Rank sees revenue hit by cost-of-living crisis; expects profit down for fiscal year

A lack of disposable income, cold weather and the World Cup have left British punters spending less at casinos, said gaming operator Rank Group on Friday, pointing to weaker-than-expected three months to the end of December. The owner of the Mecca Bingo and Grosvenor Casinos brands also warned of lower annual profit, which prompted its shares to drop by 9%.

"Weak consumer confidence and pressure on disposable income are resulting in a tougher-than-expected trading environment for our UK venues businesses, particularly in Grosvenor, where we are seeing customers spending less per visit," Chief Executive John O'Reilly said.

"Whilst we expect these challenges to continue to impact our recovery into the second half of the financial year, we have implemented a series of measures to deliver incremental cost savings and to drive revenues,” he added. “We remain committed to our roadmap of investing in initiatives that will ensure the long-term recovery and prosperity of the group.”

The Grosvenor venues, which accounted for 45% of the group's revenue in the year ended June, would take longer than expected to return to growth, the gaming group noted. The firm also highlighted continued cost increases, which remained in line with expectations at around £50 million ($60.8 million), driven by higher wages and energy costs.

Rank Group shares were down 9% after the company said like-for-like underlying operating profit is expected in the range of £10 million ($12.2 million) to £20 million ($24.3 million) for fiscal 2023, down from £40.4 million ($49.2 million) in fiscal 2022.

In its latest report, the firm said its group like-for-like net gaming revenue for the five months to Nov. 30 was almost flat over last year. "It is taking longer than we expected for customers to return to casinos, and spend per head remains subdued," an analyst at Peel Hunt said, as per Reuters.

However, Rank Group has seen good growth in its digital business, which includes RummyPassion and BellaCasinos, with net gaming revenue at the division up 11% in the five months ended Nov. 30.

The disappointing performance comes amid the highest inflation for around 40 years, mainly driven by energy costs, which has squeezed consumer budgets as wage growth has failed to keep pace. Other British gambling firms, including Entain, Flutter and 888 Holdings, have yet to report the impact of the cost-of-living crisis on their operations.