Rank Group Plc · LSE:RNK
Rank — The Rank Group — H1 2013/14 Earnings Presentation
38 slides from Rank's earnings presentation, February 2014
Slide 1: The Rank Group Presents Interim Results
Slide 2: Introduction
Introduction Ian Burke, chairman and chief executive Review of financial results Clive Jennings, finance director Strategy and operational update Ian Burke
Slide 3: Clive Jennings, finance director
Clive Jennings finance director
Slide 4: Group results summary
restated 6 months to 6 months to 31 Dec 2013(1) 31 Dec 2012(1) change Gross revenue(2) £352.4m £304.4m 16% Operating profit(3) £32.7m £38.2m (14)% Adjusted earnings per share(3) 5.3p 6.8p (22)% (3) EBITDA £54.2m £57.6m (6)% Operating cash inflow £49.7m £60.7m (18)% Net (debt) / cash(4) £(135.1)m £62
Slide 5: Revenue and operating profit by brand
(5) (6) Revenue Operating profit H1 H1 H1 H1 £m 2013/14 2012/13 change 2013/14 2012/13 change Grosvenor Casinos 194.2 144.5 34% 28.2 25.4 11% Mecca 143.5 146.1 (2)% 13.9 22.5 (38)% Enracha 14.7 13.8 7% 0.3 0.4 (25)% Central costs (9.7) (10.1) (4)% Total continuing 352.4 304.4 16% 32.7 38.2 (14)% (5)
Slide 6: Operating profit bridge H1 2012/13 to H1 2013/14
£m 9.4 (3.2) (4.5) (4.6) July hot (2.2) 38.2 weather (1.0) 0.6 Exceptional Acquired Mecca Park Tower casinos admissions Digital IT Other casino win fall shared investment items 32.7 service costs H1 2012/13 H1 2013/14 operating operating profit profit
Slide 7: Grosvenor Casinos
(7) (8) Revenue Operating profit H1 H1 H1 H1 £m 2013/14 2012/13 change 2013/14 2012/13 change London 46.8 57.2 (18)% 10.3 16.5 (38)% Provinces 80.6 75.4 7% 9.4 10.8 (13)% Belgium 7.5 7.5 0% - (0.1) 100% Acquired casinos 53.5 - 9.4 - Venues total 188.4 140.1 34% 29.1 27.2 7% Digital 5.8 4.4 32% (0.9)
Slide 8: Mecca
(9) (10) Revenue Operating profit H1 H1 H1 H1 £m 2013/14 2012/13 change 2013/14 2012/13 change Venues 113.7 115.7 (2)% 7.1 11.1 (36)% Digital 29.8 30.4 (2)% 6.8 11.4 (40)% Total brand 143.5 146.1 (2)% 13.9 22.5 (38)% KPIs Venues change Digital change Visits (000s) 6,209 6,864 (10)% 2,323 2,436 (5)%
Slide 9: Enracha
H1 H1 2013/14 2012/13 change Revenue (£m) 14.7 13.8 7% Revenue (euros m) 17.3 17.3 - Operating profit (£m) 0.3 0.4 (25)% KPIs change Visits (000s) 989 998 (1)% Spend per visit (£) 14.86 13.83 7% • Continuing tough economic conditions • Barcelona venue converted to Enracha format in H1
Slide 10: Costs
H1 H1 £m 2013/14 2012/13 change Employment 115.3 95.8 20% Direct costs 28.2 26.0 8% Property costs 30.8 25.3 22% Other 23.9 18.7 28% Sub total 198.2 165.8 20% Marketing - online 6.1 5.5 11% - offline 12.3 9.5 29% Taxes & duties 66.2 52.2 27% Depreciation 21.5 19.4 11% Total costs 304.3 252.4 21% • A
Slide 11: Income statement and tax
H1 H1 £m 2013/14 2012/13 Profit from continuing operations 32.7 38.2 Net interest payable (4.4) (1.9) Profit before tax and exceptional items 28.3 36.3 Exceptional items (34.5) (8.1) Profit / (loss) before tax (6.2) 28.2 Taxation (4.1) (10.0) Taxation – exceptional 8.8 0.6 Discontinued operations 2.
Slide 12: Cash flow
H1 H1 £m 2013/14 2012/13 Cash inflow from continuing operations 49.7 60.7 Capital expenditure (29.7) (17.1) Fixed asset disposals 0.2 2.0 Operating cash inflow 20.2 45.6 Net cash payments; provisions and exceptional items (2.9) (5.3) Discontinued operations (0.4) (4.7) Purchase price adjustment 0.9
Slide 13: Capital expenditure
H1 H1 £m 2013/14 2012/13 Grosvenor Casinos 13.0 10.4 Grosvenor Casinos - acquired 11.9 - Mecca 3.7 3.8 Enracha 0.5 0.5 Central 0.6 2.4 Total 29.7 17.1 Finance leases – Grosvenor Casinos - 0.5 Finance leases – Mecca 2.3 0.3 Total capital expenditure 32.0 17.9 • FY 2013/14 capex estimate £48m-£52m • F
Slide 14: Financing and liquidity
• Current undrawn revolving credit facilities of £60m • Strong operating cash flow with annualised EBITDA of c.£110m • Conservative leverage of less than 1.3 times • No refinancing required for at least 2 years • Application to appeal to the Supreme Court on slots litigation lodged; decision on perm
Slide 15: Current trading and outlook
• Results only for a short 4 week period; in-line with management’s expectations • Group revenue continuing to grow year on year • Anticipate H2 profits (excluding acquired casinos) will be broadly in line with last year
Slide 16: Ian Burke, chief executive
THE RANK GROUP PRESENTS Ian Burke chief executive
Slide 17: Current situation and strategy
• Current situation and improvement plan • Strategy and priorities
Slide 18: H1 positives and issues
H1 Positives • Integration of the acquired 19 casinos has gone well • Growth (from a low base) in digital casino channel H1 Issues • Mecca brand performance, in venues and digital • London casinos win %
Slide 19: Key elements of improvement plan
Key elements of improvement plan • Improving value for money for our customers • Tight control of costs • Capex focused on acquired casinos and new casino on Edgware Road
Slide 20: Strategic priorities
• Building winning brands (in a multi-channel world) • Delivering operational excellence (through people and support systems) • Wider brand distribution
Slide 21: Building winning brands: customer insight
• Customer insight critical – understanding of needs (social, excitement, escape, control) – RFM (Recency, Frequency, Monetary Value) • Product, service, experience development based on insight – improved gaming, food, drink and entertainment product • Marketing programmes driven by Customer Relatio
Slide 22: Operational excellence: people and systems
• People (recruit and retain) – satisfaction 79%, annual team turnover 25% - consistent over past 3 years • Systems – gaming platform to deliver games content to customers (where they want to play) – business intelligence – infrastructure support
Slide 23: Venue and mobile development
• Venue development – 3 conversions to G format (Glasgow Merchant City, Liverpool, Leicester) – major refurb (Tottenham Court Road Dec 13) – new casino on Edgware Road plus refurbishment of the Victoria – new clubs Southend (open autumn 14) • Mobile development – iPhone /iPad/Android applications
Slide 24: H2 and medium term focus
• Deliver a strong H2 on back of actions underway • Medium term focus on: – Grosvenor Casinos venue development (product, design) – building digital business (particularly mobile) – preparing for introduction of Remote Gaming Duty (POC) – stabilising Mecca venues – strengthening IT capability
Slide 25: Grosvenor Casinos product development
To continue the momentum of venue development initiated with the G Casino format • Gaming product – addition of bingo and sports betting • Non gaming product – food, drink and entertainment – late night sports
Slide 26: Digital development
To meet customer needs to play online • Web redesign • Content management systems • Games range • Mobile
Slide 27: Remote Gaming Duty
To mitigate the impact of the duty due end 2014 • Point of consumption tax basis • Significant disruption to digital market (assumption is 15% tax rate)
Slide 28: Mecca: stabilise and rebuild performance
To stabilise and rebuild performance • Improved value for money for existing customers • Development of proposition to attract and retain new customers • Capex restricted to essential works • Industry lobby for 15% tax rate (target March budget)
Slide 29: IT capability
To create IT system capable of supporting multi-brand multi-channel environment • New senior team • Investments in infrastructure (club servers, PCs, networks) • Simplification of 3rd party applications • Outsourcing non-core elements • Improvement to digital platform
Slide 30: Summary
• Rank operates in regulated markets and continues to work constructively with Governments and regulators • Grosvenor Casinos is the leading casino brand with opportunities for growth in all channels • Stabilising Mecca brand performance this year is a priority • Balance sheet remains strong
Slide 31: Appendices
THE RANK GROUP PRESENTS Appendices
Slide 32: 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 – 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 months to 30 June 2012 – H1 2011/12 6 month
Slide 33: Grosvenor Casinos venues KPIs
H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 FY 2010/11 Casino licences London 9 8 4 4 4 5 Provinces 54 51 33 33 33 32 Belgium 2 2 2 2 2 2 Total 65 61 39 39 39 39 Non-trading licences 13 17 10 10 10 10 Revenue (£m) 188.4 290.5 140.1 255.8 125.8 245.4 EBIT (£m) 29.1 49.5 27.2 42.8 20.4 38.6
Slide 34: Grosvenor Casinos estate current and forecast
Current estate Forecast estate (at 31 December 2013) (2015) Grosvenor Casinos – Traditional 32 28 Grosvenor Casinos – G format 24 29 Licences located alongside existing casinos 7 11 Non-trading licences 13 8(2) Total licences 76 76 Total casino venues 56 57 (2) Wolverhampton(x2), Middlesbrough, Lond
Slide 35: Mecca venues KPIs
H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 FY 2010/11 Venues 97 97 97 97 98 100 Revenue (£m) 113.7 234.9 115.7 237.8 117.4 237.5 EBIT (£m) 7.1 23.0 11.1 28.3 14.8 29.9 Operating margin 6.2% 9.8% 9.6% 11.9% 12.6% 12.6% Customers MAT (000s) 940 958 958 965 943 924 Visits (000s) 6,209 13,55
Slide 36: Enracha KPIs
H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 H1 2011/12 FY 2010/11 Venues 11 11 11 11 11 11 Revenue (£m) 14.7 28.5 13.8 29.2 14.9 33.5 EBIT (£m) 0.5 1.6 0.8 1.4 0.5 4.0 Operating margin 3.4% 5.6% 5.8% 4.8% 3.4% 11.9% Customers MAT (000s) 278 276 291 305 308 319 Visits (000s) 989 1,980 998 2,049 1,064
Slide 37: UK casino operators
Casino Total Operator Venues Licences Grosvenor Casinos 56 76 Genting 40(4) 57(4) London Clubs 9 11 A&S Leisure 6 6 Double Diamond 5 5 Aspers/Aspinall’s 4 7(4) Club 36 3 3 Clockfair 2 2 Guoco 1 1 Gala - 1 Others 11 29(4) Total 137 198 Source: company research (4) includes 2005 Act casino licences
Slide 38: UK bingo operators
(5) Operator Clubs Gala Bingo 137 Mecca Bingo 97 Top Ten Bingo 11 Carlton Clubs 13 Castle 11 Club 3000 11 Beacon 9 Others 95 Total 384 Source: Bingo Association (5) excludes the conversion of adult gaming centres to bingo clubs