Rank Group revenue plunges 55% in H2 2020 on lockdowns and Stride struggles

Rank Group has reported a 55% year-on-year drop in overall net gaming revenue (NGR) for the second half of 2020 to £177.6m. Venues-based revenue plummeted a record 70% during H2 from a high of £306m to a low of £90m, as the business was severely impacted by Covid-19 lockdown restrictions across the UK. Revenue from the digital business, including the Grosvenor and Mecca online brands, came in flat at 1%, increasing to just £66m as the Maidenhead-based operator struggled to migrate players online with venues shuttered. Non like-for-like digital revenue, which includes the acquired Stride brands, sank by 14%. As a result, the London-listed company reported an operating loss of £52.9m for the six months to the end of 2020, down 196% from the prior reporting period, with a similar profit after tax decline of 222%.

At a digital divisional level, Grosvenor NGR fell 10% during H1, although Q2 revenue increased 31% on Q1. Mecca digital H1 revenue dropped 1%, but NGR from the acquired Stride brands tumbled 41% during the period on a proforma basis. Rank attributed this decline to measures taken to “harmonise” safer gambling standards by bringing them in line with its other brands. The biggest growth in digital during H1 came in the Spanish-facing Yo Bingo and casino business, where NGR jumped by 52%. Looking ahead, the operator revealed the migration of its two flagship Mecca and Grosvenor digital brands to the Stride proprietary technology platform would take place in H2 2020/21 and H1 2021/22 respectively. The migration follows the transfer of the Bella Casino brand onto Stride in November 2020. Former Stride Gaming CEO Eitan Boyd, who had previously served as MD of Rank Interactive following the Stride acquisition, has been appointed as chief innovation officer of the digital business. A recruitment process is currently underway for his successor, with Rank Group CEO John O’Reilly taking control of the digital business until a replacement is found. “There is no doubt that the impact of the Covid-19 pandemic has been far beyond anything we or any other leisure operator could have imagined or planned for,” O’Reilly said. “The ever-changing restrictions coupled with curfews, which in particular have a seismic impact on our Grosvenor venues, have resulted in an exceptionally challenging first half for the group. “There continues to be uncertainty looking ahead, particularly as our venues remain closed and we have no firm guidance as to when we will be able to reopen,” O’Reilly added. Despite deepening losses, the CEO sounded a defiant note: “We remain focused on managing our liquidity position and, following the successful £70m equity placing in November 2020, combined with the support of our lending banks, I believe we have the balance sheet strength to survive an extended period of closure,” O’Reilly explained. “We are now focusing on delivering the next stage of our transformation plan and are ready to reopen our venues when the virus is under control and the vaccine roll-out has achieved its purpose,” he added. O’Reilly’s defiance was echoed by investment bank Peel Hunt, which reiterated its Buy rating based on the operator’s vast cash reserves, despite lowering 2021 EBITDA forecasts. “Rank ended H1 with £128m of cash and facilities; £16m more than our forecast,” wrote Peel Hunt analyst Ivor Jones. “We estimate that the group would have adequate liquidity even if the venues did not open until June, but we expect reopening to start before then. As expected, we are lowering our full-year EBITDA forecasts but this does not impact our view on Rank’s potential value. We reiterate our Buy recommendation and 240p target price,” he added. Rank shares were down 1.43% to 124p in early trading.