EXPERIENCING ENTERTAINMENT THE RANK GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014

Transcription

1 EXPERIENCING ENTERTAINMENT THE RANK GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014

2 Clive Jennings finance director 2

3 FINANCIAL HEADLINES H1 2014/15 H1 2013/14 Gross revenue (1) Operating profit (2) EBITDA (2) Operating cash inflow Net debt (3) Adjusted earnings per share (2) Total dividend per share 361.7m 40.8m 62.1m 72.8m (94.9)m 7.1p 1.60p 352.4m 32.7m 54.2m 49.7m (135.1)m 5.3p 1.35p Strong result for first six months on back of modest revenue growth Operating profit up 25% Strong operating cash inflow up 46% with net debt reduced by 42.1m over last six months Strong increase in interim dividend up 19% (1) before adjustment for free bets, promotions and customer bonuses (2) before exceptional items (3) position at the end of the 6 month period 3

4 REVENUE & OPERATING PROFIT Revenue (4) Operating profit (5) m H1 2014/15 H1 2013/14 H1 2014/15 H1 2013/14 Grosvenor Casinos Mecca Enracha Central costs (14.0) (9.7) Total continuing Casinos comprise 57% of profit before central costs Remote Gaming Duty at 15% payable from 1 December on all UK digital income Central costs reflect investment in increasing IT capabilities, particularly to support digital growth and platform change, restructuring of management team and normalisation of bonus provisions (4) before adjustment for free bets, promotions and customer bonuses (5) before exceptional items 4

5 OPERATING PROFIT BRIDGE m 32.7 (1.2) Irrecoverable VAT 3.6 Estimated benefit of bingo duty cut 4.3 Improvement in digital 5.7 Improvement in venues (2.0) Higher central employment costs (2.3) Other central costs 40.8 H1 2013/14 operating profit H1 2014/15 operating profit 5

6 GROSVENOR CASINOS m H1 2014/15 H1 2013/14 H1 2014/15 H1 2013/14 London Provinces Belgium Venues total Digital Total brand Revenue (6) Operating profit (7) (0.9) 28.2 KPIs Visits (000s) Spend per visit ( ) 4, Venues 4, Digital Growth in UK customer visits and revenue partially offset by one-off costs Continued strong digital growth, now in profit (6) before adjustment for free bets, promotions and customer bonuses (7) before exceptional items 6

7 MECCA m Venues Digital Total brand Revenue (8) Operating profit (9) H1 2014/15 H1 2013/14 H1 2014/15 H1 2013/ KPIs Visits (000s) Spend per visit ( ) 5, Venues 6, , Digital 2, Reduction in rate of decline in customer visits mitigated by spend per visit growth to leave comparable revenue marginally down on comparable period Paper bingo prices cut by 24% as part of investing bingo duty cut to 10% Planned closure of three loss making ex cinema venues during the period with another two in February Digital market remains extremely competitive with continuing shift to mobile which has lower ARPU (8) before adjustment for free bets, promotions and customer bonuses (9) before exceptional items 7

8 IMPROVING BINGO VENUE TRENDS 0.0% -1.0% -2.0% Comparable Venue Visits Jan-Jun H2 2013/14 Jul-Dec H1 2014/15 0.0% -0.5% -1.0% -1.5% Comparable Venue Revenue Jan-Jun Jul-Dec H2 2013/14 H1 2014/15-3.0% -2.0% -4.0% -2.5% -3.0% -5.0% -3.5% Cautious optimism about the recent slow-down in the rate of admissions decline Income showing a more significant improvement Paper bingo prices to play cut by 24% as part of investing bingo duty cut 8

9 ENRACHA H1 2014/15 H1 2013/14 Revenue ( m) Revenue (euros m) Operating profit ( m) (10) KPIs Visits (000s) Spend per visit (euros) Improvements in trading offset by FX impact Comparable customer visits and local currency spend per visit back in growth (10) before exceptional items 9

10 STATUTORY PROFIT & LOSS m H1 2014/15 H1 2013/14 Profit from continuing operations Net interest payable Profit before tax and exceptional items Exceptional items Profit before tax / (loss) Taxation Discontinued operations Profit for the period 40.8 (5.9) (8.0) (4.4) 28.3 (34.5) (6.2) Increase in interest driven by other financial losses (FX) Effective tax rate: 22.9% Discontinued operations comprises release of tax provision 10

11 EXCEPTIONAL ITEMS & DISCONTINUED OPS m H1 2014/15 H1 2013/14 Onerous property leases Net impact of club closures Integration costs Indirect taxation Net finance costs Total exceptionals pre tax Taxation Discontinued operations Total exceptionals post tax (1.0) (1.2) (26.1) (7.2) (34.5) (22.9) Club disposals reflects the benefit from the closure of three bingo clubs in the UK and one in Spain Discontinued operations comprises the release of a tax provision following the successful conclusion of a USA / Canada transfer pricing dispute 11

12 CASH FLOW AND NET DEBT m Cash inflow from operations Capital expenditure Fixed asset disposals Operating cash inflow Discontinued operations Acquisition and disposal of businesses Net cash payments; provisions and exceptional items Net interest and tax Settlement of legacy tax issues Dividends paid New finance leases Other (11) Cash inflow / (outflow) Opening net debt Closing net debt H1 2014/15 H1 2013/ (15.8) (0.1) (4.3) (12.3) - (1.0) 42.1 (137.0) (94.9) 49.7 (29.7) (0.4) 0.9 (2.9) (5.5) (31.1) (11.1) (2.3) 0.9 (31.3) (103.8) (135.1) (11) Includes FX translation 12

13 CAPITAL INVESTMENT m H1 2014/15 H1 2013/14 Grosvenor Casinos Mecca Enracha Central Total Finance leases Mecca Total capital expenditure /15 guidance circa 40-45m Mecca capex programme restarted post duty cut (venues refurbs and new product) Southend casino opened and Bournemouth refurbishment completed Luton 05 Act expansion commences H2 and completes by September

14 FINANCIAL STRENGTH Undrawn revolving credit facilities of 80.0m expiring January m term loans expiring May 2016 Strong operating cash flow with last 12 months EBITDA of 123.9m Conservative leverage of c.0.8 times Legacy tax issues now largely resolved Potential VAT reclaims Supreme Court hearing April

15 Henry Birch chief executive 15

16 H1 SUMMARY Strong profit performance Improved performance across all brands and channels Encouraging growth in digital Agreement for a new digital platform in place New management team in place Delivery against strategic objectives 16

17 OPERATIONAL REVIEW: Mecca Venues Improved performance around visits and revenue: focus on value to our customers reducing the cost of bingo continuing to improve our F&B offer Continued focus on improving efficiency with a 6% saving in direct payroll expenses in H1 Maintaining active retail customer base (938k vs 940k) Closure of 3 loss-making clubs in H1: reduced revenues but improved profitability 17

18 MECCA: H2 and Investment Post Bingo Duty Cut Prices cut on 89% of main stage bingo sessions 7 clubs to be refurbished in current year with another 5 to 7 planned for next year 2.4m investment into our Mecca Max handheld bingo units to improve the customer experience: 1,000 additional units purchased and up to 1,000 further units to be replaced with smaller tablet format Roll-out of new server based slot machines and upgrade of existing machines to commence in H2 Customer research and site finding underway for three new format bingo clubs, with first build to start this year Other H2 activity: TV campaign to commence H2 to promote club experience as well as digital Focus on simplifying and improving CRM and customer communications 18

19 OPERATIONAL REVIEW: Grosvenor Venues 4% revenue growth despite weaker provincial win margin and some one-off costs Launch of Black Card and Gold Card service level for VIPs Opening of Grosvenor Southend in September 2014, opening of Oldbury casino, adjacent to Mecca, and refurbishment of Grosvenor Bournemouth Play Points (loyalty programme) now in 41 of our 58 UK Grosvenor clubs A further 10 ex-gala clubs integrated into the Grosvenor Casinos Endx customer management system Goliath the UK s largest land-based poker tournament 19

20 GROSVENOR VENUES: H2 Activity Extension of Grosvenor Luton new licence, improved product and customer experience Refurbishment of the Gloucester Launch of Grosvenor services app, pulling together club and digital services and info New TV campaign promoting digital and club experience New rota system expected to deliver cost savings New F&B menu to launch 20

21 OPERATIONAL REVIEW: Digital 16% digital revenue growth yoy 71% growth in Grosvenor 6% growth in Mecca 75% growth in operating profit Successful multi-channel promotion Mecca at 8.1% digital cross-over from retail (up from 7.1%) Grosvenor: 72% increase in multi-channel customers Organisational changes: new hires, shared functions across brands Mecca Mobile: 65% of customer base played on mobile generating 37% of revenues New ipad app launched in December

22 NEW DIGITAL PLATFORM Decision to move our core platform to Bede Gaming: Flexible, open architecture allowing quick and easy integrations - central to joining up retail Control of product and functionality roadmap Improved bonusing, CRM and business intelligence Allows us to work with best of breed products and content: Playtech, IGT, Novomatic, Evolution Safecharge, WMS, Bally Potential for equity participation via a convertible loan and a call option: Allows Rank to benefit from Bede success Allows visibility into a key supplier 22

23 DIGITAL PLATFORM ROLL OUT Sequential roll-out of brands: Grosvenor, Mecca, Enracha First brand live within 2015 Staged roll-out of development: Stage 1 - all brands live on new platform with all existing integrations complete Stage 2 - Rank-specified enhanced functionality roadmap delivered (coterminous with Stage 3) Stage 3 - single account and single wallet across digital and retail delivered Stage 4 - joined up multi-channel content and systems Dedicated project team to ensure that whilst development and integration occurs, business as usual continues and recent growth is maintained 23

24 DIGITAL H2 ACTIVITY Primary focus on new platform Incremental operational improvements - digital enablers: e.g. allowing multiple payment methods on mobile & tablet Formation of a shared digital marketing team across brands and a single digital agency New games content (from IGT, Playtech/VF, Blueprint, Bally, WMS, Novomatic), including a tri-channel coordinated games release A new fully responsive and adaptive website for Mecca to deliver a consistent experience across devices 24

25 STRATEGIC UPDATE AND PROGRESS 1. Creating a Compelling Multi-Channel Offer Deal signed with Global Draw/Videobet to supply 1,000 new server based terminals for Mecca and upgrade 1,367 existing units 2. Building Digital Capability Agreement in place with Bede Gaming to supply core digital platform Strengthening of team including appointment of Colin Cole-Johnson as Group Director of Digital and Cross Channel Services New native ipad app with integrated side games 3. Venue Development Opening of Southend G Casino in September 2014 Award of 2005 licence in Luton. Extension work to existing Luton casino to be carried out this year to incorporate the new licence Progression to stage 2 of the licensing process for the new Southampton 2005 Act casino licence 25

26 STRATEGIC UPDATE AND PROGRESS 3. Venue Development cont: Refurbishment of Grosvenor Bournemouth Opening of an electronic casino adjoining to Mecca Oldbury, using an unutilised Grosvenor casino licence Increased maintenance and refurbishment budget (42% yoy increase) in Mecca venues 4. Investing in our Brands and Marketing New TV campaigns for both Mecca and Grosvenor launching in H2 New marketing agency has been appointed for Mecca, with a Grosvenor review under way 5. Using Technology to Improve Efficiency and Customer Service Addition of 1,000 new Mecca Max handheld units introduced across the estate in H1. Up to 1,000 further units to be introduced this calendar year Outsourcing of 24/7 IT support Reduction in labour costs through use of scheduling tools 26

27 NEW MANAGEMENT TEAM Martin Pugh MD Mecca (Camelot, Virgin Active, Safeway) Colin Cole-Johnson Director of Digital and Cross Channel (William Hill, Ladbrokes) Mark Jones MD Grosvenor Casinos (Mecca, Premium Bars and Restaurants, Yates, Pizza Hut) Keith Woodcock CTO Frances Bingham Co Sec and General Counsel Henry Birch Chief Executive Clive Jennings Finance Director Sue Waldock HR Director 27

28 OUTLOOK Deliverables and Current Trading Ongoing delivery of improvements in line with strategic priorities Focus of calendar delivery of new digital platform Current trading: only covers short four week period All brands are showing year on year growth Strong growth in digital casino continuing Subject to shareholder consultation, H2 may contain a provision for a new LTIP Confident of hitting full year market expectations 28

29 Appendices 29

30 ANALYSIS FOR DATA SHEETS Each operating businesses results recast to 30 June accounting reference date - H1 2014/15: 6 months to 31 December FY 2013/14: 12 months to 30 June H1 2013/14: 6 months to 31 December FY 2012/13: 12 months to 30 June H1 2012/13: 6 months to 31 December FY 2011/12: 12 months to 30 June

31 GROSVENOR CASINOS VENUES DATA SHEET H1 2014/15 FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 Casino licences London Provinces Belgium Total Non-trading licences Revenue ( m) EBIT ( m) Operating margin Customers MAT (000s) (1) Visits (000s) Spend per visit ( ) % 1,743 4, % 1,770 8, % 1,713 4, % 1,288 6, % 1,282 3, % 1,193 6, Electronic gaming (UK only) B1 machines B2 machines B3/C/D machines Electronic casino terminals 1, ,759 1, ,732 1, , , , ,072 (1) Active customers on a Moving Annual Total basis, excluding Belgium 31

32 MECCA VENUES DATASHEET HY 2014/15 FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 Venues Revenue ( m) EBIT ( m) Operating margin Customers MAT (000s) Visits (000s) Spend per visit ( ) % 938 5, % , % 940 6, % , % 958 6, % , Electronic gaming B3/B4 machines (2) C/D machines 1,749 3,342 1,762 3,407 1,841 3,423 1,908 3,577 1,224 4,213 1,164 4,285 Electronic bingo terminals 8,856 8,481 8,170 8,075 8,100 8,055 (2) includes B3 machines located in adult gaming centres, operated by Rank and located adjacent to Mecca Bingo clubs 32

33 ENRACHA DATASHEET H1 2014/15 FY 2013/14 H1 2013/14 FY 2012/13 H1 2012/13 FY 2011/12 Venues Revenue ( m) EBIT ( m) Operating margin % % % % % % Customers MAT (000s) Visits (000s) Spend per visit ( ) , , ,

34 UK CASINOS MARKET SUPPLY Operator Grosvenor Casinos Genting London Clubs A&S Leisure Double Diamond Aspers/Aspinall s Club 36 Clockfair Guoco Others Total Casino Venues Total Licences Source: company research 34

35 UK BINGO CLUBS MARKET SUPPLY Operator Gala Bingo Mecca Bingo Top Ten Bingo Carlton Clubs Castle Club 3000 Beacon Others Total Clubs (3) Source: Bingo Association (3) excludes the conversion of adult gaming centres to bingo clubs 35

36 DIVIDEND GROWTH 5.00p p p p p p 2010/ / / / / / / / / /15 Interim dividend Total full year dividend Dividend cover Strong growth in dividend Dividends growing faster than earnings 36