SBC News Voice of the Sports Betting Industry
“The White Paper was worth the wait,” Rank Group CEO John O’Reilly informed SBC after the publication of the firm’s financial results for 2022/23, when quizzed about his confidence in the post-Gambling Act review landscape.
Whilst some operators – particularly those with a focus on sports betting – have expressed dissatisfaction with the review’s proposed reforms and a lack of clarity on outcomes, for O’Reilly, inbound changes ‘are a net positive’.
Preparing for political change
Rank does not anticipate the White Paper’s recommendations to begin having an impact on group operations until 2024, as the group anticipates a to increase the number of gaming machines to offer ‘the most material change’ to its business.
This alteration to the long-standing laws of the Gaming Act 1968 will ‘lead to a doubling of the number of B1 gaming machines we have across the Grosvenor estate’, and Rank is “busily preparing for such a time, likely in 2024, when we can implement the modernisations as quickly as possible”.
O’Reilly continued: “This is positive news for the Group, as is the government’s commitment to a sliding scale for gaming machine numbers, based on size of venue, which ought to ensure that the vast majority of our 50 casinos will benefit from a greater variety of gaming machines which will better meet the needs of our customers.
“Other consumer-facing benefits in our casinos will be the implementation of sports betting which will help bring UK casinos into line with the rest of the world and the extension of electronic payment methods in our venues.
“Public policy is set and the execution is now being consulted on. We are pleased that the consultations have been launched and broadly, we are encouraged by the contents. At the same time, we are vigilant in terms of detail, timing and political change.”
Modernisation of Estates begins
Meanwhile, O’Reilly was also receptive to the paper’s proposal that the 80/20 bingo rule be scrapped – stating that this ‘would make sense on many levels’, whilst adding 50/50 model would fall in line with the government’s stated aim of relieving t compliance demands on land-based bingo operators.
In the aftermath of the government’s legislative revelations, Rank Group is adopting a ‘two-fold focus’ on its business as UK Gambling Commission (UKGC) and DCMS consultations begin.
Firstly, as O’Reilly outlined previously, the group is preparing itself to implement land-based modernisation proposals ‘as swiftly and quickly as possible’. This will be coupled with ongoing engagement with the abovementioned consultations, based around a ‘pragmatic and evidence-based’ approach.
He emphasised: “The land-based modernisations are the most material to Rank, and customers ought to benefit from a more contemporary experience that we will be able to deliver.”
Whilst Rank is recognised on the high-street as the operator of Grosvenor casinos, the firm is of course more multi-dynamic than this, also maintaining a sports betting business.
The group has been eyeing up an expansion of its offering in this area of late, having last week extended its partnership with Kambi – an arrangement O’Reilly cited as showing its desire to continue improving its sportsbook product.
“Grosvenor Sports is an increasingly important and valuable part of Rank Group’s product mix,” Rank’s CEO remarked. “We are looking to continue to improve the quality and range of products and the customer experience that we provide to customers, including things like bonusing improvements.”
‘Sportsbook of choice for Grosvenor customers’
Of course, much of the White Paper’s focus was on sports betting. This has seen a number of key policies come in for this side of the industry, although particularly impacting online operators, most notably finance risk checks.
However, for casinos this has come with an added benefit, that of the addition of sports betting in bricks-and-mortar venues. Reiterating his previous point that this would bring the UK casino space in line with other nations, O’Reilly cited this as a ‘key benefit’, whilst also offering insight into Rank’s own ambitions.
“With our focus on cross-channel opportunity, there is a very clear potential benefit to our digital sportsbook business and we are looking forward to developing that. “Ultimately we aspire for Grosvenor Sports to become the sportsbook of choice for all Grosvenor customers.”
H1 2023 saw Rank undertake a restructuring of both its UK holdings as well as its flagship Spanish brand, the Enracha online sportsbook. Although both countries are seemingly settling on different regulatory futures, Rank remains confident in its international prospects.
Ultimately, however, it is not just ‘considerably different regulations’ that set the UK and Spain apart as two very different markets, however, O’Reilly explained.
“UK and Spanish customers are different, with different preferences,” he said. “Our Spanish business is also materially different to our UK business in terms of product mix.
“That said, we are delighted with how Enracha has performed. It’s a great business with a great management team and investment in our gaming machines has paid off; we’ve seen terrific customer response to the improvements we have made.”
‘Clear turning of the corner’
The restructuring of UK and Spanish properties, impacted the profits of Rank’s 2022/2023 results as the LSE group declared an impairment loss of £109m on year accounts.
Energy costs were a continuing thorn in the firm’s side, as expenses of powering its large bricks-and-mortar were laid bare. Energy costs were up £5.4m, which coupled with a rise in employment costs of £15.9m cut down venue operating profit 27% to $40.9m.
O’Reilly remained optimistic in the face of this energy challenge, reiterating confidence in yesterday’s report that costs are stabilising – and that profit will ultimately be regained following a tough 12 months for leisure and hospitality businesses.
“We have taken a much more proactive approach to energy management: 70% of Group energy costs for FY23/24 are now fixed and we anticipate these to be in the region of c. £20m for the full year which is well down on where we were this time last year.
“Following a surge in energy costs and high wage inflation, energy costs have stabilised and inflation appears to now be easing. We are also continuing to focus on driving operating cost efficiencies in Grosvenor, including the further rollout of a table operating system to ensure table gaming is operating as efficiently as possible, LED lighting and other energy saving initiatives and reductions in trading hours in selected venues.”
Although profit may have taken a hit in 2022/24, Rank’s revenue growth suggests that progress is still being made. The CEO cited double digit growth for its brands as a key indicator of an improving performance, coupled with growing revenue and profitability within its UK venues since H1.
“There has been a clear turning of the corner since half year with a much improved H2 performance, particularly in our venues business units,” O’Reilly summarised.
Additionally, the group is realising its ambitions in the online space, the CEO continued, cting ‘strong digital venue growth from Rank brands’ which are now operating on the company’s own proprietary technology platform.
As Rank – continues to engage with government and the UKGC and await the White Paper’s implementation, the company is confident in its ability to achieve the £20.3m underlying profit for 2023/24 declared in its results this week.
“The strong balance sheet allows us to continue our investment into strategic transformation priorities, including preparing for what will be significant benefits from the land-based reforms contained in the Govt’s recently published White Paper,” O’Reilly doubled down.
“We’ve had a strong start to the current year across all our businesses (Grosvenor venues, Mecca venues, international and digital), but we are not getting carried away. We are building on the momentum that we saw in H2 and are pleased with how this year has started.”
