The Rank Group (LON:RNK) reported higher full-year revenue and operating profit, supported by growth across its digital, casino and bingo operations, while outlining plans to moderate capital spending and pursue further growth in casino-led and bingo-led gaming.
Like-for-like net gaming revenue rose 6% to £834 million, while operating profit increased 21% to £78.6 million. Operating margin improved to 9.4% from 8.1% a year earlier, Interim Chief Financial Officer Cliff Baty said. The company proposed a final dividend of 2.5 pence per share, taking the full-year dividend to 3.5 pence, up 35% from the prior year.
Digital growth continued despite higher tax
Richard, Rank’s chief executive, said digital revenue grew 12% in the fourth quarter, the first full quarter following the RGD increase, and rose 8% for the year. The company reduced above-the-line advertising substantially, while modestly increasing performance marketing and maintaining customer incentives and free bets.
“Digital performance is pleasing,” Richard said, describing the company’s commercial framework as “Join, Play, Stay,” focused on customer acquisition, engagement and retention.
Baty said digital profitability benefited from stronger-than-expected top-line performance in the fourth quarter, though Rank expects the tax burden to weigh more heavily in the coming financial year. The company estimated that the additional RGD cost will total about £35 million next year and said it expects to mitigate about £20 million of that amount, implying an estimated £15 million reduction in digital profitability.
Richard said the company had not yet seen a material benefit from competitors leaving the U.K. market, although some smaller operators had exited. He said the group expects industry consolidation over time and noted that unlicensed operators could become more competitive because they do not bear the same tax and safer-gambling obligations.
Casino machines and estate changes
Grosvenor Casinos revenue increased 5% during the year, with gaming machines the fastest-growing category. Table-gaming revenue rose 2% in the first half but was flat for the full year, as conflict in the Middle East affected travel from the region during the second half.
Richard estimated that reduced Middle Eastern visitation affected revenue by approximately £150,000 to £200,000 per week in the fourth quarter. He said early summer trading had shown signs of improvement.
Rank increased its Grosvenor gaming-machine estate by 850 machines, or about 65%, before Christmas. The company is now focused on improving machine productivity before committing further significant capital. Management said there is capacity for a further 650 machines, which would require approximately £25 million to £27 million of capital expenditure, but said a material number of additional machines is not required to achieve its medium-term operating-profit goal.
The company expects weekly slots revenue to rise from approximately £2 million before land-based gaming reforms to more than £3 million over the next two to three years. Rank is also investing in staff training, customer-service programs and a loyalty and rewards platform that will connect directly with gaming machines.
In addition, Grosvenor is trialing a smaller-format, electronic-led casino model using one of its existing venues. Richard said these sites could cover roughly 6,000 to 8,000 square feet, require about £1 million of investment per location and potentially generate operating margins of around 20%.
Bingo estate reshaped as capital spending falls
Rank closed nine Mecca bingo sites during the year, including eight in early June, after a venue-segmentation review found they were loss-making or lacked a viable path to positive cash generation over the next five years. Richard said the remaining estate of roughly 40 Mecca locations is the appropriate size under the current tax environment and consists of venues in which the company would be prepared to invest.
The company said it saw some customers transfer from closed Mecca locations to nearby venues. It also continued to invest selectively in higher-returning sites, including a new 1825 Lounge in Stockton and gaming-machine upgrades at several locations.
Both Mecca and Rank’s Enracha business in Spain delivered net gaming revenue growth, driven by bingo activity and gaming machines. Rank is also developing “social gaming lounges” within its bingo venues, offering a more energetic environment than traditional bingo halls, with customers able to play while socializing.
Richard said gaming machines and electronic play are increasingly important to the group. Slots account for around 44% of group revenue, while tablet-based play represents about 80% of Mecca bingo revenue.
Cash generation and medium-term ambitions
Net free cash flow was £25.5 million, reflecting £50.2 million of capital expenditure and £48.3 million of lease payments. Rank ended the year with net cash of £56.8 million, or accounting net debt of £147.2 million after adjusting for £204 million of IFRS 16 lease liabilities.
The group refinanced its debt facilities in June through a new four-year, £120 million revolving credit facility on improved commercial terms. Capital expenditure declined from £58.5 million in the prior year, and Baty said Rank expects spending of around £40 million in the following financial year, excluding any separately evaluated growth opportunities.
Rank said its capital-allocation priorities are maintaining balance-sheet strength, investing selectively in high-return projects, paying a progressive dividend and considering acquisitions only where they meet strategic and financial criteria. The company is seeking to grow its international operations over time, particularly in Spain and Portugal.
Rank launched online bingo in Portugal in March, resulting in a £1.3 million profit-and-loss cost during the year from startup and marketing spending. Richard said the operation is expected to remain loss-making in the current year before becoming cash-generative in fiscal 2028.
In the first six weeks of the new financial year, group revenue rose 8%, with Grosvenor gaming-machine revenue up 15% and digital revenue up 10%. Management said the group remains positioned to meet market expectations and continues to target at least £100 million of operating profit in the medium term.
About The Rank Group (LON:RNK)
The Rank Group Plc has been entertaining Britain since 1937, from its origins in motion pictures to today’s gaming based entertainment brands. Over the course of more than three-quarters of a century, the Group has entertained many millions of customers in Britain and around the world. The Group’s story is one of iconic brands and talented people with a mission to entertain.
