TIDMRNK
RNS Number : 3616B
Rank Group PLC
30 January 2020
LEI: 213800TXKD6XZWOFTE12
30 January 2020
The Rank Group Plc ("Rank" or the "Group")
Interim results for the six months ended 31 December 2019
Transformation delivering revenue and profit growth
Today Rank is pleased to announce its interim results for the
six months ended 31 December 2019. Group underlying net gaming
revenue (NGR) grew by 10% in the period and underlying operating
profit increased by 70%.
Reported NGR and operating profit also grew in the period, up
14% and 117% respectively.
On 4 October 2019, Rank completed the acquisition of Stride
Gaming plc ('Stride'). Post completion Stride contributed GBP18.1m
of NGR and GBP1.4m of operating profit in the half.
Financial highlights
H1 2019/20(1) H1 2018/19 Change
Financial Group underlying net gaming
KPIs revenue (NGR)(1) GBP377.5m GBP342.4m 10%
--------------------------------------- --------------- ------------ --------
Digital underlying NGR(1) GBP65.2m GBP57.3m 14%
------------------------------------------------------- --------------- ------------ --------
Venues underlying NGR(1) GBP312.3m GBP285.1m 10%
------------------------------------------------------- --------------- ------------ --------
Underlying operating profit(1,2)
pre IFRS 16(3) GBP55.1m GBP32.5m 70%
------------------------------------------------------- --------------- ------------ --------
Impact of IFRS 16 to underlying GBP3.8m - -
operating profit
--------------------------------------- --------------- ------------ --------
Underlying operating profit GBP59.8m GBP31.9m 87%
------------------------------------------------------- --------------- ------------ --------
Underlying profit before taxation(2) GBP52.9m GBP30.5m 73%
------------------------------------------------------- --------------- ------------ --------
Underlying net (debt)/cash GBP(59.0)m GBP7.7m -
--------------------------------------- --------------- ------------ --------
Underlying earnings per share(2) 11.0p 6.4p 72%
------------------------------------------------------- --------------- ------------ --------
H1 2019/20 H1 2018/19 Change
--------------- ------------ --------
Statutory
performance Reported NGR GBP397.4m GBP348.2m 14%
--------------------------------------- --------------- ------------ --------
Group operating profit GBP56.1m GBP25.8m 117%
------------------------------------------------------- --------------- ------------ --------
Profit after taxation GBP39.8m GBP18.7m 113%
------------------------------------------------------- --------------- ------------ --------
Cash generated from operations GBP109.3m GBP56.0m 95%
------------------------------------------------------- --------------- ------------ --------
Net (debt)/cash GBP(300.5)m GBP7.7m -
--------------------------------------- --------------- ------------ --------
Basic earnings per share 10.2p 4.8p 113%
------------------------------------------------------- --------------- ------------ --------
Dividend per share 2.8p 2.15p 30%
------------------------------------------------------- --------------- ------------ --------
1 On a like-for-like (LFL) basis which removes the impact of
club openings, closures, acquired businesses and foreign exchange
movements.
2 H1 2018/19 restated to reflect the reclassification of IFRS 3
to separately disclosed items.
3 H1 2018/19 is not restated for the impact of IFRS 16.
Operational highlights
-- The Group continues to focus on initiatives which drive
revenue growth, cost savings and improved ways of working
through the transformation programme. Central to this
is creating more exciting, entertaining and safe environments
and experiences for our customers
-- Acquisition of Stride completed 4 October 2019 and the
implementation of a comprehensive integration plan is
underway
-- In the quarter prior to completion Stride's NGR declined
by 15%, and by 2% in the quarter post acquisition
-- Strong LFL NGR growth in Digital - Grosvenor up 21% and
Mecca up 13%
-- Yo underperformed with LFL NGR down 2% but the Group remains
confident of its future prospects
-- Grosvenor venues LFL NGR grew by 15% with a strong trading
performance across the London venues and a positive customer
response to key investments into product, technology and
facilities
-- Mecca venues LFL NGR down 1% with growth in gaming machines
offset by lower customer visits impacting bingo and interval
games revenue
-- Investment in the Spanish Enracha venues estate has supported
a 9% growth in International venues LFL NGR
-- Several key safer gambling initiatives delivered in H1
with a programme of further developments scheduled for
H2
-- H1 cost savings delivered from the casino operating model
changes on track to deliver annualised saving of GBP19m
-- Strong cash flow generation led to better than expected
underlying net debt of GBP59.0m
-- Dividend up 30%
Outlook
-- Full year expected underlying operating profit to be between
GBP113m and GBP123m (GBP105m to GBP115m pre IFRS16)
-- Good progress is being made with the integration of Stride
and we expect cost synergies to be in line with the GBP13m
guidance, largely to flow through in 2020/21 and 2021/22
John O'Reilly, Chief Executive of The Rank Group Plc said:
"We are pleased with The Group's first half performance which
demonstrates that the transformation programme is delivering the
right results. The revenue growth in our digital business and
across our Grosvenor and Enracha venues shows that we are moving in
the right direction in key areas of our business. We remain on
track and are confident in our ability to deliver operational and
financial improvements underscored by a relentless commitment to
delivering exciting, entertaining and safe gambling environments
and experiences for our customers.
The successful integration of Stride into our business will
ensure that we benefit from strong synergies, proprietary
technology and a first-class digital team, all of which will
position us well for the second half of the year. These are a good
set of numbers and are a testament to our committed and talented
colleagues across the Group who have worked hard to deliver
them."
Ends
Definition of terms:
-- Net gaming revenue ('NGR') is revenue less customer incentives;
-- Underlying measures exclude the impact of amortisation
of acquired intangibles; revaluation of investments; profit
or loss on disposal of businesses; acquisition and disposal
costs including changes to deferred or contingent consideration;
impairment charges; reversal of impairment charges; restructuring
costs as part of an announced programme; charges and credits
for financing fair value remeasurements; discontinued
operations and exceptional items, should they occur in
the period. Collectively these items are referred to a
Separately Disclosed Items ('SDIs');
-- EBITDA is operating profit before SDIs, depreciation and
amortisation;
-- Underlying profit before tax is profit from continuing
operations before taxation adjusted to exclude SDIs. See
Alternative Performance Measures section for a reconciliation;
-- Underlying earnings per share is calculated by adjusting
profit attributable to equity shareholders to exclude
SDIs;
-- "H1 2019/20" refers to the six-month period to 31 December
2019 and "H1 2018/19" refers to the six-month period to
31 December 2018;
-- Like-for-like ('LFL') measures have been disclosed in
this report to show the impact of club openings, closures,
acquired businesses and foreign exchange movements;
-- Prior year LFL measures are amended to show an appropriate
comparative for the impact of club openings, disposals,
closures and acquired businesses;
-- The Group results make reference to "underlying" results
alongside our statutory results, which we believe will
be more useful to readers as we manage our business using
these adjusted measures. The directors believe that SDIs
impair visibility of the underlying performance of the
Group's business because these items are often material,
non-recurring and do not relate to the underlying trading
performance. Accordingly, these are excluded from our
non-GAAP measurement of revenue, EBITDA, operating profit,
profit before tax and underlying EPS. Underlying measures
are the same as those used for internal reports; and
-- Venues includes Grosvenor venues, Mecca venues and International
venues.
Enquiries
The Rank Group Plc
Sarah Powell, director of investor relations Tel: 01628 504
and communications (investor enquiries) 303
David Williams, director of public affairs (media Tel: 01628 504
enquiries) 295
FTI Consulting LLP
Ed Bridges Tel: 020 3727
1067
Alex Beagley Tel: 020 3727
1045
Photographs available from www.rank.com
Analyst meeting and webcast details:
Thursday 30 January 2020
There will be an analyst meeting at 9.30 am, admittance to which
is by invitation only. There will also be a simultaneous webcast of
the meeting.
For the live webcast, please register at www.rank.com. A replay
of the webcast and a copy of the slide presentation will be made
available on the website later. The webcast will be available for a
period of six months.
Forward-looking statements
This announcement includes "forward-looking statements". These
statements contain the words "anticipate", "believe", "intend",
"estimate", "expect" and words of similar meaning. All statements,
other than statements of historical facts included in this
announcement, including, without limitation, those regarding the
Group's financial position, business strategy, plans and objectives
of management for future operations (including development plans
and objectives relating to the Group's products and services) are
forward-looking statements that are based on current expectations.
Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance, achievements or financial position of
the Group to be materially different from future results,
performance, achievements or financial position expressed or
implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Group's
operating performance, present and future business strategies, and
the environment in which the Group will operate in the future.
These forward-looking statements speak only as at the date of this
announcement. Subject to the Listing Rules of the Financial Conduct
Authority, the Group expressly disclaims any obligation or
undertaking, to disseminate any updates or revisions to any
forward-looking statements, contained herein to reflect any change
in the Group's expectations, with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Past performance cannot be relied upon as a guide to future
performance.
Chief executive review
We are pleased to announce that the Group has performed strongly
in the six months ended 31 December 2019. Group like-for-like
('LFL') underlying net gaming revenue ('NGR') grew by 10% driven by
pleasing Digital, Grosvenor venues and International venues
performances. Cost initiatives delivered through the transformation
programme continued to flow into the half and, alongside strong NGR
growth, delivered a 70% increase in LFL underlying operating
profit.
The Group is one year into its three-year transformation
programme and is on track to becoming a leading multi-channel
gaming business. Following the delivery of the key cost
initiatives, focus now increases on developing the Group's revenue
growth opportunities. During the first half, we finalised the
Group's safer gambling workstream, with an initial focus on
enhanced training for colleagues, review of customer messaging,
continued development of our affordability and propensity models,
the introduction of machine limits and tighter entry controls
within Grosvenor venues.
The successful integration of Stride is a key priority for the
Group with the project now falling within the transformation
programme's framework to ensure the benefits from combining
Stride's and Rank's digital businesses are maximised.
Digital performed strongly in the last six months with LFL NGR
up 14%, driven by the performance of the Mecca and Grosvenor
brands. Mecca digital's LFL NGR grew by 13% following the launch of
a successful promotional programme and improvements to our customer
rewards programme and customer journeys. Grosvenor digital's NGR
grew by 21% in the half with 36% of our online customers now
playing via a Grosvenor One account. Yo's performance was
disappointing in the period and progress on some key initiatives
has been slower than expected. Following actions taken towards the
end of the half to address Yo's underperformance, including the
launch of YoCasino, the Group remains confident in Yo's future
prospects. Digital's LFL underlying operating profit fell by
GBP2.1m due to GBP3.8m of additional UK Remote Gaming Duty ('RGD'),
following its increase to 21% from April 2019, and a GBP2.2m
increase in Digital's depreciation charge following the launch of
Grosvenor One and Grosvenor's new content management system
('CMS').
Grosvenor venues had a particularly strong H1 with total NGR up
15% driven by higher staking levels and table win margin (up 0.8
ppts). Growth was seen across all product areas as customers
reacted positively to our recent investment into product,
technology and customer facilities. Electronic roulette's
performance also benefited from the change in B2 machine regulation
where maximum stakes were reduced to GBP2 in betting shops. Cost
savings delivered from the casino operating model changes are on
track to deliver annualised savings of GBP19m. This alongside
customer loyalty programme changes contributed to Grosvenor's 137%
improvement in LFL underlying operating profit.
Mecca venues saw a small decline in LFL NGR in the six-month
period, down 1%. Previous trends continued with a 4% increase in
spend per visit being offset by a fall in customer visits. NGR
declines were seen across both mainstage and interval gaming,
however, following recent investments, amusement machines grew NGR
by 1%. Mecca continued with its portfolio of successful
entertainment events and bingo variants in the half and is now
focused on increasing the relevance of the customer proposition
within our local communities.
International venues benefited from key product investments made
in the period, driving NGR up by 9%.
Work continues on creating a safer environment for all our
customers. For our digital channel, an affordability model was
introduced to help risk score all of Rank's digital customers with
the aim of seeking to ensure that customers are playing within
their means. For our UK venues, length of play and loss limit
customer alerts were introduced across our gaming machine products.
We are trialling ID scanning technology within our Grosvenor venues
and expect to roll this out across the estate in the second half of
the year, further tightening entry controls into our casinos.
GBPm Underlying NGR(1) Underlying operating
profit(1,2)
H1 H1 2018/19 Change H1 2019/20 H1 2018/19 Change
2019/20
----------- ------------ -------- ------------ ------------ --------
Digital 65.2 57.3 14% 10.5 12.6 (17)%
----------- ------------ -------- ------------ ------------ --------
Grosvenor venues 198.1 172.0 15% 45.9 19.4 137%
----------- ------------ -------- ------------ ------------ --------
Mecca venues 89.6 90.5 (1)% 12.3 12.0 3%
----------- ------------ -------- ------------ ------------ --------
International
venues 24.6 22.6 9% 5.3 4.1 29%
----------- ------------ -------- ------------ ------------ --------
Central costs - - - (18.9) (15.6) (21)%
----------- ------------ -------- ------------ ------------ --------
Total 377.5 342.4 10% 55.1 32.5 70%
----------- ------------ -------- ------------ ------------ --------
1 On a like-for-like (LFL) basis which removes the impact of
club openings, closures, acquired businesses and foreign
exchange.
2 Before the impact of IFRS 16.
Acquisition of Stride Gaming plc
On 4 October 2019, Rank completed the acquisition of Stride
Gaming plc for GBP116.0m.
In the first three months following completion we have been
working on developing the detailed integration plan for our two
digital businesses.
The integration programme will follow the same cadence and
rigour as the already embedded transformation programme and is
being led by Rank's chief transformation officer. We expect to
deliver cost synergy benefits of GBP13m per annum.
In the period, the new digital management team was confirmed
which is led by Eitan Boyd as the new digital chief executive.
Board changes
Chair
Alex Thursby was appointed as chair on 17 October 2019 following
the conclusion of Rank's 2019 Annual General Meeting ('2019
AGM').
Alex succeeds Ian Burke who previously had notified the Board of
his intention not to seek re-election at the 2019 AGM.
Non-executive director and audit chair
On 4 November 2019, Karen Whitworth was appointed to the Board
as a non-executive director. Karen chairs Rank's audit committee
and also serves on our safer gambling and remuneration
committees.
Dividend
The Board targets a progressive and sustainable dividend. The
dividend policy reflects strong cash flow characteristics and
long-term earnings potential of the Group, whilst allowing it to
retain sufficient capital to fund ongoing operating requirements,
investment and balance sheet management. In line with the Group's
improving performance, the Board is pleased to declare a 30%
increase in interim dividend to 2.8 pence per share to be paid to
be paid on 13 March 2020 to shareholders on the register at 14
February 2020.
Brexit
Whilst there is now greater clarity following the outcome of the
General Election in December, the Group remains cautious as
attention turns to the UK's post-transition relationship with the
EU. Mitigations have been prepared to reduce the potential impact
on the Group.
Current trading and outlook
Current trading has been in line with our recent trading update
and we expect underlying operating profit for the full year to be
between GBP113m and GBP123m including the impact of IFRS 16.
Operating review - Digital
Digital performed strongly in the half with LFL NGR up 14%,
driven by the performance of the Mecca and Grosvenor brands.
Key financial performance indicators(1)
GBPm H1 2019/20 H1 2018/19 Change
LFL NGR 65.2 57.3 14%
Mecca 34.2 30.2 13%
Grosvenor 24.3 20.1 21%
Enracha 0.3 0.5 (40)%
Yo(2) 6.4 6.5 (2)%
------------ ------------ --------
LFL operating profit pre IFRS
16 10.5 12.6 (17)%
------------ ------------ --------
IFRS 16 0.1
------------ ----------------------
LFL operating profit 10.6
------------ ------------ --------
Total NGR 83.2 57.3 45%
Mecca 34.2 30.2 13%
Grosvenor 24.3 20.1 21%
Enracha 0.3 0.5 (40)%
Yo 6.3 6.5 (3)%
Stride(3) 18.1 - -
------------ ------------ --------
Total operating profit 11.9 12.6 (6)%
------------ ------------ --------
1 Before separately disclosed items.
2 Excludes impact of foreign exchange.
3 Includes post acquisition performance only.
Mecca's NGR grew by 13% in the half, principally driven by
customer journey improvements and strong promotional activity.
Mecca's Dream Come True campaign and daily retention game, a spin
to win bonus mechanic, were promotional highlights of the period
and both contributed to a 15% increase in first time depositors.
Improvements were also made to Mecca's customer reward's programme,
introducing greater flexibility and speed to react to a customer's
play.
Strong growth in Grosvenor's active customer base helped deliver
a 21% increase in Grosvenor's NGR in the half, with 33% of
Grosvenor's revenue coming through Grosvenor One. During the
period, Grosvenor successfully migrated onto the new content
management system providing more control to the business in
building out improvements to the customer experience.
As part of Rank's safer gambling workstream, a UK digital
affordability model was introduced in the half to help improve our
ability to ensure customers are playing within their means.
Stride(4)
Q1 2019/20 Q2 2019/20 H1 2019/20
NGR growth (15)% (2)% (9)%
------------ ------------ ------------
4 Pre acquisition performance included.
Post-acquisition, the digital leadership team focused on
developing transformation initiatives to address the recent
underperformance. Early signs are encouraging, and we expect Stride
to return to NGR growth during H2.
A new operating model for the enlarged digital business is being
established with clear and achievable synergy benefits of at least
GBP13m per annum. All integration initiatives will be managed
through the transformation programme framework.
Yo underperformed in the period with NGR down 2%. Towards the
end of the first half we have strengthened the management team and
launched YoCasino which we expect will improve Yo's performance
going forward.
Yo's Portuguese bingo offer is to be launched once the necessary
regulatory approvals have been received.
Operating review - Grosvenor venues
Grosvenor venues performed strongly in the period with LFL NGR
up 15% with growth being delivered across all product areas.
Key financial performance indicators(1)
GBPm H1 2019/20 H1 2018/19 Change
LFL NGR 198.1 172.0 15%
London 80.2 65.3 23%
Rest of UK 117.9 106.7 10%
------------ ------------ --------
LFL operating profit pre IFRS
16 45.9 19.4 137%
------------ ------------ --------
IFRS 16 2.2
------------ ----------------------
LFL operating profit 48.1
------------ ------------ --------
Total NGR 198.1 172.1 15%
------------ ------------ --------
Total operating profit 48.1 19.4 148%
------------ ------------ --------
1 Before separately disclosed items.
NGR growth was seen across all product areas in the half driven
by improved table win margin, up 0.8 ppts, and higher staking
levels.
London performed particularly strongly with NGR up 23%
reflecting Grosvenor's recent investment focus, a higher win margin
and the very strong summer, helped by the weak pound. Rest of UK
NGR growth was also strong, up 10%, centred around recent
investments.
Costs continued to be well controlled and we are on track to
deliver an annualised benefit of GBP19m following the new operating
model that was introduced in late H1 2018/19. Grosvenor's customer
reward programme was withdrawn in the prior year, this led to
GBP6.1m of savings in H1. A new reward programme is expected to go
live in H1 2020/21.
Machine and product investments made in the prior year helped
deliver an incremental GBP10.1m of electronic roulette gross gaming
revenue (GGR) and GBP4.4m of slot machine GGR in the period.
Electronic roulette's performance also benefited from the change in
B2 regulation which reduced staking limits to GBP2 in betting shops
from April 2019.
During the period, customer alerts were introduced for both time
played and loss limits across gaming machines and electronic
roulette terminals. Grosvenor is currently trialling several
customer entry control systems, whilst this means customers will no
longer be able to walk into a casino unidentified, Grosvenor will
be able to capture a customer's identity easily and quickly through
the use of the very latest technology. Further enhancements are
also planned for the casino management system, Neon, which will
support the identification of and interaction with customers
potentially at risk of problem gambling and help us evaluate the
effectiveness of those interactions.
LFL venues revenue analysis
GBPm H1 2019/20 H1 2018/19 Change
Casino games 131.0 114.1 15%
------------ ------------ --------
Gaming machines 50.5 46.1 10%
------------ ------------ --------
Food and drink, card room games
and other 19.9 21.2 (6)%
------------ ------------ --------
Less: customer incentives (3.3) (9.4) 65%
------------ ------------ --------
Total NGR 198.1 172.0 15%
------------ ------------ --------
Grosvenor's overarching aim is to deliver a more entertaining
and exciting customer proposition with investments focused around
its product, technology and customer facilities.
In December 2019, Pier Nine, Grosvenor's new concept casino in
Brighton was opened. The casino aims to provide a more exciting and
entertaining casino experience with a wider and more relevant
non-gaming offer. Across its three floors, the new casino offers
both formal and informal dining, three bars, a classic casino in
addition to retro and digital gaming. A spare unused casino licence
was also utilised at Pier Nine enabling its customers to be better
served through a more accessible machine offer. The casino will be
officially launched on 1 February.
Work recently commenced on creating an improved outdoor customer
terrace at Grosvenor's flagship casino in London, the Victoria
casino. The new customer terrace, which will incorporate outdoor
gaming, and a refreshed casino entrance are expected to be
completed by the end of the current financial year.
During the half, a small but effective refurbishment was carried
out at Grosvenor's Reading Central casino. Works included new
external signage to make the casino more visible and engaging. Four
further light touch refurbishments are planned for the second half
and are expected to cost circa GBP2m.
The refurbished Sheffield casino delivered good returns
demonstrating the benefits of appealing to both a leisure and
traditional customer base through a good food and drink offer and a
more modern gaming environment. Grosvenor's Merchant City casino in
Glasgow has been identified suitable for a 'Sheffield' style
refurbishment and further opportunities are under
investigation.
Grosvenor will continue to seek opportunities to locate and
operate its remaining eight dormant casino licences.
As highlighted at our preliminary results for the year ended 30
June 2019, Grosvenor is not able to measure customer visit numbers
on a basis consistent with prior periods following staffing
reductions under the new operating model. Grosvenor's customer
entry control system trials are ongoing however we expect customer
visit numbers to be reinstated as a reported KPI for the financial
year 2020/21.
Operating review - Mecca venues
Mecca's like-for-like NGR was down 1% in the period driven by a
5% decline in customer visits partially offset by a 4% increase in
spend per visit.
Key financial performance indicators(1)
GBPm H1 2019/20 H1 2018/19 Change
LFL NGR 89.6 90.5 (1)%
------------ ------------ --------
LFL operating profit pre IFRS
16 12.3 12.0 3%
------------ ------------ --------
IFRS 16 1.7
------------ ----------------------
LFL operating profit 14.0
------------ ------------ --------
Total NGR 91.9 96.2 (4)%
------------ ------------ --------
Total operating profit 13.7 11.4 20%
------------ ------------ --------
1 Before separately disclosed items.
Continued cost efficiencies mitigated the loss in NGR in the
period, with LFL operating profit up 3%.
Mecca's southern region performed well in the half growing its
customer base following competitor closures. In contrast, Mecca's
Scottish region suffered following declines in its higher frequency
customer base.
LFL key non-financial performance indicators
H1 2019/20 H1 2018/19 Change
Customer visits (000s) 3,902 4,104 (5)%
------------ ------------ --------
Spend per visit (GBP) 22.96 22.05 4%
------------ ------------ --------
The modernisation and relevance of Mecca's customer offer to its
local community remains the key area of focus. From a product
perspective, more relevant and engaging products were introduced
across both Mecca's amusement machine and Mecca Max estate. Work
also continued to improve the accessibility of Mecca's machines
with three venues moving their machines to the front of the venue
with opening hours being extended in some cases.
With regards to engaging with Mecca's wider community, the
popular portfolio of entertainment events continued in the period
with a total of 72 events being held across 36 venues.
LFL venues NGR analysis
GBPm H1 2019/20 H1 2018/19 Change
Main stage bingo 12.3 13.2 (7)%
------------ ------------ --------
Interval bingo 33.4 34.4 (3)%
------------ ------------ --------
Amusement machines 31.8 31.4 1%
------------ ------------ --------
Food and drink/other 12.1 11.5 5%
------------ ------------ --------
Total 89.6 90.5 (1)%
------------ ------------ --------
The fall in customer visits led to main stage bingo and interval
bingo to decline by 7% and 3% respectively.
The rollout of food and drink home delivery from Mecca's
kitchens was completed in the half and results so far have been
positive.
Proposals have been developed to trial new external signage at
five Mecca venues which are due to be installed in H2.
On 16 August, Rank entered into a conditional agreement to sell
five Mecca bingo clubs to Club 3000 for GBP2.1m; all five disposals
were completed in the period and resulted in a GBP1.8m profit on
disposal.
Operating review - International venues
LFL NGR grew by 9% in the period driven by improved performance
across every Enracha venue.
Key financial performance indicators(1)
H1 2019/20 H1 2018/19 Change
LFL NGR 24.6 22.6 9%
Enracha 18.9 17.5 8%
Blankenberge Casino 5.7 5.1 12%
------------ ------------ --------
LFL operating profit pre IFRS
16 5.3 4.1 29%
------------ ------------ --------
IFRS 16 0.1
------------ ----------------------
LFL operating profit 5.4
------------ ------------ --------
Total NGR 24.2 22.6 7%
------------ ------------ --------
Total operating profit 5.3 4.1 29%
------------ ------------ --------
1 Before separately disclosed items.
Four Enracha venues underwent refurbishments in H1, focused
principally on improving the gaming machine offer. Gaming machine
revenue performance following these investments has been positive,
up 9%.
A new Enracha venue in Girona is scheduled to be opened in 2020.
The new venue will have a greater focus on electronic gaming and
sports betting compared to Enracha's other nine venues and will be
delivered through a lower operational cost model.
Three concept Enracha Stadium venues are also due to be opened
subject to planning approvals. These smaller venues will offer a
pure electronic gaming and sports betting customer experience.
The Blankenberge casino delivered strong NGR growth in the
period, up 12%, driven by machine investments. Further improvements
in product and facilities will be introduced in the second
half.
Alternative Performance Measures
When assessing, discussing and measuring the Group's financial
performance, management refer to measures used for internal
performance management. These measures are not defined or specified
under International Financial Reporting Standards (IFRS) and as
such are considered to be Alternative Performance Measures
('APMs').
By their nature, APMs are not uniformly applied by all preparers
including other operators in the gambling industry. Accordingly,
APMs used by the Group may not be comparable to other companies
within the Group's industry.
Purpose
APMs are used by management to aid comparison and assess
historical performance against internal performance benchmarks and
across reporting periods. These measures provide an ongoing and
consistent basis to assess performance by excluding items that are
materially non-recurring, uncontrollable or exceptional. These
measures can be classified in terms of their key financial
characteristics.
Profit measures allow management to assess and benchmark
underlying business performance during the year. They are primarily
used by operational management to measure operating profit
contribution and are also used by the Board to assess performance
against business plan.
Impact of IFRS 16 adoption on the Group's APMs
With the current year being a transitional year following the
introduction of IFRS 16, the Group has not adjusted its APMs for
the impact of the adoption of IFRS 16. For periods starting after
30 June 2020, all APMs will be disclosed post IFRS16.
The impact of IFRS 16 is explained fully in note 1 of the
Interim Financial Statements. The Group has applied the modified
retrospective approach to adoption and has not restated comparative
information.
Had the Group adjusted its APMs for the impact of adoption at 31
December 2019, underlying operating profit would be GBP3.8m higher;
underlying net finance costs would have been GBP4.0m higher;
underlying profit before tax would have been GBP0.2m lower; and
underlying earnings per share would have been 0.1p lower.
The following table explains the key APMs applied by the Group
and referred to in these statements:
Closest equivalent Adjustments to reconcile to primary
APM Purpose IFRS measure financial statements
Like-for-like Revenue Reported * Separately disclosed items
(LFL) net measure NGR
gaming revenue
(NGR)
---------- --------------------
* Excludes contribution from any venue openings,
closures, disposal and acquired businesses during the
period
---------- --------------------
* Foreign exchange movements
---------- -------------------- -------------------------------------------------------------
LFL EBITDA Profit Operating * Separately disclosed item
(earnings measure profit
before interest,
taxation,
depreciation
and amortisation)
---------- --------------------
* Excludes contribution from any venue openings,
closures, disposals and acquired businesses during
the period
---------- --------------------
* Depreciation and amortisation before separately
disclosed items
* Foreign exchange movements
* IFRS 16 lease adjustments
---------- -------------------- -------------------------------------------------------------
LFL operating Profit Operating * Separately disclosed items
profit measure profit
---------- --------------------
* Excludes contribution from any venue openings,
closures, disposal and acquired businesses during the
period
---------- --------------------
* Foreign exchange movements
* IFRS 16 lease adjustments
---------- -------------------- -------------------------------------------------------------
LFL profit Profit Profit before * Separately disclosed items
before taxation measure tax
---------- --------------------
* Excludes contribution from any venue openings,
closures, disposals and acquired businesses during
the period
---------- --------------------
* Foreign exchange movements
* IFRS 16 lease adjustments
---------- -------------------- -------------------------------------------------------------
LFL profit Profit Profit before * Separately disclosed items
after taxation measure tax
---------- --------------------
* Excludes contribution from any venue openings,
closures, disposals and acquired businesses during
the period
---------- --------------------
* Foreign exchange movements
* IFRS 16 lease adjustments
---------- -------------------- -------------------------------------------------------------
Underlying Profit Earnings * Separately disclosed items
earnings measure per share
per share
---------- -------------------- -------------------------------------------------------------
Underlying Debt Net debt * IFRS 16 lease adjustments
net debt
---------- -------------------- -------------------------------------------------------------
Rationale for adjustments - Profit and debt measure
1. Separately disclosed items (SDIs)
The Group has changed its presentational format to improve the
definitions and terminology to provide greater clarity on the
underlying performance of the business. The terminology has changed
from "before exceptional items" and "exceptional items" to
"underlying" and "separately disclosed". SDIs are those that bear
no relation to the Group's underlying ongoing performance. This
helps users of the accounts better assess the underlying
performance of the Group, helps align to the APMs used to run the
business and still maintains clarity to the statutory reported
numbers. The following provides the rationale for treating these
items as SDIs.
a) Profit on disposal of venues
Charges or credits associated with the disposal of part or all
of a business may arise. Such disposals may result in one time
impacts that in order to allow comparability means the Group
removes the profit or loss from the underlying operating results.
During the period five Mecca venues were sold and resulted in a
GBP1.8m profit on disposal.
b) IFRS 3 Amortisation of acquired intangible assets
Fair value uplifts associated with IFRS 3 creates assets that
are depreciated or amortised over the life of the assets with the
charge, and the tax effects thereof, being included in the Group's
reported depreciation and amortisation expense. The Group's
underlying results have therefore been adjusted to exclude the
non-cash depreciation and amortisation expense of GBP3.7m in the
period relating to the acquired intangible assets of Stride and
YoBingo.
c) Acquisition related costs
Fees and directly associated costs with potential or actual
acquisitions are charged to the income statement. As such items are
infrequent, they are not part of the underlying business and are
therefore not included in the underlying performance of the Group.
In the period there were GBP1.8m of one-off costs relating to the
acquisition of Stride.
d) Business Transformation Costs
Redundancy programmes which have been announced are infrequent
items charged to the Group income statement. As such items are
infrequent, they are not part of the underlying business and are
therefore not included in the underlying performance of the Group.
No costs of this nature were incurred in the period.
e) Finance costs and other financial losses
Those financial charges or credits associated with the (1)
discounting unwinding or (2) revaluation of foreign currency
denominated deferred or contingent considerations are considered to
relate to liabilities that are not part of the underlying operation
of the business. The Groups underlying results have therefore been
adjusted to remove these items.
f) The tax impact of all of the above items are also not
considered to be part of the underlying operations of the
Group.
Further details of the Separately Disclosed Items are included
in note 3.
2. Leases
On adoption of IFRS 16, the Group's reported loans and
borrowings include lease liabilities, as explained in note 1, which
are not directly related to the external financing of the Group.
The Group excludes these liabilities from its underlying net debt
and to better reflect the Group's underlying funding position with
its primary sources of capital.
The tables below reconcile the underlying performance measures
to the reported measures of the continuing operations of the
Group.
H1 2019/20 H1 2018/19
GBPm GBPm
LFL net gaming revenue (NGR) 377.5 342.4
------------ ------------
Stride Gaming NGR 18.1 -
------------ ------------
Closed venues NGR 2.3 5.8
------------ ------------
Foreign exchange (0.5) -
------------ ------------
Total NGR 397.4 348.2
------------ ------------
Calculation of comparative NGR
H1 2018/19
LFL reported GGR 366.0
------------
Customer incentives (26.2)
------------
LFL NGR 339.8
------------
Acquired businesses - Yo 6.5
------------
Closed venues (4.0)
------------
Foreign exchange 0.1
------------
LFL NGR 342.4
------------
H1 2019/20 H1 2018/19
GBPm GBPm
LFL underlying operating profit 55.1 32.5
------------ ------------
Acquired businesses - Stride 1.4 -
------------ ------------
Opened and closed venues (0.4) (0.6)
------------ ------------
Foreign exchange (0.1) -
------------ ------------
Underlying operating profit pre IFRS
16 56.0 31.9
------------ ------------
IFRS 16 3.8 -
------------ ------------
Underlying operating profit 59.8 31.9
------------ ------------
Separately disclosed items (3.7) (6.1)
------------ ------------
Operating profit 56.1 25.8
------------ ------------
Calculation of comparative operating profit
H1 2018/19
LFL reported operating profit 30.1
------------
YoBingo contribution 2.4
------------
LFL operating profit pre IFRS 16 32.5
------------
H1 2019/20 H1 2018/19
GBPm GBPm
LFL EBITDA 77.7 52.9
------------ ------------
Depreciation, amortisation before separately
disclosed items 22.6 20.4
------------ ------------
LFL operating profit 55.1 32.5
------------ ------------
H1 2019/20 Underlying Separately Total
GBPm Disclosed
Items
LFL EBITDA 77.7 (1.6) 76.1
------------ ------------ -------
Acquired businesses - Stride 1.6 (2.1) (0.5)
------------ ------------ -------
Closed venues (0.5) - (0.5)
------------ ------------ -------
EBITDA pre IFRS 16 78.8 (3.7) 75.1
------------ ------------ -------
IFRS 16 18.9 - 18.9
------------ ------------ -------
EBITDA 97.7 (3.7) 94.0
------------ ------------ -------
H1 2019/20 H1 2018/19
GBPm GBPm
Underlying current tax charge 10.4 5.9
------------ ------------
Deferred tax (0.5) (0.2)
------------ ------------
Tax on separately disclosed items (0.4) (1.6)
------------ ------------
Total tax charge 9.5 4.1
------------ ------------
H1 2019/20 H1 2018/19
GBPm GBPm
Underlying net (debt)/cash (59.0) 7.7
------------ ------------
IFRS 16 lease adjustments (241.5) -
------------ ------------
Reported net (debt)/cash (300.5) 7.7
------------ ------------
H1 2019/20 H1 2018/19
Underlying EPS 11.0p 6.4p
------------ ------------
Separately disclosed items (0.8)p (1.6)p
------------ ------------
Reported EPS 10.2p 4.8p
------------ ------------
Reported NGR
For the six months ending 31 December 2019, reported NGR
increased by 14% driven principally by the strong performance in
Grosvenor's venues and the contribution from Stride Gaming
following its acquisition in October 2019.
Operating profit
Strong NGR growth and continued cost savings in the period led
operating profit to grow by 117%.
Net financing charge
The GBP6.9m net financing charge for the half includes a net
GBP4.0m IFRS 16 adjustment following the adoption of the standard
in the half. Pre IFRS 16, the financing charge was GBP2.9m, GBP1.6m
higher than the comparable period due to the financing costs
associated with the Stride acquisition.
Taxation
The Group's effective underlying corporation tax rate in H1
2019/20 was 18.7% (H1 2018/19 18.5%) based on a tax charge of
GBP9.9m on underlying profit before taxation. This is in line with
the Group's anticipated effective tax rate of 18% to 19% for the
period.
Further details on the tax charge are provided in note 5. On a
statutory basis, the Group had an effective tax rate of 19.3% (H1
2018/19 18.0%) based on a tax charge of GBP9.5m and total profits
of GBP49.3m.
Earnings per share
Basic EPS rose by 113% to 10.2 pence. Underlying EPS was up 72%
to 11.0 pence. For further details refer to note 7.
Cash flow and net debt
As at 31 December 2019, net debt was GBP300.5m. Debt comprised
GBP166.1m in bank loans, GBP247.8m in finance leases and GBP3.0m in
overdrafts, offset by cash at bank and in hand of GBP116.4m.
In the period, the bi-lateral term loan facilities were reduced
to GBP38m, from GBP50m, in line with the agreed amortisation
profile.
Following the completion of the Stride Gaming plc, the
pre-arranged five-year GBP128.1m term loan was fully drawn in the
period.
H1 2019/20 H1 2018/19
GBPm GBPm
Cash inflow from operations pre IFRS 16 89.0 60.3
------------ ------------
Net cash payments in respect of provisions
and separately disclosed items (1.9) (4.3)
------------ ------------
Cash generated from operations pre IFRS
16 87.1 56.0
------------ ------------
Capital expenditure (23.4) (14.1)
------------ ------------
Acquisition of Stride Gaming plc (85.5) -
------------ ------------
Net interest and tax payments (12.3) (5.1)
------------ ------------
Repayment of acquired loans (2.5) -
------------ ------------
Loan arrangement fees (2.0) -
------------ ------------
Dividends paid (21.5) (20.7)
------------ ------------
Other (including exchange translation) (0.7) 0.9
------------ ------------
Cash (outflow) / inflow (60.8) 17.0
------------ ------------
Opening net cash/(debt) 1.8 (9.3)
------------ ------------
Closing net (debt)/cash pre IFRS16 (59.0) 7.7
------------ ------------
Closing net (debt) post IFRS 16 (300.5)
------------
Net debt for covenant purposes (pre IFRS16 adjustments) at 30
December 2019 was GBP59.0m, a GBP60.8m increase from 30 June 2019
following the acquisition of Stride Gaming plc.
Cash tax rate
In the period ended 31 December 2019, the Group had an effective
cash tax rate of 18.9% on underlying profit (H1 2018/19 14.0%). The
cash tax rate is in line with the effective tax rate.
Acquisition of Stride Gaming plc
On 4 October 209, The Group acquired Stride Gaming plc for a
total cash consideration of GBP116.0m. The provisional fair value
of the assets acquired, and liabilities assumed, goodwill and
consideration are outlined in note 13.
The amounts disclosed are provisional and the accounting will be
completed within the 12-month measurement period permitted by IFRS
3 'Business Combinations'.
Taxation changes
From April 2019, UK Remote Gaming Duty (RGD) was increased to
21% and resulted in GBP3.8m of additional RGD in the period.
IFRS 16 - Leases
The Group has adopted IFRS 16 using the modified retrospective
method. Consequently, IFRS 16 is adopted from 1 July 2019 but has
not restated comparatives for the 6 months ended 31 December 2018
nor the year ended 30 June 2019, as permitted under the specific
transitional provisions in the standard. The reclassifications and
the adjustments arising from the new leasing standard are therefore
recognised in the opening balance sheet on 1 July 2019.
The following table outlines the H1 2019/20 impact of IFRS
16.
GBPm Underlying Separately Total
disclosed
items
Operating profit pre IFRS
16 56.0 (3.7) 52.3
------------ ------------ -------
IFRS 16 3.8 - 3.8
------------ ------------ -------
Operating profit 59.8 (3.7) 56.1
------------ ------------ -------
Net financing charge pre IFRS
16 (2.9) 0.1 (2.8)
------------ ------------ -------
IFRS 16 (4.0) - (4.0)
------------ ------------ -------
Net financing charge (6.9) 0.1 (6.8)
------------ ------------ -------
Profit after tax pre IFRS
16 43.2 (3.2) 40.0
------------ ------------ -------
FRS 16 (0.2) - (0.2)
------------ ------------ -------
Profit after tax 43.0 (3.2) 39.8
------------ ------------ -------
EPS pre IFRS 16 11.1 (0.8) 10.3
------------ ------------ -------
IFRS 16 (0.1) - (0.1)
------------ ------------ -------
EPS 11.0 (0.8) 10.2
------------ ------------ -------
Note 1 outlines in further detail the approach taken and
associated impact to the Group.
IFRS 3 amortisation of acquired intangibles
As a result of this a change in reporting to Separately
Disclosed Items, GBP1.6m of amortisation relating to the acquired
intangible assets for YoBingo in the Digital segment has been
reclassified from underlying to separately disclosed for the 6
months to 31 December 2018.
The following table shows the impact to the comparative period
following the reclassification.
H1 2018/19 Underlying Separately Total
GBPm Disclosed
items
Reported operating profit 30.3 (4.5) 25.8
------------ ------------ -------
Reclassification of IFRS 3 1.6 (1.6) -
------------ ------------ -------
Restated operating profit 31.9 (6.1) 25.8
------------ ------------ -------
Going concern
In adopting the going concern basis for preparing the financial
information the directors have considered the issues impacting the
Group during the period as detailed in the financial review and
have reviewed the Group's projected compliance with its banking
covenants. Based on the Group's cash flow forecasts and operating
budgets the directors believe that the Group will generate
sufficient cash to meet its borrowing requirements for at least 12
months from the approval of this report and comply with all of its
banking covenants.
Principal risk and uncertainties
The Group's enterprise risk strategy focuses on the minimisation
of the risks for the Group. Key risks are periodically reviewed by
the risk committee, executive and the board, where appropriate,
actions are taken to mitigate these.
The principal risks and uncertainties faced by the Group remain
those set out in the Group's annual report and financial statements
for the year ended 30 June 2019 and include:
* Laws and regulations;
* Taxation;
* Changing customer needs (venues);
* Stride integration, transformation and technology
projects and programmes;
* Business continuity planning and disaster recovery;
* Data management;
* Cyber security and operational resilience; and
* Third party supply chain.
Greater detail on these risks and uncertainties are set out in
pages 50 and 51 of the Group's 2019 annual report and financial
statements.
Directors' Responsibility Statement
Each of the directors named below confirm that to the best of
his or her knowledge:
* The financial statements, prepared under
International Financial Reporting Standard (IFRS) as
adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position
and profit of the Company and the undertakings
included in the consolidation taken as a whole; and
* The management report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with
a description of the risk and uncertainties that they
face.
The directors of The Rank Group Plc are:
Chris Bell
Steven Esom
Bill Floydd
Susan Hooper
John O'Reilly
Tang Hong Cheong
Alex Thursby
Karen Whitworth
Signed on behalf of the board on 29 January 2020
John O'Reilly Bill Floydd
Chief Executive Chief Financial Officer
INDEPENT REVIEW REPORT TO THE RANK GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2019 which comprises the Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Statement of Changes in Equity, Consolidated Balance
Sheet, Consolidated Cash Flow Statement and the related explanatory
notes that have been reviewed. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2019. is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London, United Kingdom
29 January 2020
Consolidated Income Statement
for the six months ended 31 December 2019
Six months ended 31 December Six months ended 31
2019 December 2018
(unaudited) (unaudited)
------ ------------------------------------- --------------------------------------------
Separately Separately
disclosed disclosed
items items
(note (note
Underlying 3) Total Underlying 3) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Continuing
operations
Revenue 2 397.4 - 397.4 348.2 - 348.2
Cost of sales (210.4) - (210.4) (192.3) - (192.3)
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Gross profit 187.0 - 187.0 155.9 - 155.9
Other operating
costs (127.2) (3.7) (130.9) (124.0) (6.1) (130.1)
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Operating profit
(loss) 2 59.8 (3.7) 56.1 31.9 (6.1) 25.8
Financing:
- finance costs (6.9) - (6.9) (1.2) (1.4) (2.6)
- finance income 0.3 - 0.3 - - -
- other financial
(losses) gains (0.3) 0.1 (0.2) (0.2) (0.2) (0.4)
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Total net
financing
charge 4 (6.9) 0.1 (6.8) (1.4) (1.6) (3.0)
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Profit (loss)
before
taxation 52.9 (3.6) 49.3 30.5 (7.7) 22.8
Taxation 5 (9.9) 0.4 (9.5) (5.7) 1.6 (4.1)
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Profit (loss) for
the period 43.0 (3.2) 39.8 24.8 (6.1) 18.7
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Attributable to:
Equity holders of
the parent 43.1 (3.2) 39.9 24.8 (6.1) 18.7
Non-controlling
interest (0.1) - (0.1) - - -
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
43.0 (3.2) 39.8 24.8 (6.1) 18.7
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Earnings (loss) per share attributable
to equity shareholders
- basic 11.0 (0.8) 10.2 6.4 (1.6) 4.8
- diluted 11.0 (0.8) 10.2 6.4 (1.6) 4.8
------------------- ------ ------------ ------------ --------- ------------------- ------------ ---------
Consolidated Statement of Comprehensive Income
for the six months ended 31 December 2019
Six months
Six months ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
--------------------------------- ------------------ --------------
Comprehensive income:
Profit for the period 39.8 18.7
Other comprehensive income:
Items that may be reclassified
to profit or loss:
Exchange adjustments net of
tax (3.8) 1.2
---------------------------------
Total comprehensive income for
the period 36.0 19.9
--------------------------------- ------------------ --------------
Attributable to:
Equity holders of the parent 36.1 19.9
Non-controlling interest (0.1) -
--------------------------------- ------------------ --------------
Consolidated Balance Sheet
at 31 December 2019 and 30 June 2019
As at As at
31 December 30 June
2019 2019
(unaudited) (audited)
Note GBPm GBPm
------------------------------------------------ -------- ----------------- -----------
Assets
Non-current assets
Intangible assets 532.7 447.8
Property, plant and equipment 153.3 161.5
Right-of-use assets 174.8 -
Other investment 3.5 3.5
Deferred tax assets 0.1 0.1
Other receivables 7.8 4.1
------------------------------------------------ -------- ----------------- -----------
872.2 617.0
Current assets
Inventories 2.8 2.7
Other receivables 24.2 27.2
Income tax receivable - 0.6
Cash and short-term deposits 116.4 61.8
------------------------------------------------ -------- ----------------- -----------
143.4 92.3
Total assets 1,015.6 709.3
------------------------------------------------ -------- ----------------- -----------
Liabilities
Current liabilities
Trade and other payables (147.4) (145.2)
Lease liabilities (39.0) -
Income tax payable (7.0) (7.2)
Financial liabilities - loans
and borrowings (41.0) (54.7)
Provisions 8 (10.6) (14.9)
------------------------------------------------ -------- ----------------- -----------
(245.0) (222.0)
Net current liabilities (101.6) (129.7)
------------------------------------------------ -------- ----------------- -----------
Non-current liabilities
Trade and other payables - (26.0)
Lease liabilities (208.8) -
Financial liabilities - loans
and borrowings (126.2) (5.3)
Deferred tax liabilities (19.6) (22.1)
Provisions 8 (5.8) (31.9)
Retirement benefit obligations (3.9) (4.0)
------------------------------------------------ -------- ----------------- -----------
(364.3) (89.3)
Total liabilities (609.3) (311.3)
------------------------------------------------ -------- ----------------- -----------
Net assets 406.3 398.0
------------------------------------------------ -------- ----------------- -----------
Capital and reserves attributable to the Company's equity shareholders
Share capital 54.2 54.2
Share premium 98.4 98.4
Capital redemption reserve 33.4 33.4
Exchange translation reserve 13.9 17.7
Retained earnings 206.3 194.3
------------------------------------------------ -------- ----------------- -----------
Total equity before non-controlling
interest 406.2 398.0
Non-controlling interest 0.1 -
------------------------------------------------ -------- ----------------- -----------
Total equity 406.3 398.0
------------------------------------------------ -------- ----------------- -----------
Consolidated Statement of Changes in Equity
for the six months ended 31 December 2019
For the six months ended 31 December 2019 (unaudited)
----------------------------------------------------------------------------- ------------- --------
Reserves
attributable
to the
Capital Exchange Company's Non-
Share Share redemption translation Retained equity controlling Total
capital premium reserve reserve earnings shareholders interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
At 1 July 2019 54.2 98.4 33.4 17.7 194.3 398.0 - 398.0
Effect of
adoption
of IFRS 16 - - - - (7.5) (7.5) - (7.5)
At 1 July 2019
-
Adjusted 54.2 98.4 33.4 17.7 186.8 390.5 - 390.5
Comprehensive
income:
Profit for the
period - - - - 39.9 39.9 (0.1) 39.8
Business
acquired - - - - - - 0.2 0.2
Other
comprehensive
income:
Exchange
adjustments
net of tax - - - (3.8) - (3.8) - (3.8)
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
Total
comprehensive
income for
the period - - - (3.8) 39.9 36.1 0.1 36.2
Transactions
with
owners:
Dividends paid
to
equity
holders (note
6) - - - - (21.5) (21.5) - (21.5)
Credit in
respect
of employee
share
schemes
including
tax - - - - 1.1 1.1 - 1.1
At 31 December
2019 54.2 98.4 33.4 13.9 206.3 406.2 0.1 406.3
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
For the six months ended 31 December 2018 (unaudited)
----------------------------------------------------------------------------- ------------- --------
Reserves
attributable
to the
Capital Exchange Company's Non-
Share Share redemption translation Retained equity controlling Total
capital premium reserve reserve earnings shareholders interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
At 1 July 2018 54.2 98.4 33.4 16.6 193.9 396.5 - 396.5
Comprehensive
income:
Profit for the
period - - - - 18.7 18.7 - 18.7
Other
comprehensive
income:
Exchange
adjustments
net of tax - - - 1.2 - 1.2 - 1.2
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
Total
comprehensive
income for
the period - - - 1.2 18.7 19.9 - 19.9
Transactions
with
owners:
Dividends paid
to
equity
holders (note
6) - - - - (20.7) (20.7) - (20.7)
At 31 December
2018 54.2 98.4 33.4 17.8 191.9 395.7 - 395.7
---------------- --------- --------- ------------ ------------- ---------- -------------- ------------- --------
Consolidated Cash Flow Statement
for the six months ended 31 December 2019
Six months Six months
ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
Note GBPm GBPm
-------------------------------------------------- ------ -------------- --------------
Cash flows from operating activities
Cash generated from continuing operations 10 109.3 56.0
Interest received 0.4 -
Interest paid (6.7) (0.7)
Tax paid (10.0) (4.4)
Net cash from operating activities 93.0 50.9
-------------------------------------------------- ------ -------------- --------------
Cash flows from investing activities
Purchase of intangible assets (6.4) (3.4)
Purchase of property, plant and equipment (17.0) (10.7)
Purchase of subsidiaries (net of cash acquired) 13 (85.5) -
Net cash used in investing activities (108.9) (14.1)
-------------------------------------------------- ------ -------------- --------------
Cash flows from financing activities
Dividends paid to equity holders (21.5) (20.7)
Drawdown of revolving credit facilities - 31.0
Repayment of term loans (12.0) (30.0)
Repayment of acquired loans (2.5) -
Drawdown of term loans 128.1 -
Loan arrangement fees (2.0) -
Lease principal payments (18.9) (0.7)
Net cash used in financing activities 71.2 (20.4)
-------------------------------------------------- ------ -------------- --------------
Net increase in cash, cash equivalents and
bank overdrafts 55.3 16.4
Effect of exchange rate changes (0.6) 0.1
Cash and cash equivalents at start of period 58.7 47.7
-------------------------------------------------- ------ -------------- --------------
Cash and cash equivalents at end of period* 113.4 64.2
-------------------------------------------------- ------ -------------- --------------
*Cash and cash equivalents at the end of the period includes an overdraft
of GBP3.0m (period ended 31 December 2018 : GBP5.8m)
1 General information, basis of preparation and accounting
policies
The Company is a public limited company which is listed on the
London Stock Exchange and incorporated and domiciled in England and
Wales under registration number 03140769. The address of its
registered office is TOR, Saint-Cloud Way, Maidenhead, SL6 8BN.
This condensed consolidated interim financial information was
approved for issue on 29 January 2020.
This condensed consolidated financial information does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the 12 month period
ended 30 June 2019 were approved by the board of directors on 21
August 2019 and delivered to the Registrar of Companies. The report
of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain a statement
made under Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has
been reviewed but not audited.
Basis of preparation
This condensed consolidated interim financial information for
the six months ended 31 December 2019 has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS34 'Interim financial
reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in
conjunction with the financial statements for the 12 month period
ended 30 June 2019, which have been prepared in accordance with
IFRSs as adopted by the European Union.
Going concern
In adopting the going concern basis for preparing the financial
information the directors have considered the issues impacting the
Group during the period as detailed in the business review above
and have reviewed the Group's projected compliance with its banking
covenants. Based on the Group's cash flow forecasts and operating
budgets, and assuming that trading does not deteriorate
considerably from current levels, the directors believe that the
Group will generate sufficient cash to meet its requirements for at
least 12 months from the date of approval of the interim financial
information and will comply with all of its banking covenants.
Accordingly, the adoption of the going concern basis remains
appropriate.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Board of Directors, as the chief
operating decision-makers, to enable them to make strategic and
operational decisions.
The Group reports five segments: Digital, Grosvenor Venues,
Mecca Venues, International Venues and Central Costs. The Group's
acquisition of Stride is included within the Digital segment.
Accounting policies
Standards, amendments to and interpretations of existing
standards adopted by the Group
The accounting policies and methods of computation adopted in
the condensed consolidated half-yearly financial information are
consistent with those followed in the Group's financial statements
for the year ended 30 June 2019, except for the adoption of new
standards effective as of 1 July 2019. The Group applies, for the
first time, IFRS 16 - Leases.
IFRS 16 - Leases
The Group has adopted IFRS 16 using the modified retrospective
method. Consequently, IFRS 16 is adopted from 1 July 2019 but has
not restated comparatives for the 6 months ended 31 December 2018
nor the year ended 30 June 2019, as permitted under the specific
transitional provisions in the standard. The reclassifications and
the adjustments arising from the new leasing standard are therefore
recognised in the opening balance sheet on 1 July 2019.
Transitional and current year impact
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as at 1 July 2019. The weighted average lessee's incremental
borrowing rate applied to the lease liabilities on 1 July 2019 was
3.52%.
1 General information, basis of preparation and accounting
policies (continued)
GBPm
----------------------------------------------------------------- --------
Operating lease commitments disclosed as at 30 June 2019 302.9
Impact of discounting using the lessee's incremental borrowing
rate at the date of initial application (44.7)
----------------------------------------------------------------- --------
Subtotal 258.2
Finance lease liabilities already recognised as at 30 June
2019 6.0
----------------------------------------------------------------- --------
Lease liability recognised as at 1 July 2019 264.2
----------------------------------------------------------------- --------
Current lease liabilities 39.5
Non-current lease liabilities 224.7
----------------------------------------------------------------- --------
Lease liability recognised as at 1 July 2019 264.2
----------------------------------------------------------------- --------
The associated right-of-use assets were measured on a lease by
lease basis where either the retrospective measurement basis is
applied as if the new standard had always been applied or
right-of-use assets were measured at the amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the balance sheet as
at 30 June 2019.
The Group did not change the initial carrying amounts of the
recognised assets and liabilities at the date of the initial
application for leases previously classified as finance leases
(i.e. the right of use assets and lease liabilities equal the lease
assets and liabilities recognised under IAS 17). The requirements
of IFRS 16 were applied to these leases from 1 July 2019
onwards.
The recognised right-of-use assets relate to property leases and
machinery and amount to GBP186.9m and GBP174.8m for the periods 30
June 2019 and 31 December 2019 respectively. The change in
accounting policy affected the following items in the balance sheet
on 1 July 2019:
-- Lease liabilities - increase by GBP264.2m
-- Right-of-use assets - increase by GBP186.9m
-- Deferred tax assets - increase by GBP1.4m
-- Net investment in finance leases - increase by GBP5.4m
-- Onerous lease provisions - decrease by GBP30.2m
-- Rent related balances held on balances sheet prior to transition - decrease by GBP29.1m
-- Retained earnings - decrease by GBP7.5m
The adjustment to release the onerous lease provision balance
previously held on the balance sheet prior to transition has
increased by GBP15m compared to the estimate reported in the annual
report for the year ended 30 June 2019 as management taken the
advantage of the practical expedient to include rates and other
committed costs in addition to rent obligations.
For the six months ended 31 December 2019 operating profit
increased by GBP3.8m, finance costs increased by GBP4.1m and
finance income increased by GBP0.1m. The net impact on profit
before tax was GBP0.2m. The amounts disclosed below for December
2019 are as a result of the change in accounting policy.
Operating Finance Finance
profit costs income
GBPm GBPm GBPm
----------------------- ----------- --------- ---------
Digital 0.1 (0.1) 0.1
Grosvenor Venues 2.2 (2.4) -
Mecca Venues 1.7 (1.3) -
International Venues 0.1 (0.1) -
Central Costs (0.3) (0.2) -
Total 3.8 (4.1) 0.1
----------------------- ----------- --------- ---------
Earnings per share was reduced by 0.1p for the six months to 31
December 2019 as a result of the adoption of IFRS 16.
Practical expedients applied as part of transitioning to IFRS
16
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
1 General information, basis of preparation and accounting
policies (continued)
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application;
-- the use of hindsight in determining the lease term where the
contract contains options to extend the lease; and
-- onerous lease provisions have been netted against the
right-of-use asset balances at the initial application date.
For leases where there were onerous lease provisions in excess
of right-of-use assets, the difference has been accounted for in
retained earnings as part of the effect of adoption of IFRS 16
leases.
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The Group's leasing activities and how these are accounted for
are as follows:
The Group leases various properties and equipment. Rental
contracts are made for various fixed periods ranging up to 94
years. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants, but leased assets may not
be used as security for borrowing purposes.
Until 30 June 2019 all leases were classified as either finance
or operating leases. Payments made under operating leases were
charged to the income statement on a straight-line basis over the
period of the lease.
From 1 July 2019, leases are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is charged
to the income statement over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated
over the shorter of the asset's useful life and the lease term on a
straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities, where
applicable, include the net present value of the following lease
payments:
-- fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets, where applicable, are measured at cost
comprising the following:
-- the amount of the initial measurement of lease liability;
-- any lease payments made at or before the commencement date
less any lease incentives received; and
-- any initial direct costs.
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in the income statement. Short-term leases are leases with
a lease term of 12 months or less.
In determining the lease term, management considers all facts
and circumstances that create an economic incentive to exercise an
extension option. Extension options are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated). The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this
assessment and that is within the control of the Group as a
lessee.
Separately disclosed items
The Group incurs costs and earns income that is non-recurring in
nature or that, in the Directors' judgement, need to be disclosed
separately by virtue of their size and incidence in order for users
of the consolidated financial statements to obtain a proper
understanding of the financial information and the underlying
performance of the business. These items include (but are not
limited to):
1 General information, basis of preparation and accounting
policies (continued)
-- Amortisation of acquired intangible assets;
-- Revaluation of investments;
-- Profit or loss on disposal of businesses;
-- Acquisition and disposal costs including changes to deferred or contingent consideration;
-- Impairment charges;
-- Reversal of impairment charges;
-- Restructuring costs as part of an announced programme;
-- Charges and credits for financing fair value remeasurements;
-- Discontinued operations;
-- Exceptional items (items that are considered to be large and
not incurred in the normal course of business); and
-- Tax impact of all the above.
Determining whether an item is part of specific adjusting items
requires judgement to determine the nature and the intention of the
transaction.
Results for the six months ended 31 December 2018 include the
reclassification of GBP1.6m of amortisation relating to the
acquisition of QSB Gaming Limited and its subsidiaries ('YoBingo')
from underlying to separately disclosed items within the Digital
segment. The EPS impact of this is to increase underlying EPS from
6.1p to 6.4p.
For a detailed explanation of the rationale for the change
please refer to the alternative performance measures section.
Others
There are no other new or amended standards or interpretations
that became effective in the period which have had a material
impact upon the values or disclosures in the interim financial
information.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
Following a review of the Group's Alternative Performance
Measures the Group no longer discloses revenue before adjustments
for customer incentives as this is not a key alternative
performance measure.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Estimates and judgements
In preparing these condensed financial statements, management
has made judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expense. Actual results may differ
from these estimates. The significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements as at and for the year ended 30
June 2019.
Non-Underlying
The Group incurs costs and earns income that is non-recurring in
nature or that, in the Directors' judgement, need to be disclosed
separately by virtue of their size and incidence in order for users
of the consolidated financial statements to obtain a proper
understanding of the financial information and the underlying
performance of the business. These items include (but are not
limited to):
-- The impairment of tangible, intangible assets or leases which
relate to the closure of part of a business;
-- Individual restructuring projects which are material or
relate to the closure of a part of the business and are not
expected to recur;
-- Gains or losses on disposal or acquisition of businesses;
-- Gains or losses arising on significant changes to or closures
of defined benefit pension plans.
Determining whether an item is part of specific adjusting items
requires judgement to determine the nature and the intention of the
transaction.
2 Segment information
Six months ended 31 December 2019 (unaudited)*
----------------------------------------------------------------------------------------
Grosvenor Mecca International Central
Digital Venues Venues Venues Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- -------------------- --------- -------
Segment
revenue*** 83.2 198.1 91.9 24.2 - 397.4
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Underlying
operating
profit (loss) 11.9 48.1 13.7 5.3 (19.2) 59.8
Separately
disclosed
items (3.8) - 1.8 - (1.7) (3.7)
------------------ ----------- ------------- -------------------- --------- -------
Segment result 8.1 48.1 15.5 5.3 (20.9) 56.1
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Finance costs (6.9)
Finance income 0.3
Other financial
losses (0.2)
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Profit before
taxation 49.3
Taxation (9.5)
Profit for the
period 39.8
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Six months ended 31 December 2018 (unaudited)**
----------------------------------------------------------------------------------------
Grosvenor Mecca International Central
Digital Venues Venues Venues Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- -------------------- --------- -------
Segment
revenue*** 57.3 172.1 96.2 22.6 - 348.2
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Underlying
operating
profit (loss) 12.6 19.4 11.4 4.1 (15.6) 31.9
Separately
disclosed
items (1.7) (2.0) (0.1) - (2.3) (6.1)
------------------ ----------- ------------- -------------------- --------- -------
Segment result 10.9 17.4 11.3 4.1 (17.9) 25.8
------------------- ------------------ ----------- ------------- -------------------- --------- -------
Finance costs (2.6)
Other financial
losses (0.4)
------------------- ------------------ ----------- ------------- --- -------------------------- -------
Profit before
taxation 22.8
Taxation (4.1)
Profit for the
period 18.7
------------------- ------------------ ----------- ------------- --- -------------------------- -------
* Results for the six months ended 31 December 2019 include the
acquisition of Stride Gaming plc ('Stride') from 4 October 2019
within the Digital segment.
** Results for the six months ended 31 December 2018 include the
reclassification of GBP1.6m of amortisation relating to the
acquisition of QSB Gaming Limited and its subsidiaries ('YoBingo')
from underlying to separately disclosed items within the Digital
segment.
*** The Group no longer discloses revenue before adjustment for
customer incentives in line with the changes documented in note
1.
2 Segment information (continued)
To increase transparency, the Group continues to include
additional disclosure analysing total costs by type and segment. A
reconciliation of total costs, before separately disclosed items,
by type and segment is as follows:
Six months ended 31 December 2019 (unaudited)*
------------- ------------------------------------------------------------
Grosvenor Mecca International Central
Digital Venues Venues Venues Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------- ------------ --------- --------------- --------- -------
Employment and related
costs 11.5 58.1 24.8 10.6 12.3 117.3
Taxes and duties 19.1 44.0 15.9 2.3 0.6 81.9
Direct costs 20.8 12.3 10.3 1.8 - 45.2
Property costs 0.4 5.7 3.8 0.7 0.5 11.1
Marketing 11.1 6.0 3.0 1.1 - 21.2
Depreciation and
amortisation 4.6 16.1 12.3 1.8 3.1 37.9
Other 3.7 7.8 8.3 0.6 2.6 23.0
Total costs before
separately disclosed
items 71.2 150.0 78.4 18.9 19.1 337.6
------------------------- ------------- ------------ --------- --------------- --------- -------
Cost of sales 210.4
Operating costs 127.2
Total costs before
separately disclosed
items 337.6
------------------------- ------------- ------------ --------- --------------- --------- -------
Six months ended 31 December 2018 (unaudited)**
---------------------------------------------------------------------------
Grosvenor Mecca International Central
Digital Venues Venues Venues Costs Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------- ------------ --------- --------------- --------- -------
Employment and related
costs 7.5 64.9 25.4 9.5 10.1 117.4
Taxes and duties 10.6 36.8 16.5 2.0 0.8 66.7
Direct costs 16.0 11.0 10.8 2.0 - 39.8
Property costs 0.3 14.8 13.8 1.1 0.8 30.8
Marketing 5.7 6.6 4.5 1.1 - 17.9
Depreciation and
amortisation 2.2 9.9 5.0 1.4 1.9 20.4
Other 2.4 8.7 8.8 1.4 2.0 23.3
Total costs before
separately disclosed
items 44.7 152.7 84.8 18.5 15.6 316.3
------------------------- ------------- ------------ --------- --------------- --------- -------
Cost of sales 192.3
Operating costs 124.0
Total costs before
separately disclosed
items 316.3
------------------------- ------------- ----------------------- --------------- --------- -------
* Results for the six months ended 31 December 2019 include the
acquisition of Stride Gaming plc ('Stride') from 4 October 2019
within the Digital segment.
** Results for the six months ended 31 December 2018 include the
reclassification of GBP1.6m of amortisation relating to the
acquisition of QSB Gaming Limited and its subsidiaries ('YoBingo')
from underlying to separately disclosed items within the Digital
segment.
3 Separately Disclosed Items
Six months
Six months ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
-------------------------------------- ------------------ --------------
Separately disclosed items
Profit on disposal of venues 1.8 -
Amortisation of acquired intangible
assets (3.7) (1.6)
Acquisition related costs (1.8) -
Business transformation costs - (4.5)
-------------------------------------- ------------------ --------------
Impact on operating profit (3.7) (6.1)
Finance costs - (1.4)
Other financial gains (losses) 0.1 (0.2)
Taxation 0.4 1.6
Total separately disclosed items (3.2) (6.1)
-------------------------------------- ------------------ --------------
Profit on disposal of venues
The Group recognised a net credit of GBP1.8m as a result of the
sale of 5 clubs from Mecca Venues.
Amortisation of acquired intangible assets
The Group recognised a net amortisation charge of GBP3.7m on the
acquisition of acquired intangible assets. These relate to Stride
Gaming plc ('Stride') GBP2.1m (18/19: GBPnil) and QSB Gaming
limited ('YoBingo') GBP1.6m (18/19: GBP1.6m).
Acquisition related costs
Acquisition related costs of GBP1.8m include one-off costs to
professional service firms that have resulted from the acquisition
of Stride on 4 October 2019.
Business transformation costs
Transformation costs of GBP4.5m in the prior year include
one-off costs associated with restructuring the business which
primarily consist of severance costs.
Finance costs and other financial losses
Finance costs relate to non-cash interest from unwinding a
discount applied to contingent and deferred consideration payable.
Other financial losses include foreign exchange losses on the same
consideration. Contingent and deferred consideration is payable due
to the acquisition of QSB Gaming Limited ('YoBingo').
4 Financing
Six months
Six months ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
----------------------------------------------- ------------------ ---------------------------------
Finance costs:
Interest on debt and borrowings (1.6) (0.7)
Amortisation of issue costs on borrowings (1.0) (0.1)
Interest payable on leases (4.3) (0.2)
Unwinding of the discount in property
lease provisions - (0.2)
----------------------------------------------- ------------------ ---------------------------------
Total finance costs (6.9) (1.2)
Finance income:
Interest income on net investments
in leases 0.1 -
Interest income on short-term bank
deposits 0.2 -
----------------------------------------------- ------------------ ---------------------------------
Finance income 0.3 -
Other financial losses (0.3) (0.2)
Total net financing charge before separately
disclosed items (6.9) (1.4)
----------------------------------------------- ------------------ ---------------------------------
Separately disclosed items - finance
costs - (1.4)
Separately disclosed items - other
financial gains (losses) 0.1 (0.2)
Total net financing charge (6.8) (3.0)
----------------------------------------------- ------------------ ---------------------------------
5 Taxation
Income tax is recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full
financial period.
Six months
Six months ended ended
31 December
31 December 2019 2018
(unaudited) (unaudited)
GBPm GBPm
--------------------------------------------- ---------------------- ----------------
Current income tax
Current income tax - UK (8.7) (3.9)
Current income tax - overseas (1.9) (2.8)
--------------------------------------------- ---------------------- ----------------
Current income tax charge (10.6) (6.7)
Current income tax on separately disclosed
items 0.1 1.0
Amounts over provided in previous
periods 0.2 0.8
Total current income tax charge (10.3) (4.9)
--------------------------------------------- ---------------------- ----------------
Deferred tax
Deferred tax - UK 0.5 -
Deferred tax - overseas - 0.2
Deferred tax on separately disclosed
items 0.3 0.6
Total deferred tax credit 0.8 0.8
--------------------------------------------- ---------------------- ----------------
Tax charge in the income statement (9.5) (4.1)
--------------------------------------------- ---------------------- ----------------
Tax effect of items within other comprehensive income
Six months Six months
ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------ -------------- --------------
Current tax charge on exchange movements
offset in reserves (0.3) -
Total tax charge on items within other
comprehensive income (0.3) -
------------------------------------------ -------------- --------------
The credit in respect of employee share schemes included within
the Statement of Changes in Equity includes a deferred tax credit
of GBP0.1m (six months ended 31 December 2018: GBPnil).
Factors affecting future taxation
UK corporation tax is calculated at 18.50% (six months ended 31
December 2018: 19.00%) of the estimated assessable profit for the
period. Taxation for overseas operations is calculated at the local
prevailing rates.
On 8 July 2015, the Chancellor of the Exchequer announced the
reduction in the main rate of UK corporation tax to 19.00% for the
year starting 1 April 2017 and a further 1.00% reduction to 18.00%
from 1 April 2020. These changes were substantively enacted in
October 2015.
On 16 March 2016, the Chancellor of the Exchequer announced a
further 1.00% reduction to the previously announced 18.00% main
rate of UK corporation tax to 17.00% from 1 April 2020. This change
was substantively enacted in September 2016.
On 26 July 2017, the Belgian Government announced the reduction
in the corporation tax rate in Belgium from 33.99% to 29.58% for
financial years beginning in 2018 and to 25.00% for financial years
beginning in 2020 and onwards. These changes were substantively
enacted in December 2017.
The rate reductions will reduce the amount of cash tax payments
to be made by the Group.
5 Taxation (continued)
A reconciliation of tax on continuing operations to tax included
in adjusted profit is described below:
Six months
Six months ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------- ------------------ --------------
Tax charge (9.5) (4.1)
Adjusted for:
Tax on separately disclosed items (0.4) (1.6)
------------------------------------------- ------------------ --------------
Tax charge included in underlying profit (9.9) (5.7)
------------------------------------------- ------------------ --------------
6 Dividends
Six months Six months
ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------- -------------- --------------
Dividends paid to equity holders
Final dividend for 2018/19 paid on 29
October 2019 - 5.50p per share 21.5 -
Final dividend for 2017/18 paid on 30
October 2018 - 5.30p per share - 20.7
Total 21.5 20.7
---------------------------------------- -------------- --------------
The Board has declared an interim dividend of 2.80p per ordinary
share. The dividend will be paid on 13 March 2020 to shareholders
on the register at 14 February 2020. The financial information does
not reflect this dividend.
7 Underlying earnings per share
Underlying earnings is calculated by adjusting profit
attributable to equity shareholders to exclude separately disclosed
items and related tax effects. Underlying earnings is one of the
business performance measures used internally by management to
manage the operations of the business. Management believes that the
underlying earnings measure assists in providing a view of the
underlying performance of the business.
Underlying net earnings attributable to equity shareholders is
derived as follows:
Six months ended
Six months ended 31 December
31 December 2019 2018
(unaudited) (unaudited)
GBPm GBPm
--------------------------------------------- ------------------- ------------------
Profit attributable to equity shareholders 39.9 18.7
Adjusted for:
Separately disclosed items after tax 3.2 6.1
Underlying net earnings attributable
to equity shareholders 43.1 24.8
Weighted average number of ordinary
shares in issue 390.7m 390.7m
Underlying earnings per share (p) -
basic 11.0p 6.4p
Underlying earnings per share (p) -
diluted 11.0p 6.4p
--------------------------------------------- ------------------- ------------------
8 Provisions
Property Indirect
lease Disposal Restructuring tax Pay
provisions provisions provisions provisions provisions Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- -------- ------------ --------------- ------------ ------------ --------
At 1 July 2019 33.5 3.9 0.2 1.2 8.0 46.8
Effect of adoption of IFRS
16 (30.2) - - - - (30.2)
Utilised in period - - (0.1) - (0.1) (0.2)
------------ --------
At 31 December 2019 (unaudited) 3.3 3.9 0.1 1.2 7.9 16.4
----------------------------------- -------- ------------ --------------- ------------ ------------ --------
Current 1.2 0.2 0.1 1.2 7.9 10.6
Non-current 2.1 3.7 - - - 5.8
----------------------------------- -------- ------------ --------------- ------------ ------------ --------
At 31 December 2019 (unaudited) 3.3 3.9 0.1 1.2 7.9 16.4
----------------------------------- -------- ------------ --------------- ------------ ------------ --------
9 Borrowings to net debt reconciliation
Accrued interest and unamortised facility fees are classified as
loans and borrowings. A reconciliation of loans and borrowings
disclosed in the balance sheet to the Group's net debt position is
provided below:
At
At 31 December
31 December 2019 2018
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------ ------------------- --------------
Total loans and borrowings (167.2) (62.3)
Adjusted for:
Accrued interest 0.2 0.1
Unamortised facility fees (2.1) (0.1)
------------------------------------------ ------------------- --------------
(169.1) (62.3)
Cash and short-term deposits 116.4 70.0
Net (debt) cash excluding IFRS 16 lease
liabilities (52.7) 7.7
------------------------------------------ ------------------- --------------
IFRS 16 lease liabilities (247.8) -
------------------------------------------ ------------------- --------------
Net (debt) cash (300.5) 7.7
------------------------------------------ ------------------- --------------
10 Cash generated from continuing operations
Six months
Six months ended ended
31 December 31 December
2019 2018
(unaudited) (unaudited)
GBPm GBPm
----------------------------------------------- ------------------ --------------
Operating profit 56.1 25.8
Separately disclosed items 3.7 6.1
----------------------------------------------- ------------------ --------------
Operating profit before separately disclosed
items 59.8 31.9
Depreciation and amortisation 37.9 20.4
Increase in inventories (0.1) (0.2)
Increase in other receivables (1.3) (5.3)
Increase in trade and other payables 11.8 13.3
Share-based payments 1.0 0.4
Settlement of share-based payments - (0.4)
Impairment of property, plant and equipment - 0.2
----------------------------------------------- ------------------ --------------
109.1 60.3
Cash utilisation of provisions (See
note 8) (0.2) (2.4)
Cash receipts (payments) in respect
of separately disclosed items 0.4 (1.9)
Cash generated from operations 109.3 56.0
----------------------------------------------- ------------------ --------------
11 Contingent liabilities
Property leases
Concurrent to the GBP211.0m sale and leaseback in 2006, the
Group transferred the rights and obligations but not the legal
titles of 44 property leases to a third party. The Group remains
potentially liable in the event of default by the third party.
Should default occur then the Group would have recourse to two
guarantors. It is understood that, of the original 44 leases
transferred, eight of these have not expired or been surrendered.
These eight leases have durations of between two months and 93
years and a current annual rental obligation (net of sub-let
income) of approximately GBP0.3m.
During 2014, the Group became aware of certain information in
respect of a change in the financial position of the third party
and one of the guarantors. However, the Group has not to date been
notified of any default, or intention to default, in respect of the
transferred leases.
12 Related party and ultimate parent undertaking
Guoco Group Limited (Guoco), a company incorporated in Bermuda,
and listed on the Hong Kong stock exchange has a controlling
interest in The Rank Group Plc. The ultimate parent undertaking of
Guoco is Hong Leong Company (Malaysia) Berhad (Hong Leong) which is
incorporated in Malaysia. At 31 December 2019, entities controlled
by Hong Leong owned 56.2% of the Company's shares, including 52.0%
through Guoco and its wholly-owned subsidiary, Rank Assets Limited,
the Company's immediate parent undertaking.
13 Acquisition of subsidiary
On 4 October 2019, the Group acquired 100% of the issued share
capital of Stride Gaming plc ('Stride') for a total cash
consideration of GBP116.0m which included GBP1.5m in respect of
employee benefit schemes. There was no deferred or contingent
consideration.
Stride is an established scale player in the highly regulated UK
soft gaming market and provides B2C services through a portfolio of
150 online brands, 14 of which are operated on Stride's proprietary
platform and also B2B services licensing its proprietary platform.
The acquisition of Stride will accelerate the transformation of
Rank and create one of the UK's leading online gaming
businesses.
The provisional fair value of the assets acquired and
liabilities assumed, goodwill and consideration are outlined below.
The amounts disclosed are provisional and the accounting will be
completed within the 12-month measurement period permitted by IFRS
3 'Business Combinations'.
GBPm
---------------------------------------- --------
Intangible assets 41.1
Other non-current assets 3.7
Trade and other receivables 5.4
Cash and short-term deposits 30.5
Trade and other payables (14.2)
Loans and borrowings (2.5)
Deferred tax liability (0.1)
----------------------------------------- --------
Net assets acquired 63.9
Non-controlling interest (0.2)
Goodwill 52.3
----------------------------------------- --------
Total consideration 116.0
----------------------------------------- --------
The fair value of each component of
consideration is analysed as: GBPm
Total consideration - cash 116.0
----------------------------------------- --------
13 Acquisition of subsidiary (continued)
The identified intangible assets recognised separately from
goodwill are as follows:
GBPm
-------------------------- ------
Customer relationships 6.2
Brand 3.7
Technology 29.8
Software and licenses 1.4
-------------------------- ------
Total intangible assets 41.1
-------------------------- ------
The fair value of trade and other receivables and trade and
other payables correspond to the book value at which all
receivables are expected to be received. The goodwill consists of
future revenue opportunities and the assembled workforce including
marketing and technological expertise. No amount of the goodwill
recognised is expected to be deductible for tax purposes. The
goodwill of GBP52.3m arises from expected entity specific
synergies. Acquisition related costs of GBP1.8m have been
recognised as a separately disclosed item in the Group income
statement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BLMTTMTBTTRM
(END) Dow Jones Newswires
January 30, 2020 02:01 ET (07:01 GMT)
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