Can Rank cause a stir in the UK?

In the middle of the flurry of Q1 results releases it was easy to miss the brief trading update from the Rank Group, but it is well worth a second look. While it was light on detail, it provided an interesting counterpoint to those from its sportsbook rivals and the prevailing narrative they presented.

In contrast to single-digit gaming growth at the major sportsbooks, Rank announced digital revenue grew by 13% for the 46 weeks to 14 May 2017. The larger Mecca Bingo digital vertical saw revenue grow by 2% in the period, but Grosvenor Casinos’ digital arm was up 35% year-on-year.

No further guidance was offered, but in Rank’s H1 report for the six months ended December 2016 Grosvenor Casinos digital revenue was £19.3m with Mecca’s £33.1m. This suggests a total online gaming business in excess of £100m in annual run-rate revenues and 4% market share of the UK casino sector.

It’s perhaps surprising that Rank is so often dismissed or ignored in discussions over the major players in the UK market. But in truth it holds some major advantages, and a lot of headroom for growth.

Beating the trend

Where Rank’s results are most interesting is in direct contrast to those from the sports betting-led UK sector, which almost unanimously reported significantly slowdown in gaming growth during the first quarter. Ladbrokes Coral and William Hill reported 6% and 8% gaming growth respectively, while Paddy Power Betfair showed just a 2% increase.

The general story being presented is of a gaming market that is struggling for growth. “The market is competitive and growth is slower than it is in sports. It’s difficult to get an accurate read, but it’s probably low single digit,” Ladbrokes Coral CEO Jim Mullen said on an analyst call after its Q1 results. But the Rank numbers suggest an alternative tale.

Along with LeoVegas, which posted 19% growth in the UK during Q1, Rank bucked that trend in fairly spectacular fashion with its casino brand. Granted both are coming from a far lower base, but to suggest the UK gaming market is in slowdown because of the travails of the sports betting sector may be missing a trick. This is a market in a state of change.

Grosvenor Casinos’ digital arm reported a 35% YoY increase in revenues

Both Ladbrokes Coral and Paddy Power Betfair commented on the changing nature of the UK casino sector in their recent results. “We may have to think about the broader proposition and we’ve talked about the emergence of some of the softer gaming brands,” Breon Corcoran, Paddy Power Betfair CEO, said in response to concerns over its weak gaming performance in Q1. “We will fix the stuff we can fix and think about our brands and if they can stretch to where the market is.”

Stretching to fit

The question is has Rank stretched there already? What it has are brands capable of speaking to differing demographics and a platform (Bede) that potentially offers some points of differentiation. Its Grosvenor Casino brand seems aimed at the high-roller end of the market, while Mecca caters to the traditional soft gaming bingo customer and there is a new softer brand in the works.

Rank also has a strong management team including two experienced egaming executives in the shape of ex-William Hill Online CEO Henry Birch and long-time Ladbrokes director of gaming Colin Cole-Johnson. And it has recently undergone some significant heavy lifting in the shape of operational reorganisation with digital now run through a single central team and a new customer contact hub.

It’s also added back sports betting and poker products, as well as upgrading the content on both the Mecca and Grosvenor sites. But what it does now is more interesting. Against a backdrop of social-gaming style sites, such as Casumo, beginning to break through in the UK and more simple mobile-focused slots sites is there room for Grosvenor’s more traditional gaming brand to cut through?

That’s entertainment

What it will hope to do is benefit from the wider shift of casino into mainstream entertainment, a pivot not as instantly available to its sportsbook peers that have brands far more gambling-focused. But it also faces both a problem and an opportunity in the shape of its well-established Mecca Bingo brand.

The bingo sector is stagnant and in danger of going into decline in H2 with the smaller firms potentially squeezed out by the increase in operational costs and marketing restrictions. Although an acquisitive approach here coupled with a repositioning of the brand and content for a newer audience may pay dividends.

But it’s casino where most will be watching closely. Grosvenor’s growth seems to be levelling off a little (down from 39% in H1 to 33% for the 46 weeks) but as the leading land-based casino brand in the UK it’s still a very underexploited asset – although its soon-to-be launched omni-channel single wallet may go some way to addressing this. Casino is a key focus for every major online egaming firm in 2017 and Rank appears to have some inherent and recently developed advantages in the market share battle.

It may not yet be the one to fear, but it’s certainly one to watch.