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Rank “well positioned” to benefit from white paper reforms, says CEO

| By Marese O'Hagan
Reflecting on Rank Group's H1 2023-24 results, CEO John O'Reilly said the company is “well positioned” to benefit from the land-based reforms outlined in the Gambling Act review white paper over the next few months.
Rank half-year results

The Gambling Act review white paper outlined a number of measures for land-based venues. In its H1 report, Rank outlined how it expects to benefit from these new measures, subject to the ongoing consultation process.

Rank expects the process to double the number of gaming machines in the Grosvenor Casino estate, and allow electronic payments in casinos and bingo venues.

In addition, the white paper proposed removing the current 80:20 ratio of category B and C/D gaming machines, replacing this with a 50:50 model. However, Rank acknowledged that a further consultation published by the department of culture, media and sport (DCMS) proposes altering the ratio to 2:1 or 3:1 category B3 machines to category C or D.

“We are well positioned to optimise the opportunities afforded by the UK government’s planned land-based regulatory reforms which will hopefully be implemented through the passing of secondary legislation in the summer of 2024,” said O’Reilly. “These reforms cannot come soon enough in enabling us to modernise our proposition to better meet our customers’ expectations.”

Half-year revenue and performance by division

In Rank’s half-year results, net gaming revenue (NGR) totalled at £362.6m for the first half of the year, up by 7.0%. Comparably, revenue for H1 2022-23 rose by just 1.6% yearly.

O’Reilly said Rank is beginning to build revenue again following a “very challenging few years”, which had been affected by a range of factors. He added that this was being mitigated by “strong operational leverage”.

“… we are improving our profitability, with the group delivering revenue and operating profit growth across all businesses,” he said.

Grosvenor venues brought in the highest amount of revenue for the six months, coming to £167.5m, This was an increase of 10.1% yearly, with £56.4m of this coming from London and £111.1m attributed to the rest of the UK.

Rank said that the average revenue per week was £6.4m for Grosvenor during the period, up by 10.3%. It hopes for this to increase to £7.0m per week excluding any impact from the Gambling Act review.

Active customers at Grosvenor grew by 2%, while total customer visits grew 8%.

Revenue up across the board

digital revenues for rank amounted to £108.4m, a 7.5% increase

The second highest revenue came from Rank’s digital division at £108.4m, which increased by 7.5%.

Revenues from Mecca and Enracha were £67.2m and £19.5m respectively.

For Mecca, revenue was up by 8.5%. Rank noted that it had closed 20 “loss-making venues” since reopening in May 2021. One more venue closed during H1 2023-24, resulting in a total of 55 Mecca venues. Rank noted closure costs of £100,000 in the report for the period.

The group added that the closures were carried out to move customers and bingo liquidity to stronger Mecca venues. Total visits were up 2% and total spend per visit ticked up by 7%.

Enracha, Rank’s Spanish brand, benefitted from an £800,000 capital investment during the six months. This was used to fund the ongoing rollout of the Enracha loyalty card. Enracha revenue was up by 9.5% during H1. The volume of Enracha customer visits were up 9% and spend per visit grew 1%.

Rank improves on year-on-year loss

The cost of sales for the half-year totalled £208.3m, resulting in a gross profit of £154.3m. This is up by 18.2% compared to the £130.5m underlying gross profit in H1 2022-23.

The breakdown of costs for the half-year period were separated into two groups – underlying and total. Rank presents the underlying figures to exclude large and non-recurring items, which makes it easier to compare the underlying performance and profitability of the company.

In total, separately disclosed items made a £5.4m impact on operating profit.

Other operating costs delivered a further blow of £132.7m, taking the operating profit to £21.6m.

Net financing at £5.3m left the pre-tax profit at £16.3m. After considering tax of £2.8m, the profit for H1 was £13.5m, up by £19.1m yearly.

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