Rank Group Plc · LSE:RNK
Rank — The Rank Group — H1 2011 Earnings Presentation
34 slides from Rank's earnings presentation, June 2011
Slide 1: Half-year financial results 2011
Half-year financial results 2011 1
Slide 2: Agenda
Agenda Introduction Ian Burke, chairman and chief executive Review of financial results Paddy Gallagher, finance director Strategy update Ian Burke 2
Slide 3: Paddy Gallagher, finance director
Paddy Gallagher, finance director 3
Slide 4: Financial headlines
Financial headlines • Gross revenue*: £294.0m (2010 H1: £281.1m) • EBITDA**: £47.8m (2010 H1: £43.1m) • Operating profit**: £29.5m (2010 H1: £28.6m) • Adjusted profit before tax**: £26.3m (2010 H1: £25.1m) • Adjusted earnings per share**: 4.6p (2010 H1: 4.6p) • Operating cash flow: £23.5m (2010 H1:
Slide 5: Revenue & operating profit
Revenue & operating profit Revenue* Operating profit** 2011 2010 2011 2010 £m H1 H1 H1 H1 Grosvenor Casinos 123.4 116.6 20.2 17.6 Mecca Bingo 121.7 118.7 16.2 16.0 Top Rank España 14.9 18.4 0.5 3.0 Rank Interactive 34.0 27.4 2.7 2.3 Central costs (10.1) (10.3) Group 294.0 281.1 29.5 28.6 * before ad
Slide 6: Operating costs
Operating costs Online Offline £m 2011 H1 2010 H1 Change 2011 H1 2010 H1 Change Employment 5.5 4.2 31.0% 90.2 88.6 1.8% Taxes & duties 0.7 0.1 600% 45.8 45.9 (0.2)% Direct costs 9.2 7.6 21.1% 18.4 18.1 1.7% Property costs 0.4 0.4 - 24.1 22.4 7.6% Marketing 7.7 6.0 28.3% 9.1 9.1 - Depreciation 2.2 1.
Slide 7: Grosvenor Casinos
Grosvenor Casinos Revenue* Operating profit** 2011 2010 2011 2010 £m H1 H1 H1 H1 London 46.6 45.4 9.0 8.3 Provinces 68.5 63.3 11.1 8.7 Belgium 8.3 7.9 0.1 0.6 123.4 116.6 20.2 17.6 KPIs Visits (000s)*** 2,952 2,624 Spend per visit (£) 41.80 44.41 • >1 million customers (MAT) • 12.5% growth in custom
Slide 8: Mecca Bingo
Mecca Bingo 2011 2010 £m H1 H1 Revenue* 121.7 118.7 Operating profit** 16.2 16.0 KPIs Visits (000s) 7,489 7,521 Spend per visit (£) 16.32 15.78 • Continued growth in active customers • 9.7% growth in spend per visit from food and drinks * before adjustment for free bets, promotions and customer bonu
Slide 9: Top Rank España
Top Rank España 2011 2010 £m H1 H1 Revenue 14.9 18.4 Operating profit* 0.5 3.0 KPIs Visits (000s) 1,010 1,142 Spend per visit (£) 14.75 16.11 • Effect of full smoking ban and challenging economic situation • Management action to control costs * before exceptional items 9
Slide 10: Rank Interactive
Rank Interactive 2011 2010 £m H1 H1 Bingo & games 25.9 19.8 Casino 3.0 3.0 Poker 0.7 1.0 Sportsbook 4.4 3.6 Revenue 34.0 27.4 Operating profit 2.7 2.3 • Growth from meccabingo.com driven by strong increase in referrals from Mecca Bingo clubs • Investment in brands to promote long term profitability
Slide 11: Statutory profit & loss
Statutory profit & loss 2011 2010 £m H1 H1 Adjusted profit before tax 26.3 25.1 Other 0.1 (0.8) Profit before tax and exceptional items 26.4 24.3 Exceptional items 148.9 43.1 Profit before tax 175.3 67.4 Taxation (39.5) (18.8) Discontinued operations 3.6 1.8 Profit for the period 139.4 50.4 11
Slide 12: Cash flow
Cash flow 2011 2010 £m H1 H1 Continuing operations Cash inflow from operations 44.8 40.4 Capital expenditure (21.9) (27.1) Fixed assets disposals 0.6 - Operating cash inflow 23.5 13.3 Acquisitions and disposals (0.1) (0.1) Receipts - exceptional costs and provisions 77.7 37.4 101.1 50.6 Dividends (6
Slide 13: Capital investment to support growth
Capital investment to support growth 2011 2010 2011F £m H1 H1 FY Grosvenor Casinos 8.6 13.5 24-27 Mecca Bingo 7.3 9.5 15-17 Top Rank España 1.8 1.1 4 Rank Interactive 3.7 2.3 6 Other 0.5 0.7 1 Total 21.9 27.1 50 - 55 • Continued modernisation of casino estate • Targeted upgrades to Mecca Bingo clubs
Slide 14: Strengthened balance sheet
Strengthened balance sheet • Substantial strengthening due Financial position (£m) to operational cashflow and VAT 2007-2011, Net cash/(Net debt) receipts 37.2 FY 07 H1 08 FY 08 H1 09 FY 09 H1 10 FY 10 • Strong position for substantial H1 11 (133.4) (123.4) investment in brands (186.8) (208.1) • Maj
Slide 15: Financial strength
Financial strength • Target dividend cover of 3.0x Known Facts on VAT Proceeds • Certainty on VAT receipts imminent • Number of successful hearings – final ECJ ruling expected late 2011 (including VAT Tribunal and High Court): 5 • Additional VAT claims pending – at least equivalent to proceeds • Tot
Slide 16: Current trading
Current trading • Like-for-like growth in the four week trading period • UK brands performing well • Continued growth in active customers • Trading in Spain continues to be negatively affected by the smoking ban • Belgian smoking ban effective from 1 July • We remain on track to deliver full-year re
Slide 17: Ian Burke
Rank Group lan Burke 17
Slide 18: Group strategy
Group strategy To achieve sustainable growth in earnings per share by stimulating and meeting growing demand for gaming-based entertainment • Gaming-based entertainment – community & competitive • Multi-channel distribution to leverage brands and scale – trusted brands aimed at distinct customer seg
Slide 19: Brands strategy
Brands strategy Systematic use of data and customer feedback • To inspire service and product improvements – gaming & entertainment – food & drink Capital investment • To extend the reach and broaden appeal of our venues – Grosvenor Casinos – continued roll-out of G Casino format – Mecca Bingo - est
Slide 20: Engagement & insight
Engagement & insight • What is happening? - data collection – single customer relationship management system – Play Points rewards now in 20 casinos and eight bingo clubs – 17% of Grosvenor Casino revenue tracked • Why is this happening? – the insight – use a variety of means of gaining insight incl
Slide 21: Gaming
Gaming • Improvements in electronic gaming Gaming revenue (£m) – completion of Mecca Max rollout 2009-2011 – gaming terminals – broader range of online games 261.9 251.7 • Mecca’s B3 machines offered with higher stakes and increased numbers 269.3 245.5 258.3 2009 2010 2011 Second half revenue First
Slide 22: Food & drink & entertainment
Food & drink & entertainment • Table service extended from 63 to Group food & drink 75 Mecca Bingo clubs revenue (£m) 2009-2011 • Continued menu improvements across Grosvenor Casinos and Mecca Bingo 24.8 22.3 24.7 20.5 22.8 2009 2010 2011 Second half revenue First half revenue 22
Slide 23: Grosvenor Casinos - capital investment
Grosvenor Casinos - capital investment Development UK casino venues by format 45 2011 2006-2015 • 3 G Casino Conversions • 1 new G format casino 30 2011 onwards 35 35 34 • Target 30 G Casinos by FY 2015 33 32 32 17 • Estate to grow from 35 to 45 casinos 13 10 • Estimated capital cost: £70m + 6 1 4 2
Slide 24: Mecca Bingo - capital investment
Mecca Bingo - capital investment Full House Destination • Positive customer response − strong uplift in customers, customer visits and revenue • Capital and operating costs too high – improved service model to lower operating costs – review of build costs in 2011 • New Full House club later this yea
Slide 25: Brand strength
Brand strength • Strong brands becoming increasingly significant assets • Mecca brand growth 6.6% – driven by online growth • Grosvenor brand growth 5.8% • Cross channel operational integration • Further opportunity for cross sell between channels 25
Slide 26: Changing regulatory and fiscal environment
Changing regulatory and fiscal environment Regulation • Improved machine entitlements for bingo clubs from H2 2011 • DCMS plans to introduce secondary licensing for offshore online gaming • Select Committee to review Gambling Act in H2 2011 • Regulation of online gaming in Spain from 2012 Taxation •
Slide 27: Summary
Summary • Confidence in our future • Mecca and Grosvenor brands in a good position to benefit from multi-channel gaming • Financial strength to modernise existing businesses and grow through investments 27
Slide 28: Appendices
/Rank Group Appendices 28
Slide 29: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet H1 2011 FY 2010 H1 2010 FY 2009 H1 2009 Casino licenses London 5 5 5 5 5 Provinces 32 31 30 30 28 Belgium 2 2 2 2 2 Total 39 38 37 37 35 Unused licences 10 11 12 12 13 Revenue (£m) 123.4 238.6 116.6 220.0 106.7 EBIT (£m) 20.2 36.0 17.6 30.9 14.7 Operating margin 16.4% 15
Slide 30: Mecca Bingo data sheet
Mecca Bingo data sheet H1 2011 FY 2010 H1 2010 FY 2009 H1 2009 Clubs 100 103 103 103 103 Revenue (£m) 121.7 234.5 118.7 233.0 116.3 EBIT (£m) 16.2 29.7 16.0 32.3 19.0 Operating margin 13.3% 12.7% 13.5% 13.9% 16.3% Customers MAT (000s) 924 911 895* 881 912 Customer visits (000s) 7,489 14,688 7,521 14
Slide 31: Top Rank España data sheet
Top Rank España data sheet H1 2011 FY 2010 H1 2010 FY 2009 H1 2009 Clubs 11 11 11 11 11 Revenue (£m) 14.9 37.0 18.4 36.2 18.1 EBIT (£m) 0.5 6.8 3.0 5.6 2.7 Operating margin 3.4% 18.4% 16.3% 15.5% 14.9% Customers MAT(000s) 319 331 341 314 316 Customer visits (000s) 1,010 2,339 1,142 2,310 1,130 Spend
Slide 32: Rank Interactive data sheet
Rank Interactive data sheet H1 2011 FY 2010 H1 2010 FY 2009 H1 2009 Bingo/games 25.9 42.0 19.8 34.3 16.4 Casino 3.0 5.7 3.0 5.1 2.4 Poker 0.7 1.8 1.0 2.9 1.7 Sportsbook 4.4 8.2 3.6 8.5 4.4 Revenue (£m) 34.0 57.7 27.4 50.8 24.9 EBIT (£m) 2.7 7.9 2.3 7.5 3.0 Operating margin 7.9% 13.7% 8.4% 14.8% 12.0
Slide 33: Casinos market supply (July 2011)
Casinos market supply (July 2011) Operating Non-operating Total Operator clubs licences Licences Genting Stanley 46 9 55 Grosvenor Casinos 37 10 47 Gala 28 3 31 Caesar’s / London Clubs 10 0 10 A&S Leisure 6 0 6 Aspers / Aspinall’s 4 1 5 Club 36 3 0 3 Clockfair 2 0 2 Guoco 1 5 6 Independents 13 9 22
Slide 34: Bingo clubs market supply (July 2011)
Bingo clubs market supply (July 2011) Operator Clubs* Gala Bingo 144 Mecca Bingo 100 Top Ten Bingo 22 Carlton Clubs 14 Buckingham Bingo 8 Others 191 Total 479 * Excludes the conversion of adult gaming centres to bingo clubs 34