Rank CEO unveils transformation plans as profits tank

Annual profits at Rank Group fell more than 40% as a challenging year for Grosvenor Casinos offset better balls for the Mecca bingo business.

Revenues were relatively steady at £691m, down 2.3% in the year to 30 June, but operating profits plunged 40.7% to £50.1m and profit before tax plunged 41.4% to £46.7m. The FTSE 250 group had warned in April operating profits dropping 2.5% to £76m

Earnings per share crashed 42.9% to 9.2p after exceptional items yet the board still nudged the dividend per share up 2.1% to 7.45p as cash generation remained solid at £102.4m, though down 12% on the prior year.

Revenue for Grosvenor declined by 6.1% with an accelerated fall in the second half, with operating profit down 6.7%.

Mecca turnover fell 2.6% in the year as customer visits dropped 7.9% decline in customer visits. Operating profit fell by 4.3% to £28.6m, which was not as bad as management feared thanks to improved cost control.

The UK digital business grew with revenue up 9.9% but profit down 8% to £20.9m. Spanish operations, Enracha, delivered a strong performance with euro revenue up 11% and euro operating profit up 2.8% to £6.5m.

Chief executive John O'Reilly, the former Ladbrokes digital boss who started in May after a profit warning in April, said he joined Rank "because of its underlying potential".

While the completed year was "disappointing", he said "we are now moving quickly to identify the key priorities which will begin to realise the significant underlying potential that I have now seen first-hand".

He added: "We are taking steps to increase our focus on the customer, to accelerate growth in the digital business, to drive cost efficiencies across the business and to strengthen our organisational capabilities. This will be delivered within a transformational programme framework, which will ensure that we deliver a growing Rank Group that is fit for the future."

O'Reilly's transformation programme will be "all pervasive", making operational improvements across the group, to drive an increased focus on four key areas: increased focus on the customer, growth the digital business, drive cost efficiencies and drive general organisational improvements. A new management structure includes a single retail team, a new chief transformation officer joining in October from McKinsey and a new chief information officer joining after completing a transformation project at Travelodge.

Trading in the short six-week period to 12 August 2018 has been "challenging", with hot weather said to have adversely impacted UK retail businesses.

"Despite this, group financial performance for 2018/19 is expected to be in line with the current consensus expectations."

Mecca's new bingo concepts, Big Bingo Bash, Bonkers Bingo, Student events, Initial Newbie nights and other broader entertainment events, continued to be tested with "good results", helping drive visits as well as contributing incremental revenue and profit. A secure and strong revenue stream is expected from May's acquisition of Spain's YoBingo.es digital bingo business for up to a maximum consideration of €52.0m, with performance ahead of expectations so far.