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Edited Transcript of RNK.L earnings conference call or presentation 30-Jan-20 9:30am GMT

Half Year 2020 Rank Group PLC Earnings Presentation

London Feb 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Rank Group PLC earnings conference call or presentation Thursday, January 30, 2020 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* John O'Reilly

The Rank Group Plc - CEO & Director

* William Floydd

The Rank Group Plc - CFO & Executive Director

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Conference Call Participants

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* Gavin Kelleher

Goodbody Stockbrokers, Research Division - Investment Analyst

* Greg Johnson

Shore Capital Group Ltd., Research Division - Research Analyst

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Presentation

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John O'Reilly, The Rank Group Plc - CEO & Director [1]

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Good morning, everyone. I'm John O'Reilly. I'd like to welcome you to The Rank Group results presentation for the half year to the end of December 2019. Thank you for joining us this morning either here in person or via the web. Bill will take you through what are a really good set of numbers, I think, in a moment. But before he does, just a quick comment from me on the overall picture.

When we published our '18/'19 results last August, we're able to present a much better second half set of results than we had in the first half, having reported an underlying profit of just GBP 30.3 million in half 1 2018/'19, our second half operating profit rose to GBP 42.2 million. You'll have seen from today's results announcement that we've maintained that trajectory with an operating profit of GBP 55.1 million in the first half of this year. And we've also provided guidance on an operating profit for the full year of between GBP 105 million and GBP 115 million before the impact of IFRS 16, which represents a considerable step forward on last year's GBP 72.5 million.

The transformation program we began planning as a team shortly after I joined Rank in May 2018 is taking its effect on the business. We delivered significant cost-saving efficiencies early in the program, and you can see that coming through very clearly in today's results, particularly in the Grosvenor venues business, but we can only take out costs once. So far more importantly for me is our ability to grow revenues. And we can see that happening, with like-for-like revenue up 10% year-on-year for the group in the 6 months to December.

Now we further strengthened the Rank management team. We completed the acquisition of Stride Gaming in October, and we're now busy implementing the early stages of the post-merger integration plan, which will drive significant synergies as well as bringing all of our businesses on to proprietary technology. We've made encouraging start in the second half of the year in terms of continuing to drive that revenue growth. And we set out on a program to transform The Rank Group, and we're pleased with the progress we're making. I'll run through some of the highlights of that progress, and we'll lay out what we're doing next after Bill has taken you through the financial performance for the 6 months to December.

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William Floydd, The Rank Group Plc - CFO & Executive Director [2]

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Thank you, John, and good morning, everyone. Moving straight into the overall financial headlines.

Like-for-like revenue grew by 10% across H1. Like-for-like operating profit is up by 70% from a combination of cost initiatives flowing through from last year and operating leverage from revenue growth. The improvement in operating profit flowed through to the 72% improvement in underlying EPS, resulting in a 30% increase in the interim dividend to 2.8p per share. I expect the Board to maintain our approach to the dividend, and therefore, expect dividend cover of 2x underlying EPS at the full year. We ended the half with net debt of GBP 59 million before the impact of IFRS 16, demonstrating that the business continues to be a strong cash generator.

Moving to the revenue and profit by segment and the key highlights. Digital includes Yo but excludes Stride for the remainder of the year. Digital delivered 14% growth, driven by Mecca and Grosvenor brands. Digital profitability was impacted by the RGD and depreciation headwinds that we flagged at the beginning of the financial year.

Grosvenor has performed strongly with revenue driven by successful investment returns and improved win margin on the tables. Grosvenor profitability was also underpinned by the flow-through of casino operating model changes made this time last year. Mecca, which excludes the results of the 5 clubs sold during the half, performed steadily, with revenue marginally less than last year and ongoing cost initiatives delivering stable profitability.

International venues performed well, again underpinned by our investments. The increase in central costs is caused by a change in where we report the cost of the transformation team, which was previously included in exceptionals, incentive accruals and an increase in IT depreciation costs. The underlying central costs are in line with the second half of last year.

Now turning to the detail of each of the businesses and starting with Digital. Revenue grew by 14%, with the U.K. brands up 16% in aggregate, offset by a 2% decline in Yo. Mecca grew by 13%, underpinned by strong promotional activity and customer journey improvements. Mecca also launched a new customer reward program, including greater flex -- introducing greater flexibility and speed of response to changing consumer behaviors.

Grosvenor grew by 21%, 1/3 of all Grosvenor revenue is from multichannel players. We also rolled out the new content management system, which allows us more opportunity to deliver a better user experience on the front end. Yo's revenue decline of 2% was disappointing, but we remain confident in Yo's prospects. The team is small and has been chasing too many priorities. We've made some changes to the management team and the approach to marketing. YoCasino went live in mid-December. It is early days, and the KPIs are in line with the business plan.

Digital profit fell by GBP 2.1 million, absorbing the impact of a GBP 3.8 million increase in U.K. Remote Gaming Duty and a GBP 2.2 million increase in depreciation from Grosvenor One and CMS.

On Stride, the key focus in the first 3 months of ownership has been to reverse the sharp revenue declines in the previous quarters. Revenue performance has progressed month-on-month through the quarter. And with easier comparatives in the second half, I'm confident that the business will return to growth in H2.

Integration activity is well underway. We remain confident in our cost synergy commitment of GBP 13 million in year 3, and I would expect us to deliver GBP 2 million to GBP 3 million of that in the balance of this year. The initial work also confirms our view on revenue synergies from adopting the best practices in both businesses.

We're clearly very pleased with the progress in Grosvenor, albeit against weak comparatives, but nevertheless, demonstrating the opportunities available with targeting investment in offerings that excite and entertain our customers. Revenue growth of GBP 26.1 million was driven by growth in London of 23%, where we focused our investments, and growth in the rest of the U.K. was strong at 10%. I'll give you some more color on the revenue growth on the next slide.

Profit growth was even higher at GBP 26.5 million as we maintained our focus on the cost base. We've now substantially delivered the annualized savings of GBP 19 million from the casino operating model changes.

Going the other way on cost, tax and duty payments increased by GBP 7.2 million to GBP 44 million. To give you a little more color on Grosvenor's revenue performance, this slide takes you through the key changes from a year ago. Handle growth was driven by the underlying base rather than major players. Table margin improved by 80 basis points. Whilst I'm hopeful that the improved margin results from tightening up on how we play the game, it's still early in the changes to know this for sure. There were no underlying individually material customer wins or losses in the half.

As we've said before, we made substantial investments in electronic roulette. We focused this investment in 33 clubs, which drove a revenue increase of GBP 10.1 million. The other 19 clubs did not get machine investments or layout changes, but improved by GBP 1.5 million, and these clubs have benefited from network and game improvements.

We invested significantly in slots across the estate, driving revenue growth of GBP 4.4 million. The payback on this investment is likely to be well under 2 years.

Finally, there is a significant reduction in free bets from the removal of the Play Points scheme. This will annualize during Q4. We will not be ready with the new rewards scheme until the first quarter of the next financial year. The new scheme will have a more disciplined approach from both the safer gambling and the financial returns perspective.

In Mecca, revenue was flat in Q1 and fell back by 2% in Q2 for a 1% decline across the half. Visits were down by 5% and spend per visit improved by 4%. Profitability was in line with last year as we continue to make minor adjustments to the club operating model and focused marketing spend wherever possible. Arresting the decline in visits remains the key strategic challenge for Mecca, and we're starting to increase our efforts on trialing new formats and doing some targeted low-cost club makeovers in a small number of venues.

International venues performed well in the half. In Enracha, all clubs delivered growth. Q2 growth acceleration was underpinned by the completion of floor layout changes and gaming machine investments in 4 clubs. Our next development in Enracha is to open a new club in Girona utilizing a dormant license. The format of the club will be a low-cost model, emphasizing gaming machines and sports betting alongside a refocused bingo format. The casino in Blankenberge again performed well, with 12% revenue growth across the half as we continue to refine the offer to meet local demands more closely.

On the statutory income statement, the key point to note here is the impact of IFRS 16 on the shape of the income statement. The H1 outcome on IFRS 16 is very much in line with the guidance we provided at the beginning of the year. The increase in operating profit in H1 was GBP 3.8 million, with the removal of rental costs of GBP 18.9 million, offset by an increase of GBP 15.1 million in depreciation. The operating profit improvement is offset by an increase in financing costs of GBP 4 million. At an EPS level, this results in a 0.1p reduction in EPS for the half. The increase in financing charge is also driven by the drawdown of a GBP 128 million Stride acquisition facility at the beginning of October. For the second half, there will be an increase for a full 6-month cost rather than just the 3 months we had in H1.

I'll show you the breakdown of separately disclosed items in a moment. The tax charge represents an effective tax rate of 18.7% on underlying profit, in line with the headline corporation tax rate, and I still expect the full year rate will be around this level. As we noted at the beginning of the year, we've sharpened our classification and disclosures around items that do not lend themselves to understanding the underlying performance of the business. There's a significant amount of information in the RNS to fully explain what qualifies for separate disclosure. In the half, we completed the disposal of 5 Mecca clubs, realizing a profit of GBP 1.8 million on those disposals. We now include amortization of acquisition-related intangibles as separately disclosed item, given the increased materiality following the Stride acquisition. The charge for Yo for the half is GBP 1.6 million. The Stride charge is GBP 2.1 million and is provisional and for 1 quarter only. Acquisition costs of GBP 1.8 million entirely related to the Stride acquisition.

There were minimal transformation costs in the half as we move the costs of the team into the results of the underlying business. Anticipate restructuring costs in H2 of around GBP 5 million. We continue to work with HMRC on the technical breach of the national minimum wage regulations, and I still fully expect to conclude this matter within the financial year and within the existing provision.

The cash flow here has stripped out the effects of implementing IFRS 16 to aid comparability. Cash inflow from operations was strong at GBP 87 million, representing the operating profit of GBP 56 million, a GBP 22.7 million add-back on depreciation and a working capital inflow of GBP 9.3 million that I expect to reverse in H2, in line with previous years.

CapEx in the half of GBP 23 million was driven by the Brighton investment, gaming machine upgrades, International venues developments and the completion of the content management system in Digital. At the beginning of the year, I targeted CapEx of GBP 35 million to GBP 40 million this year, and we will likely be at the top end of or slightly above that range, given the strength of payback on the investments made so far. We remain rigorously focused on projects that drive fast returns and are starting to drive internal competition for funds.

The Stride acquisition cash flow of GBP 85.5 million is comprised of the headline acquisition cost less the cash in the business on completion. The increase in interest and tax cash flows is substantially in line with the increase in the P&L costs, and there will be a similar cash outflow in H2.

With strong trading over Christmas, we upgraded our guidance for underlying operating profit to be between GBP 113 million and GBP 123 million, including the impact of IFRS 16.

Looking ahead to the second half, the key points I would like to highlight are: Grosvenor revenue is seasonally weaker in H2 and the impact of the stronger win margin we had in H1. There will be a full 6 months trading of Stride. I'm not expecting a material impact from the credit card ban that's effective from the 14th of April because only around 5% of U.K. digital deposits are made using this payment method. Elsewhere, I'm anticipating the trends of H1 to broadly continue, resulting in a full year underlying EPS of around 21p to 23p.

I'll now hand you back to John to take you through the rest of the transformation and strategy update. Thank you.

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John O'Reilly, The Rank Group Plc - CEO & Director [3]

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Thanks, Bill. So as you've seen, we've continued to make good progress in the first half of the year, with underlying profit on a like-for-like basis of GBP 55.1 million, an increase of 70% on the back of net gaming revenues up 10% and some significant cost savings coming through from the first stages of the transformation program. Now that 10% growth in NGR for the group this half compares with a decline of 3% in the first half of last year. We've delivered good revenue growth in both the Mecca and Grosvenor digital businesses. The Stride business is recovering from disappointing trading pre-completion, but a much improved Q2, and there is now considerable focus in ensuring Yo gets back into growth in Spain. Overall Digital revenues, excluding the impact of Stride, grew 14% in the first half. Our Grosvenor venues have grown revenues 15% on a like-for-like basis in the first half compared with a decline of 6% in the half 1 last year. We're seeing excellent returns on the investment we've been making in improving the quality of our management team, our venues, our gaming products and our technology.

Mecca was broadly flat. Revenues declining just 1% in the half, but with a renewed focus on transforming the business as we move into the second half. And Enracha, our Spanish bingo sports electronic gaming venues business, had an excellent first half, also on the back of investments in products and venues. So there's momentum right across the group with new initiatives coming into the transformation pipeline. And we're certainly not short of opportunities to better meet the needs of our customers, providing exciting, entertaining and safer experiences within our venues and in our online business.

And our key priorities haven't changed. And so you've seen these before. They are to increase our focus on the customer, to grow our Digital business, to drive cost efficiencies and to improve our organizational capability and all to be delivered within the framework of the transformation program, which provides the necessary rigor around the process from idea generation, evaluation, prioritization and resourcing through to its implementation with military precision.

And then we're not getting everything right, of course, but we've significantly improved our processes and with it, our effectiveness. And I thought I'd cover some of the key initiatives, which are effectively delivered against each of these priorities in the first half.

So in terms of increasing our focus on the customer, our purpose as an organization hasn't changed from that which I inherited, which is to excite and to entertain our customers. And we've injected a growing emphasis on ensuring we're providing excitement and entertainment with an increasingly safer environment. My challenge to the team when joining the group was to demonstrate that to excite and to entertain was really underpinning our strategy and our tactics. I mean it certainly is now.

In Grosvenor, we've been investing in our customer offering to broaden its appeal. The casino has to deliver a good know-how. It has to provide glamor, excitement, entertainment and fun. And we have to give our customers more reasons to come and play than just to play roulette, and this requires investment in the quality of our management team, our products and services and our venues. And we're seeing excellent returns on that investment. Over the past 18 months, we've been gradually improving the customer offering in our flagship casino in London, the Vic on the Edgware Road.

And we've strengthened the team. We changed the floor plan to use the space more effectively. It's significantly improved customer journeys in the venue. We've replaced all of the electronic gaming machines, and we reintroduced controlled customer entry through ID scanning. We've improved the food and beverage offer, and we've added significant sparkle to the club. And we have further plans to the Vic in the second half. But in half 1, revenues at the Vic grew 20% year-on-year.

And a few more examples in London at the Rialto in Piccadilly. It's got an amazing cinema-style screen, which is worth a look. And we've got a new gaming floor layout, a completely new electronic gaming offering and have a great new bar upstairs, and its revenues have grown 27% in the first half. The Horseshoe again in Queensway has grown revenues by 23% on the back of a refurbishment and a change to the floor plan layout. And the Park Tower, we've improved by opening up the restaurant area, improving the bar and renewing the electronic gaming offering. Revenue is up 22% at the Park Tower in the first half.

Elsewhere, we refurbished our Sheffield venue, focusing on a new sports bar, a good dining experience and a new tournament gaming concept. Revenues have grown 21% in the first half. At the Maybury in Edinburgh, we've been working to restore the casino to its former art deco glory. Revenues have grown 31%. And Reading town center, we've improved the visibility of the venue and relayed the gaming floor to deliver 24% growth in revenue. And in just recent weeks, we've opened what we call Pier 9, a new concept casino in Brighton. It's right opposite Brighton Pier and offers a place for people to meet, to work, to rest and play. It's got a variety of bars, a variety of eateries, 2 casinos, competitive gaming, entertainment, karaoke and a lot more. And it formally launches this weekend. And if you get a chance, please do visit.

A few points I should make in the context of the development of Grosvenor. No 2 casinos are the same. No 2 casinos have the same customer profile. So in many ways, disappointingly, this is not about rolling out a one-size-fits-all fix. The quality of our management team is key to the success of the venue, and we've been investing in venues and in our people. The team is absolutely critical.

Now the change in B2 regulation in betting shops has undoubtedly contributed to our first half growth, but there's a stark contrast in the performance between those venues where we have a great team now matched with the renewed product offering and good facilities and those venues which we've yet to revitalize. Ultimately, the broadening of the appeal of the casino as a destination venue for having fun and excitement in a safe environment is the real underlying key to the improvement in the performance of Grosvenor over the past 12 months. Grosvenor One, our omnichannel service, is now embedded in our business, but we've got a lot of work to do to improve the proposition for our customers. Today's consumers seamlessly move between the physical and the digital world. And Grosvenor One is just the first iteration in terms of meeting their expectations.

In Enracha, we've similarly been investing in our venues and in electronic gaming offering and with good success. In Mecca, we've continued with -- to have some success with new variants of -- our new variants on traditional bingo, such as Bonkers and Bounce and Players and lots of other stuff with an increasing event schedule in the clubs. And we've had success in investment in our gaming machine offering in Mecca, too, but we get to do better than flat line revenue and to continue to focus on cost management.

That's now very much on the radar as we drive the next phase of Rank's transformation. And we continue to invest in our data capability to ensure data science can help us to better meet customer needs. In the Digital business, we're making further improvements to our safer gambling propensity model, which seeks to identify markers of harm, which trigger an interaction with a customer. And we further enhanced this with a model which assesses the customer's likely affordability. We're finalizing the build of a single-customer view across channel and delivering on a number of other initiatives within our safer gambling work stream, including controlled entry across the Grosvenor estate and improved facilities for capturing customer interventions in venues.

In terms of growing our Digital business, the launch of Grosvenor One, while still an early phase as a customer proposition, has helped drive the 21% growth in net revenue for the Grosvenor brand in the first half. And in that period, customers who played -- or customers who play in a Grosvenor venue accounted for 33% of our Digital revenues.

A new content management system, which gives us control of the front-end customer interface and key user journeys, has successfully rolled out to all Grosvenor customers, and the build-out for Mecca is now underway. Mecca's had a strong first half. Revenue is up 13%, with improvements to customer experience on site and an innovative promotional program for our customers. Coming up next is one of bingo's biggest events. We call it Mecca Fest. It's a celebration of bingo, both online and in our venues, and with a chance for customers to win a place at a unique celebrity-packed weekend at the Winter Gardens in Blackpool. The key development, however, in terms of driving our Digital business is, obviously, the acquisition of Stride Gaming, which we completed in October and its integration into our business. Stride delivers scale. It brings proprietary technology. It delivers significant synergies. It strengthens our management team. We've made a good start to the integration. Plans are well advanced. And just as importantly, the core Stride business has performed much more strongly in Q2. The core proprietary and nonproprietary bingo and casino businesses continue -- sorry, increased their revenue by 14% between Q1 and Q2.

The Aspers joint venture, which serves as an important case study for our future international growth ambitions, continues to deliver good growth, and the Passion Gaming Indian rummy business has seen very strong growth.

Now the new operating model within Grosvenor was fully implemented in March last year, so savings annualized early in half 2. GBP 8.2 million of savings were delivered in the second half of last year, with a full year annualized saving of GBP 19 million. The bulk of that additional GBP 10.8 million savings flowing through in the first half.

Another key area of cost saving in Grosvenor has been in player incentives. Across the board, Play Points have been replaced with more targeted offers and incentives at considerably lower cost. A saving of GBP 6.1 million was delivered in the first half, and we expect that to be worth about GBP 8 million across the full year. We're a little behind our plans in central costs, but have an initiative underway within the transformation program to decentralize costs into the business units in the second half. We've also moved transformation operating costs into business as usual.

So we continue to make progress in both the state management and procurement. We've been negotiating leases with some good successes in the first half. And in procurement, we've secured an additional GBP 2.6 million of annualized savings in the first half through gaming products and in food and beverage contracts.

The success of half 1 is a direct result of the management teams in each of the business units, who've driven the turnaround in fortunes of the group and now increasingly recognize the opportunities open to them. We continue to strengthen the management team at all levels. Jonathon Swaine joined us from Fuller's in October as the Managing Director of our venues businesses, Mecca and Grosvenor. Catrin White has joined us as Venues Marketing Director from Sodexo. Jonathan Plumb, formerly with GVC, is our new CIO, bringing a wealth of operational experience in the sector. Jon Soesan, formerly with Travelodge, has made an excellent impact as Regional Manager of our Grosvenor estate in Scotland and the Northeast. The former Stride team of Eitan Boyd and Darren Sims are now CEO and COO of the combined Rank Interactive business, with [Jon Martin] as CFO. And Ruth Johnson joined us from KPMG to lead our digital data management and analytics team.

But strengthening capability of our organization is not just about new signings. More importantly, it's building our capability from within. And much of the success in the first half is down to promotions within the business, which have seen people given a chance to demonstrate what they can do. And that's underpinned by an increasing focus on diversity and inclusion across the group to broaden both the experiences and capabilities of our management team.

So what are we doing next to maintain the upward trajectory? And what I've done in the next few charts is show you just some of the initiatives we got in train for the second half of the year as part of the next phase of the transformation program, and I'll highlight just a few of those initiatives before my voice finally gives in.

Here are the 5 work streams within the program focused on driving revenue growth. In recent months, we've been reviewing the learnings from the first phase of initiatives to ensure that going forwards we are targeting our efforts most effectively. In the marketing effectiveness work stream, we continue to work on optimizing our acquisition investment. Too much of our CRM activity is manually driven and work is advanced to provide much more automation to customer life cycle management. In the Digital work stream, we're working on quick win user journey improvements, introducing exclusive content, a new cashier for Grosvenor, which we introduced for Mecca customers in the first half very successfully, and a lot of actions in Stride to continue its turnaround. In Spain, we'll roll out a redesigned YoBingo on mobile and web by May, continuing the rollout of our gaming machine optimization work across the Enracha estate, and we intend launching Yo in Portugal by December.

Within Grosvenor, we're accelerating our investment in electronic gaming products and in our venue investments with refurbishments expected to start in Glasgow Merchant City, where we'll look to create the successful -- recreate the successful format that we've delivered into Sheffield and some smaller-scale investments in further 5 venues in the second half of the year, subject to planning consents.

In Mecca, we have a team working on making our proposition more relevant to today's consumer and anticipate a number of trial club refurbishments rolling out later in the calendar year. Work is underway on the omnichannel proposition for Mecca, and we're continuing to enhance the events and entertainment program across the estate. As I've said, much of the cost savings have already been actioned, but we continue to focus on process improvements, which can deliver important efficiency savings. In Grosvenor, we've been trying a process management tool, which helps our colleagues work more efficiently by directing them to task, which needs to be completed and sometimes evidenced. It's been very well received in our trial venues and has contributed to gaming margin improvements in those venues, too. Software will be rolled out across the estate in half 2, delivering some further cost savings in supporting the gaming margin. The second phase of optimizing our central support functions will commence in the second half. And we're also looking at improving our support office, ways of working in line with decentralizing those functions into the business units.

In procurement, we have major projects in train for the supply of wines and spirits, my specialist subject. The management of our facilities across the estate and renegotiating a number of our major technology suppliers. Also have a tender underway for the renewal of our network. Work continues on the transformation work streams, which we call our key enablers. In critical technology products, we expect to launch Mecca on the new CMS by the end of the year. We've completed the rollout of the new network, though I've mentioned early next year. I've also mentioned many of the safer gambling [instances], which will land over the coming months and note here the introduction of entry controls across the Grosvenor estate by May, dashboards for helping further identify at-risk play in Grosvenor venues by June and automated tools to more proactively encourage customers to set limits on machines by September.

And in the culture and capability work stream, we have a new diversity and inclusion strategy in plan, which will be implemented next month; a new online learning solution, which will be completed by March; a new charter for ESG by June; an ongoing initiative centered on the culture transformation journey.

And finally, but very importantly, the integration of Stride has now entered the transformation operating model. And here are just some of the work streams initiatives which are underway. In technology, we began -- we are now scaling up the migration team, working on the gap analysis of the Stride platform and finalizing the platform tool set. We anticipate having our first and a small brand migrated in October this year, with a full migration of Mecca and Grosvenor on to proprietary technology completed by October next year. We're well advanced in the new operating model for the combined Rank Interactive business, and we'll be implementing the first phase in the next 3 months. Clearly, we'll not finalize that new structure until the technology migration is completed late next year, at which point the full synergies will be released. More immediately, we will have consolidated media buying and affiliate management by March, have a single customer acquisition and retention strategy across the brands in situ by June and centralized in-house creative and design by August.

And in the support functions, we expect to have delivered economies in gaming royalties by May and harmonize our finance and reporting systems and merge our corporate IT systems by October. I hope that gives you just a flavor of some of the stuff that is in store in the transformation program in the second half.

So to the outlook. The transformation program continues to gain momentum with an increasing focus on revenue growth. Completing the Stride acquisition has enabled us to accelerate the next phase of growth in our Digital business. And we've got a lot to do to integrate the business over the next 1.5 years to 2 years. We've announced a full year underlying operating profit expectation of between GBP 113 million and GBP 123 million post-IFRS 16, any questions on which you must give to Bill, and we expect to drive further profit growth into 2020/'21 through the integration of Stride, the improving capability of the Rank management team and the key investment and other initiatives in the transformation of the group.

As Bill said, the second half has started well and in line with our expectations, and at which point, Bill and I will take any questions. Gavin? Can we get a mic, Frances?

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Questions and Answers

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Gavin Kelleher, Goodbody Stockbrokers, Research Division - Investment Analyst [1]

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Gavin Kelleher from Goodbody. Just a few for me, please. Just on the -- you mentioned the statement this morning about the 8 dormant licenses you have for Grosvenor and maybe plans to look at bringing them into action. What sort of time line are we talking about there? And when do you think there'll be decisions on those, when we could expect to see some of those come on stream?

In terms of Grosvenor, just so I'm clear, the 19 casinos that haven't had the roulette machine upgrades, that will be finished by May this year. So the entire estate will have the new roulette -- electronic roulette machines. And just on Enracha, you know a new kind of smaller concepts that you're trialing in Enracha. How big could that opportunity be?

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John O'Reilly, The Rank Group Plc - CEO & Director [2]

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Okay. Let me do it in the order you asked them, Gavin. Thank you for that. Planning, it's probably the biggest issue around dormant licenses. We've got 8. We've used a number of our dormant licenses as second licenses, where that's been facilitated by local authorities. And so we've done that with a number, but we've got 8 dormant licenses. We think we've got opportunities that we might be able to exploit 3 of those in the next 12 months, but it's all subject to planning consents. So -- and that's not easy, but that's our objective. And what is interesting is that having turned the corner in Grosvenor, suddenly, licenses that have been sitting there dormant suddenly looked interesting, yes. So it is early work in progress, but more as we progress.

In terms of the new machines, it's a little bit more complicated than the kind of what you might conclude from the broad summary that we've given you. Because, yes, we've upgraded machines across 33 of our venues, but we haven't completely upgraded the machines today across 33 of our venues. So it's a bit more complicated. But...

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William Floydd, The Rank Group Plc - CFO & Executive Director [3]

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Some of those upgrades, Gavin, we'll take them -- take them out of London and put it in provinces to replace stuff that's really old. So that's included in the 33 upgraded. But is there opportunity to do more with those clubs? Absolutely, there is.

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John O'Reilly, The Rank Group Plc - CEO & Director [4]

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So what we're working on is how quickly can we upgrade and how -- what is the point at which we get diminishing returns? We think we've got a lot of runway. Yes, we think we've got a fair bit of runway still to go with machines. And both gaming machines and electronic gaming terminals. So -- and in Enracha, that was a venues question, the Enracha, yes, okay. So look, it's -- the challenge with rolling out Enracha in Spain is twofold, I think. One is organic market entry is very difficult. Planning is not easy in Spain. So that's issue number one. Issue -- I guess, issue number two is that the political environment in Spain post the December election has probably made it a little bit more challenging for operators, I would say, moving forwards. And there are moratorium -- or moratoria because it's in more than one state currently, on new licenses being provided. So that probably impacts us. But look, if the right opportunities emerge for the Enracha business, we'd be keen to take a look. That's for sure. So yes, if opportunities come up in the Spanish market, we'd be keen. I mean, look, I think we've got probably the only branded -- really well-branded bingo and electronic gaming proposition in Spain, and the team had shown what a good job they can do with it.

Victoria?

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Unidentified Analyst, [5]

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Yes. Just as we were on Spain, quick question on YoBingo. Obviously, you're the biggest player in the bingo market. So if you're disappointed, is it because the market has slowed down or you're losing market share? And just obviously, casino being a much larger opportunity, if you could give us some indication on how -- the early signs for YoCasino.

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John O'Reilly, The Rank Group Plc - CEO & Director [6]

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So as Bill said, we're sort of in line -- on YoCasino, we're sort of in line with expectations, but we really went live at Christmas. So it's with -- on week 4, I think, or week 5. So it's very early days, but pleased with the initial progress. I think we had a -- we're disappointed by the YoBingo performance in the last 2 halves, actually. This time last year, the business was flying. But in the second half, it slowed and gone marginally backwards in the first half of this year. And I think we've been -- the management team have been very focused on the launch of YoCasino and a bit less focused on the development of YoBingo and now the priority moves back to fixing some of the challenges with the bingo product. It's a pretty simple proposition for consumer. It's got a great and very familiar brand, but there's more work to do to improve the proposition. So what we've been doing is focusing on strengthening the management team, strengthening the marketing capability within the team and strengthening our technical development team. We're in the process of doubling the size of our tech development team within the Yo business, which have relocated into Barcelona. So we've got a tech team in Barcelona that are now very focused on developing out the Yo proposition. So it's still kind of work in progress.

Greg?

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Greg Johnson, Shore Capital Group Ltd., Research Division - Research Analyst [7]

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Greg Johnson, Shore Capital. On Grosvenor digital, you talk a 30 -- 1/3 of the revenue now from Grosvenor One. Can you provide a little bit more color on sort of the key KPIs you're seeing from those customers, the multichannel customers, how that compares with sort of standard digital players? And any kind of sort of aspirations of where you think you could take that sort of share of total Grosvenor digital revenue out of Grosvenor One players and what you need to do to get there?

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John O'Reilly, The Rank Group Plc - CEO & Director [8]

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Okay. So I think we've made a reasonable start. So just correct one small thing, is that the 33% of revenue in the first half is from customers that are playing multichannel. So they're not necessary. They've not necessarily registered through Grosvenor One. A lot of them will have done, the majority will have done, but it's a stat for customers that have played in both the venues, both Grosvenor venues and Grosvenor digitally in the first half of the year. And that's a significant step-up. And that step-up has been largely driven, very largely driven by Grosvenor One. Grosvenor One delivers a single account and wallet to the customer that enables them to play through that wallet, both in the venues and online so you can withdraw and you can deposit and play multichannel with your single account. And it's early progress. I think -- the way I think about it in today's world is that consumers do seamlessly move between the physical world and the digital world. And having a single account and wallet is just one component of that. And we've delivered the component, and that maybe the most difficult bit and the most technically complex bit, but it's only part of it. So we need to -- and we are -- we have plans in train in the transformation program to deliver what I think actually is optimizing the experience for the customer between those 2 channels. And we haven't delivered that to the consumer yet today. So there's a lot more work to do to optimize and improve to meet, I think, one of today's consumers' expectations when they move seamlessly between one world -- one channel and another. So work to do. What -- I don't want to give you any metrics. But what's clear from all the numbers coming through, if a customer is playing across channel, they're more loyal in both channels. And the revenue benefit is more significant in the digital channel than it is in the venues channel, but it's significant in both. So that's the picture. And that's not uncommon because that is my experience elsewhere.

Any more questions? Nothing on IFRS 16? You obviously have -- hopefully, we're able to do this next year with IFRS 16, that will be never mentioned ever again, hopefully. But anyway, there we are. We probably got at least one more round of results before we actually get the -- at some point, we will no longer have to and comparables will be restored.

Thank you very much indeed for coming this morning. Very much appreciate it, and we'll see you, hopefully, with a good set of results when we get to the year-end. Thank you very much.

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William Floydd, The Rank Group Plc - CFO & Executive Director [9]

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Thank you.