Pulling Rank: Key takeaways from Rank Group’s H1 2022-23 results

Despite a modest 2% rise in underlying like-for-like net gaming revenue, Rank Group racked up £107m in pre-tax losses as its costs soar due to the ongoing macro-economic situation in the UK.

A £15m impact due to higher energy costs and wage inflation, coupled with lower customer spend also sent the London-listed firm’s underlying operating profit tumbling by 83% to £4.2m.

In contrast, to what seems like a concerning trend for Rank, CEO John O’Reilly remains upbeat after a year of transition for the traditionally land-based-focused operator.

Over the last year, Rank Interactive completed the final stage of its migration of the online Grosvenor business onto its proprietary tech platform, Stride Gaming.

This has already reaped some reward for the Maidenhead-based operator as digital performance rose 9%, reaching £100.8m, with profit sitting at £2.7m. O’Reilly said this success would lead to further improvements in digital and was full of praise for the teams involved in the process.

Speaking to EGR, O’Reilly touched on a series of pressing topics, including what lies in Rank’s future and what he hopes will be included in the forthcoming white paper into the Gambling Act 2005 review.

Going digital

Rank switched its Grosvenor brand over to its in-house tech platform Stride Gaming in the second half of 2022, allowing its players to play across retail and online with a single wallet and account. It was the last of Rank’s brands to be moved to this software.

For some background, Rank acquired Stride gaming for £115m in October 2019, as it looked to shift to an in-house tech stack after previously using Bede Gaming’s tech.

Rank completed its first brand migration onto the Stride platform in November 2020 with Bella Casino.

O’Reilly said at the time of the acquisition that it would “accelerate the transformation of Rank and create one of the UK’s leading online gaming businesses”.

The fruits of this move can already be seen in the first set of results since this transition, and O’Reilly applauded the teams involved and spoke of how this success will lead to further development in the future.

He said: “I’ve done lots of migrations in my career, and they are all eventful, but the Grosvenor migration was as smooth as any migration I have ever been involved with. The teams did a superb job, not just over the last year but over the last three years, preparing the platform migrating, and we’re now there.

“We delivered 9% growth but I’m expecting strong growth in the second half of the year because we’ve now got a lot of development efforts going into improving customer journeys, new products, features and greater personalisation, which is getting better by the day.”

O’Reilly noted the significance of improving its digital offering to support the group and said it was in a good position to kick on further in terms of development.

He continued: “I think the digital business has not been in this place before and had we not done the acquisition of Stride we would not be where we are today. The proof is in the pudding as far as that acquisition and what is great to me is the talent we’ve got in our team across the centres to deliver in the way that we have, so all credit to them.”

Tightened purse strings

Like most across the UK and mainland Europe, Rank has felt the crippling effects of the ongoing macro-economic troubles when it comes to the cost of living or, in its case, the cost of operating.

Energy costs are expected to amount to £31m for the financial year 2022-23, an increase of £7m compared to 2021-22, while the group is anticipating average wage increases of around 8%.

Rank has tried to offset these costs with new energy efficiency programmes, venue opening hour changes, and renegotiating leases and other contracts to cut costs.

O’Reilly said that while these current costs are unavoidable, he is hopeful that the tide will start to turn and the venues division – Mecca bingo and Grosvenor Casino – will see improvement.

O’Reilly commented: “Starting with Mecca. We are growing, but we’ve grown from a much lower base. The older cohort of customers did not return in the numbers we saw pre-pandemic, but we are seeing a slow return as the older cohort return to their normal activities. We, of course, are seeing this slow return coincide with the crunch on the consumer, the cost-of-living crisis and has hit Mecca’s customer base.

“In terms of Grosvenor, we were down 5% in revenue but up on visits. But we were up 15% on H2 of last year, and I think that was our low point, which was down to the lack of foreign travel into London, although it did pick up towards the end of our Q4, which was in June, but was then impacted by affordability measures.

“We can see there is a change in performance between the second half of last year and the first half of this year. I expect that to continue, and it has certainly; the Christmas and New Year period was very strong in Grosvenor. So I’m expecting a decent uplift in the performance growth into the second half and beyond,” O’Reilly added.

Line in the sand

The government has been promising the publication of draft legislation into the Gambling Act 2005 review for some time now, and operators and consumers alike are eagerly anticipating what recommendations will be included and how it will impact the industry.

There are reports that there will be a maximum stake limit for online slots between £2 and £5, as well as the much-maligned introduction of affordability checks on customers, which has already seen operators’ revenue hampered.

Additionally, it’s understood that the white paper will mandate the creation of an impartial ombudsman to resolve customer grievances with online businesses, and, to stop underage gambling, there will be stricter age verification checks.

O’Reilly stated in the firm’s results presentation that it eagerly anticipates publication. When speaking to EGR, O’Reilly detailed what he hopes to see in the white paper.

He said: “I think part of the objective for the white paper, when the government first embarked on this, was a recognition of the need to tighten regulation in the online space, and that’s an inevitable outcome. There has been a lot of common sense discussion, and I think, and I’m hoping as a result of that, there is a pragmatic outcome.

“I think there is a need for tightening in certain areas. I think that will come, and that is not a bad thing. I think what will be developed is not a kind of nanny state approach; we have what I think this is a liberal government with a lowercase ‘l’. I think they recognise that to some extent there’s a need for the consumer to be able to make their own decisions in life.

“I think you’ll see a pragmatic, sensible, much-needed solution that hopefully draws a line in the sand for online because that constant creep of regulation is not a good thing either. So overall, a new line in the sand where everyone understand what constitutes compliance would not be a bad thing for the sector,” he added.