Point of consumption tax will hit Rank’s performance

Rank Group, owner of the Grosvenor casino and Mecca bingo brands, has announced a 13% increase in ‘continuing business revenues’ for the 12 months to 30 June 2014, with retail growth considerably outstripping its digital performance.

Revenues increased 15% for its venues, while the digital channel achieved 2% growth. The fastest growing channel of distribution continues to be mobile where revenue increased by 43% to £18.9m. Despite the promising numbers, like-for-like revenue for the Group fell by 4%.

Henry Birch, chief executive of The Rank Group, said: “Performance improved in the second half of the year following a challenging first six months. The Group is well positioned for future growth with the cut in bingo duty, major capital investment programmes planned at Nottingham, Bournemouth and Luton casinos and full year benefits from the £8.9m investment into new product in the acquired casinos. In the short term the introduction of a digital point of consumption tax will impact performance but our strong brands and market leading positions ensure that the Group is well placed and provides long-term opportunities.”

Rank said it has been working hard on assessing the full impact of RGD and developing ways to reduce the negative impact on shareholder value, for example through the renegotiation of key digital contracts and reviewing the effectiveness of digital marketing campaigns. However it still anticipates the majority of the duty cost will impact digital profitability.

Digital revenue for Grosvenor grew strongly in the period, up 38% to £13.5m with a newly launched live casino now a major contributor to digital revenue. Lower digital marketing costs contributed to the reduction in operating loss to £900,000 from a loss of £2.1m in the prior period. The ‘highly competitive digital market’ contributed to a 4% decline in digital revenue. A reallocation of shared IT and other overhead costs from the disposed Blue Square business and increased investment in technology contributed to a fall in operating profit, down 25%.

During the year over 100 new games were released by Mecca’s digital channel along with significant upgrades to its mobile app; despite total digital revenues falling in the period mobile revenues continue to grow, up 41%.

Birch added: “While Rank has built strong positions in venue-based gaming, we have not yet been able to replicate this across our digital channels (desktop, tablet and mobile). In 2013/14, our digital operations generated just 10% of Group revenue whereas digital channels now represent around 30% of Great Britain’s gambling market (excluding National Lottery).

“We recognise that we need to step up our capability in this area if we are to meet the changing needs of our customers and to capture a greater share of the digital market. This year, we will put in place a number of building blocks to support this aim including the appointment of Colin Cole-Johnson as group director of digital and cross-channel services.”