Casino operator Rank issues second profit warning

UK gambling company Rank Group has issued its second profit warning this year as customers at its Grosvenor casinos bet less because of cost of living worries.

Rank on Friday cut its underlying operating profit forecast for the 12 months to the end of June 2023 from about £40mn to £10mn-£20mn, citing poor performance at its 51 Grosvenor venues nationwide.

Weekly net gaming revenues stood at £5.8mn during the second quarter, only marginally ahead of the previous three months. Rank said an anticipated uptick in revenues had “not yet materialised, driven by lower customer spend per visit”.

“Grosvenor venues have shown signs of improvement in recent weeks and there are robust plans in place to drive revenues, however the return to growth will take longer than previously expected due to the current challenging macroeconomic backdrop,” the casino and bingo hall operator said.

On Thursday electronics retailer Currys also issued its second profit warning this year in a further sign of the downturn hitting consumer-facing businesses.

Rank said the year-to-date performance at its 64 Mecca bingo venues “also creates a level of downside risk to the full year out-turn”. The World Cup and colder weather had combined with existing cost of living concerns to lower visitor numbers at Mecca bingo halls, the company added.

However, Rank’s Spain-based Enracha bingo halls continued to perform strongly because of “Spanish customers being less impacted by cost of living pressures”.

Rank’s chief executive John O’Reilly said “weak consumer confidence and pressure on disposable income” had resulted in “a tougher than expected trading environment” for the group’s UK venues, particularly the Grosvenor casinos where spend per head was down on expectations.

Rank in June lowered its earnings expectations for the last financial year, citing a weaker than anticipated pandemic recovery.

O’Reilly said that while he expected the challenges to “continue to impact our recovery”, Rank had “implemented a series of measures to deliver incremental cost savings and to drive revenues”. These measures include venue upgrades and investment in the group’s digital product.

Shares in the FTSE 250-listed company fell 8 per cent to about 74p in early morning trading on Friday.

“Even a modest shortfall in visit numbers and spend per head has a material impact at the bottom line,” said Peel Hunt analysts, noting that Rank’s “mid-teens” margins were already squeezed by a £50mn increase in costs, driven primarily by wage and energy inflation.

“However, we expect investments targeting repositioning to mass-market consumers to pay off,” they added, describing the profit warning as “a delay not a defeat”.