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| Revenue | Operating profit* | |||
|---|---|---|---|---|
| 2006 £m |
2005 £m |
2006 £m |
2005 £m |
|
| London - upper | 23.2 | 24.9 | 4.1 | 4.8 |
| London - mainstream | 70.9 | 67.1 | 12.0 | 9.6 |
| Provincial | 110.3 | 103.0 | 22.0 | 19.2 |
| Total UK | 204.4 | 195.0 | 38.1 | 33.6 |
| Belgium | 13.2 | 12.9 | 1.4 | 1.4 |
| Total | 217.6 | 207.9 | 39.5 | 35.0 |
* before exceptional items
In Grosvenor Casinos, we grew revenue by 4.7% and increased operating profit before exceptional items by 12.9%. This performance was achieved despite a £1.2m increase in rental costs resulting from the sale and leaseback of four casinos, which completed in August 2006.
'In the UK we achieved a 4.8% increase in revenue to £204.4m, while operating profit grew by 13.4% to £38.1m.'
In the UK we achieved a 4.8% increase in revenue to £204.4m, while operating profit before exceptional items grew by 13.4% to £38.1m. This performance was driven by a 3.7% rise in admissions and a 1.2% rise in spend per head. Active membership rose by 11.9% to more than 774,000.
After a strong start to 2006, our year-on-year admissions performance weakened during the second half. This was due in large part to our decision to spend less heavily on promotions than we had done in the final quarter of 2005 (when we ran a major marketing campaign to coincide with the removal of the '24-hour rule').
Growth in spend per head was due in large part to the performance of our electronic gaming products, following an increase in the permitted allocation of Section 31 'jackpot' machines in the final quarter of 2005. At 31 December 2006 our estate comprised 578 Section 31 machines, 196 Section 21 terminals and 759 electronic roulette positions.
In June 2006 we relocated a licence in Manchester from Empire Street to a purpose-built 35,000 sq ft site on Bury New Road. The new casino was the first to be opened under the G Casino brand, a concept designed specifically for the mainstream leisure gaming market. We are encouraged by its early performance.
In November we completed the sale for £31.0m of the Clermont Club in London and in July we exited under-performing casinos in Manchester and in Scarborough. At 31 December 2006 Grosvenor operated 33 casinos in the UK.
Our two casinos in Belgium, at Middlekerke and Blankenberge, generated a small increase in revenue to £13.2m while operating profit of £1.4m was 6.4% ahead of 2005. During 2007 we will explore opportunities presented by new legislation to broaden the range of gaming activities within these casinos. These opportunities include the introduction of video poker and electronic roulette.
| Admissions | Spend per head | |||
|---|---|---|---|---|
| 2006 000s |
2005 000s |
2006 £ |
2005 £ |
|
| London - upper | 62 | 59 | 375.30 | 423.80 |
| London - mainstream | 945 | 898 | 75.10 | 74.10 |
| Provincial | 3,521 | 3,410 | 31.30 | 30.20 |
| Total UK | 4,528 | 4,367 | 45.20 | 44.67 |
London upper - Sales and profit for the casinos in our 'London - upper' segment were affected by the sale of the Clermont Club. From 2007, the Park Tower (which is the other casino in this segment) will be reported as part of Grosvenor's London casinos.
London mainstream - Our four mainstream casinos in London generated revenue growth of 5.7%, with admissions rising by 5.2% and spend per head up by 1.3%. The Hard Rock Casino (which will be re-branded as a G Casino during 2007), located in the heart of London's tourism district on Leicester Square, drew particular benefit from the ending of the 24-hour rule, enjoying strong growth in admissions.
Provincial - Our provincial casinos posted a 7.1% increase in revenue for the year, despite the closure in July of the Hard Rock Casino in Manchester and the Grosvenor Casino in Scarborough. During the year we increased admissions by 3.3% and grew spend per head by 3.6% to £31.30. A small number of our casinos experienced a rise in competition during the year, which held back profit growth within the provincial segment.
The priorities for Grosvenor in 2007 are to continue to position both our product and our estate for continued growth in mainstream casino gaming. At the same time we are mindful of the potentially negative effects of the introduction of smoking bans in England and Wales and of the loss of Section 21 gaming terminals.
The full implementation of the 2005 Act in September 2007 brings opportunities for Grosvenor in the shape of new regulations on casino advertising and promotions, the ability to test new games and a change to revenue generation from poker room activities.
From September the restrictions on casino advertising will be relaxed. While the exact nature of the changes are not yet clear, we expect that the changes will allow us to promote the locations and the consumer offers of our casinos more clearly and through a broader range of media. We will have an early opportunity to examine the impact of television in raising awareness of our business. From August this year 10 of our casinos will feature on Channel 4 Television's coverage of the Blue Square sponsored Grosvenor UK Poker Tour.
From the implementation of the 2005 Act, we will be testing a range of internationally established casino games which have hitherto not been permitted in the UK. These include poker variants such as 'Texas Hold 'Em', 'Let It Ride' as well as a number of 'side bet' games, such as Blackjack's 'Perfect Pairs'. We will work closely with the Gambling Commission to ensure that any new games comply both with the 2005 Act and with our own code of conduct on responsible gambling.
In addition we will be permitted to charge 'rake' on card room poker games, rather than simply taking an hourly usage or dealer fee. As the UK's largest poker room operator (20 of our 33 casinos operate a dedicated card room) this presents an opportunity for the business.
'We continue to grow our estate to meet the rising consumer demand for mainstream casino gaming.'
We continue to grow our estate to meet the rising consumer demand for mainstream casino gaming. In addition to our plans to apply for new casino licences under the 2005 Act, we will add to and develop our existing portfolio of clubs, which are licensed under the 1968 Act.
We are building our first casinos in Scotland, at Aberdeen and Dundee, and expect them to open in 2008. We have been granted a further six non-operating casino licences and we have the ability to extend or relocate sub-scale casinos. These opportunities create the potential to add significant scale to our estate over the next few years.
In February 2007 we relocated our Luton casino licence from Dunstable Road to a 30,000 sq ft site with good parking facilities on Park Street West in the town centre. The casino has opened under our new G Casino brand. We will undertake a major extension project at the Grosvenor Blackpool, which will also be re-branded as a G Casino.
G Casino
During 2006 we opened our first casino under the G Casino brand at Bury New Road in Manchester. In February 2007 we opened a second G Casino at Luton and we plan to convert our Blackpool and Leicester Square casinos to the G Casino brand by the end of the year.
For more information, please visit the Grosvenor Casinos website.