Rank Group Plc · LSE:RNK
Rank — FY2003 Earnings Presentation
41 slides from Rank's earnings presentation, 2004
Slide 1: Preliminary Results 2003
,2 Rank Group Prelm nary Results 2003
Slide 2: Mike Smith, Chief Executive
(x2 Rank Group M ike Sm ith Chef Executve
Slide 3: Ian Dyson, Finance Director
(x2 Rank Group lan Dyson Fnance D xector
Slide 4: 2003 financial highlights
2003 financial highlights • EPS* of 20.1p, in-line with 2002 • Operating profit* up to £223.0m (2002 - £220.6m) • Effective tax rate down to 28.9% (2002 - 30.3%) • Free cash flow of £13.4m (2002 - £136.5m outflow) • Final dividend up 6% to 9.3p making 13.9p for the year • £1 billion of new finance r
Slide 5: Mecca Bingo
Mecca Bingo £m 2003 2002 Change Turnover UK 233.1 231.7 1% Spain 24.6 18.6 32% 257.7 250.3 3% O perating profit UK 72.6 72.4 - Spain 6.8 4.6 48% 79.4 77.0 3% M ecca UK A dm issions (000s) 21,066 22,678 -7% Spend per head (£) 11.06 10.22 8%
Slide 6: Grosvenor Casinos UK
Grosvenor Casinos UK £m 2003 2002 Turnover London -upper 19.0 23.2 London -other 54.2 55.5 Provincial 91.5 83.3 Hard Rock 9.0 1.3 173.7 163.3 O perating profit London -upper 3.6 6.0 London -other 10.4 11.7 Provinces 26.3 22.7 Hard Rock (1.6) (2.1) Divisionalcosts (6.7) (8.4) 32.0 29.9
Slide 7: Grosvenor UK - Provincial
Grosvenor UK - Provincial A dm issions (000s) H andle per head 2,700 200 2,667 2,627 2,600 181 166 2,500 2,478 2,473 150 141 2,401 2,400 126 117 2,300 100 1999 2000 2001 2002 2003
Slide 8: Grosvenor UK - Provincial
Grosvenor UK - Provincial £m 100 Turnover 91.5 O perating profit 80 83.3 69.7 60 61.7 56.5 40 26.3 22.7 16.5 20 12.7 11.1 0 1999 2000 2001 2002 2003
Slide 9: Blue Square
Blue Square £m Pro form a* Pro form a* 2003 2002 Stakes Internet 178.5 142.9 Telebet 77.3 48.0 G am es 134.1 57.2 389.9 248.1 G ross W in Internet 11.1 10.8 Telebet 3.9 1.9 G am es 8.1 3.1 23.1 15.8 * Figures assum ing Rank G roup ow ned Blue Square forthe fullyear
Slide 10: Hard Rock Operating profit
Hard Rock Operating profit £m 2003 2002 % grow th O w ned cafes 24.4 29.2 -16 Franchise and other incom e Cafes 5.8 6.2 -6 Hotels 5.2 3.8 +37 Territory deals 1.8 2.3 -22 A dvertising and prom otion (0.7) (1.4) +50 O verheads (12.3) (12.5) +2 Restructuring (1.1) - - O perating profit 23.1 27.6 -16
Slide 11: Hard Rock Owned cafe revenue
Hard Rock Owned cafe revenue U S$m Com parable cafes 400 Food & Beverage M erchandise 350 300 161 155 250 137 125 112 200 150 185 187 184 176 178 100 1999 2000 2001 2002 2003
Slide 12: Deluxe
Deluxe £m 2003 2002 % grow th Turnover Film Services 396.4 367.5 +8 M edia Services 392.1 336.7 +16 788.5 704.2 +12 O perating profit* Film Services 72.3 62.6 +15 M edia Services 21.5 27.4 -22 93.8 90.0 +4 * before exceptionalitem s and goodw illam ortisation
Slide 13: Deluxe Film Operating profit analysis
Deluxe Film Operating profit analysis £m 80 17.5 72.3 70 62.6 60 12.1 50 (16.4) 40 (3.5) 30 2002 U niversal Currency A cquisitions Profit 2003 im provem ent
Slide 14: Deluxe Film Contract status
Deluxe Film Contract status Feet(billion) 40% 2 Extended during '03 U niversal Fox Intl D ue to expire 1 18% 15% 11% 9% 7% 0 2003 2004 2005 2006 2007 2008 2009+ Contractexpiry year
Slide 15: Deluxe Media Services
Deluxe Media Services Turnover O perating profit* £m 2003 2002 2003 2002 Video duplication 111.2 178.9 (8.9) 18.1 D VD /CD replication 150.6 55.7 13.7 3.2 D istribution services 106.8 90.8 11.5 5.3 D igitalservices 23.5 11.3 5.2 0.8 392.1 336.7 21.5 27.4 * before exceptionalitem s and goodw illam or
Slide 16: Exceptional items
Exceptional items £m Blue Square restructuring (6.0) Legalprovision (9.3) Release of disposalprovisions 4.6 D eluxe M edia Services restructuring (35.8) Redem ption prem ium on 2008 bonds (11.5) Pre-tax exceptionalcharge (58.0) Tax credit on exceptionalitem s above 13.4 Release of disposalprovisions
Slide 17: Group cash flow
Group cash flow £m 2003 2002 O perating activities 309.2 242.3 D eluxe contract advances (17.3) (135.0) Capitalexpenditure (111.4) (117.9) Fixed asset disposals 5.7 21.0 O perating cash flow 186.2 10.4 Interest,tax and dividends (172.8) (146.9) Free cash flow 13.4 (136.5) A cquisitions (123.6) (57.5
Slide 18: Contract advances 2003 summary
Contract advances 2003 summary 2003 2002 £m Film M edia Total Total N ew advances (81.1) (29.8) (110.9) (210.2) A m ortisation 72.6 21.0 93.6 75.2 N et cashflow (8.5) (8.8) (17.3) (135.0) N et receivable 208.0 20.6 229.2 236.4 Creditors 79.1 9.3 88.4 42.8
Slide 19: Capital expenditure
Capital expenditure £m 2003 2002 2004 2003 Estim ate D epreciation G am ing* 44.8 40.0 70 -80 26.3 H ard Rock 12.4 26.2 10 -15 17.3 D eluxe 33.7 30.4 25 -30 32.5 U S H olidays 1.0 1.3 - 0.8 91.9 97.9 105 -125 76.9 * excluding RLM S
Slide 20: Group capital structure
Group capital structure 31 D ec 31 D ec £m 2003 2002 N et debt (700.5) (399.1) Preference shares - (226.6) A djusted net debt (700.5) (625.7) D eluxe contract advances receivable 229.2 236.4 A verage rate on net debt 5.4% 5.5% Fixed charge cover 4.4x 5.0x
Slide 21: Current trading and outlook
Current trading and outlook • Gaming • Hard Rock • Deluxe • Other items – currency – RLMS
Slide 22: Mike Smith, Chief Executive
(x2 Rank Group M ike Sm ith Chef Executve
Slide 23: Business overview
Business overview • Deluxe – number one in film, with range of other services – Media now has strong presence in DVD • Hard Rock – extending the brand into hotels and casinos • Gaming – bolstering strong market positions – preparing for deregulation
Slide 24: Deluxe Film Summary
Deluxe Film Summary • New labs in Toronto, Rome, Spain and Australia • Added Services – ETS – Capital FX • No major acquisitions or capex planned
Slide 25: Deluxe Media Summary
Deluxe Media Summary • Transformation to DVD nearly complete • 162m DVD produced in 2003 (2002 - 69m) • Distribution is key - 523m units shipped in 2003 (2002 - 443m units) • Limited capex going forward
Slide 26: Hard Rock
Hard Rock • Trading at the cafes impacted by lower merchandise sales • Food and beverage sales positive . . . • Modest expansion of owned cafes • Development now centred The new ly opened cafe in Cardiff on brand extensions, not just cafes . . .
Slide 27: Hard Rock Hotels
Hard Rock Hotels • Orlando performing well • Sol Meliá JV
Slide 28: Hard Rock Branded gaming
Hard Rock Branded gaming The Tam pa H ard Rock hoteland casino
Slide 29: Gaming Mecca Bingo
Gaming Mecca Bingo • Relocations – York, West Bromwich, Burton • 4 combined premises by end of 2004 • Product development – electronic bingo – cashline – Section 21 machines The relocated M ecca in York
Slide 30: Gaming Grosvenor Casinos
Gaming Grosvenor Casinos • Investment in new licences and relocations still driving returns The new G rosvenorCasino in Plym outh Existing G rosvenorCasinos N ew /relocated G rosvenorCasinos
Slide 31: Gaming Blue Square
Gaming Blue Square • Fully integrated – £5m cost savings – one account • Product development – new games – poker room – Blue Square casino • Blue Square shop Blue Square headquarters in London
Slide 32: UK Deregulation Key issues
UK Deregulation Key issues • Timing • Rank’s prospects in a post deregulation environment • Increased competition? • Deregulation economics
Slide 33: UK Deregulation Timing
UK Deregulation Timing • Joint Committee due to report on 8 April 2004 • First reading in 2004 • Royal assent in 2005 • While no certainty, we remain optimistic
Slide 34: UK Deregulation Key features
UK Deregulation Key features • Budd proposals still largely intact – relaxation of membership and 24 hour rule – non-permitted areas to go – advertising to be allowed – multi gaming venues to be allowed – more slots…but how many? • Change in Duty rate still unknown
Slide 35: UK Deregulation Rank's position
UK Deregulation Rank’s position • First mover advantage – 3.3m sq ft of gaming premises – 121 bingo clubs – 1m Mecca members, 900k Grosvenor members – management expertise – full suite of gaming products M ecca clubs in non-perm itted areas M ecca clubs in perm itted areas
Slide 36: UK Deregulation Competition
UK Deregulation Competition • More competition is expected . . . but from whom remains unclear • Key to success will be anticipating customer behaviour • Two studies – Pion Economics - lots of tourist gaming – BISL - very little tourist gaming • Property is key
Slide 37: UK Deregulation Rank's strategy
UK Deregulation Rank’s strategy • Rank believes the market will remain ‘local’. . . • Property is key • Rank’s focus likely to be in the provinces: – the greatest opportunity – we already have a competitive advantage . . .
Slide 38: Rank's competitive advantage
Rank’s competitive advantage • 121 Mecca Bingo clubs • 36 Grosvenor casinos • 2.8m sq ft • 15 of which are new • 65 in non-permitted areas • 0.5m sq ft • 67 potential conversions, • 382 gaming tables 30 in non-permitted areas • 547 electronic roulette • 1.0m members • 0.9m members • 353 jackpot mach
Slide 39: Deregulation economics
Deregulation economics • Machines will be the key driver • With 50 casinos, under current proposals – tables could reach 600 – electronic roulette could reach 700 – slot numbers could reach 1,800 • Additional costs – marketing, staff – capex (development and conversions, slots) – duty rate ?
Slide 40: Rank Group Summary
Rank Group Summary • Good progress on all fronts – Deluxe transition to DVD and continued film growth – Hard Rock brand extensions – Gaming relocations and openings • Gaming will be the focus for 2004/05 • Well placed to take advantage of deregulation
Slide 41: Preliminary Results 2003
,2 Rank Group Prelm nary Results 2003