Smoke ban and law changes hit Rank

Published on Wednesday 12 December 2007 11:52

LEISURE group Rank has said its future is "uncertain", after seeing the effects of the smoking ban and "restrictive" changes to gaming regulations further cut revenue at its bingo halls and casinos.

In a trading statement, the company announced that performances of its Mecca Bingo and Grosvenor Casinos chains had deteriorated from September 2007.

Like-for-like revenue for Mecca Bingo in the year to date was down four per cent on the comparable period in 2006, with admissions down seven per cent, although the amount spent by each customer rose by three per cent.

Like-for-like revenue at its Grosvenor Casinos was down four per cent.

The company, which also owns online gambling site Blue Square, said the loss of Section 21 gaming terminals in both businesses had compounded the earlier effects of the smoking ban and a weakening in consumer confidence.

The company saw a significant decline over the 14 weeks from September 1. At its Mecca halls in Scotland, which include two in Edinburgh, revenue declined by three per cent, with admissions down 13 per cent and spend per head up 11 per cent.

At Mecca halls in England and Wales the situation was worse, with revenue down by 20 per cent, admissions down 16 per cent and spend per head down five per cent.

Revenue across the group dropped two per cent over the year. Rank said its performance had stabilised since October, and that it expected group operating profit for 2007 to be broadly in line with market expectations. It has also announced that it will not pay a dividend to shareholders this year.

The group paid 15.6 million on its final dividend of 4p a share last year, but its share value has more than halved this year.

The drop since September came after the introduction of laws limiting the number of high-value jackpot machines across Rank's 102 halls.

Mecca's gaming machines contributed more than 70m to Rank's revenues last year. Each club had 13 500 jackpot machines, but this has been reduced to just four.

The company announced a number of measures to tackle the decline at its bingo halls, with immediate work including a step-up of the roll-out of electronic bingo. More than 5000 units have already been deployed across 99 clubs.

The company is also working to develop outdoor gaming areas to get around the smoking ban, with twenty-five already operational and a further five set to open before the end of the year. A new range of food and drink is also to be tested on customers next year.

The company said: "We have undertaken a thorough review of trading in Mecca Bingo, to identify and understand the key drivers of our recent performance. The scope of this review encompasses market conditions, customer attitudes, competitor activity and the effects of our own actions.

"The short-term trading outlook for Rank remains challenging. However, the Board remains confident in its long-term strategy to generate value for shareholders by taking advantage of the anticipated growth in leisure-based gambling, primarily in the UK."