Rank Group Plc · LSE:RNK
Rank — H1 2008 Earnings Presentation
49 slides from Rank's earnings presentation, Jul 31, 2008
Slide 1: Half-year results 2008
Half-year results 2008 31 July 2008
Slide 2: Peter Johnson, Chairman
a fr S Rank Group Peter Johnson, Chairman
Slide 3: Agenda
Agenda • Interim results – Paddy Gallagher • Operational review and strategic priorities – Ian Burke
Slide 4: Paddy Gallagher, finance director
Paddy Gallagher, finance director
Slide 5: Themes
Themes • H1 revenue and profit affected by significant regulatory and fiscal events compared with H1 2007 – increase in casino gaming duty (April 2007) – English smoking ban (July 2007) – Section 21 removal (September 2007) • H1 revenue and profit uplift compared with H2 2007
Slide 6: Financial headlines
Financial headlines • Revenue: £257.0m (2007: £284.6m) • Operating profit: £28.9m (2007: £47.9m) • Adjusted profit before tax: £17.6m (2007: £37.3m) • Adjusted EPS: 3.0p (2007: 5.2p) • Operating cash flow: £34.1m (2007: £64.8m) • Net debt: £273m (£317m at 31 December 2007)
Slide 7: Adjusted profit
Adjusted profit* £m 2008 2007 Revenue 257.0 284.6 Operating profit 28.9 47.9 Interest (11.3) (10.6) Profit before tax 17.6 37.3 Effective tax rate 34.3% 34.3% Adjusted earnings per share 3.0p 5.2p * 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 Bingo 127.8 148.3 25.7 36.1 Casinos 102.2 110.1 14.5 21.0 Interactive 27.0 26.2 5.3 5.5 Shared services (11.2) (10.2) Other costs (5.4) (4.5) 257.0 284.6 28.9 47.9
Slide 9: Context - the last 18 months
Context - the last 18 months revenue 300 280 H1 2007 260 H2 2007 £m 240 H1 2008 140 120 100 80 60 40 20 0 Group Mecca Top Rank Grosvenor Blue Bingo Espana Casinos Square
Slide 10: Context - the last 18 months
Context - the last 18 months operating profit 50 H1 2007 H2 2007 £m 40 H1 2008 30 20 10 0 Group* Mecca Top Rank Grosvenor Blue * after Gaming shared services Bingo Espana Casinos Square and Other (not shown)
Slide 11: Bingo
Bingo Revenue Operating profit £m 2008 2007 2008 2007 Mecca Bingo 110.1 132.5 21.6 31.5 Top Rank Espana 17.7 15.8 4.1 4.6 127.8 148.3 25.7 36.1 Mecca Bingo (comparable clubs) 2008 % change Admissions (‘000) 7,796 (13.2) Spend per head (£) 13.74 (3.0) Like-for-like revenue (15.8)
Slide 12: Casinos
Casinos Revenue Operating profit £m 2008 2007 2008 2007 London 44.1 46.3 6.7 8.9 Provincial 50.4 57.7 6.8 11.7 Belgium 7.7 6.1 1.0 0.4 102.2 110.1 14.5 21.0 Grosvenor Casinos (comparable clubs) 2008 % change 2008 % change Admissions (‘000) 1,964 (13.1) Spend per head (£) 49.29 6.2 Like-for-like reve
Slide 13: Interactive
Interactive Revenue £m 2008 2007 Gaming 19.3 17.2 Sportsbook 7.7 9.0 27.0 26.2 Operating profit 5.3 5.5 2008 % change Active customers (000s) 334 4.1
Slide 14: Statutory profit & loss
Statutory profit & loss £m 2008 2007 Adjusted profit before tax 17.6 37.3 Net return on defined benefit pension asset 3.6 5.1 Amortisation of equity component of convertible bond (1.8) (1.8) Other* (0.8) - Profit before tax and exceptional items 18.6 40.6 Exceptional items (95.2) 9.1 (Loss) profit b
Slide 15: Cash flow
Cash flow £m 2008 2007 Continuing operations Cash inflow from operations 39.8 60.6 Capital expenditure (11.3) (15.0) Fixed assets disposals 5.6 19.2 Operating cash inflow 34.1 64.8 Acquisitions and disposals (3.2) 498.7 Transfer of defined benefit pension asset 28.4 - Receipt (payments) - exceptiona
Slide 16: Financing
Financing • £167.7m convertible bond matures January 2009 – 3.875% coupon • Current plans to refinance from existing debt facilities – £150m term loan (2012) – £250m revolver (2012) – $14m Yankee bond (2018) • Increase in average cost of debt from 2009
Slide 17: Ian Burke, chief executive
> fo S Rank Group lan Burke, chief executive
Slide 18: Market context
Market context H1 performance Market environment Rank Group performance Difficult consumer • Revenue stabilised backdrop – focus on customer loyalty and value • Margins strengthened – cost reductions delivered Credit markets • Financial position strengthened constricted – pension transferred Sector
Slide 19: Market context
Market context supply and demand Bingo clubs Mecca Bingo • Demand contracting • Action taken to exit tail clubs in 06 and 07 • Supply contracting Casinos Grosvenor Casinos • Supply and demand • Product improvement growth lower than • Measured pace of expansion anticipated • Scope to step up growth I
Slide 20: Market context
Market context gaming - long-term attractiveness • Leisure market on long-term cyclical growth trajectory • Gaming shifting into mainstream leisure as a result of societal, technological and regulatory change • Barriers to entry • Enduring popularity and tradition of gaming • Historically attractive
Slide 21: Our ambition 'to be the leading gaming-based leisure company in the UK'
Our ambition ‘to be the leading gaming-based leisure company in the UK’ • Entertaining games • Trusted brands • Broad and integrated distribution • Driven by customer focus
Slide 22: Our ambition
Our ambition customer focus Entertaining games • Bingo • Slots • Casino • Sports betting • Poker Trusted brands Integrated distribution • Clubs • Internet • Casinos • Mobile • Digital TV
Slide 23: Priorities
Priorities • Stabilise Group – revenue protection and recovery – cost and capital control • Sustainable growth in customer visits – understand, reward and engage – enhance products and services – broaden distribution
Slide 24: Stabilise Group
Stabilise Group revenue protection and recovery Mecca Bingo • Outside gaming enclosures – 46 bingo enclosures licensed for gaming – >1,000 cashline positions – £1.8m revenue in H1 2008 • Government proposals to increase B3 machines – formal adoption expected in Q4 2008 – plan to add 300 B3 machines
Slide 25: Stabilise Group
Stabilise Group revenue protection and recovery Adult gaming centres • 19 locations • 29 AGCs • >100 B3 jackpot machines • Compliance with Gambling Commission guidance and with local authority approval
Slide 26: Stabilise Group
Stabilise Group cost and capital control • £15m cost savings targeted in 2008 • Cost inflation a challenge in 2009 – £5m rise in utilities forecast • Selective capital investment
Slide 27: Grow customer visits
Grow customer visits understand, reward and engage • Extensive research undertaken • Player rewards programmes – Grosvenor Casinos pilot from June 2008 – Mecca Bingo pilot from H2 2008 • Engagement – marketing – brand standards
Slide 28: Grow customer visits
Grow customer visits enhance experience - games • Electronic bingo – >6,100 units – exploring opportunities to improve games content • Video bingo – 9 clubs; 100 terminals – more positive signs after slow start • Online bingo & sportsbook – expand and enhance range of betting and gaming opportunitie
Slide 29: Grow customer visits
Grow customer visits enhance experience - games Gaming machines • Mecca Bingo – 270 server-based machines across 44 clubs • Grosvenor Casinos – move to direct supply • Machine management system replaced
Slide 30: Grow customer visits
Grow customer visits enhance experience - food & drink • Situation assessment – quality of customer offer not good enough – historic low levels of customer spend on food and drink in Mecca Bingo and Grosvenor Casinos – loss-making catering operations in 2007
Slide 31: Grow customer visits
Grow customer visits enhance experience - food & drink • Mecca Bingo – new menu rolled out to all Mecca Bingo clubs in H1 08 – dedicated catering managers in 50 clubs by FY 08 – development of food kiosks • Grosvenor Casinos – trial of new menu in H2 2008 • EPOS – installation for larger bingo clubs
Slide 32: Grow customer visits
Grow customer visits broaden distribution - bingo clubs • Operational improvement remains priority • Selective deployment of capital to improve product
Slide 33: Grow customer visits
Grow customer visits broaden distribution - casinos • 5 new G Casinos by 2012 – Aberdeen (H2 2008) – Dundee (2009) • Interest in small number of 05 Act casinos
Slide 34: Grow customer visits
Grow customer visits broaden distribution - interactive • UK – strengthen market position in sportsbook and bingo • Enter new territories – proprietary bingo and sports betting sites launched in Spain in H1 2008 – ‘white label’ sportsbook capability now in Spain, Denmark, Germany and Sweden
Slide 35: Outlook
Outlook • Short-term – cautious on UK consumer – focus on value and customer loyalty • Medium-term – gaming continues shift into mainstream leisure – convergence and growth
Slide 36: Summary
Summary Mecca Bingo • Operational improvement through implementation of centrally defined products, services and brand standards Top Rank Espana • Manage business through challenging economic and regulatory environment
Slide 37: Summary
Summary Grosvenor Casinos • Broaden customer base through customer insight, cultural change and capital deployment Blue Square • Secure and build UK position in sportsbook and bingo and develop internationally
Slide 38: Appendix
7 Sa S Rank Group Appendix
Slide 39: Exceptional items
Exceptional items £m 2008 2007 Exceptional items within continuing operations Loss on transfer of defined benefit pension asset (99.2) - Net profit on sale of property 4.0 9.1 Pre-tax exceptional items: continuing operations (95.2) 9.1
Slide 40: Capital expenditure
Capital expenditure £m H1 2008 H1 2007 Mecca Bingo 4.4 5.1 Top Rank Espana 0.8 1.8 Grosvenor Casinos 3.3 5.7 Blue Square 2.5 1.8 Other 0.3 0.6 Total 11.3 15.0
Slide 41: New additions
New additions Mecca Bingo, Thanet
Slide 42: New additions
New additions G Casino, Thanet
Slide 43: G Casino
G Casino relocations (Manchester, Luton, Thanet) £m G Casinos Grosvenor Gaming casino tables 13 9 electronic roulette 36 14 gaming machines 20 12 poker positions 140 70 Membership admissions/week 3,047 1,500 male/female ratio 65:35 75:25 All figures quoted are averages across the three G Casinos at
Slide 44: Mecca Bingo - Focus on Food & Drink
Mecca Bingo - Focus on Food & Drink Before Before After After
Slide 45: Mecca Bingo - Focus on Food & Drink
Mecca Bingo - Focus on Food & Drink After After
Slide 46: Mecca Bingo
Mecca Bingo data sheet H1 FY H1 FY H1 FY H1 FY H1 2008 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 102 102 103 113 117 117 117 120 121 Revenue 110.1 240.5 132.5 261.7 133.9 264.0 133.9 265.3 133.9 EBIT 21.6 43.6 31.5 63.6 31.8 77.9 38.5 79.6 40.3 Operating margin 20% 18% 24% 24% 24% 30% 29% 30% 30
Slide 47: Top Rank España
Top Rank España data sheet H1 FY H1 FY H1 FY H1 FY H1 2008 2007 2007 2006 2006 2005 2005 2004 2004 Clubs 11 11 11 11 11 11 11 11 10 Revenue 17.7 32.3 15.8 31.1 15.2 31.6 15.4 27.3 13.0 EBIT 4.1 9.3 4.6 8.9 4.2 10.0 4.7 7.7 3.4 Operating margin 23% 29% 29% 29% 28% 32% 31% 28% 26%
Slide 48: Grosvenor Casinos
Grosvenor Casinos data sheet H1 FY H1 FY H1 FY H1 FY H1 2008 2007 2007 2006 2006 2005 2005 2004 2004 London 5 5 5 5 6 6 6 6 6 Provincial 27 27 28 28 30 30 30 30 28 Belgium 2 2 2 2 2 2 2 2 2 Total 34 34 35 35 38 38 38 38 36 Revenue (UK) 94.5 196.4 104.0 204.4 103.4 195.0 94.3 188.4 88.4 Revenue (Belg
Slide 49: Blue Square
Blue Square data sheet H1 FY H1 FY H1 FY H1 FY H1 2008 2007 2007 2006 2006 2005 2005 2004 2004 Gaming revenue 19.3 36.9 17.2 22.9 10.2 13.1 5.7 9.2 4.3 Sportsbook revenue 7.7 15.2 9.0 16.3 8.4 13.2 6.7 16.4 8.9 Revenue (£m) 27.0 52.1 26.2 39.2 18.6 26.3 12.4 25.6 13.2 EBIT (£m) 5.3 10.9 5.5 7.8 3.1