Rank Group Plc · LSE:RNK
Rank — H1 2007 Earnings Presentation
48 slides from Rank's earnings presentation, Aug 30, 2007
Slide 1: 2007 interim results
2007 interim results 30 August 2007
Slide 2: Peter Johnson, chairman
(K€ Rank Group Peter Johnson chairman
Slide 3: Agenda
Agenda • Interim results – Peter Gill • Operational review and strategic priorities – Ian Burke
Slide 4: Highlights
Highlights H1 2007 • Operating profit growth achieved in bingo, casino and interactive • Cost saving initiatives on track • UK businesses prepared for Gambling Act 2005 • Hard Rock disposal completed; £353m returned to shareholders via special dividend
Slide 5: Peter Gill, finance director
(K€ Rank Group Peter Gill finance director
Slide 6: Accounting presentation
Accounting presentation 2006 results restated • Interim results – Discontinued businesses • Final results – Pension scheme accounting – Exceptional items
Slide 7: Financial headlines
Financial headlines continuing operations • Revenue £284.6m (2006: £277.3m) • Operating profit £47.9m (2006: £38.0m) • Adjusted profit before tax £37.3m (2006: £21.9m) • Adjusted EPS 5.2p (2006: 2.4p) • Operating cash flow £64.8m (2006: £18.7m) • Net debt £293m (£447m at 31 December 2006) • Interim
Slide 8: Adjusted profit
Adjusted profit* £m 2007 2006 Revenue 284.6 277.3 Operating profit 47.9 38.0 Interest (10.6) (16.1) Profit before tax 37.3 21.9 Effective tax rate 34.3% 33.3% Adjusted earnings per share 5.2p 2.4p * Profits and earnings before discontinued operations, exceptional items, foreign -exchange on inter-co
Slide 9: Revenue & operating profit
Revenue & operating profit Revenue Operating profit £m 2007 2006 2007 2006 Bingo 148.3 149.1 36.1 36.0 Casinos 110.1 109.6 21.0 20.5 Interactive 26.2 18.6 5.5 3.1 Shared services (10.2) (13.1) Central costs (4.5) (8.5) 284.6 277.3 47.9 38.0
Slide 10: Bingo
Bingo Revenue Operating profit £m 2007 2006 2007 2006 (1) (2) Mecca Bingo 132.5 133.9 31.5 31.8 Top Rank España 15.8 15.2 4.6 4.2 148.3 149.1 36.1 36.0 (1) Net of £4.0m additional lease costs resulting from sale & leaseback (2) Net of £2.0m one-off restructuring costs Mecca Bingo 2007 % growth (comp
Slide 11: Casinos
Casinos Revenue Operating profit £m 2007 2006 2007 2006 London 46.3 48.6 8.9 9.0 Provincial 57.7 54.8 11.7 11.0 Belgium 6.1 6.2 0.4 0.5 (1) 110.1 109.6 21.0 20.5 (1) Net of £1.6m additional lease costs resulting from sale & leaseback and £1.7m additional duty costs Grosvenor UK (comparable clubs) (2
Slide 12: Interactive
Interactive Blue Square Gross win/revenue £m 2007 2006 Gaming 17.2 10.2 Sportsbook 9.0 8.4 26.2 18.6 Operating profit 5.5 3.1 2007 2006 Active customers (000s) 320 261
Slide 13: Statutory profit & loss
Statutory profit & loss £m 2007 2006 Adjusted profit before tax 37.3 21.9 Foreign exchange on inter-company balances (inc. hedging) - 7.5 Net return on defined benefit pension asset 5.1 - Amortisation of equity component of convertible bond (1.8) (1.5) Profit before tax and exceptional items 40.6 27
Slide 14: Exceptional items
Exceptional items £m 2007 2006 Exceptional items within continuing operations Profit on club disposals 9.1 - Financing charge - (14.7) Loss on sale of investment - (12.1) Pre-tax exceptional gain / (loss): continuing operations 9.1 (26.8)
Slide 15: Discontinued operations
Discontinued operations Operating profit Exceptional items Total 2007 2006 2007 2006 2007 2006 Hard Rock 0.1 18.9 325.7 - 325.8 18.9 US Holidays - 1.1 - - - 1.1 Deluxe Media - (10.0) - - - (10.0) Deluxe Film - 1.3 - - - 1.3 0.1 11.3 325.7 - 325.8 11.3 Associates (0.3) (0.8) Tax (7.8) 1.7 Total inter
Slide 16: Group cash flow
Group cash flow £m 2007 2006 Continuing Operations Cash inflow from operating activities 60.6 39.8 Capital expenditure (15.0) (22.8) Fixed assets disposals 19.2 1.7 Operating cash inflow from continuing operations 64.8 18.7 Acquisitions and disposals 498.7 409.5 Payments - exceptional costs and prov
Slide 17: Movement in net debt
Movement in net debt (555) 547 £m (32) 41 (451) (15) (293) 172 Net Disposal of Additional Discontinued Operating Net debt at businesses pension / other cash flow debt at contributions 30/06/06 30/06/07 Sale & Special leaseback Dividend / share buy-backs
Slide 18: Ian Burke, chief executive
(K€ Rank Group lan Burke chief executive
Slide 19: Rank Group: the gaming business
Rank Group the gaming business OUR OPPORTUNITY - market forces will drive growth in gaming • Societal attitudes, regulation, technology, investment OUR STRENGTHS - rare combination of requisite qualities • Brands, gaming licences, operating expertise, track record of responsibility in gambling OUR F
Slide 20: Business strategy overview
Rank Group business strategy overview • Stabilise, modernise, grow • Modernise & grow • Grow UK business; penetrate new markets
Slide 21: Mecca Bingo overview
Mecca Bingo overview STABILISE • Manage the introduction of smoking bans and the loss of S21 terminals • Targeted cost savings being delivered MODERNISE • Product development • Marketing & service • Portfolio development GROW
Slide 22: Mecca Bingo: managing the smoking ban
Mecca Bingo managing the smoking ban • More flexible game play – Session re-engineering – Extension of linked and bonus games • Training & communication • Estate improvements – 80 clubs with sheltered outside areas* – 24 clubs licensed for outside gaming* – 9 clubs operating outside gaming* ** at at
Slide 23: Mecca Bingo: managing the smoking ban
Mecca Bingo managing the smoking ban % Year on year revenue performance (comparable clubs) since introduction of smoking bans 5 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 0 May Jun -5 Scotland -10 Wales -15 Year 1 Year 2 -20
Slide 24: Substitution for Section 21 terminals
Mecca Bingo substitution for Section 21 terminals • Section 21 terminals not permitted under 2005 Act • Section 21 terminals represent 18% of Mecca Bingo machines at 30 August 2007 • Substitution of revenue by: – Conversion of 950 Section 21 terminals to Category B3 and Category C machines – 7% incr
Slide 25: Mecca Bingo product development
Mecca Bingo product development Games • Rollover jackpots allow for major prizes – Mecca Millionaire launches in September 2007 • Extension of e-bingo – e-bingo now in 53 Mecca Bingo clubs – Range of suppliers; suite of solutions – Introduction leads to higher average sales – Extension to interval g
Slide 26: Mecca Bingo marketing & service
Mecca Bingo marketing & service • Generate awareness and understanding of bingo as relevant leisure experience – New member recruitment managers introduced to 32 Mecca Bingo clubs to deliver outreach programmes – Mecca Millionaire and other new games provide focus for marketing • Recruit and motivat
Slide 27: Mecca Bingo portfolio development
Mecca Bingo portfolio development • Active management of clubs portfolio – £6m investment in major refurbishments in 2007 – 10 clubs closed in H1; 1 club closure in H2 • limited scope for improvement • alternative use presents greater value • release of c£30m for reinvestment • Grow clubs portfolio
Slide 28: Top Rank España overview
Top Rank España overview STABILISE • 9.5% growth in H1 operating profit MODERNISE • New product available (electronic roulette, gaming machines) • Modernisation of gambling laws presents opportunity for continued product development GROW
Slide 29: Grosvenor Casinos overview
Grosvenor Casinos overview MODERNISE • product development • marketing & service GROW • 1968 Act • 2005 Act
Slide 30: Grosvenor Casinos product development
Grosvenor Casinos product development • Development of non-gaming products – Food & Drink – Entertainment • Piloting of new games under 2005 Act • Technological development – Extension of electronic gaming products – Substitution for Section 21 terminals
Slide 31: Product development: G Casino
Grosvenor Casinos product development - G Casino Luton Luton Grosvenor G Casino Total area 14,000 sq ft 24,000 sq ft Non-gaming area 30% 45% Location Outskirts Town centre/arterial Experience Gaming Entertainment, leisure & gaming Male/female ratio 75/25 65/35 Poker room 120 seats 200 seats Ancillar
Slide 32: Grosvenor Casinos marketing & service
Grosvenor Casinos marketing & service • Recruit and retain customers through high standards of service and effective marketing – Advertising programme (local press & radio) from September 2007 – New member recruitment managers and hosts • Recruit and motivate our people – Programme of cultural chang
Slide 33: Portfolio development: 1968 Act casinos
Grosvenor Casinos portfolio development - 1968 Act casinos 900,000 40 • 5 new casinos operating 800,000 38 by 2010 Casinos Casinos operating operating 700,000 36 • Up to 3 casino licence 600,000 34 32 ‘relocations’ by 2010 500,000 30 400,000 • 20 casinos refurbished, Total Total area area (sq (sq ft
Slide 34: Portfolio development: 2005 Act casinos
Grosvenor Casinos portfolio development - 2005 Act casinos • 17 new generation casino licences provided for within 2005 Act • Greater gaming provision represents significant step forward in modernisation of British casinos • Rank possesses requisite ambition and experience – Track record of responsi
Slide 35: Blue Square overview
Blue Square overview GROW EXISTING BUSINESS • Focus on generating increasing customer base • Leverage synergies with retail gaming businesses ACCESS NEW MARKETS • Develop capabilities to open new channels of growth in UK and internationally
Slide 36: Highly visible & effective marketing
Blue Square highly visible & effective marketing Targeted sponsorship and advertising to drive traffic • Blue Square Grosvenor UK Poker Tour (Channel 4) • Blue Square UK Darts Open (SKY Sports) • Blue Square Greyhound Derby (SKY Sports) • Blue Square Premier non-league football (Setanta) • Blue Squa
Slide 37: Blue Square: access new markets
Blue Square access new markets • UK - new routes to market – Blue Square now betting and gaming provider for 3 million Virgin Media customers • International - developing capabilities – Development of online bingo business for Spanish market – Evaluating opportunities to extend reach
Slide 38: Outlook
Rank Group outlook • Strong first half performance • Second half will be more challenging – Smoking banned across UK – Section 21 terminals • 2005 Act presents opportunities for growth
Slide 39: Appendix
Appendix
Slide 40: The next six months
Rank Group the next six months September • 2005 Act implemented – Advertising restrictions relaxed – New games testing permitted – Poker rake permitted – Loss of Section 21 games • Publication of Prevalence Study December • Pre-close trading update February • Preliminary results
Slide 41: Capital expenditure
Capital expenditure £m H1 2007 FY 2007F Bingo 6.9 20-30 Casino 5.7 15-20 Interactive 1.8 3-5 Other 0.6 2-3 Total 15.0 40-50
Slide 42: Casinos: relaxation of advertising restrictions
Casinos Relaxation of advertising restrictions
Slide 43: Casinos gaming machines
Casinos gaming machines Max Max 1968 Act 2005 Act Stake Prize allocation allocation Section 31 £2 £4,000 20 - Section 21 £2 £500 No limit - Category B1 £2 £4,000 - 20
Slide 44: Bingo gaming machines
Bingo gaming machines Max Max 1968 Act 2005 Act Stake Prize allocation allocation Section 31 £1 £500 4 - Section 21 £2 £500 No limit - Category B3 £1 £500 - 4 Category C 50p £35 No limit* No limit* * restrictions on AWP/Category C, which apply in a small number of local licensing areas, are abolishe
Slide 45: Mecca Bingo data sheet
Mecca Bingo data sheet H1 FY H1 FY H1 FY H1 2007 2006 2006 2005 2005 2004 2004 Clubs 103 113 117 117 117 120 121 Revenue 132.5 261.7 133.9 264.0 133.9 265.3 133.9 EBIT* 31.5 63.6 31.8 77.9 38.5 79.6 40.3 Operating margin 24% 24% 24% 30% 29% 30% 30% Active membership (millions) 1.1 1.1 1.1 1.1 1.1 1.
Slide 46: Top Rank España data sheet
Top Rank España data sheet H1 FY H1 FY H1 FY H1 2007 2006 2006 2005 2005 2004 2004 Clubs 11 11 11 11 11 11 10 Revenue 15.8 31.1 15.2 31.6 15.4 27.3 13.0 EBIT* 4.6 8.9 4.2 10.0 4.7 7.7 3.4 Operating margin 29% 29% 28% 32% 31% 28% 26%
Slide 47: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet H1 FY H1 FY H1 FY H1 2007 2006 2006 2005 2005 2004 2004 London 5 5 6 6 6 6 6 Provincial 28 28 30 30 30 30 28 Belgium 2 2 2 2 2 2 2 Total 35 35 38 38 38 38 36 Revenue (UK) 104.0 204.4 103.4 195.0 94.3 188.4 88.4 Revenue (Belgium) 6.1 13.2 6.2 12.9 6.0 12.4 6.0 Total reven
Slide 48: Blue Square data sheet
Blue Square data sheet H1 FY H1 FY H1 FY H1 2007 2006 2006 2005 2005 2004 2004 Gaming win 17.2 22.9 10.2 13.1 5.7 9.2 4.3 Sportsbook win 9.0 16.3 8.4 13.2 6.7 16.4 8.9 Gross win (£m) 26.2 39.2 18.6 26.3 12.4 25.6 13.2 EBIT (£m) 5.5 7.8 3.1 1.0 0.3 5.0 2.6 Operating margin 21% 20% 17% 4% 2% 20% 20% A