TIDMRNK
RNS Number : 9542X
Rank Group PLC
16 August 2018
LEI: 213800TXKD6XZWOFTE12
16 August 2018
The Rank Group Plc ("Rank" or the "Group")
Full year results for the 12 months ended 30 June 2018
Financial highlights
2017/18 2016/17 Change
-----------
Financial
KPIs Group like-for-like revenue GBP738.0m GBP755.2m (2.3)%
---------------------------------- ----------- ----------- ---------
UK digital revenue GBP122.5m GBP111.5m 9.9%
-------------------------------------------------- ----------- ----------- ---------
UK digital operating profit GBP20.9m GBP22.7m (7.9)%
-------------------------------------------------- ----------- ----------- ---------
Venues like-for-like revenue GBP618.5m GBP643.7m (3.9)%
-------------------------------------------------- ----------- ----------- ---------
Venues operating profit GBP84.7m GBP88.7m (4.5)%
-------------------------------------------------- ----------- ----------- ---------
Group EBITDA before exceptional
items GBP120.0m GBP128.8m (6.8)%
-------------------------------------------------- ----------- ----------- ---------
Group operating profit before
exceptional items GBP77.0m GBP83.5m (7.8)%
-------------------------------------------------- ----------- ----------- ---------
Adjusted profit before tax GBP74.3m GBP79.3m (6.3)%
-------------------------------------------------- ----------- ----------- ---------
Adjusted earnings per share 15.0p 16.0p (6.3)%
-------------------------------------------------- ----------- ----------- ---------
Statutory
performance Statutory revenue GBP691.0m GBP707.2m (2.3)%
---------------------------------- ----------- ----------- ---------
Group operating profit GBP50.1m GBP84.5m (40.7)%
-------------------------------------------------- ----------- ----------- ---------
Profit before taxation GBP46.7m GBP79.7m (41.4)%
-------------------------------------------------- ----------- ----------- ---------
Cash generated from continuing
operations GBP102.4m GBP116.3m (12.0)%
-------------------------------------------------- ----------- ----------- ---------
Net debt GBP9.3m GBP12.4m (25.0)%
-------------------------------------------------- ----------- ----------- ---------
Basic earnings per share
after exceptional items 9.2p 16.1p (42.9)%
-------------------------------------------------- ----------- ----------- ---------
Dividend per share 7.45p 7.30p 2.1%
-------------------------------------------------- ----------- ----------- ---------
Operational highlights
-- Group performance in line with the Board's revised expectations
-- A challenging year for Grosvenor's casinos hit by low win
margin, enhanced due diligence and extreme weather
-- Mecca's performance above expectations, as a result of good cost control
-- Growth from UK digital continues but with a slowdown in H2
-- Enracha's good performance continues
-- YoBingo performing strongly and beating acquisition plan
Outlook
-- Board has full confidence in the strategic direction of the Group
-- New leadership team focused on operational improvements to drive sustained profit growth
-- Company-wide transformation programme currently in
development phase to identify, validate and prioritise
the key initiatives to grow revenue and extract cost savings
-- 2018/19 Group financial performance is expected to be in line
with the current consensus expectations
John O'Reilly, Chief Executive of The Rank Group Plc said:
"I joined Rank because of its underlying potential. With the
backdrop of a disappointing performance in 2017/18, we are now
moving quickly to identify the key priorities which will begin to
realise the significant underlying potential that I have now seen
first-hand since joining the Group in early May."
"We are taking steps to increase our focus on the customer, to
accelerate growth in the digital business, to drive cost
efficiencies across the business and to strengthen our
organisational capabilities. This will be delivered within a
transformational programme framework, which will ensure that we
deliver a growing Rank Group that is fit for the future."
Ends
Definition of terms:
-- Any reference to revenue or like-for-like group revenue is
before adjustment for customer incentives;
-- EBITDA is 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 resulting from foreign exchange
gains and losses on loans and borrowings. See Financial Review for
reconciliation;
-- 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;
-- "2017/18" refers to the audited 12-month period to 30 June
2018 and "2016/17" refers to the audited 12-month period to 30 June
2017;
-- Like-for-like measures have been disclosed in this report to
show the impact of club openings, closures, and relocations;
-- Grosvenor and Mecca venues no longer disclose customer
numbers due to the introduction of new door policies, previously
referred to as 'full' and 'partial' open door, that means the Group
is no longer able to accurately track total customer numbers;
-- Prior year like-for-like measures are amended to show an
appropriate comparative for the impact of club openings, closures,
relocations, and discontinued operations;
-- 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; and
-- Venues includes Grosvenor Venues, Mecca Venues and Enracha.
Enquiries
The Rank Group Plc
Sarah Powell, director of investor relations and communications 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 16 August 2018
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
2017/18 has been a challenging year for the Group driven
principally by a disappointing performance from Grosvenor's
casinos.
Revenue(1) for Grosvenor Casinos declined by 6.1% in the year.
Performance was materially impacted by further enhanced customer
due diligence following the published advice of the UK Gambling
Commission in September 2017. Consequently, customer visits
declined resulting in revenue(1) falling 9.9% in H2 compared to a
2.4% fall in H1. Grosvenor's performance was further hindered by a
lower gaming margin from its major players and adverse weather in
Q3. Operating profit(2) fell by 6.7% due to lower revenues.
Mecca's revenue(1) fell 2.6% in the year driven by a 7.9%
decline in customer visits. Operating profit fell by 4.3%, a lower
decline than expected by management as a result of improved cost
control across both employment and marketing activities. Mecca's
new bingo concepts (Big Bingo Bash, Bonkers Bingo, Student events,
Initial Newbie nights and other broader entertainment events)
continued to be tested with good results. These concepts are
helping drive visits as well as contributing incremental revenue
and profit.
The Group's UK digital business grew with revenue(1) up 9.9%.
Importantly, a successful 'Meccarena' marketing campaign and
ongoing investments into the meccabingo.com offer drove revenue up
10.9%, following two years of low single digit growth rates.
Grosvenorcasinos.com grew revenue(1) 8.2% in the year, however the
more stringent customer due diligence (highlighted above) impacted
H2 performance resulting in revenue(1) declining in H2 following
strong growth in H1. Insufficient marketing investment and a
temporary system issue, which resulted in some of our more valuable
multi-channel customers not being contacted, exacerbated
grosvenorcasinos.com's H2 weak performance. Operating profit fell
by GBP1.8m in the year to GBP20.9m following the introduction of
remote gaming duty ('RGD') on customer bonuses, which resulted in
GBP2.5m of incremental RGD in the year.
Our Spanish operations, Enracha, delivered a strong performance
with euro revenue(1) up 11.0% and euro operating profit up
2.8%.
GBPm Group Revenue(1) Operating profit(2)
2017/18 2016/17 2017/18 2016/17
--------- --------- ----------- ----------
Grosvenor Venues 373.0 397.2 48.6 52.1
--------- --------- ----------- ----------
Mecca Venues 208.1 213.6 28.6 29.9
--------- --------- ----------- ----------
UK Digital 122.5 111.5 20.9 22.7
meccabingo.com 75.0 67.6
grosvenorcasinos.com 47.5 43.9
--------- --------- ----------- ----------
Enracha 37.5 32.8 6.5 6.2
--------- --------- ----------- ----------
Central costs (27.6) (27.4)
--------- --------- ----------- ----------
Total 741.1 755.1 77.0 83.5
--------- --------- ----------- ----------
1 Before adjustments for customer incentives.
2 Before exceptional items, as per note 2.
Pre-tax exceptional items relating to continuing operations
produced an exceptional cost of GBP26.9m in the year. Further
detail can be found in the Financial Review.
Acquisition of YoBingo
In May 2018, we completed the acquisition of QSB Gaming Limited,
the owner of YoBingo.es, a leading Spanish digital bingo business
for an initial consideration of EUR23.1m and, subject to future
performance, up to a maximum consideration of EUR52.0m. The
acquisition of YoBingo.es provides Rank with a secure and strong
digital bingo presence in Spain, a high growth and regulated
digital gaming market.
YoBingo is performing ahead of expectations but, due to the
timing of the acquisition, has not materially benefited Group
revenues in 2017/18. For further detail on the acquisition please
refer to note 13.
Responsible gambling
Rank remains committed to promoting responsible gambling to
those customers who enjoy gambling as a recreational activity and
reducing the use for those who are vulnerable or otherwise at risk
of experiencing harm. During the year, we continued to develop our
approach in reducing the social impact of problem gambling and have
made the following progress in the last 12 months:
-- Additional colleague training around enhanced customer due diligence;
-- Creation of a dedicated customer verification teams for both retail and digital;
-- Improved customer interaction record keeping following the
introduction of the enhanced Neon system in our casinos;
-- Developed a data driven alerts system to help identify
problem gamblers at an earlier stage in their game play;
-- Creation of complex models based on problem 'markers' in our
digital business to help drive customer interventions;
-- Continued the trial of a customer risk identification
initiative alongside members of the National Casino Forum; and
-- Increased social responsibility messaging in our bingo venues
alongside the introduction of machine gaming safeguards.
Focus for 2018/19
We have initiated a transformation programme to deliver revenue
growth, greater cost efficiency and improved organisational
effectiveness in this and future years. The programme will be all
pervasive, providing the framework for the delivery of operational
improvements right across the Group. Each workstream is owned by a
member of the executive team and governance is provided through a
Transformation Programme Office with the whole programme
coordinated by the recently appointed chief transformation
officer.
Over the coming year the transformation programme will drive an
increased focus on four key areas to help us deliver against our
strategic objectives:
-- Increased focus on the customer
-- We have recently rolled out 'Project Experience', a standards
setting and training programme focussed on delivering the optimal
customer experience in our Mecca and Grosvenor venues;
-- We will continue with the good work already started on
customer segmentation at a venue level within the Grosvenor estate
to provide the right experience to the right customer, moving away
from a 'one size fits all' approach;
-- We will increase the focus on offering a wider portfolio of
entertainment within our Mecca venues to
attract new customers and diversify our customer base;
-- We will significantly increase data driven customer insights
within the business and use our data to
ensure a stronger performance orientation;
-- We will be forensic in evaluating capital investments in our
venues and in our product offering; and
-- It is essential that we create a sustainable business and all
initiatives will be viewed through a
sustainability lens to ensure we are growing a business founded on responsible gambling.
-- Grow our digital business
-- We are optimising user journeys on our digital sites to make
sure they are frictionless for customers;
-- Our delayed omni-channel service, Grosvenor One, will be
delivered across the estate within the second
half of the year. This is critical to growing both our Grosvenor venues and digital business;
-- Having delivered Grosvenor One, we will be reviewing the
development of a minimum viable omni-channel
service for Mecca customers;
-- Cost savings delivered within the transformation programme
will be reinvested in marketing within the
digital business to further increase customer acquisition and loyalty; and
-- The acquisition of YoBingo provides an opportunity to drive
significant digital growth within the Spanish
market under both the Enracha and YoBingo brands.
-- Drive cost efficiencies
-- Our central costs are too high for a business of our size. We
will be reviewing central costs to ensure
appropriate sizing and control going forwards; and
-- The transformation programme will have a key focus on cost efficiencies across the Group.
-- Organisational capabilities
-- Central to the transformation programme is the objective of
creating a better quality, more effective
organisation; and
-- The programme will create opportunities for our best people
to develop and grow and improve the
attractiveness of Rank as an employer of choice.
Management team changes
Retail structure
During the year, the Group created a single leadership team
across its UK retail businesses with the promotion of Alan Morgan
to retail managing director, covering both Grosvenor Casinos and
Mecca. The retail team was further strengthened by the appointment
of Olly Raeburn, chief marketing officer, and Debbie Husband,
operations director for Grosvenor Casinos.
Given that a single customer view is the cornerstone of a
successful multi-channel brand, Olly has also assumed
responsibility for marketing across both the Group's retail and
digital channels and has joined the Rank Executive Committee.
Chief Transformation Officer
I am pleased to announce that Jim Marsh will join the Group on 1
October 2018 to take up his position as chief transformation
officer. Jim has led and delivered transformations in a variety of
sectors and will join the Rank Executive Committee. He joins us
from McKinsey & Company where he was a partner in their
transformation team.
Chief Information Officer
I am also pleased to announce the recent appointment of Jonathan
Greensted as chief information officer. Jonathan was most recently
chief information officer at Travelodge where he led a successful
IT transformation project. Phil Moyes will leave the business
following a comprehensive handover.
Board changes
Chief Executive
In March 2018, the Group announced that Henry Birch would step
down as chief executive, having advised the Board of his decision
to leave the business. The Board would like to thank Henry for his
contribution to the Group over his four-year tenure and wishes him
every success in his future ventures.
John O'Reilly assumed the role of chief executive on 7 May 2018,
with Henry leaving the business at the same time.
Finance Director
Rank's finance director, Clive Jennings , will leave the
business on 17 August 2018 to pursue other opportunities. Clive
leaves with Board's appreciation and thanks for the significant
role he has played in the development of the Company over his
18-year tenure. A search for Clive's successor is currently
underway.
The Group's head of reporting, James Pizey, will step up as
interim chief financial officer until Clive's successor has been
appointed.
Alan Morgan
Alan joined the Board as executive director on 7 May 2018. Alan
has an in-depth understanding of our venues business and he will
contribute significantly to the future development of Rank.
Richard Kilmorey
The Rt. Hon. The Earl of Kilmorey, PC, currently chair of the
responsible gambling committee, has notified the board of his
intention not to seek re-election at the 2018 annual general
meeting and will therefore step down later this year having
completed over six years on the Board.
Current trading and outlook
Trading in the short six-week period to 12 August 2018 has been
challenging following the unseasonal hot weather which has
adversely impacted our UK retail businesses.
Despite this, Group financial performance for 2018/19 is
expected to be in line with the current consensus expectations.
The Board has full confidence in the strategic direction of the
Group and the new leadership team is focused on operational
improvements to drive sustained profit growth. The company-wide
transformation programme outlined above is currently in development
to identify, validate and prioritise the key initiatives to grow
revenue and extract cost savings. This programme is expected to be
self-funding in this financial year.
Regulation and taxation
In the recent Government review of machine allocations in UK
casinos the Government stated that machine allocations were low by
international standards. The Government also stated that if
additional measures are put in place to manage the risk of
gambling-related harm effectively, they would look again at casino
machine limits. Rank has been working within the National Casino
Forum to enhance player protection measures across the casino
industry.
The Department for Culture, Media and Sport ('DCMS') has
indicated that an increase in Remote Gaming Duty ('RGD') will be
required to compensate for the predicted loss in machine duty
following the introduction of the GBP2 maximum stake for FOBTs. The
earliest implementation of any increase to RGD is expected to be
April 2019.
Dividend
The board is pleased to recommend a final dividend of 5.3 pence
per share to be paid on 30 October 2018 to shareholders on the
register at 21 September 2018. This will take the full-year
dividend to 7.45 pence per share, up 2.1% on the previous year. The
Group's dividend has thus reduced cover to 2.0 times from 2.2 times
in the prior year.
Operating Review
Grosvenor Casinos - Venues
2017/18 was a challenging year for Grosvenor's casinos, with
like-for-like(4) revenue down 4.6%.
Key financial performance indicators
2017/18 2016/17 Change
Revenue(1) (GBPm) 373.0 397.2 (6.1)%
London 123.7 140.1 (11.7)%
Provinces 238.7 242.1 (1.4)%
Belgium 10.6 15.0 (29.3)%
--------- --------- ----------
EBITDA(2) (GBPm) 70.6 76.6 (7.8)%
--------- --------- ----------
Operating profit(3) 48.6 52.1 (6.7)%
(GBPm)
London 17.6 24.6 (28.5)%
Provinces 29.6 25.9 14.3%
Belgium 1.4 1.6 (12.5)%
--------- --------- ----------
Like-for-like
revenue(4) (4.6)%
---------
1 Before adjustments for customer incentives.
2 Before exceptional items.
3 Before exceptional items, as per note 2.
4 Excludes venues openings, closures and relocations.
Total Grosvenor revenue(1) fell 6.1% in the year principally
impacted by more stringent customer due diligence following the UK
Gambling Commission's published advice in September 2017, a lower
win margin from our major players and periods of extreme weather in
Q3.
Operating profit(3) fell by 6.7% in the year due to lower
revenues. Delivering cost savings continued to be a priority in the
year with a particular focus on labour costs, down 4.9%. Work
continues into 2018/19 to improve labour efficiencies in both the
casinos and wider support functions.
In line with the London casino segmentation work carried out in
the period, targeted capital investments were made in the year. The
Barracuda casino in London which targets a higher spending
transactional customer completed the first phase of its
refurbishment, with the VIP room redevelopment completed in June
2018. The second phase of the refurbishment is due to be completed
in H1 2018/19.
Towards the end of the year, new experiential gaming product and
impactful internal and external electronic signage was put into the
St Giles casino in Tottenham Court Road, which targets a younger
casino player.
In the provinces, the Soames casino in Manchester was
refurbished and performance post its relaunch in February 2018 has
been encouraging.
During the year, five underperforming casinos were impaired
resulting in a GBP9.8m exceptional cost at year end. In June 2018,
the Grosvenor casino in Bradford was closed following a prolonged
period of underperformance.
Key non-financial performance indicators
2017/18 2016/17 Change
Customer visits
(000s)(5) 7,004 7,732 (9.4)%
London 1,303 1,398 (6.8)%
Provinces 5,559 6,087 (8.7)%
Belgium 142 247 (42.5)%
--------- --------- ----------
Spend per visit 53.26 51.37 3.7%
(GBP)(5)
London 94.93 100.21 (5.3)%
Provinces 42.94 39.77 8.0%
Belgium 74.65 60.73 22.9%
--------- --------- ----------
5 Unaudited
Customer visits fell by 9.4% in the year. Spend per visit
increased in the year with Grosvenor's lower spending, more leisure
orientated, customers visiting less often.
Refurbishments in the first half of the year at the Golden
Horseshoe and the Rialto (formerly the Piccadilly) severely
disrupted London visits in the period. If these clubs visit
performances were excluded London visits would have been broadly
flat for the year. Provincial visits fell in the period following a
reduction in the leisure customer base.
The wider casino market has been in decline in the last three
years. However, new concepts like the Hippodrome Casino, with its
broader leisure based offer which includes a strong entertainment
and F&B offer, and Aspers Stratford, offering over 150 slot
machines, have delivered growth. This supports management's view
that an increased focus on customer service and a wider leisure
offer can provide growth opportunities for Grosvenor's casinos.
In September 2017, the casino concession at Middlekerke in
Belgium expired following a decision by management not to renew.
Therefore, from 1 September 2017, the Belgian operations consisted
of only one casino in Blankenberge. With the Blankenberge
concession due to end on 31 December 2020, the local council
commenced the process to grant a new concession which was
subsequently successfully secured by Grosvenor.
Venues revenue analysis - Great Britain only
GBPm 2017/18 2016/17 Change
Casino games 229.7 248.3 (7.5)%
--------- --------- --------
Gaming machines 90.8 89.5 1.5%
--------- --------- --------
Card room games 14.7 15.3 (3.9)%
--------- --------- --------
Food and drink/other 27.2 29.1 (6.5)%
--------- --------- --------
Total 362.4 382.2 (5.2)%
--------- --------- --------
Gaming machines revenue was up 1.5% in the year despite total
revenue declining. Investments previously made into new product and
the reallocation of additional licences at Glasgow Merchant City,
Glasgow Riverboat and Gloucester Road Casino drove this positive
performance.
Mecca - Venues
Mecca's like-for-like(4) revenue was down 2.4% in the year.
Falling customer visits driven by the ongoing market trend were
worsened by the widespread adverse weather in Q3 and Q4.
Key financial performance indicators
2017/18 2016/17 Change
Revenue(1,5)
(GBPm) 208.1 213.6 (2.6)%
--------- --------- --------
EBITDA(2,5) (GBPm) 40.2 41.8 (3.8)%
--------- --------- --------
Operating profit(3,5)
(GBPm) 28.6 29.9 (4.3)%
--------- --------- --------
Like-for-like
revenue(4) (2.4)%
---------
1 Before adjustments for customer incentives.
2 Before exceptional items.
3 As per note 2.
4 Excludes venues closures.
5 Includes Luda
Total revenue(1,5) for the year fell by 2.6% with two clubs
closed in the comparable period. Strong cost discipline led to a
1.9% fall in operating costs in the year despite increases from
National Living Wage, however the fall in revenue led to a 4.3%
decline in operating profit(3,5) .
For both visits and revenue, though in decline, Mecca's is
outperforming other national operators.
Key non-financial performance indicators(6)
2017/18 2016/17 Change
Customer visits
(000s) 9,698 10,528 (7.9)%
--------- --------- --------
Spend per visit
(GBP) 21.46 20.29 5.8%
--------- --------- --------
6 Unaudited
Customer visits fell by 7.9% in the period. Spend per visit
increased by 5.8% due to growth in main stage bingo.
In July 2018, Mecca closed its venue in Ashford reducing the
total number of venues to 84.
Mecca hosted 63 of its new experimental bingo events aimed at
attracting a new and younger customer base. There has been an
increased focus on their cost with all, apart from Big Bingo Bash,
now positively contributing to operating profit.
This year also saw the first tie up with P&O Mini Cruises
where 500 passengers engaged with Bonkers Bingo during a mini
cruise to Amsterdam. During the year, a new concept, 'Newbie
Bingo', was also launched in collaboration with a founder of Rebel
Bingo which focuses on the concept of social gaming along with
other more broader entertainment events, for example band nights
and eSport competitions.
With the increasing popularity of these events we plan to double
the number of events in 2018/19. In addition to incremental revenue
and profit these events help us drive brand awareness, reappraise
our traditional offer and drive new customers to Mecca.
Venues revenue analysis
GBPm 2017/18 2016/17 Change
Main stage bingo 36.7 35.0 4.9%
--------- --------- --------
Interval games 76.2 82.9 (8.1)%
--------- --------- --------
Amusement machines 68.9 69.7 (1.1)%
--------- --------- --------
Food and drink/other 26.3 26.0 1.2%
--------- --------- --------
Total 208.1 213.6 (2.6)%
--------- --------- --------
Main stage bingo continued to benefit from the introduction of
new bingo games, resulting in a 4.9% uplift in main stage bingo
revenues. However, these new games consequently reduced interval
sessions and contributed to the 8.1% fall in interval games
revenue.
Amusement machine investments (product and promotions) continued
in the year, however the impact of lower visits resulted in a 1.1%
fall in amusement machine revenue. Food and beverage revenue was
marginally up due to improved menu management.
Luda - venues
During the year three experimental high street gaming venues
were opened designed to target a different demographic from Mecca -
Walsall (August 2017), Weston-super-Mare (September 2017) and Leeds
(October 2017).
Performance to date has been below management's expectations,
consequently all three venues have been impaired resulting in an
exceptional cost of GBP2.1m. All three venues are under review to
improve returns, specifically modifications are underway to create
a better offer more suited to their individual local market.
UK digital
Rank's UK digital business continued to grow, with revenue(1) up
9.9%.
Key financial performance indicators
2017/18 2016/17 Change
Revenue(1) (GBPm) 122.5 111.5 9.9%
meccabingo.com 75.0 67.6 10.9%
grosvenorcasinos.com 47.5 43.9 8.2%
--------- --------- --------
EBITDA(2) (GBPm) 25.1 27.8 (9.7)%
--------- --------- --------
Operating profit(3)
(GBPm) 20.9 22.7 (7.9)%
--------- --------- --------
1 Before adjustments for customer incentives.
2 Before exceptional items.
3 As per note 2.
A successful 'Meccarena' marketing campaign and ongoing
investment into the meccabingo.com offer drove revenue(1) up 10.9%,
following two years of low single digit growth rates.
Grosvenorcasinos.com grew revenue(1) 8.2% in the year, however the
more stringent approach to customer due diligence impacted H2
performance resulting in revenue to decline following a strong H1.
A temporary system issue resulted in some of Grosvenor's more
valuable multi-channel casino customers not being contacted which
exacerbated grosvenorcasinos.com's H2 poor performance.
Operating profit(3) fell in the year due to higher employment
costs and higher taxes following the change in taxation of free
bets that came into effect from October 2017.
Customer numbers grew in the year by 7.0% driven by strong
increases in grosvenorcasinos.com.
The new slots-led digital casino brand, bellacasino.com, was
recently launched on the Group's new digital content management
system ('CMS'). A targeted customer marketing campaign is scheduled
for H1 2018/19.
Key non-financial performance indicators(4)
2017/18 2016/17 Change
Customers (000s) 428 400 7.0%
--------- --------- --------
4 Unaudited
The Group invested GBP4.2m in the year into Grosvenor One, the
single account and wallet casino product. Roll-out across the
casino estate should be completed in H2 2018/19 with a
comprehensive marketing programme to drive omni-channel use within
our existing digital and retail casino customer base.
Enracha and YoBingo
The Group's Spanish operations, continued to deliver a strong
performance principally driven by its venues. Revenue(1) and
operating profit(3) of EUR42.4m and EUR7.4m, grew by 11.0% and 2.8%
respectively.
Key financial performance indicators
2017/18 2016/17 Change
Revenue(1) (EURm) 42.4 38.2 11.0%
--------- --------- --------
Revenue(1) (GBPm) 37.5 32.8 14.3%
--------- --------- --------
EBITDA(2) (GBPm) 8.4 7.7 9.1%
--------- --------- --------
Operating profit(3)
(EURm) 7.4 7.2 2.8%
--------- --------- --------
Operating profit(3)
(GBPm) 6.5 6.2 4.8%
--------- --------- --------
Euro like-for-like
revenue(4) 4.5%
---------
1 Before adjustments for customer incentives.
2 Before exceptional items.
3 As per note 2.
4 There were no venue closures or openings in the year,
therefore like-for-like is the same as the revenue disclosed
above.
The above revenue and operating profit for 2017/18 includes a
GBP1.6m revenue and GBP0.3m operating profit contribution from the
recently acquired Spanish digital business, YoBingo, and a GBP0.6m
revenue and GBP1.3m operating loss contribution from
enracha.es.
Enracha's venues continued to leverage the recovery in the
Spanish economy which led to euro venues revenue to grow by 4.5% in
the year.
During the year, Enracha launched its first Enracha Stadium
concept in Seville. The concept focuses on sports betting,
amusement machines, electronic roulette and food and beverage.
Following gaming tax changes, the Group reversed previous
exceptional impairment charges of GBP1.8m regarding its venue in
Gorbea. Following a change in provincial legislation, the Zahira
venues was impaired resulting in an impairment cost of GBP0.7m.
Key non-financial performance indicators - venues only(5)
2017/18 2016/17 Change
Customer visits
(000s) 2,006 1,984 1.1%
--------- --------- --------
Spend per visit
(EUR) 21.14 19.25 9.8%
--------- --------- --------
Spend per visit
(GBP) 18.69 16.53 13.1%
--------- --------- --------
5 Unaudited
Venues revenue analysis
EURm 2017/18 2016/17 Change
Bingo 22.0 21.1 4.3%
--------- --------- --------
Amusement machines 13.0 12.7 2.4%
--------- --------- --------
Food & drink/other 4.9 4.4 11.4%
--------- --------- --------
Total 39.9 38.2 4.5%
--------- --------- --------
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 venues, online or mobile.
1. Creating a compelling multi-channel offer
In the markets 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 149 venues, our membership-based models,
our loyalty and reward programmes and the high levels of engagement
that our team members enjoy with customers.
2017/18 progress:
-- Trial of Grosvenor's single account and wallet, Grosvenor
One, in Grosvenor's Stockport casino;
-- Dual play launched, the live streaming of electronic roulette
and baccarat at the Victoria casino to the
Group's digital channels;
-- Roll-out of a new affiliate programme rewarding Grosvenor
employees for converting retail customers to
digital play; and
-- Mobile ordering of F&B in Mecca successfully trialled in
seven additional venues; further roll-out
currently under review.
2018/19 current plans:
-- Grosvenor One to be rolled out across Grosvenor's casinos
with a full marketing programme to be launched in H2; and
-- Continue development of an omni-channel service for Mecca customers.
2. Building digital capability and scale
Rank has built strong positions in venue-based gaming which we
seek to replicate across our digital channels (online and mobile).
In 2017/18, our digital operations generated 17% of Group revenue
whereas digital channels now represent around 35% 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 and meet their changing needs.
2017/18 progress:
-- Acquisition of YoBingo to increase Rank's digital presence in
a high growth and regulated Spanish digital market;
-- Enracha.es soft launched;
-- New Live Casino app successfully launched in August 2017 and performing well;
-- New Grosvenor and Mecca android apps launched with positive results;
-- Relaunch of Bellacasino.com on the new content management system; and
-- Launched new customer relationship management system, Adobe Campaign.
2018/19 current plans:
-- Support the ongoing growth of YoBingo;
-- Launch new content management system for grosvenorcasinos.com;
-- Deliver a suite of improvements to our promotion and bonus tools;
-- Appointment of new digital games suppliers to provide our
customers with bespoke and exclusive games; and
-- Increase customer acquisition marketing investment
underpinned by strong Return On Investment analytics.
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 concepts, we
are constantly evolving and enhancing the experiences that we offer
to customers.
2017/18 progress:
-- Opened three experimental Luda venues. Ongoing reviews of
each venue is underway to address under
performance with a focus on their local market;
-- Utilisation of three unused casino licences (Glasgow and London);
-- Completion of refurbishments at The Rialto (formerly The
Piccadilly) and The Golden Horseshoe casinos in
London and the Soames casino in Manchester;
-- Refurbishment of the VIP area at the Barracuda casino completed;
-- Enhancement of St Giles casino with the installation of new
high impact signage and experiential gaming product;
-- External refurbishment of Mecca Beeston completed and new F&B offer launched;
-- Roll-out of 470 new digital gaming machines in Mecca's venues
incorporating server-based gaming and
Ticket-In-Ticket- Out functionality;
-- Roll-out of new bingo concepts to additional bingo venues,
with a total of 63 events held during the year;
-- GBP2.2m of property savings realised in the year following negotiations with landlords;
-- Condensed Mecca F&B menu rolled out across the estate
with three different menu types (premium, core and
reduced); and
-- Renewal of Belgium casino concession for another 15 years.
2018/19 current plans:
-- Continue with customer research and testing programme
centring around a new casino venue and product concept;
-- Complete second phase refurbishment at Grosvenor's Barracuda casino in London; and
-- Continue negotiations with venue landlords to re-gear and
extend leases whilst reducing property costs.
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.
2017/18 progress:
-- Launch of a new fully integrated 'Meccarena' marketing campaign, including TV advertising;
-- New Customer Relationship Management ('CRM') system launched;
-- Olly Raeburn appointed as chief marketing officer;
-- Improvements made to the Luda proposition driven by their individual local markets;
-- Development and implementation of more impactful external
displays at two London casinos (The Rialto and
St Giles casinos in London);
-- Segmentation of retail estate to improve marketing effectiveness with tailored promotions;
-- Increased focus on customer communications to drive our venue
customers to their complementary digital offer; and
-- Clear new customer propositions created for each London
casino with bespoke marketing plans.
2018/19 current plans:
-- Increase marketing investment in digital across both
meccabingo.com and grosvenorcasinos.com;
-- Comprehensive rollout of Grosvenor One to Grosvenor's casino
customers to drive omni-channel service;
-- Complete an integrated CRM and loyalty strategy including the
launch of interactive reward pods in
Grosvenor's casinos;
-- Roll-out of new customer propositions for Grosvenor's London casinos;
-- Continue roll-out of new customer experience project to drive
improved customer journeys in both our bingo
and casino venues;
-- Roll-out of new VIP strategy following the recent appointment
of the new VIP casino team; and
-- New local marketing platform to be rolled out in H1 2018/19
providing clubs with better support and
consistency over local promotional activity.
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.
2017/18 progress:
-- Four electronic roulette pricing experiments were carried out
across eight casinos with the aim of
improving efficiency and suitability of the offer;
-- A review of rostering software was carried out and concluded
that an upgrade of our current system was appropriate;
-- Roll-out of additional side bets on electronic roulette;
-- Dual play, the live streaming of electronic roulette and
baccarat at the Victoria casino to the Group's digital
channels;
-- Broadcast blackjack and baccarat piloted in four casinos to improve customer experience;
-- New bingo side bet launch on Mecca Max in Mecca retail; and
-- New product installed in the St Giles casino which includes
the creation of a new slots area to accommodate tournament style
gaming and the installation of more experiential roulette
wheels.
2018/19 current plans:
-- Comprehensive rollout of Grosvenor One to Grosvenor's casino
customer to drive omni-channel service;
-- Continue development of an omni-channel service for Mecca customers.
-- Refurbishment of 3,500 Mecca Max units;
-- GBP4.0m investment into new casino gaming machines;
-- Introduction of Ticket In Ticket Out ('TiTo') for table gaming;
-- Self-service TiTo cash terminals to be installed across
casinos to allow customers to buy in and cash out
their TiTo tickets; and
-- Contactless chip and pin payment to be introduced at the casino's cash desk.
Financial Review
2017/18 2016/17 Change
(GBPm) (GBPm)
Revenue 741.1 755.1 (1.9)%
--------- --------- ---------
Less: customer incentives (50.1) (47.9) 4.6%
--------- --------- ---------
Statutory revenue 691.0 707.2 (2.3)%
--------- --------- ---------
Operating profit(1) 77.0 83.5 (7.8)%
--------- --------- ---------
Less: net finance charges(1) (2.8) (4.8) (41.7)%
--------- --------- ---------
Add: other financial losses 0.1 0.6
--------- --------- ---------
Adjusted profit before taxation(2) 74.3 79.3 (6.3)%
--------- --------- ---------
Group operating profit before interest
and tax 50.1 84.5 (40.7)%
--------- --------- ---------
Net financing charge (3.4) (4.8) (29.2)%
--------- --------- ---------
Taxation (10.8) (16.8) (35.7)%
--------- --------- ---------
Profit after taxation 35.9 62.9 (42.9)%
--------- --------- ---------
Earnings per share 9.2p 16.1p (42.9)%
--------- --------- ---------
Adjusted earnings per share(3) 15.0p 16.0p (6.3)%
--------- --------- ---------
1 Before exceptionals, as per note 2.
2 Adjusted profit before taxation is calculated by adjusting
profit from continuing operations before taxation to exclude
exceptional items, the unwinding of the discount on disposal
provisions and other financial gains and losses.
3 Adjusted EPS is calculated using adjusted profit which
excludes 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.
For the year ended 30 June 2018, statutory revenue decreased by
2.3% to GBP691.0m.
Operating profit was down by 7.8% due to lower revenues, with
adjusted profit before taxation down 6.3%.
Total costs before exceptional items were lower driven by labour
efficiency savings and lower taxes due to lower revenues.
The net financing charge before exceptional items fell by 41.7%
to GBP2.8m as debt levels continued to reduce.
Exceptional items
In order to give a full understanding of the Group's performance
and to aid comparability between periods, the Group reports certain
items as exceptional to normal trading.
Exceptional item: GBPm
Impairments 12.1
------
Onerous leases 9.1
------
Closure of venues 3.7
------
Group restructuring 1.6
------
Acquisition costs 0.4
------
Total exceptional operating costs 26.9
------
Impairments of GBP12.1m principally relate to the
underperformance of five Grosvenor casinos (GBP9.8m) and the
experimental Luda venues (GBP2.1m). A reversal of a prior
impairment in Enracha's Gorbea venue was booked in the year
(GBP1.8m) due to a sustained improvement in performance and
following a change in provincial legislation, the Zahira venue was
impaired resulting in an impairment cost of GBP0.7m.
GBP9.0m of the onerous lease costs related to Grosvenor's
casinos, principally regarding leases at two operating casinos
(Southend and Sunderland) and a closed site (New Brighton).
Closure costs includes a GBP4.3m charge regarding the closure of
Grosvenor's loss-making casino in Bradford.
In H1 2017/18 the Group completed a group restructuring project.
The total cost of the project was GBP10.4m, with the remaining
GBP1.6m recognised in 2017/18. Total costs include costs associated
with changes to management and team structures at both venue 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 the digital business into one operational
team.
Acquisition-related costs include one-off costs to professional
service firms that have resulted from the completed acquisition of
YoBingo.
Total exceptional items resulted in a GBP1.2m cash outflow in
the year.
Earnings per share
Basic EPS was down 42.9% to 9.2 pence. Adjusted EPS(3) was down
6.3% to 15.0 pence. For further details refer to note 7.
Taxation
The Group's effective corporation tax rate in 2017/18 was 21.1%
(2016/17: 21.1%) based on a tax charge of GBP15.7m on adjusted
profit before taxation. This is in line with the Group's
anticipated effective tax rate of 20%-22% for the year. Further
details on the taxation charge are provided in note 5. On a
statutory unadjusted basis, the Group had an effective tax rate of
23.1% (2016/17: 21.0%), based on a tax charge of GBP10.8m and total
profit for the year of GBP46.7m.
Cash tax rate
In the year ended 30 June 2018, the Group had an effective cash
tax rate of 19.4% on adjusted profit (2016/17: 18.5%). The cash tax
rate is lower than the effective tax rate mainly as a result of the
use of losses within the Group and the timing of tax instalment
payments.
Cash flow and net cash
As at 30 June 2018, net debt was GBP9.3m, GBP3.1m lower than at
the previous year end. Net debt comprised GBP50.0m in bank term
loans, GBP7.0m in finance leases and GBP2.7m in overdrafts, offset
by cash at bank and in hand of GBP50.4m. In February 2018, the term
loan facilities were reduced to GBP50.0m, from GBP70.0m, in line
with the agreed amortisation profile. The GBP90.0m of revolving
credit facilities ('RCF') was undrawn at the year-end.
In August 2018, the GBP50.0m term loan will be further amortised
to GBP20.0m and will be settled by drawing on the Group's RCF. The
final term loan repayment of GBP20.0m is due in March 2019.
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.
In January 2018, the Group's Yankee Bonds matured and were
settled from surplus cash.
2017/18 2016/17
Cash inflow from operations 109.4 128.4
--------- ---------
Net cash payments in respect of provisions
and exceptional items (7.0) (12.1)
--------- ---------
Cash generated from operations 102.4 116.3
--------- ---------
Capital expenditure (37.0) (42.7)
--------- ---------
Acquisition of YoBingo (16.5) -
--------- ---------
Net interest and tax payments (16.8) (17.7)
--------- ---------
Dividends paid (29.1) (26.2)
--------- ---------
Refund on unclaimed dividend - 0.2
--------- ---------
Other (including exchange translation) 0.1 (1.1)
--------- ---------
Cash inflow 3.1 28.8
--------- ---------
Opening net debt (12.4) (41.2)
--------- ---------
Closing net debt (9.3) (12.4)
--------- ---------
Capital expenditure
Cash 2017/18 2016/17
Grosvenor Casinos - venues 9.2 17.1
--------- ---------
Mecca - venues 3.2 9.0
--------- ---------
Luda - venues 2.1 0.3
--------- ---------
UK digital 9.0 2.3
--------- ---------
Spain - venues 0.7 1.2
--------- ---------
Spain - digital 0.3 -
--------- ---------
Central 12.5 12.8
--------- ---------
Total 37.0 42.7
--------- ---------
During the year there were two key refurbishments in Grosvenor's
London casino estate, at The Golden Horseshoe and The Rialto
(formerly The Piccadilly), the cost in the year of both
refurbishments was GBP3.0m. GBP1.2m was also spent in the year on
the new casino management system, Neon.
Regarding the Group's UK digital business, GBP4.2m was spent on
the continued development of Grosvenor One and GBP1.9m on the new
content management system in the year.
Within central, GBP1.0m was spent on the roll out of the new
finance system and GBP7.2m on the purchase of the freehold at
Stockton.
During 2018/19 the Group is planning to invest between GBP45m
and GBP55m.
Total capital committed at 30 June 2018 was GBP1.0m.
Acquisition of YoBingo
On 21(st) May 2018, Rank Digital Holdings Limited (a wholly
owned group company) acquired the entire share capital of QSB
Gaming Limited, the owner of YoBingo.es, the second largest online
bingo operator in Spain for an estimated total consideration of
EUR52.0m. The results of that business have been incorporated into
the Enracha segment and details on the provisional acquisition
accounting are set out in note 13.
Further contingent consideration will be paid based on the
EBITDA generated by YoBingo in the calender year 2018 and has been
estimated based on recent business performance and expectations for
future growth. Payment is expected in H2 2018/19 and the Group
currently intends to fund this through drawing on its revolving
credit facility.
Acquisition accounting will be finalised in the Group's 2018/19
report.
Bede convertible loan
The Group provided GBP3.5m of finance to Bede Gaming (the
supplier of its UK digital gaming platform) in the form of a
convertible loan which can be converted into 17.2% of the share
capital of Bede. Notice of conversion was given on 4 June 2018 but
the shares in Bede were not issued until after 30 June 2018. The
Group intends to hold the shares as a trade investment in
accordance with IAS39.
Taxation changes
Changes to remote gaming duty in relation to freeplays and
non-cash prizes were effective for Rank from October 2017. These
changes resulted in additional remote gaming duty of GBP2.5m in the
year.
In May 2018, it was announced that the rate of remote gaming
duty will be increased to offset reduced tax revenues from the
proposed changes to the maximum stakes of Fixed Odds Betting
Terminals ("FOBTs"). Based on the Group's current levels of online
gaming, each 1% increase in remote gaming duty would increase
Rank's tax liability by approximately GBP1.1m.
From 1 April 2017, new rules were introduced restricting the
amount of interest which can be treated as tax deductible in the UK
(corporate interest restriction rules). In 2017/18, this results in
non-deductible interest costs of GBP1.0m, increasing Rank's tax
liability by approximately GBP190k.
IFRS 16 - Lease
IFRS16 'Leases' will replace IAS17 in its entirety and will be
effective for the Group from its 2019/20 accounting year. It will
result in most leases being recognised in the Statement of
Financial Position, with additional fixed assets and liabilities
being recognised. The Group continues to assess the full impact of
IFRS16 and it is not yet possible to reasonably quantify its
financial effects. The effect will be impacted by interest rates in
future years, along with changes to the terms of the Group's
existing leases. The directors believe that the new standard will
have a material impact upon the Group's reported performance with
increases in EBITDA being largely offset by increases in both
depreciation and interest charges, and increases I operating profit
largely offset by increases in interest charges. There is no
current expectation that the group's cashflows will be materially
impacted.
IFRS 9 and IFRS 15
IFRS 9 and IFRS 15 will be effective for the Group from its
2018/19 accounting year. The Group does not anticipate a material
impact on the results or net assets from these standards that are
in issue but not yet effective.
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 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
Risk Impact Mitigation
---------------------------------- ----------------------------------
Laws and regulation Increasing The Group ensures
that it actively provides
Regulatory and legislative With the increased and promotes a compliant
regimes for betting focus of regulators environment in which
and gaming in key the risk here is considered customers can play
markets are constantly to be increasing, safely.
under and the impact of
review and can change non-compliance The Group participates
at short notice. These could result in the in trade bodies'
changes could benefit imposition of licence representations
or have an adverse conditions, the loss to political and regulatory
effect of bodies to ensure that
on the business and gaming licences and/or such stakeholders
additional costs might fines. clearly understand
be incurred in order the positive
to comply. contribution that
the business provides
Current key risk areas to the economy.
include:
-- Responsible gambling The Group also works
(including adverse with stakeholders,
impact on brand and customers and regulators
reputation); to help public understanding
-- AML EDD requirements; of the gaming offers
and it provides.
-- Jurisdiction management.
The Group engages
with regulators as
appropriate and examines
the learnings from,
and measures adopted
by, other
operators and sectors
of the gambling industry.
---------------------------------- ----------------------------------
Taxation Stable
Changes in fiscal It is envisaged that The Group continues
regimes for betting there will be no further to monitor taxation
and gaming in key changes in taxation levels, performs regular
markets can change in the immediate future analysis of the financial
at short notice. These other than Remote impact to organisation
changes could benefit Gaming Duty, with on changes to taxation
or have an adverse the risk and impact rates and develops
effect and additional of current regimes organisational contingency
costs might be incurred being understood. plans as appropriate.
in order to comply
with any fiscal requirements.
Current key risk areas
include:
* Remote Gaming Duty,
* Machine Gaming Duty, and
* Gaming Duty.
---------------------------------- ----------------------------------
Changing customer Increasing
needs
With the retail macroeconomic The Group monitors
Progressive changes environment, changes financial performance
over time in retail in consumer spending across the clubs with
consumer spending habits and the need clubs performing adversely
habits is resulting to continually asses being raised for remedial
in lower numbers of the relevance of the attention.
customer visits. This proposition, this
can be also attributable is requiring an ever-increasing Changing the club
to the overall retail focus by the Group. product and service
proposition declining offering to have greater
in relevance to the appeal to today's
consumer and changes more leisure oriented
in the macroeconomic customer is being
environment. developed through
segmentation and new
product offerings.
---------------------------------- ----------------------------------
Strategic programmes Increasing
Key strategic projects A failure to deliver Key strategic projects
fail to deliver resulting key strategic projects are subject to detailed
in missed market opportunities impacts on customer management oversight
and/or take longer loyalty and strategic from a project board
to deliver resulting growth of the organisation. as well as having
in missed synergies sponsorship from a
and savings. senior-level stakeholder.
Current key strategic
projects include: The Group has a structured
* Single Account Wallet (Grosvenor One), and disciplined project
and delivery methodology
to ensure that critical
projects are robustly
* Content Management System (CMS). managed to achieve
their outcome.
A comprehensive project
risk approach is also
undertaken within
the project, managed
by experienced project
managers.
---------------------------------- ----------------------------------
Business Continuity Stable
Planning
The geographical nature Group business continuity
Planning and preparation of the operating environment plans have been developed
of the organisation and key risk exposures and are in place for
to ensure it overcomes having not changed key business areas
serious incidents significantly and with an ongoing refresh
or disasters and resumes are known and understood. to ensure that they
its normal operations remain current for
within a reasonably all business areas.
short period is critical
to ensure that minimal This approach includes
impact occurs to its the development, embedding
operations, customers and refinement of
and reputation. the incident and crisis
management approach
Typical disasters for the Group in order
that business continuity to proactively manage
covers can include: these incidents
natural disasters
including fires, floods,
accidents impacting
key people, insolvency
of key suppliers,
negative media campaigns
and market upheavals.
---------------------------------- ----------------------------------
Customer Data Management Stable
Processing of personal The Group has developed Awareness, training
customer data (including a robust control environment and recruitment of
name, address, age, in relation to customer a data protection
bank details and betting/gaming data controls and officer to oversee
history) is performed the regulatory requirements. ongoing data regulation
and therefore must compliance.
comply with strict
data protection and Programme of activity
privacy laws in all initiated and in place
jurisdictions in which to ensure the Group
the Group operates, meets the GDPR requirements
such as GDPR. and continues to improve
its current control
The Group is exposed environment.
to the risk that this
data could be wrongfully
appropriated, lost
or disclosed, or processed
in breach of data
protection regulations.
This could result
in prosecutions including
potential financial
penalties and the
loss of the goodwill
of its customers and
could deter new customers.
---------------------------------- ----------------------------------
Cyber Security and Increasing
Resilience
Due to the persistent External cyber benchmarking
Cyber-attacks can nature of this threat has been performed
disrupt and cause and reliance on core to understand level
considerable financial technology systems, of maturity of controls
and reputational damage this is considered with a roadmap of
to the Group. If a an increasing risk further work planned
cyber-attack were to the Group. to enhance these within
to occur the Group the current IT estate.
could lose assets,
reputation and business, Programme of work
and potentially face ongoing to enhance
regulatory fines and cyber security and
litigation - as well resilience within
as the costs of remediation. the IT estate with
dedicated specialised
Operations are highly resources.
dependent on technology
and advanced information
systems (such as cloud
computing) and there
is a risk that such
technology or systems
could fail or outages
occur.
---------------------------------- ----------------------------------
Third Party Supply Stable
Chain
The third party operating The Group has a central
The Group is dependent environment and key team in place to oversee
on a number of third risk exposures remaining the processes for
party suppliers for unchanged. acquisition of suppliers
the operation of its across the Group.
business. The withdrawal
or removal from the Close communication
market of one or more and relationships
of these third-party are in place with
suppliers, or failure suppliers to ensure
of these suppliers that Group requirements
to comply with contractual can be met.
obligations could
adversely affect operations,
especially where these
suppliers are niche.
---------------------------------- ----------------------------------
Volatility of gaming Stable Gaming limits are
win utilised across all
Fluctuations in gaming areas of gaming operations
The nature of the win margin directly to continually manage
games played means affect profitability. risk exposure. Such
that win margin can limits are reviewed
fluctuate in the short as appropriate.
term although it will
generally perform
at a stable average
over a longer period.
The important VIP
sector of the business
in both retail and
digital contains a
small volume of customers
who can themselves
create volatility
in the overall margin
given the value of
their gaming play.
Issues with misfeasance
or the accurate management
of the games can also
affect win margins.
---------------------------------- ----------------------------------
Directors' Responsibility Statement
Each of the directors named below confirm that to the best of
his or her knowledge:
-- The financial statements, prepared under International
Financial Reporting Standard (IFRS) as adopted by the European
Union, give a true and fair view of the assets, liabilities,
financial position and profit of the Company and the undertakings
included in the consolidation taken as a whole; and
-- The management report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings including in the consolidation taken
as a whole, together with a description of the risk and
uncertainties that they face.
The directors of The Rank Group Plc are:
Chris Bell
Ian Burke
Steven Esom
Susan Hooper
Clive Jennings
Lord Kilmorey
Alan Morgan
John O'Reilly
Alex Thursby
Signed on behalf of the board on 15 August 2018
John O'Reilly Clive Jennings
Chief Executive Finance Director
Group Financial Information
Group Income Statement
For the year ended 30 June 2018
Year ended 30 June 2018 Year ended 30 June 2017
--------------------------------------- ---------------------------------------
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 customer incentives 741.1 - 741.1 755.1 - 755.1
Customer incentives (50.1) - (50.1) (47.9) - (47.9)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Revenue 691.0 - 691.0 707.2 - 707.2
Cost of sales (376.6) - (376.6) (391.4) - (391.4)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Gross profit 314.4 - 314.4 315.8 - 315.8
Other operating costs (237.4) (26.9) (264.3) (232.3) 1.0 (231.3)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Group operating profit
(loss) 77.0 (26.9) 50.1 83.5 1.0 84.5
Financing:
- finance costs (3.0) (0.3) (3.3) (4.4) - (4.4)
- finance income 0.3 - 0.3 0.2 - 0.2
- other financial
losses (0.1) (0.3) (0.4) (0.6) - (0.6)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Total net financing
charge (2.8) (0.6) (3.4) (4.8) - (4.8)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Profit (loss) before
taxation 74.2 (27.5) 46.7 78.7 1.0 79.7
Taxation (15.7) 4.9 (10.8) (15.6) (1.2) (16.8)
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Profit (loss) for
the year 58.5 (22.6) 35.9 63.1 (0.2) 62.9
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Attributable to:
Equity holders of
the parent 58.5 (22.6) 35.9 63.1 (0.2) 62.9
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Earnings (loss) per share attributable to equity shareholders
- basic 15.0p (5.8)p 9.2p 16.2p (0.1)p 16.1p
- diluted 15.0p (5.8)p 9.2p 16.1p (0.1)p 16.0p
---------------------------- ------------- ------------- --------- ------------- ------------- ---------
Group Statement of Comprehensive Income
For the year ended 30 June 2018
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
--------------------------------------------------- ------------ ------------
Comprehensive income:
Profit for the year 35.9 62.9
Other comprehensive income:
Items that may be reclassified subsequently to
profit or loss:
Exchange adjustments net of tax 0.8 2.3
Items that will not be reclassified to profit
or loss:
Actuarial gain (loss) on retirement benefits net
of tax 0.1 (0.6)
Total comprehensive income for the year 36.8 64.6
--------------------------------------------------- ------------ ------------
Attributable to:
Equity holders of the parent 36.8 64.6
--------------------------------------------------- ------------ ------------
Group Statement of Changes in Equity
For the year ended 30 June 2018
Capital Exchange Retained
Share Share redemption translation earnings
capital premium reserve reserve (losses) 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 year - - - - 62.9 62.9
Other comprehensive income:
Exchange adjustments net of
tax - - - 2.3 - 2.3
Actuarial loss on retirement
benefits net of tax - - - - (0.6) (0.6)
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive income
for the year - - - 2.3 62.3 64.6
Transactions with owners:
Dividends paid to equity holders
(see note 6) - - - - (26.2) (26.2)
Refund of unclaimed dividends
(see note 6) - 0.2 0.2
Debit in respect of employee
share schemes including tax - - - - (0.6) (0.6)
At 30 June 2017 54.2 98.4 33.4 15.8 188.8 390.6
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Comprehensive income:
Profit for the year - - - - 35.9 35.9
Other comprehensive income:
Exchange adjustments net of
tax - - - 0.8 - 0.8
Actuarial gain on retirement
benefits net of tax - - - - 0.1 0.1
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Total comprehensive income
for the year - - - 0.8 36.0 36.8
Transactions with owners:
Dividends paid to equity holders
(see note 6) - - - - (29.1) (29.1)
Debit in respect of employee
share schemes including tax - - - - (1.8) (1.8)
At 30 June 2018 54.2 98.4 33.4 16.6 193.9 396.5
----------------------------------- --------- --------- ------------ ------------- ---------- --------
Group Balance Sheet
At 30 June 2018
As at As at
30 June 30 June
2018 2017
GBPm GBPm
----------------------------------------------- --------- ---------
Assets
Non-current assets
Intangible assets 459.1 411.5
Property, plant and equipment 171.5 187.9
Other investments 3.5 -
Deferred tax assets 0.4 0.1
Other receivables 3.7 6.5
----------------------------------------------- --------- ---------
638.2 606.0
Current assets
Inventories 2.5 2.8
Other receivables 29.2 25.3
Income tax receivable - 0.3
Cash and short-term deposits 50.4 79.0
----------------------------------------------- --------- ---------
82.1 107.4
Total assets 720.3 713.4
----------------------------------------------- --------- ---------
Liabilities
Current liabilities
Trade and other payables (153.1) (128.9)
Income tax payable (10.3) (12.7)
Financial liabilities - loans and borrowings (54.2) (34.6)
Provisions (8.0) (10.0)
----------------------------------------------- --------- ---------
(225.6) (186.2)
Net current liabilities (143.5) (78.8)
----------------------------------------------- --------- ---------
Non-current liabilities
Trade and other payables (30.6) (31.8)
Financial liabilities - loans and borrowings (5.5) (57.0)
Deferred tax liabilities (24.4) (19.9)
Provisions (33.6) (23.7)
Retirement benefit obligations (4.1) (4.2)
----------------------------------------------- --------- ---------
(98.2) (136.6)
Total liabilities (323.8) (322.8)
----------------------------------------------- --------- ---------
Net assets 396.5 390.6
----------------------------------------------- --------- ---------
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 16.6 15.8
Retained earnings 193.9 188.8
----------------------------------------------- --------- ---------
Total shareholders' equity 396.5 390.6
----------------------------------------------- --------- ---------
Group Statement of Cash Flow
For the year ended 30 June 2018
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
---------------------------------------------------- ------------ ------------
Cash flows from operating activities
Cash generated from operations (see note
10) 102.4 116.3
Interest received 0.3 0.2
Interest paid (2.7) (3.2)
Tax paid (14.4) (14.7)
Net cash from operating activities 85.6 98.6
---------------------------------------------------- ------------ ------------
Cash flows from investing activities
Purchase of intangible assets (11.6) (13.1)
Purchase of property, plant and equipment (25.4) (29.6)
Purchase of subsidiaries (net of cash acquired) (16.5) -
Net cash used in investing activities (53.5) (42.7)
---------------------------------------------------- ------------ ------------
Cash flows from financing activities
Dividends paid to equity holders (29.1) (26.2)
Refund of unclaimed dividends - 0.2
Repayment of term loans (20.0) (10.0)
Repayment of Yankee bond (10.1) -
Finance lease principal payments (1.4) (1.3)
Net cash used in financing activities (60.6) (37.3)
---------------------------------------------------- ------------ ------------
Net (decrease) increase in cash, cash equivalents
and bank overdrafts (28.5) 18.6
Effect of exchange rate changes (0.3) -
Cash and cash equivalents at start of year 76.5 57.9
---------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of year 47.7 76.5
---------------------------------------------------- ------------ ------------
1. General information, basis of preparation and accounting policies
General information
The Company is a public limited company which is listed on the
London Stock Exchange and is incorporated and domiciled in England
and Wales under registration number 03140769. The address of its
registered office is TOR, Saint-Cloud Way, Maidenhead, SL6 8BN.
This condensed consolidated financial information was approved
for issue on 15 August 2018.
This condensed consolidated financial information does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The statutory accounts for the year ended
30 June 2018 were approved by the board of directors on 15 August
2018, but have not yet been delivered to the Registrar of
Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement made under Section 498 of the Companies
Act 2006. The statutory accounts for the year ended 30 June 2017
have been delivered to the Registrar of Companies.
Basis of preparation
The financial information attached has been extracted from the
audited financial statements for the year ended 30 June 2018. The
financial information has been prepared in accordance with IFRS as
adopted by the European Union.
Going concern
In adopting the going concern basis for preparing the
consolidated and Company financial statements, 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, the directors
believe that the Group will generate sufficient cash to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and comply with its banking
covenants. Accordingly, the adoption of the going concern basis
remains appropriate.
Accounting policies
(a) Standards, amendments to and interpretations of existing
standards adopted by the Group
The Group has not been materially impacted by the adoption of
any standards. The Group has not early adopted any standard,
amendment or interpretation that was issued but is not yet
effective.
(b) Standards, amendments to and interpretations of existing
standards that are not yet effective
IFRS 16 'Leases' represents a significant change, notably for
lessees, in how leases are accounted for and reported. The standard
will be effective for the Group for the period beginning 1 July
2019, and will replace IAS 17 'Leases'. IFRS 16 will require all
lessees to recognise a right of use asset and lease liability for
all leases, except for leases with a lease term of 12 months or
less or where the underlying asset is of low value.
The Group expects the standard to apply to the majority of its
operating lease commitments and to have a material impact on the
Group's reported results and balance sheet. The recognition of
right of use assets and lease liabilities will result in an
increase in total assets and total liabilities reported. Within the
income statement, the current rent expense will be replaced with a
depreciation and interest expense. The standard will also impact a
number of statutory reporting measures such as operating profit and
cash generated from operations, as well as alternative performance
measures used by the Group.
The full impact of IFRS 16 on the Group is currently being
assessed, including the practical application of the principles of
the standard to the Group's leases, and it is therefore not yet
possible to provide a reasonable estimate of its effect.
IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from
Contracts with Customers' will be effective for our next financial
reporting period. The Group does not anticipate a material impact
on the results or net assets from these standards or any other
standards that are in issue but not yet effective.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the management team that makes
strategic and operational decisions.
The Group currently reports five segments: Grosvenor Venues,
Mecca Venues, UK Digital, Enracha and Central Costs. The
acquisition of QSB Gaming Limited ('YoBingo') has been included
within Enracha.
2. Segment information
Year ended 30 June 2018
-----------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----------------- --------- --------- --------
Continuing
operations
Revenue before
adjustment for
customer
incentives 373.0 208.1 122.5 37.5 - 741.1
Customer
incentives (13.0) (9.1) (27.9) (0.1) - (50.1)
------------------ ----------------- ------------- ----------------- --------- ---------
Statutory
revenue 360.0 199.0 94.6 37.4 - 691.0
------------------ ----------------- ------------- ----------------- --------- --------- --------
Operating profit
(loss) before
exceptional
items 48.6 28.6 20.9 6.5 (27.6) 77.0
Exceptional
(loss)
profit (23.4) (3.7) 0.2 1.2 (1.2) (26.9)
----------------- ------------- ----------------- --------- --------- --------
Segment result 25.2 24.9 21.1 7.7 (28.8) 50.1
------------------ ----------------- ------------- ----------------- --------- --------- --------
Finance costs (3.3)
Finance income 0.3
Other financial
losses (0.4)
------------------ ----------------- ------------- ----------------- --------- --------- --------
Profit before
taxation 46.7
Taxation (10.8)
Profit for the
year 35.9
------------------ ----------------- ------------- ----------------- --------- --------- --------
Year ended 30 June 2017
-----------------------------------------------------------------------------------
Grosvenor Mecca Central
Venues Venues UK Digital Enracha Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----------------- --------- --------- --------
Continuing
operations
Revenue before
adjustment for
customer
incentives 397.2 213.6 111.5 32.8 - 755.1
Customer
incentives (14.9) (10.0) (23.0) - - (47.9)
------------------ ----------------- ------------- ----------------- --------- ---------
Statutory
revenue 382.3 203.6 88.5 32.8 - 707.2
------------------ ----------------- ------------- ----------------- --------- --------- --------
Operating profit
(loss) before
exceptional
items 52.1 29.9 22.7 6.2 (27.4) 83.5
Exceptional
(loss)
profit (5.2) 11.2 (2.0) 0.6 (3.6) 1.0
----------------- ------------- ----------------- --------- --------- --------
Segment result 46.9 41.1 20.7 6.8 (31.0) 84.5
------------------ ----------------- ------------- ----------------- --------- --------- --------
Finance costs (4.4)
Finance income 0.2
Other financial
losses (0.6)
------------------ ----------------- ------------- ----------------- --------- --------- --------
Profit before
taxation 79.7
Taxation (16.8)
Profit for the
year 62.9
------------------ ----------------- ------------- ----------------- --------- --------- --------
2. Segment information (continued)
To increase transparency, the Group has decided 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:
Year ended 30 June 2018
-------------------------------------------------------------------------------------
Grosvenor UK Central
Venues Mecca Venues Digital Enracha Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ -------------- ---------- --------- --------- -------
Employment and
related costs 133.4 52.2 12.1 15.3 18.4 231.4
Taxes and duties 75.2 33.2 15.0 2.5 1.8 127.7
Direct costs 18.6 20.9 28.0 4.1 - 71.6
Property costs 32.1 26.9 0.5 1.3 1.6 62.4
Marketing 14.5 8.7 7.8 1.3 - 32.3
Depreciation and
amortisation 22.0 11.6 4.2 1.9 3.3 43.0
Other 15.6 16.9 6.1 4.5 2.5 45.6
Total costs before
exceptional items 311.4 170.4 73.7 30.9 27.6 614.0
----------------------- ------------ -------------- ---------- --------- --------- -------
Cost of sales 376.6
Operating costs 237.4
Total costs before
exceptional items 614.0
----------------------- ------------ -------------- ---------- --------- --------- -------
Year ended 30 June 2017
-----------------------------------------------------------------------
Grosvenor UK Central
Venues Mecca Venues Digital Enracha Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------ -------------- ---------- --------- --------- -------
Employment and
related costs 140.2 53.7 9.2 13.8 21.1 238.0
Taxes and duties 82.7 33.5 10.6 1.8 1.8 130.4
Direct costs 17.2 20.4 27.4 3.5 - 68.5
Property costs 30.1 27.3 0.7 1.4 1.3 60.8
Marketing 13.7 8.4 9.1 1.0 0.2 32.4
Depreciation and
amortisation 24.5 11.9 5.1 1.5 2.3 45.3
Other 21.8 18.5 3.7 3.6 0.7 48.3
Total costs before
exceptional items 330.2 173.7 65.8 26.6 27.4 623.7
----------------------- ------------ -------------- ---------- --------- --------- -------
Cost of sales 391.4
Operating costs 232.3
Total costs before
exceptional items 623.7
----------------------- ------------ -------------- ---------- --------- --------- -------
3. Exceptional items
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------------- ------------ ------------
Continuing operations
Impairment charges (13.9) (6.7)
Impairment reversals 1.8 2.5
Group restructuring including relocation
costs (1.6) (8.8)
Onerous lease and other property (costs)
income (9.1) 14.7
Closure of venues (3.7) -
Acquisition related costs (0.4) (0.7)
Exceptional operating (costs) income(1) (26.9) 1.0
Finance costs (see note 4) (0.3) -
Other financial losses (see note 4) (0.3) -
Taxation (see note 5) 4.9 (1.2)
Exceptional items (22.6) (0.2)
------------------------------------------- ------------ ------------
(1) It is Group policy to reverse exceptional costs in the same
line as they were originally recognised.
Year ended 30 June 2018 exceptional items
Impairment charges
The Group recognised impairment charges of GBP13.9m, of which
GBP9.8m related to five venues within Grosvenor Casinos, GBP3.4m
related to eight venues within Mecca and GBP0.7m related to a venue
within Enracha. Performance at these venues (most notably
admissions) has not been in line with expectations and is not
expected to significantly improve in the future. These have been
presented as an exceptional item due to both its material scale and
one-off nature.
Impairment reversals
The Group reversed a GBP1.8m impairment charge in Enracha due to
a reduction in the local gaming tax rate which has significantly
improved performance at one venue. This has been presented as an
exceptional item due to both its material scale and one-off
nature.
Group restructuring including relocation costs
In the first six months of 2017/18 the Group completed its group
restructuring project. The total cost of the project was GBP10.4m,
the remaining GBP1.6m has been recognised in the current financial
year. Total costs include costs associated with changes to
management and team structures at both venue 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. This has been
presented as an exceptional item due to both its material scale and
one-off nature.
Onerous lease and other property costs
The group has recognised a net charge of GBP9.1m as a result of
committed onerous costs on property leases.
A charge of GBP9.0m has been recognised within Grosvenor. Of
this charge GBP8.0m is attributable to two venues where expected
improvements in trading results have not been realised and
unavoidable committed costs exceed forecast future trading
performance and GBP1.0m to a potential tenant for a vacant site
deciding not to proceed despite advance negotiations to sub-let the
onerous property.
Within Mecca a GBP0.3m charge has been recognised as a result of
an increase in expected onerous costs at four venues and a GBP0.2m
credit has been recognised in Central due to revisions in expected
future costs and income at onerous multi-let sites. These costs
have been presented as an exceptional item due to both its material
scale and one-off nature.
3. Exceptional items (continued)
Closure of venues
The group has recognised a net charge of GBP3.7m as a result of
closed clubs.
Grosvenor has recognised a GBP4.3m charge due to costs
associated with closing a loss-making venue for which it is not
expected the remaining lease can be sublet. Mecca has recognised a
net credit of GBP0.5m. This is due to GBP0.4m of cost from closing
one club having been offset by a GBP0.6m surrender premium having
been received in return for agreeing to exit a lease early at one
site and an additional GBP0.3m overage payment having been received
for a site previously disposed of. Enracha has recognised a net
credit of GBP0.1m due to it having successfully won an employee
dispute for unfair dismissal at a disposed of club.
These have been presented as an exceptional item due to both its
material scale and one-off nature.
Acquisition related costs
Acquisition related costs of GBP0.4m include one-off costs to
professional service firms that have resulted from acquisitions.
The finance cost and foreign exchange loss associated with
contingent consideration payable has also been recognised as an
exceptional finance cost and exceptional other financial loss. This
has been presented as an exceptional item due to its one-off
nature.
4. Financing
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------------------- ------------ ------------
Continuing operations
Finance costs:
Interest on debt and borrowings(2) (1.9) (2.6)
Amortisation of issue costs on borrowings(2) (0.4) (0.4)
Interest payable on finance leases (0.5) (0.6)
Unwinding of discount in property lease
provisions (0.2) (0.8)
------------------------------------------------- ------------ ------------
Total finance costs (3.0) (4.4)
Finance income:
Interest income on short-term bank deposits(2) 0.2 0.1
Interest income on loans(2) 0.1 0.1
------------------------------------------------- ------------ ------------
Total finance income 0.3 0.2
Other financial losses (0.1) (0.6)
Total net financing charge before exceptional
items (2.8) (4.8)
Exceptional finance costs (0.3) -
Exceptional other financial losses (0.3) -
Total net financing charge (3.4) (4.8)
------------------------------------------------- ------------ ------------
(2) Calculated using the effective interest method.
Other financial losses include foreign exchange losses on loans
and borrowings.
Exceptional finance costs and other financial losses includes
interest recognised and foreign exchange loss on deferred
consideration payable as a result of the acquisition of QSB Gaming
Limited ('YoBingo').
A reconciliation of total net financing charge before
exceptional items to adjusted net interest included in adjusted
profit is disclosed below:
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------------------ ------------ ------------
Total net financing charge before exceptional
items (2.8) (4.8)
Adjust for :
Other financial losses 0.1 0.6
Adjusted net interest payable (2.7) (4.2)
------------------------------------------------ ------------ ------------
5. Taxation
Year ended Year ended
30 June 2018 30 June 2017
GBPm GBPm
-------------------------------------------- ---------------- ---------------
Current income tax
Current income tax - UK (11.3) (11.8)
Current income tax - overseas (3.7) (3.4)
Current income tax on exceptional items 3.0 (1.8)
Amounts over provided in previous period 0.1 0.5
Total current income tax charge (11.9) (16.5)
-------------------------------------------- ---------------- ---------------
Deferred tax
Deferred tax - UK (0.5) (1.3)
Deferred tax - overseas - (0.3)
Restatement of deferred tax due to rate
change - 1.1
Deferred tax on exceptional items 1.9 0.6
Amounts under provided in previous period (0.3) (0.4)
Total deferred tax credit (charge) 1.1 (0.3)
-------------------------------------------- ---------------- ---------------
Tax charge in the income statement (10.8) (16.8)
-------------------------------------------- ---------------- ---------------
Tax on exceptional items
The taxation impacts of exceptional items are disclosed
below:
Year ended 30 June Year ended 30 June
2018 2017
------------------------------ ------------------------------
Current Current
income Deferred income Deferred
tax tax Total tax tax Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ---------- ------- --------- ---------- -------
Impairment charges - 2.3 2.3 - 1.0 1.0
Impairment reversals - (0.4) (0.4) - (0.5) (0.5)
Group restructuring
including relocation
costs 0.3 - 0.3 1.5 0.1 1.6
Onerous lease and
other property costs
(income) 1.7 - 1.7 (3.3) - (3.3)
Closure of venues 0.9 - 0.9 - - -
Finance costs and
other financial losses 0.1 - 0.1 - - -
-------------------------- --------- ---------- ------- --------- ---------- -------
Tax credit (charge)
on exceptional items 3.0 1.9 4.9 (1.8) 0.6 (1.2)
-------------------------- --------- ---------- ------- --------- ---------- -------
Tax effect of items within other comprehensive income
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------------------------- ------------- ------------
Current income tax credit on exchange movements
offset in reserves - 0.2
Deferred tax credit on actuarial movement
on retirement benefits - 0.1
Total tax credit on items within other comprehensive
income - 0.3
------------------------------------------------------- ------------- ------------
The debit in respect of employee share schemes included within
the Statement of changes in equity includes a deferred tax credit
of GBP0.1m (year ended 30 June 2017: GBP0.1m).
5. Taxation (continued)
Factors affecting future taxation
UK corporation tax is calculated at 19.00% (year ended 30 June
2017: 19.75%) of the estimated assessable profit for the period.
Taxation for overseas operations is calculated at the local
prevailing rates.
On 8 July 2015, the Chancellor of the Exchequer announced the
reduction in the main rate of UK corporation tax to 19.00% for the
year starting 1 April 2017 and a further 1.00% reduction to 18.00%
from 1 April 2020. These changes were substantively enacted in
October 2015.
On 16 March 2016, the Chancellor of the Exchequer announced a
further 1.00% reduction to the previously announced 18.00% main
rate of UK corporation tax to 17.00% from 1 April 2020. This change
was substantively enacted in September 2016. The rate reductions
will reduce the amount of cash tax payments to be made by the
Group.
On 26 July 2017, the Belgian Government announced the reduction
in the corporation tax rate in Belgium from 33.99% to 29.58% for
financial years beginning in 2018 and to 25.00% for financial years
beginning in 2020 and onwards. These changes were substantively
enacted in December 2017.
6. Dividends paid to equity holders
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------------------ ------------ ------------
Final dividend for 2015/16 paid on 20 October
2016 - 4.70p per share - 18.4
Interim dividend for 2016/17 paid on 21 March
2017 - 2.00p per share - 7.8
Final dividend for 2016/17 paid on 31 October
2017 - 5.30p per share 20.7 -
Interim dividend for 2017/18 paid on 15 March
2018 - 2.15p per share 8.4 -
Dividends paid to equity holders 29.1 26.2
------------------------------------------------ ------------ ------------
Refund of unclaimed dividends - (0.2)
------------------------------------------------ ------------ ------------
A final dividend in respect of the year ended 30 June 2018 of
5.30p per share, amounting to a total dividend of GBP20.7m, is to
be recommended at the Annual General Meeting on 18 October 2018.
These financial statements do not reflect this dividend
payable.
7. Adjusted earnings per share
Adjusted earnings is calculated by adjusting profit attributable
to equity shareholders to exclude discontinued operations,
exceptional items, other financial gains or losses, unwinding of
the discount in disposal provisions and the related tax effects.
Adjusted earnings is one of the business performance measures used
internally by management to manage the operations of the business.
Management believes that the adjusted earnings measure assists in
providing a view of the underlying performance of the business.
Adjusted net earnings attributable to equity shareholders is
derived as follows:
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
----------------------------------------------- ------------ ------------
Profit attributable to equity shareholders 35.9 62.9
Adjust for:
Exceptional items after tax 22.6 0.2
Other financial losses 0.1 0.6
Taxation on adjusted items and impact of
reduction in tax rate - (1.2)
----------------------------------------------- ------------ ------------
Adjusted net earnings attributable to equity
shareholders (GBPm) 58.6 62.5
Adjusted earnings per share (p) - basic 15.0p 16.0p
Adjusted earnings per share (p) - diluted 15.0p 15.9p
----------------------------------------------- ------------ ------------
8. Provisions
Property
Indirect
lease Disposal Restructuring tax
provisions provisions provisions provision Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------------ ------------ --------------- ----------- -------
At 1 July 2017 24.6 4.2 3.7 1.2 33.7
Unwinding of discount 0.2 - - - 0.2
Charge to the income
statement - exceptional 14.3 - 0.2 - 14.5
Release to the income
statement - exceptional (0.7) - (0.2) - (0.9)
Release to the income
statement - operating - (0.1) - - (0.1)
Utilised in year (2.4) (0.1) (3.3) - (5.8)
--------------------------- ------------ ------------ --------------- ----------- -------
At 30 June 2018 36.0 4.0 0.4 1.2 41.6
--------------------------- ------------ ------------ --------------- ----------- -------
Current 6.2 0.2 0.4 1.2 8.0
Non-current 29.8 3.8 - - 33.6
--------------------------- ------------ ------------ --------------- ----------- -------
Total 36.0 4.0 0.4 1.2 41.6
--------------------------- ------------ ------------ --------------- ----------- -------
Further details of the exceptional charge and release to the
income statement are provided in note 3.
9. Borrowings to net debt reconciliation
Under IFRS, accrued interest and unamortised facility fees are
classified as loans and borrowings. A reconciliation of loans and
borrowings disclosed in the balance sheet to the Group's net debt
position is provided below:
As at As at
30 June 30 June
2018 2017
GBPm GBPm
------------------------------------- ---------- ----------
Total loans and borrowings (59.7) (91.6)
Less: Accrued interest 0.1 0.4
Add: Unamortised facility fees (0.1) (0.2)
------------------------------------- ---------- ----------
(59.7) (91.4)
Less: Cash and short-term deposits 50.4 79.0
------------------------------------- ---------- ----------
Net debt (9.3) (12.4)
------------------------------------- ---------- ----------
10. Cash generated from operations
Year ended Year ended
30 June 30 June
2018 2017
GBPm GBPm
---------------------------------------------------- ------------ ------------
Continuing operations
Operating profit 50.1 84.5
Exceptional items 26.9 (1.0)
---------------------------------------------------- ------------ ------------
Operating profit before exceptional items 77.0 83.5
Depreciation and amortisation 43.0 45.3
Settlement of share-based payments (1.7) -
Share-based payments (0.2) (0.7)
Loss on disposal of property, plant and equipment 0.3 0.9
Impairment of intangible assets 0.3 -
Impairment of property, plant and equipment 0.2 0.5
Decrease in inventories 0.3 0.1
(Increase) decrease in other receivables (3.4) 11.0
Decrease in trade and other payables (6.4) (12.2)
---------------------------------------------------- ------------ ------------
109.4 128.4
Cash utilisation of provisions (5.8) (7.8)
Cash payments in respect of exceptional items (1.2) (4.3)
---------------------------------------------------- ------------ ------------
Cash generated from operations 102.4 116.3
---------------------------------------------------- ------------ ------------
11. Contingent liabilities
Property leases
Concurrent to the GBP211.0m 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, eight of these have not expired or been surrendered.
These eight leases have durations of between eight months and 95
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 transactions 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 30 June 2018, entities controlled by
Hong Leong owned 56.2% of the Company's shares, including 52.0%
through Guoco's wholly-owned subsidiary, Rank Assets Limited, the
Company's immediate parent undertaking.
13. Acquisition of subsidiary undertakings
On 21 May 2018, the Group acquired 100 per cent of the issued
share capital of QSB Gaming Limited and its subsidiaries
('YoBingo') for an initial consideration of EUR23.1m. Of the
initial consideration, EUR21.1m was paid in cash on completion and
EUR2.0m is deferred for 24 months. Further contingent consideration
will also be paid in cash, subject to 2018 calendar year
performance, up to a total consideration cap of EUR52.0m.
YoBingo.es is a leading digital bingo business in the high
growth regulated Spanish gaming market. The acquisition provides
the Group with a nationally recognised brand, an established
customer base and a proprietary platform including bingo, roulette
and video bingo content for the Spanish market. The acquisition
also provides the potential to accelerate the multi-channel
strategy of Rank's established Enracha brand and operate in other
regulated markets.
The provisional fair value of the assets acquired and
liabilities assumed, goodwill and consideration are outlined below.
The amounts disclosed are provisional due to the proximity of the
acquisition to the Group's year-end and the completion account
process, outlined by the sale and purchase agreement, extending
beyond the finalisation of these financial statements. The
accounting will be completed within the 12-month measurement period
permitted by IFRS 3 Business Combinations.
GBPm
------------------------------- -------
Intangible assets 14.9
Trade and other receivables 1.4
Cash and short-term deposits 1.9
Trade and other payables (0.9)
Income tax payable (0.4)
Deferred tax liability (5.2)
-------------------------------- -------
Net assets acquired 11.7
Goodwill 31.9
-------------------------------- -------
Total consideration 43.6
-------------------------------- -------
The fair value of each component of consideration
is analysed as:
Cash 18.4
Deferred cash consideration 1.7
Contingent cash consideration 23.4
Estimated completion account adjustment 0.1
----------------------------------------------------- ------
Total consideration 43.6
----------------------------------------------------- ------
13. Acquisition of subsidiary undertakings (continued)
A reconciliation of total consideration to the cash outflow from
acquisition of subsidiary undertakings included in investing
activities in the Group cash flow statement is as follows:
GBPm
----------------------------------------------- --------
Total consideration 43.6
Less:
Cash and short-term deposits acquired (1.9)
Deferred cash consideration (1.7)
Contingent cash consideration (23.4)
Estimated completion account adjustment (0.1)
------------------------------------------------ --------
Acquisition of subsidiary including deferred
consideration 16.5
------------------------------------------------ --------
The contingent consideration is determined based on a multiple
of adjusted EBITDA for the year ended 31 December 2018, less an
amount of EUR21.0m. The Group has recognised the maximum contingent
consideration under the cap. The range of outcomes, on an
undiscounted basis, is between EURnil and EUR28.9m such that the
maximum total consideration payable cannot exceed EUR52.0m. The
contingent consideration is expected to be paid in the first half
of calendar year 2019 following completion of the process to
prepare, review and agree adjusted EBITDA. The finance cost
associated with the discount rate has been recognised as an
exceptional item further details of which can be found in note
3.
The identified intangible assets recognised separately from
goodwill are as follows:
GBPm
-------------------------- ------
Customer Relationships 8.6
Brand 2.8
Software and technology 3.5
--------------------------- ------
Total intangible assets 14.9
--------------------------- ------
The fair value of trade and other receivables of GBP1.4m
corresponds to the book value at which all receivables are expected
to be received.
The goodwill consists of future revenue opportunities, the
assembled workforce (including marketing and technological
expertise) and the deferred tax liability recognised on certain
fair value adjustments. No amount of the goodwill recognised is
expected to be deductible for tax purposes.
Acquisition related costs of GBP0.4m have been recognised as an
exceptional finance cost in the Group income statement.
In the year ended 30 June 2018, QSB Gaming Limited 'YoBingo'
contributed statutory revenue of GBP1.4m and GBP0.3m of profit
before tax.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KMGMRMKLGRZZ
(END) Dow Jones Newswires
August 16, 2018 02:01 ET (06:01 GMT)
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