The Rank Group H2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2025

Key Takeaways

  • Positive Sentiment: Like-for-like net gaming revenue rose 11% to £795.3 m, while underlying operating profit jumped 38% to £63.7 m, lifting margins to 8%.
  • Positive Sentiment: The UK casino reforms passed in July 2025 enable an additional 850 machines this year (and 650 over 30 months), increasing capacity by 110% and unlocking new customer demand.
  • Positive Sentiment: Digital revenues grew 10%, with cross-channel brands up (Grosvenor +22%, Mecca +11%) and app penetration climbing from 13% to 30%; digital margins expanded from 7.8% to 14.1%.
  • Positive Sentiment: Elevated capital expenditure of £60 m per annum is planned for FY26–27, targeting a return on capital employed of at least 35% and a pathway to over £100 m operating profit, supported by strong free cash flow.
AI Generated. May Contain Errors.
Earnings Conference Call
The Rank Group H2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good morning, everyone. A little video there, which shows something that we hear our colleagues across the businesses that make up the Rank Group deliver fun, excitement and entertainment to our customers. I mean you're going to see a lot of numbers this morning, but as always, but ultimately, giving fun to our customers is actually what this wonderful business is all about. Right. Good morning, everybody.

Operator

I'm John O'Reilly. I'm Rank Group's CEO and delighted to welcome you to our results presentation for the year to the 06/30/2025. Many thanks for taking the time to join us here this morning, and thanks too for those joining online, all very welcome. Joined by Richard Harris, Rank Group CFO, who will take you through the details of the full year results in a moment. But by way of a sort of brief overview, it's been another really good year of very solid progression for the group.

Operator

We've delivered growth across all of our businesses, and we now have that inflection point of the casino legislative reforms to look forward to. And they're reforms, which I think represent the most significant change for The U. K. Casino sector since the 1968 Gaming Act, so something that we are really looking forward to. These are the headlines for the year to June 2025.

Operator

Like for like net gaming revenue was up 11% over the prior year at 7 and 95,300,000.0. Underlying like for like operating profit was GBP 63,700,000.0, and that's up 38% on 2024 and slightly ahead of our expectations at this point in our progression. The group's underlying like for like operating margin was 8%, up from 6.5 last year. We're making really good progress in terms of the return on capital employed, and we were up 4.2 percentage points in the year to 14.5%. Grosvenor Casinos delivered average weekly NGR of £7,300,000 and that was up 14% on the year and above the £7,000,000 that we've been targeted, and we got there a bit faster than we expected.

Operator

So very pleased with that. Mecca had another year of improving performance with revenues up 5%. And Enracha continued its strong performance with revenues growing 9% in the year, so good performance across the Venues businesses. In digital, revenue grew by 10% in the year with very strong growth in our two cross channel brands, Grosvenor Casinos growing by 22% and Mecha Bingo growing by 11%. The land based casino reforms are on the statute book, and we expect to be rolling out around eight fifty machines this financial year and commencing that process in just a few days' time, all being well.

Operator

And I'll say a bit more about that as we go on. And with the strong momentum across the group, the Board has set a final dividend of 1.95p per share, taking the full year dividend to 2.6p. So in the round, it's been another good year for the group. Our performance continues to improve, and it reflects the strategy we have in place, the priorities we've set and I think the high quality of execution of our key initiatives. And I'd like to thank all of my colleagues across the group for the hard yards and lots of skill and talent that they put in over recent years to ensure that Rank is making really strong progress and building profitability and cash flows and increasing returns for our shareholders.

Operator

And here's Richard to take you through the details of the numbers.

Speaker 1

Thanks John and good morning everybody. I'm going take you through the group results, a little bit more detail on the business unit performance and then spend a bit of time focusing on CapEx, return on investment and cash flow. So starting with the key drivers of the profit improvement in the first in the year, revenue growth of 11% contributes almost GBP50 million of additional profit after deducting all the direct costs and that's partially offset by higher employment costs of £26,000,000 which have grown 11% on the prior year and that's due to the higher national minimum wage, one quarter's impact of higher employer national insurance contributions, some selected investments in headcount and some additional costs associated with colleague incentives. Looking forward to twenty fivetwenty six unemployment costs, we're expecting a further increase of 6% to 7% that's largely driven by the same factors. Depreciation costs were higher in the year due to the capital investments we're making in the business and overall operating profit is up about 38%.

Speaker 1

Net free cash flow in the period was GBP27.7 million. Within that capital expenditure was GBP58.5 million within our guided range of GBP55 million to GBP60 million. It's up on the prior year as we started the investment to capitalize on the casino reforms and obviously we've taken the refurbishment of the BIC. There's a net working capital inflow of 10,900,000.0 and around half of that improvement is sustainable improvement for the medium term and half is temporary in nature and we expect that half to reverse in the first half of twenty twenty five-twenty twenty six. In the table on the right hand side, you can see how the net free cash flow has converted through into a closing net cash balance of £45,400,000 There was £3,800,000 consideration received on the disposal of the non proprietary business on which a further £3,700,000 is due over the next few years.

Speaker 1

We restarted the dividends last year and included interim dividend for this year, total dividends paid was 7,000,000 Including lease liabilities, net debt was GBP 130,800,000.0. Within this lease liabilities have increased by GBP 23,000,000 in the period and lease liabilities as a multiple of lease payments are now sitting at 4.4 times. That's because we've extended the leases on a number of strategic properties in Grosvenor that will come to the end of our lease term. There are still a handful more leases in negotiation and as a reminder, we expect the medium term position to be in the range of 4.5 to five times annual lease payments. We've now entered the higher capital investment phase with spend in the year of GBP58.5 million.

Speaker 1

We've made significant progress with the maintenance and infrastructure backlog over the last two years. And whilst there's still some work to be done in the year ahead, the venues estates are now in much better shape. In Grosvenor, we completed the refurbishment of the Leicester Casino at the start of the financial year, invested in the refurb at the Vic, upgraded electronic terminals and table equipment and prepared a number of venues to capitalize on the opportunity from the casino reforms. In Mecca, a large proportion of the spend was related to maintenance and infrastructure, but we also made selected investments to improve gaming machine areas, improve external signage and further investments to modernize the proposition. The growth investments are all delivering strong return on investment, I'll bring that to life shortly.

Speaker 1

Total spend on the proprietary digital platforms was £9,300,000 with the vast majority of the spend being capitalized headcount. This year we reported the group's return on capital employed for the first time. We've entered a higher capital investment phase and this is the mechanism by which we will hold ourselves to account and demonstrate the returns that we're delivering. It's something we already monitor internally at both the project level, but also at the group level as part of our capital allocation framework. As you can see, RoTE has improved relatively materially over the last couple of years to 14.5.

Speaker 1

We've got clear hurdle rates in place and we're going to prioritize those investments that present the clearest growth opportunities where the competitive potential in local markets is the highest and investments that allow us to quickly assess the impact of the casino reforms. So moving into the business unit detail for last year, Grosvenor venues grew NGR by 14% and that was a bit ahead of our expectations. Table gaming revenues grew 18% as a result of the investments we've made in product and table management. Electronic gaming grew 21% and I'll touch on that more in a moment. Gaming machine revenues were up 8%, that's ahead of the visits growth but with supply limited and unable to fully meet the customer demand.

Speaker 1

Geographically, the rest of The UK grew strongly at 17%. The total growth for London was 9%, but excluding the Vic, the other venues in London grew 21%. Employment costs were the main headwind, growing GBP 14,100,000.0 in the year. And taking all of that revenue growth and employment costs into account, like for like operating profit was up 35% to GBP 32,000,000. When combined with the excellent colleague engagement scores at 8.4, improving customer NPS and the casino reforms, there's much to be optimistic about within Grosvenor.

Speaker 1

So I thought I'd take a little bit of time just to illustrate the return on investments we've seen so far with some brief examples. So this one electronic roulette accounts for around 15% of Grosvenor revenues and in comparison to table based roulette, it offers the customer a number of benefits. So you've got independence from other players, a private game that is uninterrupted. We've got stake size of the customers choosing with minimum stakes much lower than those on tables. The opportunity to win progressive prizes including going for gold, one of our side games and all that available 20 fourseven in all of our casinos.

Speaker 1

Over the last twelve months, we've removed poorer quality, older terminals, some of which have been in our venues for over ten years. We replaced these machines with new high quality terminals that are already proven elsewhere in our state. The in year investment was £7,800,000 in five forty five machines and we haven't changed the total number of terminals at around thirteen fifty. The customer benefits of the changes include high quality, consistent customer experience, much improved user interface, is more intuitive and with better inventory and content. And we've been able to introduce new games including baccarat.

Speaker 1

It all sounds relatively simple, but the investment is delivering great financial returns. Stakes are up 39% on the new terminals compared to those that they replaced. NGR on the terminals is up 42% from the period that they were launched and the return on investment has been 45%, which indicates a payback of just over two years. And overall, this was a significant contribution to the ER total growth of 21%. So having grown the digital business by 12% in 'twenty three, 'twenty four, we've grown by a further 10% in 'twenty four, 'twenty five.

Speaker 1

That's despite the introduction of maximum slot stake in limits online from the April. Both of the cross channel brands have grown by double digit percentage with Grosvenor performance being particularly strong. We launched new Grosvenor and Mecca apps early last year and the penetration of app revenues has increased from 13% to 30%. The Spanish digital business had a tougher period with revenues flat. And in addition to the maximum slots taking limits, the new statutory levy also took effect from the April 1.

Speaker 1

We now pay 1.1% of GGY, up from 0.1% previously. The combined impact of these two Gambling Act review measures were a negative £1,900,000 in Q4 and they have an annualized impact of around £8,000,000 Despite this, like for like operating profit grew 41% to 33,300,000 At the Capital Markets event we held in December 2023, we set out a target to deliver 500 basis points of margin improvement in digital in the medium term, which we then subsequently increased to 600 basis points on a like for like basis. You can see here that we've grown margins from 6.5% to 14.1% in that time. And of the increase, 1.3% relates to the disposals of both nonproprietary business and Passion Gaming. The rebased starting point of 7.8 has then subsequently increased to 14.1% and that's the combined effect of the operating leverage that comes from a double digit growth rate over two years plus the operating model enhancements that we've made in that time.

Speaker 1

Looking forward, we see a twelve month period where margins will level off impacted by the statutory levy and the dilutive impact of the maximum stock staking limits. In addition, there'll be a non like for like impact from the launch of Yo Bingo in Portugal. From 2026, 2027 onwards, we see further room for improvement benefiting from the planned revenue growth. Moving to land based bingo, so in recent years we've seen a significant rationalization of the Mecca estate and processes continued this year with two further venue closures bringing our estate size to around 50 clubs. We now have a more competitive business with clubs that offer stronger price boards due to higher liquidity.

Speaker 1

Revenue growth was 5%, all driven by an increase in spend per head. Mainstage Bingo revenues were down 1% off the back of investments we've made in additional prize money, key for the health of the business in the medium term. Gaming machine revenues grew by 9% and now account for 41% of overall Mecca revenues. As with Grosvenor, the largest cost in Mecca is employment costs and they were up GBP2.7 billion in the year due to the impact of the National Living Wage and Employers National Insurance contributions. So like for like operating profit was down marginally to GBP3.4 million and it's largely driven by that higher employment costs.

Speaker 1

In Spain, there was further revenue and profit growth from our estate of nine well invested flagship and matcher venues. Revenue was up 9%, an acceleration on the growth seen in the first half. Within this venue visits were up 3% and spend per head was up 6%. In the first half, we completed the refurbishment of our Seville venue and that saw 4% growth in visits and 14% growth in revenue since launch. Our broader investment in products, service and environment has seen gaming machine revenues in Inratcha grow 9%.

Speaker 1

Overall underlying like for like operating profit grew 15% to GBP10.8 million and that's another year of record profitability for Inracha. Over the past three years, we've made selected low cost investments to improve the gaming machine areas in our bingo clubs. In Mecca, we've called it Project Jackpot. Gaming machine areas present a significant opportunity in Mecca but have been historically underinvested due to the primary focus on bingo. 25 venues have seen a total investment of around £5,300,000 that's approximately £200,000 per venue and we've actioned 15 of these investments over the course of last year.

Speaker 1

We've refurbished the gaming machine areas, improved the layouts, enhanced the lighting and introduced better audio quality. Venues that received the investment are delivering 14% higher staking than other venues and MGR is up 13%. It's delivering a return on investment of 65%, so paying back in around one point five years. Given the success of these investments and the need to further modernize the proposition, we've also invested in the gaming machines themselves. Eight fifty Equinox cabinets from Light and Wonder were rolled out replacing much older Clarity machines A further six sixty four new machines from a mix of suppliers were also introduced across the whole estate.

Speaker 1

Looking forward on CapEx, as I mentioned, we're now in a phase of elevated investment. We expect the base level of capital expenditure throughout the plan to be in the range of GBP25 million to GBP30 million. This covers investment in maintenance, infrastructure and the ongoing development of our digital platforms. In FY 2026 and FY 2027, total CapEx is expected to be GBP60 million per annum with £30,000,000 of growth CapEx in Venues, which includes the investment to take advantage of casino reforms alongside further refurbishment and work in Grosvenor. A normalized capital expenditure of GBP 50,000,000 is expected, therefore profit improvement roughly equivalent to a ROCE of at least 35%.

Speaker 1

We first presented this slide at the digital capital markets spent in November 23 and it shows the cash generation we expected to deliver over the medium term. In the first stage of the plan, were expecting to be broadly cash flow neutral. In fact, we've done much better than that due to the disciplined capital investment, improved profitability and improved working capital. The combined impact has delivered net free cash flow of GBP55 million over two years. We've got two further years where CapEx will be at those elevated levels, but with continued improvements in profitability off the back of the investments we're making, we expect another two years of good cash generation.

Speaker 1

Thereafter, when CapEx has normalized and we're seeing material benefits from the casino reforms plus ongoing growth in digital, we expect cash generation to improve even further. With that, I'll hand you back to John.

Speaker 2

Thanks, Richard.

Operator

Right, to strategic update and outlook, a bit about sort of what's coming next. These four key areas of focus, which we believe deliver our pathway to operating profits of 100,000,000 plus, Not new news, sustained growth in the Grosvenor business, accelerating our digital growth, maximizing cash in our land based bingo businesses and of course, the key reforms from the land based casino and bingo sectors in the government's review of gambling legislation and regulation in The UK. And that's all underpinned by investment in technology, very strong group wide focus on safer gambling and a focus on our people and a culture of ensuring we always deliver great service, excitement and entertainment for our customers, which is the business that we're in. So in terms of sustained growth in the Groven and Casinos business, we've got a clear line of sight to an average net gaming revenue per week of over GBP 8,000,000 before the revenue benefit of more gaming machines and sports betting this year. And at some point, hopefully, electronic payments are also promised in the government's Gambling Act review.

Operator

The key initiatives which are driving the growth include the investment we've been making in the quality of the gaming products, that's tables, roulette wheels, the table gaming management system, all importantly, electronic gaming terminals, you've seen that this morning and so on. We continue to invest in poker. A couple of weeks ago, we concluded the twenty twenty five Goliath, which is the biggest poker tournament outside of Vegas, with another record entry this year and a price pool of over £2,000,000 One lucky winner walked away with £316,000 maybe not so lucky. We're continuing to invest in the quality of our facilities. The Vic Casino, which are very much our flagship and which we all colloquially call the Vic, has seen a £15,000,000 refurbishment.

Operator

We started works last October. We completed the refurbishment just a few weeks ago. We inevitably delivered quite a lot of disruption to customers during much of the year. Revenues fell just £120,000 per week during the works, and that's a huge credit to all the team at the Vic. Customer reaction to refurbished venue has been amazing.

Operator

We expect the Vic to make considerable contribution towards a step up to £8,000,000 per week. Our approach to investment during the latter half of FY 'twenty four and during 'twenty five has been to ready some of our more important and competitively significant casinos for the land based reforms. Richard mentioned Grove and Leicester. That was under refurbishment as we entered the year, and we completed during half one. It provides a pretty good case study.

Operator

It's in a strong competitive location in the city. Hadn't had any investment for well over ten years. We fully modernized it, and doing so, prepared it for the casino reforms, which will enable it to host 80 gaming machines. Refurbishment also created a sports book, Today, a sports viewing lounge. Hopefully, in a week or two, it will become a sports book taking bets as soon as we get the all clear from the local authority.

Operator

Visits have grown 10% since the refurbishment year on year. NGR has grown 19%. The investment was GBP 4,000,000, and we expect to pay back within thirty months based upon the current performance, and that's before the impact of 80 machines rather than 20 machines. Every time I go to Leicester, all the customers want to talk about is when are we going to get more machines. So there we are.

Operator

We've also readied a further seven Grosvenor Casinos in 2024, 2025 for the maximum allowable number of gaming machines given their floor space. And more investments are made over the next two years as we learn about the reforms. We're in the hospitality business, obviously, and the relationship between our colleagues and our customers is absolutely central to Groden's success. We've been running a cultural program called From Like to Love, and it gained continues to gain traction across the group. It's benefiting our customer NPS scores and our employee engagement levels with record engagement scores for Graperna Casinos in our most recent employee opinion survey, and we're very pleased with that.

Operator

It's a fabulous business with a leading operator with 50 of the 111 casinos currently trading in The U. K. We've got the benefit what is now only an emerging seamless cross channel experience. We've got a strong management team in situ. We've got a culture focused on service, excitement, entertainment and very importantly, the protections we deliver to our customers.

Operator

The estate was underinvested, but we're gradually dealing with that. And now we have the long awaited land based reforms. And this is what we expect to happen in regards to the reforms. So in twenty twenty four-twenty twenty five, the Grosvenor state of 50 casinos had an average of thirteen sixty seven gaming machines, generating revenue of GBP 102,000,000. Casino reforms enabling higher machine allocations for casinos licensed under the 68 Gaming Act, and that's 49 of our 50 casinos, became law on the July 1 and with a coming into force date of the July 22.

Operator

And the reforms apply to England and Wales, not to Scotland, and the legislation would need to be implemented by the Scottish Parliament, and that is not currently on the horizon. The legislation requires casinos to submit variation applications to the relevant local authority. And we submitted 38 applications on the first available date, which was the July 22. And we've got five casinos in Scotland. There are three casinos in England, which are too small to receive additional gaming machines.

Operator

And we've got four casinos in England where the development works we would need development works before we could add any level of additional machines. So hence, 38 applications being made on the first available day. And the process at the local authorities takes twenty eight days, so we're hoping to be turning on our first additional gaming machines for customers around the middle of next week. Fingers crossed. Thereafter, we expect to be rolling out just over eight fifty gaming machines through this financial year, the majority of which we expect to be introduced during half one.

Operator

Subject to development, which includes structural works in our casinos to change physical layout to create more space, we expect to roll out a further six fifty machines over the next thirty months, and that makes an additional 1,500 machines in total, which is an increase on the current estate of 110%. And we've said in the past that we expect to get to an increase of 130% over time. That's still the case, but it will require the legislation to be passed in Scotland and plus additional development in the shape of extensions and relocations. Now as I always say, not everyone who bets on sport plays in a casino, but just about every casino player also bets on sport. And we've acquired purchased three fifty six sports betting terminals and expect to complete the installations across 38 casinos in line with gaming machine installations.

Operator

We will experiment with proper fully fledged sports books in a few of our casinos starting with Leicester and Luton. Think of it as a very nice bedding shop with great service and food and beverage. Space is clearly a constraint to do it everywhere right across the estate, but we intend offering sports betting wherever we possibly can as we think it will give us existing existing customers more reasons to visit and broaden the appeal of casinos to a wider audience of consumers. Our digital business is on a journey towards delivering increasingly rich and seamless cross channel experience for our customers. And the scale of the business has been gradually increasing since the acquisition of the Yo!

Operator

Bingo business in Spain in 2018 and Stride Gaming in The U. K. In 2019. We set an expectation of growing revenue by 8% to 12% compound average growth over the medium term, and we've got a strong pipeline of developments to deliver that going forward. We've been modernizing the core platform to ensure we can develop, test and deploy new functionality, features and products at speed.

Operator

In this respect, we've got an important road map for developments ahead of us this year, including a new bonus engine, a new wallet and a new operator interface, which actually went live this week for the teams running our online services in real time. In the next couple of months, we'll be merging Mecca's venue based apps. We've got a couple of those with our core Mecca Bingo app to deliver one single app experience for Mecca customers across both venues and digital. In Q3, we will launch single membership for Mecca customers so that as a customer of a Mecca brand, you're recognized regardless of channel. We're extending the footprint of cross channel games within both Mecca and Grosvenor.

Operator

We launched something called Mega Money, which is a Friday night joint liquidity game, which is called in venue and streamed online and more live at Grosvenor table gaming opportunities from our bricks and mortar venues. When our digital business grew 12% in the year to June in Spain, we were flat. And that followed several years of really strong growth. And the challenge in Spain has been the core Bingo platform, which has lacked the capacity, the scalability to grow concurrent customer numbers during peak trading periods. We've been working on a new Bingo platform.

Operator

We are going to launch that in the next few weeks, and that provides much greater scale, bigger pools and therefore, bigger prizes. It's a critical development in getting the Yo! Bingo business back into the double digit growth rate that we've seen over recent years. And we're confident by the end of half one, the business will be back in growth. A little drum roll for the next part.

Operator

We've now successfully completed the homologation process in Portugal, with the regulator giving our platform the all clear for launch. So we're now in the process of getting ready for a soft launch in the next in the coming days, really, as we gear up for a full customer launch later this half, and we'll be the first online bingo operator in Portugal. So the digital business is now a material business. It's got strong management talent, good technology, is making a significant contribution to our overall profitability and cash flows, and there's considerable further upside to be delivered as we build out that seamless and tailored cross channel experience for our customers. Our approach to the Bingo business right now is to maximize cash over the short to medium term.

Operator

And that said, as you've heard, we've been making some investments where we're seeing rapid returns. And in addition to some further investments to machine areas and external decor and signees this year, We have a couple of investment trials of outdoor terraces and cashless interval games. We've been scaling electronic bingo. We're pushing that even further this year with an ambitious goal to take the share of bingo revenue played on tablets well beyond last year's 76% figure. In terms of reforms, we've been awaiting the reforms in the Gambling Act review that were posed for Bingo, including the much needed change to the eightytwenty rule, which revised just about the opposite mix of category B3 and C machines that are preferred by our customers.

Operator

And we've also been waiting for a broadening of what constitutes bingo to enable side bets on the main stage game, which provides customers with more chances to win. Those changes have been delayed as the government reviews the licensing regime for traditional Bingo venues, but we're hopeful that we'll see this reform at some point during this financial year. Bingo very much needs help. It's recognized too by the government, and it needs help if it's been just to be kind of sustained at today's levels across the country. MECO is super well positioned for these reforms, 50 venues with increasingly strong prize boards, giving great value to customers, registering amazingly high customer net promoter scores and delivered by a highly engaged team of MECO colleagues.

Operator

And in Spain, we kind of continue to improve what is a terrific Enracha business. Two further venue investments this year, one nearly already nearing completion at a venue in Sabodell in Catalonia. So we believe the kind of path we're on and the progress we've already made and the runway of opportunity we've got before us creates a compelling investment case for the group. We've got market leading positions in attractive markets. We've got the biggest brands in the land based bingo and casino markets.

Operator

We've got the benefit of strong cross channel customer economics and in Groven, a casino business with a licensing requirement, which creates a high barrier to entry. We've got an attractive customer proposition as a result of the renewal investment we've been making across our venues businesses, the complete renewal of our digital business on acquired and now increasingly modernized proprietary technology and with a very strong road map of investment opportunities, particularly this year with the legislative reforms for casinos in The UK. Highly engaged and skilled workforce, group wide record engagement scores this year of 8.3 out of 10, not surprisingly delivering market leading customer net promoter scores and with considerable investment going into further enhancing the culture within our business. And with very clear growth drivers, clear path to million pounds net gaming revenue per week in Grosvenor, and that's before the land based reforms and expected 8% to 12% compound average growth rate in digital and the anticipated continued growth in a now well set Mecca and a well polished Inracha estate in Spain, plus a 62% increase in gaming machine numbers in Grosvenor this year, with that extended to 110% increase by the end of 2027 calendar year.

Operator

And with targeted investment to maximize shareholder value, a capital allocation policy with clear hurdle rates for capital investment and a progressive dividend policy. And we think all of that inevitably is delivering and will continue to deliver strong financial outcomes, double digit revenue growth with growth in all businesses and strong profit conversion. We're on track to deliver £100,000,000 plus operating profit in the medium term. Cash generation is ahead of expectations, and it will continue to improve as operating profit grows and capital investment normalizes. Strong payback on investments.

Operator

We're growing the return on capital employed. A strong balance sheet with a net cash position and with significant further opportunities for group. And in our view, that's probably the most important of all. There is a lot more to come. Very briefly on current trading.

Operator

Good momentum within the group continued into the early part of this year. We're six weeks in, and NGR is growing at 9% over those six weeks, so pleased with that. And we're well placed to meet expectations in the year. Now we'll be holding Capital Markets Day events at the newly refurbished Vic on London's Edinburgh Road on the morning of Wednesday, October 22. We had planned to hold it during the summer, but we thought we'd just delay it, hold it back until we've got some early insights into the casino reforms.

Operator

That is all I wanted to say to questions. We're going to take questions from the room first, I think. So if you've a question, please raise your hand. We're going to mic to you. And if you could say your name so that, I mean, everybody knows either, but if you could say your name so that those joining online know who the question is from.

Operator

And then what we're to do, if you've got questions online, please type them into the Q and A box, and we'll pick up any questions that are asked online if we haven't covered them in the room, I think is the format we're going to operate to.

Speaker 2

You, John. Ivor Jones from Peel Hunt. Three things. Mecca, what are the prospects? You talk about cash maximization.

Speaker 2

You spent nearly GBP 10,000,000 on CapEx last year. When do we see the payback? Same thing really about Portugal. It's been in the background for so long. I kind of forgotten what the prospects are.

Speaker 2

What's the market? What's Brent's opportunity to get Yo into that market? Is that material? Should I even be asking that question? And then on Grosvenor, where how can we talk about the unsatisfied demand?

Speaker 2

You've already delivered really strong double digit revenue growth. It would have been more without the bit being disrupted this year. Is that existing customers spending more? Where's the next leg of revenue growth going to come from? Is it more people being converted to being casino customers?

Speaker 2

So how should we think about that upside opportunity?

Operator

Why don't you do we start with the Mecca payback?

Speaker 1

Yes. So the Mecca business is not cash positive at the moment. So we're investing now because we believe that is the best route to cash maximization in the medium term and we'll continue to invest over the course of the next few years. The investments we're making are relatively low cost individual projects. So on average, kind of 150,000 investment into our clubs, a little bit more in the gaming machine areas, but that's delivering rapid paybacks as you've seen from the slide earlier, 65% return on capital employed.

Speaker 1

So my expectation over the next two to three years is we can get that business back into cash positive territory. So that's the kind of timeframe that we're looking at. And that will coincide with double digit operating profit in Mecca. That's a reasonable ambition to have. It's a bit harder than when we originally set that target because employment costs have increased dramatically and that is the largest cost within the Mecca business.

Speaker 1

So it's gone back a little bit from where we originally anticipated, but the business is growing nicely. And the only way we're going to get there is to continue to grow the top line, hence why we need the investment.

Operator

Richard, thank you. And look, Mecca is a really important community asset too, and we've been forced to close a lot of Mecca venues we really don't want to close anymore. And keeping them open is all important to us because these, as I say, they're really important community assets. Portugal, we've waited a long time, haven't we, to get to this point where we're going to go live. And but it's a very fair question, what do we expect?

Operator

Well, look, year one, we expect start up. We will be incurring losses in the first year as we build the brand in Portugal inevitably. Portugal is quite a strong bingo country, but there's no bingo online operator. There are now 18 licensees in Portugal. We'll be the nineteenth when we receive our license in the coming days, hopefully, and will be the nineteenth.

Operator

We'll be the only operator offering bingo in that market. So there's quite a bit of consumer education to be done. I remember that in Spain in the very early days, having launched the first sports book in Spain many, many, many moons ago. So I remember it very well. It takes a bit of time for the consumer to recognize and understand the game.

Operator

But we think we'll build the liquidity fairly quickly and be able to deliver strong prices to the consumer very quickly in Portugal. So excited about the opportunity, but we'll incur some start up losses this year, entries. Will it be material in the next couple of years? We hope it will be a significant enough part of the international digital business to make it worth its while. And we'd like to then think from there.

Operator

We're looking at some other territories, other jurisdictions for the Yeo brand. Growth, there is definitely unsatisfied demand. So I know this in my travels. Everywhere I go up and down the country, customers ask me one question, when can we have more machines? I was in a casino in the Northeast a few weeks ago where we actually only opened at midday and by I was back of house talking to colleagues.

Operator

And when I came out front of house and the casino had opened, and it was twenty past twelve, And 12 of the 20% are being used, and it was twenty past twelve. The casino had only been open twenty minutes. That is the extent of unsatisfied demand. So undoubtedly, the machine reforms much needed will satisfy more demand and will broaden the audience of people because gaming machines kind of anybody can pay. Everybody can, everybody wants to.

Operator

People who like to play gaming machines, it will definitely deliver unsatisfied demand. In terms of the move from now 7.3% to 8%, I think that's about just giving better entertainment with a stronger product offering in nicer facilities to customers. It's a stronger proposition. It's a stronger offering than we've had in the Grosvenor business for many a year and that customers are responding with their feet coming more often and enjoying the experience that we deliver for them. So I think there's a good way more to go.

Speaker 3

It's Richard Stuberth from Deutsche Bank, please. Can I have three questions as well? The first one is lots

Speaker 1

of press

Speaker 3

speculation about potential tax hikes in the autumn statement. Could you tell us what sort of you're hearing, what your expectations are? And particularly, I guess you mentioned that bingo needs seem to be recognized by the government. Are there any other sort of safer parts of gambling, which you think won't be touched? That's my first question.

Speaker 3

Second question is, obviously, you're putting all these new machines in. As you said, sort of IVAP, there's definitely a demand for them. But are you doing anything subtractively sort of highlight the new machine's opportunity so you can get the so you can sort of ramp up the utilization more quickly? And the final question is the 100,000,000 EBIT target. Now you have a bit more sort of visibility around land based reforms.

Speaker 3

How quickly do you think you can get to that GBP 100,000,000 number?

Operator

I'm definitely going to let Richard answer the first one or the last one of those three because I'll give you the wrong answer, Richard. I'll be far more optimistic. So let me start with the tax point. There is lots of coverage of tax as we all know in recent kind of recent weeks, particularly recent days. So the way I describe our business is we entertain like millions of people, which is wonderful.

Operator

We employ a huge number of people. We employ 7,800 people across the rank group, which for a company with the relative size of profitability, that's an enormous number of people that we employ. And we pay a lot of tax. I mean they're the three things that this group does. We pay an awful lot of tax.

Operator

So if I look at the profit after tax number for the year just gone at GBP 44,600,000.0. In the year, Rank Group paid GBP 189,000,000 in taxes, and that's corporate gaming tax and employer national insurance. I've included their local taxes in that number, so business rates and the like, but taxes that we pay. So in a sense, for every GBP 5 we generate, we're paying GBP 4, in rough simple math, we're paying GBP 4 in tax. So that's what we are.

Operator

We employ a lot of people, we entertain a lot of people and we pay a lot of tax. That's the business we're in. But you can see in those mathematics that the margins for tax movement are not that significant. And I don't moan about, by the way, the taxes that we pay. That's the business that we're in.

Operator

That's the business that we've always been in. So I'm not moaning about the tax rates we pay. But I think the margins for tax increases are not very significant and clearly run the risk of moving companies that are profitable to being unprofitable. And unprofitable businesses don't last, and that creates less competition in the market and less competition means a worse deal for the consumer. And I think that is well recognized by the Treasury, by the way.

Operator

So I think you've got to kind of separate the views of some think tanks, which were the same views as those think tanks before last year's budget and maybe even the year before. And you've to separate that from actually what the treasury is doing. What the treasury is doing is consulting on remote gambling taxes. And there are three remote gambling taxes, and they're proposing to simplify them into one remote betting and gaming duty rather than the three taxes you know. And we've put a full submission into the treasury and went to what the outcome is.

Operator

Mean our preference would be, from a group perspective, clearly, would prefer for the status quo to prevail and for the online taxis not to be harmonized into one tax would be my strong preference. Why? Because actually, say that from a materiality point of view, we're not a very big sports operator. We launched a new sports book, by the way, in the last week, which is fabulous. You should take a look.

Operator

And leaving that aside, it's not a material part of the group. So if and let's assume Treasury were to go down the road of delivering one online tax rate one online tax and one online tax rate. And we got to assume it will harmonize up to 21 rather than down to 15, which is the current rate for sports betting. If that were to happen, then the materiality for the group for year commencing April 26 would be about GBP 1,000,000 in operating profit. So not that material given that sports is not a terribly significant part of our offering today.

Operator

But we'd like to compete more effectively in sports over time. It's clearly what we'd to do. And the higher the tax rate goes, the more difficult it is for anybody to compete with the very, very large players in the market. And that impacts the consumer ultimately. That was such a long answer.

Operator

Can't remember what the next one was.

Speaker 3

Incentivizing machines.

Operator

Incentivizing machines. Look, I we will be running quite a lot of activity inevitably to advise customers that the machine offer in Grosvenor Casinos has changed. It will be done locally. Lots of TRM activity inevitably. So we've got a campaign program lined up.

Operator

And we will turn the machine on and it will work. However, I mean, my view is I turn the marketing machine on and no doubt it will work. I think it will work anyway. I think that the consumers have long recognized that there's not insufficient choice for them on gaming machines in casinos. And once there is more choice, they will quickly recognize it.

Operator

And I think, yes, I think supply will better meet demand going forward, and that's all important. And stop me being optimistic about when we get to GBP 100,000,000 plus.

Speaker 1

So I think the great thing is we've had two years' worth of good profit improvement, but the fantastic thing from our perspective is that we see lots of financial and strategic headway over the course of the next few years, obviously supported by the casino reforms. I think we give quite a lot of guidance around our kind of future prospects. So I'm probably not going to give you an exact timing because there's lots of information we give you. So we have one piece where you can fill in the gaps yourself. But the analysts that have updated for machine reforms, I think they've got us in at making around GBP 100,000,000 as a consensus by FY twenty twenty eight.

Operator

Greg? Sorry, there we are.

Speaker 2

Thank you.

Speaker 4

Good morning. A couple of questions. One on current trading. Could you maybe sort of update on where we are with the performance of London at the start of the year given the relaunch or completion of the refurb of the Vic? And secondly, very encouraging to see that app penetration in the cross channel brands has gone from 13% to 30%.

Speaker 4

Can you maybe sort of give any steer on where you see KPIs between app users and non app users?

Operator

Okay. Thank you, Greg. Sorry, beg your pardon. Thank you for the questions. A bit mixed actually on the app numbers, and we are slowly kind of better understanding it, I think, because it's still pretty new world.

Operator

And we're not pushing the apps as hard as we might. The Grosvenor app is generating higher spend per customer on app from mobile web and desktop, actually. So for Grosvenor, clearly, significant upside benefit. Not quite seeing the same coming through for Mecca, and we are trying to better understand why that is the case. A bit of it is margin related, and some big wins have an impact on it, but it's not quite the same dynamic with Mecca.

Operator

But so we're just kind of understanding that a little bit more. We've got more consumer research going on currently. And we just kind of understand that before we press the accelerator on encouraging more mobile web users to transfer across to the Mecca app. So slowly but surely, we're sort of understanding that. But really pleased with where we are.

Operator

I mean our old apps were not good enough. Our new apps built in house on proprietary technology are so much better than the outsourced apps we've offered in previous years. It's taken us a while to get there. We had to the first thing was to bring proprietary technology in house, but now very much focused on the strength of those apps. And the move the Mecca move to having one app for both venues and our digital business.

Operator

I mean I talked about it briefly earlier. You can see the materiality when all of our I mean Venues customers use the app. It's what they use to get vouchers and promotions. They use it to buy food and beverage within the venue. They use it to order tickets, to order a Max tablet on our big money weekends to make sure that they've got a Max tablet when they come and play.

Operator

So they're used to using the app that we offer. And what we're doing is bringing that together with meccabingo.com to one single app for all customers. And we think that will be quite a material breakthrough in terms of creating that cross channel experience for the customer. In terms of current train, we're really pleased with the 9%. A good start to the year.

Operator

London, I think London is like one week behind this summer from last summer. I can't explain why it is. But if I look at the metrics and I look, we look every week at who's visiting and who's not. We see the visit numbers and we see the drop numbers by nationality actually week in, week out. And it feels like it's just one week behind last year.

Operator

I don't really know why. Last year, Paris Olympics, maybe a few more customers using London as their base last year than is the case this year, can't really explain it. But London is pretty positive nonetheless, and the VIK is very positive. So we're just a few weeks in, but we're very excited about the prospects for the VIC. And as the summer picks up now as we get through this month, I think the VIC is going be super busy.

Operator

It has been in the first few weeks of opening, but one swallow and all that doesn't make a summer. So a few more weeks to go under the bridge before we celebrate too much, but customer reaction to the new is extraordinary. I caught the old Vic and the new Vic. I have to say there was a lot of drama in between. Anyway, we are.

Operator

Have we got any more questions?

Speaker 5

So there are two questions online, both of which from David Rouhan of Goodbody. The first question reads, how should we think about the cannibalization risk of electronic gaming and table gaming from the rollout of new gaming machines? And the second question, can you please give a sense on per machine revenue expectations from the new sports betting terminals or how significant the opportunity of sports may be?

Operator

I don't see there being a terribly material substitution from new gaming machines relative to electronic table gaming. I don't think that's that significant. They are largely speaking, not entirely, but largely speaking, different players. They appeal to a slightly different audience in truth. So I don't there clearly will be an element of substitution from machine revenues from other products, given that if I walk into a casino tonight and I've got money in my pocket and I want to play and there isn't a gaming machine available for me to play on, then I might well put my money somewhere else.

Operator

So that's just an inevitability. But I don't think they are directly substitutional other than in that regard. So I don't think it will be that material, but we'll find out in the fullness of time. The sports betting, we just don't know. I'd like to note, we don't know today.

Operator

We are seeing in we've got one venue, which is Luton, which offers sports betting. It's been an it's an improving offering to the consumer. It's getting better. It's getting stronger week by week, and we're learning a lot as we go. I would say we've now got it to a point where it's a very good betting shop.

Operator

Like I'm thinking now in the economics of a licensed betting office. We've now got a very good betting shop at Luton. I'd like it to be better than just a than just a very good betting shop, but we're not quite there yet. So we've got further to go. And we will learn a lot more when we've got sports in a larger range of outlets, a larger range of casinos than just Grosvenor, Luton.

Operator

But we've made a good start there. I'm pleased with the numbers.

Speaker 5

Thank you, John. There are no further questions online.

Operator

Great. If there's nothing further, I'm going to draw stumps. Many thanks for coming this morning. It's lovely to see everybody. Thanks to everybody joining us online.

Operator

And as I Capital Markets Day event, October 22. Think we're going to start at ten in the And hopefully, by then, we'll have some proper numbers to talk to you about, about the performance of new machines across the estate, which we're very excited about. Many thanks again.

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