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The Rank Group Plc

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The Rank Group Plc Annual Report and Financial Statements 2009 The Rank Group Plc A new perspective on gaming Inside: – The customer experience: A 360 o perspective – Mecca Full House: So much more – G Casino: One amazing venue Contents DIRECTORS’ REPORT Overview 1 Group highlights 2 Group overview 4 Chairman’s statement DIRECTORS’ REPORT Business review A 6 Chief executive’s review 7 Market review 8 Strategy 14 Risk management 16 Bingo 22 Casinos 28 Interactive Our aim is to create 30 Operating responsibly 35 Finance review fun and enjoyment 38 Tax fact file for our customers DIRECTORS’ REPORT through gaming-based Governance B leisure experiences. 40 Board of directors 42 Corporate governance 46 Accountability and audit Our approach is 48 Remuneration report underpinned by our 55 Other statutory information business principles: Statutory reports and • fairness C financial statements • responsibility 58 Independent Auditors’ report 59 Group income statement • and sustainability 59 Group statement of comprehensive income 60 Balance sheets 61 Statement of changes in equity 62 Cash flow statements 63 Notes to the financial statements Other information D 106 Five year review 107 Shareholder information 108 Glossary DIRECTORS’ REPORT: GROUP HIGHLIGHTS How we have performed – Operating highlights – Revenue* (£m) Operating profit** (£m) – Resilient performance £540.0m £58.0m in challenging REVENUE OPERATING PROFIT market conditions 2008: £522.2m 2008: £60.3m – Significant growth in adjusted earnings per share 68.3 534.4 540.0 522.2 – Step-up in capital investment 60.3 58.0 to support growth strategy – Further reduction in Group net debt – Dividend payments resumed 07 08 09 07 08 09 Statutory revenue (£m) Adjusted profit before tax (£m) £520.5m £48.5m STATUTORY ADJUSTED PROFIT REVENUE BEFORE TAX 2008: £505.4m 2008: £40.5m 48.5 520.5 46.2 511.0 505.4 40.5 07 08 09 07 08 09 Net debt (£m) Adjusted earnings per share (pence) £186.8m 8.9p NET DEBT ADJUSTED EARNINGS 2008: £226.5m PER SHARE 2008: 7.3p 8.9 316.9 7.4 7.3 226.5 186.8 07 08 09 07 08 09 * Before adjustment for free bets, promotions and customer bonuses ** Before exceptional items THE RANK GROUP PLC: ANNUAL REPORT AND FINANCIAL STATEMENTS 2009 1 DIRECTORS’ REPORT: GROUP OVERVIEW Our businesses – Our operations – Rank is a leading European gaming and betting company, headquartered in Great Britain and listed on the London Stock Exchange. Mecca Bingo Revenue* Operating profit** Mecca Bingo is a leading operator of bingo clubs. The business is headquartered £233.0m £32.3m in Maidenhead, England and operates 2008 : £227.6m clubs under the Mecca Bingo brand in 2008 : £37.9m Great Britain. Top Rank España Top Rank España operates 11 premium bingo clubs in Spain. The business is £36.2m £5.6m headquartered in Barcelona and operates 2008 : £35.8m 2008 : £6.9m clubs in the provinces of Madrid, Catalonia, Andalucia and Galicia. Grosvenor Casinos Grosvenor Casinos is a leading operator of casinos. The business is headquartered in £220.0m £30.9m Maidenhead, England and operates casinos 2008 : £206.2m 2008 : £25.9m in Great Britain under the Grosvenor and G Casino brands. It also operates two casinos in Belgium. Rank Interactive Rank Interactive is a remote gaming and betting business. Its principal brands are £50.8m £7.5m meccabingo.com (bingo and games), 2008 : £52.6m 2008 : £7.6m bluesq.com (sports betting, casino, poker and games) and gcasino.com (casino). Rank Interactive is based in Alderney, Channel Islands and its primary market is Great Britain. It provides betting and gaming websites in English, Danish, French, German, Spanish and Swedish. * Before adjustment for free bets, promotions and customer bonuses ** Before exceptional items 2 THE RANK GROUP PLC: ANNUAL REPORT AND FINANCIAL STATEMENTS 2009 – Operating markets – The Group operates businesses in Great Britain, Spain and Belgium and provides business services to gaming operators in a number of additional markets. Great Britain Mecca Bingo: 103 clubs Grosvenor Casinos: 35 casinos Rank Interactive: – bluesq.com – meccabingo.com – grosvenorcasinos.com – gcasino.com – 888sport.com Employees: 8,170 Spain Top Rank España: 11 clubs Rank Interactive: – bingouniversal.com – apuestauniversal.com – 888sport.com Employees: 607 Belgium Grosvenor Casinos: 2 casinos Employees: 180 Mecca Bingo Grosvenor/G Casinos Note: 888sport.com is a sports betting website owned and operated by 888 Holdings plc. In return for a share of revenue, Rank Interactive supplies a ‘white label’ online sports betting service to customers of 888.com through 888sport.com. THE RANK GROUP PLC: ANNUAL REPORT AND FINANCIAL STATEMENTS 2009 3 DIRECTORS’ REPORT: CHAIRMAN’S STATEMENT A year of progress – Overview of 2009 – Rank has delivered strong growth in earnings in 2009. As a consequence, the board has recommended a resumption of dividend payments. Peter Johnson Chairman ver the course of the year, a change in culture, allying broader retail concepts and new customer experiences Rank delivered a total return expertise to our strong understanding in leisure, based around gaming. to shareholders of 22.6% as of the gaming market and its In 2009, the Group stepped up the the stock market responded regulatory framework. pace of expansion for its proven G Casino positively to the Group’s Since 2008, Rank has appointed new format. By the end of the year, the Orevenue growth, the effectiveness of managing directors in its three largest G Casino brand had grown from six to its cost control measures and further businesses. Each has an operational ten casinos, with each delivering levels of substantial reductions in net debt and background in either leisure retail or customer visits and revenue significantly financial leverage. online retail. higher than the average across the In June 2009, Mark V Jones, an remainder of the estate. Operating successfully experienced operator of pubs and The year also saw the launch of At the heart of Rank’s strategy to achieve restaurants, joined us as managing the Mecca ‘Full House’ club concepts. long-term growth in earnings per share director of Mecca Bingo to lead the The first Mecca ‘Full House Destination’ is a focus on reaching out to a wider transformation of that business. opened in Nottingham in May 2009, customer base, extending both the reach Reflecting this cultural shift, Rank offering a new style of gaming-based and the relevance of our businesses. has started to build a reputation for social entertainment, aimed principally In order to achieve this, the board innovation in the development, at women. The early performance of the recognised that it needed to bring about refinement and deployment of new club has been encouraging and we have Shareholder return Total shareholder return Adjusted earnings per share Dividend payments (three years) KPI (pence) KPI (three years) 120 Rank FTSE 350 Travel & Leisure FTSE 350 96 8.9 2.0 7.4 72 7.3 48 1.35 24 0 Nil 07 08 09 10 07 08 09 07 08 09 Shares in Rank have under-performed the FTSE 350 in Between 2007 and 2009, Rank grew adjusted earnings As part of management’s response to the difficult trading recent years as the effect of negative legislative changes per share by 20.3% as the Group stabilised its operating conditions, Rank suspended payment of dividends in 2007. to the taxation and operation of land-based gaming performance and achieved substantial reductions in Following a review of the Group’s capital structure, the businesses in Britain caused the market to reduce net debt. board has recommended the resumption of dividend forecast earnings for the Group. payments from May 2010. 4 THE RANK GROUP PLC: ANNUAL REPORT AND FINANCIAL STATEMENTS 2009 now developed two additional sites under problem gambling. For example, in result of this review, Rank intends to the format. 2008/9, of the 22,691 incidences of adjust its capital structure to target a level At the same time, the Group achieved underage gambling in Britain reported by of around 2.5 times net debt to EBITDA much closer integration between its the Gambling Commission, only seven over the medium term. online and land-based gaming brands, (or 0.03%) took place in our premises. In addition, the board has determined exploiting opportunities for revenue and We recognise too that we have a to recommend a resumption of dividend cost synergies. responsibility to our shareholders, to our payments, beginning with a 1.35p per employees and to our customers to share final dividend for 2009. The dividend Operating responsibly engage fully with regulators and will be paid on 5 May 2010 to shareholders The benefits of the Group’s actions are governments to help shape a supportive on the register at 6 April 2010. reflected not simply in its financial and responsible operating environment We plan to adopt a progressive performance but also in forward-looking for our businesses. dividend policy, taking into measures which indicate the success We have recently set out a consideration the Group’s capital of our businesses in engaging new vision for the British investment requirements and the stability with both customers and gaming industry, based of the wider operating and economic employees. During the around the principles of environment. Within this context, the year, the Group “The ability of fairness, responsibility board intends to set dividends such that achieved increases in and sustainability. This Rank achieves a dividend cover of around satisfaction and our businesses to forms the basis for the 3.0 times over the medium term. engagement scores Group’s future from both customers delight and entertain Outlook engagement with the and employees. While the board is pleased with customers in a safe and Gambling The ability of our the progress achieved during 2009, Commission, the businesses to delight social environment opportunities and challenges lie ahead.
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