TIDMRNK
RNS Number : 1458V
Rank Group PLC
26 January 2017
News release
26 January 2017
The Rank Group Plc ("Rank" or the "Group")
Half-year results for the six months ended 31 December 2016
Financial highlights
H1 2016/17 H1 2015/16 Change
(unaudited) (unaudited)
--------------- --------------------------- -------------- -------------- --------
Financial Group like-for-like
KPIs revenue GBP378.6m GBP372.9m 2%
--------------- --------------------------- -------------- -------------- --------
Digital revenue GBP52.4m GBP47.1m 11%
------------------------------------------- -------------- -------------- --------
Venues like-for-like
revenue GBP326.2m GBP325.8m 0%
------------------------------------------- -------------- -------------- --------
Group EBITDA before
exceptional items GBP59.7m GBP62.7m (5)%
------------------------------------------- -------------- -------------- --------
Group operating profit
before exceptional
items GBP36.6m GBP40.4m (9)%
------------------------------------------- -------------- -------------- --------
Adjusted profit before
tax GBP34.5m GBP37.4m (8)%
------------------------------------------- -------------- -------------- --------
Adjusted earnings per
share 6.9p 7.4p (7)%
------------------------------------------- -------------- -------------- --------
Statutory
performance Statutory revenue GBP355.3m GBP352.7m 1%
--------------- --------------------------- -------------- -------------- --------
Profit before taxation
after exceptional items GBP35.4m GBP42.7m (17)%
------------------------------------------- -------------- -------------- --------
Cash generated from
continuing operations GBP51.8m GBP63.7m (19)%
------------------------------------------- -------------- -------------- --------
Net debt GBP33.0m GBP52.0m 37%
------------------------------------------- -------------- -------------- --------
Basic earnings per
share 7.0p 8.1p (14)%
------------------------------------------- -------------- -------------- --------
Dividend per share 2.0p 1.8p 11%
------------------------------------------- -------------- -------------- --------
Key highlights
-- Like-for-like group revenue up 2%
-- Digital revenue up 11%; digital platform stable and performing well
-- Like-for-like retail revenue flat in the period
-- Improving trends in retail casino and UK digital in Q2 over Q1
-- Digital operations restructured to drive further future growth
-- Debt levels 37% lower than prior year with leverage down to 0.3x
-- Continued strong dividend growth with interim dividend of 2.0p, up 11% year-on-year
Henry Birch, Chief Executive of The Rank Group Plc said:
"The first half of the Group's financial year has seen
challenging trading conditions for both our retail casino and bingo
businesses, with strong comparable figures in the previous year.
That being said, both businesses showed a year-on-year improvement
from quarter to quarter. Our digital business continues to grow
strongly and there remains significant potential for this channel
as we deliver improvements in H2."
"Despite increased inflationary and employment costs, we have
detailed plans to improve H2 operating profit and remain confident
that the Group will make good strategic progress in 2017. As a
result, the Board expects that the full year results will be in
line with market forecasts."
Ends
Definition of terms:
-- Any reference to Group revenue or like-for-like group revenue
is before adjustment for customer incentives;
-- 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
and other financial gains or losses;
-- Adjusted earnings per share is calculated by adjusting profit
attributable to equity shareholders to exclude the impact of
reductions in tax rate, discontinued operations, exceptional items,
other financial gains or losses and the related tax effects as
detailed in note 7;
-- "H1 2016/17" refers to the unaudited six-month period to 31
December 2016 and "H1 2015/16" refers to the unaudited six-month
period to 31 December 2015;
-- Following the decision to merge Rank's UK digital operations
into one team, the Group has decided to change its segmental
reporting and to disclose the Group's UK facing digital operations
as a single segment. Enracha will also now be shown as a single
segment rather than split between digital and retail operations as
Enracha's digital results are not yet large enough to warrant
reporting as a separate segment;
-- Like-for-like measures have been disclosed in this report to
show the impact of club openings, closures, relocations, and
discontinued operations;
-- Prior year like-for-like measures are amended to show an
appropriate comparative for the impact of club openings, closures,
relocations, and discontinued operations. A GBP1.3m reduction to H1
2015/16 Group revenue has been made to reflect a like-for-like
prior year comparative; and
-- The Group results make reference to "'adjusted" results
alongside our statutory results, which we believe will be more
useful to readers as we manage our business using these adjusted
measures. The directors believe that exceptional items and other
adjustments impair visibility of the underlying performance of the
Group's business and accordingly, these are excluded from our
non-GAAP measurement of revenue, profit before tax, EBITDA,
operating profit and adjusted EPS. Adjusted measures are the same
as those used for internal reports.
Enquiries
The Rank Group Plc
Sarah Powell, investor relations Tel: 01628 504 303
FTI Consulting LLP
Ed Bridges Tel: 020 3727 1067
Alex Beagley Tel: 020 3727 1045
Photographs available from www.rank.com
Analyst meeting and webcast details:
Thursday 26 January 2017
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
Group revenue was up 1% in the period with like-for-like revenue
up 2%. Our retail businesses faced challenging trading conditions
and, although they grew their respective market shares, combined
like-for-like retail revenue was flat. Digital continued to grow
strongly with total revenue up 11%.
The introduction of the National Living Wage, increased property
costs, along with general cost inflation led to Group EBITDA
(before exceptional items) falling by 5% in the period. More recent
trends in Grosvenor's casinos suggest an improvement in trading in
H2, but further cost increases in 2017 are anticipated including
changes to the National Living Wage in April, increased business
rates and the impact of higher inflation.
In H1 2016/17 the Group completed a detailed review of its
entire UK organisational structure and cost base designed to
improve customer service, simplify operations and increase
efficiencies. This has resulted in changes to management and team
structures at both club and central levels, the decision to
centralise support functions in a new office in Maidenhead and the
merging of the separately run brand teams supporting digital into
one operational team. These changes, along with strong control of
discretionary costs, are expected to deliver H2 cost savings of
circa GBP8m which equates to 2.5% of our cost base.
GBPm Group Revenue(1) Operating profit(2)
---------------------------------- -------------------------- --------------------------
H1 2016/17 H1 2015/16 H1 2016/17 H1 2015/16
---------------------------------- ------------ ------------ ------------ ------------
Grosvenor Venues 202.0 205.1 26.1 30.9
---------------------------------- ------------ ------------ ------------ ------------
Mecca Venues 108.0 109.8 13.3 14.3
---------------------------------- ------------ ------------ ------------ ------------
UK Digital 52.4 47.1 7.3 8.0
meccabingo.com 33.1 33.2
grosvenorcasinos.com 19.3 13.9
---------------------------------- ------------ ------------ ------------ ------------
Enracha 16.2 12.2 2.9 1.4
---------------------------------- ------------ ------------ ------------ ------------
Central costs - - (13.0) (14.2)
---------------------------------- ------------ ------------ ------------ ------------
Total 378.6 374.2 36.6 40.4
---------------------------------- ------------ ------------ ------------ ------------
1 before adjustments for customer incentives
2 before exceptional items
Positive momentum continues in the Group's Spanish operations
with both revenue and operating profit growing strongly in the
period.
Exceptional items relating to continuing operations produced a
profit of GBP1.8m in the year. Further detail can be found in the
financial review.
Current trading and outlook
Trading in the 4-week period to 22 January 2017 has been in line
with management's expectations and, combined with our detailed
plans to improve H2 operating profit, we expect that the full year
results will be in line with market forecasts.
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 ongoing operating requirements,
investment and balance sheet management. The Board is pleased to
declare an 11% increase in interim dividend to 2.0 pence per share
to be paid on 21 March 2017 to shareholders on the register at 10
February 2017.
Regulation - Department of Culture, Media and Sport's ('DCMS')
Triennial Review
On 2 December 2016, the Group submitted its response to the
DCMS's call for evidence in relation to their review of gaming
machines and social responsibility measures. Rank supports the
Government's review and believes both the gambling industry and
Rank can do more to mitigate gambling-related harm while still
providing an improved service to the majority of customers who
gamble responsibly. A copy of Rank's submission can be accessed
from its corporate website, rank.com.
In summary, Rank recommended:
1. an increase in the ratio of machines to tables in the 2005
Act "small" casinos from 2:1 to 3:1, subject to a maximum of 80
machines; and
2. to harmonise the machine allocation in the 1968 Act casinos
from a fixed 20 Category B machines to the same 3:1 ratio.
We expect the DCMS will publish its consultation paper during
the first half of 2017.
Grosvenor Casinos Performance Review - Venues
H1 2016/17 H1 2015/16 Change
------------------------ ------------ ------------ --------
Revenue(1) (GBPm) 202.0 205.1 (2)%
------------------------ ------------ ------------ --------
EBITDA(2) (GBPm) 38.8 43.0 (10)%
------------------------ ------------ ------------ --------
Operating profit(2)
(GBPm) 26.1 30.9 (16)%
------------------------ ------------ ------------ --------
Like-for-like revenue 0%
------------------------ ------------
1 Before adjustment for customer incentives
2 Before exceptional items
The trading environment for Grosvenor venues has been
challenging with like-for-like revenue flat in the period, impacted
by a lower than average gaming margin: 15.8% vs a five year average
of 16.3%. Trading in the equivalent period in 2015 was particularly
strong and revenue in H1 represents a 3% increase over the
equivalent period in 2014. Information from the Gambling Commission
shows that in October 2016 - the last period for which information
is currently available - Grosvenor achieved its highest share of
admissions in four years.
The casino sector has been impacted by a more stringent
application of customer due diligence to address money laundering,
proceeds of crime and problem gambling, which in part has led to
lower visits. Additionally, evidence points to the wider leisure
sector having experienced a weaker 2016 with eating and drinking
out conversely benefiting. Recent trends have been more encouraging
and consecutive quarters from Q4 2015/16 (April-June 2016) through
to Q1 and the most recent Q2 have all shown an improvement in
comparable trading.
Lower revenue and higher employment and property costs led to a
16% fall in operating profit.
Key performance indicators
H1 2016/17 H1 2015/16 Change
------------------------- ------------ ------------ --------
Customer visits (000s) 3,958 4,194 (6)%
------------------------- ------------ ------------ --------
Spend per visit (GBP) 51.04 48.90 4%
------------------------- ------------ ------------ --------
Spend per visit increased by 4% in the period.
In July 2016, Grosvenor's Princes casino in Glasgow was closed
and the Group plans to relocate the spare licences alongside the
brand's two remaining casinos in Glasgow once the necessary
licensing and planning approvals have been obtained.
Venues regional analysis
The casino estate is split into three key areas - London,
Provinces and Belgium. To better illustrate the different
performance across the estate, analysis is provided below.
Customer Spend per Revenue Operating
visits (000s) visit (GBPm) profit (GBPm)
(GBP)
------------ ---------------------- ---------------------- ---------------------- ----------------------
H1 H1 H1 H1 H1 H1 H1 H1
2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
London 732 772 98.36 97.41 72.0 75.2 13.6 16.0
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Provinces 3,093 3,293 39.35 37.47 121.7 123.4 11.5 14.4
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Belgium 133 129 62.41 50.39 8.3 6.5 1.0 0.5
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 3,958 4,194 51.04 48.90 202.0 205.1 26.1 30.9
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Venues revenue analysis - Great Britain only
GBPm H1 2016/17 H1 2015/16 Change
--------------------- ------------ ------------ --------
Casino games 126.2 131.9 (4)%
--------------------- ------------ ------------ --------
Gaming machines 44.5 43.1 3%
--------------------- ------------ ------------ --------
Card room games 7.9 7.6 4%
--------------------- ------------ ------------ --------
Food & drink/other 15.1 16.0 (6)%
--------------------- ------------ ------------ --------
Total 193.7 198.6 (2)%
--------------------- ------------ ------------ --------
Mecca Performance Review - Venues
H1 2016/17 H1 2015/16 Change
------------------------ ------------ ------------ --------
Revenue(1) (GBPm) 108.0 109.8 (2)%
------------------------ ------------ ------------ --------
EBITDA(2) (GBPm) 19.2 20.8 (8)%
------------------------ ------------ ------------ --------
Operating profit(2)
(GBPm) 13.3 14.3 (7)%
------------------------ ------------ ------------ --------
Like-for-like revenue 0%
------------------------ ------------
1 Before adjustment for customer incentives
2 Before exceptional items
Like-for-like revenue was flat in the period with a reduction in
visits offset by a higher spend per visit. Total revenue was down
2% as a result of the closure of two clubs in the period: West
Bromwich in August and Bradford in November. Operating profit fell
by 7% in the year due to lower revenue and the impact of higher
employment costs.
Key performance indicators
H1 2016/17 H1 2015/16 Change LFL change
------------------ ------------ ------------ -------- ------------
Customers(3)
(000s) 969 973 (0)% (1)%
------------------ ------------ ------------ -------- ------------
Customer visits
(000s) 5,379 5,756 (7)% (6)%
------------------ ------------ ------------ -------- ------------
Spend per visit
(GBP) 20.08 19.08 5%
------------------ ------------ ------------ --------
3 Customers shown on a moving annual total ('MAT') basis
Customer numbers fell in the period, down 1%, with 2% growth in
the 18 to 24 age category, offset by reductions across the other
age categories. Like-for-like visits fell by 6% in the period while
spend per visit rose by 5%.
Mecca will continue to add to its product and service offering
in the second half of the financial year, including participation
in the launch of a new National Game for bingo and the roll-out of
additional Mecca Maxes, and will look to mitigate additional cost
from the increase in the National Living Wage.
Venues revenue analysis:
GBPm H1 2016/17 H1 2015/16 Change LFL change
--------------------- ------------ ------------ -------- ------------
Main stage
bingo 17.2 16.0 8% 9%
--------------------- ------------ ------------ -------- ------------
Interval games 42.4 44.5 (5)% (3)%
--------------------- ------------ ------------ -------- ------------
Amusement machines 35.4 36.0 (2)% 0%
--------------------- ------------ ------------ -------- ------------
Food & drink/other 13.0 13.3 (2)% 0%
--------------------- ------------ ------------ -------- ------------
Total 108.0 109.8 (2)% 0%
--------------------- ------------ ------------ -------- ------------
UK Digital Performance Review
H1 2016/17 H1 2015/16 Change
---------------------------------- ------------ ------------ --------
Revenue(1) (GBPm) 52.4 47.1 11%
meccabingo.com 33.1 33.2 0%
grosvenorcasinos.com 19.3 13.9 39%
---------------------------------- ------------ ------------ --------
EBITDA(1) (GBPm) 10.1 10.1 0%
---------------------------------- ------------ ------------ --------
Operating profit(1)
(GBPm) 7.3 8.0 (9)%
---------------------------------- ------------ ------------ --------
1 Before adjustment for customer incentives
UK digital revenue grew by 11% in the period driven by the
continued strong performance of grosvenorcasinos.com, up 39%, and
an improving meccabingo.com performance. Meccabingo.com's revenues
were flat in the period but revenues grew 3% in Q2 with growth
continuing into 2017.
UK digital operating profit fell by 9% due to higher operating
costs but we expect operating margins to improve significantly in
H2.
Key performance indicators
H1 2016/17 H1 2015/16 Change
------------------------------------- ------------ ------------ ----------
Customers
(000s)(2) 418 402 4%
------------------------------------- ------------ ------------ ----------
Customer cross
over
meccabingo.com 9.3% 9.0% 0.3ppt
grosvenorcasinos.com(3) 3.2% 2.7% 0.5ppt
------------------------------------- ------------ ------------ ----------
2 Customers shown on a moving annual total ('MAT')
3 The percentage of registered venues customers which are also
digital customers; this number has been impacted by the
introduction of FOD/POD
A new sportsbook offer and an improved poker product were
launched in the period. Both are performing in line with
management's expectations. The sportsbook, powered by Kambi, is
being used by approximately 15% of Grosvenor's weekly active
customer base and, as well as generating additional revenue, is
proving an effective retention tool. Digital poker remains a low
but growing revenue contributor, but we now have increased
flexibility to leverage our leading land-based position in poker
and are part of a growing poker network.
The Group's digital operations were restructured into a single
team in the period, rather than separate brand-led digital teams,
and from now will report as a single business segment. The single
team supports a multi-brand approach and we plan to launch more
digital brands in the course of 2017.
Enracha Performance Review
Positive momentum continues in the Group's Spanish operations
with both revenue and operating profit growing strongly in the
year.
H1 2016/17 H1 2015/16 Change
----------------- ------------ ------------ --------
Revenue (EURm) 18.8 16.9 11%
----------------- ------------ ------------ --------
Revenue (GBPm) 16.2 12.2 33%
----------------- ------------ ------------ --------
EBITDA(1)
(GBPm) 3.7 2.2 68%
----------------- ------------ ------------ --------
Operating
profit(1)
(EURm) 3.4 1.9 79%
----------------- ------------ ------------ --------
Operating
profit(1)
(GBPm) 2.9 1.4 107%
----------------- ------------ ------------ --------
1 Before exceptional items
A stronger Spanish economy contributed to an 11% increase in
euro revenues in the year. Operating profit was up 107% driven by
revenue growth.
Key performance indicators
H1 2016/17 H1 2015/16 Change
------------------ ------------ ------------ --------
Customers
(000s)(2) 270 260 4%
------------------ ------------ ------------ --------
Customer visits
(000s) 982 978 0%
------------------ ------------ ------------ --------
Spend per
visit (EUR) 19.14 17.28 11%
------------------ ------------ ------------ --------
Spend per
visit (GBP) 16.50 12.47 32%
------------------ ------------ ------------ --------
2 Customers shown on a moving annual total ('MAT')
Euro spend per visit increased 11% in the period.
Venues revenue analysis
EURm H1 2016/17 H1 2015/16 Change
--------------------- ------------ ------------ --------
Bingo 10.4 9.8 6%
--------------------- ------------ ------------ --------
Amusement
machines 6.5 5.8 12%
--------------------- ------------ ------------ --------
Food & drink/other 1.9 1.3 46%
--------------------- ------------ ------------ --------
Total 18.8 16.9 11%
--------------------- ------------ ------------ --------
Our strategy
Rank's aim is to be the UK's leading multi-channel gaming
operator. We are focused on building brands with the ability to
deliver them via the channels our customers prefer, whether that is
through our 150 venues, online or mobile.
1. Creating a compelling multi-channel offer
In the markets where we operate, Rank is one of the few gaming
companies in a position to provide customers a genuine
multi-channel gaming offer. We have a number of key assets,
including a portfolio of 150 venues, our membership-based model
with approximately 2.9 million members, our loyalty and reward
programmes and the high levels of engagement that our team members
enjoy with customers.
Activity in H1 2016/17
-- Full launch of digital Grosvenor Casinos' sports book:
Launched in H1, Grosvenor's sportsbook has performed well both
financially and as a retention tool for existing customers, with
approximately 15% of Grosvenor's weekly active user base placing
bets on the sportsbook
-- Continued improvements to digital poker offer: During the
period the new poker product was marketed into the brand's venues
with improved returns expected from H2
Priorities for H2 2016/17
-- Launch of single account and wallet: Grosvenor Casinos aims
to trial its first single account and wallet offer in its Stockport
casino in June 2017, and will be shortly followed by a roll-out
across the remainder of the Grosvenor estate
-- Launch of new bingo brand across both online and retail
channels: The new online Luda bingo brand is scheduled to be
launched in 2017 alongside its retail channel (subject to
planning)
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 H1 2016/17, our digital operations generated 14% of Group
revenue whereas digital channels now represent around 45% of Great
Britain's gambling market (excluding National Lottery), presenting
a significant growth opportunity. We continue to enhance our
capability in this area such that we can leverage our active retail
customer base of 2.8m customers and meet their changing needs.
Activity in H1 2016/17
-- Restructure of digital team: In H1 Rank created a single team
responsible for its UK digital operations. The creation of a
single, multi-brand digital team allows for clearer lines of
accountability, improved efficiencies and a structure which can be
leveraged easily into multiple brands
-- Improvement to Grosvenor Casinos' digital Live Casino offer:
In July 2016, Grosvenor Casinos' successful live casino product was
refreshed following the move of its supplier's studio from Riga,
Latvia to a larger facility in Malta. In addition, the brand is
investigating the possibility of streaming live venues table gaming
to our digital customers as an alternative Live Casino offer
-- Launch of new digital Mecca VIP site: A new VIP microsite was
launched alongside a new VIP programme. The dedicated VIP team will
work alongside customer service agents based in our new Customer
Solutions Hub in Sheffield
-- Enracha.es: The full Enracha.es site went live in the period
offering customers digital bingo, blackjack, and roulette. Slots is
expected to be launched shortly
Priorities for H2 2016/17
-- Launch of new digital brands: A slots-led brand is scheduled
to be launched in H2 and the multi-channel bingo brand Luda will go
live later in 2017. Both brands will be aimed at new, existing and
lapsed digital customers
-- Agreements with new games providers: New digital slots and
games providers will continue to be added in H2 to provide our
customers with greater choice
3. Developing our venues
Our casino and bingo venues remain a material part of Rank's
business, providing entertainment for millions of customers each
year and generating the majority of the Group's revenue and
profits. 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 H1 2016/17
-- Mecca refurbishments: A further three venues (Blackpool,
Glasgow Forge and Swansea) were refurbished in H1 2016/17 at a cash
cost of GBP0.8m. No further refurbishments are scheduled for H2
-- Refurbishments of Grosvenor Casinos' venues in Leeds and
Nottingham: A GBP3.0m refurbishment of Grosvenor's casino in Leeds
was completed in the period alongside the relocation of an unused
Leeds licence. The refurbishment of Grosvenor's Nottingham casino
was commenced in the period and is expected to be completed in H2
2016/17 at a total cost of GBP3.0m
-- Further roll out of full ('FOD') and partial open door
('POD') in Grosvenor Casinos: The planned FOD and POD rollout was
completed in the period
-- Open door policy trial in Mecca: During the period Mecca
trialled open door at its Acocks Green venue. Initial feedback is
positive, however it is too early to decide whether further trials
will take place
Priorities for H2 2016/17
-- Addition of second licence alongside Grosvenor's existing
casino: An unused licence in Leeds was opened in the period and
licence applications have been submitted to utilise two unused
licences in Glasgow
-- Opening of new concept bingo venues: The Group has made
several planning applications to secure sites for the new bingo
brand, but to date applications have been rejected. Additional
locations have been identified and the Group continues to liaise
with landlords to secure the necessary approvals
-- Refurbishments of Grosvenor's London Golden Horseshoe casino:
This will be completed in H2 at a capital cost of GBP1.2m
4. Investing in our brands and marketing
The development of a group of well-defined, relevant and
resonant brands is critical for the success of our ambition. Rank
possesses a number of well-known brands with strong levels of
affinity amongst customers. Continuing to invest and develop these
brands, alongside new ones, is an important part of increasing and
sustaining revenues.
Activity in H1 2016/17
-- Launch of new Customer Solutions Hub in Sheffield: Rank
successfully combined its in-house (London) and outsourced contact
centres to a fully in-sourced facility in Sheffield in the period.
The new centre's strategy aims to generate profit through a more
proactive relationship with our customers and is open 24 hours a
day 7 days per week. The Hub opened in September 2016 and to date
customer satisfaction scores have increased and customer complaint
resolution times have significantly reduced
-- Mecca TV advertising: A new TV campaign was launched in H1.
The campaign didn't meet the required returns and will not be
rolled into H2
Priorities for H2 2016/17
-- Launch of a new CRM and segmentation tool: This new tool will
provide the business with a single customer view across all brands
and channels with the ability to automate lifecycle campaigning
across multiple communication channels
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 business and driving efficiency. Improved
customer experience and operating margins can help create a
competitive advantage. We have identified 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 H1 2016/17
-- Get Set Roulette launched in a further eight casinos: The
rollout of Get Set Roulette continued in the period. Get Set
Roulette offers an enhanced customer experience for electronic
roulette with a more consistent rate of play and greater choice of
wheels
-- Rollout of new Neon casino management system: Neon's rollout
was successfully completed in July 2016
-- Investment in new cash line systems to accommodate the new
GBP1 coin: At a total cost of GBP1.2m the existing Mecca cashline
system was upgraded in preparation for the introduction of the new
GBP1 coin
Priorities for H2 2016/17
-- Get Set Roulette to launch in a further five casinos
-- Trial of additional Neon functionality: Neon's functionality
for table management and single wallet is scheduled to be piloted
in H2 2016/17
-- Additional Mecca Max rollout: Following the successful
introduction of additional Mecca Max units at the start in 2014/15,
a further 5,250 units are soon to be rolled across the Mecca estate
of which 2,500 will be incremental
-- New loyalty scheme for Grosvenor Casinos: The new loyalty
scheme within Neon will be trialled in H2 with plans for a full
rollout across the casino estate soon after
-- New head office systems: In H2 new modern human resources and
finance systems will be put in place at a capital cost of
GBP1.6m
Financial review
Statutory revenue for the six-month period rose by 1%.
Group like-for-like revenue for the six-month period from
continuing operations rose by 2% to GBP378.6m, while Group
operating profit before exceptionals of GBP36.6m was 9% lower than
the prior period as a result of a disappointing venues performance,
impact of the new National Living Wage and higher digital operating
costs.
Profit before taxation after exceptional items fell by 17% in
the period.
Lower anticipated vesting on the long term incentive plan,
maturing in June 2017, has resulted in a net credit to central
costs of GBP1.5m compared to a charge of GBP1.2m in H1 2015/16.
Adjusted net interest payable for the six months was lower than
the comparable period due to lower debt levels and lower financing
costs following the refinancing of Rank's bank facilities in
September 2015 (further details can be found in note 4).
Adjusted earnings per share was down 7% year on year at
6.9p.
Taxation
The Group's effective corporation tax rate on continuing
operations was 22.0% (H1 2015/16: 22.2%) based on a tax charge of
GBP7.6m on adjusted profit before taxation and exceptionals. The
Group's effective corporation tax rate for 2016/17 is expected to
fall within the range of 22% to 23%. In the period the Group
incurred a GBP1.0m exceptional tax charge which principally relates
to the surrender of Mecca's Bradford lease offset by a number of
tax exceptional credits.
On a statutory unadjusted basis, the Group had an effective tax
rate of 20.6% (H1 2015/16: 2.1%) based on a tax charge of GBP7.3m a
total profit of GBP35.4m.
The Group had a cash tax rate of 17.0% on adjusted profit (H1
2015/16: 15.2%). This adjusted cash tax rate was in line with
management's expectations. The Group is expected to have a cash tax
rate of 16% to 18% for the full year. This is lower than the
Group's effective corporation tax rate due to the timing of
corporation tax instalment payments and the utilisation of losses
in the Group.
As highlighted in previous reports, the Group previously
participated in a disclosed tax avoidance scheme. The scheme is now
expected to be litigated through the courts with another tax payer
as the lead case and following some recent delays may not be heard
until after August 2017. The principal amount of tax under dispute
was settled by Rank in the prior year.
Cash flow
Six months Six months
to 31 December to 31 December
2016 2015
GBPm GBPm
------------------------------------ ----------------- -----------------
Continuing operations
------------------------------------ ----------------- -----------------
Cash inflow from operations 57.9 67.0
------------------------------------ ----------------- -----------------
Net cash payments in respect
of provisions and exceptional
items (6.1) (3.3)
------------------------------------ ----------------- -----------------
Cash generated from continuing
operations 51.8 63.7
------------------------------------ ----------------- -----------------
Capital expenditure (17.0) (26.1)
------------------------------------ ----------------- -----------------
Fixed asset disposals - 7.0
------------------------------------ ----------------- -----------------
Net interest and tax payments (7.2) (5.1)
------------------------------------ ----------------- -----------------
Payment of disputed tax - (21.4)
------------------------------------ ----------------- -----------------
Dividends paid (18.4) (15.6)
------------------------------------ ----------------- -----------------
Refund of unclaimed dividend 0.2 -
------------------------------------ ----------------- -----------------
Convertible loan payment - (1.0)
------------------------------------ ----------------- -----------------
Other (including foreign exchange
translation) (1.2) (0.6)
------------------------------------ ----------------- -----------------
Cash inflow 8.2 0.9
------------------------------------ ----------------- -----------------
Opening net debt (41.2) (52.9)
------------------------------------ ----------------- -----------------
Closing net debt (33.0) (52.0)
------------------------------------ ----------------- -----------------
Exceptional items
In H1 2016/17, the Group carried out a detailed review of its
entire UK organisational structure designed to improve customer
service and simplify operations. This has resulted in changes to
management and team structures at both venues and the support
offices, the decision to combine support functions into one office
in Maidenhead and the merging of the separate digital brand teams
into one operational digital team. The cost of this restructure is
estimated to be GBP8.0m with GBP3.8m booked in H1 with the balance
expected to be incurred in H2.
Other exceptional items refer to the successful exit of an
onerous lease in Bradford and an impairment of the Grosvenor's
Southend casino following its disappointing performance.
Full details of the Group's exceptional items are provided in
note 3.
Financial structure and liquidity
At 31 December 2016, net debt was GBP33.0m compared to net debt
of GBP52.0m at 31 December 2015. The net debt comprised GBP80.0m in
bank term loans, GBP11.1m in fixed rate Yankee bonds, GBP8.3m in
finance leases and GBP5.1m in overdrafts, offset by cash at bank
and in hand of GBP71.5m.
At the start of the financial year the Group's banking
facilities comprised GBP80.0m bi-lateral term loans and GBP90.0m of
undrawn bi-lateral revolving credit facilities totalling GBP170.0m.
The GBP80.0m of term loan facilities comprises three bilateral
agreements and the GBP90.0m of revolving credit facilities
comprises three bi-lateral agreements.
The bank facilities require the maintenance of a minimum ratio
of earnings before interest, tax, depreciation and amortisation
('EBITDA') to net interest payable and a maximum ratio of net debt
to EBITDA, tested biannually. The Group has complied with its
banking covenants.
The Group's balance sheet continued to strengthen in the period
with net debt falling by 37% to GBP33m (0.3 times leverage at 31
December 2016.
Capital expenditure
six months to six months to
30 June 2016 30 June 2015
GBPm GBPm
------------------- --------------- ---------------
Cash:
------------------- --------------- ---------------
Grosvenor Venues 6.7 12.5
------------------- --------------- ---------------
Mecca Venues 4.0 3.0
------------------- --------------- ---------------
UK digital 1.5 1.2
------------------- --------------- ---------------
Enracha 0.5 2.4
------------------- --------------- ---------------
Central 4.3 7.0
------------------- --------------- ---------------
Total capital
expenditure 17.0 26.1
------------------- --------------- ---------------
During the period, Rank invested GBP6.7m into its Grosvenor
Casinos venues with two major venue projects started in the period.
In December 2016, the GBP3.0m extension and refurbishment of
Grosvenor's Nottingham casino was commenced and completion is
expected in H2. In addition, the GBP3.0m refurbishment of the
Grosvenor Leeds Westgate casino was completed in the period. The
balance was principally spent on smaller scale venue improvements,
known as Sparkles, maintenance and other IT investments.
Mecca invested GBP4.0m into its venues in the period with
GBP0.9m spent on the refurbishment of three venues, GBP0.6m on new
Mecca Max units and GBP0.4m on wi-fi and network refresh. With the
introduction of the new GBP1 coin in March 2017, GBP0.4m was spent
on the replacement of cashline coin mechanisms and new coin
counters. The balance was spent on general venue improvements and
maintenance.
UK Digital invested GBP1.5m in the period, with the majority
invested into meccabingo.com to improve our core bingo product and
the IOS application along with purchase of the URL for the new Luda
brand. Grosvenorcasinos.com's key project for the half was the
launch of the new sportsbook.
Development of the Group's single account and wallet offer
continued with GBP2.0m being invested in the period. Other Central
investments included the ongoing works to the new HR and finance
systems and IT systems utilised by the new Customer Solutions
Hub.
Capital investment for the full year is now expected to be in
the range of GBP50m to GBP55m. This is lower than previously
guided, reflecting lower cash generated from operations, and
results from cancellation or delay to a number of retail projects,
including new electronic product in Grosvenor Casinos. In addition,
to the on-going projects detailed above, the key projects planned
for H2 include major refurbishments at the Golden Horseshoe and
Piccadilly casinos in London, a new casino loyalty system, a new
support office in Maidenhead, additional Mecca Max units and new
games / applications for UK Digital.
Total capital committed at 31 December 2016 was GBP4.5m.
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 financial review 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 the current levels, the directors believe that
the Group will generate sufficient cash to meet its borrowing
requirements for at least 12 months from the approval of this
report and comply with all of its banking covenants.
Principal risks 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 the 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 2016 and include:
-- regulatory, finance and tax risks;
-- operational risk (volatility of gaming win, loss of licences,
business continuity and disaster recovery); and
-- information technology risks.
Greater detail on these risks and uncertainties are set out in
pages 34 to 36 of the Group's 2016 annual report and financial
statements.
The Group is primarily focused on the UK market and is not
directly exposed to risks from Brexit. However the Group does face
a number of indirect risks including ability to attract and retain
non-UK casino staff, cost inflation on imported goods as well as
the general economic risks arising from macro-economic conditions
and inflationary pressures arising from the UK's exit from
Europe.
Directors' Responsibility Statement
The interim management report complies with the Disclosure Rules
and Transparency Rule ('DTR') of the United Kingdom's Financial
Conduct 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 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 the description of
the principal risks and uncertainties for the remaining six months
of the year, as required by DTR 4.2.7R; and
-- The interim management report and note 12 to the Group
financial statements include a fair review of related party
transactions and changes therein; as required by DTR 4.2.8R.
The directors of The Rank Group Plc are:
Chris Bell
Henry Birch
Ian Burke
Steven Esom
Susan Hooper
Clive Jennings
Lord Kilmorey
Owen O'Donnell
Signed on behalf of the board on 25 January 2017
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 2016 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 2016 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
25 January 2017
Group Income Statement
for the six months to 31 December 2016
Six months to 31 Six months to
December 2016 31 December 2015
(unaudited) (unaudited)
------ --------------------------------------- -------------------------------------------
Before Exceptional Before Exceptional
Exceptional items exceptional items
(note (note
Items 3) Total items 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Continuing
operations
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Revenue before
adjustment for
customer
incentives 378.6 - 378.6 374.2 - 374.2
Customer
incentives (23.3) - (23.3) (21.5) - (21.5)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Revenue 2 355.3 - 355.3 352.7 - 352.7
Cost of sales (193.0) (0.2) (193.2) (188.1) - (188.1)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Gross profit 162.3 (0.2) 162.1 164.6 - 164.6
Other operating
(costs) income (125.7) 2.0 (123.7) (124.2) 6.0 (118.2)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Group operating
profit 2 36.6 1.8 38.4 40.4 6.0 46.4
Financing:
- finance costs (2.2) - (2.2) (3.1) - (3.1)
- finance income 0.1 - 0.1 0.1 - 0.1
- other
financial
losses (0.9) - (0.9) (0.7) - (0.7)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Total net
financing
charge 4 (3.0) - (3.0) (3.7) - (3.7)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Profit before
taxation 33.6 1.8 35.4 36.7 6.0 42.7
Taxation 5 (6.3) (1.0) (7.3) (5.1) 0.3 (4.8)
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Profit for the
period from
continuing
operations 27.3 0.8 28.1 31.6 6.3 37.9
Discontinued
operations - - - - 3.7 3.7
Profit for the
period 27.3 0.8 28.1 31.6 10.0 41.6
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Attributable
to:
Equity holders
of the parent 27.3 0.8 28.1 31.6 10.0 41.6
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Earnings per share attributable
to equity shareholders
- basic 7.0 0.2 7.2 8.1 2.5 10.6
- diluted 7.0 0.2 7.2 8.1 2.5 10.6
Earnings per share - continuing
operations
- basic 7.0 0.2 7.2 8.1 1.6 9.7
- diluted 7.0 0.2 7.2 8.1 1.6 9.7
Earnings per share - discontinued
operations
- basic - - - - 0.9 0.9
- diluted - - - - 0.9 0.9
------------------ ------ ------------- ------------- --------- ----------------- ------------- ---------
Group Statement of Comprehensive Income
for the six months to 31 December 2016
Six months to Six months to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
--------------------------------- --------------- ---------------
Comprehensive income:
Profit for the period 28.1 41.6
Other comprehensive income:
Items that may be reclassified
to profit or loss:
Exchange adjustments
net of tax 1.0 1.3
Items that will not be
reclassified to profit
or loss:
Actuarial loss on retirement
benefits net of tax - (0.1)
---------------------------------
Total comprehensive income
for the period 29.1 42.8
--------------------------------- --------------- ---------------
Attributable to:
Equity holders of the
parent 29.1 42.8
--------------------------------- --------------- ---------------
Group Statement of Changes in Equity
for the six months to 31 December 2016
For the six months to 31 December 2016
(unaudited)
-----------------------------------------------------------------------
Capital Exchange
Share Share redemption translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- --------- ------------ ------------- ---------- --------
At 1 July 2016 54.2 98.4 33.4 13.5 153.1 352.6
Comprehensive income:
Profit for the period - - - - 28.1 28.1
Other comprehensive
income:
Exchange adjustments
including tax - - - 1.0 - 1.0
------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive
income for the period - - - 1.0 28.1 29.1
Transactions with
owners:
Dividends paid to
equity holders (note
6) - - - - (18.4) (18.4)
Refund of unclaimed
dividends (note
6) - - - - 0.2 0.2
Debit in respect
of employee share
schemes including
tax - - - - (1.3) (1.3)
At 31 December 2016 54.2 98.4 33.4 14.5 161.7 362.2
------------------------- --------- --------- ------------ ------------- ---------- --------
For the six months to 31 December 2015
(unaudited)
-----------------------------------------------------------------------
Capital Exchange
Share Share Redemption translation Retained
Capital Premium Reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- --------- ------------ ------------- ---------- --------
At 1 July 2015 54.2 98.4 33.4 9.0 99.4 294.4
Comprehensive income:
Profit for the period - - - - 41.6 41.6
Other comprehensive
income:
Exchange adjustments
including tax - - - 1.3 - 1.3
Actuarial loss on
retirement benefits
net of tax - - - - (0.1) (0.1)
------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive
income for the period - - - 1.3 41.5 42.8
Transactions with
owners:
Dividends paid to
equity holders (note
6) - - - - (15.6) (15.6)
Credit in respect
of employee share
schemes including
tax - - - - 1.3 1.3
------------------------- --------- --------- ------------ ------------- ---------- --------
At 31 December 2015 54.2 98.4 33.4 10.3 126.6 322.9
------------------------- --------- --------- ------------ ------------- ---------- --------
Group Balance Sheet
at 31 December 2016 and 30 June 2016
31 December 30 June
2016 2016
(unaudited)
Note GBPm GBPm
---------------------------------- ------ ------------- ---------
Assets
Non-current assets
Intangible assets 404.0 404.3
Property, plant and
equipment 188.5 202.0
Deferred tax assets 1.2 1.3
Other receivables 6.6 6.5
---------------------------------- ------ ------------- ---------
600.3 614.1
Current assets
Inventories 3.1 2.9
Other receivables 28.4 36.2
Income tax receivable 0.4 0.4
Cash and short-term
deposits 71.5 61.0
---------------------------------- ------ ------------- ---------
103.4 100.5
Total assets 703.7 714.6
---------------------------------- ------ ------------- ---------
Liabilities
Current liabilities
Trade and other payables (129.2) (139.3)
Income tax payable (13.6) (11.0)
Financial liabilities
- loans and borrowings (16.3) (14.4)
Provisions 8 (11.1) (9.2)
---------------------------------- ------ ------------- ---------
(170.2) (173.9)
Net current liabilities (66.8) (73.4)
---------------------------------- ------ ------------- ---------
Non-current liabilities
Trade and other payables (33.2) (34.7)
Financial liabilities
- loans and borrowings (88.2) (87.8)
Deferred tax liabilities (19.6) (21.0)
Provisions 8 (26.6) (40.9)
Retirement benefit obligations (3.7) (3.7)
---------------------------------- ------ ------------- ---------
(171.3) (188.1)
Total liabilities (341.5) (362.0)
---------------------------------- ------ ------------- ---------
Net assets 362.2 352.6
---------------------------------- ------ ------------- ---------
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 14.5 13.5
Retained earnings 161.7 153.1
---------------------------------- ------ ------------- ---------
Total shareholders'
equity 362.2 352.6
---------------------------------- ------ ------------- ---------
Group Cash Flow Statement
for the six months to 31 December 2016
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
Note GBPm GBPm
------------------------------------------ ------ -------------- --------------
Cash flows from operating activities
Cash generated from continuing
operations 10 51.8 63.7
Interest received 0.1 0.1
Interest paid (1.5) (2.5)
Tax paid (5.8) (22.6)
Discontinued operations - (0.2)
Net cash from operating activities 44.6 38.5
------------------------------------------ ------ -------------- --------------
Cash flows from investing activities
Purchase of intangible assets (3.8) (6.5)
Purchase of property, plant and
equipment (13.2) (19.6)
Proceeds from sale of property,
plant and equipment - 7.0
Purchase of convertible loan note - (1.0)
Net cash used in investing activities (17.0) (20.1)
------------------------------------------ ------ -------------- --------------
Cash flows from financing activities
Dividends paid to equity holders (18.4) (15.6)
Refund of unclaimed dividends 0.2 -
Drawdown of revolving credit facilities - 7.0
Repayment of term loans - (120.0)
Drawdown of term loans - 90.0
Loan arrangement fees - (1.5)
Finance lease principal payments (0.7) (1.5)
Net cash used in financing activities (18.9) (41.6)
------------------------------------------ ------ -------------- --------------
Net increase (decrease) in cash,
cash equivalents and bank overdrafts 8.7 (23.2)
Effect of exchange rate changes (0.2) 0.1
Cash and cash equivalents at start
of period 57.9 87.5
------------------------------------------ ------ -------------- --------------
Cash and cash equivalents at end
of period* 66.4 64.4
------------------------------------------ ------ -------------- --------------
*Cash and cash equivalents at the end of the period
includes overdraft of GBP5.1m (year ended 31 December
2015: GBP5.9m)
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 25 January 2017.
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 2016 were approved by the board of directors on 22
August 2016 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 2016 has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct 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 2016, 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 segment
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 12 months from the date of approval of the interim financial
information and comply with all of its banking covenants.
Accordingly the adoption of the going concern basis remains
appropriate.
Accounting policies
There have been no new or amended standards or interpretations
that became effective in the period which have had a material
impact upon the values or disclosures in the interim financial
information.
Except as described below, the accounting policies applied are
consistent with those of the financial statements for the 12 month
period ended 30 June 2016, as described in those financial
statements.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The Group has not early adopted any standard, interpretation or
amendment that was issued but is not yet effective.
Changes in presentation - analysis by segment
The combination of the operating segments has been modified
following changes in management responsibilities. As from 1
December 2016 Grosvenor Casinos Digital and Mecca Digital have been
combined into a single operating segment which is now known as UK
digital.
Enracha Venues and Enracha Digital have also been combined into
a single operating segment which is now known as Enracha.
As a result the group will now report five segments being
Grosvenor Venues, Mecca Venues, UK Digital, Enracha and Central
Costs. 2015 comparative information has been restated.
2 Segment information - continuing operations
Six months to 31 December 2016 (unaudited)
-----------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------------- --------- --------- --------
Continuing
operations
Group revenue
reported in
internal
information 202.0 108.0 52.4 16.2 - 378.6
Customer
incentives (6.9) (5.9) (10.5) - - (23.3)
------------------- ------------------ ------------- ---------------- --------- ---------
Segment revenue 195.1 102.1 41.9 16.2 - 355.3
------------------- ------------------ ------------- ---------------- --------- --------- --------
Operating profit
(loss) before
exceptional
items 26.1 13.3 7.3 2.9 (13.0) 36.6
Exceptional
operating (loss)
profit (4.2) 10.5 (1.4) (0.2) (2.9) 1.8
------------------ ------------- ---------------- --------- --------- --------
Segment result 21.9 23.8 5.9 2.7 (15.9) 38.4
------------------- ------------------ ------------- ---------------- --------- --------- --------
Finance costs (2.2)
Finance income 0.1
Other financial
losses (0.9)
------------------- ------------------ ------------- ---------------- --------- --------- --------
Profit before
taxation 35.4
Taxation (7.3)
Profit for
the period
from continuing
operations 28.1
------------------- ------------------ ------------- ---------------- --------- --------- --------
Six months to 31 December 2015 (unaudited)*
-----------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------------- --------- --------- --------
Continuing
operations
Group revenue
reported in
internal
information 205.1 109.8 47.1 12.2 - 374.2
Customer
incentives (7.8) (5.3) (8.4) - - (21.5)
------------------- ------------------ ------------- ---------------- --------- ---------
Segment revenue 197.3 104.5 38.7 12.2 - 352.7
------------------- ------------------ ------------- ---------------- --------- --------- --------
Operating profit
(loss) before
exceptional
items 30.9 14.3 8.0 1.4 (14.2) 40.4
Exceptional
operating profit - 6.0 - - - 6.0
------------------ ------------- ---------------- --------- --------- --------
Segment result 30.9 20.3 8.0 1.4 (14.2) 46.4
------------------- ------------------ ------------- ---------------- --------- --------- --------
Finance costs (3.1)
Finance income 0.1
Other financial
losses (0.7)
------------------- ------------------ ------------- ---------------- --------- --------- --------
Profit before
taxation 42.7
Taxation (4.8)
Profit for
the period
from continuing
operations 37.9
------------------- ------------------ ------------- ---------------- --------- --------- --------
* 2015 figures have been restated based on the following changes
to operating segments effective from 1 December 2016:
- Grosvenor Casinos Digital and Mecca Digital have been reported
as a single operating segment now known as UK Digital
- Enracha Venues and Enracha Digital have been reported as a
single operating segment now known as Enracha
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 2016 (unaudited)
--------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----------------- --------- ---------------- --------- ------------ -------
Employment
and related
costs 71.1 27.7 4.9 7.3 9.5 120.5
Taxes and duties 42.4 17.3 4.5 0.8 0.9 65.9
Direct costs 7.0 10.4 12.6 1.4 - 31.4
Property costs 15.1 13.4 0.4 0.7 0.6 30.2
Marketing 7.3 5.1 6.5 0.4 - 19.3
Depreciation
and amortisation 12.7 5.9 2.8 0.8 0.9 23.1
Other 13.4 9.0 2.9 1.9 1.1 28.3
Total costs
before exceptional
items 169.0 88.8 34.6 13.3 13.0 318.7
---------------------- ----------------- --------- ---------------- --------- ------------ -------
Cost of sales 193.0
Operating costs 125.7
Total costs
before exceptional
items 318.7
---------------------- ----------------- --------- ---------------- --------- ------------ -------
Six months to 31 December 2015 (unaudited)*
--------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----------------- --------- ---------------- --------- ------------ -------
Employment
and related
costs 69.7 26.4 4.1 5.8 8.7 114.7
Taxes and duties 43.3 18.0 5.7 0.7 0.8 68.5
Direct costs 5.9 10.4 11.0 1.1 - 28.4
Property costs 14.5 13.2 0.3 0.8 0.5 29.3
Marketing 8.9 5.7 6.4 0.4 - 21.4
Depreciation
and amortisation 12.1 6.5 2.1 0.8 0.8 22.3
Other 12.0 10.0 1.1 1.2 3.4 27.7
Total costs
before exceptional
items 166.4 90.2 30.7 10.8 14.2 312.3
---------------------- ----------------- --------- ---------------- --------- ------------ -------
Cost of sales 188.1
Operating costs 124.2
Total costs
before exceptional
items 312.3
---------------------- ----------------- --------- ---------------- --------- ------------ -------
* 2015 figures have been restated based on the following changes
to operating segments effective from 1 December 2016:
- Grosvenor Casinos Digital and Mecca Digital have been reported
as a single operating segment now known as UK Digital
- Enracha Venues and Enracha Digital have been reported as a
single operating segment now known as Enracha
3 Exceptional items
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
-------------------------------- -------------- --------------
Exceptional items relating
to continuing operations
Closure of venues (0.3) 6.0
Impairment charges (4.7) -
Impairment reversals 0.6 -
Group restructuring including
relocation costs (3.8) -
Release from provisions for
property leases 10.7 -
Aborted acquisition costs (0.7) -
-------------------------------- -------------- --------------
Exceptional operating income 1.8 6.0
Taxation (see note 5) (1.0) 0.3
Exceptional items relating
to continuing operations 0.8 6.3
-------------------------------- -------------- --------------
Exceptional items relating
to discontinued operations
Finance costs (see note 4) - (0.2)
Taxation (see note 5) - 3.9
-------------------------------- -------------- --------------
Exceptional items relating
to discontinued operations - 3.7
-------------------------------- -------------- --------------
Total exceptional items 0.8 10.0
-------------------------------- -------------- --------------
Continuing operations
Closure of venues
The Group has recognised GBP0.1m for additional costs associated
with the closure of two Grosvenor clubs and GBP0.2m for a gaming
duty claim in relation to a previously disposed Enracha club.
Impairment charges
The Group has recognised an impairment charge of GBP4.1m for a
venue within Grosvenor Venues and GBP0.6m for a venue within
Enracha. Performance at these venues has not been in line with
expectations.
Impairment reversal
The Group has recognised an impairment reversal of GBP0.6m for a
venue within Enracha. Performance at this venues has exceeded
expectations due to improvements in the local economic
environment.
Group restructuring including relocation costs
In H1 2016/17 the Group carried out a detailed review of its
entire UK organisational structure designed to improve customer
service and simplify operations. This has resulted in changes to
management and team structures at both club and central levels, the
decision to centralise support functions into a new office in
Maidenhead and the merging of the separately run brand teams
supporting digital into one operational team. The cost of this
restructure is estimated to be GBP8.0 million with GBP3.8 million
recognised in H1 and the balance expected to be incurred in H2.
H1 costs include GBP1.2m of redundancy cost, GBP2.3m of
relocation cost and GBP0.3m of legal and professional fees.
Costs by segment were GBP0.1m Grosvenor Venues, GBP0.2m Mecca
Venues, GBP1.3m UK Digital and GBP2.2m Central.
Release from provision for property leases
The Group recognised a net release of GBP10.7m in relation to
provisions for onerous leases in the period due to the successful
surrender of a site within Mecca for a payment of GBP2.0m.
Aborted acquisition costs
Central cost includes GBP0.7m of aborted acquisition costs.
4 Financing
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
---------------------------------- -------------- --------------
Continuing operations
Finance costs:
Interest on debt and borrowings (1.3) (1.8)
Amortisation of issue costs
on borrowings (0.2) (0.4)
Interest payable on finance
leases (0.3) (0.4)
Unwinding of the discount
in property lease provisions (0.4) (0.5)
---------------------------------- -------------- --------------
Total finance costs (2.2) (3.1)
Finance income:
Interest income on short
term bank deposits 0.1 0.1
---------------------------------- -------------- --------------
Finance income 0.1 0.1
Other financial losses -
including foreign exchange (0.9) (0.7)
Total net financing cost
for continuing operations (3.0) (3.7)
Discontinued operations
Exceptional finance costs - (0.2)
Total net financing cost
for discontinued operations - (0.2)
---------------------------------- -------------- --------------
Total net financing costs (3.0) (3.9)
---------------------------------- -------------- --------------
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
---------------------------------- -------------- --------------
Total net financing cost
for continuing operations (3.0) (3.7)
Adjust for:
Other financial losses -
including foreign exchange 0.9 0.7
Interest payable included
in adjusted profit (2.1) (3.0)
---------------------------------- -------------- --------------
5 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
2016 (unaudited)
--------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
------------------------------------ ------------- -------------- -------
Current income tax
Current income tax - UK (5.7) - (5.7)
Current income tax - overseas (1.2) - (1.2)
------------------------------------ ------------- -------------- -------
Current income tax charge (6.9) - (6.9)
Current income tax on exceptional
items (1.6) - (1.6)
Total current income tax
charge (8.5) - (8.5)
------------------------------------ ------------- -------------- -------
Deferred tax
Deferred tax - UK (0.4) - (0.4)
Deferred tax - overseas (0.1) - (0.1)
Restatement of deferred tax
from 18% to 17% 1.1 - 1.1
Deferred tax on exceptional
items 0.6 - 0.6
Total deferred tax credit 1.2 - 1.2
------------------------------------ ------------- -------------- -------
Tax charge in the income
statement (7.3) - (7.3)
------------------------------------ ------------- -------------- -------
Six months to 31 December
2015 (unaudited)
--------------------------------------
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
------------------------------------ ------------- -------------- -------
Current income tax
Current income tax - UK (7.1) - (7.1)
Current income tax - overseas (0.6) - (0.6)
------------------------------------ ------------- -------------- -------
Current income tax charge (7.7) - (7.7)
Amounts over provided in
previous years on exceptional
items 0.3 3.9 4.2
Total current income tax
(charge) credit (7.4) 3.9 (3.5)
------------------------------------ ------------- -------------- -------
Deferred tax
Deferred tax - UK (0.4) - (0.4)
Deferred tax - overseas (0.1) - (0.1)
Restatement of deferred tax
from 20% to 18% 3.1 - 3.1
Total deferred tax credit 2.6 - 2.6
------------------------------------ ------------- -------------- -------
Tax (charge) credit in the
income statement (4.8) 3.9 (0.9)
------------------------------------ ------------- -------------- -------
5 Taxation (continued)
The tax effect of items within other comprehensive income was as
follows:
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
--------------------------------- -------------- --------------
Current tax credit on exchange
movements offset in reserves 0.2 0.1
Total tax credit on items
within other comprehensive
income 0.2 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 (six months to 31 December 2015: GBP0.2m).
Factors affecting future taxation
On 16 March 2016, the Chancellor of the Exchequer announced a
further 1.0% reduction to the previously announced 18.0% main rate
of UK corporation tax to 17.0% from 1 April 2020. This change was
substantively enacted in September 2016.
On 8 July 2015, the Chancellor of the Exchequer announced the
reduction in the main rate of UK corporation tax to 19.0% for the
year starting 1 April 2017 and a further 1.0% reduction to 18.0%
from 1 April 2020. These changes were substantively enacted in
October 2015.
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 and onwards. These changes were substantively enacted in
November 2014.
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 Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
---------------------------------- -------------- --------------
Tax charge for continuing
operations (7.3) (4.8)
Adjust for:
Tax on exceptional items 1.0 (0.3)
Tax on adjusted items and
impact of reduction in tax
rate (1.3) (3.2)
----------------------------------
Tax charge included in adjusted
profit (7.6) (8.3)
---------------------------------- -------------- --------------
6 Dividends
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
----------------------------------- -------------- --------------
Dividends paid to equity holders
Final dividend for 2015/16
paid on 20 October 2016 - 4.70p
per share 18.4 -
Final dividend for 2014/15
paid on 21 October 2015 - 4.00p
per share - 15.6
Refund of unclaimed dividends (0.2) -
Total 18.2 15.6
----------------------------------- -------------- --------------
The Board has declared an interim dividend of 2.00p per ordinary
share. The dividend will be paid on 21 March 2017 to shareholders
on the register at 10 February 2017. The financial information does
not reflect this dividend.
7 Adjusted earnings per share
Adjusted earnings is calculated by adjusting profit attributable
to equity shareholders to exclude the impact of reductions in tax
rate, 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 Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
------------------------------------- -------------- --------------
Profit attributable to equity
shareholders 28.1 41.6
Adjust for:
Discontinued operations (net
of taxation) - (3.7)
Exceptional items after tax
on continuing operations (0.8) (6.3)
Other financial losses 0.9 0.7
Taxation on adjusted items
and impact of reduction in
tax rate (1.3) (3.2)
------------------------------------- -------------- --------------
Adjusted net earnings attributable
to equity shareholders 26.9 29.1
Weighted average number of
ordinary shares in issue 390.7m 390.7m
Adjusted earnings per share
(p) - basic 6.9p 7.4p
Adjusted earnings per share
(p) - diluted 6.9p 7.4p
------------------------------------- -------------- --------------
8 Provisions
Property Indirect
lease Disposal Restructuring tax
provisions provisions provisions provisions Total
GBPm GBPm GBPm GBPm GBPm
------------------------ ------------ ------------ --------------- ------------ --------
At 1 July 2016 44.5 4.4 - 1.2 50.1
Exchange adjustments - 0.2 - - 0.2
Unwinding of discount 0.4 - - - 0.4
Charge to the
income statement
- exceptional - - 2.0 0.2 2.2
Release to the
income statement
- exceptional (10.7) - - - (10.7)
Utilised in period (4.4) (0.1) - - (4.5)
At 31 December
2016 (unaudited) 29.8 4.5 2.0 1.4 37.7
------------------------ ------------ ------------ --------------- ------------ --------
Current 6.9 0.8 2.0 1.4 11.1
Non-current 22.9 3.7 - - 26.6
At 31 December
2016 (unaudited) 29.8 4.5 2.0 1.4 37.7
------------------------ ------------ ------------ --------------- ------------ --------
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:
At At
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
------------------------------------ -------------- --------------
Total loans and borrowings (104.5) (122.2)
Less: accrued interest 0.4 0.6
Less: unamortised facility
fees (0.4) (0.7)
------------------------------------ -------------- --------------
(104.5) (122.3)
Add: cash and short term deposits 71.5 70.3
Net debt (33.0) (52.0)
------------------------------------ -------------- --------------
10 Cash generated from continuing operations
Six months Six months
to to
31 December 31 December
2016 2015
(unaudited) (unaudited)
GBPm GBPm
-------------------------------------- -------------- --------------
Continuing operations
Operating profit 38.4 46.4
Exceptional items (1.8) (6.0)
-------------------------------------- -------------- --------------
Operating profit before exceptional
items 36.6 40.4
Depreciation and amortisation 23.1 22.3
Increase in inventories (0.2) (0.2)
Decrease in other receivables 7.8 7.3
Decrease in trade and other
payables (8.4) (4.3)
Share-based payments (1.5) 1.1
Loss on disposal of property,
plant and equipment 0.2 -
Impairment of property, plant
and equipment 0.3 0.4
-------------------------------------- -------------- --------------
57.9 67.0
Cash utilisation of provisions
(See note 8) (4.5) (3.3)
Cash payments in respect of
exceptional items (1.6) -
Cash generated from continuing
operations 51.8 63.7
-------------------------------------- -------------- --------------
11 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, 9 of these
have not expired or been surrendered. These 9 leases have durations
of between 3 months and 96 years and a current annual rental
obligation (net of sub-let income) of approximately GBP0.8m.
During 2014, the Group became aware of certain information in
respect of a change 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.
12 Related party and ultimate parent undertaking
Guoco Group Limited (Guoco), a company incorporated in Bermuda,
and listed on the Hong Kong stock exchange has 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 2016, entities controlled
by Hong Leong owned 56.2% of the Company's shares, including 52.0%
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
IR OKPDKCBKDNDB
(END) Dow Jones Newswires
January 26, 2017 02:00 ET (07:00 GMT)
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