Rank Group Plc · LSE:RNK
Rank — The Rank Group — H1 2017/18 Earnings Presentation
41 slides from Rank's earnings presentation, February 2018
Slide 1: Interim Results for the Six Months Ended 31 December 2017
(x2, Rank Group TO EXCITE AND TO ENTERTAIN The Rank Group Plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 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 INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2017 Re vant Group
Slide 3: Summary
Summary * Very strong Group operating profit performance, up 14% ° Strong digital performance continued with revenue up 16% and operating profit up 56% ¢ Retail environment remains challenging, but casino market showing some positive signs * Group moved to a net cash position, £4.0m at 31 December 2
Slide 4: Clive Jennings, Finance Director
Clive Jennings Finance Director
Slide 5: Financial headlines
Financial headlines H1 H1 2017/18 2016/17 % LfL revenue” £378.1m £373.9m 1% Operating profit” £41.7m £36.6m 14% EBITDA” £63.3m £59.7m 6% Net cash / (debt) £4.0m £(33.0)m Adjusted EPS” 8.0p 6.9p 16% Dividend per share 2.15p 2.0p 8% Continued strong digital performance Challenging period for UK retail
Slide 6: Revenue & operating profit
Revenue & operating profit Revenue“ Operating profit® H1 H1 H1 HI £m 2017/18 2016/17 2017/18 2016/17 Grosvenor Casinos - venues 197.2 202.0 30.1 26.11 Mecca - venues 104.1 108.0 12.7 13.3 UK digital 60.6 52.4 11.4 7.3 Enracha 17.7 16.2 2.6 2.9 Central costs 2 - (15.1) (13.0) Total 379.6 378.6 41.7 3
Slide 7: 2017/18 H1 Operating Profit Bridge
2017/18 H1 Operating Profit Bridge Decrease in £m Decrease in marketing taxes and costs duties Decrease in 3.9 (11) employment 1.9 . costs 2 | Increase in 41.7 Decrease in other 48 (3.6) depreciation opera Revenue : costs growth Increase in (1.2) 15 | direct . . costs heel 36.6 . costs Increase in c
Slide 8: Costs
Costs H1 H1 £m 2017/18 2016/17 Employment and related costs 116.9 121.7 Taxes and duties 65.3 67.2 Direct costs 371 33.5 Property costs 31.8 30.6 Marketing 15.4 19.3 Depreciation & amortisation 21.6 23.1 Other 24.4 23.3 Total 312.5 318.7 Direct costs up due to digital revenue growth H2 controllable
Slide 9: Statutory profit and loss
Statutory profit and loss H1 H1 £m 2017/18 2016/17 Profit from operations 41.7 36.6 Net interest payable (1.4) (3.0) Profit before taxation and exceptional items 40.3 33.6 Exceptional items (7.5) 1.8 Profit before taxation 32.8 35.4 Taxation (7.7) (7.3) Profit for the period 25.1 28.1 * Continued re
Slide 10: Exceptional items
Exceptional items H1 H1 £m 2017/18 2016/17 Impairments and property leases (5.9) 6.6 Closure of venues = (0.3) Group restructuring including relocation costs (1.6) (3.8) Aborted acquisition costs - (0.7) Total exceptionals pre tax (7.5) 1.8 Taxation 1.3 (1.0) Total exceptionals post tax (6.2) 0.8 *
Slide 11: Cashflow and net debt
Cashflow and net debt H1 H1 £m 2017/18 2016/17 Cash inflow from operations 67.3 57.9 Net cash payments in respect of provisions and exceptional items (5.4) (6.1) Cash generated from operations 61.9 51.8 Capital expenditure (17.4) (17.0) Net interest and tax (7.6) (7.2) Dividends paid (20.7) (18.4) O
Slide 12: Capital investment
Capital investment H1 H1 £m 2017/18 2016/17 Grosvenor Casinos - venues 6.7 6.7 Mecca - venues 21 4.0 Luda - venues 1.6 - UK digital 45 15 Enracha 0.4 0.5 Central 21 4.3 Total 17.4 17.0 Three new Luda venues opened Single account and wallet trial 2017/18 guidance in £45m-£48m range Refurbishments com
Slide 13: Financial strength
Financial strength * Continued strong cash generation with ability to quickly flex capex up or down °* Moved to a £4.0m net cash position at 31 December 2017 ° Flexibility provided by £90m of undrawn revolving credit facilities * £10.1m Yankee Bond repaid in Jan 2018 * Term Loan will be fully amorti
Slide 14: Henry Birch, Chief Executive
(? ank Group HENRY BIRCH Chief Executive
Slide 15: Operational review: UK digital
Operational review: UK digital * Very strong overall performance: — Revenue up 16% — Profit up 56% * Strong momentum in meccabingo.com * Continuing growth in grosvenorcasinos.com driven by strong slots and live offer * Increased taxes with gaming duties on customer incentives from October 2017 * But
Slide 16: New CRM system launched: Adobe Campaign
New CRM system launched: Adobe Campaign New live casino apps launched ‘Dual play’ launched, streaming of live electronic roulette from Victoria casino; baccarat to follow in H2 ‘Meccarena’ integrated marketing campaign, inc. TV Significant multi-channel activity (see separate slide) Continued levera
Slide 17: A new content management system (CMS)
A new content management system (CMS) New digital brands and sites (Bella Casino and Luda) New Playtech slots and casino games suite Re-designs of Mecca and Grosvenor websites ‘Dual play’ Baccarat The launch of Grosvenor One, single account and wallet solution Upgraded Kambi sports product, includin
Slide 18: Operational review: Multi-channel
Operational review: Multi-channel * 2018: focus on driving multi-channel activity oy: ce ‘Grosvenor One’ *« Ambition: within 3 years have 15% of our Grosvenor Single Account and Wallet retail customer base playing digitally (currently 3.5%) * New Grosvenor employee affiliate scheme launched in H1 to
Slide 19: Operational review: New Retail Structure
Operational review: New Retail Structure Human Resources + New retail structure effective 1 December 2017 Director * Alan Morgan appointed Retail Managing Director MSIE RTING) USEC ca Icer * Combination of Grosvenor and Mecca central teams: — Cost savings and efficiencies — Additional capability in
Slide 20: Operational review: Mecca Venues
Operational review: Mecca Venues Decrease in admissions but continued growth in spend per visit Recent trends highlight Mecca outperforming market Experiential events continue to attract new audiences Spend per visit driven by: — Prior year Mecca Max investments — New games launched in prior year —
Slide 21: Luda venues: three distinct business lines
Three distinct business lines and physical areas: Three Luda venues opened in period — F&B: coffee shop + bar — Walsall August 2017 — Bingo: fixed odds and linked games — Weston-super-Mare October 2017 — Slots and arcade games — Leeds November 2017 Walsall below expectations but facing local challen
Slide 22: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues * Challenging year with revenues impacted by: Revenue™ Operating profit” — Lower win margin (0.7ppt lower than H1 H1 H1 HI rolling five year average) £m 2017/18 2016/17 2017/18 ~=—-2016/17 L isit London 671 72.0 12.2 13.6 — Lower vIsIts Provinces 124.2 12
Slide 23: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues Venue Development * Grosvenor Piccadilly (€2m) and Golden Horseshoe (£1m) refurbishments completed Plans to refurbish the Barracuda (London) in H2 Middlekerke in Belgium closed in August 2017 at the end of licence concession Blankenberge concession renewa
Slide 24: Operational review: Grosvenor Casinos Venues
Operational review: Grosvenor Casinos Venues Product Development Organisational Change * Neon, new casino management system roll-out * Project One complete: restructuring of pay across casino estate and benefits * New Neon loyalty upgrade occurring in H2 * Levels of club management streamlined * Rol
Slide 25: Operational review: Enracha
Operational review: Enracha a) Revenue HI HI * Continued strong performance 2017/18 2016/17 Revenue (£m) 17.5 16.2 * ‘Bingo Dynamico’ launched in Madrid Revenue (€m) 19.7 188 + Particularly strong amusement machines performance Operating profit’? (£m) 3.6 31 * Enracha Digital soft-launched in Septem
Slide 26: Regulatory outlook
Regulatory outlook * Triennial Review consultation period now complete: conclusions awaited — Likely changes to FOBT max stakes — Rank’s submission argued for harmonisation of 1968 and 2005 Act casino licences, increasing slot allowances in some casinos * Increased scrutiny by the Gambling Commissio
Slide 27: Responsible Gambling
Responsible Gambling Continued focus on responsible gambling: * Support for the introduction of a statutory levy to help fund research, education and treatment of gambling-related harm * Ongoing responsible gambling training throughout our business * Continued development of propensity models to ide
Slide 28: Priorities and outlook
Priorities and outlook * Current trading: in-line with management’s expectations * Full year expectations remain unchanged * We remain cautious about the retail consumer outlook, but casino sector showing some positive signs and digital showing strong momentum * We continue to review acquisition opp
Slide 29: Appendices
(RP eank croup APPENDICES
Slide 30: Strategy update
Strategy update 30 INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2017 (Krank Group
Slide 31: 1. Creating a compelling multi-channel offer
1. Creating a compelling multi-channel offer Activity H1 2017/18 Priorities for H2 2017/18 * Trial of Grosvenor’s single account and wallet in * Roll-out of single account and wallet in Grosvenor’s Stockport casino Grosvenor Casinos from Q4; roll-out to be , . . completed in the summer * Dual play,
Slide 32: 2. Building digital capability and scale
2. Building digital capability and scale Activity in H1 2017/18 Priorities for H2 2017/18 * Enracha.es launched * Launch of Luda’s digital offer * New Live Casino apps successfully launched in * Launch of a new digital content management August 2017 and performing well (‘CMS’), to be deployed on Gro
Slide 33: 3. Developing our venues
3. Developing our venues Activity in H1 2017/18 * Opened three Luda venues in Walsall, Weston-super-Mare and Leeds * Local authority approvals received for locating spare casino licences at two casinos in Glasgow (Riverboat and Merchant City) * Completion of refurbishments at Piccadilly and Golden H
Slide 34: 4. Investing in our brands and marketing
4. Investing in our brands and marketing Activity in H1 2017/18 * New fully integrated “Meccarena” marketing campaign, including TV ads, launched on Boxing Day 2017 - New Customer Relationship Management (‘CRM’) system launched with full functionality to be rolled out in H2 2017/18 * Olly Raeburn ap
Slide 35: 5. Using technology to drive efficiency and improve customer experience
5. Using technology to drive efficiency and improve customer experience Activity in H1 2017/18 Priorities for H2 2017/18 ¢ Four electronic roulette pricing experiments were ¢ Findings of electronic roulette pricing trials to be carried out across eight casinos with the aim of reviewed and rolled out
Slide 36: Group datasheet
Group datasheet HI FY HI FY HI FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Revenue (£m) 379.6 7551 378.6 753.0 374.2 738.3 - YOY growth 0% 0% 1% 2% 3% 4% Operating profit (£m) 41.7 83.5 36.6 82.4 40.4 84.0 - YOY growth 14% 1% (2)% (2)% (1% 16% Operating margin 11.0% 11.1% 9.7% 10.9% 10.8% 11.
Slide 37: Grosvenor Casinos Venues datasheet
Grosvenor Casinos Venues datasheet H1 FY H1 FY H1 FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Casino licences: London 9 9 9 9 9 9 Provinces 54 54 54 56 58 56 Belgium 1 2 2 2 2 2 Total 64 65 65 67 69 67 Non-trading licences 12 12 12 12 10 12 Revenue (£m) 197.2 397.2 202.0 408.1 205.1 4011 Oper
Slide 38: Grosvenor Casinos Venues - London datasheet
Grosvenor Casinos Venues - London datasheet HI FY H1 FY HI FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Revenue (£m) 671 1401 72.0 150.3 75.2 148.3 Operating profit (£m) 12.2 24.6 13.6 317 16.0 34.0 Operating margin 18.2% 17.6% 18.9% 21.1% 21.3% 22.9% Visits (000s) 679 1,398 732 1,482 772 1,46
Slide 39: Mecca Venues datasheet
Mecca Venues datasheet HI FY HI FY HI FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Venues 85 85 85 87 87 90 Revenue (£m) 104.1 213.6 108.0 221.5 109.8 224.4 Operating profit (£m) 12.7 29.9 13.3 32.9 14.3 28.9 Operating margin 12.2% 14.0% 12.3% 14.9% 13.0% 12.9% EBITDA (£m) 18.6 41.8 19.2 45.5
Slide 40: UK Digital datasheet
UK Digital datasheet HI FY HI FY HI FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Revenue (£m) 60.6 1.5 52.4 96.7 471 87.5 - meccabingo.com 36.1 67.6 33.1 66.2 33.2 65.2 - grosevenorcasinos.com 24.5 43.9 19.3 30.5 13.9 22.3 Operating profit (£m) 11.4 22,7 7.3 13.9 8.0 17.2 Operating margin 18.8
Slide 41: Enracha datasheet
Enracha datasheet HI FY H1 FY HI FY 2017/18 2016/17 2016/17 2015/16 2015/16 2014/15 Venues 9 9 9 9 9 9 Revenue (£m) 17.7 32.8 16.2 26.7 12.2 253 Operating profit (Em) 2.62 6.2 2.9 3.6 1.4 2.6 Operating margin 14.7% 18.9% 17.9% 13.5% 11.5% 10.3% EBITDA (£m) 3.4 77 37 51 2.2 4] Visits (000s) 987 1,984