Rank Group Plc · LSE:RNK
Rank — The Rank Group — FY2019 Earnings Presentation
49 slides from Rank's earnings presentation, Aug 22, 2019
Slide 1: Rank Group Preliminary results for the 12 months ended 30 June 2019
(x® Rank Group oup Ple i r the 12 months ended 30 June 2019
Slide 2: Agenda
Agenda Introduction John O’Reilly, Chief Executive Financial and operational performance Bill Floydd, Chief Financial Officer Strategic update and outlook John O’Reilly, Chief Executive Q&A 2 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 3: Introduction
Introduction John O’Reilly, Chief Executive 3 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 4: Rank post Transformation Programme
Rank post Transformation Programme TODAY 2020/21 A balanced retail and Customer offer A retail focused business digital business Gaming business appealing Product market Transactional gaming operator to a broader leisure market Greater proportion of revenues Geographic market UK focused from non-UK
Slide 5: Financial and operational performance
Financial and operational performance Bill Floydd, Chief Financial Officer 5 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 6: Financial headlines
Financial headlines LFL Revenue, YOY 2018/19 2017/18 % 4% LFL revenue (1) £729.5m £731.3m 0% Q4 2% LFL operating profit (2) £72.1m £78.6m (8)% Exceptional costs £(28.6)m £(22.6)m 27% 0% Q1 Q2 Q3 Adjusted EPS (2) 14.8p 15.0p (1)% -2% Dividend per share 7.65p 7.45p 3% -4% Net cash/(debt) (3) £1.8m £(9
Slide 7: LFL revenue & operating profit
LFL revenue & operating profit LFL Revenue (4) LFL Operating Profit (5) £m 2018/19 2017/18 % 2018/19 2017/18 % Grosvenor – venues 353.0 360.4 (2)% 44.7 47.8 (7)% Mecca – venues 199.9 203.2 (2)% 30.0 30.1 0% International – venues 44.9 44.6 1% 9.3 8.6 8% Digital 131.7 123.1 7% 19.1 19.6 (3)% Central
Slide 8: Operational review: Grosvenor Venues
Operational review: Grosvenor Venues (6) (7) LFL Revenue LFL Operating Profit • LFL revenue down 2% YOY; H2 up 1% £m 2018/19 2017/18 2018/19 2017/18 London 128.3 129.9 18.3 22.3 • Capital investments – Barracuda, Victoria and Sheffield Provinces 224.7 230.5 26.4 25.5 • Successful gaming machine inve
Slide 9: Operational review: Mecca Venues
Operational review: Mecca Venues (8) LFL Revenue LFL Operating Profit (9) • LFL revenue down 2% YOY £m 2018/19 2017/18 2018/19 2017/18 − Visits down 9% Venues 199.9 203.2 30.0 30.1 − Spend per visit up 8% (8) before adjustment for customer incentives. (9) before exceptional items. − Stabilisation of
Slide 10: Operational review: International venues
Operational review: International venues (10) (11) LFL Revenue LFL Operating Profit • Stable performance in the year £m 2018/19 2017/18 2018/19 2017/18 Enracha 35.3 35.3 7.8 7.4 • Optimisation of Enracha’s non-bingo offer Belgium casino 9.6 9.3 1.5 1.2 a key area of focus Total 44.9 44.6 9.3 8.6 (10
Slide 11: Operational review: Digital
Operational review: Digital (12) NGR LFL Operating Profit • LFL NGR up 11% £m 2018/19 2017/18 2018/19 2017/18 − Mecca up 9% Mecca 62.2 57.3 Grosvenor 42.4 37.4 − Grosvenor up 13% Enracha 0.9 0.6 • YoBingo LFL NGR up 18% LFL total 105.5 95.3 19.1 19.6 YoBingo 13.0 1.4 1.6 0.3 • Operating profit down
Slide 12: Statutory income statement
Statutory income statement £m 2018/19 2017/18 Operating profit 72.5 77.0 Net financing charge (2.8) (2.8) Profit before taxation and exceptional items 69.7 74.2 Exceptional items (35.1) (27.5) Profit before taxation 34.6 46.7 Tax on exceptional items 5.0 4.9 Taxation (12.0) (15.7) Profit after tax f
Slide 13: Exceptionals
Exceptionals £m 2018/19 2017/18 Transformation costs (10.8) - NMW pay provision (8.0) - Impairments (11.1) (12.1) Acquisition related costs (2.2) (0.4) Onerous lease and property provisions (1.4) (9.1) Group restructuring costs - (1.6) Closure of venues - (3.7) Finance costs (1.6) (0.6) Exceptional
Slide 14: Cashflow and net debt
Cashflow and net debt £m 2018/19 2017/18 Cash inflow from operations 129.0 109.4 • Term loan facilities increased to £50.0m and extended to early Net cash payments in respect of provisions and exceptional items (15.9) (7.0) 2020; £90m RCF to be refinanced in H1 2019/20 Cash generated from operations
Slide 15: Reporting changes
Reporting changes £m 2018/19 £m 2018/19 Total GGR 2018/19 746.5 Total operating profit 2018/19 72.5 Less: customer incentives (51.4) Add: IFRS 3 intangible amortisation 3.2 Less: closures and disposals (9.7) Add: IFRS 16 estimated impact 9.0 LFL NGR 2018/19 baseline 685.4 Operating profit 2018/19 ba
Slide 16: Guidance
Guidance Original FY H2 FY 2019/20 £m 2018/19 Incremental 2019/20 Plan Casino operating model 8.2 19.5 18.0 Support office 1.5 4.5 6.5 Procurement 1.0 4.0 2.5 Less: wage cost increases - (8.0) (8.0) Total transformation benefits 10.7 9.3 20.0 19.0 • Encouraging early signs of revenue growth from tra
Slide 17: Strategic Update and Outlook
Strategic Update and Outlook John O’Reilly, Chief Executive 17 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 18: H2 Revenue Growth by Business
H2 Revenue Growth by Business Group Grosvenor Venues Mecca Venues Digital NGR GGR GGR GGR incl Yo 2.0% 23.9% 0.9% H2 H2 0.1% 21.1% H1 H1 H1 H2 -2.4% H1 H2 -3.3% -4.7% 18 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 19: Our plan of action – update
Our plan of action – update 1 2 3 4 Increase Grow Drive Improve our focus on the our our customer digital cost organisational business efficiencies capability 19 The Rank Group Plc Preliminary results for the 12 months ended 30 June 2019
Slide 20: 1. Increase our focus on the customer
1. Increase our focus on the customer • Data science − New strategy − Investments into team and technology Barracuda casino London • Forensic approach to capital investment − Barracuda refurbishment − Victoria improvements − Sheffield refurbishment − Gaming machines and electronic roulette Sheffield
Slide 21: 2. Growing our digital business
2. Growing our digital business Grosvenor • Gathering momentum H1 H2 FY 2018/19 2018/19 2018/19 • Grosvenor: GGR 0% 15% 8% − Grosvenor One NGR 5% 22% 13% − New CMS migration Average monthly active customers (4)% − Buy in bonus improvements • Mecca: Mecca − Daily retention game H1 H2 FY 2018/19 2018/
Slide 22: 3. Driving cost efficiencies
3. Driving cost efficiencies • Casino operating model successfully delivered in H2 − Simplified management structure − Improved team member scheduling • ‘Fit for purpose’ support office size and structure • Property − 10 lease re-gears − Secured business rate reductions • Further procurement savings
Slide 23: 4. Improve organisational capability
4. Improve organisational capability • Strengthened management team • Right general manager is critical − 14 new general managers appointed • Jonathon Swaine appointed retail managing director • Catrin White appointed retail marketing director • Focus on culture and capability 23 The Rank Group Plc
Slide 24: Transformation plan – enhancing revenue growth
Transformation plan – enhancing revenue growth Key deliverables 2019 2020 2021 JAN 20 Redesigned user journeys Marketing JUN 20 Optimised acquisition through performance marketing effectiveness DEC 20 Automated customer lifecycle management OCT 19 Payment journey improvements (Grosvenor) Materially
Slide 25: Transformation plan – driving cost efficiencies
Transformation plan – driving cost efficiencies Key deliverables 2019 2020 2021 Review of UK retail SEP 19 Workforce planning software rollout in first region operating model DEC 19 Introduce process efficiencies within current model Fit for purpose SEPT 19 Improved contractor management process imp
Slide 26: Transformation plan – key enablers
Transformation plan – key enablers Key deliverables 2019 2020 2021 Critical DEC 19 Content Management System (Grosvenor) systems JUNE 20 Content Management System (Mecca) Data NOV 19 Launch dashboards for Mecca & Grosvenor DEC 21 analytics DEC 19 Data Community Data quality and BI DEC 19 Sign-off ne
Slide 27: Outlook
Outlook • Transformation programme continues to gain momentum − increased focus on revenue growth • Stride completion expected October 2019 subject to necessary approvals • Current trading in line with management’s expectations • Optimistic about 2019/20 outturn 27 The Rank Group Plc Preliminary res
Slide 28: Appendices
Appendices
Slide 29: Strategy execution
Strategy execution 1 Creating a compelling multi-channel offer 2 Building digital capability and scale 3 Developing our venues 4 Consistently improve our customer experience through innovation 5 Be committed to safe and fair gaming 6 Within an environment which enables our colleagues to develop, be
Slide 30: 1. Creating a compelling multi-channel offer
1. Creating a compelling multi-channel offer 2018/19 activity: • Grosvenor One was successfully rolled out across all 52 casinos; and • Exploratory work commenced into creating a new omni-channel service for the Mecca brand. 2019/20 priorities: • Enhancements to Grosvenor One customer sign up and ot
Slide 31: 2. Building digital capability and scale
2. Building digital capability and scale 2018/19 activity: • Ongoing development of the YoBingo.es offer; • Development of YoCasino.es and YoBingo.pt; • Successful launch of new CMS for Grosvenor digital customers; • Go live of a new enhanced buy in and other bonuses for Mecca and Grosvenor; • Plans
Slide 32: 2. Building digital capability and scale - continued
2. Building digital capability and scale - continued 2019/20 priorities: • Investment into and development of Grosvenor’s sportsbook offer; • Develop a suite of proprietary games; • Launch of a Grosvenor daily retention game; • Continue with enhancements to customer user and payment journeys; • Auto
Slide 33: 3. Developing our venues
3. Developing our venues 2018/19 activity: • Refresh completed at Grosvenor’s flagship Victoria casino in London with improvements to the electronic product offer and VIP facilities; • Following the appointment of a new VIP team, focus on developing existing and acquiring new VIP customers; • Refurb
Slide 34: 3. Developing our venues - continued
3. Developing our venues - continued 2019/20 priorities: • Open a new casino concept at our Brighton casino; • Continue to upgrade casino slots estate across all venues; • Investment in a new outdoor customer facility at the Victoria casino incorporating live gaming; • Accelerated programme of devel
Slide 35: 4. Consistently improve our customer experience through innovation
4. Consistently improve our customer experience through innovation 2018/19 activity: • Home delivery trials of food and drink from our London casinos through a third-party partnership taking advantage of quieter periods in our venues’ kitchens; and • Self-service ticket-in ticket-out (‘TiTo’) cash t
Slide 36: 5. Be committed to safe and fair gaming
5. Be committed to safe and fair gaming 2018/19 activity: • Began a trial in five casinos of using algorithms designed and built by Focal Research to help us detect potentially at-risk behaviour among slot machine players; • Established a dedicated safer gambling team within our Sheffield Customer S
Slide 37: 5. Be committed to safe and fair gaming - continued
5. Be committed to safe and fair gaming - continued 2019/20 priorities: • Better target our customer interactions with those most at risk; • Extend the Focal Research trial to include electronic roulette play and roll-out across the Grosvenor estate; • Reduce our reliance on less sophisticated syste
Slide 38: 6. Within an environment which enables our colleagues to develop
6. Within an environment which enables our colleagues to develop, be creative and deliver exceptional service 2018/19 activity: • Revisited Rank’s strategy and culture statements to ensure they are still relevant and appropriate in light of Rank’s new ambition; • Reviewed and created new communicati
Slide 39: Group datasheet
Group datasheet FY H1 FY H1 FY H1 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 Revenue (£m) 746.5 374.4 741.1 379.6 755.1 378.6 - YOY growth 1% (1)% (2)% 0% 0% 1% Operating profit (£m) 72.5 30.3 77.0 41.7 83.5 36.6 - YOY growth (6)% (27)% (8)% 14% 1% (9)% Operating margin (%) 9.7 8.1 10.4 11.0 11
Slide 40: Grosvenor Venues datasheet
Grosvenor Venues datasheet FY H1 FY H1 FY H1 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 Casino licences: London 9 9 9 9 9 9 Provinces 55 54 54 54 54 54 Total 64 63 63 63 63 63 Non-trading licences 9 10 10 12 12 12 Revenue (£m) 353.2 181.4 362.5 191.2 382.2 193.6 Operating profit (£m) 44.9 19.4
Slide 41: Mecca Venues datasheet
Mecca Venues datasheet FY H1 FY H1 FY H1 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 Venues 82 82 85 85 85 85 Revenue (£m) 202.1 100.0 208.1 104.1 213.6 108.0 Operating profit (£m) 28.6 11.4 28.6 12.7 29.9 13.3 Operating margin (%) 14.2 11.4 13.7 12.2 14.0 12.3 EBITDA (£m) 39.1 16.4 40.2 18.6 41
Slide 42: International venues datasheet
International venues datasheet FY H1 FY H1 FY H1 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 Revenue (£m) 44.9 22.6 45.8 23.5 47.8 24.6 Operating profit (£m) 9.3 4.1 8.8 4.4 8.3 4.2 Operating margin (%) 20.7 18.1 19.2 18.7 17.4 17.1 EBITDA (£m) 12.0 5.5 11.5 5.8 11.1 5.7 Visits (000s) 2,103 1,06
Slide 43: Digital datasheet
Digital datasheet FY H1 FY H1 FY H1 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 NGR (£m) 118.5 57.3 96.7 47.3 88.5 41.9 Operating profit (£m) 20.7 11.0 20.0 10.4 22.2 7.1 Operating margin (%) 14.1 15.6 16.0 17.1 19.9 13.5 EBITDA (£m) 29.5 14.8 25.0 12.6 27.3 9.9 43 The Rank Group Plc Preliminary
Slide 44: LFL revenue reconciliation 2018/19
LFL revenue reconciliation 2018/19 Grosvenor Mecca International venues venues venues Digital Total LFL revenue (GGR) 353.0 199.9 44.9 131.7 729.5 Add: Luda - 0.8 - - 0.8 Add: Grosvenor closures 0.2 - - - 0.2 Add: Mecca closures - 1.4 - - 1.4 Add: YoBingo - - - 14.6 14.6 Total revenue (GGR) 353.2 20
Slide 45: CGR to NGR 2018/19 baseline
CGR to NGR 2018/19 baseline Grosvenor Mecca International venues venues venues Digital Total Revenue (GGR) 353.2 202.1 44.9 146.3 746.5 Less: customer incentives (15.0) (8.6) - (27.8) (51.4) Net gaming revenue (NGR) 338.2 193.5 44.9 118.5 695.1 Less NGR closed clubs 2018/19 (0.2) (2.1) - - (2.3) Les
Slide 46: 2018/19 Rebased Operating Profit
2018/19 Rebased Operating Profit Grosvenor Mecca International venues venues venues Digital Head Office Total Operating profit 44.9 28.6 9.3 20.7 (31.0) 72.5 IFRS 16 Rent add back 18.5 18.0 1.0 0.5 2.0 40.0 IFRS 16 Deprecation increase (13.5) (14.5) (1.0) (0.5) (1.5) (31.0) Subtotal - impact of IFRS
Slide 47: IFRS 16 Transition Balance Sheet Impact (initial analysis)
IFRS 16 Transition Balance Sheet Impact (initial analysis) £m Assets Non-current assets Property, plant and equipment 185.0 Recognise Right Of Use Asset (discounted future rent payments at lease start less depreciation to date) Other receivables 5.0 Recognise Finance Sublease Asset (discounted futur
Slide 48: IFRS 16 Year 1 Income Statement Impact (initial analysis)
IFRS 16 Year 1 Income Statement Impact (initial analysis) Grosvenor Mecca Internationa Central Venues Venues Digital l Venues Costs Total £m £m £m £m £m £m Revenue - - - - - - Cost of sales - - - - - - Gross profit - - - - - - Other operating costs 5.0 3.5 - - 0.5 9.0 Reduction in rent cost offset b
Slide 49: IFRS 16 Year 1 Cash Flow Statement Presentation Impact
IFRS 16 Year 1 Cash Flow Statement Presentation Impact (initial analysis) £m Cash flows from operating activities Cash generated from operations 44.0 Reclass Rent Payments in the year to Finance Lease Principal Payments Net cash from operating activities 44.0 Cash flows from investing activities - N