Rank Group pins hopes on digital turnaround after 40% profit drop

Rank Group pins hopes on digital turnaround after 40% profit drop

Thursday, August 16, 2018 Posted by Luke Massey
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The multi-channel casino operator endured a challenging 2017/18

Full-year results for the period ending 30 June 2018 showed that Rank Group has so far struggled to offset the slowdown at its halls and casinos with increased online business.

While a challenging year for venues was expected due to extreme weather, the operator will be disappointed to report that a 9.9% increase in UK digital revenues (€111.5 to 122.5 million) amounted to a 7.9% drop in UK digital operating profit (€22.7 to €20.9 million).

This reduction was explained by Rank by higher employment costs and taxes, following a change in the taxation of free bets that came into play in October of last year, while Rank added that digital business slowed in the second half of the year after the UK Gambling Commission announced tighter regulation on money laundering and stricter customer identification in September.

However, the company was keen to point to double digit revenues for meccabingo.com (10.9%), off the back of two years of single digit growth, achieved in part thanks to a successful ‘Meccarena’ marketing campaign. YoBingo.es also exceeded expectations, yet because the acquisition only went through in May 2018, it has not materially benefited the Group's revenues this time around.

By comparison, revenue growth slowed considerably at grosvenorcasinos.com, from 44% in 2016/17 to 8.4% (€43.9 to €47.5 million) over the subsequent 12-month period. Insufficient marketing investment and a temporary system issue, which resulted in some of its more valuable multi-channel customers not being contacted, was said to have exacerbated this slowdown.

Digital acceleration is seen as key for the UK's largest multi-channel casino operator to return to profit, after operating profit slumped 40.7% from €84.5 to €50.1 million, in a challenging year driven principally by a disappointing performance from Grosvenor’s land-based casinos.

Revenues for Grosvenor fell by 6.1%, with operating profit down 6.7% (€52.1 to €48.6 million). Meanwhile, Mecca couldn’t escape the slowdown, albeit at a lower level. Revenues were down 2.6% driven by a 7.9% decline in customer visits, amounting to an operating profit drop of 4.3%.

John O’Reilly, Chief Executive of The Rank Group Plc, said: “I joined Rank because of its underlying potential. With the backdrop of a disappointing performance in 2017/18, we are now moving quickly to identify the key priorities which will begin to realise the significant underlying potential that I have now seen first-hand since joining the Group in early May.

“We are taking steps to increase our focus on the customer, to accelerate growth in the digital business, to drive cost efficiencies across the business and to strengthen our organisational capabilities. This will be delivered within a transformational programme framework, which will ensure that we deliver a growing Rank Group that is fit for the future.”

Totally Gaming says: O’Reilly took the chance presented by today’s announcement to unveil a new plan focused on increased efficiencies and accelerated online growth. As part of this proposed digital turnaround, the acquisition of QSB provides Rank with an opportunity to drive significant growth in the Spanish market under both the Enracha and YoBingo brands, while the Group will also deliver its delayed omni-channel service, Grosvenor One, within the second half of the year.

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