Rank Group Plc · LSE:RNK
Rank — The Rank Group — FY2017 Earnings Presentation
41 slides from Rank's earnings presentation, August 2017
Slide 1: Preliminary Results for the Year Ended 30 June 2017
(x9, Rank Group TO EXCITE AND TO aidlelctemed nk Group Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2017
Slide 2: Agenda
Agenda Introduction Henry Birch, Chief Executive Financial Performance Clive Jennings, Finance Director Operational Performance and Strategic Outlook Henry Birch, Chief Executive Q&A 2 PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2017 Re vant Group
Slide 3: Summary
Summary * Very strong H2 profit performance vs H1: £46.9m vs £36.6m ¢ Group operating profit up 1% at £83.5m ° Strong digital performance with revenues up 15% and operating profit up 63% * More challenging year for retail businesses but retained/increased market share ¢ Improved KPI’s in H2 vs H1 an
Slide 4: Clive Jennings, Finance Director
Clive Jennings Finance Director
Slide 5: Financial headlines
Financial headlines 2016/17 2015/16 % LfL revenue” £754.0m £743.9 1% Operating profit £83.5m £82.4m 1% EBITDA” £128.8m £128.2m 0% Net debt® £012.4)m £(41.2)m (70)% Adjusted EPS” 16.0p 15.4p 4% Final dividend per share 7.30p 6.50p 12% Significantly stronger H2 performance Final dividend up 12% (1) be
Slide 6: Revenue & operating profit
Revenue & operating profit Revenue Operating profit © £m 2016/17 2015/16 2016/17 2015/16 Grosvenor Casinos - venues 397.2 408.1 52.1 60.9 Mecca - venues 213.6 221.5 29.9 32.9 UK digital 11.5 96.7 22.7 13.9 Enracha 32.8 26.7 6.2 3.6 Central costs = - (27.4) (28.9) Total continuing 755.1 753.0 83.5 82
Slide 7: Operating profit bridge
Operating profit bridge £m (3.4) _ 6.1 (2.4) 0.5 growth Free bet (4.4) meme (4.3) Property Depreciation . costs and amortisation Employment Gaming - A and related taxes and Direct Marketing costs duties 2015/16 2016/17 OPERATING PROFIT OPERATING PROFIT 7 PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUN
Slide 8: Statutory profit and loss
Statutory profit and loss £m 2016/17 2015/16 Profit from continuing operations 83.5 82.4 Net interest payable (4.8) (6.2) fort before taxation and exceptional 73.7 76.2 Exceptional items 1.0 9.3 Profit before taxation 79.7 85.5 Taxation (16.8) (14.4) Discontinued operations = 3.6 Profit for the peri
Slide 9: Exceptional items
Exceptional items £m 2016/17 2015/16 Impairments and property leases 10.5 1.9 Disposal of freehold property = 10.0 Closure of venues 2 (2.6) Group restructuring including (8.8) . relocations costs Aborted acquisition costs (0.7) - Total exceptionals pre tax 1.0 9.3 Taxation (1.2) 0.4 Discontinued op
Slide 10: Cashflow and net debt
Cashflow and net debt £m 2016/17 2015/16 Cash inflow from continuing operations 128.4 116.4 Net cash payments in respect of provisions and exceptional items (12.1) (6.2) Cash generated from continuing operations 116.3 110.2 Capital expenditure (42.7) (52.7) Fixed asset disposals (inc subsidiaries) -
Slide 11: Capital investment
Capital investment £m 2016/17 2015/16 Grosvenor Casinos - venues 171 24.9 Mecca - venues OS 91 UK digital 2.3 17 Enracha 1.2 3.4 Central 12.8 13.6 Total 42.7 52.7 * Two major Grosvenor Casinos refurbishments completed at Nottingham and Leeds, both are trading ahead of expectations * 5,250 new Mecca
Slide 12: Financial strength
Financial strength * Continued strong cash generation with ability to quickly flex capex up or down * Low net debt of £12.4m - down 70% since June 2016 * Continued reduction in leverage to cO.1 times * Flexibility provided by £90m revolving credit facilities ° Strong cashflow generation allows all d
Slide 13: Henry Birch, Chief Executive
(? ank Group HENRY BIRCH Chief Executive
Slide 14: Operational review: Mecca Venues
Operational review: Mecca Venues * Overall decline in revenues and profits, despite good product and service progress driving spend per visit * Outperformance of competitors in admissions and revenues * Two clubs closed in H1 (Bradford and West Bromwich) * Spend per visit driven by: — Rollout of 5,2
Slide 15: Operational review: Mecca Venues
Operational review: Mecca Venues New initiatives to drive admissions * Improved marketing effectiveness and CRM: lower spend with higher impact * New bingo events trialled in H2 and to be rolled out to clubs in Q1 and Q2: — Bonkers Bingo (aimed at 18-30yr olds) — Batty Bingo (aimed at students) — Bi
Slide 16: Operational review: Mecca Venues
Operational review: Mecca Venues Technology driving efficiency and customer experience Wireless ordering of F&B Extended TiTo for Slots + Ability for customers to order food and beverage * Ticket in ticket out solution to be implemented across a from their phones, pay for it and have it delivered fu
Slide 17: Operational review: Mecca Venues
Operational review: Mecca Venues Launch of Luda * The first Luda opened in Walsall on 7th August 2017 Three distinct business lines and physical areas: — F&B: coffee shop + bar — Bingo: fixed odds and linked games — Slots and arcade games Mecca Walsall: — 2,900 ft sq — £790k capex, subsequent Ludas
Slide 18: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues . : . Revenue‘®) Operating profit . . Challenging year with 0.4% ke impacted by: £m 2016/17 2015/16 2016/17_—_2015/16 ~ Lower win margin (0.4% lower than London 14011503 24.6 37 previous year) Provi 2421 243.7 25.9 27.2 . . rovinces . le . . — £8.6m lower
Slide 19: Grosvenor Nottingham and Leeds refurbished
Grosvenor Nottingham (£2.6m) and Leeds (£2.5m) refurbished and transformed Glasgow Princes Street and Leeds Merrion Way closed. Planned use of the Princes licence in one of our other Glasgow clubs Middlekerke in Belgium to close in September at the end of licence concession Piccadilly and Golden Hor
Slide 20: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues Product Development * Implementation of Neon, new casino management system throughout our estate: — Improved loyalty system — Table management system — Enhanced player tracking and bonusing — Core component of single account and wallet * Further roll-out
Slide 21: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues Product Development * Roll-out of new EPOS system including new contactless terminals (about 80% complete) * Planned roll-out of electronic baccarat and additional side bets on ER (spread bet option and new double zero wheel) in this financial year * Cont
Slide 22: Operational review: Enracha retail
Operational review: Enracha retail . (10) * Enracha had a very strong year, doubling Revenue operating profit over the last 2 years £m 2016/17 2015/16 Revenue (£m) 32.8 26.7 * Enracha’s re-invention of a modern day Revenue (€m) 38.2 35.6 bingo offering which has expanded to Operating profit™ (¢m) 6.
Slide 23: Operational review: Enracha digital
Operational review: Enracha digital * Enracha will launch a full digital offering on enracha.es the Bede platform in September 2017 * While online is currently a relatively small market (LTM online gross win of c€500m out of an overall market GGW of c.€4bn) we believe there is a material opportunity
Slide 24: Operational review: UK digital
Operational review: UK digital * Very strong overall performance: Revenue Operating profit — Revenue up 15% £m 2016/17. 2015/16 = 2016/17_—_2015/16 ~ Profit up 63% UK digital 11.5 96.7 22.7 13.9 - meccabingo.com 67.6 66.2 * Acceleration of revenue and profit growth - grosvenorcasinos.com 43.9 30.5 f
Slide 25: Operational review: UK digital
Operational review: UK digital * Sportsbook: driving additional revenues and new customers * New gaming content: competitive offer with differentiation growing product * Live casino (now in Malta) our fastest A GREAT CSREN att N. * Continued development of Customer Solutions Hub in Sheffield * Grosv
Slide 26: Operational review: UK digital
Operational review: UK digital Drivers of Growth - this year and beyond ° ° ° Dual play: live casino using a table from inside one of our casinos Single account and wallet: piloting in H1 with H2 roll out Retail to digital affiliate scheme: incentivising staff to convert customers to digital New bra
Slide 27: Regulatory outlook
Regulatory outlook * Remote Gaming Duty to be applied to bonuses in digital from October: would have cost £3.3m last year ° Expanded Triennial Review, including a review of advertising and responsible gambling measures as well as stakes and prizes on slots, expected to opine in October * Tougher app
Slide 28: Priorities and outlook
Priorities and outlook * Current trading positive: encouraging and in-line with management’s expectations * Cautious about economic and consumer outlook ° UK industry M&A likely on hold pending conclusion of the Triennial Review * Priorities for the year: — Return Grosvenor venues to revenue and pro
Slide 29: Appendices
(RP eank croup APPENDICES
Slide 30: Strategy update
Strategy update 30 PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2017 (Krank Group
Slide 31: 1. Creating a compelling multi-channel offer
1. Creating a compelling multi-channel offer Activity 2016/17 * Continued investment in and development of Grosvenor’s single account and wallet * Affiliate programme for Grosvenor Casino piloted * Cross-channel events held for VIP customers * Digital membership available in Mecca retail via a mobil
Slide 32: 2. Building digital capability
2. Building digital capability Activity 2016/17 New digital sports betting offer launched Improved digital poker offer launched New restructured digital team in place Improved digital live casino offer launched 1OS and android apps launched for digital poker New digital games suppliers appointed pro
Slide 33: 3. Developing our venues
3. Developing our venues Activity 2016/17 ¢ Refurbishment of Leeds Westgate and Nottingham casinos * Refurbishment of Mecca Swansea * New London casino strategy launched with the proposed refurbishment of the Barracuda casino and ongoing refurbishments of the Golden Horseshoe and Piccadilly casinos
Slide 34: 4. Investing in our brands and marketing
4. Investing in our brands and marketing Activity 2016/17 Priorities for 2017/18 *« New Customer Solution Hub launched in * Investment in Mecca digital marketing Sheffield in September 2016 * Digital marketing through further high profile * New two-year sponsorship deal agreed with sponsorship deals
Slide 35: 5. Using technology to drive efficiency and improve customer experience
5. Using technology to drive efficiency and improve customer experience Activity 2016/17 Successful roll-out of new casino management system, Neon, across the Grosvenor Casino estate Additional Neon functionality (replacement loyalty system, player tracking functionality for slots and electronic rou
Slide 36: Group datasheet
Group datasheet FY HI FY H1 FY HI 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Revenue (£m) 755.1 378.6 753.0 374.2 738.3 361.7 - YOY growth 0% 1% 2% 3% 4% 3% Operating profit (£m) 83.5 36.6 82.4 40.4 84.0 40.8 - YOY growth 1% (9)% (2)% (1)% 16% 25% Operating margin 111% 9.7% 10.9% 10.8% 11.4% 11
Slide 37: Grosvenor Casinos Venues datasheet
Grosvenor Casinos Venues datasheet FY HI FY H1 FY HI 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Casino licences: London gS 9 9 9 9 9 Provinces 54 54 56 58 56 56 Belgium 2 2 2 2 2 2 Total 65 65 67 69 67 67 Non-trading licences 12 12 12 10 12 12 Revenue (£m) 397.2 202.0 408.1 205.1 401.1 195.7 Op
Slide 38: Grosvenor Casinos Venues - London datasheet
Grosvenor Casinos Venues - London datasheet FY HI FY H1 FY H1 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Revenue (£m) 1401 72.0 150.3 75.2 148.3 71.2 Operating profit (£m) 24.6 13.6 31.7 16.0 34.0 16.3 Operating margin 17.6% 18.9% 21.1% 21.3% 22.9% 22.9% Visits (000s) 1,398 732 1,482 772 1,468
Slide 39: Mecca Venues datasheet
Mecca Venues datasheet FY HI FY HI FY HI 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Venues 85 85 87 87 90 93 Revenue (£m) 213.6 108.0 221.5 109.8 224.4 m8 Operating profit (£m) 29.9 13.3 32.9 14.3 28.9 14.5 Operating margin 14.0% 12.3% 14.9% 13.0% 12.9% 13.0% EBITDA (£m) 41.8 19.2 45.5 20.8 41.
Slide 40: UK Digital datasheet
UK Digital datasheet FY H1 FY H1 FY H1 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Revenue (£m) 11.5 52.4 96.7 471 87.5 41.4 - meccabingo.com 67.6 33.1 66.2 33.2 65.2 31.5 - grosevenorcasinos.com 43.9 19.3 30.5 13.9 22.3 9.9 Operating profit (£m) 22.7 7.3 13.9 8.0 17.2 10.3 Operating margin 20.4
Slide 41: Enracha datasheet
Enracha datasheet FY HI FY HI FY H1 2016/17 2016/17 2015/16 2015/16 2014/15 2014/15 Venues 9 9 9 9 9 9 Revenue (£m) 32.8 16.2 26.7 12.2 25.3 12.8 Operating profit (£m) 6.2 2.9 3.6 1.4 2.6 0.9 Operating margin 18.9% 17.9% 13.5% 11.5% 10.3% 7.0% EBITDA (£m) 77 3.7 51 2.2 41 17 Customers MAT (000s) 275