Rank sees revenue increase in Q3 despite Covid-19 impact
The Rank Group has reported a 5% year-on-year increase in statutory revenue for the third quarter, despite the business being impacted by the ongoing novel coronavirus (covid-19) outbreak.
Rank put overall growth during the three months to 31 March down to the success of its digital division, which reported a 21% rise in like-for-like net gaming revenue for the period.
The digital arm of its Grosvenor Casinos business saw revenue climb 27%, due in part to continued growth in new players and strong levels of returning players. Mecca Digital also performed strongly with net gaming revenue up 20%.
Rank also noted that since the closure of its UK and Spanish venues, as a result of the coronavirus pandemic, digital revenue growth rates have increased further.
Statutory revenue was also boosted by the acquisition of Stride Gaming in October of last year, with the Stride business seeing revenue rise 3% in Q3. Rank’s like-for-like revenue – excluding the effects of M&A, club openings, closures, relocations and foreign exchange – was down 4%.
Rank also saw year-on-year declines across all other areas its business, as like-for-like revenue for Grosvenor venues fell 5%, Mecca venues 17% and its international venues 12%.
That said, according to Rank, UK and international venues businesses performed strongly and in line with expectations in the first two months of the quarter, with weaker trading conditions only effecting the group towards the end of February and March due to coronavirus measures.
Focusing more on the impact of coronavirus, Rank said it made progress on its plan to ensure it withstands the crisis and “re-emerge as a strong business”. Rank set out its plans to mitigate the impact of the outbreak last month.
Rank said the short-term economic impact to its venues had been significant, but added that it acted swiftly and decisively to mitigate the effects. Across its UK venues and support offices, around 7,000 staff, out of a UK workforce of 7,600, were furloughed.
Where relevant, Rank said it topped up the UK government’s Coronavirus Job Retention Scheme so staff in furlough receive 80% of their salary. Its executive and non-executive directors have volunteered a 20% reduction in salaries and fees from 1 April for as long as staff are in furlough.
Rank said the positive cash impact of the furlough initiative, and similar schemes in Spain and Belgium, will be approximately £8m per month. The group also benefitted by around £1m per month from the business rates holiday, while it said discussions to reduce cash outflow are ongoing with suppliers and landlords.
Meanwhile, Rank said at the outset of the UK lockdown, it requested repayment from HMRC of £25.2m in relation to VAT paid on slot machine revenue between 2002 and 2005 to maximise its liquidity and this was received in early April.
Subsequently on 15 April, following an appeal in January, the Upper Tribunal ruled in favour of Rank. Should HMRC be granted permission to appeal this latest decision and the Court of Appeal rule in favour of HMRC, Rank would need to repay the £25.2m.
Should this be the case, Rank said it does do not expect any repayment to be made for at least 12 months. In addition, it reached an agreement with HMRC to defer around £40m of tax and duty due to be paid in April 2020 initially until 30 June 2020.
Meanwhile, Rank said its board does not intend to recommend a dividend unless all creditors, directly arising from group actions to mitigate the economic impact of coronavirus, have been resolved and it has the necessary visibility on future cashflows following the reopening of venues. Rank had been due pay out this dividend in October.
Should all Rank venues remain closed until the end of its financial year on 30 June, Rank said underlying operating profit for the year would be between £48m (€55.1m/$59.8m) and £58m after IFRS 16.
Prior to lockdown measures in the UK, Rank estimated that during a period of full closure of all venues, monthly cash outflow before mitigation was £25m and would be reduced to £17m with mitigating actions within its control.
However, as a result of the Treasury’s support measures and progress its own mitigations, Rank said its monthly cash outflow rate would be reduced to around £10m from May 2020.
As of 31 March, total available cash and facilities, after deducting customer balances, was £166m, with the month of April expected to be broadly cash neutral.
“With the tremendous support we have received from HM Treasury and HMRC, together with our own mitigations, we have established a robust financial position to address and withstand an extended period of economic turmoil,” Rank chief executive John O’Reilly said.
“Given the uncertainty we face and continued social distancing measures likely to be in place for some time to come, we continue to work to protect cash and to prepare for the reopening of our venues in as safe a way as possible.”
Aside from measures to protect its own business, Rank has rolled out a number of other schemes to support the national coronavirus effort in the UK. These have included offering its venues to support key workers and vulnerable people in local communities.
Rank also launched a new charity initiative in collaboration with Blue Light Card, a discount service for the UK’s National Health Service, emergency services, social care workers and armed forces. Here, Rank has provided free meals to key workers from some of its UK venue kitchens.
In addition, Rank said it has redoubled its safer gambling efforts, incorporating the Betting & Gaming Council's 10-point action plan and bolstering resource in its safer gambling teams.
“I am enormously proud of our colleagues and how they have responded to the decisions we have had to take as well as their selfless response and contribution to the national effort,” O’Reilly said.
“We know how important our venues are in many local communities and we've answered the call to contribute by stepping up to help those who need it most right now.”