Rank Group Plc · LSE:RNK
Rank — The Rank Group — FY2009 Earnings Presentation
43 slides from Rank's earnings presentation, Feb 25, 2010
Slide 1: Full-year results 2009
Full-year results 2009 25 February 2010
Slide 2: Peter Johnson, chairman
_ Rank Group Peter J ohnson, chairman
Slide 3: Paddy Gallagher, finance director
Paddy Gallagher, finance director
Slide 4: Changes to disclosure
Changes to disclosure • Segmental reporting (IFRS 8) – Reallocation of shared services • Tax changes in HM Government’s Budget 2009 – Like-for-like revenue adjusted for bingo and poker VAT exemptions • Change to revenue recognition – Financial accounts now reported on a net basis deducting free bets
Slide 5: Financial headlines
Financial headlines • Gross revenue: £540.0m (2008: £522.2m) • Operating profit: £58.0m (2008: £60.3m) • Adjusted profit before tax: £48.5m (2008: £40.5m) • Adjusted EPS: 8.9p (2008: 7.3p) • Operating cash flow: £87.3m (2008: £90.2m) • Net debt: £186.8m (2008: £226.5m) • DPS: 1.35p (2008: Nil)
Slide 6: Adjusted profit*
Adjusted profit* £m 2009 2008 Revenue - Gross 540.0 522.2 Operating profit 58.0 60.3 Interest (9.5) (19.8) Profit before tax 48.5 40.5 Effective tax rate 29.0% 29.9% Adjusted earnings per share 8.9p 7.3p Memo: Cash tax rate (8.9)% 7.2% * Profits and earnings before discontinued operations, exception
Slide 7: Revenue & operating profit
Revenue & operating profit Revenue Operating profit £m 2009 2008 2009 2008 Mecca Bingo 233.0 227.6 32.3 37.9 Top Rank España 36.2 35.8 5.6 6.9 Grosvenor Casinos 220.0 206.2 30.9 25.9 Rank Interactive 50.8 52.6 7.5 7.6 Central Costs (18.3) (18.0) Group 540.0 522.2 58.0 60.3
Slide 8: Operating costs
Operating costs £m 2009 2008 change Employment 177.8 168.2 5.7% Taxes & duties 85.2 74.7 14.1% Direct costs 49.7 48.2 3.1% Property costs 46.9 47.1 (0.4)% Marketing 45.4 46.4 (2.2)% Depreciation 25.9 26.3 (1.5)% Other 51.1 51.0 0.2% Total 482.0 461.9 4.4% • Like-for-like costs held in line with 2008
Slide 9: Mecca Bingo
Mecca Bingo £m 2009 2008 Revenue 233.0 227.6 Operating profit 32.3 37.9 KPIs Visits (000s) 14,933 15,358 Spend per visit (£) 15.60 14.82 • Strong growth from gaming machines • £4.4m additional taxation in period as result of HM Government Budget 2009
Slide 10: Top Rank España
Top Rank España £m 2009 2008 Revenue 36.2 35.8 Operating profit 5.6 6.9 KPIs Visits (000s) 2,310 2,410 Spend per visit (£) 15.67 14.85 • 8.9% revenue decline in euros • Continued gains in market share • Profitability stabilised in the second half year
Slide 11: Grosvenor Casinos
Grosvenor Casinos Revenue Operating profit £m 2009 2008 2009 2008 London 86.9 88.5 13.2 12.5 Provinces 115.9 101.8 16.8 11.7 Belgium 17.2 15.9 0.9 1.7 220.0 206.2 30.9 25.9 UK KPIs Visits (000s) 4,519 3,965 Spend per visit (£) 44.88 47.98 • Growth in customer visits - London and provinces • Strong g
Slide 12: Rank Interactive
Rank Interactive Revenue Revenue £m 2009 2008 Bingo / Games 34.3 29.7 Casino 5.1 5.5 Poker 2.9 3.8 Sportsbook 8.5 13.6 50.8 52.6 Operating profit 7.5 7.6 • Strong growth from meccabingo.com • Casino returned to growth in Q4
Slide 13: Statutory profit & loss
Statutory profit & loss £m 2009 2008 Adjusted profit before tax 48.5 40.5 Net return on defined benefit pension asset - 3.6 Amortisation of equity component of convertible bond (0.3) (3.6) Other* 1.0 (2.3) Profit before tax and exceptional items 49.2 38.2 Exceptional items 2.8 (64.3) Profit (loss) b
Slide 14: Cash flow
Cash flow £m 2009 2008 Continuing operations Cash inflow from operations 87.3 90.2 Capital expenditure (34.3) (28.2) Fixed assets disposals 1.6 5.6 Operating cash inflow 54.6 67.6 Acquisitions (0.3) (3.8) (Payments) receipt - exceptional costs and provisions (17.6) 32.3 36.7 96.1 Interest, hedging a
Slide 15: Capital investment to support growth
Capital investment to support growth 2010F 2009 2008 £m FY Mecca Bingo 17.0 – 20.0 13.0 10.8 Top Rank España 2.0 – 2.0 1.5 2.2 Grosvenor Casinos 16.0 – 18.0 15.8 9.9 Rank Interactive 3.0 - 3.0 3.3 4.7 Other 2.0 - 2.0 0.7 0.6 Total 40.0 - 45.0 34.3 28.2 • Grosvenor Casinos - G Casino expansion • Mecc
Slide 16: Capital structure
Capital structure • Previous structure – Net debt to EBITDA 3.5x – 4.0x • Revised structure – Target approximately 2.5x over the medium term • No change to banking covenants • Current debt 2.2x EBITDA & business stable • Dividend – Final dividend of 1.35p per share recommended for 2009 – Progressive
Slide 17: Strengthened balance sheet
Strengthened balance sheet • Sustained reduction in net debt Group net debt (£m) • Positive developments on VAT claims 316.9 – Favourable High Court ruling 273.4 – Slots Tribunal win 226.5 208.1 – Mainstage claim now part of 186.8 same case • Significant headroom against £400m+ debt facilities – £15
Slide 18: Ian Burke, chief executive
Ian Burke, chief executive
Slide 19: 2010 - market assessment
2010 - market assessment • Economic recession has impacted most forms of gaming and betting • Economic recovery likely to be slow and gradual – Interest rates likely to rise during 2010 – UK unemployment to peak at 9.1% in 2011* – Personal taxes may rise • Regulatory and tax framework still fluid •
Slide 20: 2010 - where we are
2010 - where we are Rank represents an attractive equity investment opportunity in British land-based gaming • Fundamental attractiveness of land-based gaming – Significant demand growth potential – High barriers to entry • Proven ability to stimulate demand by broadening appeal • Strong market posi
Slide 21: Strategic priorities
Strategic priorities • Customer insight to drive product and service innovation • Selective investment to strengthen UK position and exploration of overseas development potential • Work positively with governments and regulators to shape operating environment
Slide 22: Customer insight - electronic gaming
Customer insight - electronic gaming • Investment in leading games, Gaming machines revenue offered online and offline - Mecca Bingo and Grosvenor Casinos* (£m) • Continued evolution of electronic roulette, electronic 51.1 bingo and video bingo 48.8 • Continued investment in server-based gaming • In
Slide 23: Customer insight - food and drink
Customer insight - food and drink • Significantly improved standards of food and drink across Mecca and Grosvenor – good quality, good value • 16 Mecca Bingo clubs now cook-to-order; six provide table service – increase in spend per visit • Extension of cook-to-order to at least 30 more Mecca Bingo
Slide 24: Customer insight - games development
Customer insight - games development • After Dark Binglo and Rock and Roll Bingo launched, May 2009 • Successful in reaching out to non-bingo customers • Enables clubs to trade for longer • Uplift on bar sales • Extension of After Dark brand in 2010 – Poker Factory, Quiz Night, Film Club
Slide 25: More accessible - open all hours
More accessible - open all hours • 24-hour opening introduced into two casinos in 2008 • Extended to a total of 17 clubs in 2009 • Since 2008, aggregate opening hours increased by 13% (like-for-like) • Licensing permission gained to extend 24-hour opening across the estate • Extension of 24-hour ope
Slide 26: More rewarding - customer loyalty
More rewarding - customer loyalty • Play Points launched in 2008; now in eight casinos • Plans to roll-out to further ten casinos in 2010 • Provides data on customer spending and preferences • Enables greater marketing efficiency • Performance premium for clubs with Play Points • Opportunity to exte
Slide 27: More satisfying - NPS scores improving
More satisfying - NPS scores improving • Forward looking Net promoter scores 2009 (%) performance indicator 45 • Improvements across 40 35 Group in 2009 30 • Target 45% in 2010 25 20 15 Mecca Bingo 10 Grosvenor Rank Interactive 5 0 Q1 Q2 Q3 Q4
Slide 28: Strengthen UK position - where we are
Strengthen UK position - where we are • 138 venues licensed for gaming – #1 in casinos – #2 in bingo clubs • >1.8 million customers • >19 million customer visits/year • National distribution – presence in 30 largest cities in Britain Mecca Bingo Grosvenor / G Casinos
Slide 29: Strengthen UK position - winning formats
Strengthen UK position - winning formats ‘Traditional’ Locations secondary high profile Buildings anonymous exciting Experience gaming entertainment Service compliance hospitality First visit intimidating welcoming
Slide 30: Strengthen UK position - G Casino
Strengthen UK position - G Casino • Develop six unutilised licences • Relocate existing casinos and convert to G Casino – up to four licences to be relocated – c.£4.5m capital investment • Convert larger existing casinos to G Casino – up to eight casinos to be converted – c.£1.5m capital investment
Slide 31: Strengthen UK position - Mecca
Strengthen UK position - Mecca • Assess performances of ‘Full House Destination’ conversions – Catford, Oldbury & Aberdeen • Scope out roll-out plans • c.50% of estate may be suitable for conversion to Full House Destination • c.£0.8m to £1.5m capital investment • Remaining clubs may be suitable for
Slide 32: Explore overseas opportunities
Explore overseas opportunities • Opening up of European markets presents opportunity for Rank Interactive – Games rather than sports-led • Priority to stabilise and recover Top Rank España – challenging economic situation – threat of full smoking ban • Greater diversification of political and econom
Slide 33: Shape political and fiscal environment
Shape political and fiscal environment • Stepped-up programme of engagement • Positive regulatory changes achieved – Gaming machines in British and Spanish bingo clubs • Damaging taxation policies . . . then some progress – Budget 2009 cost Rank £9m* – Changes in PBR clawed back £2.5m* * Annualised
Slide 34: Shape political and fiscal environment
Shape political and fiscal environment A new agenda • Responsibility – Closer alignment of regulation with aims of the Gambling Act – Closer alignment of fiscal policy with social policy • Fairness – Single rate of taxation across all forms of gaming and betting • Sustainability – Shared vision to c
Slide 35: Current trading
Current trading • Positive start to 2010 • Growth in Group customer visits • High win margin in London casinos
Slide 36: Summary
Summary • Management of political risk • Balance sheet strength • Stronger leadership in depth • Momentum building – Operational improvements – Concept development
Slide 37: Appendices
_ Rank Group Appendices
Slide 38: Mecca Bingo data sheet
Mecca Bingo data sheet FY 2009 H1 2009 FY 2008 H1 2008 Clubs 103 103 102 102 Revenue (£m) 233.0 116.3 227.6 116.9 EBIT (£m) 32.3 19.0 37.9 22.7 Operating margin 13.9% 16.3% 16.7% 19.4% Customers MAT (000s) 881 912 898 984 Customer visits (000s) 14,933 7,491 15,358 7,893 Spend per visit (£) 15.60 15.
Slide 39: Top Rank España data sheet
Top Rank España data sheet FY 2009 H1 2009 FY 2008 H1 2008 Clubs 11 11 11 11 Revenue (£m) 36.2 18.1 35.8 17.7 EBIT (£m) 5.6 2.7 6.9 4.1 Operating margin 15.5% 14.9% 19.3% 23.2% Customers MAT(000s) 314 316 323 330 Customer visits (000s) 2,310 1,130 2,410 1,203 Spend per visit (£) 15.67 16.02 14.85 14
Slide 40: Grosvenor Casinos data sheet
Grosvenor Casinos data sheet FY 2009 H1 2009 FY 2008 H1 2008 Casinos London 5 5 5 5 Provinces 30 28 27 27 Belgium 2 2 2 2 Total 37 35 34 34 Unused licences 12 13 13 13 Revenue (£m) 220.0 106.7 206.2 102.2 EBIT (£m) 30.9 14.7 25.9 12.5 Operating margin 14.0% 13.8% 12.6% 12.2% Customers MAT (000s) 918
Slide 41: Rank Interactive data sheet
Rank Interactive data sheet FY 2009 H1 2009 FY 2008 H1 2008 Bingo/games 34.3 16.4 29.7 14.7 Casino 5.1 2.4 5.5 2.6 Poker 2.9 1.7 3.8 2.0 Sportsbook 8.5 4.4 13.6 7.7 Revenue (£m) 50.8 24.9 52.6 27.0 EBIT (£m) 7.5 3.0 7.6 3.5 Operating margin 14.8% 12.0% 14.4% 13.0%
Slide 42: Casinos market supply (February 2010)
Casinos market supply (February 2010) Operating Non-operating Total Operator clubs licences licences Genting Stanley 44 11* 55 Grosvenor Casinos 35 12 47 Gala 27 4 31 Caesar’s/London Clubs 9 2 12 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 10 11 2
Slide 43: Bingo clubs market supply (February 2010)
Bingo clubs market supply (February 2010) Operator Clubs Gala Bingo 145* Mecca Bingo 103 Top Ten Bingo 27 Carlton Clubs 14 Riva Bingo 11 Buckingham Bingo 11 Others 253* Total 564 * Includes clubs closing February 2010