The Rank Group has cautioned that the British retail gambling sector is facing cost burdens and that the upcoming months will be challenging, as the company experienced a substantial £101.2 million loss in the initial three months.
Rank Group highlighted that since the removal of restrictions and other pandemic-related actions, energy expenses in the UK have skyrocketed, wage inflation remains elevated, the return of international travelers to London has been sluggish, and consumer discretionary income is under mounting strain.
The operator of Grosvenor Casinos and Mecca Bingo stated that while they witnessed robust trading during the Christmas and New Year period, and this momentum persisted into the first three weeks of January 2023, the cost of living pressures are likely to continue influencing British retail customers in the coming months.
This, combined with a persistent tightening of the regulatory landscape, particularly in terms of customer affordability constraints, could create a difficult period for Rank and other land-based gambling operators. Rank has already forewarned that it will be reducing expenses.
The chief executive officer of Ranks, John O’Reilly, declared that the revival of their British locations, Grosvenor and Mecca, has been slower than initially predicted following the global health crisis.
Although they witnessed robust business activity during the Christmas and New Year period, they foresee a difficult landscape in the upcoming months due to persistent cost pressures within the hospitality industry.
In spite of these obstacles, business is improving as they invest in product and property quality, introduce novel gaming concepts, and re-engage inactive customers with the thrill of gaming.
Ranks’ income for the six-month period concluding on December 31, 2022, reached £338.9 million, representing a 1.6% year-on-year increase.
Grosvenor venues contributed £153.4 million, a 4.8% decrease year-on-year, primarily attributed to the slower return of London travelers and financial limitations on high-end patrons.
Mecca venues experienced a 4.1% year-on-year rise in revenue to £65.5 million, but Rank noted a reduction in customer growth compared to pre-pandemic levels. Customer visits increased by 4.0% year-on-year, but they observed a decline in visits from older players.
Spanish entertainment venues witnessed a substantial 25.5% surge in income, hitting £17.7 million, driven by the sustained robust recovery of the nation’s retail sector from the pandemic. Nevertheless, despite a 16.0% annual rise in customer visits, they remain 14.0% below pre-pandemic levels.
Moving to the digital sphere, revenue in this sector expanded by 9.5%, reaching £100.8 million, which Rank characterized as a “strong” performance in this area of the business. Mecca’s digital revenue totaled £36.1 million, Grosvenor generated £27.8 million, Enracha/Yo contributed £11.6 million, and Stride’s traditional brands added £25.3 million.
Regarding expenditures and the cost of goods sold, the figure reached £303.8 million, a 61.9% increase compared to the 2021-22 fiscal year. Meanwhile, operating costs climbed by 10.7% to £136.4 million, with total finance costs amounting to £6.1 million.
As a result, the pre-tax loss amounted to £107.1 million, compared to a profit of £101.5 million in the corresponding period the previous year.
After incorporating a positive tax impact of £5.9 million, the total net loss for the first half of the year reached £101.2 million, a stark contrast to the £84 million profit recorded in the first half of the 2021-22 fiscal year.
“I am deeply appreciative of the dedication of colleagues across the group to customers and the local communities they serve, and for the progress we are making in Rank’s ongoing transformation,” said O’Reilly.
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