Rank Group Plc · LSE:RNK
Rank — The Rank Group — H1 2010 Earnings Presentation
45 slides from Rank's earnings presentation, Jul 29, 2010
Slide 1: Half-year financial results
Half-year financial results 29 July 2010 1 1
Slide 2: Peter Johnson, chairman
_ Rank Group Peter Johnson, chairman
Slide 3: Agenda
Agenda Review of financial results Paddy Gallagher, finance director Strategy update Ian Burke, chief executive 3
Slide 4: Paddy Gallagher, finance director
Paddy Gallagher, finance director 4
Slide 5: Disclosure items
Disclosure items • Tax changes in HM Government’s Budget 2009 – like-for-like revenue adjusted for bingo and poker VAT exemptions • Change to revenue recognition – financial accounts now reported on a net basis deducting free bets and added prize money – gross revenue used on slides for consistency
Slide 6: Financial headlines
Financial headlines • Gross revenue*: £281.1m (2009 H1: £266.0m) • EBITDA**: £43.1m (2009 H1: £42.7m) • Operating profit**: £28.6m (2009 H1: £30.2m) • Adjusted profit before tax**: £25.1m (2009 H1: £24.7m) • Adjusted earnings per share**: 4.6p (2009 H1: 4.5p) • Operating cash flow: £13.3m (2009 H1:
Slide 7: Revenue & operating profit
Revenue & operating profit Revenue* Operating profit** 2010 2009 2010 2009 £m H1 H1 H1 H1 Grosvenor Casinos 116.6 106.7 17.6 14.7 Mecca Bingo 118.7 116.3 16.0 19.0 Top Rank España 18.4 18.1 3.0 2.7 Rank Interactive 27.4 24.9 2.3 3.0 Central costs (10.3) (9.2) Group 281.1 266.0 28.6 30.2 * before adj
Slide 8: Operating costs
Operating costs 2010 2009 £m H1 H1 Change Employment 92.8 87.1 6.5% Taxes & duties 46.0 38.7 18.9% Direct costs 25.7 24.3 5.8% Property costs 22.8 22.6 0.9% Marketing 15.1 13.5 11.9% Depreciation 14.5 12.5 16.0% Other 24.1 27.0 (10.7)% Total 241.0 225.7 6.8% • Higher taxes account for 48% of Group c
Slide 9: Grosvenor Casinos
Grosvenor Casinos Revenue* Operating profit** 2010 2009 2010 2009 £m H1 H1 H1 H1 London 45.4 41.2 8.3 5.3 Provinces 63.3 57.3 8.7 8.9 Belgium 7.9 8.2 0.6 0.5 116.6 106.7 17.6 14.7 KPIs Visits (000s) 2,624 2,270 Spend per visit (£) 44.41 47.00 • >1 million customers (MAT) • Like-for-like revenue up 3
Slide 10: Mecca Bingo
Mecca Bingo 2010 2009 £m H1 H1 Revenue* 118.7 116.3 Operating profit** 16.0 19.0 KPIs Visits (000s) 7,521 7,491 Spend per visit (£) 15.78 15.53 • Customers and customer visits in growth for first time in more than a decade • Like-for-like revenue flat excluding effect of heavy snowfall in week 2 * b
Slide 11: Top Rank España
Top Rank España 2010 2009 £m H1 H1 Revenue 18.4 18.1 Operating profit* 3.0 2.7 KPIs Visits (000s) 1,142 1,130 Spend per visit (£) 16.11 16.02 • Growth in customers and customer visits • 4.3% revenue growth in euros • Economic situation remains challenging * before exceptional items 11
Slide 12: Rank Interactive
Rank Interactive Revenue* 2010 2009 £m H1 H1 Bingo & games 19.8 16.4 Casino 3.0 2.4 Poker 1.0 1.7 Sportsbook 3.6 4.4 27.4 24.9 Operating profit 2.3 3.0 • Strong growth from meccabingo.com and gcasino.com • International start-up costs incurred in period • Profit improvement expected in H2 * before a
Slide 13: Statutory profit & loss
Statutory profit & loss 2010 2009 £m H1 H1 Adjusted profit before tax 25.1 24.7 Other* (0.8) 0.9 Profit before tax and exceptional items 24.3 25.6 Exceptional items 43.1 1.4 Profit before tax 67.4 27.0 Taxation (18.8) (7.5) Discontinued operations 1.8 - Profit for the period 50.4 19.5 * includes unw
Slide 14: Cash flow
Cash flow 2010 2009 £m H1 H1 Continuing operations Cash inflow from operations 40.4 41.3 Capital expenditure (27.1) (14.3) Fixed assets disposals - 1.6 Operating cash inflow 13.3 28.6 Dividends (5.3) - Acquisitions and disposals (0.1) (0.3) Receipt (payments) - exceptional costs and provisions 37.4
Slide 15: Capital investment to support growth
Capital investment to support growth 2010 2009 2010F £m H1 H1 FY Grosvenor Casinos 13.5 3.9 20 Mecca Bingo 9.5 8.1 20 Top Rank España 1.1 0.5 4 Rank Interactive 2.3 1.6 4 Other 0.7 0.2 2 Total 27.1 14.3 50 • Grosvenor Casinos – Electronic roulette & G Casino expansion • Mecca Bingo – Amusement machi
Slide 16: Strengthened balance sheet
Strengthened balance sheet • Sustained reduction in net debt Group net debt (£m) 2007-2010 • 1.6 x net debt to EBITDA (MAT) – below target range • Reduction in debt facilities 316.9 273.4 – 2012 revolver reduced from 226.5 £250m to £200m 208.1 186.8 – reflects financial strength 133.4 – £160k intere
Slide 17: Current trading
Current trading • Four week trading period • Like-for-like revenue growth across all businesses • Continued growth in customer visits 17
Slide 18: Ian Burke, chief executive
Ian Burke, chief executive 18
Slide 19: Review: 2007 to 2010
Review: 2007 to 2010 • Recovery and stabilisation Group adjusted following ‘Perfect Storm’ earnings per share (p) 2007-2010 – cost controls tightened – capital conservation – senior management team 5.2 strengthened 4.5 4.6 4.4 4.3 • Resilience during 2008/9 3.0 recession 2.2 – strong growth from cas
Slide 20: Strategic update
Strategic update • Broaden appeal - gain deeper customer understanding – insight & engagement – products & services – entertainment & accessibility • Extend reach - strengthen position in Britain and explore opportunities overseas – G Casino – Mecca Full House – Rank Interactive • Work positively wi
Slide 21: Broaden appeal - insight & engagement
Broaden appeal - insight & engagement • Launch of Smart Focus in H2 – single customer database for Mecca Bingo, Grosvenor Casinos and Rank Interactive – enhanced ability to track and engage with customers • Customer rewards – Play Points in 13 casinos at H1; 15 casinos by FY 2010 - driving increased
Slide 22: Broaden appeal - electronic gaming
Broaden appeal - electronic gaming • >15,000 electronic gaming Rank Group terminals electronic gaming terminals H1 2010 (Great Britain only) – c6,700 gaming machines B1 – c7,600 electronic bingo Electronic B3/B4 bingo terminals – c980 electronic roulette terminals C/D • £59.7m gaming machines revenu
Slide 23: Broaden appeal - electronic gaming
Broaden appeal - electronic gaming • Amusement and gaming machines – acquisition of c5,300 amusement machines – server-based gaming machines now deployed across all Mecca Bingo clubs – completion of PlaySafe deployment across all Mecca Bingo clubs • Electronic bingo – roll-out of ‘next generation’ o
Slide 24: Broaden appeal - electronic gaming
Broaden appeal - electronic gaming Performance Group gaming machine revenue (£m) • 6.2% increase in Group 2007-2010 machine revenue • 8.2% increase excluding effect of VAT rise 59.1 59.7 58.5 56.2 50.5 51.2 51.9 • PlaySafe driving greater efficiency • Gaming machine revenue now exceeding pre-S21 lev
Slide 25: Broaden appeal - food & drink
Broaden appeal - food & drink Mecca Bingo • Table service extended from 16 clubs to 33 in H1 – 18% spend per visit uplift • Table service to be introduced to a further 14 clubs in H2 Grosvenor Casinos • Continued improvement in menu and service • Greater standardisation drives margin benefits 25
Slide 26: Broaden appeal - food & drink
Broaden appeal - food & drink Performance Group food & beverage revenue (£m) • 11.2% increase in Group F&B 2007-2010 revenue despite VAT rise – Grosvenor Casinos +28% 22.8 – Mecca Bingo +8% 21.1 20.5 18.4 19.3 19.2 19.0 • Strong improvements in customer satisfaction scores H1 07 H2 07 H1 08 H2 08 H1
Slide 27: Broaden appeal - entertainment & accessibility
Broaden appeal - entertainment & accessibility • Historically poor asset utilisation • Extension of trading hours where demand exists – 24-hour opening extended from 17 casinos to 21; at least 22 by FY 2010 – trials of extended opening in 14 Mecca Bingo clubs • Product and service improvements to dr
Slide 28: Broaden appeal - entertainment & accessibility
Broaden appeal - entertainment & accessibility Performance Grosvenor Casinos Like-for-like operating hours • 11.7% like-for-like increase 2007-2010F in casino operating hours 250 • 28% like-for-like increase in 200 casino operating hours 2007 Hours (000s) to 2010F 150 • Drives incremental visits and
Slide 29: Strengthen position - G Casino
Strengthen position - G Casino G Casino - the story so far • Launched in 2006 to broaden appeal of casino as a leisure venue – Eye-catching venues in high profile sites – Broad range of gaming and non-gaming activities Thanet – Hospitality rather than compliance model of service • Brand development
Slide 30: Strengthen position - G Casino
Strengthen position - G Casino Luton Performance Customer visits per week Provincial casinos • Significant growth achieved: 4,000 – customers/visits – revenue 3,000 – profit Thanet • Exceeding 15% pre-tax return 2,000 target – relocations and conversions 1,000 achieve target faster than 0 new casino
Slide 31: Strengthen position - G Casino
Strengthen position - G Casino Development G Casino estate development (casinos) 2006-2012 2010 • Growth in G Casino from ten to 20 12 casinos – two conversions in H1 16 2011 onwards 12 10 • Target remains at least 20 G Casinos by FY 2012 6 – one new-build and at least 1 4 three conversions planned
Slide 32: Strengthen position - Mecca Full House
Strengthen position - Mecca Full House Mecca Full House – the story so far • Launched in 2009 to modernise female-friendly social gaming – vibrant venues in community locations – zoning to create different environments and atmospheres – broad range of gaming and non-gaming activities • Brand develop
Slide 33: Strengthen position - Mecca Full House
Strengthen position - Mecca Full House Performance Customer visits per week • Significant growth achieved 2010 5,000 • Review of format and service model 4,000 − interval games shortfall being addressed 3,000 − introduction of more efficient service model 2,000 • Mecca FHD grows from two to six club
Slide 34: International opportunities
International opportunities Rank Interactive 2010 • £0.8m capital investment to prepare for international development 2011 • Launch of bingo and games sites in Spain and Italy* *subject to licensing 34
Slide 35: Work positively with governments
Work positively with governments Our agenda - fairness, simplicity, sustainability • Taxation – harmonisation of taxation – single 15% rate of duty across all forms of gaming and betting, including offshore remote gaming • Regulation – increase in gaming machines allocations for licensed casinos and
Slide 36: Work positively with governments
Work positively with governments Conservative Party on gaming • Bingo clubs (policy commitments) – increase in max stake on B3 machine from £1 to £2 – increase in max allocation of B3 machines from eight to 20% of total – increase in max prize on C machines from £70 to £100 • Casinos – “Casinos have
Slide 37: Summary
Summary • Economic outlook remains uncertain – employment – interest rates • Resilient Group trading performance – momentum with casinos – British and Spanish bingo clubs steady • Capital investment to support growth strategy • Debt refinancing in 2011 • Opportunity for positive regulatory reform ov
Slide 38: Appendices
_ Rank Group Appendices 38
Slide 39: VAT refunds
VAT refunds • £105.7m received to date* – interval bingo – main stage bingo – amusement machines • Rank’s claims supported by courts – VAT Tribunal – High Court • HMRC continues to appeal decisions • ECJ to deliver final ruling – expected in H1 2012 at latest * Including related interest and duty 39
Slide 40: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet £m H1 2010 FY 2009 H1 2009 FY 2008 H1 2008 Casinos London 5 5 5 5 5 Provinces 30 30 28 27 27 Belgium 2 2 2 2 2 Total 37 37 35 34 34 Unused licences 12 12 13 13 13 Revenue (£m) 116.6 220.0 106.7 206.2 102.2 EBIT (£m) 17.6 30.9 14.7 25.9 12.5 Operating margin 15.1% 14.0% 1
Slide 41: Mecca Bingo data sheet
Mecca Bingo data sheet £m H1 2010 FY 2009 H1 2009 FY 2008 H1 2008 Clubs 103 103 103 102 102 Revenue (£m) 118.7 233.0 116.3 227.6 116.9 EBIT (£m) 16.0 32.3 19.0 37.9 22.7 Operating margin 13.5% 13.9% 16.3% 16.7% 19.4% Customers MAT (000s) 943 881 912 898 984 Customer visits (000s) 7,521 14,933 7,491
Slide 42: Top Rank España data sheet
Top Rank España data sheet £m H1 2010 FY 2009 H1 2009 FY 2008 H1 2008 Clubs 11 11 11 11 11 Revenue (£m) 18.4 36.2 18.1 35.8 17.7 EBIT (£m) 3.0 5.6 2.7 6.9 4.1 Operating margin 16.3% 15.5% 14.9% 19.3% 23.2% Customers MAT(000s) 341 314 316 323 330 Customer visits (000s) 1,142 2,310 1,130 2,410 1,203 S
Slide 43: Rank Interactive data sheet
Rank Interactive data sheet £m H1 2010 FY 2009 H1 2009 FY 2008 H1 2008 Bingo/games 19.8 34.3 16.4 29.7 14.7 Casino 3.0 5.1 2.4 5.5 2.6 Poker 1.0 2.9 1.7 3.8 2.0 Sportsbook 3.6 8.5 4.4 13.6 7.7 Revenue (£m) 27.4 50.8 24.9 52.6 27.0 EBIT (£m) 2.3 7.5 3.0 7.6 3.5 Operating margin 8.4% 14.8% 12.0% 14.4%
Slide 44: Casinos market supply (July 2010)
Casinos market supply (July 2010) Operating Non-operating Total Operator clubs licences Licences Genting Stanley 45 10 55 Grosvenor Casinos 35 12 47 Gala 27 4 31 Caesar’s / London Clubs 9 2 11 A&S Leisure 6 0 6 Aspers / Aspinall’s 4 2 6 Club 36 3 0 3 Clockfair 2 0 2 Guoco 1 5 6 Independents 9 11 20
Slide 45: Bingo clubs market supply (July 2010)
Bingo clubs market supply (July 2010) Operator Clubs Gala Bingo 144 Mecca Bingo 103 Top Ten Bingo 24 Carlton Clubs 14 Riva Bingo 11 Buckingham Bingo 9 Others 253 Total 558 45