Slide 1: 2007 preliminary results
2007 preliminary results 29 February 2008
Slide 2: Peter Johnson, chairman
(x2 Rank Group Peter Johnson chairman
Slide 3: Agenda
Agenda • Preliminary results – Peter Gill • Operational review and strategic priorities – Ian Burke
Slide 4: Highlights 2007
Highlights 2007 • Hard Rock sold • £353m returned to shareholders • Creation of a focused gaming business • Action to address difficult external conditions • Significant cost savings achieved across continuing Group • Assets & liabilities of final salary pension plan transferred
Slide 5: Peter Gill, finance director
(x2 Rank Group Peter Gill finance director
Slide 6: Accounting Presentation
Accounting Presentation 2006 results restated • Exceptional items • Pension scheme accounting
Slide 7: Financial headlines
Financial headlines continuing operations • Revenue £534.4m (2006: £549.6m) • Operating profit* £68.3m (2006: £73.2m) • Adjusted profit before tax £46.2m (2006: £40.2m) • Adjusted earnings per share 7.4p (2006: 4.6p) • Operating cash in flow £83.9m (2006: £67.2m) • Net debt £317m (£447m at 31 Decemb
Slide 8: Adjusted profit
Adjusted profit* 2007 2006 £m (restated) Revenue 534.4 549.6 Operating profit 68.3 73.2 Interest (22.1) (33.0) Profit before tax 46.2 40.2 Effective tax rate 30.9% 33.3% Adjusted earnings per share 7.4p 4.6p * Profits and earnings before discontinued operations, exceptional items, unwinding of disco
Slide 9: Revenue & operating profit
Revenue & operating profit Revenue Operating profit * £m 2007 2006 2007 2006 (restated) Bingo 272.8 292.8 52.9 72.5 Casinos 209.5 217.6 29.9 36.3 Interactive 52.1 39.2 10.9 7.8 Shared services (18.5) (26.0) Central costs (6.9) (17.4) 534.4 549.6 68.3 73.2 * Before exceptional items
Slide 10: Bingo
Bingo Revenue Operating profit * £m 2007 2006 2007 2006 (restated) Mecca Bingo 240.5 261.7 43.6 63.6 Top Rank Espana 32.3 31.1 9.3 8.9 272.8 292.8 52.9 72.5 Mecca Bingo (comparable clubs†) 2007 % change Admissions (‘000) 16,809 (6.4) Spend per head (£) 13.76 2.3 Like-for-like revenue† (4.3) * Before
Slide 11: Casinos
Casinos Revenue Operating profit * £m 2007 2006 2007 2006 (restated) London 88.0 94.1 14.7 14.7 Provincial 108.4 110.3 14.3 20.2 Belgium 13.1 13.2 0.9 1.4 209.5 217.6 29.9 36.3 Grosvenor (comparable clubs†) 2007 % growth Admissions (‘000) 4,227 (1.2) Spend per head (£) 46.19 0.6 Like-for-like revenu
Slide 12: Interactive
Interactive Blue Square Revenue £m 2007 2006 Gaming 36.9 23.0 Sportsbook 15.2 16.2 52.1 39.2 Operating profit 10.9 7.8 2007 2006 Active customers (000s) 321 285
Slide 13: Statutory profit & loss
Statutory profit & loss £m 2007 2006 (restated) Adjusted profit before tax 46.2 40.2 Net return on defined benefit pension asset 10.5 6.7 Amortisation of equity component of convertible bond (3.6) (3.0) Unwinding of discount in disposal provisions (1.3) - Other financial gains 0.5 10.0 Profit before
Slide 14: Exceptional items
Exceptional items £m 2007 2006 (restated) Exceptional items within continuing operations Impairment of clubs (33.9) (8.6) Provision for onerous leases (27.7) - Net profit on sale of property 16.4 19.1 Profit on sale and leaseback - 55.3 Loss of sale on investment - (12.1) Financing charge - (14.7) P
Slide 15: Discontinued operations
Discontinued operations £m Operating profit Exceptional items Total 2007 2006 2007 2006 2007 2006 Hard Rock 2.1 40.4 352.7 - 354.8 40.4 US Holidays - 2.1 - (20.0) - (17.9) Deluxe Media - (13.9) - - - (13.9) Deluxe Film - 1.5 - - - 1.5 2.1 30.1 352.7 (20.0) 354.8 10.1 Loss from associates (0.3) (1.2)
Slide 16: Group cash flow
Group cash flow £m 2007 2006 Continuing Operations Cash inflow from operating activities 101.8 107.3 Capital expenditure (47.3) (50.2) Fixed assets disposals 29.4 10.1 Operating cash inflow 83.9 67.2 Acquisitions and disposals 495.8 629.9 Payments - exceptional costs and provisions (15.8) (37.0) 563
Slide 17: Borrowing facilities
Borrowing facilities Year £m Bank facilities 2012 400 Yankee bond 2008 50 Yankee bond 2018 7 Convertible loan stock 2009 168 625 Net debt at December 2007 317
Slide 18: Ian Burke, chief executive
(x2 Rank Group lan Burke chief executive
Slide 19: The Rank Group strategic focus
The Rank Group strategic focus • Providing a range of products geared to different segments of gaming and betting market • Blend of everyday and occasional gaming-based leisure experiences • Distribution via leisure retail units, internet, mobile phone and interactive TV • On line UK focus but with
Slide 20: The market opportunity
The market opportunity • Gambling - participation % of adult population steady/ spend and supply 16 1999 patterns shifting 14 2007 12 • Bingo - participation 10 steady/ supply falling 8 6 • Casinos - participation 4 growing/ supply growth 2 restricted 0 Bingo Casino Slot Online • Interactive - parti
Slide 21: The market opportunity
The market opportunity • Total value of UK market £bn expected to grow at 3.4% 12 CAGR 10 • Bingo - revenue decline 8 forecast 6 • Casinos - revenue growth 4 forecast 2 • Interactive - revenue 0 2002 2004 2006 2008 2010 growth forecast Source: Keynote research 2007
Slide 22: Government Policies
Government Policies • Gambling Act 2005 implemented – loss of Section 21 gaming terminals – 2005 Act Casinos • Taxation – Bingo double taxation – £4.6m increase in casino gaming duty • Smoking bans in Scotland, Wales & England • Gambling Sector requirements of Government
Slide 23: The Rank Group: The business of gaming
The Rank Group The business of gaming Gender No. active Average Experience customers customer M F (000’s) visits/year net spend (£) Bingo 25 75 999 17 13.76 UK customers; everyday (bingo/games, social gaming slots) Casino 70 30 803 6 45.03 UK & international (casino, customers; social poker, slots)
Slide 24: 2007 in perspective
2007 in perspective • Strong performance in first 8 months – Like-for-like revenue growth across Group – Operating profit growth • Trading conditions deteriorated during last 4 month – 1 July - smoking ban introduced to England – 1 September - Gambling Act prohibits Section 21 terminals. Rank remove
Slide 25: 2007 in perspective
2007 in perspective admissions and revenue Mecca Bingo Grosvenor Casinos % % 5 5 1 Weeks 36-52 0 2 Weeks 36-52 0 0 -4 Weeks 1-35 -6 -7 -5 Weeks 1-35 -5 -15 -17 -10 -10 -15 -15 -20 -20 admissions revenue All numbers are like-for-like
Slide 26: Strategic priorities
Strategic priorities Stabilise Group Grow customer visits • Adapt businesses to • Improve product & protect revenues service • Tighten cost control • Attract and reward customers • Selective investment & deferral of non- • Extend reach through essential capital retail and interactive projects distri
Slide 27: Stabilise Group: protect revenue
Stabilise Group protect revenue Mecca • Smoking shelters erected at more than 80 clubs • 41 licensed for gaming; 39 operational • £1.4k per club per week incremental revenue generation Grosvenor • Smoking shelters erected at 30 clubs • Actions taken to recover win margin
Slide 28: Stabilise Group: control costs
Stabilise Group control costs • £15m additional cost savings identified – centralisation of marketing in Mecca Bingo – deferral of annual pay reviews – purchasing operating efficiencies – limited redundancies
Slide 29: Stabilise Group: selective capital deployment
Stabilise Group selective capital deployment • Forecast 2008 capital expenditure reduced from £50m to £20m – selective deferrals of major capital expenditure projects – clubs portfolio generally well maintained – disciplined deployment of maintenance capital
Slide 30: Grow customer visits
Grow customer visits • Improve product offer and service • Reward customer loyalty and engage with new customers • Extend reach through growth of retail and interactive distribution
Slide 31: Product development
Product development Gaming • New technologies – Electronic bingo – Video bingo – Server based gaming
Slide 32: Product development
Product development Gaming • New games – Bingo variants – Gaming machines • quality review of estate – Sports betting • international product development
Slide 33: Product development
Product development Non-gaming • Food & drink – Better menus – Better service skills – New EPOS systems – New approach to convenience food
Slide 34: Reward loyal customers
Reward loyal customers • Recognition through customer service • Rewards systems – Casino system in place in H1 – Mecca Bingo and Blue Square systems to be developed in H2
Slide 35: Engage with new customers
Engage with new customers • Direct marketing • Referral programmes • New member sales managers • Sponsorship and advertising – Blue Square’s calendar of targeted sponsorships – Casino advertising
Slide 36: Portfolio development: Mecca Bingo
Portfolio development Mecca Bingo Clubs in GB 750 • Portfolio development 700 • 11 club closures in 2007 650 600 • 1 club opening in 2008 550 • Small number of clubs loss- 500 making before rents/rates 450 400 • No decisions on further club 350 closures until tax & trading 300 position clarified 200
Slide 37: Portfolio development: Grosvenor & G Casinos
Portfolio development Grosvenor & G Casinos Casinos in GB 160 • Portfolio development 140 • 32 casinos operating (UK)* 120 • 13 non-operating licences 100 80 • 5 new casinos by 2012 60 • Opportunities for further 40 relocations 20 • Selective refurbishment 0 2002 2003 2004 2005 2006 2007 2008 and ex
Slide 38: Portfolio development: Blue Square
Portfolio development Blue Square • UK – Proprietary sites – Distribution agreements • Virgin Media • Probability Games • International – Proprietary sites • bingouniversal.com(Spain) – Distribution agreements • 888.com
Slide 39: Current trading and outlook
Current trading and outlook • Mecca Bingo – modest improvement since Q4 • Grosvenor Casinos - trading in line with Q4 • Blue Square – continuing growth • Priority to stabilise performance in difficult trading conditions • Retain focus on long term opportunities
Slide 40: Summary
Summary • Programme of disposals and restructuring complete • Vigorous action to combat external headwinds • Aggressive cost cutting actions taken, capital expenditure deferred, dividend cancelled • Revenue growth through delivery of improved customer experience and value
Slide 41: Questions & Answers
Questions & Answers
Slide 42: Appendix
Appendix
Slide 43: Rank Group: the year ahead
Rank Group the year ahead • 12 March HM Government Budget 2008 • 7 May AGM & interim management statement • 31 July interim results • October interim management statement
Slide 44: Capital expenditure
Capital expenditure £m FY 2007 FY2008F Bingo 24.3 7-10 Casino 17.1 6-9 Interactive 4.5 4-6 Other 1.4 1-2 Total 47.3 20-25
Slide 45: Mecca Bingo data sheet
Mecca Bingo data sheet FY H1 FY H1 FY H1 FY H1 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 102 103 113 117 117 117 120 121 Revenue 240.5 132.5 261.7 133.9 264.0 133.9 265.3 133.9 EBIT* 43.6 31.5 63.6 31.8 77.9 38.5 79.6 40.3 Operating margin 18% 24% 24% 24% 30% 29% 30% 30% Active membership (milli
Slide 46: Top Rank España data sheet
Top Rank España data sheet FY H1 FY H1 FY H1 FY H1 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 11 11 11 11 11 11 11 10 Revenue 32.3 15.8 31.1 15.2 31.6 15.4 27.3 13.0 EBIT* 9.3 4.6 8.9 4.2 10.0 4.7 7.7 3.4 Operating margin 29% 29% 29% 28% 32% 31% 28% 26%
Slide 47: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet FY H1 FY H1 FY H1 FY H1 2007 2007 2006 2006 2005 2005 2004 2004 London 5 5 5 6 6 6 6 6 Provincial 27 28 28 30 30 30 30 28 Belgium 2 2 2 2 2 2 2 2 Total 34 35 35 38 38 38 38 36 Revenue (UK) 196.4 104.0 204.4 103.4 195.0 94.3 188.4 88.4 Revenue (Belgium) 13.1 6.1 13.2 6.2
Slide 48: Blue Square data sheet
Blue Square data sheet FY H1 FY H1 FY H1 FY H1 2007 2007 2006 2006 2005 2005 2004 2004 Gaming revenue 36.9 17.2 22.9 10.2 13.1 5.7 9.2 4.3 Sportsbook revenue 15.2 9.0 16.3 8.4 13.2 6.7 16.4 8.9 Revenue (£m) 52.1 26.2 39.2 18.6 26.3 12.4 25.6 13.2 EBIT (£m) 10.9 5.5 7.8 3.1 1.0 0.3 5.0 2.6 Operating