Rank Group Plc · LSE:RNK
Rank — FY2008 Earnings Presentation
46 slides from Rank's earnings presentation, February 2009
Slide 1: Annual results 2008
Annual results 2008 31 July 2008
Slide 2: Peter Johnson, Chairman
Srl ae _ Rank Group Peter J ohnson, Chairman
Slide 3: Agenda
Agenda • Annual results – Paddy Gallagher • Operational review and strategic priorities – Ian Burke
Slide 4: Paddy Gallagher, finance director
Paddy Gallagher, finance director
Slide 5: Themes
Themes • 2008 vs 2007 – important considerations – Smoking ban – Gambling Act – section 21 machine removal – VAT on interval games • Focus on deleverage – Substantial reduction in net debt – Removal of pension liabilities
Slide 6: Financial headlines
Financial headlines • Revenue: £522.2m (2007: £534.4m) • Operating profit: £60.3m (2007: £68.3m) • Adjusted profit before tax: £40.5m (2007: £46.2m) • Adjusted EPS: 7.3p (2007: 7.4p) • Operating cash flow: £67.6m (2007: £83.9m) • Net debt: £227m (£317m at 31 December 2007)
Slide 7: Adjusted profit
Adjusted profit* £m 2008 2007 Revenue 522.2 534.4 Operating profit 60.3 68.3 Interest (19.8) (22.1) Profit before tax 40.5 46.2 Effective tax rate 29.9% 30.9% Adjusted earnings per share 7.3p 7.4p * Profits and earnings before discontinued operations, exceptional items, unwinding of discount in disp
Slide 8: Revenue & operating profit
Revenue & operating profit Revenue Operating profit £m 2008 2007 2008 2007 Mecca Bingo 227.6 240.5 41.8 43.6 Top Rank Espana 35.8 32.3 6.9 9.3 Casinos 206.2 209.5 29.5 29.9 Interactive 52.6 52.1 11.4 10.9 Shared services (20.8) (18.5) Other costs (8.5) (6.9) 522.2 534.4 60.3 68.3
Slide 9: Context – operating profit
Context – operating profit 60 £m H1 2007 50 H2 2007 H1 2008 40 H2 2008 30 20 10 0 Mecca Top Rank Grosvenor Rank Group Bingo Espana Casinos Interactive
Slide 10: Mecca Bingo
Mecca Bingo 2008 2007 Revenue (£m) 227.6 240.5 Operating profit (£m) 41.8 43.6 KPIs (comparable clubs) Admissions (000s) 15,087 16,984 Spend per visit (£) 14.79 13.82 • VAT benefit on interval games • Spend per visit growth in food & drink and gaming machines
Slide 11: Top Rank Espana
Top Rank Espana 2008 2007 Revenue (£m) 35.8 32.3 Operating profit (£m) 6.9 9.3 KPIs (comparable clubs) Admissions (000s) 2,410 2,458 Spend per visit (£) 14.85 13.13 • 5.0% revenue decline in Euros • High unemployment; rising business costs • Gaining market share
Slide 12: Grosvenor Casinos
Grosvenor Casinos Revenue Operating profit £m 2008 2007 2008 2007 London 88.5 88.0 14.3 14.7 Provincial 101.8 108.4 13.5 14.3 Belgium 15.9 13.1 1.7 0.9 206.2 209.5 29.5 29.9 KPIs (comparable clubs) 2008 2007 Admissions (000s) 3,928 4,436 Spend per visit (£) 49.26 44.62 • Lower promotional spend • Ma
Slide 13: Rank Interactive
Rank Interactive Revenue £m 2008 2007 Gaming 39.0 36.9 Sportsbook 13.6 15.2 52.6 52.1 Operating profit 11.4 10.9 KPIs Active customers (000s) 327 321 • Strong performance in meccabingo.com
Slide 14: Statutory profit & loss
Statutory profit & loss £m 2008 2007 Adjusted profit before tax 40.5 46.2 Net return on defined benefit pension asset 3.6 10.5 Amortisation of equity component of convertible bond (3.6) (3.6) Other* (2.3) (0.8) Profit before tax and exceptional items 38.2 52.3 Exceptional items (64.3) (45.2) (Loss)
Slide 15: Exceptional items
Exceptional items £m 2008 2007 Exceptional items within continuing operations VAT reclaim on interval games (net) 42.8 - Loss on transfer of defined benefit pension asset (99.2) - Impairment charge (14.5) (33.9) Provision for onerous leases (1.7) (27.7) Net profit on sale of property 4.1 16.4 Other
Slide 16: Cash flow
Cash flow £m 2008 2007 Continuing operations Cash inflow from operations 90.2 101.8 Capital expenditure (28.2) (47.3) Fixed assets disposals 5.6 29.4 Operating cash inflow 67.6 83.9 Acquisitions and disposals (3.8) 495.8 Receipt (payments) - exceptional costs and provisions 32.3 (15.8) 96.1 563.9 In
Slide 17: Financing
Financing • Convertible bond $14m Yankee Bond January 2018 redeemed in January 2009 £250m Revolver • £400m syndicated banking April 2012 facilities in place • Net debt of £226.5m £150m at 31 December 2008 Term Loan April 2012 • Further deleveraging targeted in 2009
Slide 18: Ian Burke, chief executive
Srl ae _ Rank Group lan Burke, chief executive
Slide 19: Review of 2008
Review of 2008 • Revenue stabilised • Significant cost savings achieved • Substantial reduction in net debt
Slide 20: Focus for 2009
Focus for 2009 • Focus on value for customers • Tight control of costs and cash • Motivated management teams
Slide 21: Strengthen management team
Strengthen management team Name Position Background Paddy Gallagher finance director IT Phil Urban MD, Grosvenor Casinos budget hotels & pubs Mark Jones MD, Rank Interactive online travel Julian Barker director of strategy telecommunications Frances Bingham company secretary health & fitness clubs
Slide 22: Strategic priorities
Strategic priorities Becoming the UK’s leading gaming-based leisure business . . . • Deepen customer insight to drive product and service improvement • Selective investment to strengthen position in UK and assess longer term growth opportunities overseas • Active engagement to shape the regulatory e
Slide 23: Deepen customer insight
Deepen customer insight • Improved knowledge of customer spending • Enhanced management information systems • Measurement systems implemented
Slide 24: Deepen customer insight
Deepen customer insight Customer spending • Grosvenor Casinos – Play Points • Mecca Bingo – Lucky Swipes • Understanding spend patterns • Customer benefit – Earn as you play (tables, electronic gaming, F&B) – Redeem for gifts & prize draws – Targeted offers
Slide 25: Deepen customer insight
Deepen customer insight Management systems • Playsafe – Replace legacy system – Data guides product and service improvements – Reduces downtime and shrinkage • EPOS replacement – Data guides product and service improvements – Stock days and wastage reduction
Slide 26: Deepen customer insight
Deepen customer insight Measuring our progress • Quantitative and qualitative research • Single methodology across UK businesses • Net promoter score – Mecca Bingo – Grosvenor Casinos – Rank Interactive • >2,500 active customers canvassed every month
Slide 27: Grosvenor Casinos
Grosvenor Casinos Market opportunity • Low penetration levels – 4% of UK adults • Catalysts for growth – Investment – Service – Technology – Regulations • Restricted supply – <160 casinos by 2012
Slide 28: Grosvenor Casinos
Grosvenor Casinos G Casino • First G Casino opened Manchester, June 2006 – 20,000 sq ft + sites – Expansion of electronic gaming content – Expansion of non-gaming amenity Average Weekly Admissions – Female friendly 3,500 3,000 • Aberdeen becomes sixth G 2,500 Casino, October 2008 2,000 1,500 • Two n
Slide 29: Grosvenor Casinos
Grosvenor Casinos Casino development Investment priorities (non-operating licences) G Casino • Non-operating licences in 13 Other format local markets Dundee • G Casino format suitable for 7 of new licences Edinburgh Stockton-on-Tees • 20% + reduction in G Casino Scarborough Leeds capital cost Manch
Slide 30: Mecca Bingo
Mecca Bingo Market opportunity • Everyday social gaming – 7% penetration among UK adults – c.50 million customer visits per year across industry – Major out of home leisure activity for many women • Catalysts for regeneration – Investment – Service – Technology – Regulation • Reducing supply
Slide 31: Mecca Bingo
Mecca Bingo Product and Service Improvements • Product improvement – Electronic bingo terminals – Server-based gaming – £1/£70 Cat C machines Jackpot Machines in Mecca Bingo – Food and beverage 2006 - 2008 1,400 • Product expansion 1,200 1,000 – B3 increase from 800 February 2009 600 – >90 AGCs 400
Slide 32: Mecca Bingo
Mecca Bingo New club, Beeston • Develop club model incorporating key innovations and improvements – Electronic gaming – Customer zoning – Enhanced service – Improved bar and restaurant
Slide 33: Top Rank Espana
Top Rank Espana Challenging market • Difficult market conditions – High unemployment – High inflation – Low consumer confidence – Low probability of favourable regulatory change • High quality business – 11 clubs – Taking market share • Limited capital expenditure in near term
Slide 34: Rank Interactive
Rank Interactive A change of focus • New MD from December 2008 • Greater focus on supporting online distribution of land-based brands • Assessment of international opportunities for online bingo
Slide 35: Shape regulatory environment
Shape regulatory environment • Programme of active engagement • Gambling Act guides approach • Progress achieved in 2008/9 – Increase in B3 machine allocation for bingo clubs – Cat C stakes and prizes review – SNP & DCMS back calls for end to Double Taxation • Continue to make our case for regulatio
Slide 36: Outlook
Outlook • Steady start to 2009 • Scope for further operational improvement • Cautious on consumer confidence and unemployment • Maintain balance between near term pressures and longer term opportunities
Slide 37: Summary
Summary • Starting 2009 in better shape than 2008 – Stronger management team – Stronger financial position – Improving customer propositions • Clear strategy for group and individual businesses supported by action plan • Positive on longer term outlook for UK gaming market
Slide 38: Appendix
Srl ae _ Rank Group
Slide 39: Current Trading
Current Trading Like-for-like Total Mecca Bingo (3)% (2)% Top Rank Espana 11% 11% Grosvenor Casinos 3% 5% Rank Interactive (10)% (10)% Group 0% 1%
Slide 40: Capital expenditure
Capital expenditure £m 2009 F 2008 Mecca Bingo 15.0 – 16.0 10.8 Top Rank Espana 1.0 – 2.0 2.2 Grosvenor Casinos 16.0 – 17.0 9.9 Blue Square 3.0 – 4.0 4.7 Other 0 – 1.0 0.6 Total 35.0 – 40.0 28.2 2009 figures are based on projections and do not reflect committed capital expenditure. Capital will be c
Slide 41: Mecca Bingo data sheet
Mecca Bingo data sheet FY H1 FY H1 FY H1 FY H1 FY H1 2008 2008 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 102 102 102 103 113 117 117 117 120 121 Revenue 227.6 116.9 240.5 132.5 261.7 133.9 264.0 133.9 265.3 133.9 EBIT 41.8 24.5 43.6 31.5 63.6 31.8 77.9 38.5 79.6 40.3 Operating margin 18% 21% 18%
Slide 42: Top Rank España data sheet
Top Rank España data sheet FY H1 FY H1 FY H1 FY H1 FY H1 2008 2008 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 11 11 11 11 11 11 11 11 11 10 Revenue 35.8 17.7 32.3 15.8 31.1 15.2 31.6 15.4 27.3 13.0 EBIT 6.9 4.1 9.3 4.6 8.9 4.2 10.0 4.7 7.7 3.4 Operating margin 19% 23% 29% 29% 29% 28% 32% 31% 28%
Slide 43: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet FY H1 FY H1 FY H1 FY H1 FY H1 2008 2008 2007 2007 2006 2006 2005 2005 2004 2004 London 5 5 5 5 5 6 6 6 6 6 Provincial 27 27 27 28 28 30 30 30 30 28 Belgium 2 2 2 2 2 2 2 2 2 2 Total 34 34 34 35 35 38 38 38 38 36 Revenue (UK) 190.3 94.5 196.4 104.0 204.4 103.4 195.0 94.3
Slide 44: Rank Interactive data sheet
Rank Interactive data sheet FY H1 FY H1 FY H1 FY H1 FY H1 2008 2008 2007 2007 2006 2006 2005 2005 2004 2004 Gaming revenue 39.0 19.3 36.9 17.2 22.9 10.2 13.1 5.7 9.2 4.3 Sportsbook revenue 13.6 7.7 15.2 9.0 16.3 8.4 13.2 6.7 16.4 8.9 Revenue (£m) 52.6 27.0 52.1 26.2 39.2 18.6 26.3 12.4 25.6 13.2 EBI
Slide 45: Forthcoming Events
Forthcoming Events 23 April 2009 Interim management statement (7.00am) Annual general meeting (11.00am) 31 July 2009 Half-year results investor relations contacts Dan Waugh Alex Viney director of investor relations assistant 01628 504053 01628 504072 dan_waugh@rank.com alex_viney@rank.com
Slide 46: G Casino locations
G Casino locations