Rank Group reveals revenue and profit growth in first half

The Rank Group has announced a year-on-year increase in net gaming revenue and profit after tax for the first half of its financial year, driven by growth in its digital, Grosvenor venues and international venues divisions.

Like-for-like group underlying net gaming revenue for the six months to 31 December 2019 amounted to £377.5m (€444.8m/$490.2m), up 10% from £342.4m in 2018.

Rank reported year-on-year revenue growth across all of its businesses, with the exception of Mecca venues, where revenue slipped 1% to £89.6m.

Digital revenue was up 14% to £65.2m, driven by the performance of the Mecca and Grosvenor brands. Mecca digital revenue grew by 13%, while revenue from Grosvenor digital operations jumped 21%.

Elsewhere, Rank’s Grosvenor venues arm also saw significant growth, with revenue climbing by 15% from £172.0m to £198.1m, driven by higher staking levels and table win margin.

Rank also saw international venues revenue increase by 9% to £24.6m in the period, having benefitted from investment in product during the period.

In terms of spending in the first half, total costs before separately disclosed items amounted to £337.6m, an increase of 6.7% on the same period in the previous year. Total operating costs were up 2.6% to £127.2m, while cost of sales climbed 9.4% to £210.4m.

The operator’s main outgoing – employment and related costs – remained level at £117.3m, while property costs were lowered by 64.0% to £11.1m. However, direct costs climbed 13.6% to £45.2m, while marketing spend increased 18.4% to £21.2m.

Rank also noted an 85.8% year-on-year rise in depreciation and amortisation costs from £20.4m to £37.9m, while taxes and duties increased by 22.8% to £81.9m.

However, despite spending more during the period, revenue growth meant that Rank was able to post underlying operating profit of £55.1m, an increase of 70% on £32.5m in the previous year. This was based on performance prior to the impact of IFRS 16 measures.

With a positive impact of £3.8m expected from IFRS 16, Rank said underlying operating profit reached £59.8m for the period. Underlying profit before tax was also up 87% year-on-year from £30.5m to £52.9m.

“Group like-for-like ('LFL') underlying net gaming revenue (NGR) grew by 10% driven by pleasing Digital, Grosvenor venues and International venues performances,” Rank’s chief executive john O’Reilly said.

“Cost initiatives delivered through the transformation programme continued to flow into the half and, alongside strong NGR growth, delivered a 70% increase in LFL underlying operating profit.

“The group is one year into its three-year transformation programme and is on track to becoming a leading multi-channel gaming business. Following the delivery of the key cost initiatives, focus now increases on developing the group's revenue growth opportunities. 

“During the first half, we finalised the group's safer gambling workstream, with an initial focus on enhanced training for colleagues, review of customer messaging, continued development of our affordability and propensity models, the introduction of machine limits and tighter entry controls within Grosvenor venues.”

O’Reilly also noted the ongoing integration of Stride into the group, saying that the project is falling within the transformation programme’s framework to ensure the benefits from combining Stride’s and Rank’s digital businesses are maximised. Rank completed its acquisition of Stride in October last year in a deal worth £115.3m.

“The successful integration of Stride into our business will ensure that we benefit from strong synergies, proprietary technology and a first-class digital team, all of which will position us well for the second half of the year,” he said. “These are a good set of numbers and are a testament to our committed and talented colleagues across the Group who have worked hard to deliver them.”

Earlier this month, Rank said it is likely to post better-than-expected operating profit for the 12 months through to 30 June, 2020, due to positive trading within its digital and Grosvenor Casino and international land-based venues businesses.

Based on the trends experienced to date, Rank said operating profit for the year is now expected to amount to between £105m and £115m.