Final Results

News release

LEI: 213800TXKD6XZWOFTE12

15 August 2024

The Rank Group Plc ('Rank' or the 'Group')

Preliminary results for the 12 months ended 30 June 2024

Delivering against the strategic plan with growth across all businesses

Rank (LSE: RNK) is pleased to announce its preliminary results for the 12 months ended 30 June 2024.

Overview

Financial highlights

1.        On a like-for-like ('LFL') basis which removes the impact of club openings, closures, foreign exchange movements and discontinued operations.

2.        Excludes separately disclosed items.

3.        Restated, refer to CFO review for further details.

Operational highlights

Current trading and outlook

We have made a good start to the new financial year. We exited 2023/24 with good momentum which has continued into 2024/25, with Group NGR up 10% for the first 6 weeks against a strong comparative.

Dividend

The continuing recovery in profitability combined with the Group's balance sheet strength gives the Board the confidence to propose a resumption of ordinary dividend payments.  The Board is recommending a final dividend of 0.85p as a full year dividend. 

The Group is also intending to declare an 2024/25 interim dividend alongside its half year results in January 2025.

John O'Reilly, Chief Executive of The Rank Group Plc said:

"This has been a year of strong financial, operational and strategic progress for Rank. We are continuing to rebuild profitability following the impact of lockdowns and the material inflationary pressures experienced in recent years. Trading continues to improve due to ongoing investment in our people, our products and the facilities within our venues businesses, and the continued development of the proprietary technology which is driving the growth of our digital business.

With some important developments within our proprietary technology now in place, we are increasingly delivering a seamless and tailored cross-channel experience for our customers, leveraging our key area of competitive advantage.

We are well-positioned to take advantage of the much needed land-based reforms which will help to further modernise our casino and bingo propositions to better meet the expectations of today's customers and we look forward to the Government confirming the timetable for the required secondary legislation.  

We have started the new financial year as we finished the previous one, with good momentum across all businesses. With inflation receding, disposable incomes improving, investment continuing to be made in the customer proposition and a strong pipeline of growth initiatives underway, we are confident in the future prospects of the Group.

It would not be possible to deliver this improved performance without our excellent colleagues who continue to excite, entertain and protect their customers, support their local communities and contribute fully to the progress we are continuing to make."

Definition of terms:

Photographs available from www.rank.com

Analyst meeting and webcast details:

Thursday 15 August 2024

There will be an analyst meeting at 9.30am, 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 or on https://brrmedia.news/RNK_PR24 . 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.

Business review

The year to 30 June 2024 saw continued improvement in trading conditions and in the financial performance of the Group. All businesses have delivered good levels of NGR growth and strong increases in profitability.

At a Group level, underlying like-for-like ('LFL') Net Gaming Revenue ('NGR') of £734.4m grew by 9% against the prior year. Grosvenor venues grew NGR by 9%, Mecca grew by 8% and Enracha grew by 7%. The digital business saw NGR growth of 12%, with the UK growing by 11% and Spain growing by 16%.

With NGR increasing across the Group, underlying LFL operating profit more than doubled from £20.1m in 2022/23 to £46.5m in 2023/24.

1.         Results are presented on a like-for-like ('LFL') basis which removes the impact of club closures and foreign exchange movements.

2.         A full analysis of these adjustments can be found in the Alternative Performance Measures ('APM') section.

3.         Before the impact of separately disclosed items.

4.         Restated, refer to CFO review for further details.

Digital cross-channel customer revenues continue to grow faster than overall Group revenues, up 16% in the year. The key enabler is the Group's proprietary technology platform, which has seen several critical enhancements successfully delivered this year. These include a single content management system across all of our UK digital brands and a much improved app for the Grosvenor brand which has been developed in-house for the first time.  We successfully transferred the UK's digital platform to the cloud to enhance security, scalability and cost efficiency and completed the single customer engagement platform serving each of our UK businesses. There are many technology developments in the roadmap over the coming years to deliver a full cross-channel seamless experience for our customers and to maximise this area of significant competitive advantage. The next steps include the delivery of a single cross-channel membership for Mecca customers in 2024/25 and the development of several cross-channel products and services for both the Grosvenor and Mecca brands.

At a Group level, the focus remains on driving cost efficiencies and ensuring we operate within an appropriately tight control framework. Good progress is being made in enhancing controls and adding automation within both the finance and people and culture support functions. To ensure data is protected and development opportunities are prioritised appropriately, the Group has implemented a governance framework for Artificial Intelligence ('AI').

We retain a single programme management framework across the Group to evaluate, prioritise, resource and continuously monitor the key strategic initiatives, which ensure we continue to meet the needs of our customers, while driving growth in revenues and delivering cost efficiencies.

Grosvenor venues

Key performance indicators:

1.         Results are presented on a like for like ('LFL') basis which removes the impact of club closures.

2.         Before the impact of separately disclosed items.

The Grosvenor management team was strengthened early in the year with the appointment of Mark Harper as Managing Director and Samantha Collins as National Operations Director. We continued to invest in people in the year, ensuring we have the right people in the right roles to deliver quality customer experience and operational execution. Customer Net Promoter Scores ('NPS') climbed steadily throughout the year to reach 68 (30 June 2023: 64), whilst colleague engagement scores have reached a new high of 79% (30 June 2023: 70%).

Grosvenor venues LFL underlying NGR was £331.3m, a growth of 9% over the prior year. This is an acceleration on the 3% growth delivered in 2022/23 as the business continues to recover from the impact of lockdowns, the slow return of international customers, particularly to London's casinos, and the tightening of affordability restrictions in recent years.

Average weekly NGR, which was £7.5m in the eight months prior to lockdown in 2019/20, grew from £5.9m in 2022/23 to £6.3m, highlighting the further opportunity to grow revenues, even before the much needed and anticipated legislative reforms.  Active LFL customers in the year grew 2%, reflecting the continued improvements being made in managing customer affordability risk through improvements in systems, processes and in the skills of our colleagues.

Grosvenor's London casino estate grew revenues by 10% with customer visits up 11%. The higher footfall casinos, lower stakes venues which attract tourists and London commuters performed strongly in the year. The higher-end venues, which have historically attracted high net worth international customers continued to perform softly relative to the pre-Brexit position.

The rest of the UK also saw performance continue to improve with NGR up 8% on customer visits up 9%.

With 4,200 colleagues across Grosvenor's 51 venues, employment was the major area of cost increase in the year. Employment costs increased by £17.6m with pay rises heavily focussed towards the lower paid colleagues.

Despite wage pressures, the improved revenue combined with the significant operating leverage within the Grosvenor business delivered a 42% growth in underlying LFL operating profit of £23.7m.

At a statutory level, operating profit improved from a loss of £35.4m in 2022/23 to a profit of £16.5m in 2023/24, including a net impairment charge of £5.9m, principally driven by the underperformance against expectations of one venue.

Grosvenor continues to see strong and consistent growth in all gaming products. Electronic roulette revenues grew 11% in the year, gaming machine revenues grew 9% and table gaming saw revenues grow 9%.

£6.4m was invested in new products during the year. Principally, this was in the form of replacing electronic roulette terminals, roulette wheels, gaming tables and supporting equipment. The business typically leases gaming machines or has contracts on a revenue share basis. In the year, Grosvenor introduced gaming machines from Aristocrat and Blueprint, as well as upgrading Novomatic and IGT machines across the estate. There is considerable opportunity, following the anticipated land-based legislative reforms, to broaden the range of gaming machine content across the Grosvenor estate to increase the excitement and entertainment for our customers.

In addition to product renewal, £7.6m was invested in the property facilities in the year. This included external signage and decoration works at the Northampton, Manchester (Bury New Road), Reading and Great Yarmouth casinos, plus smaller investments in a number of other Grosvenor venues. At the year end, Grosvenor Leicester was nearing completion of a full refurbishment, including the development of an extensive sports viewing facility, which will be converted to a sports betting arena once permitted.

Investment in heating, air conditioning, health and safety and other general infrastructure amounted to £5.0m in the year reflecting the continued catching up following a period of underinvestment during the Covid pandemic.

Grosvenor successfully completed the Gamcare Safer Gambling Standard assessment, being awarded the gold level accreditation.

Mecca venues

Key performance indicators:

1.        Results are presented on a like for like ('LFL') basis which removes the impact of club closures.

2.        Before the impact of separately disclosed items.

The Mecca business has undergone a considerable rationalisation of the estate following the impact of the pandemic on both customer numbers and visit frequency. In 2018/19, Mecca had 82 venues; we have ended 2023/24 with 52 venues. Four venues were closed in the year and, with one further closure anticipated in 2024/25, that will complete the rationalisation process other than in the context of specific property lease events which may arise over the coming years. The result of this rationalisation has been the creation of a stronger and more competitive estate with higher liquidity, namely higher visits and therefore more attractive prize boards.

Mecca grew LFL NGR by 8% in the year. LFL visits grew 2% and the average customer spend per visit grew 6%. LFL active customers grew by 1%.

Mecca continues to attract very large volumes of new customers with over 187,000 new memberships in the year. 44% of these new customers to Mecca are under 35 years of age, demonstrating the continued strong appeal of bingo when provided in a contemporary environment, with good value prices and attractive prize boards.

NGR from main stage bingo, the primary game played within Mecca's venues, grew 11% on the prior year with LFL revenues 11% ahead of pre-pandemic 2019 levels. Main stage bingo is the principal driver of customer visitation, and this growth underpins the longevity of the land-based bingo business.

Gaming machine revenues grew 9% and are 1% ahead of LFL revenues in pre-pandemic 2019 levels. The machine estate continued to be modernised during the year with a broader range of both suppliers and game content. Gaming machines account for 40% of Mecca's revenue and remain a significant growth opportunity, subject to the expected delivery of the land-based legislative reforms, which will enable up to 50% of machines to be category B3 machines, by far the most popular machines with bingo customers.

The interval bingo game grew LFL revenue 7% in the year, with food and beverage sales growing 6%.

With a more vibrant Mecca estate, the experience for our customers also improved, reflected in the customer NPS of +78. Significantly, Mecca's employee engagement level continues to grow, from 75% in 2022/23 to 83% in 2023/24.

Underlying LFL operating profit in the year was £3.9m, a strong recovery from the loss of £5.6m in the prior year. The key cost increase was employment costs which grew by 12% due to the continued investment in our colleagues, particularly those on lower hourly pay rates.

Statutory operating loss for the year was £1.7m following a net impairment charge of £5.3m. Whilst there are a large number of impairments and impairment reversals, driven by the sensitivity of changes to financial forecasts at a venue level, the net impairment charge is primarily driven by a small number of venues that have underperformed our expectations.

Capital investment in the year was £14.1m. £1.2m of this was regarding improvements to the branding and external appearance of six venues. At the year end, 15 out of the 52 Mecca venues have received investment in external signage and décor since 2022. £3.5m was invested in improving the gaming machine areas within 17 Mecca venues; 20 Mecca venues now have redesigned and refurbished gaming machine areas since the investment programme commenced. Both the investment in external signage and interior gaming machine areas are delivering strong returns and will continue into 2024/25. An additional £3.5m was spent in the year on refreshing new product across the remaining estate and a new reporting and monitoring system, Playsafe, which provides colleagues with greater visibility of customer's machine play was rolled out across the year.

Capital investment in infrastructure amounted to £4.0m and this was primarily centred on air conditioning systems, boilers, electrical works and other renewals.

Overall, 2023/24 was a positive year for the Mecca business, returning to profitability with a rationalised and revitalised estate, a strong management team, improving revenue growth and good momentum entering 2024/25.

Enracha venues

Key performance indicators:

1.        Results are presented on a like for like ('LFL') basis which removes the impact of foreign exchange movements.

2.        Before the impact of separately disclosed items.

The Enracha estate of nine bingo, sports betting and gaming machine venues in Spain, continues to perform very strongly. Underlying LFL NGR of £38.5m was 7% ahead of the prior year, with all venues delivering growth. Customer visits grew 6% in the year, as the business continues to attract high attendances for its attractive bingo prize boards. Customer NPS reached a record score of 56 in the year, demonstrating the attractiveness of the customer offering and the high levels of service provided by our Enracha team.

Bingo revenues continue to grow, up 7% on the prior year, and gaming machine revenues increased by 7%.

Underlying LFL operating profit hit a record £9.6m in the year, an increase of 7% on the prior year.

Statutory operating profit for the year was £13.1m following an impairment reversal of £3.6m relating to one venue.

A total £0.9m of capital was invested in a full refurbishment of Enracha Seville, which extends the gaming machine area and improves the overall customer facilities. The overall capital investment in the year was £2.3m and this included the completion of the refurbishment of Enracha Reus, the further roll out of the customer loyalty programme, a new CRM system, new gaming machine jackpot display screens and a new food and beverage EPOS system.

The Enracha business is in a strong position as it enters 2024/25.

Digital

Key financial performance indicators:

1.        Results are presented on a like for like ('LFL') basis which removes the impact of foreign exchange movements.

2.        Before the impact of separately disclosed items.

3.        Restated, refer to CFO review for further details.

Scaling Rank's digital business is a key strategic pillar for the Group and 2023/24 saw considerable progress being made. Underlying LFL NGR increased 12% on the prior year, in line with the 8% to 12% annual growth opportunity outlined in the November 2023 Capital Markets Event.

In the UK facing business, revenues grew 11% with very strong growth of 20% and 21% respectively in the Mecca and Grosvenor cross-channel brands. The other UK facing brands operating on the Group's proprietary technology platform were down 1%.

Driving the growth in customers and revenues in the UK has been the delivery of some key technology developments. In the second half of the year a new single content management system to service all the proprietary technology brands was successfully rolled out. In addition to providing operational efficiencies and speed to market of new front end developments, this also delivers faster webpage loads for customers.

A new in-house developed Grosvenor app was launched in Q4 and is already seeing strong take-up from customers and is driving higher deposits per player. The expectation is that a new in-house developed app for Mecca customers will launch in 2024/25.

Improved personalisation continues following the successful build of the central engagement platform. This centralised data platform is also serving to improve our customer risk management systems with a number of enhancements to Rank's proprietary 'Hawkeye' customer monitoring system introduced in the year.

The proprietary technology platform modernisation programme continues at pace with a number of key architectural changes and system enhancements completed during the year. The full modernisation programme is expected to complete during 2024/25.

In the multi-brand business (non-proprietary brands), which consists of over 80 brands operating on third party platforms and licences, NGR declined 21% in the year. The decision was made mid-way through the year to exit the multi-brand business, for which the process is well advanced, and the Group expects to complete the sale in the coming months.

Yo and Enracha Spanish digital brands delivered NGR growth of 16% over the prior year. In December 2023, the business was successfully relocated to Ceuta, halving the rate of gaming tax from 20% to 10% from the start of the second half.

In April 2024, 'Live Bingo', a streamed bingo service, was successfully introduced with a strong take up from the Yo Bingo community of customers.

The launch of the Yo brand in Portugal is now expected in 2024/25. This will be the first bingo brand to launch in the country and therefore the licensing process has been frustratingly complex and extended.

Passion Gaming, the online Indian rummy in which Rank held a 51% stake, was sold in June 2024 to its founders following significant changes to the tax regime for online games of skill, which saw NGR decline 39% year on year. For further detail refer to note 16.

Underlying operating profit in the digital business grew 79% in the year to £23.4m highlighting the strong operating leverage within the digital business as revenues grow.

Statutory operating profit for the year was £16.2m following £6.6m of amortisation of acquired intangible assets.

Capital investment in the year totalled £10.3m, principally centred on the ongoing developments within the proprietary technology platform.

With a strong pipeline of technology developments being released during 2024/25 another strong performance for the Group's digital business is anticipated, in line with the revenue opportunity presented at the recent Capital Markets Day.

Group liquidity

The Group ended the year with net cash pre IFRS 16 of £20.9m.

Working capital at the end of the year was an inflow of £27.0m, due to the Group's improved financial performance, which has resulted in a higher duty payable and the reinstatement of employee bonuses which are paid post year end.

In January 2024, the Group successfully secured a new £120m club facility, comprising a £30m Term Loan and a £90m Revolving Credit Facility ('RCF').  The Term Loan expires in October 2026 and the RCF in January 2027.  Both the Term Loan and RCF have market typical tenor extension options which are at the lender's discretion.

The new facility retains the two financial covenants which were applicable to its previous facilities, net debt to EBITDA not to exceed 3x and EBITDA to net interest payable of no less than 3x.  There is an additional covenant referred to as a Fixed Charge Cover ratio, where (net interest payable plus operating leases) to (EBITDA plus net operating leases) can be no less than 1.5x. The Group expects to retain significant headroom against these covenants.

Sustainability update

Our sustainability strategy is now well-established; it focuses on the four key areas of Customers, Colleagues, Environment and Communities.

Customers

Our commitment to our customers is unwavering. We continue to prioritise the safety of our customers, ensuring that they enjoy a frictionless experience, while going beyond compliance to minimise the risk of harmful play. By harnessing increasingly advanced data modelling, we have been able to identify potentially vulnerable customers earlier and with greater precision. Furthermore, we are focused on utilising new technologies to enhance our proposition, to improve our customer service response times and to make the customer experience increasingly personalised and relevant. These measures are part of our ongoing efforts to safeguard our customers, whilst delivering an exciting and entertaining experience.

Colleagues

Our colleagues are at the heart of what we do. This year, we have focused on weaving our employee value proposition, 'Work. Win. Grow.', into every facet of our operations. We believe that investing in our people is crucial to our continued success. To ensure our venue colleagues are engaged and aware of developments within our business, we launched the connect platform. Our colleagues can now access company information more easily online or through an app; this is already fostering a stronger connection between our colleagues and the business. We are proud to have an employee engagement score of 79%, up 7ppts on the prior year.

Environment

Our journey towards a sustainable future continues to gain momentum. We have made significant progress on our Net Zero Pathway, including the completion of baselining energy use data in our 40 highest-consuming UK venues. Additionally, we have completed Scope 1, 2, and 3 emissions baselining for all our Spanish venues. This year, we commenced our Scope 3 assessment in the UK and began engaging with suppliers to gain a complete picture of our emissions profile across the value chain.

The success of our decarbonisation efforts relies in part on the actions of our colleagues. We therefore launched a cultural programme as part of the Net Zero Pathway and have been raising awareness for more energy conscious behaviours such as our energy efficient lighting initiative. Energy consumption monitoring has been valuable in demonstrating the immediate effect of behavioural change on energy use, and introducing monthly league tables has been a great success in encouraging our venues' teams to think about energy consumption. As a result of these efforts, emissions have fallen by 11%, underscoring the effectiveness of our early initiatives.

Communities

Rank continues to occupy a central role in the communities in which we operate. It has been inspiring to see our colleagues participate in various fundraising initiatives, demonstrating our collective commitment to making a positive impact. This year, we celebrated ten years of our partnership with Carers Trust, raising £3.8m for this deserving charity in that time.  Our charitable activities extend beyond fundraising, with our venues being used by Carers Trust to host local events and colleagues volunteering their time for various carers support initiatives.  Our ongoing community engagement reflects our dedication to supporting and enriching the lives of those around us.

High standards of business conduct underpin everything we do at Rank. Compliance remains a central focus, and we ensure that we act in accordance with all relevant regulations in each of our operating locations. Anticipating the impact of new regulations on sustainability reporting, we have proactively begun to align our disclosures to meet these requirements. This year, we conducted a double materiality assessment process to better position ourselves for future reporting obligations, reaffirming our commitment to transparency and accountability.

As we look back on the achievements of 2023/24, we are proud of our progress and remain steadfast in our commitment to sustainable and responsible business practices.

Regulatory update

Publication of the Government's White Paper into gambling reforms was made in April 2023 and the start of 2023/24 saw a number of Gambling Commission and DCMS-led consultations launched with the intention of exploring how best to apply the public policies contained in the White Paper.  For Rank, the most material consultation of the year related to the, much needed, land-based reforms for casino and bingo.  In May 2024, the Government published its response to the consultation, outlining how the various reforms would be delivered and the proposed secondary legislation to bring them into being. We welcomed the details of the Government's consultation response, noting that it signified another important step closer to the legislation which will enable Rank's Grosvenor and Mecca venues to better meet the needs of our customers. 

The July general election inevitably delayed the proposed secondary legislation but, with a new Labour Government now in place and a new DCMS ministerial team appointed, we expect the passage of legislation to recommence in the coming months. 

CFO's review

Within this section all prior year comparatives are to the 12 months ended 30 June 2023.

Reported net gaming revenue ('NGR')

For the 12 months ended 30 June 2024, total NGR increased by 8% to £734.7m with improved NGR performance across all of the Group's business units.

Operating profit

The Group delivered an operating profit of £29.4m for the year, compared to an operating loss of £110.4m¹ in the prior year.  The improvement in operating profit was due to improved NGR performance across the Group and significantly reduced net impairment charges in the current period of £7.6m, compared to £118.9m in the prior period.

Separately disclosed items ('SDIs')

SDIs are infrequent in nature and/or do not relate to Rank's underlying business performance.

Total SDIs for the 12 months ended 30 June 2024 were £16.9m.

The material SDIs in the year were as follows:

Further details regarding the SDIs can be found in note 3.

Prior period restatement

These consolidated financial statements include a prior year restatement in relation to prior year costs identified in the Digital business which erroneously had not been recognised in the prior year consolidated income statements. The error was considered to be material due to its nature and impact to key performance indicators. Accordingly, a third balance sheet has been presented in accordance with IAS 1 'Presentation of Financial Statements'.

During the year, the Group identified an accumulated total of £4.4m of prior year adjustments within the Digital business comprising £3.2m of trading related costs which erroneously had not been recognised in the prior year financial statements and £1.2m of excess releases to income which erroneously had been recognised in the prior year financial statements. Of the total value of £4.4m, £0.5m relates to financial year 2022/23 and the remaining £3.9m relates to pre 2022/23.

The above restatement reduces both basic and diluted EPS by 0.1 pence for the year ended 30 June 2023.

The impact of the adjustment on the June 2023 balance sheet is a reduction to total asset of £2.0m, an increase on trade and other payables of £2.2m, a reduction to closing reserves as at 30 June 2023 of £4.4m and a reduction to opening reserves as at 1 July 2022 of £3.9m.

Due to the working capital movements stated above, the opening cash balance has reduced by £2.0m and cash flows from operating activities increased by £2.4m in the cash flow statement for the year ended 30 June 2023.

In addition to above, the consolidated statement of cash flow includes a prior year restatement in relation to leases. During the year, the Group identified that the lease principal payments incorrectly included £4.6m of property-related VAT and £1.1m of property service charges. Cash flows from lease-related VAT and property service charges should have been disclosed within cash flows from operating activities.  This restatement results in a reduction of £5.7m in both net cash generated from operating activities and net cash used in financing activities in the 2023 statement of cash flows.

For further details refer to note 1.

Net financing charge

The £12.8m net financing charge was slightly higher than the prior period's charge of £12.3m principally due to higher bank fees following the refinancing of the Group's facilities in January 2024. The net financing charge includes £5.9m of lease interest calculated under IFRS 16.

Cash flow and net debt

As at 30 June 2024, net debt was £132.5m. Debt comprised £30.0m of term loan, £11.5m of drawn revolving credit facilities and £153.4m in finance leases, offset by cash at bank of £62.4m.

The Group finished the year with net cash for covenant purposes of £5.1m.

1.        Restated.

Taxation

The Group's underlying effective corporation tax rate in 2023/24 was 18.8% (2022/23: 8.1%) based on a tax charge of £6.3m on underlying profit before taxation.

The underlying effective corporation tax rate for 2024/25 is expected to be 17-19%, being below the UK statutory tax rate.  The tax rate is driven by some overseas profits being taxed at lower rates than the UK.

On a statutory basis, the Group had an effective tax rate of 22.6% in 2023/24 (2022/23: 22.1%) based on a tax charge of £3.5m on total profit of £15.5m.  This is higher than the effective tax rate on underlying profit due to a significant level of separately disclosed items which relate to overseas operations and attract a tax credit at lower rates than the UK.

Further details of the tax charge are provided in note 5

Dividend

The continuing recovery in profitability combined with the Group's balance sheet strength gives the Board the confidence to propose a resumption of ordinary dividend payments.  The Board is recommending a final dividend of 0.85p as a full year dividend.  Subject to approval by shareholders the final dividend will be paid on 25 October 2024 to shareholders on the register on 20 September 2024.  The ex-dividend date will be 19 September 2024.

Earnings per share ('EPS')

Basic EPS increased to 2.7p from a loss of 20.5p¹ in the prior period. Underlying EPS increased to 5.9p, up from 1.1p¹ in the prior period. For further details refer to note 7.

Cash tax rate

In the 12 months ended 30 June 2024, the Group had an effective cash tax rate of (7.2)% on underlying profit before taxation (2022/23: 51.6%). 

On a statutory basis, the Group had an effective cash tax rate of (15.5)% in 2023/24 (2022/23: (2.6)%) based on a tax refund of £2.4m on total profit of £15.5m.

The cash tax rate differs from the standard rate of UK tax due to refunds of UK tax overpaid in prior years.

The Group is expected to have an underlying cash tax rate of approximately 1-3% for the year ended 30 June 2025.  The cash tax rate is driven by utilisation of brought forward tax losses and expected refunds of UK and Maltese tax paid in prior years from loss carry back and dividend refund claims.

Going concern

Based on the Group's cash flow forecasts and business plan, the Directors believe that the Group will generate sufficient cash to meet its liabilities as they fall due for the period up to 31 August 2025.   In making such statement, the Directors highlight forecasting accuracy in relation to the level of trading performance achieved as the key sensitivity in the approved base case.

The Directors have considered two downside scenarios which reflect a reduced trading performance and inflationary impacts on the cost base. In these events, the Group will generate sufficient cash to meet it liabilities as they fall due and meet covenant requirements for the period to 31 August 2025.

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 UK adopted 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 and users of the financial statements 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.

The following table explains the key APMs applied by the Group and referred to in these statements:

Rationale for adjustments - Profit and debt measure

SDIs are items that bear no relation to the Group's underlying ongoing operating performance.  The adjustment helps users of the accounts better assess the underlying performance of the Group, helps align to the measures used to run the business and still maintains clarity to the statutory reported numbers. 

Further details of the SDIs can be found in the Financial Review and note 3. 

In the current year (2023/24), the Group closed four Mecca venues.  For the purpose of calculating like-for-like ('LFL') measures its contribution has been excluded from the prior period numbers and current period numbers, to ensure comparatives are made to measures on the same basis.

During the year the exchange rates may fluctuate, therefore by using an exchange rate fixed throughout the year the impact on overseas business performance can be calculated and eliminated.

The tables below reconcile the underlying performance measures to the reported measures of the continuing operations of the Group.

Reconciliation 1a

Reconciliation 1b

Reconciliation 2

Calculation of comparative underlying LFL NGR

Reconciliation 3a

Reconciliation 3b

1.        Restated, refer to CFO review for further details

Reconciliation 4

Calculation of comparative underlying LFL operating profit

1.        Restated, refer to CFO review for further details

Reconciliation 5

1.        Restated, refer to CFO review for further details.

Reconciliation 6

1.        Restated, refer to CFO review for further details.

Principal risks and uncertainties

The Board has conducted an assessment of the Company's principal and emerging risks. The risks outlined in this section are the principal risks that we have identified as material to the Group. They represent a 'point-in-time' assessment, as the environment in which the Group operates is constantly changing and new risks may always arise.

Risks are considered in terms of likelihood and impact and are based on residual risk rating of: high, medium and low, i.e. after taking into account controls already in place and operating effectively. Mapping risks in this way helps not only to prioritise the risks and required actions but also to direct the required resource to maintain the effectiveness of controls already in place and mitigate further where required.

The risks outlined in this section are not set out in any order of priority, and do not include all risks associated with the Group's activities.

Additional risks not presently known to management, or currently deemed less material, may also have an adverse effect on the business. Risks such as these are not raised as principal risks but are nevertheless periodically monitored for their impact on the Group.

The Risk Committee takes responsibility for managing the risk framework, reviews risk and risk mitigation on a monthly basis an acts as an escalation point for risk within the business.  The chief finance officer takes responsibility for reporting on risk to the Audit Committee and the Board.

Summary Residual Risk

Emerging risks

The Group's risk profile will continue to evolve as a result of future events and uncertainties. Our risk management processes include consideration of emerging risks; horizon scanning is performed with a view to enabling management to take timely steps to intervene as appropriate.

The methodology used to identify emerging risks includes reviews with both internal and external subject matter experts, reviews of consultation papers and publications from within and outside the industry and the use of key risk indicators. Throughout the year some new risks have emerged and developed which have been monitored by management with appropriate actions taken.

The Board and management team continue to monitor the political and macroeconomic backdrop faced by the Group. In particular, the forming of the new Government by the Labour party could result in policy or taxation that impact on the profitability of the Group. 

Changes to regulation in the gambling industry continue to be closely monitored in all our jurisdictions as further changes are anticipated. The formation of the new Government has created uncertainty over the timing of the legislation to implement the Gambling Act review, including land-based reforms.

The Group primarily operates from properties on short leases in the UK venues businesses. Management seek to renew leases for longer period in strategically important locations and ensure continuity of tenure in profitable venues. However, it is not always possible to guarantee security of tenure where landlords seek to occupy a property themselves or take it back on redevelopment grounds.

New technologies such as Artificial Intelligence (AI) are being explored by the Group and are expected to provide opportunities to deliver improved customer service and efficiency. However, there are also risks associated with new AI technology, particularly in the protection of and use of proprietary data - the Group is exploring how best to capitalise on these technologies whilst not exposing itself to unnecessary risk.

Climate risks are currently not regarded as a principal risk for the Group, but there are additional disclosure requirements that need to be reported on, such as the EU Corporate Sustainability Reporting Directive ('CSRD').

Principal risk 1: Uncertain trading environment

Principal risk

Consumers' discretionary expenditure continues to be impacted by uncertain political and macroeconomic conditions. Such pressures influence customer behaviour and can reduce spend on entertainment and leisure activities such as those offered by the Group, as well as their propensity to visit our venues. This could impact our financial performance and ability to deliver on our strategic plans.

Whilst overall inflationary pressures have eased, wage inflation remains significant and continues to impact the operating margins of our venues businesses. Related risks caused by the current macroeconomic conditions and the change of the UK Government may lead to changes in consumer activity, reduced energy availability and the increased cost of products and services, all of which could impact our future performance.

Residual risk rating and change in risk impact

Considered high residual risk and stable.

With the current trading environment, inflationary pressures (particularly in labour costs), energy prices remaining above historic norms, higher interest rates and labour shortages impacting the leisure sector in particular, the risk here is considered high.

Risk mitigation strategy

We are actively monitoring the situation and continue to put contingency measures in place to manage these risks, including:

Governance and oversight of risk

Board.

Principal risk 2: Compliance with gambling laws and regulations

Principal risk

Regulatory and legislative regimes for betting and gaming in key markets are constantly under review and can change (including as to their interpretation by regulators) at short notice. These changes could benefit or have an adverse effect on the business and additional costs might be incurred in order to comply. Failing to comply leads to an increased risk of investigation(s), regulatory action and sanctions by way of licence conditions, financial penalties and/or loss of an operating licence.

Residual risk rating and change in risk impact

Considered high residual risk and stable.

There is ongoing and increased regulatory focus on compliance by regulators in the jurisdictions in which the Group operates. The risk of potential non-compliance increases with the pace of change in regulation. In particular, regulatory change in the UK is often delivered through Gambling Commission guidance, which is often open to interpretation.

Risk mitigation strategy

The Group ensures that:

Governance and oversight of risk

ESG and Safer Gambling Committee.

Principal risk 3: Safe and sustainable gambling

Principal risk

Safe gambling underpins our strategy with one of our five strategic pillars being that we will build sustainable relationships with our customers by providing them with safe environments in which to play. This minimises the potential for our customers to suffer harm from their gambling and will assist the Group in ensuring that it grows the business in a sustainable way. We are committed to delivering the highest possible levels of player safety and protection.

Failure to provide a safe gambling environment for our customers could have regulatory implications, affect trust in our brands and impact our ability to build a sustainable business for the long term.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

Our most material ESG issue is to ensure the highest possible levels of player safety and protection.

Risk mitigation strategy

The Group ensures that:

Governance and oversight of risk

ESG and Safer Gambling Committee.

Principal risk 4: People

Principal risk

Pivotal to the success of the organisation  isa failure to attract or retain key individuals may impact the Group's ability to deliver on its strategic priorities.

A prerequisite to achieving all the strategic priorities is ensuring the Group has the right people with the right skills, deployed within the right area of the business.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

The availability of colleagues and competition for talent continues to be a focus area, particularly for our UK venues business.

Risk mitigation strategy

The Group ensures that it:

Governance and oversight of risk

Board, Nominations and Remuneration Committees.

Principal risk 5: Strategic programmes

Principal risk

Key projects and programmes (including technological change programmes) could fail to deliver, and/or take longer to deliver resulting in missed market opportunities for the Group resulting in missed synergies or savings.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

Failure to deliver key strategic projects and programmes impacts on customer loyalty and the strategic growth of the business and therefore remains a medium residual risk but is also regarded as stable.

Risk mitigation strategy

The Group ensures that programmes:

Governance and oversight of risk

Board.

Principal risk 6: Data protection and management

Principal risk

The inability to adequately protect sensitive customer data and other key data and information assets that could be leaked, exposed, hacked or transmitted would result in customer detriment, formal investigations and/or possible litigation leading to prosecution, fines and/or damage to our brands.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

The Group continues to develop and enhance its control environment in relation to customer data controls and regulatory requirements.

Risk mitigation strategy

The Group has in place data protection policies in order to protect the privacy rights of individuals in accordance with GDPR and other relevant local data protection and privacy legislation (as applicable). These are monitored by an experienced Data Protection Officer ('DPO') to ensure that the business is aware of, and adheres to, legal requirements and industry best practice. The DPO provides regular reports to the Group Risk Committee on relevant data and trends, monitoring programme outputs, ongoing projects and any potential regulatory matters. The DPO also provides bi-annual reports to the Audit Committee.

All colleagues undertake annual mandatory training, with additional training being undertaken as required/requested or as may be appropriate to a specific role.

Technology and IT security controls are in place to restrict access to sensitive data and ensure individuals only have access to the data they need to do their job. The Group also carries out periodic penetration testing of security controls around data.

Governance and oversight of risk

Audit Committee.

Principal risk 7: Cyber resilience

Principal risk

Cyber-attacks can disrupt and cause considerable financial and reputational damage to the Group. If a cyber-attack were to occur, the Group could lose assets, reputation and business, and potentially face regulatory fines and/or litigation - as well as the costs of remediation.

Operations are highly dependent on technology and advanced information systems (such as the use of cloud computing) and there is a risk that such technology or systems could fail, or outages occur.

Residual risk rating and change in risk impact

Considered medium residual risk and increasing.

There is an ongoing programme of work in place, including monitoring and responding to new and emerging attack vectors. However, the nature of the external environment means this is considered an increasing risk for the Group.

Risk mitigation strategy

The Group:

Governance and oversight of risk

Audit Committee.

Principal risk 8: Business continuity and disaster recovery

Principal risk

Planning and preparation of the organisation, to ensure it could overcome serious incidents or disasters and resume normal operations within a reasonably short period, is critical to ensure that there is minimal impact to its operations, customers and reputation.

Typical disasters might include: natural disasters such as fires and floods, pandemics, accidents impacting key people, insolvency of key suppliers, events that result in a loss or lack of availability of data or IT systems, negative media campaigns and market upheavals.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

The geographical nature of the operating environment and key risk exposures are known and understood.

Risk mitigation strategy

The Group seeks to develop, embed and refine its approach to incident and crisis management on an ongoing proactive basis. Group business continuity plans are regularly reviewed for key sites and business areas and this work includes reviewing the resilience of and disaster recovery for IT systems.

Governance and oversight of risk

Audit Committee.

Principal risk 9: Dependency on third parties and supply chain

Principal risk

The Group is dependent on a number of third parties and suppliers for the operation of its business. The withdrawal or removal from the market of one or more of these third-party suppliers, failure of these suppliers to comply with contractual obligations, or reputational issues arising in connection with these suppliers could adversely affect operations, especially where these suppliers are niche.

Residual risk rating and change in risk impact

Considered medium residual risk and stable.

The third-party operating environment and key risk exposures continue to be monitored.

Risk mitigation strategy

The Group has a central procurement team that oversees the process for selecting suppliers across the Group, utilising a supplier risk management framework. Our policies and procedures require due diligence to be carried out on material suppliers.

We require that supplier contracts include, amongst other things, appropriate clauses on compliance with applicable laws and regulations, the prevention of modern slavery and anti-bribery. We seek to work with suppliers who are actively managing climate risks.

Business owners are responsible for communication with key suppliers and are ultimately accountable for such relationships and ensuring that contractual requirements are met.

Governance and oversight of risk

Board and Audit Committee.

Principal risk 10: Taxation

Principal risk

Changes in fiscal regimes in domestic and international markets can happen at short notice. These changes could benefit or have an adverse impact with additional costs potentially incurred in order to comply.

Residual risk rating and change in risk impact

Considered low residual risk and stable.

Tax changes in the immediate future are not anticipated to be material. However, with the election of the new UK Government, there may be changes in taxation policy or tax rates that could impact the future profitability of the Group.

Risk mitigation strategy

The Group's tax strategy is approved annually by the Board. Responsibility for its execution is delegated to the Chief Financial Officer who reports the Group's tax position to the Board on a regular basis.

The Group ensures that it:

Governance and oversight of risk

Board and Audit Committee.

Principal risk 11: Liquidity and funding

Principal risk

The Group is reliant on committed debt facilities with four lenders, all of which have specific obligations and covenants that need to be met, and multiple banks for clearing (transaction processing).

A loss of debt facilities and/or clearing facilities could result in the Group being unable to meet its obligations as they become due.

Residual risk rating and change in risk impact

Considered low residual risk and reducing.

The above is being maintained through open dialogue with the banks.

Risk mitigation strategy

The Group ensures that it:

Governance and oversight of risk

Board and Finance Committee.

Principal risk 12: Health and safety

Principal risk

Failure to meet the requirements of the various domestic and international rules and regulations relating to the safety of our employees and customers could expose the Group (and individual Directors and employees) to material civil, criminal and/or regulatory action with the associated financial and reputational consequences.

Residual risk rating and change in risk impact

Considered low residual risk and reducing.

No significant changes in domestic and international standards/regulations are anticipated in the short term.

Risk mitigation strategy

The Group ensures that:

Governance and oversight of risk

Audit Committee.

Directors' Responsibility Statement

The Statement of Directors' Responsibilities is made in respect of the full Annual Report and the Financial Statements not the extracts from the financial statements required to be set out in the announcement.

Each of the directors named below confirm that to the best of his or her knowledge:

The directors of The Rank Group Plc are:

Chew Seong Aun

Lucinda Charles-Jones

Richard Harris   

Keith Laslop

Katie McAlister

John O'Reilly

Alex Thursby

Karen Whitworth

Signed on behalf of the board on 14 August 2024

Group income statement

for the year ended 30 June 2024

Group statement of comprehensive income (loss)

for the year ended 30 June 2024

Group balance sheet

at 30 June 2024

Group statement of changes in equity

for the year ended 30 June 2024

Group statement of cash flow

for the year ended 30 June 2024

1.   General information, basis of preparation and accounting policies

General information

The consolidated financial statements of The Rank Group Plc ("the Company") and its subsidiaries (together "the Group") for the year ended 30 June 2024 were authorised for issue in accordance with a resolution of the Directors on 14 August 2024.

The Company is a public limited company which is listed on the London Stock Exchange and is 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.

The Group operates gaming services in Great Britain (including the Channel Islands), Spain and India.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.  These policies have been consistently applied to all periods presented, except where noted below.

Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention.

The financial information does not constitute the Group's statutory accounts for the years ended 30 June 2024 or 2023 but is derived from those accounts. Statutory accounts for 2023 have been delivered to the Registrar of Companies, and those for 2024 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

Whilst the financial information included in this announcement has been computed using the recognition and measurement requirements of UK adopted International Accounting Standards (IAS), this announcement does not 
itself contain sufficient information to comply with IAS. The Company expects to send its Annual Report 2024 to shareholders on 14 September 2024.

Statement of compliance

The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards.  UK-adopted International Accounting Standards includes standards issued by the International Accounting Standards Board ('IASB') that are endorsed for use in the UK.

Going concern

In adopting the going concern basis and viability statement for preparing the financial information, the Directors have considered the circumstances impacting the Group during the year, including the budget for 2024/25 ('the base case') and long range forecast approved by the Board, and recent trading performance, and have reviewed the Group's projected compliance with its banking covenants and access to funding options for the period from the date of this report to 31 August 2025 for the going concern period, and for the period to 31 August 2027 for the viability assessment. The Directors have reviewed and challenged management's assumptions for the Group's base case view for the going concern period. Key considerations are the assumptions on the levels of customer visits and their average spend in the venues-based businesses, and the number of first time and returning depositors in the digital businesses, and the average level of spend per visit for each. The key base assumptions on costs are as follows:

·      Payroll costs are adjusted for increases in the National Minimum Wage and pay rise awarded in April 2025

·      Rent due during the 24/25 financial year is paid on time

·      All tax and duty are paid on time

·      Capital expenditure is in line with strategic plans

·      Standard payment terms are assumed for supplier payments.

The base case view contains certain discretionary costs within management control that could be reduced in the event of a revenue downturn.  These include reductions to overheads, reductions to marketing costs, reductions to the venues' operating costs and reductions to capital expenditure.

The committed financing position in the base case within the going concern assessment period is that the Group continues to have access to the following committed facilities:

·      Revolving credit facilities ("RCF") of £90.0m, repayable in January 2027.

·      Term loan of £30.0m with bullet repayment in October 2026 - this is after the going concern period.

·      Both have +1+1 extension options.

In undertaking their assessment, the Directors also reviewed compliance with the banking covenants ("Covenants") which are tested bi-annually at June and December.  The Group expects to meet the Covenants throughout the going concern period and have the cash available to meet its liabilities as they fall due.  

Sensitivity Analysis

The base case view reflects the Directors' best estimate of the outcome for the going concern period.

A number of plausible but severe downside risks, including consideration of possible mitigating actions, have been modelled with particular focus on the potential impact to cash flows, cash headroom and covenant compliance throughout the going concern period.

The two downside scenarios modelled are:

(i)    revenues in Grosvenor fall by 7% and Rank Interactive by 10% versus the base case view, with management taking a number of mitigating actions including reduction in capital expenditure, reduction in staff costs and the removal of the Group planning contingency.

(ii)   a reverse stress test, revenues in Grosvenor fall by 23.5% and revenues in Rank Interactive fall by 15% in the initial year, with management taking actions as for scenario (i) but with further mitigating actions on employment costs and marketing costs.

Having modelled the downside scenarios, the indication is that the Group would continue to meet its covenant requirements in all scenarios and have available cash to meet liabilities within the going concern period.

The Directors acknowledge that there is ongoing uncertainty regarding the outcome of the Gambling Act Review (GAR) and its subsequent timing. The Directors acknowledge that this may have a more positive impact on the budgeting and forecasting performance than anticipated if earlier implementation occurs. For the going concern period, management have not included any benefit from the GAR.

Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period at least through to 31 August 2025.

For these reasons, the Directors continue to adopt the going concern basis for the preparation of these consolidated financial statements, and in preparing the consolidated financial statements, they do not include any adjustments that would be required to be made if they were prepared on a basis other than going concern.

Going concern statement

Based on the Group's cash flow forecasts and business plan, the Directors believe that the Group will generate sufficient cash to meet its liabilities as they fall due for the period up to 31 August 2025. In making such statement, the Directors highlight forecasting accuracy in relation to the level of trading performance achieved as the key sensitivity in the approved base case.

The Directors have considered two downside scenarios which reflects a reduced trading performance, inflationary impacts on the cost base and various management-controlled cost mitigations.

In each of the downside scenarios, the Group will generate sufficient cash to meet its liabilities as they fall due and meet its covenant requirements for the period to 31 August 2025 with scenarios i) and ii) requiring the implementation and execution of mitigating cost actions within the control of management.

Changes in accounting policy and disclosures

(a) Standards, amendments to and interpretations of existing standards adopted by the Group

In preparing the consolidated financial statements for the current period, the Group has adopted the following new IFRSs amendments to IFRSs and IFRS Interpretations Committee (IFRIC) interpretations.  All standards do not have a significant impact on the results or net assets of the Group.  Changes are detailed below:

·      Insurance Contracts (IFRS 17)

·      Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2 effective for period beginning 1 July 2023)

·      Definition of accounting estimates (amendments to IAS 8 effective for period beginning 1 July 2023)

·      Deferred tax related to assets and liabilities arising from a single transaction (amendment to IAS 12 effective for period beginning 1 July 2023) Interest rate benchmark reform - Phase 2 (amendment to IAS 39)

·      International Tax Reform- Pillar Two Model Rules (amendments to IAS 12)

·      Classification of Liabilities as Current or Non-current and Non-current liabilities with Covenants (amendment to IAS 1)

·      Lease liability in a Sale and Leaseback (amendment to IFRS 16)

·      Disclosure: Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

·      Lack of exchangeability (amendment to IAS 21)

·      Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (amendments to IFRS 10 and IAS 28).

(b) Standards, amendments to and interpretations of existing standards that are not yet effective

At the date of authorisation of the consolidated financial statements, the following Standards, amendments and Interpretations, which have not been applied in these consolidated financial statements, were in issue but not yet effective:

·      International Tax Reform - Pillar 2 Model Rules - (Amendments to IAS 12)

·      Classification of Liabilities as Current or Non-Current and Non-current Liabilities with Covenants (amendment to IAS 1)

·      Lease liability in a sale and leaseback (Amendments to IFRS 16)

·      Disclosures: Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7

·      Lack of exchangeability - amendments to IAS 21

·      Classification and measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7

·      Presentation and Disclosure in Financial Statements

·      Subsidiary without Public Accountability: Disclosures

·      Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28

The Group does not currently believe that the adoption of these new standards or amendments would have a material effect on the results or financial position of the Group.

Separately disclosed items (SDI)

The Group separately discloses certain costs and income that impair the visibility of the underlying performance and trends between periods.  The SDIs are material and infrequent in nature and/or do not relate to underlying business performance.  Judgement is required in determining whether an item should be classified as an SDI or included within the underlying results.

SDIs include but are not limited to:

·      Amortisation of acquired intangible assets

·      Profit or loss on disposal of businesses

·      Costs or income associated to the closure of venues

·      Acquisition and disposal costs including changes to deferred or contingent consideration

·      Impairment charges

·      Reversal of previously recognised impairment charges

·      Property-related provisions

·      Restructuring costs as part of an announced programme

·      Retranslation and remeasurement of foreign currency contingent consideration

·      General dilapidations provision interest unwinding

·      General dilapidation asset depreciation

·      Discontinued operations

·      Significant, material proceeds from tax appeals; and

·      Tax impact of all the above.

Climate change

The Group continues to consider the impact of climate change in the consolidated financial statements and considers that the most significant impact would be in relation to the cost of energy to the Group for which best estimates have been factored into future forecasts, the carrying value of assets in the accounts, albeit this is not considered to have a material impact at the current time and the useful economic life of assets.

The Group constantly monitors the latest government legislation in relation to climate related matters. At the current time, no legislation has been passed that will impact the Group. The Group will adjust key assumptions in value in use calculations and sensitise these calculations should a change been required.

Dilapidation costs

The provision represents the estimated cost of dilapidation at the end of the lease term of certain properties. The provision is reviewed periodically and reflects judgement in the interpretation of lease terms and negotiation positions with landlords including the likelihood that the current leasehold properties may be subject to redevelopment at the end of lease term

Estimates and judgements

In preparing the condensed consolidated financial information, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense, including inflationary cost pressures impacting the cost of living and customer sentiment and behaviour.  Actual results may differ from these estimates. 

Dilapidations provision

Provisions for dilapidations are recognised where the Group has the obligation to make-good its leased properties.  These provisions are measured based on historically settled dilapidations which form the basis of the estimated future cash outflows.  Any difference between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made.

The Group's provisions are estimates of the actual costs and timing of future cash flows, which are dependent on future events, property exits and market conditions.  Thus, there is inherently an element of estimation uncertainty within the provisions recognised by the Group.  Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made.

The provisions are most sensitive to estimates of the future cash outflows which are based on historically settled dilapidations.  This means that an increase in cash outflows of 1% would have resulted to a £0.3m increase in the dilapidations provision.  Likewise, a decrease in cash outflows of 1% would have resulted to a £0.3m decrease in the dilapidations provision.

Prior period restatement

These consolidated financial statements include a prior year restatement in relation to prior year costs identified in the Digital business which erroneously had not been recognised in the prior year consolidated income statements. The error was considered to be material due to its nature and impact to key performance indicators.

Accordingly, a third balance sheet has been presented in accordance with IAS 1 'Presentation of Financial Statements.'

During the period, the Group identified an accumulated total of £4.4m of prior year adjustments within the Digital business comprising £3.2m of trading related costs which erroneously had not been recognised in the prior year financial statements and £1.2m of excess releases to income which erroneously had been recognised in the prior year financial statements. Of the total value of £4.4m, £0.5m relates to financial year 2022/23 and the remaining £3.9m relates to pre 2022/23.

The impact of the adjustment on the June 2023 balance sheet is a reduction to total asset of £2.2m, an increase on trade and other payables of £2.2m, a reduction to closing reserves as at 30 June 2023 of £4.4m and a reduction to opening reserves as at 1 July 2022 of £3.9m.

The above restatement reduces both basic and diluted EPS by 0.1 pence for the year ended 30 June 2023.

In addition to above, the consolidated statement of cash flow includes a prior year restatement in relation to leases. During the year, the Group identified that the lease principal payments incorrectly included £4.6m of property-related VAT and £1.1m of property service charges. Cash flows from lease-related VAT and property service charges should have been disclosed within cash flows from operating activities.  This restatement results in a reduction of £5.7m in both net cash generated from operating activities and net cash used in financing activities in the 2023 statement of cash flows. The restatement was identified following a review of the 2023 Annual Report by the Financial Reporting Council ('FRC'). The FRC's review does not benefit from detailed knowledge of our business, or an understanding of the underlying transactions entered into and therefore provides no assurance that the Annual Report is correct in all material aspects.

The prior period comparatives have been restated for the above items in accordance with IAS 8: 'Accounting Policies, Changes in Accounting Policies and Errors' and have impacted the primary financial statements as follows:

Income Statement

for the year ended 30 June 2023