Written Evidence Submitted by Rank Group Plc
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Written evidence submitted by Rank Group plc 1.0 Introduction 1.1 This response is submitted on behalf of the Rank Group plc, a FTSE250 licensed betting & gaming company. Rank is regulated in the UK by the Gambling Commission, and DCMS is our sponsor department in government. 1.2 Rank is the biggest land-based casino operator (Grosvenor casinos), and the second-biggest bingo operator (Mecca bingo) in the UK. We employ c. 7500 colleagues and in 2018/19, we paid £159m in UK taxes and £191m in taxes overall. This is 6.5 times the level of profit generated (£29.1m PAT) 1.3 Pre-COVID-19, our 53 Grosvenor casinos, last year, saw over 4.5 million visits from customers who played on 632 gaming tables and 2993 gaming machines. In Mecca, we enjoyed 8.7 million visits to our 77 bingo halls from an active customer base of over 900,000 customers. 1.4 We are very proud to have been in the vanguard of the betting and gaming industry’s response to the call for a ‘national effort’. We have directly informed DCMS, amongst others, of all the work we are continuing to do; for example, using many of our casino and bingo kitchens to provide hot meals to vulnerable groups, our partnership with Blue Light Card for NHS staff and other key workers, and our collaboration with MPs across the UK to support those in need during this crisis. More detail is provided below (in 2.6). 1.5 As we prepare to exit lockdown and hopefully re-open our venues, we reflect on the government’s CJRS which has been hugely important in our struggle to survive the crisis and, in doing so, helped to protect jobs. The flexibility that is being provided to furlough arrangements from July is vital as we re-open our venues with social distancing and some inevitable demand constraints impacting our revenues. Going forward we will need continued flexibility in the CJRS as we react to consumer demand (see section 4, below). 2.0 What has been the immediate impact of Covid-19 on the sector? 2.1 Our 53 casinos and 77 bingo halls in the UK had ceased trading by midnight on 20th March 2020 – as instructed by government earlier that day. Prior to this, we experienced a month of substantially reduced trade and, in London, the impact on casinos was even more severe than elsewhere in the UK, as casinos in the capital benefit from tourism and contribute significantly to the tourist economy. 2.2 Rank Group is predominantly a UK venues-based business and the pain endured by mandatory closure of our venues is evidenced in our revenues being down 73% since lockdown commenced. Our digital business has grown revenues during this period but at a rate which has limited impact on our overall revenue. 2.3 The modest uplift in revenues in our digital businesses is entirely in line with what we might have expected with loyal brand customers unable to visit our Grosvenor and Mecca venues in the UK or our Enracha venues in Spain. 2.4 Approximately 7000 of our UK total of 7500 colleagues have been furloughed and we have been extremely grateful for the financial support of the CJRS to date. By way of explanation of the financial impact, immediately prior to lockdown measures in the UK, we estimated that during a period of full closure of all venues, monthly cash outflow before mitigation was £25m and would be reduced to £17m with mitigating actions within our control. As a result of the HM Treasury’s support measures (primarily the CJRS) and further progress on our own mitigations, we now estimate that our monthly cash outflow rate has been reduced to approximately £10m from May 2020. 2.5 Business rates payments have been cancelled in line with HM Government’s package of support measures for business, although we are disappointed that the rates holiday does not apply in Scotland and applies only to our Mecca venues (and not our Grosvenor venues) in Wales. This makes very little sense to us. 2.6 Further to comments (in 1.4) above, we responded swiftly and extensively to the call for a national effort response and mobilised colleagues and the key assets (kitchens, car parks) we have in our venues in a range of ways, including: We have secured MP and local council support at a number of our Grosvenor and Mecca clubs to ensure kitchen capacity from our venues can be used to distribute meals to charities, including the homeless, elderly and vulnerable groups. We are about to distribute our 30,000th meal through our ‘community kitchens’ work. We launched a charity initiative for NHS and emergency services workers in collaboration with Blue Light Card. Over 1,000 hot meals, prepared at our venues, have been distributed via the Blue Light Card arrangement. We have made 40 of our car parks – situated near hospitals and care homes – available free of charge to NHS workers through agreements with car park operators. 3.0 How effectively has the support provided by DCMS, other Government departments and arms-length bodies addressed the sector’s needs? 3.1 We requested from government, and were delighted to hear of and qualify for, swift and critical financial support, soon after lockdown. By far the most significant support provided has been via the CJRS, the dominant cost in a hospitality/entertainment/venues-based leisure business like Rank being employment/salary costs. 3.2 We have also benefited from business rates relief in England (and partially in Wales, see 2.5) duty deferral and the encouragement of landlords to respond constructively to tenant pressures. 3.3 We are also in discussions with our banks and seeking their support for a Government-backed Coronavirus Business Interruption Loan Scheme (CBILS) which is key to our liquidity as we navigate our way through this crisis. 3.4 We have welcomed the frequent guidance updates provided by DCMS, HMT and HMRC in particular, as we have sought to navigate this unprecedented crisis. We have already put on record, but would welcome the opportunity to do so again, our considerable thanks to government for the support provided to date. 3.5 At CEO level, we have taken part in and benefitted from three telephone calls with our Minister, Nigel Huddleston, facilitated by DCMS, each of which provided a welcome opportunity to share our progress through the crisis with the Minister and his key officials. We would very much welcome the continuation of these calls in the weeks and months ahead. 3.6 The Gambling Commission has provided guidance for operators to implement changes to existing practices “as soon as possible” and supposedly in line with data findings on the impact of COVID-19. We recognised that there may be an increased risk of gambling-related harm being experienced by a small number of consumers during lockdown and moved swiftly to implement extra measures to address this potential risk. As outlined above, Rank is experiencing a 73% decline in revenues with over 90% of our workforce in furlough, but we have worked extremely hard (and without advance warning or notification of what was expected of us) to deliver the changes expected of us by the Gambling Commission. This has not been without its challenges. 4.0 What will the likely long-term impacts of Covid-19 be on the sector, and what support is needed to deal with those? IMPACTS 4.1 The scale of impact on our venues-based business is likely to be determined by a) the duration of lockdown (date of reopening); b) the application of social distancing measures post reopening; c) the level of support from the Government during the period of business disruption including the post reopening period into 2021, d) consumer confidence and; e) the scale of a UK and global (re: tourism) recession. 4.2 Our monthly net cash outflow of £10m increases the strain on our liquidity and with it the going concern strength of the business for every additional week that our venues are closed. This is exacerbated by the deferred payments for tax, rents and other liabilities which are providing short- term help to our balance sheet, but ultimately will have to be repaid, some in the near future. 4.3 Notwithstanding these concerns (above, in 4.2), we would rather reopen as many venues as we can, as swiftly as we can (and ideally by 4 July), with appropriate safety measures in place, to start providing a service to our customers, generating revenues and, in doing so, protecting the business and jobs. 4.4 We are fortunate that Rank venues (both Grosvenor casinos and Mecca bingo clubs) invariably benefit from being relatively large in size, allowing us to safely accommodate large numbers of customers. We are confident in our ability to satisfy customer demand whilst doing what is required of us with regards to social distancing and related measures, but do not believe that we will be able to return to pre-COVID levels of business whilst the supply side constraints are in place. 4.5 Predicting or forecasting customer demand in the early days, weeks and months after reopening (which we hope to be from July 4) is extremely difficult. It is for this reason that we will require government support (as outlined below). SUPPORT 4.6 It is critical that as we work to reopen our venues and return them to profitability as swiftly as possible in order to protect the business and protect jobs, we are provided with continued support from DCMS and HM Treasury.