The Rank Group H1 2025 Earnings Report

The Rank Group EPS Results

• Actual EPS: GBX 4.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

The Rank Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

The Rank Group Announcement Details

• Quarter: H1 2025
• Date: 1/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 4:30AM ET

The Rank Group (LON:RNK) has been entertaining Britain since 1937, from its origins in motion pictures to today's gaming based entertainment brands. Over the course of more than three-quarters of a century, the Group has entertained many millions of customers in Britain and around the world. The Group's story is one of iconic brands and talented people with a mission to entertain.

The Rank Group H1 2025 Earnings Call Transcript

Presentation

[John O’Reilly, CEO at Rank Group]

Good morning, everyone. A video that provides a bit of a showcase of the Rent Group, providing sort of excitement and same to our customers, which is what we all do. Good morning. I'm John O'Reilly, Rent Group's CEO. Delighted to welcome you to our results presentation for the half year to 31 December 2024.

[John O’Reilly, CEO at Rank Group]

Many thanks for taking the time to join us here this morning. Many thanks to you for those of you joining us online. Richard is with me, Richard Harris, Rent Group CFO, who will take you through the details of the half year numbers. So you'll see it all. By way of a brief overview to get us started, it's been another really good half.

[John O’Reilly, CEO at Rank Group]

Really pleased with where we are. I think it's a 4th consecutive half in which we've delivered profits growth and we've entered the second half of the year with a really strong momentum. So we're in good order. We've been investing in our business and that investment is delivering strong returns. Right up front, I'd like to thank all my colleagues across the group for all the hard yards they put in over recent years to arrive at this point.

[John O’Reilly, CEO at Rank Group]

And it's a point at which Rent Group is making very strong progress and building both profitability and cash flow. So there are the headlines for the first half of the year. Like for like net gaming revenue is up 13% over the prior year at £402,000,000 Underlying like for like operating profit is £32,900,000 and that's up 55% on the first half of last year and is a little bit ahead of our expectations at this point. Groom and Casino's performance stepped up again with revenues up 15% to deliver an average weekly net gaming revenue of £7,300,000 and we said we get this revenue back above £7,000,000 per week, and we've achieved that a little bit faster than we expected. Mercury and Ratchet both delivered good solid performances.

[John O’Reilly, CEO at Rank Group]

The digital business grew by 14% in the first half with very strong growth from there to what we call cross channel brands, Groven and Casinos and Mecha Bingo both growing above 20%. And we've got the land based reforms to look forward to, with the casino reform expected to be implemented this coming summer, and I'll say a bit more about that later on. And with a strong momentum across the group, the Board has set an interim dividend of 0.65p per share. So we're in a strong position. Here's Richard to take you through the detailed numbers.

[Richard Harris, CFO & Director at Rank Group]

Thank you, John, and good morning, everyone. So starting with the key drivers of the profit improvement in the first half. It's a pretty simple story. The revenue growth of 13% contributed €28,400,000 of additional operating profit, a 63% drop through once taxes, duties and other direct costs are deducted. The cost inflation experienced over the last few years has largely abated with the clear exception of employment costs, which are up £14,700,000 in the half.

[Richard Harris, CFO & Director at Rank Group]

Depreciation is up marginally as a result of the investments we've been making in the business. And as a result, like for like operating profit was up 55% to £32,900,000 The story of the first half is expected to continue into the second half of this year and beyond. Employment costs for the full year are expected to rise around 10%, with the main drivers being the increase in the national minimum wage, the higher national insurance contributions, both of which step up from April and additional costs associated with colleague incentives. Looking into 2025, 2026, employment costs are expected to grow a further 6% to 7% due to the same factors. And the increase in the government statutory levy also takes effect from April and adds a further €4,500,000 of costs based on current annual run rate current annual revenues.

[Richard Harris, CFO & Director at Rank Group]

Going into the business unit detail on the first half in a bit more detail. So Groverner Venues grew by 15%, ahead of expectations. And the business is now largely recovered to the average weekly revenues that were achieved prior to the pandemic. Increased visits and higher spend per visits both contributed to the strong growth, up 7% 8%, respectively. Table Gaming revenue grew 23% as a result of increased visits and investments we've made in product and table management and a stronger than average table margin in the period.

[Richard Harris, CFO & Director at Rank Group]

We upgraded 341 electronic terminals in the first half, taking the total number of new machines to 600 over the last 2 years. Electronic gaming grew 16% as a result. Gaming machine revenues were up 6% and other revenues, including poker, were up 7%. Both product groups grew broadly in line with visits. Moving to look at geographically, both our London casinos and the rest of the U.

[Richard Harris, CFO & Director at Rank Group]

K. Grew strongly, giving us confidence that the performance and growth will be sustained into the future. As with the wider group, employment costs were the main headwind and there are programs in place to mitigate as much of the impact as possible. These efficiency programs are critical in our industry, given our limited ability to pass on cost inflation to the consumer. Like for like operating profit in the half was up 47% to CHF 20,600,000 Despite the external pressures on employment costs, we continue to invest in developing the skills of our Grosvenor colleagues, who are critical to offering an exciting and entertaining experience for our customers.

[Richard Harris, CFO & Director at Rank Group]

This is reflected in an increased employee engagement score of 8.2 up materially over the last 12 months. Having delivered 12% growth last financial year, digital growth has accelerated 14% in the first half, ahead of our medium term guidance. Both of our UK cross channel brands are up over 20%, reflecting the investments we've made in technology and the broader customer proposition. The non proprietary business declined 25% prior to disposal in December and the other U. K.

[Richard Harris, CFO & Director at Rank Group]

Brands grew 6%. The Spanish digital business through the Johan and Ratcha brands had a more challenging period, growing only 5% in the first half, which is below our expectations. And John will talk to the plans we have in place to improve performance in this area. Overall, digital operating profit in the first half grew 43% to £14,200,000 and operating margin is now up to 11.8%. We've grown operating margin by 540 basis points on the FY 'twenty three base.

[Richard Harris, CFO & Director at Rank Group]

And the medium term guidance of over 600 basis points takes into account the impact of statutory levy and maximum slot staking limits, both of which are expected to take effect in the final quarter of this financial year. Responsible gambling is a significant part of how we ensure a sustainable business for the long term, and it was pleasing to be recognized for the work we do in this area, recently winning EGR's Safer Gambling Operator of the Year Award. Moving on to land based bingo. In Mecca, we closed one further venue in the first half. And the cumulative effect of the estate rationalization that has happened over the last few years has helped to provide a more compelling customer proposition in our remaining 51 venues.

[Richard Harris, CFO & Director at Rank Group]

Revenue growth was 6%, with the selected investments we've made in external signage, supporting the 1% growth in visits. And spend per head grew 5%, driven by the more attractive main stage bingo game and the investments we've been making in gaming machines, where revenue grew by 9% in the half. Mecca like for like operating profit grew to €300,000 as the higher employment costs partially offset the improved revenue contribution. We saw record colleague engagement scores in Mecca of 8.5 out of 10, a very strong result across the board. In Spain, there was further revenue and profit growth from our estate of 9 well invested flagship venues in enrapture.

[Richard Harris, CFO & Director at Rank Group]

Revenue was up 7%, driven by 7% increase in visits and benefiting from our Enratcher loyalty program, which we continue to evolve. The investments we've made in gaming machines over the last few years also continue to pay off with revenue up a further 10%. In matches, like for like operating profit was up 13% to £5,400,000 So you can see here a bridge from operating profit to net free cash flow, which was €4,300,000 in the period. I'm just going to highlight a couple of points. So lease payments were €18,900,000 exactly in line with where we were last year.

[Richard Harris, CFO & Director at Rank Group]

Capital expenditure in the period was €27,300,000 and I'll provide a bit more detail on that shortly. We had a working capital outflow of £3,900,000 which is temporary in nature and expected to have reversed by the end of the year. And on the right hand side of this slide, you can see the flow through of net free cash flow into closing net cash of £24,200,000 excluding lease liabilities. £3,000,000 inflow relates to the upfront consideration we received on the disposal of the non proprietary business. And we expect to receive a further £4,500,000 for consideration over the next 3 years or so.

[Richard Harris, CFO & Director at Rank Group]

As you know, we restarted the final dividend last year, totaling €4,000,000 and that was paid in October. When we include lease liabilities, net debt finished at €111,800,000 And as we discussed at the year end results, we expect lease liabilities to increase over time to 4.5 to 5 times annual lease payments. This is primarily linked to the extension of leases for key strategic properties within Grosvenor. And the timing will be uncertain, but dependent on when the leases get signed. Having restarted the dividend at modest levels at the end of the last financial year, it's now appropriate to give some color on how we think about capital allocation across the group.

[Richard Harris, CFO & Director at Rank Group]

The board's primary intention, as always, is to ensure the group maintains a strong balance sheet position and has appropriate financing in place to manage our operational requirements. We'll continue to invest capital in a disciplined manner to further improve the customer proposition and to maximize the opportunity presented by the land based reforms. This includes addressing the historical backlog of infrastructure and maintenance investment that is required to keep our venues operating effectively. Growth capital expenditure is subject to strict hurdle rates, typically with a payback of 3 years or less. And we prioritize investment in venues based on the competitive potential in local markets.

[Richard Harris, CFO & Director at Rank Group]

Those markets with the clearest growth opportunities and investments that allow us to quickly assess the impact of the land based reforms. Performance in the areas we've been investing in has been very encouraging so far and this is borne out in the first half results. We'll make returns to shareholders by way of an ordinary dividend, operate in a progressive policy and with a payout ratio that is expected to grow to over 35%. After the consideration of any inorganic growth opportunities in line with our strategic plan, well then any surplus cash will then be returned to shareholders through supplementary returns at the board's discretion. In January, we extended €100,000,000 of the group's €120,000,000 banking facilities for a further year.

[Richard Harris, CFO & Director at Rank Group]

And this ensures we've got appropriate financing in place to support delivery of that plan over the next 3 years. There's a further extension available to us in December 2025, subject to the banking group's agreement. As a result of lower facilities drawings, we now expect net underlying financing charges to be in the range of £10,000,000 to £10,500,000 for 202420 4, 2025. And the charge is expected to be at the bottom end of that range in 2025, 2020 6, so circa £10,000,000 And in both years, the IFRS 16 lease interest charge is expected to be around £6,000,000 You can see here an overview of capital expenditure in the half, with total spend of €27,300,000 up from just over €19,000,000 last year. As mentioned, we're working through the historical backlog of maintenance and infrastructure investment, and this is necessary spend to ensure our venues are capable of offering an appropriate experience for our customers.

[Richard Harris, CFO & Director at Rank Group]

In Grosvenor, we completed the refurbishment of Leicester Casino, invested in electronic terminals and table gaming equipment and also started the refurbishment of our flagship casino at Leveque. In Mecca, there are selected investments to improve the gaming machine areas, improve external signage and where appropriate further investments to modernize the bingo proposition. The payback from investment in gaming machines has been around 1 year and the external signage schemes are paying back in less than 18 months. We'll continue to invest in our digital proprietary digital platforms, both in the U. K.

[Richard Harris, CFO & Director at Rank Group]

And in Spain, with the vast majority of the spend being capitalized headcount. The content management system that launched in the second half of last year has had a material impact on performance. And based on results so far, we expect our new apps will at least deliver in line with the original plan. CapEx for the current financial year is expected to be in the range of €55,000,000 to €60,000,000 depending on the timing of the land based reforms with a similar level of spend expected next financial year. We've earmarked capital spend to maximize the opportunity provided by the land based reforms, and that's included within our plans.

[Richard Harris, CFO & Director at Rank Group]

But we'll only deploy the spend when we're confident in the returns. Finally, a reminder on what we're expecting in cash generation. As you know, we've broken this down into 3 distinct phases. The first phase primarily relates to FY 'twenty four and FY 'twenty five, where we're investing for growth. We expect it to be broadly neutral in this 2 year period.

[Richard Harris, CFO & Director at Rank Group]

And with the cash generated last year and in the first half, we're a bit ahead of the plan thus far. Profits have been ahead of expectations and the selected investments we are making are delivering strong returns. During the second phase, broadly relating to FY 'twenty six and into FY 'twenty seven financial years, we'll be balancing investment and returns. Our earnings momentum will have improved further off the back of the investments we've made and delivery of our other strategic initiatives. Whilst the CapEx is still at elevated levels, we'll have a period of further modest cash generation.

[Richard Harris, CFO & Director at Rank Group]

Finally, our 3rd phase being the second half of FY 'twenty seven and beyond. By then, earnings are expected to be much improved despite the cost headwinds we're facing. And we should be over the hump of investment over the next few years. During this phase, we'll be growing shareholder returns. With that, I'll hand back to John.

[John O’Reilly, CEO at Rank Group]

Thanks, Richard.

[John O’Reilly, CEO at Rank Group]

To the strategic update and the outlook. Our now hopefully familiar investment case is built on these 4 key areas of focus, which we believe delivers our pathway to operating profits of £100,000,000 plus. And there's sustained growth in the Grosvenor business, accelerating our digital growth, maximizing cash in our land based business bingo businesses, and of course, the key reforms in the land based casino and bingo sectors in the UK's review of gambling legislation regulation. All that underpinned by investment in our technology and our data quality, particularly data quality and our data systems, strong group wide focus on safer gambling. And we're a hospitality business, which excites and entertains our customers through the quality of both our people and our culture.

[John O’Reilly, CEO at Rank Group]

So to Grosvenor, you've seen the Grosvenor Casino business performing well and there's further organic growth to be delivered in our view. We've been targeting getting the business back above 7,000,000 net gaming revenue per week. We're now at 7,300,000 and we now have a line of sight through to delivering £8,000,000 net gaming revenue per week. And that's before the positive impact of more gaming machines, sports betting and electronic payments in the Gambling Act review. And the key initiatives which are driving that growth include the investment we're making in our table gaming experience with new tables, new rollout wheels.

[John O’Reilly, CEO at Rank Group]

We're now just about renewed the whole estate in terms of the latest roulette wheels. The continued expansion of our table gaming management system, and that's key to ensuring that we've got the right tables at the right pricing points open for customers at the right time. A complete renewal of our electronic roulette offering, we started that program in 2019. We're just about there. We'll conclude it this coming this quarter.

[John O’Reilly, CEO at Rank Group]

And we've been broadening the base of gaming machine suppliers. This industry is typically only ever had 2 game machine suppliers. We've now grown that to 5 and interest continues to grow in the UK casino gaming machine market opportunity. We've been investing in the quality of our facilities. The Vic Casino in Edgewood Road, very much our flagship and most financially important venue, has been undergoing refurbishment since September in a program of work which we will complete in late June.

[John O’Reilly, CEO at Rank Group]

It's a £15,000,000 investment. It's the biggest investment biggest single refurbishment program that the Rent Group has ever undertaken. The 1st floor casino is now nearing completion, will reopen in February, after which then works commence on the 2nd floor casino also the U. K. Most renowned poker room.

[John O’Reilly, CEO at Rank Group]

Our approach to investment during the latter half of FY twenty twenty four and during FY twenty twenty five is to be prepare to prepare some of our most important and competitively significant casinos for the land based reform. So in addition to the Vic, we've completed a full refurbishment of Grosvenor Leicester, a project which will be hugely insightful when the reforms are implemented. We're also ready to further 7 Grosvenor sites for the maximum allowable number of gaming machines for the implementation date of the statutory instruments. So we are ready to go. In Luton, our only casino license under the 2,005 Act, We've implemented a sports book with promising early results.

[John O’Reilly, CEO at Rank Group]

And we've also built out a similar facility within Grosvenor Leicester in readiness for sports betting when permitted. So we're well invested, ready to see the impact of the reforms when they are delivered. The relationship between our colleagues and our customers is central to Grosvenor's success. Our cultural program from like to love continues to gain traction across the estate. We put 470 colleagues through a 2 day residential conferences during 2024 to discuss the quality of service that they deliver to our customers.

[John O’Reilly, CEO at Rank Group]

Our customer net promoter scores continue to improve and put simply our team is working really, really hard to ensure that their customers love visiting a Grosvenor Casino. From a regulatory perspective, our systems and processes and the skill sets and mindsets of our colleagues continue to be the critical area of investment in both development and training to ensure we both protect our customers and minimize unnecessary customer friction. I almost can't tell you how important that is to the overall success of the Grosvenor business. Our next key development here is the automation of KYC processes to deliver near real time customer risk assessments to our colleagues that works well underway. And that leads me on to talk about data, which is at the heart of growing the Grosvenor business.

[John O’Reilly, CEO at Rank Group]

And the organic growth opportunity we have here is founded in the improvements in data. Over recent years, we've been investing to kind of frankly sort our data out. Having one single cross channel view of the customer is central to ensuring we're increasingly delivering a seamless and tailored cross channel experience to Grosvenor's customers. We now have a data in good order and we have lots of opportunity to exploit that investment with more relevant and timely customer communication and interaction. So lots of good progress being made with lots to discuss.

[John O’Reilly, CEO at Rank Group]

We're planning a capital markets event in the summer centered on the Grosvenor business. The quality and scale of RANKS digital business being gradually taking shape since we acquired Geo Bingo back in 2018 in Spanish market and the Stride Gaming business in the UK in 2019. I think we're sort of slightly different to other digital operators and our primary customer audience are those customers perhaps like me for whom as well as being fun, gambling is a considered an important activity. I call it serious fun. Over 70% of land based casino consumers in the U.

[John O’Reilly, CEO at Rank Group]

K. Also play online. And that's our sweet spot. With our own proprietary technology, we're on a journey to deliver increasingly personalized high quality cross channel experiences. In this context, just by way of a couple of data points, 61% of Grobner's online revenues today come from customers within our rewards loyalty program and it's 53% now for Meka.

[John O’Reilly, CEO at Rank Group]

Both continue to grow as we further sharpen the use of our data. In the past 12 months, we've successfully launched new in house developed apps for both Mecha and Grosvenor. We've quickly accelerated the number of active customers playing on apps and the percentage of digital revenue that our apps are generating, but there remains a big opportunity for us here. In Q4, we will deliver cross channel single membership for Mecha customers. This means we do not recognize you as a venue customer and a digital customer with distinct memberships, but as a Mecha customer with important growth ramifications for both our venues and for the Mecha digital offering.

[John O’Reilly, CEO at Rank Group]

We recently launched online more live tables from our casinos. In the next couple of months, we'll launch online a really popular game played in our venues called Cash Dash, which we'll be launching online. We also have a new bingo game launching this half, which will share liquidity across both venues and online, creating some of the biggest jackpots in the market. We've made further enhancements are making further enhancements to Hawkeye and that's our proprietary real time customer monitoring system, which helps mitigate customer risk by prompting timely interactions with our customers when required. Our proprietary platforms continue to develop.

[John O’Reilly, CEO at Rank Group]

We've had an ongoing major modernization program in our U. K. Facing platform, which we will conclude this summer. And we'll soon be launching a new Yote bingo platform, which will provide much needed scale within our bingo rooms and allow for bigger jackpots, bigger pools, bigger prizes. And that's a critical development to get the Yote business back into the double digit growth rates that we've been that we've expected actually over recent years.

[John O’Reilly, CEO at Rank Group]

We've previously guided to an average digital NGR growth rate of 8% to 12% per annum over the medium term. We'll be at the top end of that range, perhaps slightly above this year. And despite the impact of maximum stakes of £5 for online slots in the U. K, we have both a development pipeline and continued improvements in data led marketing to maintain this level of growth going forwards. On the cost side, we continue to drive efficiencies.

[John O’Reilly, CEO at Rank Group]

And as we scale the business, we're maintaining that guidance that we provided 600 basis points margin improvement from what was 6.4% in 2023 to 12.5% in 2028, despite the impact of the 1.1% U. K. Statutory levy, which will take effect from April this year. Digital is now a material business, making a significant contribution to Rent Group's overall profitability and cash flows with considerable further upside to be delivered as we build out an increasingly seamless and tailored cross channel experience for our customers. Our approach to the bingo business right now is to maximize cash over the short to medium term.

[John O’Reilly, CEO at Rank Group]

It does not mean we'll not invest in this business. We have and we are, but we're only doing so where we're seeing rapid returns. In U. K, we've rightsized the Mecca Estate. We had 84 Mecca Venues.

[John O’Reilly, CEO at Rank Group]

As recently as 2018. We have 51 Mecca Venues Trading Today. We focused on our more vibrant venues with strong liquidity and consequently strong price boards and strong price boards not surprisingly drive that strong liquidity. A strong Bingo Club remains a highly attractive business in terms of profit margins and returns on investment. But the evidence in recent years is that low liquidity clubs can't be turned around without significant investment, investment which does not deliver an exceptional level of financial return.

[John O’Reilly, CEO at Rank Group]

But we now have a strong Mecca estate in the U. K. It's the main stage bingo game that drives customer visits, strong attractive prize boards mean the main stage bingo game is only marginally profitable for us, but it drives attendances. And when customers come to play bingo, they typically also play our interval bingo games and our gaming machines. To grow attendances, we've been investing in the exterior look of our venues and in our prize boards.

[John O’Reilly, CEO at Rank Group]

To grow margins, we've been investing in the gaming machine offering. And that's the most significant contributor of revenue to Ameca Bingo Club. As well as improving the game machine areas within our venues, we've been improving the mix of gaming machines and that continues through half 2, with over 1500 machines across the Meka state being replaced in the most extensive upgrade I think we've ever done. Mecca is, of course, the brand that also very much drives our digital business, mekabingo.com being the single biggest contributor in terms of online revenues and profits. The delivery of single membership for Mecha customers is a big step forward for the Mecha Bingo's venues business because it provides a much better data view of the customer to our venue colleagues in real time.

[John O’Reilly, CEO at Rank Group]

That helps customer retention, deliver more personalized interactions, more relevant promotions, appropriate next best actions for the customer and so on. As we've been growing the vibrancy of the Metro Estate, so we've been growing confidence amongst our colleagues in the future of the business this year, delivering record colleague engagement levels. And that's being achieved in the middle of a rollout of an efficiency program, which is ensuring that our employment rotors better meet the needs of our customers. And that's delivering quite significant and necessary savings to mitigate against some of the employment cost increases from this coming April. In Spain, we've completed an excellent refurbishment project at our venue in Seville and we're soon commencing a similar project in Sabadell in Catalonia, which as well as improving the facilities significantly increased the size of our gaming machine and electronic roulette offering, which is where much of our growth is coming from.

[John O’Reilly, CEO at Rank Group]

The UK Gambling Minister has recently publicly said she wants to see the bingo industry thrive rather than just survive and we clearly do too. And for that to happen, we need the land based reforms proposed in the government's Gambling Act review. The government minister has also welcomed the relatively modest reforms for the U. K. Casino sector, but it's very much a kind of once in a generation opportunity.

[John O’Reilly, CEO at Rank Group]

The customer proposition in a U. K. Casino, what the gaming product is that we offer our customers is decided by Westminster and Whitehall rather than by us because it's a matter of statute and it requires legislation to change it. The proposed reforms of higher game machine allocation, sports betting and electronic payments for gaming, including on machines and terminals, are the most significant changes for casinos and their customers since the 1968 Gaming Act, which legalized commercial casinos in the U. K.

[John O’Reilly, CEO at Rank Group]

Our expectation now is that the legislature will soon pass through Parliament to enable higher game machine allocations and sports betting to be implemented this summer. The legislative process for electronic payments will take a little bit longer. We're ready for the reforms. We will add 886 gaming machines to the current estate of 1361 gaming machines. That's an increase of 65% within the 1st 4 months from the government's implementation dates.

[John O’Reilly, CEO at Rank Group]

Additional development works in Groverne and Venue, which will commence once we see the impact of that initial rollout, we'll see our machine estate growth from 1361 machines today to 3,122 machines and that's a growth of around 130%. That development work will require capital investment, which once we're comfortable with the expected returns will roll out and complete over the next 2 to 3 years. In the macro estate, we expect the legislative process to take a little longer. We're now hoping that the reform to the eightytwenty rule for gaming machines will be implemented later this year. We're also hoping that the white paper support for side bets on the game of bingo materializes in the shape of legislative change at some point in the not too distant future.

[John O’Reilly, CEO at Rank Group]

In the round, I'm delighted that the casino reforms are nearly with us and we are very well prepared. The bingo reforms will take a little longer, but this has government support and hopefully we can make progress there during 2025. So to the current trading and outlook, we've made a really good start to the new calendar year. Christmas and New Year trading period was strong across all of our businesses. Trading in January has also been strong, particularly so when compared with last year.

[John O’Reilly, CEO at Rank Group]

So we had a good start to half 2. As I said earlier, we have built a strong momentum in across the business. We've got the employment cost pressures of national living wage increase and the very sharp increase in employer National Insurance contribution to Navigate. And with that in mind, we have further efficiency programs underway to mitigate as much of that impact as possible. Most significant, of course, we have plenty of opportunity to drive revenue growth across each of our businesses.

[John O’Reilly, CEO at Rank Group]

We've got a strong cash position, which enables continued investment in our strategic priorities and for the group to be able to deliver a progressive dividend for our shareholders. In regards to this year's outturn, we now expect full year like for like operating profit to be slightly ahead of expectation. And as you've heard this morning, we're very well placed for the planned legislative reforms for land based casinos, which we expect to be implemented this summer and for Bingo hopefully later in the calendar year. That's it to questions. I think we're going to take questions in the room first.

[John O’Reilly, CEO at Rank Group]

Somebody nod if that's what we're doing. So for the benefit of the audience online, please say who you are, if you wouldn't mind before asking a question. And for those joining us online, if you've got a question or questions you'd like to ask, there's a Q and A box. Please type them in and we'll try and pick up any questions which we've not covered in the room. Thank you.

[John O’Reilly, CEO at Rank Group]

I think we've got a mic somewhere. Who is going to start? Oh, here we are.

[Ivor Jones, Equity Analyst at Peel Hunt]

Ivy Jones from Peel Hunt. The growth in table gaming revenues, very notable. I'm not quite sure how to ask the question. But in terms of capacity, if footfall continues to grow, is there table capacity to absorb more revenue as it comes through? Is that any sense of a limitation?

[Ivor Jones, Equity Analyst at Peel Hunt]

Or can that just continue to grow?

[John O’Reilly, CEO at Rank Group]

It can continue to grow, yes. So we have very large headroom for more table gaming players. Yes, we're not constrained by that at all. I mean, we the capacity the constraint short term constraint is in people rather than tables, and but that's something we deal with day in, day out. In a new table gaming management system, which is now largely deployed across the estate either, we that drives table gaming opening.

[John O’Reilly, CEO at Rank Group]

So it prompts us when we need to open another table or tables and it prompts us on the price too for that table. It props us on the price we're offering on table on the current tables that are open in the venue. That is the science here is that the more players around the table, the slower the game, the slower the game, the weaker the margin and the less fun it is for the consumer. So the sweet spot on a roulette table is 4.5 to 5 customers on the table And once you get past 5 tables, 5 customers on a table, you need to open another table because the settlement of the bet takes too long. So but across the estate, our estate is built for large numbers of table gaming players, no capacity constraint in that regard.

[Ivor Jones, Equity Analyst at Peel Hunt]

And you talked about improved margins on the table.

[John O’Reilly, CEO at Rank Group]

Yes.

[Ivor Jones, Equity Analyst at Peel Hunt]

Is that mostly to do with improved table management? Or was there a bit of luck? And particularly, was the Olympics significant, do you think?

[John O’Reilly, CEO at Rank Group]

Olympics, no. So you can never know, in truth. So my sense is that we are improving the margin. And I suspect we've had a little bit of luck too in the first half, but we are improving the margin through the improvement in table opening.

[Ivor Jones, Equity Analyst at Peel Hunt]

Okay. You talked about extracting cash from Mecca, but it looked like CapEx was more the depreciation in the half. So when does cash start to get generated from Mecca?

[Richard Harris, CFO & Director at Rank Group]

Yes. So, Mecca operating profit last year was around €4,000,000 And our expectation is that we would get it to double digit operating profit in the medium term. Along that journey, there is a not too distant point where that business starts to generate cash. We're looking at the next 12, 18 months, that kind of time period.

[John O’Reilly, CEO at Rank Group]

Okay. Quite. We probably it's fair to say that we've had the biggest hump in maintenance catch up backlog in the Mecca business. And we're through a good part of that. We still have more to do, but we're through a good part of that now.

[Ivor Jones, Equity Analyst at Peel Hunt]

Okay. And can I ask about Portugal and YOO?

[John O’Reilly, CEO at Rank Group]

What can I tell you? There are only 17 licensees in Portugal. There have only been 17 for many, many years. We will understand why that is, but we are getting closer and closer. So we hope we're in the final stages of homologation with the regulator.

[John O’Reilly, CEO at Rank Group]

We hope we are. So we will know in the coming weeks months when we're going to be licensed.

[Richard Harris, CFO & Director at Rank Group]

Okay. And last one, you talked about colleague incentives increasing. Is that just a function of improved profitability? Or are you managing the business in a different way?

[Richard Harris, CFO & Director at Rank Group]

Got a combination of both. So it's a reflection of performance against targets, but also how we're thinking about colleagues incentives across the

[Richard Harris, CFO & Director at Rank Group]

group.

[David Brohan, Analyst at Goodbody]

David Bron from Good Buddies. So three questions, 2 on Grosvenor and 1 on taxes. Firstly, all the investment in the Grosvenor state, have you seen any meaningful reaction from your competitors to that investment? Secondly, on Grosvenor, where is the overseas customer base at now relative to pre COVID?

[David Brohan, Analyst at Goodbody]

And then finally, just a lot of noise around the budget last year about an increase potential increase in taxes. How should we be thinking about that over the next couple of years? Thank you.

[John O’Reilly, CEO at Rank Group]

So let me start with taxes. So there was a lot of noise. I mean, I don't know if there was anything beyond media noise about taxes prior to the budget. I'm not sure whether that was ever a serious consideration. The prior Chancellor announced a review of digital taxes.

[John O’Reilly, CEO at Rank Group]

There are 3 different taxes, as you know, gaming, betting and pools. And there was a view that maybe that structure should be simplified. That was repeated in the budget. So I think there is an expectation that consultation will start during this calendar year. I think it will take some years for any change.

[John O’Reilly, CEO at Rank Group]

It's quite complicated, as you well understand, it's quite a complicated area. And there's lots of moving parts in there if you're thinking about harmonizing, yes, because there are different costs associated with different betting products. Horseracing is different to football. Both are different to casino gaming. Lots of complexity in trying to harmonize tax in that space.

[John O’Reilly, CEO at Rank Group]

So we just have to wait the outcome of that. It's going to take some time, I think. So we're not expecting any change in the immediate term. Investment in the growing estate and competitor, yes, there is some movement in the business. I mean, the great thing about the casino business is because our licenses are protected by statute, which is a wonderful thing in so many ways.

[John O’Reilly, CEO at Rank Group]

It's frustrating in regards getting reforms. It's but nonetheless, it's probably it's the greatest protection a business can ever have because it can't be more casinos without an act of parliament. But we compete. We compete head on in towns and cities and up and down the country. And yes, I think there is a general sense that the casino business is going to be more prosperous post the reforms and there is a getting ready for those reforms.

[John O’Reilly, CEO at Rank Group]

And you've seen some new entrants coming into the market. Wynn recently bought acquired a casino in Central London. Bally's have bought acquired a casino, the Asquith Casino in Newcastle. So there are there is some movement in the marketplace. We expect our competitors to be readying themselves and investing.

[John O’Reilly, CEO at Rank Group]

We could see that in some specific properties where investment is taking place. Yes, that's going to continue, I suspect. Certainly, we're ready for that to continue. In terms of the overseas customer base, I don't think there's any real marked movement. London's grown by 10%, which is good.

[John O’Reilly, CEO at Rank Group]

All the things you've ever talked about, we would like to be able to offer credit and compete internationally more effectively. Yes, we would. Government supports that, but finding the legislative vehicle that enables that to happen is difficult because it requires primary legislation. So we continue to talk to government about that. And they would love to find a way through, but it's difficult to do.

[John O’Reilly, CEO at Rank Group]

So and like lots of other businesses, we would like VAT to return to where it was pre Brexit for our international travelers coming to London particularly. But it's broader than London. It's across the U. K, but London in particular, I suppose. So yes, but we kind of are where we are.

[John O’Reilly, CEO at Rank Group]

We've had a strong summer. Christmas has been positive. And we're hoping for a strong Easter. So we will see. Have we got any more questions?

[John O’Reilly, CEO at Rank Group]

Greg?

[Greg Johnson, Equity Analyst at Shore Capital]

Good morning. Just a quick question on sort of digital and the investment in sort of data. It's probably the most bullish I've heard you sound on the prospects of sort of the old cross channel selling. Where are we in terms of sort of the growth we've seen this year or so? How much of that is being driven by existing players?

[Greg Johnson, Equity Analyst at Shore Capital]

And where do you think we can get to in terms of delivering more from the existing retail customer base?

[John O’Reilly, CEO at Rank Group]

So our growth is very much being driven by existing players rather than new customers. That is certainly the case in digital. I think you can just about so you can see that in the numbers. There's a long way to go. We are I think I describe it as being on the nursery slopes.

[John O’Reilly, CEO at Rank Group]

We do lots of cost promotion. We recognize the customer as a single customer now across channel, but we still have 2 memberships in both businesses. We need to bring those together. Mecha will be the 1st. We'll do that this half, which is an exciting development.

[John O’Reilly, CEO at Rank Group]

Once we've done it in Mecha, it's relatively easy to then do it in Grosvenor. We don't have a single wallet in Mecha. We will get there and we need to deliver that same single wallet mechanism through our proprietary platform for Grosvenor 2. We have a single wallet mechanism in Grosvenor today. It's not the cleanest, slickest service I'd like to give our customers.

[John O’Reilly, CEO at Rank Group]

I want to get this business to a point where it's genuinely seamless for the consumer to move between channel. We're not there. We were a couple of years away probably from delivering all the technology change, all the pipeline of activity that gets us there. So yes, we've got a lot of progress ahead of us. It is our sweet spot.

[John O’Reilly, CEO at Rank Group]

It's our corporate it's our position of corporate competitive advantage is where we maximize our brands. Our venue based brands both in venue and online. We're on a journey to get us there.

[Richard Stuber, Director at Deutsche Numis]

Thank you. Richard Stuber from Deutsche Numis. Just a quick question on offsetting some of the hires of labor costs for next year. Obviously, the main way presumably is just to grow the top line and you have that high flow through. Are there any other efficiency savings that you can see to get to offset those higher costs?

[Richard Harris, CFO & Director at Rank Group]

Yes. So we've got efficiency programs underway in all of our business units, so across Grosvenor, Mecha and the digital business. They've got bespoke specific efficiency programs that are identifying opportunities to improve processes, systems, technology, data use, all that kind of stuff to make it as seamless a process as possible for our customers to best serve their colleagues. I wouldn't want to put a number on it at the moment, but at the same time, we've got a significant headwind coming. So we have to make sure that we are taking all the opportunities in the right place to drive efficiencies as best we can.

[John O’Reilly, CEO at Rank Group]

Yes. But as you say, growing revenue is the key thing. And I think there we're seeing I mean, we have seen positive signs. We tend to see positive signs, I think. Yes, probably been a bit of an economic wobble, bit of consumer confidence wobble over recent kind of last couple of months, but the trends look reasonably positive.

[John O’Reilly, CEO at Rank Group]

And I think our customers are seeing the benefits of real wage growth. They're seeing the benefits of interest rates slowly coming down. Certainly, the big one for us is inflation because we don't have a pricing mechanism. We can't pass on a price increase. So inflation coming down is super helpful for us.

[John O’Reilly, CEO at Rank Group]

And we're seeing customers having a good time, long way that continues.

[Richard Stuber, Director at Deutsche Numis]

And just as a follow-up to a very small point, but I guess things like food costs, how are you that's obviously a small part of your business, but I suppose you'll be sort of being able to sort of increase some of that and you've got some food cost inflation coming through as well.

[Richard Harris, CFO & Director at Rank Group]

F and B is the one part of the business where we can pass on inflation to the end consumer. We want to remain, particularly in Mecca, we want to make sure we're remaining a great value proposition. So we kind of balance that up carefully. But F and B is one area that we can pass on to the customer in appropriate places.

[John O’Reilly, CEO at Rank Group]

I discovered this week, I should add that we've that I didn't know what a bottomless brunch was, but I've now discovered it. And so on Valentine's Day, and I think it might be this Saturday, you can drink as many pints of lager and pints of beer and Prosecco. I don't think you drink Prosecco by the pint, maybe you do as you like. There you go. I learned you learn something every week, every day.

[John O’Reilly, CEO at Rank Group]

That's Imeca, by the way, I should add.

[Ivor Jones, Equity Analyst at Peel Hunt]

Thank you. Just picking up on the digital point. Has the new affordability regime landed? Can you model its effects? Is there a step change coming that we should think about?

[John O’Reilly, CEO at Rank Group]

So the first part of that that's landed, which is the verification check, we that has probably, in a strange way had either no effect or slightly positive effect because we put every customer through that verification check and now we don't put every customer through the verification check until they hit the hurdle that's specified in the regulatory change. So kind of it saved us a bit of cost really by putting we previously put every customer through it. We don't know how to put every customer through it until they hit a level of expenditure that necessitates it. So no impact for us, maybe slightly positive cost benefit. We're in the pilot for the financial risk assessments.

[John O’Reilly, CEO at Rank Group]

I've been working closely with the credit referencing agencies and the gambling commission. There's a way to go, I think. We've been looking backwards on customer behavior and comparing the credit referencing agency results against the information and action we took at the time. We're working through that. We've been through Phase 1, Phase 2.

[John O’Reilly, CEO at Rank Group]

The next phase is Phase 3 and we move on to Phase 2. I don't know, at some point when the commission are happy that that's the now is the time to start. It's difficult to know at this moment, difficult to be super confident about the benefit that's going to deliver in terms of frictionless checks. I'm hoping it doesn't make the situation worse. The government clearly intention is to make the situation better for consumers.

[John O’Reilly, CEO at Rank Group]

We hope that is the case. It's not obvious at the moment that this is going to lead to a significant benefit for the consumer, but we will know more as we go through Phase 3 of the trial.

[Ivor Jones, Equity Analyst at Peel Hunt]

Okay. Thank you. And could you talk a bit about the brand strategy in digital? Rummy has gone. You've sold the non proprietary brands.

[Ivor Jones, Equity Analyst at Peel Hunt]

You sound very optimistic about the platform. Should there be another principal rank owned brand built on this platform? Are there other brands to put into the system? Was it mainly Mecca and Grosvenor that are the opportunity for growth?

[John O’Reilly, CEO at Rank Group]

So I think we've got a lot of opportunity in the other brands that we currently run on the non proprietary platform. I think we inevitably have focused most of the development on our 2 proprietary brands first. But the developments are coming down the track from our program modernization is called NextGen, very familiar to everybody within the rank group, I can assure you. And the NextGen program delivers sooner number of changes, which will significantly benefit the non cross channel brands. So our other proprietary brands, which we've got, I think, 14 operating on the ride platform.

[John O’Reilly, CEO at Rank Group]

So lots of opportunity there. In the short term, what's really obvious is the benefit that's delivering to the cross channel brands of Grosvenor and Mecha. Lots still to come actually. So things like our bonusing engine needs to improve. We've got a new bonus engine which will deliver this half.

[John O’Reilly, CEO at Rank Group]

It's quite a significant step change for us. It's a technical benefit rather than consumer benefit, but it will mean more competitive bonuses being able to be offered to the consumer. So lots of change still coming down the path. As for new brands, I think we'll operate it, we'll be operating 17, 18 brands online across Spain and the UK. I think we've probably got quite a lot of runway within our existing brands before we think about new ones, but you never say no.

[Operator]

We have a couple of questions from the webcast. First question is, do you expect dividends to be increased in the coming year?

[Richard Harris, CFO & Director at Rank Group]

So our final dividend from last year was €4,000,000 We've announced an interim dividend this year of €3,000,000 And if you kind of broadly work on that onethree, twothree basis, gives you a good indication of what we expect the full year position to be. So a healthy step forward, I think, you can expect this year.

[Operator]

Next question, what is the forward year's outlook of revenue in current economic climate?

[John O’Reilly, CEO at Rank Group]

I saw it. I didn't quite catch that, sorry. That's right.

[Operator]

What is the forward year's outlook of revenue in the current economic climate?

[John O’Reilly, CEO at Rank Group]

Okay. So I we are super hopeful that we continue on the trajectory that we're on and continue to grow revenue through the second half. No reason why we shouldn't. Yes, so we've got a positive second half ahead of us. We started well, expect it to be positive.

[John O’Reilly, CEO at Rank Group]

And yes, lots of initiatives to drive revenue.

[Operator]

Brilliant. Thank you. No more questions on the webcast. I'll hand back over to you.

[John O’Reilly, CEO at Rank Group]

Thank you very much, everybody. Lovely to see everyone. We've had a good path. Hopefully, when we well, we'll meet before hopefully meet before year end results in August because as I say, we've got that Capital Markets Day event being lined up for June. We hope you can make it along to that.

[John O’Reilly, CEO at Rank Group]

Many thanks for everybody taking the trouble to be with us this morning. Thank you.

Participants

Analysts

• John O’Reilly, CEO at Rank Group
• Richard Harris, CFO & Director at Rank Group
• Ivor Jones, Equity Analyst at Peel Hunt
• David Brohan, Analyst at Goodbody
• Greg Johnson, Equity Analyst at Shore Capital
• Richard Stuber, Director at Deutsche Numis