16% increase in digital revenues and 75% increase in operating
profit. To further strengthen our offer in this important channel,
we have today announced an agreement with Bede Gaming to supply our
new core digital platform which will ensure the Group has a
flexible and modern platform to build on."
"The first half saw three senior management appointments
including two managing directors to lead Mecca and Grosvenor
Casinos, and the newly created role of Group Director of Digital
and Cross-Channel Services. These appointments further strengthen
the Group's management team and ensure that we are well placed to
take advantage of future growth."
"During the period, we opened a new Grosvenor Casino in Southend
and completed the refurbishment of our Bournemouth casino. This was
combined with a 42% increase in Mecca venue maintenance following
the reduction in bingo duty from 20% to 10%. The Group's venue
maintenance and development programme remains very busy in the
second half and beyond into 2015/16. Rank remains in a strong
financial position, possesses market-leading brands and has a clear
strategy for long term growth. As a result, the Board continues to
look to the future with confidence."
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;
-- "H1 2014/15" refers to the unaudited six month period to 31
December 2014 and "H1 2013/14" refers to the unaudited six month
period to 31 December 2013; 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 29 January 2015
There will be an analyst meeting at 9.30am, admittance to which
is by invitation only. The presentation will also be accessible via
a live webcast, details of which can be found 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
During the six months to 31 December 2014, Rank has grown both
revenue, up 3%, and operating profit, up 25%.
Venues revenue grew by 1% and digital by 16% (desktop down 4%
and mobile up 87%). Like-for-like revenue for the Group grew by
4%.
GBPm Revenue* Operating profit**
-------------------- -------------------------- ---------------------------
H1 2014/15 H1 2013/14 H1 2014/15 H1 2013/14
-------------------- ------------ ------------ ------------- ------------
Grosvenor Casinos 205.6 194.2 31.0 28.2
Venues 195.7 188.4 29.1 29.1
Digital 9.9 5.8 1.9 (0.9)
-------------------- ------------ ------------ ------------- ------------
Mecca 143.3 143.5 22.9 13.9
Venues 111.8 113.7 14.5 7.1
Digital 31.5 29.8 8.4 6.8
-------------------- ------------ ------------ ------------- ------------
Enracha 12.8 14.7 0.9 0.3
-------------------- ------------ ------------ ------------- ------------
Central costs (14.0) (9.7)
-------------------- ------------ ------------ ------------- ------------
Total 361.7 352.4 40.8 32.7
-------------------- ------------ ------------ ------------- ------------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items
Grosvenor Casinos' revenue increased 6% in the period to
GBP205.6m principally driven by the investments made in the
acquired estate from Gala Coral and the progress made in its
digital channel. Total operating profit rose by 10% to GBP31.0m.
Venues operating profit was flat in the period due to a weaker win
margin and certain one off costs.
Mecca's revenue was marginally down with improvements in its
digital channel being offset by the brand's venues performance.
Total operating profit rose by 65% to GBP22.9m driven by the cost
actions taken in H2 2013/14 and the reduction in bingo duty from
20% to 10%. The period saw a substantial reduction in the rate in
revenue and visits decline.
Enracha's euro revenue decreased by 6% as customer visits fell
by 9% following the closure of two loss making venues. Sterling
operating profit rose by GBP0.6m.
Central costs increased by 44% to GBP14.0m principally due to
higher IT, bonus and redundancy costs and a number of one-off
credits in the prior period.
During the period Rank invested GBP15.8m of capital across the
Group with more than 60% deployed in our Grosvenor Casinos
business.
The Group's adjusted net financing charge of GBP5.0m was in line
with the prior period.
Adjusted earnings per share increased by 34% to 7.1p.
Exceptional items relating to continuing operations were GBP1.4m
in the period and further detail can be found in note 3.
Group key performance indicators (KPIs)
H1 2014/15 H1 2013/14
------------------------- ------------ ------------
Customers* (000s) 2,830 2,734
------------------------- ------------ ------------
Customer visits (000s) 13,882 13,803
------------------------- ------------ ------------
*Unique customers shown on a moving annual total ('MAT')
basis
Dividend
The board is pleased to declare an interim dividend of 1.60
pence per share, an increase of 19% over the prior period. The
dividend will be paid on 20 March 2015 to shareholders on the
register at 13 February 2015.
Taxation
From 30 June 2014, bingo duty was reduced from 20% to 10% and
resulted in a GBP5.6m tax reduction in the period.
From 1 December 2014, Remote Gaming Duty at 15% was applied to
all online gambling revenue generated by customers in the UK. The
cost to the Group in H1 2014/15 was GBP0.8m.
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 to appeal and the appeal will be held on 21 April 2015.
If successful Rank will be entitled to a repayment of GBP25.2m.
Investment into bingo venues
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 period:
1. Investment in facilities
o Bingo venue refurbishment programme recommenced, GBP0.5m
invested in H1 with GBP1.4m forecasted for H2;
o Group remains committed to investing in three new bingo venues
and new site searches are underway;
o Research programmes commenced to identify a new club format
and customer demographic;
o Maintenance expenditure increased by 42% to GBP1.1m; and
o Wi-Fi upgraded in venues to enhance customer experience.
2. Improved value to customers
o Reduced main stage bingo pricing resulted in an average
customer saving of GBP2.16 per visit in H1 2014/15; and
o GBP0.8m was provided in enhanced customer prizes.
3. Improvements in product
o 1,000 additional handheld units purchased;
o Trial of next generation handheld units commenced; and
o Commitment signed for 1,000 new server based gaming slot
machines and the upgrade of another 1,367 units.
New digital platform
The Group has signed an agreement with Bede Gaming for the
supply of a new core digital platform. The rationale for a new
platform is to give greater control, flexibility and speed in
integrating third party and retail content and functionality. The
Group believes that over the course of time the new platform will
improve customer yields by allowing improved CRM and analytics
capability. As part of a platform migration Rank will continue to
work with its existing product and content suppliers such as
Playtech, IGT, Novomatic and Evolution Gaming. Alongside a platform
agreement, Rank has the option to make an equity investment in Bede
Gaming via a convertible loan.
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%. The UKLA has reserved the right to revoke or further
alter this modification at any time.
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 will be
responsible for the integration and delivery of Rank's
multi-channel offer.
During H1 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.
Management incentivisation
The Board will shortly commence a consultation with its major
shareholders on a new Long Term Incentivisation Plan for its senior
management team.
Current trading and outlook
Trading in the short four week period since the start of the
second half has been in line with our internal expectations and
follows the trends seen in the first half of the year.
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 focused on building
engaging brands with the ability to deliver them via the channels
that customers prefer - whether venues, online or mobile. We will
focus in particular on building engagement with customers across
multiple channels, where research tells us we are likely to
generate more durable and valuable customer relationships.
Progress made during H1 against the Group's strategic objectives
was as follows:
Creating a
compelling * Following a successful trial in ten venues Mecca has
multi-channel committed to roll-out server based gaming across the
offer entire venues estate. In partnership with Global
Draw/Videobet the roll-out is expected to be
completed by the end of FY 2014/15
---------------------- -------------------------------------------------------------
Building digital
capability * The Group has signed an agreement with Bede Gaming to
supply its new core digital platform
* Strengthened digital management team
* New Mecca iPad app launched with multi-room bingo
capabilities and exclusive slot content
---------------------- -------------------------------------------------------------
Developing
our venues * Approximately GBP4.3m of capital has been approved to
expand Grosvenor Casino's Luton venue to accommodate
the recently awarded 2005 Act licence. The work is
expected to be completed by September 2015
* Grosvenor Casinos was successful in progressing to
stage two of the licensing process for the new
Southampton 2005 Act licence. The licence award is
expected early 2016
* A new Grosvenor Casino in Southend was opened on 25
September 2014 at a capital cost of GBP6.3m
* The refurbishment of the Bournemouth casino was
completed in December 2014 at a total capital cost of
GBP1.3m
* In December 2014, an electronic casino was opened
adjacent to Mecca's venue in Oldbury. The casino
licence had previously been unused by the Group
* Following the bingo duty reduction Mecca has
increased its venues maintenance by 42% in the period
to improve the look and feel of the estate
---------------------- -------------------------------------------------------------
Investing in
our brands * A new marketing agency has been appointed for Mecca,
and marketing with a Grosvenor Casinos review under way. Both
brands will be running new TV campaigns in H2
2014/15. Where we have seen a return on our
investment, marketing investment has been gradually
increased
---------------------- -------------------------------------------------------------
Using technology
to drive efficiency * GBP0.6m was spent in the period to improve Mecca's
and improve handheld gaming units. This included the addition of
customer experience 1,000 new units across the estate
* Grosvenor Casinos completed a detailed review of its
labour scheduling during the period. The review
resulted in a GBP0.7m reduction in labour costs
* IT operations were outsourced to provide 24/7 support
---------------------- -------------------------------------------------------------
Business review
Grosvenor Casinos
Grosvenor Casinos has produced a solid performance during the
six months to 31 December 2014. Strong digital growth and good
venues growth was offset by a weaker venue win margin and certain
one off costs.
H1 2014/15 H1 2013/14 Change
--------------------------- ------------ ------------ --------
Total revenue* (GBPm) 205.6 194.2 6%
--------------------------- ------------
* Venues 195.7 188.4 4%
--------------------------- ------------
* Digital 9.9 5.8 71%
--------------------------- ------------
Total EBITDA** (GBPm) 43.8 39.8 10%
--------------------------- ------------ ------------ --------
* Venues 41.2 39.7 4%
--------------------------- ------------ ------------ --------
* Digital 2.6 0.1 2500%
--------------------------- ------------ ------------ --------
Total operating profit**
(GBPm) 31.0 28.2 10%
--------------------------- ------------
* Venues 29.1 29.1 0%
--------------------------- ------------
* Digital 1.9 (0.9) 311%
--------------------------- ------------ ------------ --------
Like-for-like revenue 5%
--------------------------- ------------
* Venues 3%
--------------------------- ------------
* Digital 71%
--------------------------- ------------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items
Returns on the capital invested in the acquired casinos from
Gala Coral contributed to a 4% increase in total venues revenue
despite win margin being marginally below that seen in the
comparable period. An on-going disagreement with HMRC regarding the
calculation of irrecoverable VAT resulted in a GBP1.2m increase in
VAT charged in the period (GBP0.8m relating to the prior year) and
higher operating costs removed the benefit of the higher
revenues.
The digital brand continued to grow strongly in the period, with
revenue up 71%, driven by an increase in customers and improved
customer management. Digital delivered a profit of GBP1.9m.
Key performance indicators
H1 2014/15 H1 2013/14
-------------------------- ------------ ------------
Total customers (000s)* 1,766 1,737
-------------------------- ------------ ------------
* Venues 1,743 1,713
-------------------------- ------------ ------------
* Digital 54 42
-------------------------- ------------ ------------
Total customer visits
(000s) 4,417 4,282
-------------------------- ------------ ------------
* Venues 4,147 4,082
-------------------------- ------------ ------------
* Digital 270 200
-------------------------- ------------ ------------
Total spend per visit
(GBP) 46.55 45.35
-------------------------- ------------ ------------
* Venues 47.19 46.15
-------------------------- ------------ ------------
* Digital 36.67 29.00
-------------------------- ------------ ------------
* Customers shown on a moving annual total ('MAT') basis and
cross-over customers included only once
Customer numbers increased across both channels in the period
with total brand customers up 2%. The numbers of customers playing
both in our casinos and online increased by 72% driven by venues
led cross-channel promotional activity.
A new casino in Southend was opened on 25 September 2014 at a
total capital cost of GBP6.3m and the GBP1.3m refurbishment of the
Bournemouth casino was completed in December 2014. The new Southend
casino is trading in line with management's expectations.
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)
------------ ------------------------ ------------------------ ------------------------ --------------------------
H1 H1 H1 H1 H1 H1 H1 2014/15 H1 2013/14
2014/15 2013/14 2014/15 2013/14 2014/15 2013/14
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
London 757 729 94.06 89.85 71.2 65.5 16.3 13.9
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Provinces 3,251 3,202 36.20 36.04 117.7 115.4 12.6 15.2
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Belgium 139 151 48.92 49.67 6.8 7.5 0.2 -
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Total 4,147 4,082 47.19 46.15 195.7 188.4 29.1 29.1
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
An increase in customer visits and handle contributed to a 9%
increase in London revenues. Provincial revenue increased by 2% due
to higher customer visits. Provincial profit has been adversely
impacted by the increase in irrecoverable VAT, start-up losses at
Southend, the lower win margin and a number of costs that will not
recur in H2. Grosvenor Casinos' provincial estate remains a key
player in the UK's provincial market with a market share of circa
45%.
Venues revenue analysis - UK only
GBPm H1 2014/15 H1 2013/14 Change
--------------------- ------------ ------------ --------
Casino games 127.3 124.2 2%
--------------------- ------------ ------------ --------
Gaming machines 38.8 35.4 10%
--------------------- ------------ ------------ --------
Card room games 7.8 7.1 10%
--------------------- ------------ ------------ --------
Food & drink/other 15.0 14.2 6%
--------------------- ------------ ------------ --------
Total 188.9 180.9 4%
--------------------- ------------ ------------ --------
Gaming machine revenue was up 10% in the period driven by
product improvements in the slot machine estate. A full six months'
contribution from the London Poker Room (opened November 2013)
contributed to a 10% increase in card room games revenue.
Mecca
Total brand revenue was marginally down in the period as gains
in the digital channel were offset by a decline in venues revenue
following the closure of three venues in the period.
H1 2014/15 H1 2013/14 Change
--------------------------- ------------ ------------ --------
Total revenue* (GBPm) 143.3 143.5 0%
--------------------------- ------------
* Venues 111.8 113.7 (2)%
--------------------------- ------------
* Digital 31.5 29.8 6%
--------------------------- ------------
Total EBITDA** (GBPm) 29.9 22.2 35%
--------------------------- ------------ ------------ --------
* Venues 20.8 14.3 45%
--------------------------- ------------ ------------ --------
* Digital 9.1 7.9 15%
--------------------------- ------------ ------------ --------
Total operating profit**
(GBPm) 22.9 13.9 65%
--------------------------- ------------
* Venues 14.5 7.1 104%
--------------------------- ------------ ------------ --------
* Digital 8.4 6.8 24%
--------------------------- ------------ ------------ --------
Like-for-like revenue 1%
--------------------------- ------------
* Venues (1)%
--------------------------- ------------
* Digital 6%
--------------------------- ------------
* before adjustments for free bets, promotions and customer
bonuses; ** before exceptional items
Venues revenue of GBP111.8m was marginally down in the period. A
weather affected comparable period and a decline in H1 2014/15
customers resulted in a less than 1% decline in like-for-like
revenue in the period. Operating profit increased by 104% following
cost reductions implemented in H2 2013/14 and the estimated benefit
of the reduction in bingo duty (GBP3.6m).
The Group remains committed to opening three new venues
following the reduction in bingo duty. Searches for news sites are
underway and potential new concepts are being developed. As part of
Mecca's drive to create a more profitable and sustainable estate
three planned closures of loss-making venues were completed in the
period with two further loss-making venues due to close in H2
2014/15.
Digital revenues increased by 6% to GBP31.5m as customer numbers
increased and customer retention improved driven by a more
competitive sign up bonus and the recent TV campaign. Operating
profit increased by 24% to GBP8.4m.
Key performance indicators
H1 2014/15 H1 2013/14
-------------------------- ------------ ------------
Total customers (000s)* 1,105 1,107
-------------------------- ------------ ------------
* Venues 938 940
-------------------------- ------------ ------------
* Digital 243 234
-------------------------- ------------ ------------
Total customer visits
(000s) 8,562 8,532
-------------------------- ------------ ------------
* Venues 5,993 6,209
-------------------------- ------------ ------------
* Digital 2,569 2,323
-------------------------- ------------ ------------
Total spend per visit
(GBP) 16.74 16.82
-------------------------- ------------ ------------
* Venues 18.66 18.31
-------------------------- ------------ ------------
* Digital 12.26 12.83
-------------------------- ------------ ------------
* Customers shown on a moving annual total ('MAT') basis and
cross-over customers included only once
The decline in venues customer visits slowed in the period, down
3%, compared to a 10% decline in the prior period. Spend per visit
increased by 2%.
Digital spend per visit decreased by 4% driven by the growth in
mobile and new customers.
Venues revenue analysis
GBPm H1 2014/15 H1 2013/14 Change
--------------------- ------------ ------------ --------
Main stage bingo 15.5 17.7 (12)%
--------------------- ------------ ------------ --------
Interval games 46.7 46.5 0%
--------------------- ------------ ------------ --------
Amusement machines 36.8 36.7 0%
--------------------- ------------ ------------ --------
Food & drink/other 12.8 12.8 0%
--------------------- ------------ ------------ --------
Total 111.8 113.7 (2)%
--------------------- ------------ ------------ --------
Following the reduction in the rate of bingo duty Mecca reduced
the level of participation fees charged to its customers.
Enracha
H1 2014/15 H1 2013/14 Change
------------------------ ------------ ------------ --------
Revenue (EUR m) 16.3 17.3 (6)%
------------------------ ------------
Revenue (GBPm) 12.8 14.7 (13)%
------------------------ ------------
EBITDA* (GBPm) 1.7 1.3 31%
------------------------ ------------ ------------ --------
Operating profit*
(GBPm) 0.9 0.3 200%
------------------------ ------------ ------------ --------
Like-for-like revenue 3%
------------------------ ------------
* before exceptional item
Like-for-like euro revenue was up 3%. Reductions in tax, tighter
cost control and the removal of two loss making venues contributed
to a higher operating profit.
Key performance indicators
H1 2014/15 H1 2013/14
------------------------- ------------ ------------
Customers (000s)* 250 278
------------------------- ------------ ------------
Customer visits (000s) 903 989
------------------------- ------------ ------------
Spend per visit (EUR) 18.05 17.49
------------------------- ------------ ------------
Spend per visit (GBP) 14.17 14.86
------------------------- ------------ ------------
* Customers shown on a moving annual total ('MAT') basis
Venues revenue analysis
EURm H1 2014/15 H1 2013/14 Change
--------------------- ------------ ------------ --------
Bingo 9.4 10.7 (12)%
--------------------- ------------ ------------ --------
Amusement machines 5.6 5.1 10%
--------------------- ------------ ------------ --------
Food & drink/other 1.3 1.5 (13)%
--------------------- ------------ ------------ --------
Total 16.3 17.3 (6)%
--------------------- ------------ ------------ --------
Upgraded product and improved promotions contributed to a 10%
increase in amusement machine euro revenue.
Financial review
Group revenue for the six-month period from continuing
operations rose by 3% to GBP361.7m while Group operating profit
before exceptionals of GBP40.8m was 25% higher than the comparable
period.
Adjusted net interest payable for the six months was in line
with the comparable period.
The Group's adjusted profit before tax was GBP35.8m, up 29%.
Adjusted earnings per share was up 34% period-on-period at
7.1p.
Taxation
The Group's effective corporation tax rate on continuing
operations was 22.9% (H1 2013/14: 25.3%) based on a tax charge of
GBP8.2m on adjusted profit before taxation. This is within the
Group's anticipated effective corporation tax rate range for
2014/15 of 22% to 24%.
The Group had a H1 effective cash tax rate of 11.5% on adjusted
profit after excluding a GBP8.9m repayment received in respect of
UK corporation tax overpaid in the prior year. The Group is
expected to have a cash tax rate of 15.0% to 17.5% in 2014/15,
excluding any tax payable on the resolution of a number of legacy
issues and the GBP8.9m repayment. This is lower than the Group's
effective corporation tax rate due to the utilisation of capital
allowances and the timing of corporation tax instalment
payments.
Rank's appeal to the Supreme Court concerning overpaid output
VAT on gaming machines will be heard on 21 April 2015. If
successful Rank will be entitled to a repayment of GBP25.2m.
As previously disclosed, the Group participated in a disclosed
tax avoidance scheme which has been included in the list of
Disclosure of Tax Avoidance Schemes ("DOTAS"). This scheme is being
challenged by HMRC and the case will be heard at a Tax Tribunal
later on this year, with another tax payer as lead case. Under tax
rules introduced last year, HMRC could request payment of the
amounts under dispute in advance of the Tax Tribunal. The amounts
in dispute are worth up to GBP22.0m and have already been fully
provided by the Group. The Group has not yet received any request
for payment.
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.
During the period the Group recognised the following exceptional
items:
-- A reduction in the onerous lease provision at two venues committed to close in H2 2014/15;
-- Onerous lease provision relating to the underperformance of one Mecca venue; and
-- A discontinued exceptional tax credit, mainly relating to the
release of a provision following the successful resolution of a
transfer pricing dispute.
Full details of the Group's exceptional items are provided in
notes 3 and 6.
Cash flow
H1 2014/15 H1 2013/14
GBPm GBPm
Continuing operations
Cash inflow from operations 72.8 49.7
Capital expenditure (15.8) (29.7)
Fixed asset disposals 1.5 0.2
Operating cash inflow 58.5 20.2
Discontinued operations - (0.4)
Net acquisitions and disposals (0.1) 0.9
Net cash payments in respect of provisions
and exceptional items (4.3) (2.9)
------------------------------------------------- ------------- -------------
54.1 17.8
Net interest and tax receipts (payments) 1.3 (5.5)
Settlement of legacy tax issues - (31.1)
Dividends paid (12.3) (11.1)
New finance leases - (2.3)
Other (including foreign exchange translation) (1.0) 0.9
------------------------------------------------- ------------- -------------
Cash inflow (outflow) 42.1 (31.3)
Opening net debt (137.0) (103.8)
------------------------------------------------- ------------- -------------
Closing net debt (94.9) (135.1)
------------------------------------------------- ------------- -------------
Financial structure and liquidity
At the end of December 2014, net debt was GBP94.9m compared with
net debt of GBP135.1m at the end of December 2013. The net debt
comprised GBP140.0m in bank term loans in respect of the
acquisition of the former Gala casinos, GBP9.2m in fixed rate
Yankee bonds, GBP13.4m in finance leases and GBP5.4m in overdrafts
offset by cash at bank and in hand of GBP73.1m.
The Group's banking facilities comprise two GBP70.0m bi-lateral
term loans and four GBP20.0m bi-lateral revolving credit facilities
with its relationship banks totalling GBP220.0m. 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 has a strong balance sheet with a conservative
leverage of 0.8 times net debt to EBITDA.
Capital expenditure
H1 2014/15 H1 2013/14
GBPm GBPm
---------------------------- ------------ -------------
Cash:
Continuing operations
Grosvenor Casinos 9.6 24.9
Mecca 4.7 3.7
Enracha 0.2 0.5
Central 1.3 0.6
---------------------------- ------------ -------------
15.8 29.7
Finance leases:
Mecca - 2.3
---------------------------- ------------ -------------
- 2.3
Total capital expenditure 15.8 32.0
---------------------------- ------------ -------------
During the six-month period, Rank invested GBP9.0m into its
Grosvenor Casino venues, with the majority being expended on the
newly-opened Southend casino (GBP4.0m) and the refurbishment of a
number of venues (GBP2.2m). The balance was principally spent on
continuing the roll out of the brand's loyalty scheme, Play Points,
across the acquired venues, upgrades to the IT systems and general
venues maintenance.
Mecca invested GBP3.5m into its venues. GBP1.2m was spent on
venue refurbishments and improvements to gaming product. The
balance was spent on upgrades to the IT systems and general venues
maintenance.
On developing our digital capability we invested a total of
GBP1.2m in Mecca and GBP0.6m in Grosvenor Casinos.
During H2 2014/15, we plan to spend circa GBP26.0m. Of this,
approximately GBP4.5m will be invested in Grosvenor Casinos venues,
which includes the commencement of works to our Luton casino to
accommodate the awarded 2005 Act licence. Approximately GBP4.1m
will be invested into Mecca's venues to continue the H1 programme
of improving the venues and gaming product. GBP4.2m will be spent
on enhancing our digital capability and GBP5.2m on group wide IT
investments. The balance of the capex spend will be on general
maintenance.
GBP2.2m of capital was committed at 31 December 2014.
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. Based on the Group's cash flow forecasts and operating
budgets, and assuming that trading does not deteriorate
considerably from those projected levels, the directors believe
that the Group will generate sufficient cash to meet its
requirements for at least the next 12 months and comply with its
banking covenants. Accordingly the adoption of the going concern
basis remains appropriate.
Principal risk and uncertainties
The Group's risk management strategy focuses on the minimisation
of risks for the Group. Key risks are reviewed by the executive
committee and board on a regular basis and, where appropriate,
actions are taken to mitigate the key risks that are identified.
The principal risks and uncertainties faced by the Group remain
those set out in the Group's annual report and financial statements
for the year ended 30 June 2014 and include:
-- Regulatory and tax risks;
-- Operational risks (new online gaming platform, volatility of
gaming win and loss of licences);
-- External events;
-- Business continuity and disaster recovery;
-- Wage rise inflation; and
-- Information Technology risks (IT outsourcing and reliance on technology).
Greater detail on these risks and uncertainties are set out in
pages 22 to 25 of the Group's 2014 annual report and financial
statements.
Directors' Responsibility Statement
The interim management report complies with the Disclosure Rules
and Transparency Rule ('DTR') of the United Kingdom's Financial
Services Authority in respect of the requirement to produce a
half-yearly financial report. The interim report is the
responsibility of, and has been approved by, the directors. We
confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared in accordance with IAS 34;
-- The interim management report includes a fair review of the
important events during the first six months and description of the
principal risk and uncertainties for the remaining six months of
the year, as required by DTR 4.2.7R; and
-- The interim management report and note 14 to the Group
financial information includes a fair review of disclosure of
related party transactions and changes therein, as required by
4.2.8R.
The directors of The Rank Group Plc are:
Ian Burke
Henry Birch
Clive Jennings
The Rt. Hon. the Earl of Kilmorey, PC
Owen O'Donnell
Tim Scoble
Shaa Wasmund
For and on behalf of the board on 28 January 2015.
Henry Birch Clive Jennings
Chief Executive Finance Director
INDEPENDENT REVIEW REPORT TO THE RANK GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2014 which comprises the Group Income
Statement, Group Statement of Comprehensive Income, Group Statement
of Changes in Equity, Group Balance Sheet, Group Cash Flow
Statement and the related explanatory notes. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
28 January 2015
Group Income Statement
for the six months to 31 December 2014
Six months to 31 December Six months to 31 December
2014 2013
(unaudited) (unaudited)
--------------------------------------- ---------------------------------------
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 361.7 - 361.7 352.4 - 352.4
Free bets, promotions
and customer bonuses (18.4) - (18.4) (15.4) - (15.4)
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Revenue 343.3 - 343.3 337.0 - 337.0
Cost of sales (182.8) - (182.8) (190.8) - (190.8)
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Gross profit 160.5 - 160.5 146.2 - 146.2
Other operating costs (119.7) 1.4 (118.3) (113.5) (27.3) (140.8)
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Group operating profit
(loss) 40.8 1.4 42.2 32.7 (27.3) 5.4
Financing:
- finance costs (5.4) - (5.4) (5.1) (8.2) (13.3)
- finance income 0.3 - 0.3 - 1.0 1.0
- other financial
(losses) gains (0.8) - (0.8) 0.7 - 0.7
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Total net financing
charge (5.9) - (5.9) (4.4) (7.2) (11.6)
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Profit (loss) before
taxation 34.9 1.4 36.3 28.3 (34.5) (6.2)
Taxation (8.0) - (8.0) (4.1) 8.8 4.7
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Profit (loss) for
the period from continuing
operations 26.9 1.4 28.3 24.2 (25.7) (1.5)
Discontinued operations - 16.0 16.0 - 2.8 2.8
Profit (loss) for
the period 26.9 17.4 44.3 24.2 (22.9) 1.3
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Attributable to:
Equity holders of
the parent 26.9 17.4 44.3 24.2 (22.9) 1.3
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Earnings (loss) per share attributable to equity shareholders
- basic 6.9 4.4 11.3 6.2 (5.9) 0.3
- diluted 6.9 4.4 11.3 6.2 (5.9) 0.3
Earnings (loss) per share - continuing operations
- basic 6.9 0.3 7.2 6.2 (6.6) (0.4)
- diluted 6.9 0.3 7.2 6.2 (6.6) (0.4)
Earnings per share - discontinued operations
- basic - 4.1 4.1 - 0.7 0.7
- diluted - 4.1 4.1 - 0.7 0.7
------------------------------ ------------- ------------- --------- ------------- ------------- ---------
Group Statement of Comprehensive Income
for the six months to 31 December 2014
Six months
Six month to to 31 December
31 December 2014 2013
(unaudited) (unaudited)
GBPm GBPm
-------------------------------------- ------------------- -----------------
Comprehensive income:
Profit for the period 44.3 1.3
Other comprehensive income:
Exchange adjustments net of
tax (1.1) (1.1)
Actuarial (loss) gain on retirement
benefits net of tax (0.4) 0.1
--------------------------------------
Total comprehensive income for
the period 42.8 0.3
-------------------------------------- ------------------- -----------------
Attributable to:
Equity holders of the parent 42.8 0.3
-------------------------------------- ------------------- -----------------
Group Statement of Changes in Equity
for the six months to 31 December 2014
For the six months to 31 December 2014 (unaudited)
-----------------------------------------------------------------------
Capital Exchange
Share Share redemption translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- --------- ------------ ------------- ---------- --------
At 1 July 2014 54.2 98.4 33.4 13.7 42.6 242.3
Comprehensive income:
Profit for the period - - - - 44.3 44.3
Other comprehensive
income:
Exchange adjustments
including tax - - - (1.1) - (1.1)
Actuarial loss on retirement
benefits net of tax - - - - (0.4) (0.4)
------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive
(expense) income for
the period - - - (1.1) 43.9 42.8
Transactions with owners:
Dividends paid to equity
holders (see note 7) - - - - (12.3) (12.3)
At 31 December 2014 54.2 98.4 33.4 12.6 74.2 272.8
------------------------------- --------- --------- ------------ ------------- ---------- --------
For the six months to 31 December 2013 (unaudited)
-----------------------------------------------------------------------
Capital Exchange
Share Share redemption translation Retained
capital premium reserve reserve earnings 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 period - - - - 1.3 1.3
Other comprehensive
income:
Exchange adjustments
including tax - - - (1.1) - (1.1)
Actuarial gain on retirement
benefits net of tax - - - - 0.1 0.1
------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive
(expense) income for
the period - - - (1.1) 1.4 0.3
Transactions with owners:
Dividends paid to equity
holders (see note 7) - - - - (11.1) (11.1)
Debit in respect of
employee share schemes
including tax - - - - (0.4) (0.4)
At 31 December 2013 54.2 98.4 33.4 15.0 29.7 230.7
------------------------------- --------- --------- ------------ ------------- ---------- --------
Group Balance Sheet
at 31 December 2014 and 30 June 2014
31 December 2014 30 June 2014
(unaudited)
GBPm GBPm
------------------------------------ ------------------ --------------
Assets
Non-current assets
Intangible assets 390.5 390.2
Property, plant and equipment 208.5 217.5
Deferred tax assets 2.2 2.5
Other receivables 3.2 3.1
------------------------------------ ------------------ --------------
604.4 613.3
Current assets
Inventories 3.2 3.1
Other receivables 22.9 31.1
Income tax receivable - 6.6
Cash and short-term deposits 73.1 47.1
------------------------------------ ------------------ --------------
99.2 87.9
Total assets 703.6 701.2
------------------------------------ ------------------ --------------
Liabilities
Current liabilities
Trade and other payables (115.9) (113.2)
Income tax payable (30.0) (40.3)
Financial liabilities -
loans and borrowings (8.7) (4.4)
Provisions (8.4) (10.5)
------------------------------------ ------------------ --------------
(163.0) (168.4)
Net current liabilities (63.8) (80.5)
------------------------------------ ------------------ --------------
Non-current liabilities
Trade and other payables (39.1) (40.5)
Financial liabilities -
loans and borrowings (159.2) (179.5)
Deferred tax liabilities (19.2) (18.1)
Provisions (46.5) (49.0)
Retirement benefit obligations (3.8) (3.4)
------------------------------------ ------------------ --------------
(267.8) (290.5)
Total liabilities (430.8) (458.9)
------------------------------------ ------------------ --------------
Net assets 272.8 242.3
------------------------------------ ------------------ --------------
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 12.6 13.7
Retained earnings 74.2 42.6
------------------------------------ ------------------ --------------
Total shareholders' equity 272.8 242.3
------------------------------------ ------------------ --------------
Group Cash Flow Statement
for the six months to 31 December 2014
Six months to Six months to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Cash generated from continuing operations 68.5 33.1
Interest received 0.3 -
Interest paid (4.2) (4.6)
Tax received (paid) 5.2 (12.3)
Discontinued operations - (6.4)
Net cash from operating activities 69.8 9.8
---------------------------------------------------- --------------- ---------------
Cash flows from investing activities
(Disposal) acquisition of subsidiary including
deferred consideration (0.1) 0.9
Purchase of intangible assets (3.5) (10.0)
Purchase of property, plant and equipment (12.3) (19.7)
Proceeds from sale of property, plant and
equipment 1.5 0.2
Net cash used in investing activities (14.4) (28.6)
---------------------------------------------------- --------------- ---------------
Cash flows from financing activities
Dividends paid to equity holders (12.3) (11.1)
Repayment of bilateral facilities (20.0) -
Drawdown on bilateral facilities - 28.0
Finance lease principal payments (1.6) (1.6)
Net cash (used in) from financing activities (33.9) 15.3
---------------------------------------------------- --------------- ---------------
Net increase (decrease) in cash, cash equivalents
and bank overdrafts 21.5 (3.5)
Effect of exchange rate changes (0.1) (0.3)
Cash and cash equivalents at start of period 46.3 61.9
Cash and cash equivalents at end of period 67.7 58.1
---------------------------------------------------- --------------- ---------------
1 General information, basis of preparation and accounting policies
The Company is a public limited company which is listed on the
London stock exchange and 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 interim financial information was
approved for issue on 28 January 2015.
This condensed consolidated financial information does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the 12 month period
ended 30 June 2014 were approved by the board of directors on 13
August 2014 and delivered to the Registrar of Companies. The report
of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain a statement
made under Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has
been reviewed but not audited.
Basis of preparation
This condensed consolidated interim financial information for
the six months ended 31 December 2014 has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with IAS34 'Interim financial
reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in
conjunction with the financial statements for the 12 month period
ended 30 June 2014, which have been prepared in accordance with
IFRSs 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. Based on the Group's cash flow forecasts and operating
budgets, and assuming that trading does not deteriorate
considerably from current levels, the directors believe that the
Group will generate sufficient cash to meet its requirements for at
least the next 12 months and comply with its banking covenants.
Accordingly the adoption of the going concern basis remains
appropriate.
Accounting policies
Except as described below, the accounting policies applied are
consistent with those of the financial statements for the 12 month
period ended 30 June 2014, as described in those financial
statements. The changes did not have any impact on the financial
position or performance of the Group.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The following new standards, amendments and interpretations are
mandatory for the first time for the financial period beginning 1
July 2014.
IFRS10 Consolidated Financial Statements
IFRS11 Joint Arrangements
IFRS12 Disclosure of Interests in Other Entities
IAS27 Separate Financial Statements (Revised)
IAS28 Investments in Associates and Joint Ventures (Revised)
IAS32 Financial Instruments: Presentation - offsetting Financial
Assets and Financial Liabilities (Amendment)
IAS36 Recoverable Amount Disclosures for Non-Financial Assets
IAS39 Novation of Derivatives and Continuation of Hedge Accounting (Amendment)
IFRIC21 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,
interpretation or amendment that was issued but is not yet
effective.
2 Segment information - continuing operations
Six months to 31 December 2014 (unaudited)
--------------------------------------------------------------------------------------
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 195.7 9.9 111.8 31.5 12.8 - - 361.7
Free bets, promotions
and customer bonuses (3.8) (2.1) (6.8) (5.7) - - - (18.4)
-------------------------- --------- ---------- -------- --------- -------- --------- ---------
Segment revenue 191.9 7.8 105.0 25.8 12.8 - - 343.3
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Operating profit
(loss) before
exceptional
items 29.1 1.9 14.5 8.4 1.2 (0.3) (14.0) 40.8
Exceptional operating
profit (loss) - - 1.9 - (0.5) - - 1.4
--------- ---------- -------- --------- -------- --------- --------- ------------
Segment result 29.1 1.9 16.4 8.4 0.7 (0.3) (14.0) 42.2
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Finance costs (5.4)
Finance income 0.3
Other financial
losses (0.8)
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Profit before taxation 36.3
Taxation (8.0)
Profit for the
period from continuing
operations 28.3
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Six months to 31 December 2013 (unaudited)
--------------------------------------------------------------------------------------
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 188.4 5.8 113.7 29.8 14.7 - - 352.4
Free bets, promotions
and customer bonuses (2.2) (1.3) (6.9) (5.0) - - - (15.4)
--------------------------
Segment revenue 186.2 4.5 106.8 24.8 14.7 - - 337.0
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Operating profit
(loss) before
exceptional
items 29.1 (0.9) 7.1 6.8 0.5 (0.2) (9.7) 32.7
Exceptional operating
loss (4.9) - (22.4) - - - - (27.3)
Segment result 24.2 (0.9) (15.3) 6.8 0.5 (0.2) (9.7) 5.4
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Finance costs (13.3)
Finance income 1.0
Other financial
gains 0.7
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
Loss before taxation (6.2)
Taxation 4.7
Loss for the period
from continuing
operations (1.5)
-------------------------- --------- ---------- -------- --------- -------- --------- --------- ------------
2 Segment information - continuing operations (continued)
To increase transparency, the Group continues to include
additional disclosure analysing total costs by type and segment. A
reconciliation of total costs, before exceptional items, by type
and segment is as follows:
Six months to 31 December 2014 (unaudited)
-----------------------------------------------------------------------------------
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 68.8 1.5 26.9 3.1 6.4 0.1 8.7 115.5
Taxes and duties 41.4 0.2 17.7 0.7 0.9 - 1.1 62.0
Direct costs 6.9 2.3 11.4 7.3 1.0 0.2 - 29.1
Property costs 15.0 0.1 13.7 0.2 0.8 - 0.5 30.3
Marketing 7.3 0.9 5.3 4.9 0.4 - - 18.8
Depreciation
and amortisation 12.1 0.7 6.3 0.7 0.8 - 0.7 21.3
Other 11.3 0.2 9.2 0.5 1.3 - 3.0 25.5
Total costs before
exceptional items 162.8 5.9 90.5 17.4 11.6 0.3 14.0 302.5
--------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Cost of sales 182.8
Operating costs 119.7
Total costs before exceptional
items 302.5
-------------------------------------------- -------- --------- -------- --------- --------- -------
Six months to 31 December 2013 (unaudited)
-----------------------------------------------------------------------------------
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 68.9 0.8 28.5 3.5 6.8 0.1 6.7 115.3
Taxes and duties 39.6 0.1 24.2 0.3 1.1 - 0.9 66.2
Direct costs 7.2 1.4 10.8 7.5 1.3 - - 28.2
Property costs 14.8 0.1 13.7 0.4 1.3 - 0.5 30.8
Marketing 6.4 2.0 5.4 4.1 0.5 - - 18.4
Depreciation
and amortisation 10.6 1.0 7.2 1.1 1.0 - 0.6 21.5
Other 9.6 - 9.9 1.1 2.2 0.1 1.0 23.9
-------
Total costs before
exceptional items 157.1 5.4 99.7 18.0 14.2 0.2 9.7 304.3
--------------------- --------- ---------- -------- --------- -------- --------- --------- -------
Cost of sales 190.8
Operating costs 113.5
Total costs before exceptional
items 304.3
-------------------------------------------- -------- --------- -------- --------- --------- -------
3 Exceptional items
Six months
Six months to to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
--------------------------------------------- --------------- --------------
Exceptional items relating to continuing
operations
Charge to provision for property leases (1.0) -
Closure of venues 2.4 -
Net charge to provision for indirect
taxation - (26.1)
Integration costs - (1.2)
--------------------------------------------- --------------- --------------
Exceptional operating costs 1.4 (27.3)
Finance costs (see note 5) - (8.2)
Finance income (see note 5) - 1.0
Taxation (see note 6) - 8.8
Exceptional items relating to continuing
operations 1.4 (25.7)
--------------------------------------------- --------------- --------------
Exceptional items relating to discontinued
operations
Finance costs (see note 5) - (0.3)
Finance income (see note 5) - 0.3
Taxation (see note 6) 16.0 2.8
--------------------------------------------- --------------- --------------
Exceptional items relating to discontinued
operations 16.0 2.8
--------------------------------------------- --------------- --------------
Total exceptional items 17.4 (22.9)
--------------------------------------------- --------------- --------------
Continuing operations
Charge to provision for property leases
The Group has recognised a charge of GBP1.0m in respect of a
Mecca venue where the expected income no longer exceeds the
unavoidable costs associated with the lease.
Closure of venues
During the period the Group has closed, or committed to close,
four venues. Three of these venues are in Mecca and one is in
Enracha. The majority of the credit in the period relates to a
reduction in the onerous lease provision required at two of these
venues of GBP2.3m (see note 9).
4 Discontinued operations
Discontinued operations, other than those disclosed within
exceptional items (see note 3), relate to the historic disposal of
the loss making Blue Square Bet business. Blue Square Bet had no
impact on the income statement in the current or prior reporting
periods.
Cash flows relating to discontinued operations are as
follows:
Six months
Six months to to
31 December 31 December
2014 2013
(unaudited) (unaudited)
--------------------------------------- ---------------- --------------
Cash utilisation of provisions - (6.2)
Interest paid - (0.2)
--------------------------------------- ---------------- --------------
Cash flows from operating activities - (6.4)
Cash flows from investing activities - -
Cash flows from financing activities - -
- (6.4)
-------------------------------------------------------- --------------
5 Financing
Six months
Six months to to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------------- --------------- --------------
Continuing operations
Finance costs:
Interest on debt and borrowings (3.3) (3.2)
Amortisation of issue costs on borrowings (0.7) (0.7)
Interest on direct taxation (0.3) -
Interest payable on finance leases (0.4) (0.5)
Unwinding of the discount in onerous
lease provisions (0.6) (0.6)
Unwinding of the discount in disposal
provisions (0.1) (0.1)
---------------------------------------------- --------------- --------------
Total finance costs (5.4) (5.1)
Finance income:
Interest income on short term bank deposits 0.1 -
Interest income on direct taxation 0.2 -
---------------------------------------------- --------------- --------------
Finance income 0.3 -
Other financial (losses) gains - including
foreign exchange (0.8) 0.7
Total net financing cost for continuing
operations before exceptional items (5.9) (4.4)
Exceptional finance costs - (8.2)
Exceptional finance income - 1.0
Total net financing cost for continuing
operations (5.9) (11.6)
---------------------------------------------- --------------- --------------
Discontinued operations
Discontinued finance costs - (0.3)
Discontinued finance income - 0.3
Total net financing income for discontinued
operations - -
---------------------------------------------- --------------- --------------
Total net financing costs (5.9) (11.6)
---------------------------------------------- --------------- --------------
A reconciliation of total net financing costs to adjusted net interest
included in adjusted profit is disclosed below:
Six months
Six months to to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------------- --------------- --------------
Total net financing cost for continuing
operations (5.9) (4.4)
Adjust for:
Unwinding of the discount in disposal
provisions 0.1 0.1
Other financial losses (gains) - including
foreign exchange 0.8 (0.7)
Interest payable included in adjusted
profit (5.0) (5.0)
---------------------------------------------- --------------- --------------
6 Taxation
Income tax is recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full
financial period.
Six months to 31 December
2014 (unaudited)
--------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
---------------------------------------------- ------------- -------------- -------
Current income tax
Current income tax - UK (7.0) - (7.0)
Current income tax - overseas (0.3) - (0.3)
---------------------------------------------- ------------- -------------- -------
Current income tax charge (7.3) - (7.3)
Current income tax on exceptional items (0.4) - (0.4)
Amounts over provided in previous years 0.5 - 0.5
Amounts over provided in previous years
on exceptional items 0.4 16.0 16.4
Total current income tax (charge) credit (6.8) 16.0 9.2
---------------------------------------------- ------------- -------------- -------
Deferred tax
Deferred tax - UK (0.6) - (0.6)
Deferred tax - overseas (0.1) (0.1)
Amounts under provided in respect of
previous years (0.5) - (0.5)
Total deferred tax charge (1.2) - (1.2)
---------------------------------------------- ------------- -------------- -------
Tax (charge) credit in the income statement (8.0) 16.0 8.0
---------------------------------------------- ------------- -------------- -------
Six months to 31 December
2013 (unaudited)
--------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
----------------------------------------------- ------------- -------------- -------
Current income tax
Current income tax - UK (3.9) - (3.9)
Current income tax - overseas (0.3) - (0.3)
----------------------------------------------- ------------- -------------- -------
Current income tax charge (4.2) - (4.2)
Current income tax on exceptional items 7.3 - 7.3
Amounts over provided in previous years 1.0 - 1.0
Amounts over provided in previous years
on exceptional items 1.5 2.8 4.3
Total current income tax credit 5.6 2.8 8.4
----------------------------------------------- ------------- -------------- -------
Deferred tax
Deferred tax - UK (4.0) - (4.0)
Deferred tax - overseas (0.1) - (0.1)
Reduction in deferred tax rate 2.2 - 2.2
Amounts over provided in respect of previous
years 1.0 - 1.0
Total deferred tax charge (0.9) - (0.9)
----------------------------------------------- ------------- -------------- -------
Tax credit in the income statement 4.7 2.8 7.5
----------------------------------------------- ------------- -------------- -------
6 Taxation (continued)
The tax effect of items within other comprehensive income was as
follows:
Six months to Six months to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------- --------------- ---------------
Current tax charge on exchange movements
offset in reserves (0.1) (0.1)
Deferred tax credit on actuarial loss
on retirement benefits 0.1 -
Total tax charge on items within other
comprehensive income - (0.1)
------------------------------------------- --------------- ---------------
There was no tax effect of items charged or credited directly to
equity in either period.
Tax on discontinued operations
The GBP16.0m exceptional tax credit in discontinued operations
consists of the release from income tax payable of GBP16.9m
following the successful resolution of a transfer pricing dispute,
offset by GBP0.1m tax charge in connection with adjustments to tax
returns agreed for discontinued entities and an increase in income
tax payable of GBP0.8m in relation to an overseas audit of a
disposed entity.
Factors affecting future taxation
On 23 March 2013, the Chancellor of the Exchequer announced the
reduction in the main rate of UK corporation tax to 21.0% for the
year starting 1 April 2014 and a further 1.0% reduction to 20.0%
from 1 April 2015. These changes were substantively enacted in July
2013. The rate reductions will reduce the amount of cash tax
payments to be made by the Group.
A reconciliation of tax on continuing operations to tax included
in adjusted profit is described below:
Six months to Six months to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
----------------------------------------- --------------- ---------------
Total net tax (charge) credit for
continuing operations (8.0) 4.7
Adjust for:
Tax on exceptional items - (8.8)
Tax on adjusted items and impact of
reduction in tax rate (0.2) (2.9)
----------------------------------------- --------------- ---------------
Tax charge included in adjusted profit (8.2) (7.0)
----------------------------------------- --------------- ---------------
7 Dividends
Six months
to Six months to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------- -------------- ---------------
Dividends paid to equity holders
Final dividend for 2013/14 paid on 22
October 2014 - 3.15p per share 12.3 -
Final dividend for 2012/13 paid on 23
October 2013 - 2.85p per share - 11.1
---------------------------------------- -------------- ---------------
Total 12.3 11.1
---------------------------------------- -------------- ---------------
The Board has resolved to pay an interim dividend of 1.60p per
ordinary share. The dividend will be paid on 20 March 2015 to
shareholders on the register at 13 February 2015. The financial
information does not reflect this dividend.
8 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:
Six months to Six months to
31 December 31 December
2014 2013
(unaudited) (unaudited)
GBPm GBPm
--------------------------------------------- --------------- ---------------
Profit attributable to equity shareholders 44.3 1.3
Adjust for:
Discontinued operations (net of taxation) (16.0) (2.8)
Exceptional items after tax on continuing
operations (1.4) 25.7
Other financial losses (gains) 0.8 (0.7)
Unwinding of the discount in disposal
provisions 0.1 0.1
Taxation on adjusted items and impact
of reduction in tax rate (0.2) (2.9)
--------------------------------------------- --------------- ---------------
Adjusted net earnings attributable to
equity shareholders 27.6 20.7
Weighted average number of ordinary
shares in issue 390.7m 390.7m
Adjusted earnings per share (p) - basic 7.1p 5.3p
Adjusted earnings per share (p) - diluted 7.1p 5.3p
--------------------------------------------- --------------- ---------------
9 Provisions
Property Indirect
lease Disposal Restructuring tax
provisions provisions provisions provisions Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------ ------------ --------------- ------------ -------------
At 1 July 2014 52.8 4.6 0.9 1.2 59.5
Exchange adjustments - 0.2 - - 0.2
Unwinding of discount 0.6 0.1 - - 0.7
Charge to the income
statement - exceptional 1.0 - - - 1.0
Release to the income
statement - exceptional (2.3) - - - (2.3)
Utilised in period (3.0) (0.3) (0.9) - (4.2)
At 31 December 2014
(unaudited) 49.1 4.6 - 1.2 54.9
--------------------------- ------------ ------------ --------------- ------------ -------------
Current 6.2 1.0 - 1.2 8.4
Non-current 42.9 3.6 - - 46.5
At 31 December 2014
(unaudited) 49.1 4.6 - 1.2 54.9
--------------------------- ------------ ------------ --------------- ------------ -------------
Further details of the exceptional charge and release to
the income statement are disclosed in note 3.
10 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:
At At
31 December 2014 31 December 2013
(unaudited) (unaudited)
GBPm GBPm
----------------------------- -------------------- -------------------
Total loans and borrowings (167.9) (196.9)
Less: accrued interest 0.9 0.9
Less: unamortised facility
fees (1.0) (1.6)
----------------------------- -------------------- -------------------
(168.0) (197.6)
Add: cash and short term
deposits 73.1 62.5
Net debt (94.9) (135.1)
----------------------------- -------------------- -------------------
11 Cash generated from continuing operations
Six months to Six months to
31 December 2014 31 December 2013
(unaudited) (unaudited)
GBPm GBPm
-------------------------------------- ------------------- -------------------
Continuing operations
Operating profit 42.2 5.4
Exceptional items (1.4) 27.3
-------------------------------------- ------------------- -------------------
Operating profit before exceptional
items 40.8 32.7
Depreciation and amortisation 21.3 21.5
Increase in inventories (0.2) (0.2)
Decrease in other receivables 7.7 5.7
Increase (decrease) in trade
and other payables 3.2 (9.6)
Share-based payments and other - (0.4)
-------------------------------------- ------------------- -------------------
72.8 49.7
Cash utilisation of provisions (4.2) (8.3)
Cash payments in respect of
exceptional items (0.1) (8.3)
Cash generated from continuing
operations 68.5 33.1
-------------------------------------- ------------------- -------------------
12 Contingent liabilities
Property leases
Concurrent to the GBP211m sale and leaseback in 2006, the Group
transferred the rights and obligations but not the legal titles of
44 property leases to a third party. The Group remains potentially
liable in the event of default by the third party. Should default
occur then the Group would have recourse to two guarantors. It is
understood that, of the original 44 leases transferred, 14 of these
have not expired or been surrendered. These 14 leases have
durations of between one month and 98.5 years and a current annual
rental obligation (net of sub-let income) of approximately
GBP1.5m.
During the prior year, the Group became aware of certain
information in respect of a deterioration in the financial position
of the third party and one of the guarantors. However, the Group
has not to date been notified of any default, or intention to
default, in respect of the transferred leases.
13 Contingent assets
Discontinued taxation
During the period the Group released an amount of GBP16.9m from
income tax payable following the successful conclusion of a
transfer pricing dispute relating to a discontinued operation in an
overseas jurisdiction. In addition, the Group has been advised that
it could receive a refund of between GBP2.5m and GBP4.0m in respect
of amounts previously paid.
The Group has not recognised any gain in the financial
information at 31 December 2014 in respect of the potential
refund.
14 Related party transactions and ultimate parent
undertaking
On 7 June 2011, Guoco Group Limited (Guoco), a company
incorporated in Bermuda and listed on the Hong Kong stock exchange,
acquired a controlling interest in The Rank Group Plc. The ultimate
parent undertaking of Guoco is Hong Leong Company (Malaysia) Berhad
(Hong Leong) which is incorporated in Malaysia. At 31 December
2014, entities controlled by Hong Leong owned 68.6% of the
Company's shares, including 51.8% through Guoco and its wholly
owned subsidiary Rank Assets Limited, the Company's immediate
parent undertaking.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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