It’s been a year of transformation. The new management team focused on developing our corporate transformation programme soon after I joined the Group in May 2018. The programme provides a framework for driving initiatives - from the generation of an idea through to its validation, planning, resourcing and ultimately its implementation. This has introduced new ways of working within Rank Group that puts us in good stead going forwards.
As the transformation programme moved from planning into execution, operating profit grew from £30.3m in the first half to £42.2m in the second (H2). This is a significant turnaround for the Group and was based on excellent work from the cost reduction workstreams.
However, we can only take cost out of the business once - and ultimately shareholder value is created by growing our revenues. This means better meeting the needs of our customers.
In terms of financial performance, the first half of the year was challenging. The hot British summer cut attendance in our venues, with a knock-on impact on revenues. Our UK Digital business started to improve – though from a weak position following a reduction in marketing investment in the previous year. So, I was pleased to see H2 revenue growth in both Grosvenor and Mecca, and a 14% H2 growth in the UK digital business.
In Spain, YoBingo had an excellent first half. It slowed a little in H2 but has some very exciting initiatives in the pipeline. The Enracha venues business continues to perform well and has some important developments coming through.
In addition to the early successes achieved by the transformation programme, we have announced the acquisition of Stride Gaming Plc. We expect this transaction to close in the next couple of months, and it should add much needed scale to our digital business.
While I am disappointed to be reporting a decline in the Group’s operating profit year-on-year, I am pleased with the groundwork we have put in place to turn things around and expect that the results of our initiatives will become increasingly clear.
Rank is a good business and I would not have joined the Group if I didn’t think there was a sizeable opportunity to improve its performance. Doing just that has been my focus and that of the management team.
We made a number of important personnel changes in the year and have considerably strengthened the team. As a result, we are now in a much stronger position in terms of organisational capability to drive change and to do so at pace.
Within the venue’s businesses, in both the UK and Spain, there are opportunities to reduce cost and grow revenues. The Grosvenor business made some material cost savings by introducing a new operating model involving fewer levels of management and the more appropriate scheduling of colleagues to meet customer demand.
Cost saving is inevitably front-loaded in business transformations, because it is generally easier to deliver than revenue growth. So that is what we have focused on.
However, we have also been pursuing some key revenue growth opportunities that are more fun and more rewarding for colleagues across the Group. This is now the direction in which we are heading because this is not a business short on opportunity.
In the past year the management team has reviewed the Group’s ambition, purpose and strategy.
We concluded that there’s nothing much wrong. It’s just that we haven’t been precise enough in delivering these things.
As a result of the review, we have set an ambition to become a £1bn revenue business by 2023 and re-stated our strategy for how we will achieve this.
I would like to emphasise the importance of our purpose. This is to excite and to entertain. We are in the entertainment business and ultimately our customers come to us to have fun - and I speak as someone who thoroughly enjoys gambling. Many of our key revenue growth opportunities centre on ensuring that we deliver fun and entertainment to our customers. The more customer-centric we are as a business, the more successful we will be – and there is a big opportunity for us to do just that.
In Grosvenor we are testing new casino propositions, new gaming products and new casino designs to meet the needs of today’s consumers. We are also focused on meeting the needs of our customers who do not distinguish between channels in anything like the way that we do.
We are also trialling new bingo formats and improving the proposition for both our online and Mecca venue customers. We have some exciting ideas in the pipeline. The same applies to Enracha and also to the YoBingo business.
There is a lot to do – but we will have a lot of fun doing it.
Most important to us is maintaining the momentum of the transformation programme. I see this programme as a way of working. We get ideas from across the business which we put through the rigour of the programme to ensure those that make the cut are then properly resourced and brilliantly delivered. To plagiarise a famous Gary Player quote, the more we practice, the luckier we get.
As it is a constantly developing plan, we always need more ideas for generating revenues or reducing costs. And the best ideas come from colleagues in the business who are closest to our customers.
The transformation programme has made a great start and I can see and feel that we are turning things around. Our priority for 2019/20 is to return the business to long-term, sustainable revenue growth. That’s the biggest challenge for the coming year.
But it’s not the only one. We also expect to complete the acquisition of Stride and integrate it into Rank’s digital business. Buying Stride will create more scale in our digital business; strengthen our management team; deliver cost and revenue synergies; and bring in proprietary technology – which is a key attribute in terms of accelerating growth both in the UK and internationally.
The Rank Group has a big opportunity, and it is one that we intend to maximise.
John O'Reilly, Chief Executive