Rank warns of cost pressures for retail after posting £101.2m H1 loss

Since the easing of lockdown and other pandemic-relate measures, Rank said Britain has faced a huge increase in energy costs, high wage inflation, slow return of overseas visitors to London and increasing pressure on consumers’ discretionary income.

The Grosvenor Casinos and Mecca Bingo operator said while its trading across the Christmas and New Year period was strong, and this continued into the first three weeks of January 2023, the cost-of-living pressures are likely to continue to have an effect on British retail customers in the months ahead.

This, tied in with continued tightening of the regulatory environment, particularly in regard to affordability restrictions on customers, will likely mean a challenging period for Rank and other operators in the land-based sector, with Rank having already warned it will cut costs.

“The recovery from the severe impact of the pandemic on our UK venues businesses – Grosvenor and Mecca – has certainly been slower than we anticipated,” Rank chief executive John O’Reilly said.

“We experienced strong trading over the Christmas and New Year holiday period but recognise that the trading environment is likely to be challenging in the months ahead and cost pressures will continue to weigh heavily on the UK hospitality sector. 

“However, trading is improving as we invest in the quality of our products and properties, introduce new gaming concepts for our customers, reduce the level of intrusion in managing customer risk and reintroduce lapsed customers to the fun and excitement of our gaming experience.”

Looking at Rank’s performance in the six months to 31 December 2022, revenue during the first half of the operator’s 2022-23 financial year was £338.9m (€385.0m/$420.3m), up 1.6% year-on-year.

Grosvenor venues contributed £153.4m to the revenue total, 4.8% lower than the previous year, primarily due to the slower-than-expected return of visitors to London following the pandemic and tightening of affordability restrictions on higher-end customers.

While revenue from Mecca venues increased 4.1% year-on-year to £65.5m, Rank warned that the rate of customer volume growth has slowed since before the pandemic. Customer visits were 4.0% higher year-on-year, although Rank noted a decline in visits from its older cohort of players.

Revenue from Rank’s Enracha venues in Spain jumped 25.5% to £17.7m as the retail sector in the country continued a stronger recovery from the pandemic. However, while customer visits were 16.0% higher year-on-year, this was still 14.0% lower than pre-pandemic levels.

Turning to digital, revenue here was 9.5% higher at £100.8m, with Rank describing this as a “strong” performance for this area of the business. Mecca digital revenue was £36.1m, Grosvenor £27.8m and Enracha/Yo £11.6m, while Stride legacy brands contributed £25.3m.

Looking at spending and cost of sales stood at £303.8m, some 61.9% ahead of 2021-22, while operating costs climbed 10.7% to £136.4m and financial costs totalled £6.1m. 

As such, loss before tax was £107.1m, compared to a £101.5m profit at the same point in the previous financial year.

After taking into account a positive tax impact of £5.9m, this left a total net loss of £101.2m for the half, a stark contrast to the £84.0m profit posted in H1 of 2021-22.

“Given the challenges we have faced, I am very grateful to my colleagues across the group for their commitment to their customers and to the local communities they serve and for the progress we continue to make in the ongoing transformation of Rank,” O’Reilly said.