Rank puts building blocks in place for strong H2

On first reading, The Rank Group’s H1 digital results last week were a bit of a mixed bag, however, when put into wider context the firm could well be one to watch over the next six months and beyond.

Firstly, the firm’s 11% revenue growth is not to be sniffed at, particularly in what is an ultra-competitive UK bingo and casino market where big brands appear happy to cling onto market share amid rising CPAs and aggressive mid-tier rivals.

Admittedly bingo failed to fire on all cylinders. Rank’s Mecca revenues were flat year-on-year across the period due to a disappointing bingo performance, although CEO Henry Birch pointed to the fact that the vertical posted 3% growth in Q2 as reason to be optimistic.

Describing the wider online bingo market as “relatively soft”, Birch applauded supplier Virtue Fusion for its proactivity in introducing a network-wide million-pound jackpot game in December to stimulate interest.

The CEO also revealed the firm had signed a new three-year agreement with the supplier, in what should be seen as a statement of satisfaction with its bingo offering. Virtue Fusion will also power Rank’s forthcoming Luda brand – billed as a “new concept” bingo product.

Moving focus

However, as Birch told EGR Intel, despite the strength of its Mecca brand and its Q2 performance, bingo was unlikely to be the operator’s main source of growth moving forward, or indeed its primary focus.

“Where we saw our main growth was in slots and casino on the Mecca side, and to us that suggests where the greatest potential lies,” Birch said. “If we look at some of our competitors, the ones who performed well over the past year are less bingo heavy.”

But to fully take advantage of this opportunity, the CEO says the firm must expand its number of brands in order to broaden its appeal to both ends of the customer spectrum.

“We were probably missing a trick by not having different brands to allow us to experiment a bit more,” Birch said.

“It’s a luxury to have a tried and tested and successful brands [such as Mecca] but it doesn’t give you that much room for manoeuvre in terms of trying new things, as there’s a danger you could alienate your existing customer base.

“We are genuinely excited about the launch of at least a couple of new digital brands this year,” he added. While details of these new brands were in short supply, one will be slots-led with the firm signing up a rake of new content providers over the past six months in preparation.

Off the box

Yet while revenue growth was positive, the firm’s operating profit slid 9%. However, there were a number of issues behind this which have since been addressed.

Birch was candid in admitting the firm’s major marketing push in H1 – which involved a series of TV adverts involving former popstar and recent Strictly finalist Louise Redknapp – had been a flop.

“The principle thing [behind the operating profit drop] was the TV campaign we ran which, frankly, wasn’t a success,” Birch said.  “In terms of adding any kind of meaningful digital customers, it didn’t deliver, so that’s really the main part – the increased marketing costs.”

The firm had planned to continue the campaign into 2017 but has since scratched the idea and binned the campaign altogether. Birch said the campaign was too brand-led and “fuzzy”, and suggested the firm would revert to call-to-action campaigns moving forward.

The withdrawal of the TV ads will result in some marketing savings and, as Birch said, isn’t likely to have a negative impact on customer acquisition moving forward, as the campaign hadn’t been delivering on that front anyway.

All for one

Another reason to believe H2 should be more profitable than H1 lies behind its recent company restructure, which saw previously brand-led divisions merged into one. As the firm readies a number of new brands, gone are the separate Mecca and Grosvenor teams, and in has come a single digital team.

This inevitably led to a number of departures, some senior, meaning long-term cost savings as Rank looks to become a more efficiently run business. Rents will also be reduced with the firm in the process of vacating its London digital-focused office as its tenancy winds down.

Another catalyst for this structural change was its recent move onto the Bede Gaming platform (the firm moved from OpenBet to Bede in early 2016), as Birch recognised “we now have the same product across the two [brands] in terms of slots and casino”.

Following some initial transitional hiccups, Birch said the Bede platform had performed well throughout H2 and had opened the door to its recent influx of content suppliers, primarily due to its ability to plug-in a wider range of third-party feeds, resulting in a more competitive casino product.

Marketing levers

Furthermore, the Bede platform also adds a level of CRM sophistication that the firm didn’t have before and which Rank hopes to further leverage to its advantage in the coming months, particularly as it expands its brand portfolio giving it the ability to cross-sell customers between brands.

Grosvenor continued to grow during the period – its revenues were up 39% with the firm boosted by the addition of a Kambi-powered sportsbook, which Birch noted had a positive impact on retention numbers. The exec, however, said the firm had no plans to launch a standalone sportsbook brand.

The introduction of a Coral Connect-style single wallet is also expected later this year. Birch believes the omni-channel wallet could well be Rank’s “game-changer” and the much needed bridge between retail and online where cross-over so far has been weak (the number of retail customers using digital nudged up just 0.3ppt and 0.5ppt for Mecca and Grosvenor, respectively). Only time will tell what impact this new wallet will have.

But with a platform migration now complete and bedded in, a company restructure finalised, a more competitive casino product introduced and an expensive and unsuccessful TV advertising campaign pulled, it would appear the firm is moving into a sunnier trading period.

With the addition of a number of new brands imminent and further improvements in CRM expected, 2017 could well be the year Rank becomes a digital business to contend with, across all verticals.