Rank Group Plc · LSE:RNK
Rank — The Rank Group — H1 2016/17 Earnings Presentation
42 slides from Rank's earnings presentation, January 2017
Slide 1: Interim results for the six months ended 31 December 2016
(% ‘ank Group DELIVERING THE The Rank Group Plc & Interim results for the six months ended 31 December 2016 4
Slide 2: Henry Birch, Chief Executive
(a? ank Group HENRY BIRCH ™ Chief Executive
Slide 3: Agenda
Agenda Introduction Henry Birch, Chief Executive Financial performance Clive Jennings, Finance Director Operational performance and Strategic Outlook Henry Birch, Chief Executive Q&A ge ‘ank Group
Slide 4: Summary
Summary e Like-for-like group revenue up 2% * Digital revenues up 11%, with Q2 showing good growth on Q1 ¢ Like-for-like Grosvenor retail revenue flat ° Like-for-like Mecca retail revenue flat ¢ EBITDA and operating profit down 5% and 9% respectively e Net debt position improved to £33.0m * Dividend
Slide 5: Clive Jennings, Finance Director
(a? ank Group CLIVE JENNINGS “ Finance Director - y 5)
Slide 6: Financial headlines
6 Financial headlines H1 H1 2016/17 2015/16 % Gross revenue” £378.6m £374.2 1% Reported operating profit” £36.6m £40.4m (9)% EBITDA” £59.7m £62.7m (5)% Net debt® £33.0m £52.0m 37% Adjusted earnings per share 6.9p 7.4p (7)% Dividend per share 2.0p 1.8p 1% ¢ Challenging six months, particularly for th
Slide 7: Revenue & operating profit
Revenue & operating profit Revenue“ Operating profit © H1 H1 H1 H1 £m 2016/17 2015/16 2016/17 2015/16 Grosvenor Casinos - venues 202.0 205.1 26.1 30.9 Mecca - venues 108.0 109.8 13.3 14.3 Digital 52.4 471 7.3 8.0 Enracha 16.2 12.2 2.9 1.4 Central costs - - (13.0) (14.2) Total continuing 378.6 374.2
Slide 8: Operating profit bridge
Operating profit bridge £m (2.4) (1.8) Decrease = Improvement Increase in in venues in digital incentives acum 8) and rebates . a National Living Wage — in Decrease in depreciation central costs H1 2015/16 H1 2016/17 OPERATING PROFIT OPERATING PROFIT (n% ank Group
Slide 9: Costs
Costs ¢ Lack of revenue growth places venues profitability under pressure * Overall costs are up by 2% - slightly ahead of the December CPI at 1.6% ¢ Detailed cost review completed in Q2 ¢ Employment and related costs comprise 41% of total costs (excluding depreciation) ¢ Living wage and differentia
Slide 10: Statutory profit and loss
Statutory profit and loss H1 H1 £m 2016/17 2015/16 Profit from continuing operations 36.6 40.4 Net interest payable (3.0) (3.7) erent ters aration ane 36 67 Exceptional items 1.8 6.0 Profit before taxation 35.4 42.7 Taxation (7.3) (4.8) Discontinued operations - 3.7 Profit for the period 28.1 41.6 ¢
Slide 11: Exceptional items
Exceptional items H1 H1 £m 2016/17 2015/16 Release from onerous lease provision 10.7 - Impairments (4.1) 6.0 Restructuring (3.8) - Abortive acquisition costs (0.7) - Other (0.3) - Total exceptionals pre tax 18 6.0 Taxation (1.0) 0.3 Discontinued operations - 3.7 Total exceptionals post tax 0.8 10.0
Slide 12: Cash flow and net debt
Cash flow and net debt H1 H1 £m 2016/17 2015/16 Cash inflow from continuing operations 58.1 67.0 Net cash payments in respect of provisions and exceptional items (6.1) (3.3) Cash generated from continuing operations 52.0 63.7 Capital expenditure (17.0) (26.1) Fixed asset disposals (inc subsidiaries)
Slide 13: Capital investment
13 Capital investment H1 H1 £m 2016/17 2015/16 Grosvenor Casinos - venues 6.7 12.5 Mecca - venues 4.0 3.0 UK digital 1.5 1.2 Enracha 0.5 2.4 Central 4.3 7.0 Total 17.0 26.1 * Two major Grosvenor Casinos refurbishments - Leeds and Nottingham ¢ H2 plans include casino refurbishments at Piccadilly and
Slide 14: Financial strength
14 Financial strength ¢ Strong cashflow generation with ability to quickly flex capex up or down ¢ Low net debt of £33.0m - down 20% since June ¢ Conservative leverage of c.0.3 times ¢ Bank facilities including undrawn £90m revolving credit facilities provide flexibility ¢ Strong cashflow allows all
Slide 15: Henry Birch, Chief Executive
(a? ank Group HENRY BIRCH ™ Chief Executive
Slide 16: Operational review: Mecca Venues
16 Operational review: Mecca Venues Like-for-like revenue flat Spend per visit driven by product and service improvement offsetting a decline in admissions Total customer numbers broadly flat Operating profit down 7% on the back of higher employment costs inc. National Living Wage Two underperformin
Slide 17: Operational review: Mecca Venues
17 Operational review: Mecca Venues Venue and product development ¢ Refurbishments of three clubs (Blackpool, Glasgow Forge and Swansea) * Bingo cashline systems fully adapted for new one pound coin (April 2017) ¢ Frustrating planning experience with new bingo concept Luda, but further multiple site
Slide 18: Operational review: Grosvenor Casinos Venues
18 Operational review: Grosvenor Casinos Venues ¢ Like-for-like revenue flat on tough comps ¢ Lower than average gaming margin compounding underperformance; down O.5ppts ¢ Operating profit down 16%: employment costs, duty mix * Qt: weak provincial performance, on budget London performance; ¢ Q2: wea
Slide 19: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues _ Some challenges ¢ The last 12 months has seen casino industry-wide focus on increased customer diligence and KYC measures leading to drop off in customers and reduced play in some cases ¢ Significant overhaul of club structure (‘Project One’) to improve
Slide 20: Venue and product development
20 Venue and product development Significant refurbishments to Grosvenor Leeds (£3m) and Grosvenor Nottingham (£3m), with Nottingham completing in H2 Integration of loyalty system into Neon Get Set roulette rolled out to a further eight casinos Licence additions (Glasgow x2, Brighton) and refurbs in
Slide 21: Operational review: Enracha
21 Operational review: Enracha ¢ Strong performance: - Euro revenues up 11% - Euro operating profit up 79% ¢ H1 performance led mainly by clubs in Catalonia where we have secured our highest ever market share in Barcelona (2 clubs: 16.5%) and Girona (65.3%) ¢ Strong contribution from slots and autom
Slide 22: Operational review: Digital
22 Operational review: Digital Continued strong digital performance 11% revenue growth Grosvenor continuing trajectory up 39% Mecca improving well: Ql: (4)% vs last year Q2: 3% increase vs last year Revenue?) Operating profit H1 H1 H1 H1 £m 2016/17 2015/16 2016/17 2015/16 UK Digital 52.4 471 7.3 8.0
Slide 23: Operational review: Digital
Operational review: Digital New products ¢ Sportsbook launched - competitive product supplied by Kambi - approximately 15% of weekly actives on Grosvenor using sportsbook - revenue generation and customer retention capability ¢ Poker re-launched - Microgaming network (now No2 network); revenues smal
Slide 24: Operational review: Digital
24 Operational review: Digital New content and functionality ¢ New and exclusive slots and games launched from the likes of Endemol, NetEnt and NYX with more to come in 2017 ¢ £1m Virtue Fusion bingo game ¢ New Mecca VIP microsite ¢ Reverse withdrawal functionality added to HERQES OF SPIN both brand
Slide 25: Operational review: Digital
25 Operational review: Digital New customer solutions hub ¢ New customer contact centre opened in Sheffield ¢ Replaces previous central London facility and partial outsourcing ¢ Lower cost, better staff retention ¢ Sheffield will house: customer service, VIP management, fraud & payments, outbound sa
Slide 26: Regulatory Outlook
Regulatory Outlook ¢ Each of the Gambling Commission’s three licensing objectives under scrutiny ¢ ‘Triennial Review’ into slots, advertising and social responsibility measures. Rank recommended: - an increase in the ratio of machines to tables in the 2005 Act ‘small’ casinos from 2:1 to 3:1, subjec
Slide 27: Priorities and outlook
27 Priorities and outlook ¢ Return to growth for Grosvenor retail * Continued strong growth in digital « Launch of new brands ¢ Launch of single account and wallet across retail and digital ¢ Improved data analysis capability through new platform ¢ Trading in last four weeks in line with expectation
Slide 28: Slide 28
Slide 29: Strategy update
29 Strategy update Aim: To be the Uk’s leading multi-channel gaming Clear strategy for delivering sustainable profitable growth across all our brands through 5 initiatives: Mo BP° >: Be 1. Creating a 2. Building digital 3. Developing compelling capability our venues multi-channel offer 4. Investing
Slide 30: 1. Creating a compelling multi-channel offer
30 1. Creating a compelling multi-channel offer Activity in H1 e Hard launch of Kambi- powered sportsbook on Grosvenor digital and promotion in-club ° Improvements to new poker product e Simultaneous launch of games across online, mobile and retail e Further development of Mecca and Grosvenor servic
Slide 31: 2. Building digital capability
31 2. Building digital capability Activity in H1 ¢ Restructure of digital into a single cross-brand team e Live casino upgrade with switch from Riga to Malta with Evolution * Games content from new suppliers e Launch of new Mecca digital VIP site ¢ Hard launch of new digital sports book Priorities f
Slide 32: 3. Developing our venues
3. Developing our venues Activity in H1 ° Refurbishment of Grosvenor Leeds and Nottingham e Refurbishments to Mecca Blackpool, Glasgow Forge and Swansea * Open door trial at Mecca Acocks Green 32 Priorities for 2017 * Opening of new concept bingo venues * Completion of Grosvenor Nottingham ° Refurbi
Slide 33: 4. Investing in brands and marketing
4. Investing in brands and marketing Activity in H1 Priorities for 2017 e Launch of new Customer e Launch of anew CRM Solutions Hub in Sheffield and segmentation tool e Mecca TV campaign ‘You know the Feeling’ Customer Solutions hub - Sheffield O°, ank Group 33
Slide 34: 5. Using technology to drive efficiency and improve customer experience
34 5. Using technology to drive efficiency and improve customer experience Activity in H1 ° ‘Get Set Roulette’ launched in a further eight casinos, offering an enhanced customer experience ° Upgrade of bingo cash line systems to deal with the introduction of the new £1 coin Priorities for 2017 « New
Slide 35: Group datasheet
35 Group datasheet H1 FY H1 FY H1 FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Revenue (£m) 378.6 753.0 374.2 738.3 361.7 707.7 - YOY growth 1% 2% 3% 4% 3% 13% Operating profit (£m) 36.6 82.4 40.4 84.0 40.8 72.4 - YOY growth (9)% (2)% (1)% 16% 25% 4% Operating margin 9.7% 10.9% 10.8% 11.4% 11.
Slide 36: Grosvenor Casinos Venues datasheet
36 Grosvenor Casinos Venues datasheet H1 FY H1 FY H1 FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Casino licences: London 9 9 9 9 9 9 Provinces 43 56 58 56 56 54 Belgium 2 2 2 2 2 2 Total 54 67 69 67 67 65 Non-trading licences 14 12 10 12 12 13 Revenue (£m) 202.0 4081 2051 4011 195.7 377.7 Ope
Slide 37: Grosvenor Casinos Venues - London datasheet
37 Grosvenor Casinos Venues - London datasheet HI FY H1 FY HI FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Revenue (£m) 72.0 150.3 75.2 148.3 71.2 131.5 Operating profit (£m) 13.6 31.7 16.0 34.0 16.3 279 Operating margin 18.9% 21.1% 21.3% 22.9% 22.9% 21.2% Visits (000s) 732 1,482 772 1,468 757
Slide 38: Mecca Venues datasheet
Mecca Venues datasheet H1 FY H1 FY H1 FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Venues 85 87 87 90 93 96 Revenue (£m) 108.0 221.5 109.8 224.4 11.8 229.3 Operating profit (£m) 13.3 32.9 14.3 28.9 14.5 211 Operating margin 12.3% 14.9% 13.0% 12.9% 13.0% 9.2% EBITDA (£m) 19.2 45.5 20.8 41.6 20.
Slide 39: UK Digital datasheet
39 UK Digital datasheet H1 FY H1 FY H1 FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Revenue (£m) 52.4 96.7 47) 87.5 41.4 72.4 - meccabingo.com 33.1 66.2 33.2 65.2 31.5 58.9 - grosevenorcasinos.com 19.3 30.5 13.9 22.3 9.9 13.5 Operating profit (£m) 7.3 13.9 8.0 17.2 10.3 15.9 Operating margin 1
Slide 40: Enracha datasheet
40 Enracha datasheet H1 FY H1 FY H1 FY 2016/17 2015/16 2015/16 2014/15 2014/15 2013/14 Venues 9 9 9 9 9 10 Revenue (£m) 16.2 26.7 12.2 25.3 12.8 28.3 Operating profit (£m) 2.9 3.6 1.4 2.6 0.9 0.8 Operating margin 17.9% 13.5% 11.5% 10.3% 7.0% 2.8% EBITDA (£m) 3.7 51 2.2 41 17 2.9 Customers MAT (000s)
Slide 41: UK casinos market supply
41 UK casinos market supply Casino Total Venues Licences Operator Grosvenor Casinos 54 77 Genting 4) 56 Caesers Entertainment UK 9 1 A&S Leisure 6 6 Double Diamond 6 7 Aspers/Aspinall’s 7 9° Club 36 3 3 Clockfair 2 2 Guoco 1 1 Others 12 26 Total 141 198 Source: National Casino Industry Forum (3) inc
Slide 42: UK bingo clubs market supply
42 UK bingo clubs market supply Clubs“? Operator Gala Bingo 131 Mecca 85 Top Ten Bingo 15 Carlton Clubs 13 Castle 1 Club 3000 12 Beacon 8 Others 83 Total 358 Source: Bingo Association (4) excludes the conversion of adult gaming centres to bingo clubs (oe Group