REG - Rank Group PLC - Half-year Report
26/01/2023 07:00
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RNS Number : 9058N Rank Group PLC 26 January 2023
LEI: 213800TXKD6XZWOFTE12
26 January 2023
The Rank Group Plc ('Rank' or the 'Group')
Interim results for the six months ended 31 December 2022
Rank (LSE: RNK) is pleased to announce its interim results for the six months
ended 31 December 2022.
Overview
· LFL NGR in H1 grew 2% year on year with 9% growth in Digital offset by
weakness in Grosvenor venues, which declined 5%
· LFL underlying operating profit of £4.2m (H1 2021/22 £24.9m), reflecting the
impact of £15.0m of incremental energy costs and wage inflation in H1
· Grosvenor digital business successfully migrated to the RIDE platform in
September 2022, with all Group brands now operating on Rank's proprietary
technology platform and well set to drive growth
· Strong Christmas and New Year trading, particularly in Grosvenor venues,
however we remain cautious about H2 given macro-economic conditions
· Cash and available bank facilities of £148.4m at 31 December 2022, with net
cash pre IFRS 16 of £10.9m. Refinancing of bank facilities planned for H2
· Our strong financial position enables continued investment in both the digital
and venues businesses and positions the Group well for when trading conditions
normalise
· Maintaining operating profit guidance range of between £10m and £20m for the
full year
Financial highlights
H1 2022/23 H1 2021/22 Change
Financial Group underlying LFL net gaming revenue (NGR)(1) £337.4m £330.5m 2%
KPIs
Digital underlying LFL NGR £100.8m £92.3m 9%
Venues underlying LFL NGR(1) £236.6m £238.2m (1)%
Underlying LFL operating profit(1,2) £4.2m £24.9m (83)%
Net cash pre IFRS 16 £10.9m £53.6m (80)%
Underlying (loss) / earnings per share(2) (0.8)p 2.8p -
H1 2022/23 H1 2021/22 Change
Statutory performance Reported NGR £338.9m £333.7m 2%
Group operating (loss) / profit £(101.0)m £102.4m -
(Loss) / profit before taxation £(107.1)m £101.5m -
(Loss) / profit after taxation £(101.2)m £84.0m -
Net free cash flow £(5.7)m £101.2m -
Net (debt) £(158.3)m £(142.7)m 11%
Basic (loss) / earnings per share £(21.6)p 17.9p -
Dividend per share - - -
1. On a like-for-like ('LFL') basis which removes the impact of
club openings, closures, foreign exchange movements and discontinued
operations.
2. Excludes separately disclosed items.
· Venues LFL NGR of £236.6m declined 1% on the prior year. Grosvenor venues
declined 5%, Mecca venues grew 4% and Enracha venues increased by 25%
· Digital LFL NGR of £100.8m, up 9% with 9% growth in the UK and 9% growth in
Spain
· Underlying LFL operating profit for H1 of £4.2m compared with £24.9m in the
same period last year
· Statutory Group operating loss of £101.0m includes £95.4m of impairment
charges, reflecting soft trading in UK venues, and £7.3m of venues closure
costs
· The balance sheet remains strong with £148.4m of cash and available
facilities
Operational highlights
· Grosvenor venues LFL NGR declined 5% in H1 compared with the prior year, but
grew 15% on H2 2021/22 as the business continued to improve the quality of its
safer gambling measures, invest in products and facilities and encourage
lapsed customers to revisit
· Grosvenor venues customer visit volumes grew 5% on the prior year and active
customers increased by 4% but spend per visit declined 9% due to impact of
affordability restrictions and the cost of living crisis. LFL NGR was down 22%
on H1 2019/20 which was unaffected by the pandemic
· Mecca venues LFL NGR grew 4%, with customer visit volumes up 4%, continuing
the slow recovery from the impact of the pandemic on the bingo sector. LFL NGR
was down 20% on H1 2019/2020. Mecca's venues estate profitability continues
to be actively managed, with the planned closure of eight venues in H2 2022/23
· Enracha venues delivered very strong LFL NGR growth of 25% on customer visit
volumes up 16% and active customers up 27%. LFL NGR was 11% ahead H1 2019/20
levels
· The 9% growth in Digital NGR was driven by the successful migration of
Grosvenor onto the RIDE proprietary platform, completing the migration of the
Rank brands, with development effort consequently refocused on enhancements to
the player experience and product offering
· The strong balance sheet of the Group has enabled continued investment in
revenue generating projects within the transformation programme
Current trading and outlook
We experienced strong Christmas and New Year trading and, whilst this has
continued into the first three weeks of January 2023, we recognise that the
cost-of-living pressures are likely to continue to have an effect on our UK
venues' customers over the coming months.
The digital business has continued to trade very positively in recent weeks,
and we expect to deliver strong growth through to the year end.
Whilst we have experienced a good start to the second half of the year, in
light of the challenging macroeconomic environment, we are maintaining our
underlying LFL operating profit guidance range of between £10m and £20m for
the full year.
Dividend
Taking account of the difficult trading environment for our UK venues
businesses and the considerable pipeline of investment opportunities, the
Board has not proposed an interim dividend but expects to recommence dividend
payments as soon as circumstances permit.
John O'Reilly, Chief Executive of The Rank Group Plc said:
"The recovery from the severe impact of the pandemic on our UK venues
businesses, Grosvenor and Mecca, has certainly been slower than we
anticipated. Since lockdown we have faced a huge increase in energy costs,
high wage inflation, the slow return of overseas visitors to London and the
increasing pressure on consumer's discretionary income. We have also
experienced a continued tightening of the regulatory environment, particularly
in regards to affordability restrictions on customers. However, trading is
improving as we invest in the quality of our products and properties,
introduce new gaming concepts for our customers, reduce the level of intrusion
in managing customer risk and reintroduce lapsed customers to the fun and
excitement of our gaming experience.
"Our digital business is continuing to perform well and, with all our brands
now operating on proprietary technology, we are very well placed to drive
strong growth on the back of further improvements to our platforms and
enhanced customer experiences both online and cross-channel. We are now in
control of our future from a technology standpoint and have the vision and
capability to deliver a market leading cross-channel customer experience in
both Grosvenor and Mecca alongside strong and growing support brands in the UK
and internationally.
"We experienced strong trading over the Christmas and New Year holiday period
but recognise that the trading environment is likely to be challenging in the
months ahead and cost pressures will continue to weigh heavily on the UK
hospitality sector. We are driving efficiencies across our business whilst
always ensuring that we are well placed in terms of the quality of our
customer offering and the talent within the Group for the challenges and
opportunities that lie ahead.
"We continue to look forward to the publication of the UK Government's
gambling review white paper. Casino and bingo venues are in need of long
overdue modernisation of outdated regulation which heavily restricts the
customer proposition. This appears to be widely recognised within the debate
surrounding the Government's review and we are hopeful of a positive policy
outcome followed by the much-needed rapid implementation of new regulation.
"Given the challenges we have faced, I am very grateful to my colleagues
across the Group for their commitment to their customers and to the local
communities they serve and for the progress we continue to make in the ongoing
transformation of Rank."
Definition of terms:
· Net gaming revenue ('NGR') is revenue less customer incentives;
· Underlying measures exclude the impact of amortisation of acquired
intangibles; profit or loss on disposal of businesses; acquisition and
disposal costs including changes to deferred or contingent consideration;
impairment charges; reversal of impairment charges; restructuring costs as
part of an announced programme; retranslation and remeasurement of foreign
currency contingent consideration; discontinued operations, significant
material proceeds from tax appeals and the tax impact of these, should they
occur in the period. Collectively these items are referred to as separately
disclosed items ('SDIs');
· EBIT is operating profit before SDIs;
· Underlying earnings per share is calculated by adjusting profit attributable
to equity shareholders to exclude SDIs;
· 'H1 2022/23' refers to the six-month period to 31 December 2022, 'H1 2021/22'
refers to the six-month period to 31 December 2021 and 'H1 2019/20' refers to
the six-month period to 31 December 2019;
· Like-for-like ('LFL') measures have been disclosed in this report to show the
impact of club openings, closures, acquired businesses, foreign exchange
movements and discontinued operations;
· Prior year LFL measures are amended to show an appropriate comparative for the
impact of club openings, disposals, closures and acquired businesses;
· The Group results make reference to 'underlying' results alongside our
statutory results, which we believe will be more useful to readers as we
manage our business using these adjusted measures. The directors believe
that SDIs impair visibility of the underlying performance of the Group's
business because these items are often material, non-recurring and do not
relate to the underlying trading performance. Accordingly, these are
excluded from our non-GAAP measurement of revenue, EBITDA, operating profit,
profit before tax and underlying EPS. Underlying measures are the same as
those used for internal reports. Please refer to APMs for further details;
and
· Venues includes Grosvenor venues, Mecca venues and Enracha venues.
Enquiries
Enquiries
The Rank Group Plc
Sarah Powell, director of investor relations and communications (investor Tel: 01628 504 303
enquiries)
David Williams, director of public affairs (media enquiries) Tel: 01628 504 295
FTI Consulting LLP
Ed Bridges Tel: 020 3727 1067
Alex Beagley Tel: 020 3727 1045
Photographs available from www.rank.com (http://www.rank.com/)
Analyst meeting and webcast details:
Thursday 26 January 2023
There will be an analyst meeting at 9.30am, admittance to which is by
invitation only. There will also be a simultaneous webcast of the
meeting.
For the live webcast, please register at www.rank.com. A replay of the webcast
and a copy of the slide presentation will be made available
on the website later. The webcast will be available for a period of six
months.
Forward-looking statements
This announcement includes 'forward-looking statements'. These statements
contain the words 'anticipate', 'believe', 'intend, 'estimate', 'expect' and
words of similar meaning. All statements, other than statements of historical
facts included in this announcement, including, without limitation, those
regarding the Group's financial position, business strategy, plans and
objectives of management for future operations (including development plans
and objectives relating to the Group's products and services) are
forward-looking statements that are based on current expectations. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance,
achievements or financial position of the Group to be materially different
from future results, performance, achievements or financial position expressed
or implied by such forward-looking statements. Such forward-looking statements
are based on numerous assumptions regarding the Group's operating performance,
present and future business strategies, and the environment in which the Group
will operate in the future. These forward-looking statements speak only as at
the date of this announcement. Subject to the Listing Rules of the Financial
Conduct Authority, the Group expressly disclaims any obligation or
undertaking, to disseminate any updates or revisions to any forward-looking
statements, contained herein to reflect any change in the Group's
expectations, with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. Past performance cannot be
relied upon as a guide to future performance.
Business review
Whilst year-on-year comparisons are now free from the material impacts of the
pandemic experienced in calendar years 2020 and 2021, the Group continues to
review performance against the 12 months to 31 December 2019 (CY 2019), the
last comparable period which was unaffected by COVID-19. For the purposes of
comparing performance in H1 2022/23 to a pre-pandemic period, we are using H1
2019/20 which forms the comparable six months of CY 2019.
During H1 2022/23, the Group undertook a review of the Group's central costs
and concluded it is appropriate that a proportion of central costs should be
allocated to each of its operating business units. As a consequence, we have
presented operating profit pre and post the central cost reallocation and, to
aid comparisons, H1 2021/22 operating profit for each business unit has been
restated accordingly.
At a Group level, underlying LFL NGR of £337.4m was up 2% on the prior period
but down 15% on H1 2019/20. The venues businesses were down 1% on the prior
period and down 20% on H1 2019/20. In contrast, Digital NGR grew 9% on last
year and 1% in comparison to H1 2019/20(1).
Underlying LFL operating profit of £4.2m was down on the £24.9m of operating
profit in H1 2021/22 and £58.8m in H1 2019/20.
Operating margins have been impacted by material increases in energy, wages
and other costs. Including COVID-19 related Government support received in
2021/22, we expect total comparable costs to increase by around £45-50m in
2022/23 compared to the prior year. Energy costs, which were £13m in CY 2019
and £24m in 2021/22, are expected to be £31m for 2022/23 with 100% of our
gas and electricity requirement now hedged in Q3 2022/23 and 75% in Q4
2022/23. We expect energy costs for 2023/24 to be approximately £26m based on
current market prices. Average wage increases across the Group have been 8%
compared to the prior period with Grosvenor and Mecca colleagues receiving
average increases of 9% to support them through this period of high cost of
living increases. A number of initiatives including energy efficiency
programmes, changes to opening hours, renegotiating leases and other contracts
are mitigating some of the impact of the Group's cost increases.
1. Stride was acquired in October 2019 and has been included on
a proforma basis in the H1 2019/20 LFL measure.
NGR / £m H1 2022/23 H1 2021/22 Change
Grosvenor venues £153.4m £161.1m (5)%
Mecca venues £65.5m £62.9m 4%
Enracha venues £17.7m £14.2m 25%
Digital £100.8m £92.3m 9%
Underlying LFL(2) Group £337.4m £330.5m 2%
Impact of venues openings, closures and FX(3) £1.5m £3.2m (53)%
Underlying Group £338.9m £333.7m 2%
Operating profit / £m H1 2022/23 H1 2021/22 Change
Grosvenor venues £9.9m £34.6m (71)%
Mecca venues £(0.1)m £(0.3)m (67)%
Enracha venues £4.0m £3.4m 18%
Digital £9.9m £3.1m 219%
Central costs £(19.5)m £(15.9)m 23%
Underlying LFL(2) Group £4.2m £24.9m (83)%
Presentation post reallocation of central costs:
Grosvenor venues £4.3m £29.8m (86)%
Mecca venues £(4.9)m £(4.0)m 23%
Enracha venues £3.9m £3.3m 18%
Digital £7.4m £1.1m 573%
Central costs £(6.5)m £(5.3)m 23%
Underlying LFL(2) Group £4.2m £24.9m (83)%
Impact of venues openings, closures, and FX(3) £(1.0)m £(1.8)m (44)%
Total Group £3.2m £23.1m (86)%
2. Results are presented on a like-for-like ('LFL') basis which
removes the impact of club openings, club closures, foreign exchange movements
and discontinued operations.
3. A full analysis of these adjustments can be found in the
Alternative Performance Measures ('APM') section.
Grosvenor venues
Key financial performance indicators:
H1 2022/23 H1 2021/22 Change H1 2019/20 Change
£m £m £m
LFL(1) NGR 153.4 161.1 (5)% 197.4 (22)%
London 53.7 54.4 (1)% 80.4 (33)%
Rest of the UK 99.7 106.7 (7)% 117.0 (15)%
Total NGR 153.4 161.6 (5)% 198.1 (23)%
Underlying LFL(1,2) operating profit pre central cost reallocation 9.9 34.6 (71)% 47.9 (79)%
Underlying(1,2) LFL operating profit post central cost reallocation 4.3 29.8 (86)%
Total (loss) / profit £(42.4)m £68.0m -
1. Results are presented on a like for like ('LFL') basis which
removes the impact of club openings, club closures, foreign exchange movements
and discontinued operations.
2. Before the impact of separately disclosed items.
Grosvenor's underlying LFL NGR was down 5% compared to H1 2021/22 and down 22%
compared with the pre-pandemic H1 2019/20. London's recovery continues to be
slow with NGR down 1% on the prior period and down 33% on H1 2019/20 when
large numbers of overseas visitors were in London enjoying shopping, dining,
entertainment and the gaming experience. Across the rest of the UK, NGR was
down 7% on the prior period and down 15% on pre-pandemic performance in H1
2019/20.
Whilst NGR declined year-on-year, Grosvenor grew LFL NGR 15% compared with H2
2021/22. H2 2021/22 was a low point in Grosvenor's recovery with the impact of
Omicron, very few overseas visitors into London and a tightening of
affordability restrictions creating the highest level of friction for higher
spending customers. In H1 2022/23, there has been a slow increase in overseas
visitors into London and investments in systems and training have focussed on
positive interactions with customers to build out an understanding of the
customer's affordability as early as possible in the business relationship.
Average weekly NGR of £5.2m in Q3 FY22 and £5.1m in Q4 FY22 grew to £5.8m
in Q1 and to £6.0m in Q2.
The number of customer visits to Grosvenor venues has grown 5% over H1 2021/22
with the number of visiting customers growing 4%. However, the average spend
per visit was down 9% reflecting the impact of affordability restrictions on
higher spending customers and the impact of the cost of living crisis on
discretionary expenditure.
Improvements to the management of customer risk have continued to be
implemented throughout the period. An algorithm to assess customers showing
potentially at-risk behaviour was developed during lockdown and, following
successful trials, was implemented across the Grosvenor estate in November
2021. What became clear throughout H2 2021/22 was the need for heightened
skill levels and support systems to reduce the perceived level of intrusion
for customers who were identified as requiring affordability interactions.
Over 850 Grosvenor colleagues have now taken part in a face-to-face training
programme to develop their skills in conducting positive interactions with
customers. The training programme was developed in partnership with Gamcare,
the leading provider of support for those experiencing problem gambling and
the operator of the National Gambling Helpline. Work continues on the
calibration of customer risk management across the Grosvenor estate. Moreover,
enhancements are being made to the support technology with a new app,
currently being trialled in three casinos, which delivers key customer
information more effectively to colleagues and supports timely capture of the
outputs of customer interactions.
The strongest performing venues during H1 were typically those which have
received investment in recent years to improve the facilities and customer
proposition. Examples include London's Barracuda and the Vic, Merchant City in
Glasgow, the Maybury in Edinburgh, Soames in Manchester and Walsall.
With NGR declining 5% and material increases in energy costs and hourly wage
rates across the Grosvenor estate, LFL operating profit declined 71% to £9.9m
in H1. 21 of Grosvenor's 52 venues were loss making in the half, one of which,
Russell Square, was permanently closed in November 2022. Whilst the estate
continues to be kept under close review, the expectation is that all Grosvenor
venues will return to profitability with an upturn in the trading climate and
following regulatory change in the UK Government's review of gambling
legislation. After reallocation of costs previously assigned as central costs
but now appropriately charged to the Grosvenor business, H1 underlying LFL
operating profit was £4.3m
The Grosvenor business continued to drive cost efficiencies in H1 and this
work continues into the second half of the year with tight monitoring of the
operating model in terms of opening hours, ensuring the optimum table openings
and staking minimums are in line with customer demand, improved staff
scheduling and energy saving programmes including the rollout of LED lighting
across the estate. Staffing shortages have been dramatically reduced during
the period with a softening of attrition rates, accelerated recruitment and an
ongoing programme of gaming academies to train croupiers to meet the table
opening needs of the business.
Total loss for the period was £42.4m, principally driven by impairment
charges of £43.1m recognised in H1 reflecting the softer trading performance
of the Grosvenor business.
Despite the difficult trading conditions, a number of key initiatives have
been delivered in H1 to accelerate the transformation of the Grosvenor
business and to position it for growth when the consumer climate improves and
in readiness for positive regulatory change for land-based casinos in the
Government's gambling review.
£3.9m has been invested in property developments during H1 including
refurbishments to the Bayswater Casino, the completion of the refurbishment to
Merchant City in Glasgow, further improvements to the Pier Nine casino in
Brighton and the commencement of a full refurbishment to London's Gloucester
Road casino which will complete in Q3 2022/23.
£3.2m has been invested in new electronic roulette terminals, gaming
machines, tables and wheels during H1. This continued programme of renewal is
helping to support strong table margins and the introduction of new products
such as Going For Gold, a linked jackpot electronic roulette game which has
been successfully trialled in the period and which will roll out early in H2
2022/23.
Mecca venues
Key financial performance indicators:
H1 2022/23 H1 2021/22 Change H1 2019/20 Change
£m £m £m
LFL(1) NGR 65.5 62.9 4% 81.6 (20)%
Total NGR 67.0 65.9 2% 91.9 (27)%
Underlying LFL(1,2) operating (loss) / profit pre central cost reallocation (0.1) (0.3) - 13.1 -
Underlying LFL(1,2) operating (loss) post central cost reallocation (4.9) (4.0) 23%
Total (loss) / profit (61.8) 39.9 -
1. Results are presented on a like for like ('LFL') basis which
removes the impact of club openings, club closures, foreign exchange movements
and discontinued operations.
2. Before the impact of separately disclosed items.
The impact of the pandemic has been severe on the land-based bingo sector.
Whilst customer volumes are growing, the rate of growth is slow and from a
much lower base than prior to the pandemic. Mecca customer visits grew 4% in
H1 compared to the prior period, with LFL NGR growing 4% to £65.5m. Compared
with pre-pandemic H1 2019/20, LFL customer visits were down 28% with NGR down
20%. The largest decline in visits is amongst Mecca's older cohort of
customers.
LFL NGR on the core main stage bingo game grew 13% in the period compared with
H1 2021/22 with LFL NGR from the interval bingo game, Cashline, growing 11%.
LFL Gaming machine NGR declined 3% with overall spend per visit flat in the
period.
Underlying LFL operating profit improved from a loss of £0.3m in H1 2021/22
to a loss of £0.1m. After reallocation of costs previously assigned as
central costs but now appropriately charged to the Mecca business, the
underlying LFL H1 operating loss was £4.9m, compared to an operating loss of
£4.0m in H1 2022/23.
Bingo requires liquidity to provide attractive prize-boards to customers and
it is the venues with smaller customer bases which have suffered the most as a
consequence of the pandemic. Seven loss making Mecca venues were closed in H1
and a further eight venues will close in Q3 reducing the estate to 56. 29
venues were loss making in the half.
Total loss for the half was £61.8m, principally driven by an impairment
charge of £52.3m reflecting the slow rate of recovery and £3.6m of closure
costs.
25 venues grew profitability in the half despite the impact of higher energy
costs and wage inflation. Mecca has many profitable and good performing bingo
venues and the focus is on ensuring that these businesses prosper going
forwards and continue to provide an important social amenity within local
communities. A key requirement is the removal of the archaic 80/20 gaming
machine rule in the Government's review of gambling legislation. Under the
rule, bingo venues are required to ensure that no more than 20% of gaming
machines are category B3 machines, the machines that customers most choose to
play and which account for nearly two thirds of Mecca's machine revenues.
Regulatory reform which enables the sector to better meet the needs of its
customers will be critical in sustaining bingo as a leisure option for
consumers in towns and cities across the UK.
Awaiting the outcome of the gambling review, investment in the Mecca estate is
largely restricted to maintenance capex, safer gambling technology and the
rollout of LED lighting. However, four venues received investment to improve
their external appeal as part of a trial which will be reviewed in the second
half of the year. Playsafe, a system to support real time information for
customers and colleagues on machine play, is being rolled out across the Mecca
estate.
Enracha venues
Key financial performance indicators:
H1 2022/23 H1 2021/22 Change H1 2019/20 Change
£m £m £m
Underlying LFL(1) NGR 17.7 14.2 25% 16.0 11%
Total NGR 17.7 14.1 26% 18.7 (5)%
Underlying LFL(1,2) operating profit pre central cost reallocation 4.0 3.4 18% 4.0 0%
Underlying LFL(1,2) operating profit post central cost reallocation 3.9 3.3 18%
Total profit 3.8 1.4 171%
1. Results are presented on a like for like ('LFL') basis which
removes the impact of club closures, foreign exchange movements and
discontinued operations.
2. Before the impact of separately disclosed items.
The well-invested Enracha business in Spain has continued to recover strongly
from the enforced temporary closures and subsequent restrictions during the
height of the pandemic. Underlying LFL NGR grew 25% year on year to £17.7m
and was 11% ahead of pre-pandemic H1 2019/20.
Customer visits were up 16% in the period but were still 14% behind
pre-pandemic levels. LFL bingo NGR was 13% ahead of prior period and is now
just 1% behind H1 2019/20 levels. The big growth area has been in machine NGR
where the business has continued to invest in the quality of the customer
offering. Gaming machine NGR (AWPs, electronic roulette and B3/B4 bingo
machines) was up 39% against the prior year and up 36% against H1 2019/20.
The nine Enracha venues delivered an LFL underlying operating profit of £4.0m
up from £3.4m in the same period last year and in line with the £4.0m profit
delivered in H1 2019/20. Spain also saw a substantial rise in energy costs and
this has been the primary area of cost increase for Enracha in the period.
Digital
Key financial performance indicators:
H1 2022/23 H1 2021/22 Change H1 2019/20 Change
£m £m
LFL(1) NGR 100.8 92.3 9% 100.0 1%
Mecca 36.1 34.9 3% 34.4 5%
Grosvenor 27.8 25.8 8% 24.4 14%
Enracha/Yo 11.6 10.6 9% 6.4 81%
Other including Stride legacy brands(3) 25.3 21.0 20% 34.8 (27)%
Total NGR 100.8 92.1 10% 83.2 21%
Mecca 36.1 34.9 3% 34.4 5%
Grosvenor 27.8 25.8 8% 24.4 14%
Enracha/Yo 11.6 10.4 12% 6.3 84%
Other including Stride legacy brands 25.3 21.0 20% 18.1 40%
Underlying LFL(1,3) operating profit pre central cost reallocation 9.9 3.1 219% 13.0 (24)%
Underlying LFL(1,2) operating profit post central cost reallocation 7.4 1.1 573%
Total profit/(loss) 2.7 (6.1) -
1. Results are presented on a like-for-like ('LFL') basis which
removes the impact of acquired businesses and foreign exchange.
2. Before the impact of separately disclosed items.
3. Stride was acquired in October 2019 and has been included on
a proforma basis.
The digital business continues to perform strongly with LFL NGR in the half up
9% on the prior period at £100.8m. The operating leverage within the business
enabled LFL underlying operating profit to rise 219% to £9.9m. After
deducting £4.4m of amortisation relating to acquired intangible assets and
the reallocation of £2.6m of costs previously assigned as central costs, but
now appropriately charged to the digital business, the H1 operating profit was
£2.7m.
In the UK, LFL NGR was up 9% at £89.2m. Mecca returned to growth with NGR up
3% against the prior period. Grosvenor continues to grow, having been
successfully migrated onto the proprietary RIDE platform in September 2022,
with NGR up 8%. The portfolio of other brands operating on the RIDE platform
grew NGR 22%, whilst those brands operating on third party platforms returned
to growth, up 8% against the prior period.
With the Rank brands now fully operating on the RIDE platform acquired through
the acquisition of Stride Gaming plc in late 2019, the UK facing business is
well set to drive growth through enhancing the customer offering and
maximising the cross-channel opportunity for the Grosvenor and Mecca brands.
New live tables continue to be launched so that customers can experience the
Grosvenor casino experience online and new cross-channel bingo games will be
launched in Mecca in the second half of the year. The RIDE platform continues
to undergo further development to deliver additional scale and to continuously
improve the consistency and quality of the customer experience. In this
regard, the software engineering hub in Cape Town is being further
strengthened, as is the operational support hub in Mauritius.
Customer affordability journeys continue to be improved to reduce unnecessary
friction for customers. A new markers of harm model has been introduced with
further enhancements introduced during the period and additional developments
planned for H2 2022/23 to provide for tighter identification of potentially at
risk play and to ease unnecessary intrusion for customers playing within their
means.
In Spain, Yo and Enracha grew NGR 9% to £11.6m. YoSports was successfully
launched in September 2022 in readiness for the FIFA World Cup in November and
December 2022 and it received a very positive reaction from customers. The
inability to incentivise new customers and the very tight marketing
restrictions imposed in Spain in May 2021 continues to make it difficult and
expensive to recruit new customers. However, average customer values are much
higher than previously as there are no incentives to attract them to other
brands operating within the market. The challenge for the Yo and Enracha
online brands is to grow market share through new customer acquisition and
YoSports is an important additional asset in this regard.
Passion Gaming, the online Indian rummy business in which Rank holds a 51%
share, grew LFL NGR 68% with the easing of regulatory restrictions in certain
states compared to the prior period and a resultant increase in marketing
investment to grow the customer base.
Group liquidity
The Group ended the H1 2022/23 in a strong liquidity position with total cash
and available facilities of £148.4m.
In May 2023, the Group will make its scheduled term loan repayment of £34.5m
in line with the agreed loan amortisation profile reducing its term loan to
£44.3m. The final repayment of £44.3m is due in May 2024.
The Group's available debt facilities comprise £65m of Revolving Credit
Facilities ('RCF') which expire in 2023/24 and a £15m RCF which expires in
2024/25. In light of the upcoming expiration dates Rank will look to
refinance its debt facilities in the second half of the year.
The Group expects to meet all future financial covenants under it lending
facilities.
Sustainability update
In addition to the key safer gambling achievements outlined above we have also
made some significant progress on our environmental objectives.
During the half, Rank moved all its electricity energy consumption
requirements from non-renewable sources to renewable sources. In addition,
from October 2023 Rank will start to benefit from its renewable electricity
Power Purchase Agreement ('PPA') which was entered into in October 2022.
There are many other environmental initiatives underway focused on reducing
Rank's total energy consumption and environmental impact. The most material
immediate project is the move from inefficient fluorescent lighting to more
efficient LED lighting in the UK venues. Seven venues were completed in the
half and a further 89 are expected to be completed in H2 2022/23.
Regulatory update
The Government's commitment to address some of the historic imbalances between
digital and land-based gambling was made over two years ago when the review of
gambling legislation was first announced. Since then, we have refined a series
of modest but commercially important proposals that we have presented to DCMS,
wider Government officials and parliamentarians. We have also sought elevated
engagement with the Gambling Commission to ensure the key proposals are fully
understood.
In Grosvenor, all but one of our 51 venues are regulated under the 1968
Gambling Act which restricts gaming machines to 20 per licence. The 2005 Act
(we have one casino in Luton which benefits from this licence) permits up to
80 slots. Harmonising regulations to permit up to 80 slots per licence (a
sliding scale would ensure that slot numbers are aligned to venue size) is a
key proposal which, if included in the White Paper, will trigger a programme
of improvements across much of our estate. The 2005 Act also permits sports
betting in casinos whereas the 1968 Act prohibits it and we hope that this
archaic anomaly is removed in the gambling review, irrespective of venue size.
We would like to be able to offer a broader range of table gaming than just
roulette on electronic terminals, as is the case across most other
jurisdictions. We have also proposed the extension of cashless payment methods
in venues, with appropriate customer protections, which would meet changing
consumer behaviour and modernise the in-venue experience.
In terms of land-based bingo, the archaic '80/20' rule dictates that no more
than 20% of our gaming machines can be the popular B3 machines which customers
enjoy playing. The remainder must be Cat C or Cat D machines which are
increasingly obsolete and less popular with our customers. We have argued that
the removal or reform of the 80/20 rule be addressed. We have also argued that
permitting side-bets on the main stage game of bingo would enhance and
modernise the in-club customer experience. All our proposals are underscored
by extensive customer protection measures.
Government does not involve itself in gambling legislation on a regular basis
and this is therefore a vital window of opportunity for the land-based casino
and bingo sectors if the customer offering is to be modernised to better meet
the needs of today's consumers.
Board changes
Having completed over six years on the Board, Steven Esom, Non-Executive
Director and Chair of the Remuneration Committee, stepped down from the Board
on 31 December 2022.
Lucinda Charles-Jones succeeded Steven Esom as Chair of the Remuneration
Committee and was appointed as the Designated Non-Executive Director for
workforce engagement from 1 January 2023.
CFO's review
Within this section all prior year comparatives are to the six months ended 31
December 2021.
Reported net gaming revenue ('NGR')
For the six months ended 31 December 2022 NGR increased by 2% to £338.9m with
growth in Mecca venues, Enracha venues and Digital offset by weaker trading in
our Grosvenor venues.
Operating profit
Operating profit fell to a loss £101.0m, from an operating profit of £102.4m
in the prior period principally due to higher operating costs, notably energy
costs and wage costs, and an impairment charge of £95.4m.
Separately disclosed items ('SDIs')
SDIs are items that are infrequent in nature and/or do not relate to Rank's
underlying business performance.
Total SDIs before tax and interest for the six months ended 31 December 2022
were £104.2m.
The key SDIs in the period were as follows:
· Impairment charges of £95.4m relating to lower than anticipated
performances of Grosvenor and Mecca venues in the current period and a
lowering of performance expectations for future periods;
· Venues closure costs of £7.3m regarding the closure of one Grosvenor
casino and a number of Mecca venues;
· Amortisation costs of £4.4m relating to the acquired intangible
assets of Stride, Rialto and Yo; and
· A £3.7m provision release regarding legacy claims relating to sold
or closed businesses.
Further detail relating to the SDIs is provided in note 3.
Dilapidation provision
Property related provisions include provisions for dilapidations which are
recognised where the Group has the obligation to make-good its leased
properties.
Following the recent closures of venues in 2021/22 and 2022/23, and the
possibility of future closures and the downturn in the trading outlook,
together with a hardening position from landlords and recessionary environment
making certain properties less attractive, the Group reconsidered the basis of
the dilapidation provision estimate and has recognised an additional asset and
liability of £27.2m. The recognised asset is subsequently charged to the
income statement over the remaining life of the lease.
The dilapidation asset of £27.2m was included in the impairment review of the
Mecca and Grosvenor businesses and resulted in an associated impairment charge
of £18.6m.
The dilapidation provision is recognised based on historically settled
dilapidations which form the basis of the estimated future cash outflows. Any
difference between amounts expected to be settled and the actual cash outflow
will be accounted for in the period when such determination is made.
Prior period restatement
During the period, the Group identified an accumulated total of £2.2m of
prior year payment processing costs within the Digital business which
erroneously had not been recognised in the prior year financial statements. Of
the total value, £1.3m relates to 2021/22, with £0.6m relating to H1 2021/22
and £0.7m to H2 2021/22. The remaining £0.9m relates to pre 2021/22.
Net financing charge
The £6.0m underlying net financing charge for the six months ended 31
December 2022 was in line with the prior period's charge.
The underlying net financing charge includes £3.2m of lease interest
calculated under IFRS-16.
Taxation
The Group's underlying effective corporation tax rate in H1 2022/23 was
(39.3)% (H1 2021/22: 19.9%) based on a tax charge of £1.1m on underlying loss
before taxation. This is different to the Group's anticipated effective tax
rate of 16-18% for the period. This is mainly as a result of UK operations
being in a loss position for the period and no tax credit recognised in
respect of these losses due to uncertainty around the availability of taxable
profits in the foreseeable future against which these losses can be utilised.
The underlying effective corporation tax rate for 2022/23 is expected to be
higher than the anticipated effective tax rate of 16-18%. Similar to the
position for H1, the full year tax rate will be driven by UK losses generated
in the period on which no tax credit is expected to be recognised.
Further details of the tax charge are provided in note 5.
Earnings per share ('EPS')
Basic EPS fell to a loss of (21.6)p from 17.9p in the prior period. Underlying
EPS declined to (0.8)p from 2.8p in the prior period. For further details
refer to note 7.
Cash flow and net debt
As at 31 December 2022, net debt was £158.3m. Debt comprised £78.8m in term
loans and £169.2m in finance leases, offset by cash at bank of £89.7m.
H1 2022/23 H1 2021/22
£m £m
Operating profit from continuing operations 3.2 23.1
Operating profit from discontinued operations - -
Depreciation and amortisation 31.5 34.4
Working capital 16.3 (0.2)
Other 0.4 (0.3)
Cash inflow from operations 51.4 57.0
Capital expenditure (24.2) (13.4)
Net interest and tax (10.0) (10.2)
Lease principal payments (20.3) (13.9)
Cashflows in relation to SDI and provisions (2.6) 81.7
Net free cash flow (5.7) 101.2
Payment of contingent consideration (0.3) -
Business disposal - 3.1
Total cash inflow (6.0) 104.3
Opening net debt pre IFRS 16.9 (50.7)
Closing net cash / (debt) pre IFRS 10.9 53.6
IFRS 16 lease liabilities (169.2) (196.3)
Closing net (debt) post IFRS 16 (158.3) (142.7)
The Group finished the period with net debt for covenant purposes of £6.8m.
Cash tax rate
In the six months ended 31 December 2022, the Group had an effective cash tax
rate of (2.3)% on total loss before taxation (H1 2021/22: 5.8%). The cash tax
paid in the period relates to overseas operations. The cash tax rate differs
from the standard rate of UK tax due to losses generated by the Group's UK
operations during the period resulting in no cash tax payable in the UK.
The Group is expected to have a cash tax rate of approximately (4)% for the
year ended 30 June 2023. Similar to the position for H1, the cash tax rate
is driven by losses expected to be generated by UK operations resulting in no
cash tax payable in the UK.
Going concern statement
Based on the Group's cash flow forecasts and business plan, the Directors
believe that the Group will generate sufficient cash to meet its liabilities
as they fall due for the period up to 31 January 2024. In making such
statement, the Directors highlight forecasting accuracy in relation to the
level of trading performance achieved as the key sensitivity in the approved
base case.
The Directors have considered three downside scenarios which reflect a reduced
trading performance and an inability to successfully negotiate any new RCF
facilities. The Directors note that beyond the end of the going concern
period, a portion of the RCF matures and the final term loan repayment is due
in May 2024. Management is confident in the ability of the business to
refinance the RCF facilities and will commence discussions in February 2023.
However, given the proximity of these events to the end of the going concern
period, in concluding on the going concern position, management have
considered the ability of the business to operate in the unlikely event that
the RCF is not refinanced.
In each of these three scenarios, the Group will generate sufficient cash to
meet its liabilities as they fall due in all scenarios and meet covenant
requirements for the period to 31 January 2024, in all of the scenarios.
Alternative Performance Measures
When assessing, discussing and measuring the Group's financial performance,
management refer to measures used for internal performance management. These
measures are not defined or specified under UK adopted International Financial
Reporting Standards (IFRS) and as such are considered to be Alternative
Performance Measures ('APMs').
By their nature, APMs are not uniformly applied by all preparers including
other operators in the gambling industry. Accordingly, APMs used by the Group
may not be comparable to other companies within the Group's industry.
Purpose
APMs are used by management to aid comparison and assess historical
performance against internal performance benchmarks and across reporting
periods. These measures provide an ongoing and consistent basis to assess
performance by excluding items that are materially non-recurring,
uncontrollable or exceptional. These measures can be classified in terms of
their key financial characteristics.
Profit measures allow management and users of the financial statements to
assess and benchmark underlying business performance during the year. They are
primarily used by operational management to measure operating profit
contribution and are also used by the Board to assess performance against
business plan.
The following table explains the key APMs applied by the Group and referred to
in these statements:
APM Purpose Closest equivalent IFRS measure Adjustments to reconcile to primary financial statements
Underlying like-for-like ('LFL') net gaming revenue ('NGR') Revenue measure NGR · Separately disclosed items
· Excludes contribution from any venue openings, closures, disposals, acquired
businesses and discontinued operations
· Foreign exchange movements
Underlying LFL operating profit /(loss) post central cost reallocation Profit measure Operating profit / (loss) · Separately disclosed items
· Excludes contribution from any venue openings, closures, disposals, acquired
businesses and discontinued operations
· Foreign exchange movements
· Central cost reallocation
Underlying LFL operating profit /(loss) pre central cost reallocation Profit measure Operating profit / (loss) · Separately disclosed items
· Excludes contribution from any venue openings, closures, disposals,
acquired businesses and discontinued operations
· Foreign exchange movements
Underlying profit / (loss) before taxation Profit measure Profit / (loss) before tax · Separately disclosed items
Underlying (loss) / profit after taxation Profit measure Profit / (loss) after tax · Separately disclosed items
Underlying (loss) / earnings per share Profit measure Earnings / (loss) per share · Separately disclosed items
Free cash flow Cash measure Net cash generated from operating activities · Lease principal repayments
· Cash flow in relation to SDIs
· Cash capital expenditure
· Net interest and tax payments
·
Underlying LFL operating profit /(loss) post central cost reallocation
Profit measure
Operating profit / (loss)
· Separately disclosed items
· Excludes contribution from any venue openings, closures, disposals, acquired
businesses and discontinued operations
· Foreign exchange movements
· Central cost reallocation
Underlying LFL operating profit /(loss) pre central cost reallocation
Profit measure
Operating profit / (loss)
· Separately disclosed items
· Excludes contribution from any venue openings, closures, disposals,
acquired businesses and discontinued operations
· Foreign exchange movements
Underlying profit / (loss) before taxation
Profit measure
Profit / (loss) before tax
· Separately disclosed items
Underlying (loss) / profit after taxation
Profit measure
Profit / (loss) after tax
· Separately disclosed items
Underlying (loss) / earnings per share
Profit measure
Earnings / (loss) per share
· Separately disclosed items
Free cash flow
Cash measure
Net cash generated from operating activities
· Lease principal repayments
· Cash flow in relation to SDIs
· Cash capital expenditure
· Net interest and tax payments
·
Rationale for adjustments - Profit and debt measure
1. Separately disclosed items ('SDIs')
SDIs are items that bear no relation to the Group's underlying ongoing
operating performance. The adjustment helps users of the accounts better
assess the underlying performance of the Group, helps align to the measures
used to run the business and still maintains clarity to the statutory reported
numbers.
Further details of the SDIs can be found in the Financial Review and note 3.
2. Contribution from any venue openings, closures, disposals, acquired businesses
and discontinued operations
In the current period (H1 2022/23), the Group closed one Grosvenor venue and
seven Mecca venues. For the purpose of calculating like-for-like ('LFL')
measures its contribution has been excluded from the prior period numbers and
current period numbers, to ensure comparatives are made to measures on the
same basis.
3. Foreign exchange movements
During the year the exchange rates may fluctuate, therefore by using an
exchange rate fixed throughout the year the impact on overseas business
performance can be calculated and eliminated.
The tables below reconcile the underlying performance measures to the reported
measures of the continuing operations of the Group.
£m H1 2022/23 H1 2021/22
Underlying LFL net gaming revenue (NGR) 337.4 330.5
Open, closed and disposed venues 1.5 3.6
Foreign exchange ('FX') - (0.4)
Underlying NGR - continuing operations 338.9 333.7
Calculation of comparative underlying LFL NGR
H1 2021/22
Reported underlying LFL NGR 333.5
Reversal of H1 2020/21 closed venues (3.6)
H1 2021/22 closed venues 0.2
H1 2021/22 FX 0.4
Restated underlying LFL NGR 330.5
£m H1 2022/23 H1 2021/22
LFL underlying operating profit 4.2 24.9
Opened, closed and disposed venues (1.0) (1.8)
Underlying operating profit - continuing operations 3.2 23.1
Separately disclosed items (104.2) 79.3
Operating (loss) / profit - continuing operations (101.0) 102.4
Calculation of comparative underlying LFL operating profit
£m H1 2021/22
Reported underlying LFL reported operating loss pre IFRS 16 24.1
Opened and closed venues 1.8
H1 2021/22 closed venues (0.4)
Impact of prior year error (0.6)
Underlying LFL operating profit 24.9
£m H1 2022/23 H1 2022/22
Underlying current tax (charge) (1.3) (7.3)
Tax on separately disclosed items 7.0 (17.3)
Deferred tax 0.2 4.0
Tax credit / (charge) 5.9 (20.6)
H1 2022/23 H1 2021/22
Underlying EPS (0.8)p 2.8p
Separately disclosed items (20.8)p 15.1p
Reported EPS (21.6)p 17.9p
Reallocation of central costs
During the period, the Group undertook a review of the Group's central costs
and has concluded that a proportion of them, which are directly attributable
to the relevant business units, should be allocated to those business units,
better reflecting the underlying profitability of each segment. This resulted
in changes in the underlying profit (loss) of each segment in the prior year
which has been re-presented in the table below.
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor venues Mecca venues Enracha Central Costs Total
venues
£m £m £m £m £m £m
Segment revenue 100.8 153.4 67.0 17.7 - 338.9
Other operating income - - - - - -
Operating profit (loss) 10.0 9.9 (1.2) 4.0 (19.5) 3.2
Separately disclosed items (4.7) (46.7) (55.9) (0.1) 3.2 (104.2)
Segment result 5.3 (36.8) (57.1) 3.9 (16.3) (101.0)
Central costs allocation (2.6) (5.6) (4.7) (0.1) 13.0 -
Segment result (post central cost allocation) 2.7 (42.4) (61.8) 3.8 (3.3) (101.0)
Finance costs (6.1)
Finance income 0.2
Other financial gains (0.2)
Loss before taxation (107.1)
Taxation 5.9
Loss for the period from continuing operations (101.2)
Six months ended 31 December 2021 (unaudited and re-presented)
Digital Grosvenor venues Mecca venues Enracha venues Central Costs Total
£m £m £m £m £m £m
Segment revenue 92.1 161.6 65.9 14.1 - 333.7
Other operating income - 2.3 0.7 - - 3.0
Operating profit (loss) 3.1 34.7 (1.5) 2.7 (15.9) 23.1
Separately disclosed items (7.2) 38.1 45.1 (1.2) 4.5 79.3
Segment result (4.1) 72.8 43.6 1.5 (11.4) 102.4
Central cost allocation (2.0) (4.8) (3.7) (0.1) 10.6 -
Segment result (post central cost allocation) (6.1) 68.0 39.9 1.4 (0.8) 102.4
Finance costs (6.6)
Finance income 5.7
Profit before taxation 101.5
Taxation (20.6)
Profit for the period from continuing operations 80.9
Analysis of total costs by type and segment and how the central costs have
been re-allocated:
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor venues Mecca venues Enracha venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 14.9 62.5 22.9 8.5 3.9 112.7
Taxes and duties 24.2 33.5 12.8 1.0 0.3 71.8
Direct costs 25.5 14.3 10.7 1.4 - 51.9
Property costs 0.3 5.4 3.2 0.5 0.5 9.9
Marketing 17.6 3.4 2.8 1.1 0.1 25.0
Depreciation and amortisation 7.4 15.9 6.0 0.8 1.4 31.5
Other 3.5 14.1 14.5 0.5 0.3 32.9
Total costs before SDI (post central cost allocation) 93.4 149.1 72.9 13.8 6.5 335.7
Cost of sales 208.4
Operating costs 127.3
Total costs before SDI (post central cost allocation) 335.7
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 1.7 2.6 2.1 - (6.4) -
Taxes and duties 0.1 0.4 0.4 0.1 (1.0) -
Direct costs - - - - - -
Property costs - - - - - -
Marketing - - - - - -
Depreciation and amortisation 0.1 0.5 0.4 - (1.0) -
Other 0.7 2.1 1.8 - (4.6) -
Central cost allocation 2.6 5.6 4.7 0.1 (13.0) -
Cost of sales -
Operating costs -
Central cost allocation -
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 13.2 59.9 20.8 8.5 10.3 112.7
Taxes and duties 24.1 33.1 12.4 0.9 1.3 71.8
Direct costs 25.5 14.3 10.7 1.4 - 51.9
Property costs 0.3 5.4 3.2 0.5 0.5 9.9
Marketing 17.6 3.4 2.8 1.1 0.1 25.0
Depreciation and amortisation 7.3 15.4 5.6 0.8 2.4 31.5
Other 2.8 12.0 12.7 0.5 4.9 32.9
Total costs before SDI (pre central cost allocation) 90.8 143.5 68.2 13.7 19.5 335.7
Cost of sales 208.4
Operating costs 127.3
Total costs before SDI (pre central cost allocation) 335.7
Six months ended 31 December 2021 (unaudited and re-presented)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 13.0 54.2 24.5 7.3 3.2 102.2
Taxes and duties 20.3 34.1 13.3 0.8 0.3 68.8
Direct costs 25.6 12.7 9.9 1.1 - 49.3
Property costs 0.1 4.8 1.8 0.4 0.4 7.5
Marketing 19.9 2.1 3.1 0.8 - 25.9
Depreciation and amortisation 7.1 16.5 8.3 0.7 1.8 34.4
Other 5.0 9.6 10.9 0.4 (0.4) 25.5
Total costs before SDI (post central cost allocation) 91.0 134.0 71.8 11.5 5.3 313.6
Cost of sales 198.4
Operating costs 115.2
Total costs before SDI (post central cost allocation) 313.6
Six months ended 31 December 2021 (unaudited and re-presented)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 1.9 2.5 2.3 - (6.7) -
Taxes and duties 0.1 0.4 0.4 - (0.9) -
Direct costs - - - - - -
Property costs - 0.4 - - (0.4) -
Marketing - - - - - -
Depreciation and amortisation 0.1 0.5 0.4 - (1.0) -
Other (0.1) 1.0 0.6 0.1 (1.6) -
Central cost allocation 2.0 4.8 3.7 0.1 (10.6) -
Cost of sales -
Operating costs -
Central cost allocation -
Six months ended 31 December 2021 (unaudited and re-presented)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 11.1 51.7 22.2 7.3 9.9 102.2
Taxes and duties 20.2 33.7 12.9 0.8 1.2 68.8
Direct costs 25.6 12.7 9.9 1.1 - 49.3
Property costs 0.1 4.4 1.8 0.4 0.8 7.5
Marketing 19.9 2.1 3.1 0.8 - 25.9
Depreciation and amortisation 7.0 16.0 7.9 0.7 2.8 34.4
Other 5.1 8.6 10.3 0.3 1.2 25.5
Total costs before SDI (pre central cost allocation) 89.0 129.2 68.1 11.4 15.9 313.6
Cost of sales 198.4
Operating costs 115.2
Total costs before SDI (pre central cost allocation) 313.6
Principal risks and uncertainties
Key business risks are reviewed by the executive directors, other senior
executives and the Board on a regular basis and, where appropriate, actions
are taken to mitigate the key risks that are identified. We have a Group wide
enterprise risk management framework and approach in place, integrated into
our organisational management structure and responsibilities, with the Board
having overall responsibility for risk management in the Group.
The principal risks and uncertainties that could impact the Group are detailed
in the Group's Annual Report and Accounts 2022 with the principal risks being
as follows:
· Uncertain trading environment: Recovery from the pandemic is slowed by
inflationary pressures impacting consumers' discretionary expenditure. Such
pressures influence customer behaviour (see also Customer Behaviour Changes)
and can reduce spend on entertainment and leisure activities such as those
offered by the Group, and propensity to visit our venues. Moreover, the sharp
rise in energy cost is impacting the operating margins of our venues
businesses and this will be further impacted if prices continue to increase.
Related risks caused by current macroeconomic and geopolitical uncertainty are
energy availability and the increased cost of products and services, all of
which could impact our future performance and strategic decisions.
· Customer behaviour changes: Customer habits both as a consequence of the
cost-of-living crisis and aftermath of the pandemic continues to impact
customer attendance and average spend, negatively impacting our financial
performance.
· Compliance with gambling law and regulations: Regulatory and legislative
regimes for betting and gaming in key markets are constantly under review and
can change (including as to their interpretation by regulators) at short
notice.
· Safer gambling: This underpins our strategy with one of our five strategic
pillars being that we will build sustainable relationships with our customers
by providing them with safe environments in which to play. This minimises the
potential for our customers to suffer harm from their gambling and will assist
the Group in ensuring that it grows the business in a sustainable way.
· People: Pivotal to the success of the organisation and a failure to attract or
retain key individuals may impact the Group's ability to deliver on its
strategic priorities.
· Change project and programmes: Key Group projects and programme could fail to
deliver, resulting in missed market opportunities for the Group, and/or take
longer to deliver, resulting in missed synergies and savings.
· Health and safety: Failure to meet the requirements of the various domestic
and international rules and regulations relating to the safety of our
employees and customers could expose the Group (and individual Directors and
employees) to material civil, criminal and/or regulatory action with the
associated financial and reputational consequences.
· Data protection and management: The inability to adequately protect sensitive
customer data and other key data and information assets that could be leaked,
exposed, hacked or transmitted would result in customer detriment, formal
investigations and/or possible litigation leading to prosecution, fines and/or
damage to our brands.
· Cyber resilience: Cyber-attacks can disrupt and cause considerable financial
and reputational damage to the Group with the loss of assets, reputation and
business, and potentially face regulatory fines and/or litigation.
· Business continuity and Disaster Recovery: Planning and preparation to ensure
that we could overcome serious incidents or disasters and resume normal
operations within a reasonably short period, is critical to ensure that there
is minimal impact to its operations, customers and reputation.
· Dependency on third parties and supply chain: The Group is dependent on a
number of these for the operation of its business. The withdrawal or removal
from the market of one or more of these third-party suppliers, failure of
these suppliers to comply with contractual obligations, or reputational issues
arising in connection with these suppliers could adversely affect operations,
especially where these suppliers are niche.
· Taxation: Changes in fiscal regimes in domestic and international markets can
happen at short notice. These changes could benefit or have an adverse impact
with additional costs potentially incurred in order to comply.
Additionally, the following risk is now included as a principal risk:
· Treasury and banking: The Group is reliant on committed debt facilities with
five lenders, all of which have specific obligations and covenants that need
to be met, and multiple banks for clearing (transaction processing). A loss of
debt facilities and/or clearing facilities could result in the Group being
unable to meet its obligations as they become due.
Emerging and Evolving Risks
The current economic pressures, increasing rates of inflation and increasing
energy costs are a cause for concern for many consumers. The executive
directors continue to be vigilant of the changing economic backdrop and the
impact on the Group.
Additionally, the Group continues to evolve its analysis of climate-related
risks and opportunities. However, climate risks are currently not regarded as
a principal risk and the risk itself is currently considered low.
Directors' Responsibility Statement
Each of the directors named below confirm that to the best of his or her
knowledge:
· The financial statements, prepared under UK-adopted International Financial
Reporting Standard (IFRS), give a true and fair view of the assets,
liabilities, financial position and profit of the Company and the undertakings
included in the consolidation taken as a whole; and
· The management report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the risk and uncertainties that they face.
The directors of The Rank Group Plc are:
Chew Seong Aun
Lucinda Charles-Jones
Richard Harris
Katie McAlister
John O'Reilly
Alex Thursby
Karen Whitworth
Signed on behalf of the board on 25 January 2023
John
O'Reilly
Richard Harris
Chief
Executive
Chief Financial Officer
INDEPENDENT REVIEW REPORT TO THE RANK GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2022 which comprises the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Statement of Changes in
Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement and the
related explanatory notes that have been reviewed. We have read the other
information contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2022 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Glasgow
25 January 2023
Consolidated Income Statement
for the six months ended 31 December 2022
Six months ended 31 December 2022 Six months ended 31 December 2021
(unaudited)
(unaudited and restated)
Separately Separately
disclosed items disclosed items
Underlying (note 3) Total Underlying (note 3) Total
Note £m £m £m £m £m £m
Continuing operations
Revenue 2 338.9 - 338.9 333.7 - 333.7
Cost of sales 2 (208.4) (95.4) (303.8) (198.4) 10.8 (187.6)
Gross profit (loss) 130.5 (95.4) 35.1 135.3 10.8 146.1
Other operating costs 2 (127.3) (8.8) (136.1) (115.2) (8.6) (123.8)
Other operating income 2 - - - 3.0 77.1 80.1
Operating profit (loss) 3.2 (104.2) (101.0) 23.1 79.3 102.4
Financing:
- finance costs 4 (6.1) - (6.1) (6.6) - (6.6)
- finance income 4 0.2 - 0.2 - - -
- other financial (losses) gains 4 (0.1) (0.1) (0.2) 0.1 5.6 5.7
Total net financing (charge) income (6.0) (0.1) (6.1) (6.5) 5.6 (0.9)
(Loss) profit before taxation (2.8) (104.3) (107.1) 16.6 84.9 101.5
Taxation 5 (1.1) 7.0 5.9 (3.3) (17.3) (20.6)
(Loss) profit for the period from continuing operations (3.9) (97.3) (101.2) 13.3 67.6 80.9
Discontinued operations
Profit after tax for the period from discontinued operations - - - - 3.1 3.1
(Loss) profit for the period (3.9) (97.3) (101.2) 13.3 70.7 84.0
Attributable to:
Equity holders of the parent (3.9) (97.3) (101.2) 13.3 70.7 84.0
Non-controlling interests - - - - - -
(3.9) (97.3) (101.2) 13.3 70.7 84.0
(Loss) earnings per share attributable to equity shareholders
- basic 7 (0.8)p (20.8)p (21.6)p 2.8p 15.1p 17.9p
- diluted 7 (0.8)p (20.8)p (21.6)p 2.8p 15.1p 17.9p
(Loss) earnings per share - continuing operations
- basic 7 (0.8)p (20.8)p (21.6)p 2.8p 14.4p 17.2p
- diluted 7 (0.8)p (20.8)p (21.6)p 2.8p 14.4p 17.2p
Earnings per share - discontinued operations
- basic - - - - 0.7p 0.7p
- diluted - - - - 0.7p 0.7p
Consolidated Statement of Comprehensive (Loss) Income
for the six months ended 31 December 2022
Six months ended Six months ended
31 December
31 December
2022
2021
(unaudited) (unaudited and restated)
£m £m
Comprehensive (loss) income:
(Loss) profit for the period (101.2) 84.0
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange adjustments net of tax 1.3 (1.5)
Total comprehensive (loss) income for the period (99.9) 82.5
Attributable to:
Equity holders of the parent (99.9) 82.5
Non-controlling interests - -
Consolidated Balance Sheet
at 31 December 2022 and 30 June 2022
As at As at
31 December 30 June
2022
2022
(unaudited) (audited and restated)
Note £m £m
Assets
Non-current assets
Intangible assets 468.6 493.6
Property, plant and equipment 96.4 113.1
Right-of-use assets 70.3 101.6
Deferred tax assets 1.3 1.4
Other receivables 6.7 6.7
643.3 716.4
Current assets
Inventories 2.7 2.3
Other receivables 38.8 34.2
Income tax receivable 11.8 8.1
Cash and short-term deposits 89.7 95.7
143.0 140.3
Total assets 786.3 856.7
Liabilities
Current liabilities
Trade and other payables (148.7) (131.1)
Lease liabilities (44.4) (40.4)
Income tax payable (3.3) (4.2)
Financial liabilities - loans and borrowings (34.9) (33.9)
Provisions 9 (9.5) (6.9)
(240.8) (216.5)
Net current liabilities (97.8) (76.2)
Non-current liabilities
Lease liabilities (124.8) (141.3)
Financial liabilities - loans and borrowings (43.5) (44.1)
Deferred tax liabilities (16.2) (20.5)
Provisions 9 (32.0) (5.6)
Retirement benefit obligations (3.6) (3.6)
(220.1) (215.1)
Total liabilities (460.9) (431.6)
Net assets 325.4 425.1
Capital and reserves attributable to the Group's equity shareholders
Share capital 65.0 65.0
Share premium 155.7 155.7
Capital redemption reserve 33.4 33.4
Exchange translation reserve 15.9 14.6
Retained earnings 55.5 156.5
Total equity before non-controlling interests 325.5 425.2
Non-controlling interests (0.1) (0.1)
Total shareholders' equity 325.4 425.1
Consolidated Statement of Changes in Equity
for the six months ended 31 December 2022
For the six months ended 31 December 2022 (unaudited)
Share capital Share premium Capital redemption reserve Exchange translation reserve Retained earnings Reserves attributable to the Group's equity shareholders Non- controlling interest Total equity
£m £m £m £m £m £m £m £m
At 1 July 2022 (as previously reported) 65.0 155.7 33.4 14.6 158.7 427.4 (0.1) 427.3
Impact of prior period error - Note - - - - (2.2) (2.2) - (2.2)
At 1 July 2022 (as restated) 65.0 155.7 33.4 14.6 156.5 425.2 (0.1) 425.1
Comprehensive income:
Loss for the period - - - - (101.2) (101.2) - (101.2)
Other comprehensive income:
Exchange adjustments net of tax - - - 1.3 - 1.3 - 1.3
Total comprehensive profit (loss) for the period - - - 1.3 (101.2) (99.9) - (99.9)
Transactions with owners:
Credit in respect of employee share schemes including tax - - - - 0.2 0.2 - 0.2
At 31 December 2022 65.0 155.7 33.4 15.9 55.5 325.5 (0.1) 325.4
For the six months ended 31 December 2021 (unaudited)
Share capital Share premium Capital redemption reserve Exchange translation reserve Retained earnings Reserves attributable to the Group's equity shareholders Non- controlling interest Total equity
£m £m £m £m £m £m £m £m
At 1 July 2021 (as previously reported) 65.0 155.7 33.4 14.6 92.6 361.3 (0.1) 361.2
Impact of prior period error - Note - - - - (0.9) (0.9) - (0.9)
At 1 July 2021 (as restated) 65.0 155.7 33.4 14.6 91.7 360.4 (0.1) 360.3
Comprehensive income:
Profit for the period - - - - 84.0 84.0 - 84.0
Other comprehensive income:
Exchange adjustments net of tax - - - (1.5) - (1.5) - (1.5)
Total comprehensive (loss) profit for the period - - - (1.5) 84.0 82.5 - 82.5
Transactions with owners:
Credit in respect of employee share schemes including tax - - - - 0.3 0.3 - 0.3
At 31 December 2021 65.0 155.7 33.4 13.1 176.0 443.2 (0.1) 443.1
Consolidated Cash Flow Statement
for the six months ended 31 December 2022
Six months ended Six months ended
31 December
31 December
2021
2022
(unaudited) (unaudited and restated)
Note £m £m
Cash flows from operating activities
Cash generated from operations 11 48.6 139.0
Interest received 0.1 0.1
Interest paid (7.6) (4.4)
Tax paid (2.5) (5.9)
Net cash generated from operating activities 38.6 128.8
Cash flows from investing activities
Additional proceeds on disposal of business - 3.1
Purchase of intangible assets (4.4) (5.5)
Purchase of property, plant and equipment (19.8) (7.9)
Payment of contingent consideration of business combination 12 (0.3) -
Net cash used in investing activities (24.5) (10.3)
Cash flows from financing activities
Repayment of revolving credit facilities - (11.0)
Lease principal repayments (20.3) (13.9)
Net cash used in financing activities (20.3) (24.9)
Net (decrease) increase in cash and short-term deposits (6.2) 93.6
Effect of exchange rate changes 0.2 (0.3)
Cash and short-term deposits at start of period (as restated) 95.7 68.7
Cash and short-term deposits at end of period 89.7 162.0
1 General information, basis of preparation and accounting policies
General information
The Rank Group Plc ('the Company') and its subsidiaries (together 'the Group')
operate gaming services in Great Britain (including the Channel Islands),
Spain and India.
The Company is a public limited company which is listed on the London Stock
Exchange and is incorporated and domiciled in England and Wales under
registration number 03140769. The address of its registered office is TOR,
Saint-Cloud Way, Maidenhead, SL6 8BN.
This condensed consolidated interim financial information was approved for
issue on 26 January 2023.
This condensed consolidated financial information does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the 12-month period ended 30 June 2022 were
approved by the Board of Directors on 18 August 2022 and delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement made under Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has been reviewed
but not audited.
Basis of preparation
This condensed consolidated interim financial information for the six months
ended 31 December 2022 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with UK-adopted
International Accounting Standards (IAS) 34 'Interim financial reporting'. The
condensed consolidated interim financial information should be read in
conjunction with the financial statements for the 12-month period ended 30
June 2022, which have been prepared in accordance with UK-adopted
International Accounting Standards.
Going concern
Assessment
In adopting the going concern basis for preparing the consolidated interim
financial statements, the Directors have considered the circumstances
impacting the Group during the last year, recent trading performance, as
detailed in the trading review on pages 5 to 11, including the budget for
2022/23, the latest forecast for 2022/23 and the long range forecast for
2023/24 approved by the Board, and have reviewed the Group's projected
compliance with its banking covenants and access to funding options for the 12
months ending 31 January 2024, the going concern period.
The Directors recognise that there is continued uncertainty at this time
caused by the slower than anticipated return of customers to UK land-based
leisure entertainment venues, the impact of current geopolitical influences
impacting on consumer sentiment and disposable incomes, the pressure on the
operating costs of the business (including wages and energy costs), increase
in inflation and interest rates and their overall impact on consumer demand
and discretionary spending. The Directors note that this has had an impact
on the accuracy of budgeting and forecasting for the current financial year,
and this has been considered by the management when preparing their
sensitivity review for the going concern period.
The Directors have reviewed and challenged management's assumptions for the
Group's base case view for the going concern period, including their
assumptions on revenues and costs. Key considerations are the assumptions on
the levels of customer visits and their average spend in the venues based
businesses, and the number of first time and returning depositors in the
digital businesses, and the average level of spend per visit for each.
The base case view contains certain discretionary costs within management
control that could be reduced in the event of a revenue downturn. These
include reductions to overheads, reduction to marketing costs, reductions to
the venues' operating costs and reductions to capital expenditure.
The committed financing position in the base case within the going concern
assessment period is that the Group continues to have access to the following
committed facilities:
· Term loan of £78.8m which reduces to £44.3m in May 2023 due to
a scheduled loan repayment
· Revolving credit facilities ("RCF") of £80.0m, reducing to
£55.0m in July 2023.
At the date of approval of the consolidated interim financial statements, the
term loan was £78.8m and the £80.0m RCF was undrawn.
Beyond the end of the going concern period, £40m of the RCF facility matures
in May 2024 and the final term loan repayment of £44m is due in May 2024.
Management are confident in the ability of the business to refinance the RCF
facilities and plans to commence discussions in February 2023. However, given
the proximity of these events to the end of the going concern period, in
concluding on the going concern position, management have considered the
ability of the business to operate in the unlikely event that the RCF is not
refinanced.
In undertaking their assessment, the Directors also reviewed compliance with
the banking covenants ("Covenants") which are tested bi-annually at June and
December. The Group expects to meet the Covenants at June 2023 and December
2023 and have available cash to meet liabilities as they fall due.
Sensitivity Analysis
The base case view reflects the Directors' best estimate of the outcome for
the going concern period. A number of plausible but severe downside risks,
including consideration of possible mitigating actions, have been modelled
with particular focus on the potential impact to cash flows, cash headroom and
covenant compliance throughout the going concern period.
The three downside scenarios modelled are:
(i) revenues in the Grosvenor business fall by 11.8% in the balance of FY23
and in FY24, with management taking no mitigating actions to reduce costs or
capex
(ii) the Group is not able to refinance and obtain any new RCF, management
reduces operating and capital expenditure to ensure the Group retains
sufficient liquidity
(iii) the Group is not able to refinance and obtain any new RCF, management
reduces operating and capital expenditure to ensure the Group retains
sufficient liquidity and Grosvenor revenues decline by 13.0% and Rank
Interactive by 10.0%, in the balance of FY23 and in FY24, versus the base case
view. This represents a reverse stress test scenario.
Having modelled these threes downsides, the indication is that the Group would
continue to meet its covenant requirements in all scenarios and have available
cash to meet liabilities in all three scenarios.
Accordingly, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period at least
through to 31 January 2024.
For these reasons, the Directors continue to adopt the going concern basis for
the preparation of these consolidated interim financial statements and in
preparing the consolidated interim financial statements they do not include
any adjustments that would be required to be made if they were prepared on a
basis other than going concern.
Going concern statement
Based on the Group's cash flow forecasts and business plan, the Directors
believe that the Group will generate sufficient cash to meet its liabilities
as they fall due for the period up to 31 January 2024. In making such
statement, the Directors highlight forecasting accuracy in relation to the
level of trading performance achieved as the key sensitivity in the approved
base case.
The Directors have considered three downside scenarios which reflect a reduced
trading performance and an inability to successfully negotiate any new RCF
facilities.
The Directors note that beyond the end of the going concern period, a portion
of the RCF matures and the final term loan repayment is due in May 2024.
Management are confident in the ability of the business to refinance the RCF
facilities and will commence discussions in February 2023. However, given
the proximity of these events to the end of the going concern period, in
concluding on the going concern position, management have considered the
ability of the business to operate in the unlikely event that the RCF is not
refinanced.
In each of the three downsides scenarios, the Group will generate sufficient
cash to meet its liabilities as they fall due and meet covenant requirements
for the period to 31 January 2024 with scenarios ii) and iii) requiring the
implementation and execution of mitigating cost saving actions within the
control of management.
Accounting policies
Standards, amendments to and interpretations of existing standards adopted by
the Group
The accounting policies and methods of computation adopted in the condensed
consolidated interim financial information are consistent with those followed
in the Group's financial statements for the year ended 30 June 2022.
There are no new or amended standards or interpretations that became effective
in the period from 1 July 2022 which have had a material impact upon the
values or disclosures in the condensed consolidated interim financial
information.
The Group has not early adopted any standard, interpretation or amendment that
has been issued but is not yet effective.
Separately disclosed items (SDI)
The Group incurs costs and earns income that is non-recurring in nature or
that, in the Directors' judgement, need to be disclosed separately by virtue
of their size and incidence in order for users of the condensed consolidated
interim financial information to obtain a proper understanding of the
financial information and the underlying performance of the business. These
items include (but are not limited to):
• Amortisation of acquired intangible assets;
• Profit or loss on disposal of businesses;
• Costs or income associated to the closure of venues;
• Acquisition and disposal costs including changes to deferred or contingent
consideration;
• Impairment charges;
• Reversal of previously recognised impairment charges;
• Property related provisions;
• Restructuring costs as part of an announced programme;
• Retranslation and remeasurement of foreign currency contingent consideration;
• Discontinued operations;
• Significant, material proceeds from tax appeals;
• The tax impact of all the above.
Determining whether an item is part of specific adjusting items requires
judgement to determine the nature and the intention of the transaction.
Estimates and judgements
In preparing these condensed consolidated financial information, management
has made judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expense, including inflationary cost pressures impacting the cost of
living and customer sentiment and behaviour. Actual results may differ from
these estimates. The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the consolidated financial statements for
the year ended 30 June 2022 including the additional significant estimates for
the interim period ending 31 December 2022.
Dilapidations provision
Provisions for dilapidations are recognised where the Group has the obligation
to make-good its leased properties. These provisions are measured based on
historically settled dilapidations which form the basis of the estimated
future cash outflows and discounted based on the discount rates that reflect
current market assessments and the risks specific to the liability. Any
difference between amounts expected to be settled and the actual cash outflow
will be accounted for in the period when such determination is made.
The Group's provisions are estimates of the actual costs and timing of future
cash flows, which are dependent on future events, property exits and market
conditions. Thus, there is inherently an element of estimation uncertainty
within the provisions recognised by the Group. Any difference between
expectations and the actual future liability will be accounted for in the
period when such determination is made.
The provisions are most sensitive to estimates of the future cash outflows
which are based on historically settled dilapidations. This means that an
increase in cash outflows of 1% would have resulted to a £0.3m increase in
the dilapidations provision. Likewise, a decrease in cash outflows of 1% would
have resulted to a £0.3m decrease in the dilapidations provision.
Taxation
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
Prior period restatement
These consolidated interim financial statements include a prior year
restatement in relation to: the presentation and classification of the
reversal of impairment charges and prior year costs identified in the Digital
business which erroneously had not been recognised in the prior year
consolidated interim income statements.
Presentation and classification of prior year reversal of impairment charges
During the period ended 31 December 2021, the reversal of impairment charges
was presented and classified within the "Other operating income" line item of
the consolidated interim financial statements in error. As the previously
recognised impairment charges was presented and classified within "Cost of
sales", the reversal of the impairment charges likewise need to be applied
through "Cost of sales" and not through "Other operating income". The
adjustment has no impact on the result for the period ended 31 December 2021,
net assets or the cash flow statement.
Unrecorded costs in the Digital business
During the period, the Group identified an accumulated total of £2.2m prior
year payment processing costs within the Digital business which erroneously
had not been recognised in the prior year financial statements. Of the total
value, £1.3m relates to FY2021/22, with £0.6m relating to the period ending
31 December 2021 and £0.7m to the six month period to 30 June 2022
respectively. The remaining £0.9m related to pre-FY2021/22.
The adjustments made to the period ending 31 December 2021 increase cost of
sales by £0.6m, reduce cash and short term-term deposits by £1.5m, reduce
prior year opening reserves by £0.9m and closing reserves is reduced by
£1.5m.
The impact of the adjustment on the June 2022 balance sheet is a reduction to
cash and short-term deposits of £2.2m, a reduction to closing reserves of
£2.2m and a reduction to opening reserves of £0.9m.
The prior period comparatives have been restated for the above items in
accordance with IAS 8: 'Accounting Policies, Changes in Accounting Policies
and Errors' and have impacted the primary financial statements as follows:
Income Statement
for the six months ended 31 December 2021
As previously reported Adjustment Unaudited and restated
£m £m £m
Revenue 333.7 - 333.7
Cost of sales (198.4) 10.8 (187.6)
Gross profit 135.3 10.8 146.1
Other operating costs (123.2) (0.6) (123.8)
Other operating income (loss) 90.9 (10.8) 80.1
Operating profit (loss) 103.0 (0.6) 102.4
Financing:
- finance costs (6.6) - (6.6)
- finance income - - -
- other financial gains 5.7 - 5.7
Total net financing charge (0.9) - (0.9)
Profit (loss) profit before taxation 102.1 (0.6) 101.5
Taxation (20.6) - (20.6)
Profit (loss) profit for the period from continuing operations 81.5 (0.6) 80.9
Profit after tax from discontinued operations 3.1 - 3.1
Profit (loss) for the period 84.6 (0.6) 84.0
As previously reported Adjustment Unaudited and restated
£m £m £m
Total earnings per share attributable to equity shareholders
- basic 18.1p (0.2)p 17.9p
- diluted 18.1p (0.2)p 17.9p
Underlying earnings per share attributable to equity shareholders
- basic 3.0p (0.2)p 2.8p
- diluted 3.0p (0.2)p 2.8p
Total earnings per share attributable to equity shareholders - continuing
operations
- basic 17.4p (0.2)p 17.2p
- diluted 17.4p (0.2)p 17.2p
Underlying earnings per share attributable to equity shareholders - continuing
operations
- basic 3.0p (0.2)p 2.8p
- diluted 3.0p (0.2)p 2.8p
Balance Sheet
As previously reported Adjustment Audited and restated
£m £m £m
Assets
Cash and short-term deposits 97.9 (2.2) 95.7
Total assets 858.9 (2.2) 856.7
Total liabilities (431.6) - (431.6)
Net assets 427.3 (2.2) 425.1
Equity
Retained earnings 158.7 (2.2) 156.5
Total equity before non-controlling interests 427.4 (2.2) 425.2
Non-controlling interests (0.1) - (0.1)
Total shareholders' equity 427.3 (2.2) 425.1
At 30 June 2022
Balance Sheet
As previously reported Adjustment Audited and restated
£m £m £m
Assets
Cash and short-term deposits 163.5 (1.5) 162.0
Total assets 947.8 (1.5) 946.3
Total liabilities (503.2) - (503.2)
Net assets 444.6 (1.5) 443.1
Equity
Retained earnings 177.5 (1.5) 176.0
Total equity before non-controlling interests 444.7 (1.5) 443.2
Non-controlling interests (0.1) - (0.1)
Total shareholders' equity 444.6 (1.5) 443.1
At 31 December 2021
Cash flow statement
for the six months ended 31 December 2021
As previously reported Adjustment Audited and restated
£m £m £m
Cash flows from operating activities
Cash generated from operations 139.6 (0.6) 139.0
Net cash generated from operating activities 129.4 (0.6) 128.8
Net cash used in investing activities (10.3) - (10.3)
Net cash used from financing activities (24.9) - (24.9)
Net increase in cash and short-term deposits 94.2 (0.6) 93.6
Cash and short-term deposit at the start of the period 69.6 (0.9) (68.7)
Cash and short-term deposits at end of period 163.5 (1.5) 162.0
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Board of Directors, as the chief operating
decision-makers (CODM), to enable them to make strategic and operational
decisions.
The Group reports five segments: Digital, Grosvenor Venues, Mecca Venues,
Enracha Venues and Central Costs.
2 Segment information
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor Venues Mecca Venues Enracha Central Costs Total
Venues
£m £m £m £m £m £m
Segment revenue 100.8 153.4 67.0 17.7 - 338.9
Other operating income
Operating profit (loss) 7.4 4.3 (5.9) 3.9 (6.5) 3.2
Separately disclosed items (4.7) (46.7) (55.9) (0.1) 3.2 (104.2)
Segment result 2.7 (42.4) (61.8) 3.8 (3.3) (101.0)
Finance costs (6.1)
Finance income 0.2
Other financial losses (0.2)
Loss before taxation (107.1)
Taxation 5.9
Loss for the period from continuing operations (101.2)
Six months ended 31 December 2021 (unaudited, re-presented and restated)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Segment revenue 92.1 161.6 65.9 14.1 - 333.7
Other operating income - 2.3 0.7 - - 3.0
Operating profit (loss)* 1.1 29.9 (5.2) 2.6 (5.3) 23.1
Separately disclosed items (7.2) 38.1 45.1 (1.2) 4.5 79.3
Segment result (6.1) 68.0 39.9 1.4 (0.8) 102.4
Finance costs (6.6)
Finance income 5.7
Profit before taxation 101.5
Taxation (20.6)
Profit for the period from continuing operations 80.9
*During the period, the Group undertook a review of the Group's Central Costs
and has concluded that a proportion of them, which are directly attributable
to the relevant business units, should be allocated to those business units,
better reflecting the underlying profitability of each segment. This resulted
in changes in the underlying profit (loss) of each segment in the prior year
which has been re-presented in the table above.
2 Segment information (continued)
Under IFRS 8 - Operating Segments, segments are reported in a manner
consistent with internal reporting provided to the CODM.
To increase transparency, the Group continues to include additional disclosure
analysing total costs by type and segment. A reconciliation of total costs,
before separately disclosed items, by type and segment is as follows:
Six months ended 31 December 2022 (unaudited)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 14.9 62.5 22.9 8.5 3.9 112.7
Taxes and duties 24.2 33.5 12.8 1.0 0.3 71.8
Direct costs 25.5 14.3 10.7 1.4 - 51.9
Property costs 0.3 5.4 3.2 0.5 0.5 9.9
Marketing 17.6 3.4 2.8 1.1 0.1 25.0
Depreciation and amortisation 7.4 15.9 6.0 0.8 1.4 31.5
Other 3.5 14.1 14.5 0.5 0.3 32.9
Total costs before SDI 93.4 149.1 72.9 13.8 6.5 335.7
Cost of sales 208.4
Operating costs 127.3
Total costs before SDI 335.7
Six months ended 31 December 2021 (unaudited, re-presented and restated)
Digital Grosvenor Venues Mecca Venues Enracha Venues Central Costs Total
£m £m £m £m £m £m
Employment and related costs 13.0 54.2 24.5 7.3 3.2 102.2
Taxes and duties 20.3 34.1 13.3 0.8 0.3 68.8
Direct costs 25.6 12.7 9.9 1.1 - 49.3
Property costs 0.1 4.8 1.8 0.4 0.4 7.5
Marketing 19.9 2.1 3.1 0.8 - 25.9
Depreciation and amortisation 7.1 16.5 8.3 0.7 1.8 34.4
Other 5.0 9.6 10.9 0.4 (0.4) 25.5
Total costs before SDI 91.0 134.0 71.8 11.5 5.3 313.6
Cost of sales 198.4
Operating costs 115.2
Total costs before SDI 313.6
3 Separately disclosed items
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited)
£m £m
Separately disclosed items
Impairment charges (95.4) -
Impairment reversal - 10.8
Closure of venues (7.3) (1.2)
Amortisation of acquired intangible assets (4.4) (5.9)
Disposal provision 3.7 -
Business transformation costs (0.7) (0.2)
Integration costs (0.1) (1.3)
VAT claim - 77.1
Impact on operating profit (104.2) 79.3
Other financial (losses) gains (0.1) 5.6
Taxation (see note 5) 7.0 (17.3)
Separately disclosed items relating to continuing operations (97.3) 67.6
Profit on disposal of business - 3.1
Separately disclosed items relating to discontinued operations - 3.1
Total separately disclosed items (97.3) 70.7
Impairment charges and reversal
During the period, the Group recognised impairment charges of £95.4m relating
to Grosvenor venues and Mecca clubs. Following the last assessment made on
30 June 2022, further impairment charges were recognised for a number of
reasons, including lower than anticipated performances, further reduction in
forecast earnings and a decision to close a number of clubs and venues (see
note 8 for further details).
In the prior period, the Group recognised a reversal of previously impaired
assets of £10.8m relating to its Grosvenor venues. This follows the
business transformation completed in 2020 and the reopening of venues,
following Covid related closures, since May 2021. This contributed to an
improved result in H1 of FY22 and the forecast outlook for the Grosvenor
venues identified.
These items are material, non-recurring and as such, have been excluded from
underlying results.
Closure of venues
During the period, the Group made the decision to close a number of Grosvenor
and Mecca venue at a cost of £7.3m. These relate to onerous contract costs,
dilapidations and strip out costs on leased sites and other directly related
costs that have been identified for closure. Upon initial recognition of
closure provisions, management uses its best estimates of the relevant costs
to be incurred, as well as the expected closure dates.
In the prior period, the Group closed one of its international venues
incurring £1.2m costs including redundancy and employee settlement costs,
legal costs and reallocation of assets directly attributed to this venue.
These are material, one-off costs and as such have been excluded from
underlying results.
Amortisation of acquired intangible assets
Acquired intangible assets are amortised over the life of the assets with the
charge being included in the Group's reported amortisation expense. Given
these charges are material and non-cash in nature, the Group's underlying
results have been adjusted to exclude the amortisation expense of £4.4m
(2021: £5.9m) relating to the acquired intangible assets of Stride, Rialto
and YoBingo.
Disposal provision
In prior years, provision has been made for legacy industrial disease and
personal injury claims, and other directly attributable costs arising as a
consequence of the sale or closure of previously owned businesses.
During the period, the Group have re-considered this provision by reviewing
the historic and recent claims including the final settlement made. The Group
also assessed the likelihood of payment for existing and potential future
claims and concluded, on most cases, that the payment could be not determined
if probable. It was therefore determined necessary to release the provision of
£3.7m for the period (sees Note 9 and 12).
Business transformation costs
This is a multi-year change programme for the Group focused around revenue
growth, cost savings, efficiencies and ensuring the key enablers are in
place. The transformation programme started in January 2019 and was expected
to last three years, however in light of COVID-19, the timeframe has been
extended to 2023. The multi-year change programme is a material, infrequent
programme and is not considered to be part of the underlying business
performance.
During the period, £0.7m (2021: £0.2m) of costs are excluded from the
underlying performance of the Group.
Integration Costs
Costs directly associated with the integration of business acquisitions are
charged to the consolidated income statement. Such items are material,
infrequent in nature and are not considered to be part of the underlying
business performance.
During the period, £0.1m (2021: £1.3m) of costs have been excluded from the
underlying operating results of the Group. These costs have been incurred to
ready the ride proprietary platform, acquired in the Stride acquisition, for
migrations of the legacy Rank brands, which were completed in the period.
VAT claim
On 30 June 2021, the Group was informed that the First-tier Tribunal ('FTT')
had allowed the appeal of the Group on its claim to be refunded VAT paid on
the takings from gaming machines during the period April 2006 to January 2013.
Whilst this was a positive decision for the Group, HMRC had a number of
avenues of appeal before the matter reached a definitive conclusion, beginning
with an initial 56-day period from the date of decision in which to lodge an
appeal and agree the exact guarantee of the claim with the Group. Due to this,
the transaction was disclosed as contingent assets in the Group's Annual
Report for the year ending 30 June 2021.
On 2 December 2021, the refund was received in relation to this claim
comprising £77.5m principal and interest of £5.6m, with costs directly
incurred amounting to £0.4m. This confirmed the closure of the claim and the
Group assessed no further appeal opportunities to any parties.
This is a material, one-off amount and as such was excluded from underlying
results.
Profit on disposal of business
Charges or credits associated with the disposal of part or all of a business
may arise. Such disposals may result in one time impacts that in order to
allow comparability means the Group removes the profit or loss from the
underlying operating results.
The Belgium casino sale was reported in the Annual Report and Accounts at 30
June 2021 at a profit of £23.8m. At 31 December 2021, an additional profit of
£3.1m was recognised, relating to proceeds received from the sale of the
Belgium casino following a positive outcome in a salary moderation case in
Belgium, the benefit of which was retained by Rank in the sale.
4 Financing
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited)
£m £m
Finance costs:
Interest on debt and borrowings (2.2) (2.2)
Amortisation of issue costs on borrowings (0.7) (1.0)
Interest payable on leases (3.2) (3.4)
Total finance costs (6.1) (6.6)
Finance income:
Interest income on short-term bank deposits 0.2 -
Finance income 0.2 -
Other financial (losses) gains (0.1) 0.1
Total net financing charge before SDI (6.0) (6.5)
Separately disclosed items (0.1) 5.6
Total net financing charge (6.1) (0.9)
5 Taxation
Income tax is recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial period.
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited)
Current income tax £m £m
Current income tax - UK 0.3 (1.9)
Current income tax - overseas (1.1) (0.7)
Current income tax charge (0.8) (2.6)
Current income tax on SDI 3.0 (6.2)
Amounts over provided in previous periods (0.5) (4.7)
Total current income tax credit (charge) 1.7 (13.5)
Deferred tax
Deferred tax - UK - (0.8)
Deferred tax - overseas (0.3) (0.5)
Restatement of deferred tax due to rate change - 0.6
Deferred tax on SDI 4.0 (11.1)
Amounts over provided in previous year 0.5 4.7
Total deferred tax credit (charge) 4.2 (7.1)
Tax credit (charge) in the income statement 5.9 (20.6)
The tax effect of items within other comprehensive income is as follows:
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited)
£m £m
Current tax credit (charge) on exchange movements offset in reserves 0.2 (0.1)
Total tax credit (charge) on items within other comprehensive income 0.2 (0.1)
The credit in respect of employee share schemes included within the Statement
of Changes in Equity includes a deferred tax credit of £nil (six months ended
31 December 2021: £0.4m).
Factors affecting future taxation
The Group operates in a number of territories and so the Group's profits are
subject to tax in various jurisdictions. The Group monitors income tax
developments in these territories which could affect the Group's tax
liabilities. The Group notes recent developments in relation to the OECD
inclusive Framework on Base Erosion and Profit Shifting, with the new rules
expected to apply to accounting periods beginning on or after 31 December
2023. The Group continues to monitor the progress of relevant legislation
and the potential impact on the Group's tax charge.
UK corporation tax is calculated at 20.5% (six months ended 31 December 2021:
19%) of the estimated assessable profit for the period. Taxation for
overseas operations is calculated at the local prevailing rates.
On 3 March 2021, the Chancellor of the exchequer announced the increase in the
main rate of UK corporation tax from 19% to 25% for the year starting 1 April
2023. This change was substantively enacted on 24 May 2021.
This rate increase will increase the amount of cash tax payments to be made by
the Group.
6 Dividends
No interim dividend in respect of the period ended 31 December 2022 (31
December 2021: £nil) has been recommended.
7 Underlying earnings per share
Underlying earnings is calculated by adjusting profit attributable to equity
shareholders to exclude separately disclosed items and the related tax
effects. Underlying earnings is one of the business performance measures
used internally by management to manage the operations of the business.
Management believes that the underlying earnings measure assists in providing
a view of the underlying performance of the business.
Underlying net earnings attributable to equity shareholders is derived as
follows:
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited and restated)
(Loss) profit attributable to equity shareholders (101.2)m 84.0m
Adjusted for:
Separately disclosed items after tax 97.3m (70.7)m
Underlying (loss) earnings attributable to equity shareholders (3.9)m 13.3m
Continuing operations (3.9)m 13.3m
Discontinued operations - -
Weighted average number of ordinary shares in issue 468.4m 468.4m
Underlying (loss) earnings per share - basic (0.8)p 2.8p
Continuing operations (0.8)p 2.8p
Discontinued operations - -
Underlying (loss) earnings per share - diluted (0.8)p 2.8p
Continuing operations (0.8)p 2.8p
Discontinued operations - -
8 Impairment reviews
The Group considers each venue to be a separate cash-generating unit ('CGU').
The Group's digital operations consist of the UK digital business and the
International digital business. UK digital and International digital are each
assessed as separate CGUs. The individual Grosvenor venues are aggregated for
the purposes of allocating the Grosvenor goodwill.
As at 31 December 2022, the Group assessed whether indicators of impairment
existed within its Venues and Digital operations. It was concluded that no
indicators of impairment existed within Digital operations and its Enracha
Venues. Equally, consideration was given as to whether there had been any
changes in the estimates used to determine the recoverable amount of assets
(excluding goodwill) which had previously been impaired. No changes were
identified and therefore no impairment loss reversals have been recognised.
The remaining two Venue operations, Grosvenor and Mecca, have indicators of
impairment primarily caused by lower than anticipated performances or low
level of forecast earnings. This further resulted to a decision to close a
number of Grosvenor and Mecca venues which resulted in impairment charges of
£6.5m.
The impairment test was conducted in December 2022 and management are
satisfied that the assumptions used were appropriate.
Testing is carried out by allocating the carrying value of these assets to
CGUs and determining the recoverable amounts of those CGUs. The individual
CGUs were first tested for impairment and then the group of CGUs to which
goodwill is allocated were tested. Where the recoverable amount exceeds the
carrying value of the CGUs, the assets within the CGUs are considered not to
be impaired. If there are legacy impairments for such assets, except goodwill,
these are considered for reversal.
The recoverable amounts of all CGUs or group of CGUs have been calculated with
reference to their value in use. Value in use calculations are based upon
estimates of future cash flows derived from the Group's strategic plan for the
five-year period ending 30 June 2027. Future cash flows will also include an
estimate of long-term growth rates which are estimated by business unit.
Pre-tax discount rates were re-assessed at 31 December 2022 and are applied to
each CGU or group of CGUs' cash flows and reflect both the time value of money
and the risks that apply to the cash flows of that CGU or group of CGUs. These
estimates have been calculated by external experts and are based on typical
debt and equity costs for listed gaming and betting companies with similar
risk profiles. The rates adopted are disclosed in the table below.
Pre-tax discount rate Long-term growth rate
Grosvenor venues 13% 2%
Mecca venues 13% 0%
As a result of the impairment test, the following impairment charges have been
recognised during the period and disclosed within the separately disclosed
items in the Group income statement.
Property, plant and equipment Total
Right of use and dilapidation assets Intangible assets
£m £m £m £m
Impairment charge
Grosvenor venues(1) 11.6 10.5 21.0 43.1
Mecca venues(2) 12.1 40.2 - 52.3
23.7 50.7 21.0 95.4
(1.) Impairment charges are recorded at the different individual Grosvenor
venue CGUs. The total value in use of the CGUs where impairment charges were
recognised totalled to £47.8m.
(2). Impairment charges are recorded at the different individual Mecca venue
CGUs. The total value in use of the CGUs where impairment charges were
recognised totalled £nil.
Sensitivity of impairment review
The calculation of value in use is most sensitive to the following
assumptions:
- revenue growth
- discount rates
- growth rates used to extrapolate cash flow beyond the
forecast period
Whilst the Directors recognise that there is current inflationary pressure,
management can take actions to mitigate controllable costs unlike revenue
which is driven by customer demand and has the most significant impact for the
impairment sensitivity.
Future projections contain inherent uncertainty. These uncertainties include
changing customer behaviours, future geopolitical events which could impact
consumer sentiment and disposable income, variable inflationary pressures on
the operating costs of the business, the impact of inflation and increases in
the cost of living on consumer demand and discretionary spending. The
Directors note that this has had an impact on the accuracy of budgeting and
forecasting for the current financial year, and this has been considered by
Management when preparing their sensitivity for the impairment review.
The Group has carried out sensitivity analysis on the reasonable possible
changes in key assumptions in the impairment tests for (a) each CGU or group
of CGUs to which goodwill has been allocated and (b) its venue CGUs (including
indefinite life intangible assets).
For Grosvenor venues and Mecca venues, the following sensitivities would
result in changes to the recognised impairments.
Grosvenor Venues CGUs
Key Assumptions Reasonable Possible Change Impact on Impairment
£m
Revenue Growth 10% decrease in revenue from year 1 Increase (18.2)
10% increase in revenue from year 1 Decrease 7.5
Pre-tax discount rates 1% decrease in discount rates Decrease 2.3
1% increase in discount rates Increase (7.9)
Long-term growth rates 1% decrease in long-term growth rates Increase (1.8)
1% increase in long-term growth rates Decrease 2.0
Mecca Venues CGUs
Key Assumptions Reasonable Possible Change Impact on Impairment
£m
Revenue Growth 10% decrease in revenue in year 1 Increase (4.6)
10% increase in revenue in year 1 Decrease 5.8
Pre-tax discount rates 1% decrease in discount rates Decrease 1.3
1% increase in discount rates Increase (0.1)
Long-term growth rates 1% decrease in long-term growth rates Increase 0.5
1% increase in long-term growth rates Decrease 0.7
9 Provisions
Property related Disposal Indirect tax
Pay Warranty
provisions provisions provisions provisions provisions Total
£m £m £m £m £m £m
At 1 July 2022 (audited) 6.8 3.9 1.2 0.1 0.5 12.5
Created 27.2 - - - - 27.2
Charge to income statement - SDI 7.3 - - - - 7.3
Released to the income statement - SDI - (3.7) - - - (3.7)
Utilised in period (1.8) - - - - (1.8)
At 31 December 2022 (unaudited) 39.5 0.2 1.2 0.1 0.5 41.5
Current 7.9 0.1 1.2 0.1 0.2 9.5
Non-current 31.6 0.1 - - 0.3 32.0
At 31 December 2022 (unaudited) 39.5 0.2 1.2 0.1 0.5 41.5
Property related provisions
Where the Group no longer operates from a leased property, onerous property
contract provisions are recognised for the least net cost of exiting from the
contract. Unless a separate exit agreement with a landlord has already been
agreed, the Group's policy is that this onerous contract provision includes
all unavoidable costs of meeting the obligations of the contract. The amounts
provided are based on the Group's best estimates of the likely committed
outflows and site closure dates. These provisions do not include lease
liabilities, however do include unavoidable costs related to the lease such as
service charges, insurance and other directly related costs. As at 31 December
2022, property related provision include £36.5m provision for dilapidations
and £3.0m onerous contracts provision.
Property provisions include provisions for dilapidations which are recognised
where the Group has the obligation to make-good its leased properties.
Following the recent closures of venues in FY22 and FY23, the possibility of
future closures and the downturn in the trading outlook, together with a
hardening position from landlords and recessionary environment making certain
properties less attractive, the Group re-considered the basis of the
dilapidation provision estimate and has recognised an additional asset and
liability of £27.2m. These provisions are recognised based on historically
settled dilapidations which form the basis of the estimated future cash
outflows. Any difference between amounts expected to be settled and the actual
cash outflow will be accounted for in the period when such determination is
made.
Where the Group is able to exit lease contracts before the expiry date or
agree sublets, this results in the release of any associated property
provisions. Such events are subject to the agreement of the landlord,
therefore the Group makes no assumptions on the ability to either exit or
sublet a property until a position is contractually agreed.
Disposal provisions
In prior years, a provision has been made for legacy industrial disease and
personal injury claims, and other directly attributable costs arising as a
consequence of the sale or closure of previously owned businesses.
During the period, the Group have re-considered this provision by reviewing
the historic claims and any final settlements made. The nature and timing of
any personal injury claims is uncertain and therefore, in most cases, the
payment could not be determined as probable. It was therefore determined
necessary to release the provision of £3.7m and recognise the possible
settlement of legacy industrial disease and personal injury claims as a
contingent liability (see Note 12).
10 Borrowings to net debt reconciliation
Accrued interest and unamortised facility fees are classified as loans and
borrowings. A reconciliation of loans and borrowings disclosed in the balance
sheet to the Group's net debt position is provided below:
At At
31 December
31 December
2022 2021
(unaudited) (unaudited and restated)
£m £m
Total loans and borrowings (78.4) (108.7)
Adjusted for:
Accrued interest 0.4 2.3
Unamortised facility fees (0.8) (2.0)
(78.8) (108.4)
Cash and short-term deposits from operations 89.7 162.0
Net cash excluding lease liabilities 10.9 53.6
Lease liabilities (169.2) (196.3)
Net debt (158.3) (142.7)
11 Cash generated from operations
Six months ended Six months ended
31 December 2022
31 December 2021
(unaudited) (unaudited and restated)
£m £m
(Loss) profit for the year (101.2) 84.0
Adjustments for:
Depreciation and amortisation 31.5 34.4
Net financing charge 6.0 6.5
Income tax charge 1.1 3.3
Share-based payments 0.2 0.3
Loss on disposal of property, plant and equipment - 0.3
Separately disclosed items 97.3 (70.7)
34.9 58.1
Increase in inventories (0.3) (0.4)
Increase in other receivables (3.9) (22.9)
Increase in trade and other payables 20.5 22.4
51.2 57.2
Cash utilisation (receipt) of provisions (1.8) 0.1
Cash (payments) receipts in respect of SDI (0.8) 81.7
Cash generated from operations 48.6 139.0
The Group restated the prior year cash flow format to start from (loss) profit
for the year instead of operating (loss) profit. This method provides more
comprehensive information which would be useful to the reader of the
consolidated and company financial statements.
12 Contingent liabilities
Property arrangements
The Group has certain property arrangements under which rental payments revert
to the Group in the event of default by the third party. At 31 December 2022,
it is not considered probable that the third party will default. As such, no
provision has been recognised in relation to these arrangements. If the
party were to default on these arrangements, the obligation for the Group
would be £0.9m on a discounted basis.
Legal and regulatory landscape
Given the nature of the legal and regulatory landscape of the industry, from
time to time the Group receives notices and communications from regulatory
authorities and other parties in respect of its activities and is subject to
regular compliance assessments of its licensed activities.
The Group recognises that there is uncertainty over any fines or charges that
may be levied by regulators as a result of past events and depending on the
status of such reviews, it is not always possible to reliably estimate the
likelihood, timing and value of potential cash outflows.
Disposal claims
As a consequence of historic sale or closure of previously owned businesses,
the Group may be liable for legacy industrial disease and personal injury
claims alongside any other directly attributable costs. The nature and timing
of these claims is uncertain and depending on the result of the claim's
assessment review, it is not always possible to reliably estimate the
likelihood, timing and value of potential cash outflow.
Contingent consideration
On 21 April 2022, the Group completed the purchase of the remaining 50%
shareholding of Rank Interactive Limited (formerly known as Aspers Online
Limited) for a total consideration £1.3m. Of this consideration, £0.5m was
paid in cash on completion in lieu of the outstanding loan balance the Company
owed to the seller and £0.8m in contingent consideration included in Trade
and other payables of the Consolidated balance sheet. The contingent
consideration will be equivalent to a percentage of the net gaming revenue
generated from the acquired customer database. A present value of £0.8m has
been provisionally recognised for the contingent consideration and is
dependent upon the date a competing online gaming operation is established.
At 31 December 2022, the Group settled £0.3m of the contingent consideration
leaving a balance of £0.5m.
13 Related party and ultimate parent undertaking
Guoco Group Limited (Guoco), a company incorporated in Bermuda, and listed on
the Hong Kong stock exchange has a controlling interest in The Rank Group
Plc. The ultimate parent undertaking of Guoco is GuoLine Capital Assets
Limited ('GuoLine') which is incorporated in Jersey. At 31 December 2022,
entities controlled by GuoLine owned 57.5% (31 December 2021: 56.1%) of the
Company's shares, including 53.4% (31 December 2021: 52.0%) through Guoco's
wholly-owned subsidiary, Rank Assets Limited, the Company's immediate parent
undertaking.
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. END IR BFMBTMTJTMBJRecent news on Rank
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