Summary:
The Rank Group said that like-for-like net gaming revenue (LFL NGR) was up 1% compared to the same period in the prior year, with like-for-like net gaming revenue growth in Mecca venues, Enracha venues and Digital offset by a decline in venues Underlying operating profit is expected to be in the range of 10 million to 20 million for the year ending 30 June.
In a trading update for the five months to 30 November, the Rank Group said that like-for-like net gaming revenue (LFL NGR) was up 1% compared to the same period in the prior year, with like-for-like net gaming revenue growth in Mecca venues.
Underlying operating profit is expected to be in the range of 10 million to 20 million for the year ending 30 June. It was down on an initial estimate of up to £55m, but the lower end of that estimate would be a quarter of the £40.4m achieved in 2021-22.
It was less than expected
The main variable within the estimate was the performance of the Grosvenor venues, due to the high operating leverage within them and their relative importance to the group as a whole.
The trading in Q2 was weaker than expected, with the weekly average NGR of £5.8m being only marginally ahead of the levels seen in the first quarter.
It was expected that the venues would continue to improve throughout Q2 and then into the second half of the year, but this hasn’t happened due to lower customer spend per visit. Due to the current challenging macro-economic backdrop, the return to growth will take longer than previously expected.
Mecca is a Mecca for bingo
Mecca customer visit numbers were up 4% in the first five months of the year, with Q2 weekly average NGR in line with the first quarter.
The cost of living pressure on consumers, as well as the lower visit numbers due to the World Cup and colder weather, have caused the weekly average NGR to weaken recently.
A level of downside risk to the full year out-turn for FY23 has been created by the year-to-date performance in its Mecca venues.
As investments into electronic product continue to deliver strong returns, Rank’s Enracha venues in Spain continued to perform strongly with NGR up 27%. Spanish customers are less impacted by cost of living pressures than those in the UK, so the group expects the Enracha venues to perform strongly for the remainder of FY23.
It is ranked Rank Digital
The Rank Digital business continues to deliver good growth, with NGR up 11%. The UK digital arm was up 10%, following the successful migration of Grosvenor onto its proprietary technology platform, while International was up 13%, driven by continued growth in YoBingo and the launch of YoSports in October 2022.
In issuing its profit estimate, Rank said total known cost increases for the year remain broadly in line with its expectations of approximately £50m driven by wage inflation, energy inflation, other price increases and Covid-19 related government support received in FY22.
Cost-cutting is done by the Rank Group
John O’Reilly said that the group was planning on cutting costs.
Weak consumer confidence and pressure on disposable income is resulting in a tougher-than- expected trading environment for our UK venues businesses, particularly in Grosvenor where we are seeing customers spending less per visit.
While we expect these challenges to impact our recovery into the second half of the financial year, we have implemented a series of measures to deliver incremental cost savings and to drive revenues.
We are committed to our plan of investing in initiatives that will ensure the long-term recovery and prosperity of the group. New products in our UK venues, enhancements to the design and facilities of some of our casinos, and upgrades to the table gaming and electronic offering are some of the things that are included.
Following the successful migration of all our brands onto our proprietary platforms, our digital team is now fully focused on delivering the improvements available to our UK and Spanish business.
Land-based weaknesses in the United Kingdom
The trading update provided by Rank shows that the UK land-based casino market is vulnerable to consumer retrenchment in the current climate.
Unless customers are prepared to spend more on gaming overall, something has to give, and it appears to be giving in the land-based casino market as well as in higher-spending bingo customers – the market and segment which happen to have the closest demographic overlap with higher-spending online This is a bigger problem for Rank than the market as its share of UK land-based gaming is only 14%), whereas its share of UK online gaming is only 4%).
A Rank Group fine is being appealed
The appeal of a fine handed down by the Great Britain Gambling Commission was unsuccessful.
The Commission uncovered a number of social responsibility and anti-money laundering deficiencies during an investigation over the course of a few months in January and March of 2020.
The financial penalty was a “fair and reasonable regulatory response” to the failures uncovered by the Commission, according to the judge who dismissed the appeal.