Rank Group Plc · LSE:RNK
Rank — The Rank Group — FY2013/14 Earnings Presentation
41 slides from Rank's earnings presentation, September 2014
Slide 1: Rank Group Preliminary Results 2013/14
EXP RIENOINE ENTERTAINMENT | rel ING
Slide 2: Ian Burke, chairman
Ian Burke chairman
Slide 3: Introduction
Introduction Ian Burke, chairman Financial performance 2013/14 Clive Jennings, finance director Operational performance 2013/14 Henry Birch, chief executive Strategic outlook Henry Birch, chief executive Q&A 3
Slide 4: Clive Jennings, finance director
Clive Jennings finance director 4
Slide 5: Group financial summary 2013/14
2013/14 2012/13 Gross revenue(1) £707.7m £625.0m Operating profit(2) £72.4m £69.9m Adjusted earnings per share(2) 12.4p 12.4p EBITDA(2) £116.0m £108.8m Operating cash inflow £63.2m £81.5m Net debt(3) £(137.0)m £(104.1)m Total dividend per share 4.50p 4.10p • Solid result for the year following chall
Slide 6: Revenue and operating profit by brand
(4) (5) Revenue Operating profit £m 2013/14 2012/13 2013/14 2012/13 Grosvenor Casinos 391.2 300.3 56.8 47.4 Mecca 288.2 296.2 37.0 44.1 Enracha 28.3 28.5 0.8 0.7 Central costs (22.2) (22.3) Total continuing 707.7 625.0 72.4 69.9 • Group now dominated by casino brand - 55% of revenue - 60% of profits
Slide 7: Operating profit bridge
£m -3.2 +1.5 -4.1 -6.7 +15.0 July 2013 Profit growth hot weather Mecca Park Acquired Tower win admissions casinos fall 69.9 margin 65.8 72.4 FY 2012/13 Normalised FY FY 2013/14 operating profit 2012/13 operating profit • 2012/13 Park Tower performance was the highest win margin and handle level in l
Slide 8: Grosvenor Casinos
(6) (7) Revenue Operating profit £m 2013/14 2012/13 2013/14 2012/13 London 93.6 105.8 20.7 26.6 Provinces 162.4 154.4 18.7 20.0 Belgium 14.5 14.8 0.4 - Acquired casinos 107.2 15.5 17.9 2.9 Venues total 377.7 290.5 57.7 49.5 Digital 13.5 9.8 (0.9) (2.1) Total brand 391.2 300.3 56.8 47.4 (8) KPIs Venu
Slide 9: Mecca
(9) (10) Revenue Operating profit £m 2013/14 2012/13 2013/14 2012/13 Venues 229.3 234.9 21.1 23.0 Digital 58.9 61.3 15.9 21.1 Total brand 288.2 296.2 37.0 44.1 KPIs Venues Digital Visits (000s) 12,607 13,559 4,822 5,003 Spend per visit (£) 18.19 17.32 12.21 12.25 • Venues: Cost and efficiency action
Slide 10: Enracha
2013/14 2012/13 Revenue (£m) 28.3 28.5 Revenue (euros m) 34.0 34.5 Operating profit (£m) (11) 0.8 0.7 KPIs Visits (000s) 1,945 1,980 Spend per visit (£) 14.55 14.39 • Continuing difficult economic conditions led to impairments at three clubs • One loss-making club closed (11) before exceptional item
Slide 11: Profit from continuing operations to profit for the period
£m 2013/14 2012/13 Profit from continuing operations 72.4 69.9 Net interest payable (9.0) (5.3) Profit before tax and exceptional items 63.4 64.6 Exceptional items (49.0) (21.9) Profit before tax 14.4 42.7 Taxation 3.0 (13.8) Discontinued operations 2.8 (1.9) Profit for the period 20.2 27.0 • Effect
Slide 12: Exceptional items
£m 2013/14 2012/13 Impairments & property leases (18.0) (2.2) Acquisition & integration costs (1.7) (8.5) Indirect taxation (26.1) (7.0) Restructuring costs (0.7) - Finance costs (2.5) (4.2) Total exceptionals pre tax (49.0) (21.9) Taxation 13.6 2.7 Discontinued operations 2.8 3.7 Total exceptionals
Slide 13: Cash flow and net debt
£m 2013/14 2012/13 Cash inflow from continuing operations 107.2 117.7 Capital expenditure (44.3) (38.2) Fixed asset disposals 0.3 2.0 Operating cash inflow 63.2 81.5 Discontinued operations (0.6) (9.1) Acquisition and disposal of businesses 1.1 (176.2) Net cash payments; provisions and exceptional i
Slide 14: Capital expenditure and 2014/15 guidance
£m 2013/14 2012/13 Grosvenor Casinos - existing venues 17.7 21.0 - acquired venues 17.8 - Mecca 5.9 9.6 Enracha 1.3 1.4 Central 1.6 6.2 Total continuing 44.3 38.2 • 2014/15 guidance £40m-45m 14
Slide 15: Liquidity and leverage
• Undrawn revolving credit facilities of £60.0m • Strong operating cash flow with EBITDA of £116.0m • Conservative leverage of c.1.2 times • Potential VAT claims – Supreme Court hearing April 2015 15
Slide 16: Current trading
• Only covers short six week period • All brands are showing year on year growth(13) • Strong growth in online casino continuing (13) in local currency 16
Slide 17: Henry Birch, chief executive
Henry Birch chief executive
Slide 18: Operational performance 2013/14
Operational performance 2013/14 18
Slide 19: Operational performance review
• Disappointing H1 • Slow to react to demand for value for money in Mecca • Increasingly competitive London market • Mecca digital losing some ground • Challenging economic backdrop in Spain • Successful integration of Gala casinos • Strong Grosvenor digital performance (38% revenue growth) • Luton
Slide 20: Strategic outlook
Strategic outlook 20
Slide 21: Rank at a glance
• 160+ gaming entertainment venues up and down the UK and internationally • Market leading positions in retail casino (35%) and retail bingo (34%) • A leading digital bingo business with 24% market share • c.3 million customers in the last 12 months • Recognised brands with significant equity and he
Slide 22: Strategic priorities
1. Creating a compelling multi-channel offer 2. Building digital capability 3. Developing our venues 4. Investing in our brands and marketing 5. Using technology to improve efficiency and customer experience 22
Slide 23: Creating a compelling multi-channel offer
Why is it important? • A key differentiator for Rank that leverages our assets • Increasing consumer demand for multi-channel propositions across all sectors (eg retail, banking) • Multi-channel customers are higher value than mono-channel customers • Improved customer retention • An exportable mode
Slide 24: Multi-channel play levels
• British Gambling Prevalence Survey (2010) reveals low levels of multi-channel play BUT Industry: 2010 Rank: 2014 the last 4 years has seen significant digital growth, esp. mobile • Of Rank’s total 3.0m customers, approx. 3% are multi-channel • Mecca at c.7% cross-over; Grosvenor at c.2% • Many of
Slide 25: Multi-channel proposition features
Networked Seamless content jackpots Use your own device Continue games across Across channels Mobile and tablet use to different devices/ gamble in club channels Loyalty Loyalty points earned and Mobile services app redeemable across all Mobile app to drive retail channels usage and convenience Offe
Slide 26: Building digital capability
Why is it important? • Central to our multi-channel strategy • Growth area for Rank: - Rank under-represented: digital represents 10% of total revenues vs 30% for the wider market - Mecca with strong digital market share (24%) in a relatively fragmented market - Grosvenor growing fast (38% YOY) with
Slide 27: Digital platform, data and people
Legacy platform: New platform: • Slow, costly integrations • Open architecture: easy integrations • Limited bonusing, CRM and BI • Modern back-end: bonusing, CRM, BI • Poor supplier management • Partnership model • Multi-channel difficult • Improved security Large collection of data, but not Data wa
Slide 28: Developing our venues
Why is it important? • Venues remain the prime revenue generator of Rank (90%) and the gaming industry generally (65%) • Leisure is governed by fairly short term trends meaning that venue evolution is necessary • Successful venue development will drive revenue, strengthen brands and is a means to cr
Slide 29: New clubs, estate management and licences
New clubs: • Commitment to Government to build 3 new bingo clubs • Opportunity to trial new formats and brands • BUT focus on ROI and learning from past experience Estate management: • Exit from loss-making clubs • Limited capex focused on maintenance Casino licence utilisation • Use dormant casino
Slide 30: 2014/15 venue activity and pipeline
2014/15 activity • Southend opening in September 2014 • Nottingham and Bournemouth refurbishment Pipeline: • Licence bids/usage • Relocations • Extensions Focus on joined-up London approach: • Fastest growing local market, constituting 60%+ of total UK market • Grosvenor: nine casinos throughout the
Slide 31: Investing in our brands and marketing
In Mecca and Grosvenor, Rank has well-established, recognised brands: • Mecca at 80% brand awareness amongst general public • Grosvenor at 22% brand awareness amongst general public BUT: - Need for better brand definition - Need for improved resonance/relevancy as well as brand recognition - Need fo
Slide 32: Using technology to improve efficiency and experience
Why is it important? • A means of increasing our margins through cost reduction, allowing re- investment into product and service • Providing an improved customer experience which should drive increased revenues and customer retention • Helps create a multi-channel offer Challenges Successes • Some
Slide 33: Investment requirements and capex
1. Infrastructure and applications to support our vision and ambition 2. Capex to support scheduled venue development BUT: • We see this as achievable within current anticipated levels of spend • Capex likely to stay within our depreciation charge (excluding new venues / relocations) • Accelerated v
Slide 34: Robust core businesses and clear growth strategy
Robust core businesses: • Grosvenor : leading market share, defensible position (limited licences and high barriers to entry); nascent digital business • Mecca : strong cash flow with limited capital investment, leading digital business with growth potential • Enracha : small but stable business wit
Slide 35: Appendices
Appendices
Slide 36: Change of year end to 30 June
• Rank’s year end changed to 30 June • Each operating businesses’ results recast to 30 June accounting reference date - FY 2013/14 12 months to 30 June 2014 - H1 2013/14 6 months to 31 December 2013 - FY 2012/13 12 months to 30 June 2013 - H1 2012/13 6 months to 31 December 2012 - FY 2011/12 12 mont
Slide 37: Grosvenor Casinos venues data sheet
GROSVENOR CASINOS VENUES DATA SHEET FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 Casino licences London 9 9 8 4 4 4 Provinces 54 54 51 33 33 33 Belgium 2 2 2 2 2 2 Total 65 65 61 39 39 39 Non-trading licences 13 13 17 10 10 10 Revenue (£m) 377.7 188.4 290.5 140.1 255.8 125.8 EBI
Slide 38: Mecca venues data sheet
FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 Venues 96 97 97 97 97 98 Revenue (£m) 229.3 113.7 234.9 115.7 237.8 117.4 EBIT (£m) 21.1 7.1 23.0 11.1 28.3 14.8 Operating margin 9.2% 6.2% 9.8% 9.6% 11.9% 12.6% Customers MAT (000s) 937 940 958 958 965 943 Visits (000s) 12,607 6,209
Slide 39: Enracha venues data sheet
FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 Venues 10 11 11 11 11 11 Revenue (£m) 28.3 14.7 28.5 13.8 29.2 14.9 EBIT (£m) 0.8 0.3 0.7 0.4 1.4 0.5 Operating margin 2.8% 2.0% 2.5% 2.9% 4.8% 3.4% Customers MAT (000s) 260 278 276 291 305 308 Visits (000s) 1,945 989 1,980 998 2,049
Slide 40: UK casino operators by venues and licences
Operator Casino Venues Total Licences Grosvenor Casinos 56 77 (3) (3) Genting 40 56 London Clubs 8 11 A&S Leisure 6 6 Double Diamond 5 7 (3) Aspers/Aspinall’s 7 9 Club 36 3 3 Clockfair 2 2 Guoco 1 1 (3) Others 11 26 Total 139 198 Source: company research (3) includes 2005 Act casino licences 40
Slide 41: UK bingo operators by clubs
Operator Clubs (4) Gala Bingo 135 Mecca Bingo 96 Top Ten Bingo 15 Carlton Clubs 13 Castle 11 Club 3000 11 Beacon 9 Others 90 Total 380 Source: Bingo Association (4) excludes the conversion of adult gaming centres to bingo clubs 41