August 16, 2018 / 5:01 AM / 3 months ago

New Rank boss spins wheel on turnaround plan after profit plunges

(Reuters) - Shares in Britain’s Rank Group (RNK.L) fell as much as 7 percent on Thursday after the bingo and casino hall operator posted a 40 percent drop in full-year profit and its new management announced a plan to boost revenue and cut costs.

Seeking to attract and retain new customers as fewer younger people visit its Mecca bingo halls and Grosvenor casinos, Rank is targeting online and digital platforms to bolster revenue.

“With the backdrop of a disappointing performance in 2017/18, we are now moving quickly to identify the key priorities,” said Chief Executive Officer John O’Reilly, who took up his role only three months ago.

The programme would run for about three years, O’Reilly told Reuters. The company said the plan was in the development phase, but that it is expected to be self-funded this financial year.

“It is early days in sort of identifying what the costs of the programme is going to be,” O’Reilly added.

Rank recruited Jim Marsh, previously a partner in McKinsey & Co’s transformation team, for the role of chief transformation officer.

It also named James Pizey as interim chief financial officer on Thursday, with current finance director Clive Jennings set to leave at the end of the week.

The company said trading for the first six weeks of the current year was challenging as unusually warm weather made indoor venues less attractive. Rank said full year 2018-2019 results would be in line with current market expectations.

The gambling sector has faced tougher regulation. In 2017, Britain’s Gambling Commission set out anti-money laundering rules which included identifying and verifying all customers on entry and when customers spend or win 2,000 euros.

The rules hit Rank’s UK digital business and revenue at its Grosvenor business, with growth slowing in the second half as customer visits dropped.

Full-year revenue at its UK digital business, which runs websites such as meccabingo.com and grosvenorcasinos.com, grew 9.9 percent, but operating profit fell 7.9 percent, hurt by higher employment costs and a change in tax rules on gambling.

The company’s full-year operating profit before exceptional items fell about 8 percent to 77 million pounds, in line with its revised estimate.

Total revenue fell 2.2 percent to 691 million pounds, with like-for like revenue from its venues down 3.9 percent.

Shares of Rank recouped some of their initial losses to trade down 2.3 percent at 172 pence by 0915 GMT. Guoco Group Ltd (0053.HK), controlled by Malaysian billionaire Quek Leng Chan, has had majority control of the British bingo and casino operator since 2011.

Reporting by Sangameswaran S in Bengaluru; Editing by Amrutha Gayathri

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