Annual Report and Financial Statements 2019 Creating fantastic experiences for our customers is why we come to work every day.We are a values-led business, and our STARS values of service, teamwork, ambition, responsibility, and solutions – are what leads us to strive every day to improve our business, and ensure that we are fulfilling our stakeholders' needs.Our commitment to working hard for our customers and stakeholders is what we mean by ‘Our work, your play’.Financial statementsIndependent auditor’s report102Group income statement110Group statement of comprehensive income111Balance sheets112Statements of changes in equity113Statements of cash flow114Notes to the financial statements115Unaudited appendix to the financial statements: Five year review157Other information:Shareholder information158Operating reviewOperating review Grosvenor Casinos34Operating review Mecca36Operating review International38Operating review Digital40Financial review42Tax fact file44Non-financial information statement47Risk management48Operating responsiblyOperating responsibly26GovernanceChair’s introduction54Board of directors56Corporate governance60Directors’ remuneration report76Directors’ report95Directors’ responsibilities99Strategic reportGroup KPIs6Chair’s letter8Business model12Chief Executive’s Q&A14Stakeholder engagement17Understanding our market18Market review20Our strategy21Our strategic progress22 Our purpose working together to create
exciting environments that reflect the
changing needs and expectations of
our customers and colleagues, delivering
stimulating and entertaining experiences
every time, To Excite and To Entertain.
Our ambition to become a £1bn revenue
international gaming company by 2023,
through transforming our business and
consistently exceeding our customer
and shareholder expectations.
Rank at a glanceDelivering through our brandsVenueslicensed casinos in Great Britaincasino operator (by venues) in Great Britainlicensed bingo venues in Great Britainlargest operator (by venues) in Great BritainGrosvenor CasinosMecca52822ndlargest bingo operator in SpainInternationallicensed Enracha bingo clubs in Spain licensed Grosvenor casino in Belgium9+14thDigital Largest digital bingo brand in SpainUKSpain1st2 The Rank Group Plc Annual Report and Financial Statements 2019 Strategic report
Strategic Report
Contribution to
Group revenue1 (£m)
£746.5m
Grosvenor venues
Mecca venues
International venues
Digital
353.2
202.1
44.9
146.3
Operating
profit2 (£m)
EBITDA2 (£m)
£72.5m
Grosvenor venues
Mecca venues
International venues
Digital
Central costs
44.9
28.6
9.3
20.7
(31.0)
£117.7m
Grosvenor venues
Mecca venues
International venues
Digital
Central costs
64.0
39.1
12.0
29.5
(26.9)
1. Before adjustments for customer incentives.
2. Before exceptional items.
3
Strategic report
Group KPIs
Chair’s letter
Business model
Chief executive’s Q&A
Stakeholder engagement
Understanding our market
Market review
Our strategy
Our strategic progress
6
8
12
14
17
18
20
21
22
Service
“I want our team members to understand
what our customers want, as that’s the key
to delivering the service that keeps our
customers returning time and again.”
Austin Graham
General Manager, Grosvenor’s Victoria casino
Austin Graham has had to deal with a complex management and employee
restructure within the casino, while at the same time improving ways of working,
proposition and service offered to customers. That’s quite a task.
“He takes pride in doing what’s right, and has a passion for what we do,” says
Debbie Husband, operations director of Grosvenor Casinos. “Not only has he
been a breath of fresh air within the casino, but his impact has also been felt
across the wider region.”
Never one to shirk making a difficult decision, Austin takes challenges head on,
with passion, compassion and strong leadership skills.
These changes have translated into financial results that show significant
growth year-on-year.
Group KPIs
Our performance
The following charts illustrate the Group’s
performance for the 12-month periods to
30 June over the last five years.
Statutory revenue
£695.1m
Operating profit1,2
£72.5m
2019
2018
2017
2016
2015
695.1
691.0
707.2
708.5
700.7
2019
2018
2017
2016
2015
72.5
77.0
83.5
82.4
84.0
Statutory revenue is a statutory
indicator of the Group's top-line growth.
It is revenue retained from the amounts
staked after paying out customer
winnings and deducting
customer incentives.
Statutory revenue grew by 1% in
the year driven by an improved digital
performance and the contribution
from the acquired YoBingo business
in May 2018.
Operating profit provides a picture of
the underlying performance and is a
key indicator of the Group’s success
in delivering top-line growth while
controlling costs.
Operating profit decreased by 6% in the
year due to higher central costs and the
challenging year for Grosvenor’s venues.
Earnings per share
7.4p
7.4
9.2
2019
2018
2017
2016
2015
16.1
19.1
19.1
Earnings per share (EPS) is a key
indicator of the Group’s growth after
allowing for all costs, including
interest, tax and exceptional items
and adjustments.
The decrease in EPS reflects the lower
profit for the year.
Revenue1,3
£746.5m
Adjusted operating
profit before tax1,4
£69.9m
Adjusted earnings per
share1,5
14.8p
2019
2018
2017
2016
2015
746.5
741.1
755.1
753.0
738.3
2019
2018
2017
2016
2015
69.9
74.3
79.3
77.3
74.0
2019
2018
2017
2016
2015
14.8
15.0
16.0
15.4
14.6
Revenue is the key indicator of top-line
growth. It is revenue retained from the
amounts staked after paying out
customer winnings.
Revenue grew by 1% in the year in line
with statutory revenue.
Adjusted operating profit is
operating profit adjusted for certain
non-underlying items.
Adjusted operating profit fell by 6%
in the year.
Adjusted EPS is a key indicator of
the Group’s growth after allowing for
all costs, including interest and tax
but excluding exceptional items
and adjustments.
The decrease in adjusted EPS reflects
the lower adjusted profit for the year.
6 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Strategic Report
Dividend per share
7.65p
Net (debt)/cash1
£1.8m
EBITDA1,6
£117.7m
2019
2018
2017
2016
2015
7.65
7.45
7.30
6.50
5.60
(41.2)
(52.9)
1.8
2019
(9.3)
2018
(12.4)
2017
2016
2015
2019
2018
2017
2016
2015
117.7
120.0
128.8
128.2
126.3
Dividend per share (DPS) is the
sum of declared dividends issued
by the Company for every ordinary
share outstanding.
Net (debt)/cash is calculated as total
borrowings less cash and short-term
deposits, accrued interest and
unamortised facility fees.
EBITDA is earnings before interest,
tax, depreciation, amortisation and
exceptional and non-underlying items.
It is calculated by taking operating profit
before exceptional and non-underlying
items and adding back depreciation
and amortisation.
EBITDA for the year decreased by 2%
driven by lower operating profit and
higher depreciation.
1. Alternative performance measure.
The performance of the Group is assessed using a number of alternative performance measures (APMs).
The Group’s results are presented both before and after exceptional and non-underlying items. Adjusted profitability measures are presented excluding exceptional and
non-underlying items as we believe this provides both management and investors with useful additional information about the Group’s performance and aids a more
effective comparison of the Group’s trading performance between one period and the next. Adjusted profitability measures are reconciled to unadjusted IFRS results on
the face of the income statement with details of exceptional and non-underlying items provided in note 4.
In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures
are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts and the Group’s longer-term strategic plans.
2. Before exceptionals.
3. Before adjustments for customer incentives.
4. Adjusted profit before taxation is calculated by adjusting profit from continuing operations before taxation to exclude exceptional items, the unwinding of the discount on
disposal provisions and other financial gains and losses resulting from foreign exchange gains and losses on loans and borrowings. See financial review for reconciliation.
5. Adjusted earnings per share is calculated by adjusting profit attributable to equity shareholders to exclude discontinued operations, exceptional items, other financial gains
or losses, the unwinding of the discount on disposal provisions and the related tax effects, as per note 9.
6. EBITDA is reconciled in note 19.
7
Chair’s letterDear shareholderIan BurkeChair8 The Rank Group Plc Annual Report and Financial Statements 2019 Strategic report
Strategic Report
Rank’s newly stated ambition is to become a
£1bn revenue international gaming company
by 2023, through transforming our business
and consistently exceeding our customer
and shareholder expectations.
We recently reviewed our strategic pillars in
light of our ambition statement and we believe
the following will enable the Group to deliver
for its customers and shareholders:
• Create a compelling multi-channel offer;
• Build digital capability and scale;
• Continuously evolve our venues proposition;
• Consistently improve our customer
experience through innovation;
• Be committed to safe and fair gaming; and
• Within an environment which enables our
colleagues to develop, be creative and
deliver exceptional service.
Further detail of the Group’s progress against
these six pillars can be found in the Strategy
and KPIs and Operating Review sections of
this report.
Financial performance
We are pleased with our full year results,
with revenue growth being delivered in each
of the Group’s businesses in H2 following a
weak start to the year. The Group’s
transformation programme, launched in
December 2018, is now starting to drive
performance improvements in both our UK and
international venues businesses. Rank’s digital
business grew strongly with like-for-like H2 net
gaming revenue (NGR)1 up 14% compared to
the H1 growth of 7%.
As at 30 June 2019, there were a total of 13
workstreams and 388 initiatives within the
transformation programme which is now
embedded in the business and driving new
improved ways of working. Initiatives in the
transformation programme delivered £10.7m
of cost savings in H2 and it is expected that a
further £9.3m of cost savings will be delivered
in 2019/20. Whilst we have further cost saving
initiatives in the programme, the transformation
of Rank inevitably centres on initiatives which
drive revenue growth.
The performance of Grosvenor’s casinos
across the year is very much a tale of two
halves. H1 was disappointing with both
like-for-like revenue and operating profit down
5% and 35% respectively. However, in H2
both revenue and cost initiatives started to
drive performance with H2 revenue up 1%
and operating profit up strongly at 40%.
The introduction of a new casino operating
model, with simplified management structures
and reduced labour hours, was launched in
December 2018 and led to H2 savings of
£8.2m. A further £11.3m of savings is
expected to flow through into 2019/20.
Mecca’s like-for-like revenue was down 2%
in the year driven by a 9% fall in customer
visits. Like-for-like operating profit was broadly
flat in the year as operating costs continued
to be tightly controlled. Several initiatives within
the transformation programme were
successfully delivered in the second half of
the year and will continue to be developed into
2019/20, focusing on improving the gaming
machine offer and delivering additional value
to our bingo customers.
Due to the ongoing underperformance of Luda,
the decision was made in the year to close all
three venues which ceased trading on 24
July 2019.
International venues grew like-for-like revenue
by 1%. Improvements to the management,
product and delivery of the gaming machine
offer contributed to an 8% increase in
operating profit.
Like-for-like digital NGR, excluding the
contribution for YoBingo, increased by 11% in
the year, driven by various improvements to
both the Mecca and Grosvenor offers and in
the more effective delivery of customer
bonusing. Total digital revenue grew by 17% in
the year due to the contribution from YoBingo.
Digital like-for-like operating profit was down
3% in the year as improvements to revenue
were offset by £0.8m of incremental Remote
Gaming Duty (‘RGD’) on player bonuses and
£1.9m of additional RGD following its increase
to 21% (from 15%) from 1 April 2019.
Safer gambling
Rank is committed to promoting gambling
as a recreational activity and, as importantly,
to managing or preventing its use by those
people who may be vulnerable, at risk of
experiencing harm or who have developed
a problem. The last 12 months have seen
significant changes in the way our industry
is asked to think about this commitment.
Not least, we are encouraged to no longer
frame our work in terms of responsible
gambling, which risks placing too much
emphasis on individual responsibility.
Rather, we must actively pursue improvements
in the promotion and delivery of safer
gambling, specifically:
• Continuously assessing the risks relating to
our products and environments, so that we
may design controls to make gambling safer
in the first instance; and
• Promoting safer participation in gambling by
all those people who choose to play with us.
During the year, with this in mind, we revisited
our safer gambling policy and developed a
new strategy, under the auspices of the
re-named safer gambling committee. We also
determined that safer gambling should be one
of our six strategic pillars and included it as
a specific workstream within the transformation
programme to set the course, and build upon
the momentum within the business, for
significant ongoing improvement across
the Group.
We made significant progress on a number
of safer gambling initiatives during the year,
including the development of affordability
models to improve our ability to detect
customers potentially playing outside of their
financial means and establishing a dedicated
safer gambling team within our Sheffield
Customer Solutions Hub.
In addition, Rank became a member of the
Senet Group to increase our contribution to
cross-sector collaboration and the sharing of
best practice.
In the coming year, we will further increase
our investment into safer gambling activities,
with a view to ensuring that our commitment
to safer gambling is truly embedded within
the culture of the business for the benefit of
all our stakeholders.
Acquisition of YoBingo
In May 2018, we completed the acquisition
of QSB Gaming Limited, the owner of YoBingo,
the leading Spanish digital bingo business, for
an initial consideration of €23.1m. Contingent
consideration of €28.1m was paid during
the year.
1. Net gaming revenue is revenue less
customer incentives.
9
Chair’s letter continued
“Rank’s newly stated ambition is to become a £1bn
revenue international gaming company by 2023,
through transforming our business and consistently
exceeding our customer and shareholder expectations.”
Offer for Stride Gaming Plc
On 31 May 2019, Rank announced that it had
reached an agreement with the directors of
Stride Gaming plc (‘Stride’) on the terms of a
recommended cash offer for the entire issued
share capital of Stride.
Rank believes that the acquisition of Stride will
accelerate the transformation of the Group and
create one of the UK’s leading online gaming
businesses. In particular the combination will:
• Create a business with genuine scale and
capability in the digital market;
• Create a leading multi-channel operator
in the UK;
• Improve Rank’s performance and reduce
costs through migration to Stride’s
proprietary technology platform and
in-house ecosystem;
• Leverage complementary strengths,
capabilities and expertise;
• Strengthen Rank’s management team;
• Create significant value from strong
synergies; and
• Be materially earnings accretive for Rank
once synergies are released.
On 24 July 2019, Stride’s shareholders voted
in support of Rank’s offer. Rank expects the
acquisition of Stride to be completed early in
Q2 2019/20 once all the necessary conditions
outlined in the Scheme Document are met or,
if applicable, waived.
The Scheme Document and further detail
regarding the offer can be found at:
www.rank.com/en/investors/offer-for-stride-
gaming-plc.html
Management team changes
The transformation programme identified the
need to improve organisational capability which
had led to a number of management changes
in the year.
Chief Financial Officer
Bill Floydd joined the Group on 12 November
2018 as chief financial officer (‘CFO’). Bill has
successfully led business turnarounds and
finance transformation projects in other
listed organisations. Bill joined us from
Experian Plc where he was CFO for its
UK and Ireland region.
Chief Information Officer
Jonathan Greensted joined the Group on
13 August 2018 as chief information officer.
Jonathan is a highly experienced IT and
programme director and brings with him over
20 years’ experience across a variety of
sectors. Jonathan joined us from Travelodge
where he was their chief technology officer.
Chief Transformation Officer
Jim Marsh joined the Group on 1 October
2018 as chief transformation officer. Jim has
led and delivered transformations in a variety
of sectors. He joined us from McKinsey &
Company where he was a partner in its
transformation team.
Retail Managing Director
On 10 April 2019, Alan Morgan tendered his
resignation to the Board and left the business
on 31 July 2019 to pursue other opportunities.
I would like to thank Alan for all his hard work
in the UK retail business during his three years
with the Group.
We are pleased to announce the appointment
of Jonathon Swaine as retail managing
director. Jonathon will join Rank in October
2019 from Fullers, Smith and Turner Plc
(‘Fullers’) where he has been managing director
of Fullers Inns since 2012. Jonathon has been
instrumental in developing Fuller’s service
driven growth strategy across its 400 pub
estate, underpinned by investment in fresh
food. Between 2005 and 2012 Jonathon held
various operational positions with Fullers, prior
to which he held account management and
account director roles with Bass Plc.
Retail Marketing Director
In August 2019, Catrin White joined the
Group’s retail business as retail marketing
director, following the departure of Olly
Raeburn, chief marketing officer. Catrin joins
Rank from Sodexo UK where she held
marketing director positions across various
Sodexo business units.
Director of Digital and
Cross-Channel Services
Colin Cole-Johnson, director of digital and
cross-channel services, left the business in
June 2019. As outlined in Rank’s offer
announcement for Stride, Eitan Boyd and
Darren Sims, currently chief executive officer
and chief operating officer of Stride, will
assume the roles of managing director digital
and operations director digital for Rank’s digital
business following completion.
Other
With the ongoing focus on capability within the
Group, key hires were also made in finance
and IT in addition to the appointment of 14
new general managers across the Grosvenor
and Mecca estate.
10 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Strategic Report
“Thank you to my
colleagues at Rank.
You never fail to
show real passion for
delivering the best
experience to our
customers, always
making sure that
we excite and
we entertain.”
Board changes
Chair
On 30 April 2019, after 13 years with the
Company, I notified the Group that I do not
intend to stand for re-election as Chair at the
Company’s Annual General Meeting on
17 October 2019 (‘2019 AGM’). We are
pleased to announce that Alex Thursby,
non-executive director, will be appointed as
my successor, with effect from the conclusion
of the 2019 AGM. Alex joined the Rank board
in August 2017 and has chaired the audit
committee since October 2017. Upon his
appointment Alex will step down as chair of
Rank’s audit committee. The search for a new
audit committee chair has commenced.
Richard Kilmorey
The Rt. Hon. The Earl of Kilmorey, PC did not
seek re-election at the 2018 Annual General
Meeting and therefore stepped down during
the year having completed over six years on
the Board.
I would like to thank Richard for his
contribution to the Board over his six-year
tenure and specifically his chairmanship of
the responsible gambling committee.
Tang Hong Cheong
On 15 January 2019, Tang Hong Cheong was
appointed to the Board. Tang Hong Cheong
is a director of Guoco Group Limited, Rank’s
major shareholder, and has been working with
the management of Rank since 2010. The
appointment of Tang Hong Cheong has further
enhanced the communication between Rank
and its major shareholder.
Bill Floydd
On 1 May 2019, after six months with the
Group, Bill Floydd was appointed to the Board.
Dividend
The Board is pleased to recommend a final
dividend of 5.5 pence per share to be paid
on 29 October 2019 to shareholders on the
register on 20 September 2019. This will take
the full year dividend to 7.65 pence per share,
up 3% on the previous year.
Brexit
The Group is as prepared as it can be for a no
deal Brexit. The risks of a no deal Brexit centre
on colleagues in our UK venues who are EU
nationals and who have not applied for, or
received, settled status; the timely supply of
food and beverage products to our UK venues;
the challenges which could arise for
commuters at the Spain/Gibraltar border;
and the general economic shock of a no deal
Brexit and its impact on consumer confidence
and expenditure. Mitigations have been
prepared for each of these risks to reduce
the potential impact.
Current trading and outlook
Trading in the short seven-week period to
18 August 2019 has been encouraging and we
are optimistic about the full year outturn with
both growth in revenue and additional cost
savings from the transformation programme.
Our people
This is my last opportunity to say thank you
to my 8,400 colleagues at Rank. You never fail
to show real passion for delivering the best
experience we can to our customers, always
making sure we excite and we entertain.
I have enjoyed my time at Rank immensely
and am extremely proud of what we have
achieved. I leave with the knowledge that
Rank has a strong management team and
Board which will take the business through
its transformation programme.
Ian Burke
Chair
21 August 2019
11
Our inputsWhat we do and howBusiness modelValue creationSeamless and instant journey across digital and retailBy focusing on well-known brands with a strong affinity with our customers, we strive for our digital and retail offerings to be consistent and unbeatable.Single wallet We’ve made things easier for our customers by creating a single wallet they can use both in-casino and online.360-degree player protectionOur three lines of defence model, involving our front line colleagues, our compliance team and our internal audit team, seeks to ensure that we are taking the appropriate actions to protect our customers.Robust balance sheetWe have a strong balance sheet supported by strong cash generation. Inspiring peopleWe employ over 8,400 talented and dedicated individuals who have a desire to create the best experience for our customers. Extraordinary venuesWe have a portfolio of 144 venues that provide entertaining and exciting experiences. Strong relationshipsOur relationships with the communities we serve and with our suppliers form a vital part of our strategic plans to deliver a quality product and service to our customers. TechnologyThe customer is at the heart of our business, so we invest in and introduce new technologies to maximise efficiency and ensure our customers have better experiences. 12 The Rank Group Plc Annual Report and Financial Statements 2019 Creating value for our stakeholdersOur customersWe create value for our customers by providing them with market-leading entertainment, meeting their expectations through our multi-channel offer.Our shareholdersThrough focused investments to meet our customers’ needs, we generate suitable returns for our shareholders.7.65p GovernmentsThe value we create goes back into the economies where we operate.£191.1m generated for tax authorities and local governmentsOur communitiesWe provide additional value to the communities we serve through our ‘operating responsibly’ programmes.£0.3m charitable funds raisedOur employeesWe provide our talented and dedicated individuals with rewarding and fulfilling careers, ensuring that their behaviour is aligned with our company values.8,400 employeesCross-brand convenienceOur family of brands means we are strategically aligned to promote innovation across all of our businesses.Underpinned by our STARS valuesOur five STARS values are at the core of everything we do. In delivering these values, we can achieve our purpose and fulfil our collective ambition.13Strategic report In the spotlightJohn O’ReillyChief Executive OfficerChief Executive’s Q&A14 The Rank Group Plc Annual Report and Financial Statements 2019 How would you summarise the Group’s performance in the year?What have been your key areas of focus in the year? It’s been a year of transformation. The new management team focused on developing our corporate transformation programme soon after I joined the Group in May 2018. The programme provides a framework for driving initiatives – from the generation of an idea through to its validation, planning, resourcing and ultimately its implementation. This has introduced new ways of working within Rank that puts us in good stead going forwards. As the transformation programme moved from planning into execution, operating profit grew from £30.3m in the first half to £42.2m in the second (H2). This is a significant turnaround for the Group, and was based on excellent work from the cost reduction workstreams. However, we can only take cost out of the business once – and ultimately shareholder value is created by growing our revenues. This means better meeting the needs of our customers. In terms of financial performance, the first half of the year was challenging. The hot British summer cut attendance in our venues, with a knock-on impact on revenues. Our UK digital business started to improve – though from a weak position following a reduction in marketing investment in the previous year. So, I was pleased to see H2 revenue growth in both Grosvenor and Mecca, and a 14% H2 growth in the UK digital business. In Spain, YoBingo had an excellent first half. It slowed a little in H2 but has some very exciting initiatives in the pipeline. The Enracha venues business continues to perform well and also has some important developments coming through. In addition to the early successes achieved by the transformation programme, we have announced the acquisition of Stride Gaming plc. We expect this transaction to close in the next couple of months, and it should add much needed scale to our digital business. Rank is a good business and I would not have joined the Group if I didn’t think there was a sizeable opportunity to improve its performance. Doing just that has been my focus and that of the management team. We made a number of important personnel changes in the year and have considerably strengthened the team. As a result, we are now in a much stronger position in terms of organisational capability to drive change and to do so at pace.Within the venues businesses, in both the UK and Spain, there are opportunities to reduce cost and grow revenues. The Grosvenor business made some material cost savings by introducing a new operating model involving fewer levels of management and the more appropriate scheduling of colleagues to meet customer demand. Cost saving is inevitably front-loaded in business transformations, because it is generally easier to deliver than revenue growth. So, that is what we have focused on. However, we have also been pursuing some key revenue growth opportunities that are more fun and more rewarding for colleagues across the Group. This is now the direction in which we are heading because this is not a business short on opportunity.While I am disappointed to be reporting a decline in the Group’s operating profit year-on-year, I am pleased with the groundwork we have put in place to turn things around, and expect that the results of our initiatives will become increasingly clear. At the end of his first full year in charge, we’ve spoken to chief executive John O’Reilly about how he feels the year has gone.15Strategic report Chief Executive’s Q&A continued
What do you see
as Rank’s biggest
opportunities
from here?
In the past year the management team has
reviewed the Group’s ambition, purpose
and strategy.
We concluded that there’s nothing much
wrong. It’s just that we haven’t been precise
enough in delivering these things.
As a result of the review, we have set an
ambition to become a £1bn revenue business
by 2023 and re-stated our strategy for how
we will achieve this.
I would like to emphasise the importance of
our purpose. This is to excite and to entertain.
We are in the entertainment business and
ultimately our customers come to us to have
fun – and I speak as someone who thoroughly
enjoys gambling. Many of our key revenue
growth opportunities centre on ensuring that
we deliver fun and entertainment to our
customers. The more customer-centric we
are as a business, the more successful we
will be – and there is a big opportunity for us
to do just that.
In Grosvenor we are testing new casino
propositions, new gaming products and new
casino designs to meet the needs of today’s
consumers. We are also focused on meeting
the needs of our customers who do not
distinguish between channels in anything
like the way that we do.
We are also trialling new bingo formats and
improving the proposition for both our online
and Mecca venue customers. We have some
exciting ideas in the pipeline. The same applies
to Enracha and also to the YoBingo business.
There is a lot to do – but we will have a lot of
fun doing it.
What are your
priorities for
2019/20?
Most important to us is maintaining the
momentum of the transformation programme.
I see this programme as a way of working.
We get ideas from across the business which
we put through the rigour of the programme
to ensure those that make the cut are then
properly resourced and brilliantly delivered.
To plagiarise a famous Gary Player quote,
the more we practise, the luckier we get.
As it is a constantly developing plan, we always
need more ideas for generating revenues or
reducing costs. And the best ideas come
from colleagues in the business who are
closest to our customers.
The transformation programme has made a
great start and I can see and feel that we are
turning things around. Our priority for 2019/20
is to return the business to long-term,
sustainable revenue growth. That’s the biggest
challenge for the coming year.
But it’s not the only one. We also expect to
complete the acquisition of Stride and integrate
it into Rank’s digital business. Buying Stride
will create more scale in our digital business;
strengthen our management team; deliver cost
and revenue synergies; and bring in proprietary
technology – which is a key attribute in terms
of accelerating growth both in the UK and
internationally.
The Group has a big opportunity, and it is one
that we intend to maximise.
“The Group has a big opportunity, and
it is one that we intend to maximise.”
16 The Rank Group Plc Annual Report and Financial Statements 2019
Stakeholder engagement
Strategic report
Understanding
their needs
Why we
engage
Understanding our customers’
changing needs and behaviours
helps us ensure our service satisfies
them. It also enables us to attract
new customers to the experiences
we offer.
Key areas
of interest
• Safer gambling
• Affordability
• Relevance of offer
• Customer experience
How we engage
and respond
• Customer interactions through our
venues
• Customer feedback
• Focus groups
• Websites
• Social media
• Customer Solutions Hub interactions
Customers
Employees
We depend on the passion and
commitment of our employees to
implement our strategy and ensure
our customers are served in the
best way. Engaged employees are
the best ambassadors for our
business.
Communities We engage with the communities
Regulators
& legislators
where our customers and
employees live.
Safe and fair gaming is a key pillar
of our strategy, and underpins our
commitment to our communities.
Regulators and legislators play a
key role in shaping the gambling
landscape.
Unintended consequences of
regulation can adversely impact
our ability to offer the best
experience to our customers.
• Working environment
• Effectiveness of
communications
• Board appointed non-executive
director responsible for employee
engagement
• Career development and
progression opportunities
• Employee Opinion Survey
• Meetings with appointed employee
• Safer gambling
• Employment
• Reputation
• Safer gambling
representatives and key influencers in
the business
• Charity partnership with Carers Trust
• Volunteering and fundraising
• Compliance with regulation
• Safer gambling
• Ongoing dialogue
• Sector association memberships
• Participation in public consultations
• External adviser network
Shareholders
& investors
As a publicly listed company we
have to provide fair, balanced and
understandable information to our
shareholders and investors, so that
they are able to make informed
investment decisions.
• Strategy, performance and
outlook
• Leadership capability
• Executive remuneration
• Dividend policy
• Ongoing dialogue and meetings
• Access to management
• Quarterly reporting
• Annual Report
• Investor roadshows and conferences
• Corporate website
Link to
strategy
1
5
6
5
5
1
4
2
3
2
5
3
6
17
Understanding our market
Our environment
UK economic
environment
• Higher inflation has squeezed real household incomes
Our response
• Focus on delivering a relevant and engaging
and this has inhibited consumer-led growth
leisure experience to our customers
• Brexit-related uncertainty is impacting
economic growth
• Continued focus on good cost discipline
to manage increasing operating costs
• Forecasters are pointing to moderate growth in both
• Ensure the Group is operating effectively and
UK GDP and consumer spending
efficiently through the transformation programme
Link to
strategy
1
3
Technology
• Industry innovation slower than other sectors,
• Continue our dialogue with the UK
resulting in customer expectations not being met
• Product innovation inhibited by the licensing regime
• Mismatched product innovation drivers between
suppliers and operators
regulators around new gaming concepts
and product innovation
• Closer working relationships with our product
suppliers to better address customer needs
1
2
4
Sustainability
• Hard to attract high-calibre people to work in the
gambling industry due to negative public perception
and intense media attention
• Focus on improving reward and recognition
for colleagues across all levels to improve
retention and attraction of talent
4
5
• Potential restrictions on employees to work in the
UK following Brexit may restrict an already limited
labour base
• Investment in a comprehensive development
and educational plan for colleagues to ensure
talent is developed and retained
• Restricted labour base hinders Rank’s efforts to recruit
the best people to offer the best customer experience
18 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Our industry
The Group operates
in the UK, Spanish
and Belgium
gambling markets.
The Group has:
144
venues in the UK, Spain
and Belgium operating
under the Grosvenor Casinos,
Mecca and Enracha brands.
Total UK gambling market size1,2
Retail
casinos
£1,075m
Retail
bingo
£678m
Other operators: 67%
Rank’s share: 33%
Other operators: 70%
Rank’s share: 30%
Online
casinos
£2,991m
Online
bingo
£178m
Other operators: 98%
Rank’s share: 2%
Other operators: 55%
Rank’s share: 45%
Total Spanish gambling market size2
Retail
bingo
£508m
Online
bingo
£19m
Other operators: 92%
Rank’s share: 8%
Other operators: 55%
Rank’s share: 45%
1. UK Gaming Commission (GGR)
2. H2 Gambling Capital (GGR)
19
Machine stakes and returns
Maximum
stake
£5
£2
£2
£2
£2
£1
Machine category
B1
B2
B3
B3A
B4
C
D (different variants)
Maximum
prize
£10,000
£500
£500
£500
£400
£100
10p to £1 £5 to £20
Digital
Rank operates its UK customer facing digital
businesses (Grosvenor Casinos and Mecca)
through Alderney and UK remote gambling
licences. Rank’s Spanish digital businesses
(Enracha and YoBingo) operate through
Spanish remote gambling licences.
Our digital revenues are subject to remote
gaming at 21% for the UK and 20% for the
Spanish online businesses.
Market review
Across our Grosvenor
venues we have:
1,337
B1/B2 machines
65
B3/C/D machines
1,665
Electronic casino
terminals
Across our Mecca
venues we have:
2,132
B3/B4 machines
2,906
C/D machines
12,893
Electronic casino
terminals
Retail
Rank operates 144 licensed venues through
its Grosvenor Casinos, Mecca and Enracha
brands. Our retail units are located across
Great Britain, Spain and Belgium.
Casinos – Great Britain
There are 151 casino licences operating in
Great Britain, of which Grosvenor Casinos
operates 64 across its 52 venues. In
addition, Grosvenor Casinos holds nine
non-operating licences.
All 52 Grosvenor Casinos, apart from its casino
in Luton, operate under Gaming Act 1968
licences. These licences allow a maximum
of 20 machines which can be any machines
category B to D (except B3A machines), or
any number of category C or D machines.
Across our Grosvenor Casinos estate we
have a total of 1,337 B1/B2 machines,
65 B3/C/D machines and 1,665 electronic
casino terminals.
Casinos in the UK are subject to casino duty
(from 15% to 50%) on casino games and
poker and machine gaming duty (20%) on
gaming machines. Further detail can be found
on page 46 in the tax fact file.
Bingo – Great Britain
There are 336 licensed bingo venues operating
in Great Britain, excluding holiday parks and
arcades, of which Mecca operates 82.
A licensed bingo venue can offer B3, B4 and
category C and D machines. The number of
B3 or B4 machines is restricted to 20% of
the total number of gaming machines provided
in the venue. The number of category C and D
machines can be unlimited.
Across our Mecca estate we have a total
of 2,132 B3/B4 machines, 2,906 C/D
machines and 12,893 electronic
bingo terminals.
Bingo in the UK is subject to bingo duty (at
10%) on main stage and interval bingo and
machine gaming duty (between 5% and 20%)
on gaming machines. Further detail can be
found on page 46 in the tax fact file.
20 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Our strategy
Our strategic
framework
Purpose
Working together to create exciting environments that reflect the changing needs and expectations
of our customers and colleagues, delivering stimulating and entertaining experiences every time,
To Excite and To Entertain.
Ambition
To become a £1 billion revenue international gaming company by 2023, transforming our business
and consistently exceeding our customer and shareholder expectations
Values
Service
Teamwork
Ambition
Responsibility
Solutions
Our strategic pillars
1
2
3
4
5
Create a compelling
multi-channel offer
Build digital
capability and scale
Continuously evolve
our venues proposition
In the markets where we
operate, Rank is one of the few
gaming companies in a position
to provide customers a genuine
multi-channel gaming offer. We
have a number of key assets,
including 144 venues, our
membership-based models, our
loyalty and reward programmes
and the high level of engagement
that our team members enjoy
with customers.
We have built strong positions in
venues-based gaming which we
are seeking to replicate across
our digital channel. In 2018/19,
our digital operations generated
20% of Group revenue. Across
the UK as a whole, digital
channels now represent around
47% of the gambling market
(excluding the National Lottery),
presenting a significant growth
opportunity.
Our casino and bingo venues
remain a material part of our
business, providing entertainment
for millions of customers each
year and generating the majority
of the Group’s revenue and
profits. By continuously evolving
our venues (in terms of product,
environment and service) and by
creating new concepts, we are
constantly enhancing the
experiences that we offer
our customers.
Consistently improve
our customer experience
through innovation
Our customers are at the heart of
our business, and we are always
looking for new ways to support
and entertain them. We invest in
new technologies that drive
efficiencies across the Group to
the benefit of our customers. We
also regularly invest in and
introduce innovations that make
the customer experience even
better – both in our venues
and online.
Be committed to safe
and fair gaming
We are committed to operating in
a responsible manner and have a
clear awareness of the harm that
can arise from gambling. We
recognise the importance of
continuous innovation to refine
our approach to making gambling
as safe as possible. We work to
proactively identify and interact
with those customers who show
signs of problem gambling.
6
Within an environment which enables our colleagues to develop, be creative and deliver exceptional service
21
Our strategic progress
Creating a compelling
multi-channel offer
1
Build digital
capability and scale
2
Continuously evolve
our venues proposition
3
What we said
• Launch and roll-out Grosvenor One across the casino
estate; and
What we said
• Support the ongoing growth of YoBingo.es;
• Launch a new content management system (‘CMS’)
What we said
• Completion of second phase of refurbishment at
Grosvenor’s Barracuda casino in London; and
• Continue the development of an omni-channel
for Grosvenor digital;
offer for Mecca.
What we did
• Grosvenor One was successfully rolled out across
all 52 casinos; and
• Exploratory work commenced into creating a
new omni-channel service for the Mecca brand.
What we are going to do
• Enhancements to Grosvenor One customer sign
up and other user journeys plus increased focus
on the customer benefits; and
• Further development of an omni-channel
Mecca service.
Key performance indicator
During the year the Group has focused on improving data
quality within the business. Multi-channel customer
numbers remain the appropriate measure however due
to an ongoing data cleansing exercise we are unable to
provide a meaningful number for 30 June 2019.
• Deliver a suite of improvements to our promotion
and bonus tools;
• Appointment of new digital games suppliers to provide
our customers with bespoke and exclusive games;
and
• Increase customer acquisition marketing investment
underpinned by strong return on investment analytics.
What we did
• Ongoing development of the YoBingo.es offer;
• Development of YoCasino.es and YoBingo.pt;
• Successful launch of new CMS for Grosvenor digital
customers;
• Go live of a new enhanced buy in and other bonuses
for Mecca and Grosvenor;
• Plans approved, and work commenced on the
development of new bespoke slot games;
• Continued to evolve our predictive and attribution
capability around digital marketing investments;
• Successfully integrated the YoBingo business; and
• Rank’s offer for Stride Gaming plc.
What we are going to do
• Investment into and development of Grosvenor’s
sportsbook offer;
• Develop a suite of proprietary games;
• Launch of a Grosvenor daily retention game;
• Continue with enhancements to customer user and
payment journeys;
• Automation and improvements to lifecycle
management and CRM more generally;
• Launch of YoCasino.es and YoBingo.pt;
• Complete the migration of Grosvenor’s customer
base to the new CMS and commence the migration
of Mecca’s customers; and
• Successfully conclude the acquisition of Stride
Gaming plc and commence its integration with
Rank Digital.
Key performance indicator
Following a recent review of the strategic pillars it was
decided that net gaming revenue (‘NGR’) was a more
appropriate measure than the previously stated KPI of
number of digital customers.
Digital net gaming revenue (£m)
• Continuation of renegotiations with venue landlords
to re-gear and extend leases whilst reducing
property costs.
What we did
• Refresh completed at Grosvenor’s flagship Victoria
casino in London with improvements to the electronic
product offer and VIP facilities;
• Following the appointment of a new VIP team,
focus on developing existing and acquiring new
VIP customers;
• Refurbishment at the Barracuda casino in London
successfully completed providing a more suitable
environment for its customer base;
• Refurbishment of the Sheffield casino providing
customers with a wider non-gaming offer and
improved electronic gaming experience;
• Continued development of Mecca’s wider
entertainment offer with events such as premium acts
(e.g. 5ive), Bonkers Bingo, DJ Nights and Rewind
Festivals (multi-act nights);
• ‘Players’ bingo concept launched at our Camden
venue; and
• Ongoing negotiations with venue landlords to re-gear
and extend leases whilst reducing property costs.
What we are going to do
• Open a new casino concept at our Brighton venue;
• Continue to upgrade casino slots estate across all
venues;
• Investment in a new outdoor customer facility
at the Victoria casino incorporating live gaming;
• Accelerated programme of development in the
Grosvenor estate based upon learnings from recent
investments;
• Roll out of three standalone Enracha Stadia
concept venues;
• Additional initiatives to modernise the Mecca brand
and product/service offering; and
• Further development of Mecca’s bingo and
cashline offer.
Key performance indicator
Following a review of the strategic pillars it was decided
that customer visits is the appropriate measure.
Venues customer visits (‘000)
2019
2018
118.5
96.7
2019
2018
17,281
18,708
22 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
4
Consistently improve
our customer
experience through
innovation
Committed to safe
and fair gaming
5
6
Within an environment
which enables our
colleagues to develop,
be creative and deliver
exceptional service
What we said
• Introduction of Ticket-In-Ticket-Out (‘TiTo’) for table
What we said
• This pillar was only recently added to the Group’s
What we said
• This pillar was only recently added to the Group’s
gaming; and
• Self-service TiTo cash terminals to be installed across
casinos to allow customers to buy in and cash out
their TiTo tickets.
What we did
• Home delivery trials of food and drink from our London
casinos through a third-party partnership taking
advantage of quieter periods in our venues’ kitchens;
and
• Self-service TiTo cash terminals, introduced across a
strategic overview. Further details on Rank’s approach
to safe and fairer gambling can be found on page 26.
What we did
• Began a trial in five casinos of using algorithms
designed and built by Focal Research to help us
detect potentially at-risk behaviour among slot
machine players;
• Established a dedicated safer gambling team
within our Sheffield Customer Solutions Hub;
• Began a trial of affordability modelling in our
majority of the casino sites.
digital business:
What we are going to do
• Launch of TiTo for casino table gaming;
• Extension of home delivery for food and drink from our
provincial casino kitchens;
• Examined the potential use of open-banking as a
way of improving customer due diligence; and
• Implemented the first phase of time and money
controls to our casinos’ slot machines.
• Launch of an automated ticket vending machine
dispensing pre-bundled bingo books;
What we are going to do
• Better target our customer interactions with those
• Installation of fixed Mecca Max positions to be trialled
most at risk;
to improve customer experience;
• Go live with cross channel liquidity for Mecca; and
• Introduction of TiTo across all Mecca venues.
Key performance indicator
This is a new strategic pillar for the Group and an
appropriate measure is currently under review.
• Extend the Focal Research trial to include electronic
roulette play and roll-out across the Grosvenor estate;
• Reduce our reliance on less sophisticated systems of
triggers and alerts in our retail businesses;
• Further pursue the assessment of affordability risk,
reducing our reliance on generic thresholds and those
based only on financial metrics; and
• Refresh and reinvigorate our approach to customer
messaging to encourage safer gambling behaviour.
strategic overview. Further details on Rank’s approach
to creating the right environment for our employees
can be found on pages 28 to 30.
What we did
• Revisited Rank’s strategy and culture statements to
ensure they are still relevant and appropriate in light
of Rank’s new ambition;
• Reviewed and created new communication and
employee engagement forums to ensure employees
are ‘being heard’ and messaging across the business
is consistent; and
• Harmonised employee awards schemes across
support offices.
What we are going to do
• Roll-out of Leading@Rank and Managing@Rank to
enhance our employee development programmes;
• Re-launch of a new Group intranet to improve
engagement with, and communication of, key
business issues;
• Define and celebrate sub-cultures within the Group;
and
• Ensure our leaders take responsibility for role-
modelling our values to drive cultural change.
Key performance indicator
Employee engagement score (%)
Key performance indicator
This is a new strategic pillar for the Group and an
appropriate measure is yet to be assigned.
2019
2018
66
74
23
Operating
responsibly
Operating responsibly
26
Teamwork
“Everyone in the team had a different approach,
skill set and experience to offer, and through
regular collaboration sessions, everyone’s
views were heard. The diversity of opinion,
as well as the empowerment of various teams,
made this a successful project that brought with
it new solutions to problems.”
Maliq Ali
Quality Assurance Manager, Gibraltar
Building the new content management system for Grosvenor’s digital website
was a two-year-long project for our digital team. And the final stage was critical,
transferring customers successfully to the new site in a controlled way.
A 28-strong team with different skill sets and based in different locations,
from Gibraltar to Sheffield and Maidenhead, came together to provide
solutions that not only supported the business objective but improved our
customers’ experience.
Our offering encouraged customers to try the new site, while enabling them
to go back to what they were used to if they wished. They were in control.
Once the technology team had completed the change, customers were
contacted about how they felt about it, good and bad.
“This project has been a key enabler within the digital business,” says Maliq.
“And this final stage has excelled due to the collaboration across teams
and locations that had previously not worked together.”
Our purposeOperating responsiblyOur purpose – working together to create exciting environments that reflect the changing needs and expectations of our customers and colleagues, delivering stimulating and entertaining experiences every time, To Excite and To Entertain.26 The Rank Group Plc Annual Report and Financial Statements 2019 Strategic report
Our customers…
Safer gambling
2018/19 in review
Rank is committed to providing a safe
gambling environment for its customers, and
developing a culture where the desire to do
so is evident in the decisions that we make,
the products that we offer and the service
we deliver.
As the emphasis during the year has shifted
towards ‘safer’ gambling, rather than simply
promoting responsible gambling, we have
focused on two clear objectives, namely to:
• consider the products and the environments
where we offer gambling, assess their risks,
and work to make them safer in the first
instance; and
• promote safer participation by our customers
in the gaming that we do offer.
This developed into a refreshed policy and
new strategy endorsed by the safer gambling
committee, and a specific workstream within
the transformation programme, with initiatives
proposed from around the business.
During the year some of the initiatives that
launched or progressed are:
• a trial in five casinos of complex algorithms
developed in partnership with the Canadian
company Focal Research, designed to help
us detect potentially at-risk behaviour among
slot machine players. Grosvenor is
committed to completing this trial and to
extending the use of the ALeRT system
across all casinos in the coming year;
• establishing a dedicated safer gambling
team within our Sheffield Customer
Solutions Hub;
• a trial of affordability modelling in our digital
business and a proof-of-concept (in
partnership with Experian) to examine the
potential use of open-banking as a way of
improving customer due diligence;
• implementing the first phase of time and
money controls to our casinos’ slot and
electronic roulette machines.
Cross-industry working
In collaboration with other operators, we
continue to examine how to support better
youth education, industry marketing codes
of practice, and improvements to the controls
and tools we offer to customers to manage
their gambling.
Rank is committed to working with others to
help fund a truly national programme of
education and treatment for problem gambling.
We believe that these vital services should be
readily accessible to anyone who may benefit
from them.
Safer gambling in the year ahead
During 2019/20 our initiatives will focus on:
• better targeting of our customer interactions
with those most at risk;
• reducing our reliance on less-sophisticated
systems of triggers and alerts in our
retail businesses;
• further pursuing the assessment of
affordability risk, reducing our reliance on
generic thresholds and those based only
on financial metrics;
• sharing best practice internationally between
our business units; and
• refreshing and reinvigorating our approach
to customer messaging to encourage safer
gambling behaviour.
We are increasingly moving away from
considering the risks of, for example, money
laundering and problem gambling in isolation.
Instead, we are making progress towards a
more holistic review of customer risk and we
will continue to invest in this area in the year
ahead. Specifically, we will start using
socio-economic and demographic data to
inform our risk assessments and interaction
with customers who may be playing beyond
their means or may be at risk of gambling-
related harm. We will also continue to improve
the quality and accessibility of our player data,
including cross-channel transaction data, to
support a better overview of risk for customers
that play both online and offline.
As policy-makers, regulators and stakeholders
more generally continue to pay close attention
to gambling to ensure it operates in a
responsible and safe manner, and as our
business continues its wider transformation,
we must ensure that our approach to safer
gambling develops in tandem. We are
committed to doing so.
27
Operating responsibly continued
Our employees…
Culture
Every day, we rely on our employees to deliver
our promise to excite and entertain. In return,
our employees rely on us to deliver what they
need. Culture isn’t a one-way street.
That’s why in Q2 we asked if our values
(Service, Teamwork, Ambition, Responsibility
and Solutions) are still the right fit.
The overwhelming answer was yes.
There were some “buts…” But that’s why we
asked the question in the first place.
So, over the past year we have:
Diversity and inclusion
When it comes to enhancing diversity, our
actions need to be… well, diverse. And during
the year we have:
• partnered with Global Diversity Partnership
to deliver unconscious bias workshops
across the business;
• appointed diversity champions across
our business to help roll-out diversity
and inclusion and unconscious bias
awareness training;
• implemented a diversity dashboard
• improved recruitment processes with a focus
• updated how we describe our
on gender;
• integrated diversity into our key development
programme, ‘Managing at Rank,’ and
Leading in Rank course; and
• made Enhanced Paternity Pay available to
senior employees.
In addition, we continued our partnership with
WiH2020 and our employees took part in their
mentoring programme and masterclass series.
We also created a new family network group to
provide support for employees who have
recently started a family and for those about to
have children1.
Board
Senior
management
Whole
Company
Male
8 (89%)
Female
1 (11%)
24 (71%)
10 (29%)
4,254 (51%)
4,168 (49%)
STARS values;
• created a culture dashboard;
• increased internal engagement through
focused employee sessions and the Group’s
intranet; and
• reviewed the Group’s ambition, purpose and
strategic pillars to ensure they are relevant
and appropriate.
As part of the transformation programme,
for example, we have focused on ensuring
our employees have the capability to work in,
and contribute to, a high-performance culture.
By that we mean an environment where
colleagues strive to do their best and take
ownership in delivering. Such a move should
help us to achieve our ambition, purpose and
strategic goals.
The Group already has established cultural
attributes, such as ensuring our customers
are provided with an experience that is both
safe and fair. This culture is underpinned by
sub-cultures across our businesses respecting
diversity and difference, so workplace
transformation and transition can occur
more effectively.
During 2019/20 we will continue to focus
on boosting engagement and embedding
a high-performance culture across
the organisation.
Male: 8
Female: 1
Male: 24
Female: 10
Board
Senior
management
Male: 4,254
Female: 4,168
Whole
company
1. Senior management is as defined in the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, and includes: i) persons responsible for planning,
directing or controlling the activities of the company, or a strategically significant part of the company, other than company directors, and ii) any other directors of undertakings
included in the consolidated accounts.
28 The Rank Group Plc Annual Report and Financial Statements 2019
Employee engagement
The Group takes employee engagement very
seriously and is always looking at ways to
ensure that colleagues have a chance to share
their views on what works well and what could
be improved. There are a variety of forums
for employees to participate in throughout
the year.
Employee voice:
Employee voice meetings are held bi-annually
and are attended by elected representatives
from different areas of the business. They are
also attended by John O’Reilly, chief executive,
and other members of the Rank executive
committee who are there to listen and assist
with any required action planning. Subjects
discussed included working environments and
Group policies.
Talking STARS and Leading STARS:
The Talking STARS and Leading STARS
forums are new forums created to supplement
the already established employee voice
meetings. Key individuals from across the
business were invited to debate key strategic
issues impacting the Group.
Talking STARS participants included
colleagues from across the business whereas
Leading STARS was aimed more at colleagues
from Rank’s leadership community.
Following these meetings, the following were
identified as areas that required attention
going forward:
• improvement of cross Group
communications centrally and by managers;
• greater awareness needed of personal
development opportunities; and
• issues around attracting talent to the Group.
Strategic report
66%
Engagement score
Pulse survey January 2019.
Employee opinion survey:
During the year, the Group moved from
running two full Group-wide employee opinion
surveys to just one in July 2019, however a
high level ‘pulse’ survey was carried out in
January 2019 to ‘temperature check’
engagement across the Group.
Outputs from all the above forums are shared
with the Rank executive committee and the
Rank Board.
The results from the 2019 opinion survey are
currently under review and were not available
for this report.
However, the pulse survey, carried out in
January 2019, showed employee engagement
fell by 8ppts to 66%.
The results from the 2019 engagement
survey are under review and further detail
will be available in the 2020 Annual Report
and Financial Statements.
Talking STARS
and Leading
STARS
(October)
Employee
Voice
(September)
Employee Opinion
Survey Pulse
(January)
Annual employee
engagement cycle
Employee
Opinion Survey
(July)
Employee
Voice
(March)
Talking STARS
and Leading
STARS
(March)
29
Operating responsibly continued
Disability
Rank is committed to ensuring that people
with disabilities are encouraged to apply
for roles with the Group and are supported
while at work.
Human rights
The Board agreed that it is not necessary for
the Group to operate a specific human rights
policy at the moment. Our policies already
comply with relevant laws and respect the
human rights of our employees and other
stakeholders in the business.
Health and safety
The key objectives within the 2018/19 health
and safety (H&S) plan were to:
• improve H&S awareness across the Group;
• reduce paperwork by introducing a
computerised system for assessing display
screen equipment, and using a central
database for training, for example in knife
handling, and ensuring that chemical and
food allergen training is completed for all
134 UK clubs; and
• reduce the number of employee and
customer slips, trips and falls (STF) as well
as burns accidents in the UK by 5%
compared to the previous year.
Over the year we ensured that general
managers were trained in the Risk Assessment
process; that data sheets and assessments
were in place for maintenance chemicals; and
that our fire door training project was prepared
and signed-off with a start date of 1 July 2019.
We launched the display screen equipment
project in July 2019, and all other training
including knife handling, COSHH and allergen
training has been put in place.
We looked to reduce both burns and slips,
trips and falls (STF) by 5%. Year to date we
have exceeded our objectives, with burns
reduced by 26% and STFs reduced by 29%
across the Group.
30 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Our communities…
Rank Cares
Rank has been supporting Carers Trust since
2014, and we’re pleased to say we will be
doing so again in 2019/20.
Our employees are incredible ambassadors
for Rank Cares and have raised a further
£0.3m in the year bringing the total since the
start of the partnership to £2.3m – a truly
fantastic achievement. We have baked, cycled,
run and walked all in the name of fundraising,
as well as donating a total of 277 volunteer
hours in 2018/19.
The money raised is made available to the
charity’s grant-giving programme and has
so far provided support to 11,000 carers.
About Carers Trust
Carers Trust works to improve support,
services and recognition for anyone living with
the challenges of caring, unpaid, for a family
member or friend who is ill, frail, disabled or
has mental health or addiction problems.
It does this with a UK-wide network of quality
assured independent partners and through the
provision of grants to help carers get the extra
help they need to live their own lives.
With locally based Network Partners they are
able to support carers in their homes through
the provision of replacement care, and in the
community with information, advice, emotional
support, hands-on practical help and access
to much needed breaks.
It offers specialist services for carers of people
of all ages and conditions and a range of
individually tailored support and group activities.
To find out more about the work Carers Trust
does visit its website at carers.org
£0.3m
Raised by Rank Cares
11,000
Carers received
support
277
Volunteer hours by
Rank employees
31
Operating Review
Operating review Grosvenor Casinos
Operating review Mecca
Operating review International
Operating review Digital
Financial review
Tax fact file
Non-Financial Information Statement
Risk management
34
36
38
40
42
44
47
48
Ambition
“The transformation programme is clear about its
mission. We not only aim to achieve the Group’s
£1bn ambition, but we want to be the best in our
sector and outshine our competition. We will do
this by using the full diversity of our resources.”
Neil Brown,
Programme Change Manager, Maidenhead
A is for Ambition. And what we’re ambitious about is transforming our business,
delivering a step change in performance and ensuring the Group achieves its full
potential.
Our five-year transformation programme was launched in December 2018
by Jim Marsh, our chief transformation officer.
There are 13 workstreams within the programme, each owned by an executive
committee member or senior leader. These fall into three main categories:
• fixing the basics to build a more capable business;
• managing our cost base better; and
• driving performance to grow revenue.
By 2023 we expect revenue to be £1bn. We expect to double our operating
profit and to have made the best use of our people.
That’s ambition.
Operating review
Grosvenor venues
34 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Following a challenging first half with
like-for-like revenue down 5%, Grosvenor’s
performance improved in H2 with revenue
up 1%.
Under the Group’s transformation programme,
a new casino operating model was introduced
across the estate focused on removing layers
of management in our casinos and ensuring
the scheduling of colleagues’ hours better
matched consumer demand. The new model
led to gross labour savings of £8.2m in the
year. To mitigate any adverse impact on
customer service, licensed casino employees,
such as dealers, were largely unaffected by
the changes.
Further transformation programme initiatives
began to drive revenue growth in the year
which were partly offset by lower handle and
win margin from Grosvenor’s major players.
The lower major player revenues were almost
entirely the result of lower win margin primarily
felt in two London casinos, the Barracuda and
Park Tower, which experienced a £9.6m
revenue decline year on year.
During the year we completed two key London
refurbishments, both aimed at improving the
customer experience and ensuring each
casino’s specific customer base is better
served. The first was at the Barracuda casino
where a complete refurbishment of the Baker
Street club has delivered a much-enhanced
playing environment for higher-spending
customers. The second was at Grosvenor’s
flagship Victoria casino. Here we focused on
making improvements to the gaming floor
layout alongside a full renewal of the electronic
roulette and gaming machine offering.
Trading following the investment has been
strong. New VIP facilities were completed post
year-end and plans are underway to improve
the entrance and outdoor terrace which will
incorporate live gaming and improved
customer facilities. These successful
refurbishments will better inform future
Grosvenor investments.
In May 2019, we also completed the
refurbishment of the Sheffield casino. The
refurbishment was based upon the successful
Nottingham casino concept which targets both
traditional and leisure customers. The casino
now provides an improved food and beverage
offer alongside state-of-the-art gaming which
includes tournament electronic gaming, a
dedicated VIP area and a sports bar.
Key financial performance indicators*
Revenue1,2 (£m)
London4
Provinces4
EBITDA1,3 (£m)
Operating profit1,3 (£m)
Total revenue2
Total operating profit3
FY 2018/19
353.0
128.3
224.7
63.8
44.7
353.2
44.9
FY 2017/18
360.4
129.9
230.5
68.4
47.8
362.4
47.2
H1 YOY
(5)%
(3)%
(6)%
(28)%
(35)%
(5)%
(34)%
H2 YOY
1%
0%
1%
23%
40%
0%
42%
FY YOY
(2)%
(1)%
(3)%
(7)%
(6)%
(3)%
(5)%
1. Excludes venues openings, closures and relocations.
2. Before adjustments for customer incentives.
3. Before exceptional items.
4. Adjusted for the reallocation of beamed roulette from Provinces to London following tax treatment agreement
with HMRC.
* From 1 July 2018, figures exclude the contribution of the Belgian casino which is now reported under
International venues.
Venues revenue analysis
£m
Casino games
Gaming machines
Card room games
Food and drink/other
Total5
2018/19
221.7
91.3
14.3
25.7
353.0
2017/18
228.5
90.2
14.6
27.1
360.4
Change
(3)%
1%
(2)%
(5)%
(2)%
5. Excludes venues openings, closures and relocations.
We also made some key improvements to Grosvenor’s electronic roulette offer during the year,
including the addition of new electronic roulette machines, product improvements and the
introduction of tournament play at our Sheffield and St Giles casinos. The performance of
Grosvenor’s electronic roulette offer has improved following these investments and was
particularly strong in the later part of Q4 following the introduction of the £2 maximum stake
for B2 machines in UK betting shops.
Key non-financial performance indicators
Customer visits (000s)6,7
London
Provinces
Spend per visit (£)6,7
London
Provinces
2018/19
6,502
1,325
5,177
54.29
96.83
43.40
2017/18
6,804
1,303
5,501
52.97
99.69
41.90
Change
(4)%
2%
(6)%
2%
(3)%
4%
6. Excludes venues opening, closures and relocations.
7. Unaudited.
Reduced staffing following the introduction of the new casino operating model led to inaccuracies
in the manual counting of customer visit numbers in H2. Sample testing suggests that the figures
could be understated by 5-10%. Any understatement in customer visits will result in overstated
spend-per-visit numbers. We are currently looking at technology solutions to address this issue
going forward.
During the year, an exceptional impairment charge of £10.7m was recognised relating to five of
Grosvenor’s casinos.
35
Operating review continued
Mecca venues
36 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Key financial performance indicators
Revenue1,2 (£m)
EBITDA1,3 (£m)
Operating profit1,3 (£m)
Total revenue2
Total operating profit3
FY 2018/19
199.9
40.5
30.0
202.1
28.6
FY 2017/18
203.2
41.7
30.1
208.1
28.6
H1 YOY
(3)%
(10)%
(8)%
(4)%
(10)%
H2 YOY
0%
3%
5%
(2)%
8%
1. Excludes venues closures.
2. Before adjustments for customer incentives.
3. Before exceptional items.
Key non-financial performance indicators
Customer visits (000s)4,5
Spend per visit (£)4,5
4. Excludes venues opening, closures and relocations.
5. Unaudited.
2018/19
8,676
23.04
2017/18
9,508
21.37
Spend per visit increases were seen across all revenue categories in the year.
Venues revenue analysis
£m
Main stage bingo
Interval bingo
Amusement machines
Food and drink/other
Total6
2018/19
36.0
72.0
67.0
24.9
199.9
2017/18
36.1
74.7
66.9
25.5
203.2
6. Excludes venues openings, closures and relocations.
Luda
FY YOY
(2)%
(3)%
0%
(3)%
0%
Change
(9)%
8%
Change
0%
(4)%
0%
(2)%
(2)%
In 2017/18, three new high street bingo shops were opened under the Luda brand. The Luda
concept targeted a more casual customer base with a highly accessible electronic bingo offer
alongside gaming machines and a convenient food and beverage offer. Despite considerable
experimentation with the customer offering, revenues have remained below the breakeven point
and the decision was taken to close all three Luda shops. All three shops ceased trading in July
2019 and closure costs are estimated to be £2.0m, principally reflecting future lease obligations.
Mecca’s like-for-like revenue was down 2%
in the year resulting from a 9% fall in customer
visits offset by an 8% increase in spend per visit.
During the year, Mecca reviewed the
relationship between the price to play and
the prizes on offer with a focus on enhancing
the value for our customers. This led to the
introduction of lower priced sessions in the
quieter mid-week sessions and guaranteed
big prizes at the busier weekend sessions.
Mecca’s offer was further enhanced by a
number of transformation initiatives including
the development of new games and side
bets and extending the length of afternoon
bingo sessions.
The drive to improve the offer began to bear
fruit in H2 with Mecca growing revenue, albeit
modestly and against a weak comparative
period, the first time since H2 2016.
During the year, Mecca also progressed
several transformation programme initiatives
aimed at enhancing the gaming machine offer
which included the introduction of new and
upgraded machines offering new and popular
games titles. The accessibility of machines
was also addressed by some clubs moving
their machines to the more prominent, but less
used, foyer area and extending opening hours
across some locations. Effective management
of the machine estate is critical in delivering the
right customer experience and to this end new
in-club teams were introduced solely focused
on machine management.
Mecca’s wider entertainment offer, now a
well-managed and coordinated programme,
continued to contribute to revenue and
operating profit in the year. It has a strong
audience appeal and has broadened the
attractiveness of Mecca clubs within their
local communities.
Operating costs continued to be tightly
controlled with savings delivered through
more efficient rotas and promotional costs.
Three clubs (Ashford, Ellesmere Port and
Catford) were closed early 2018/19 as part
of our ongoing estate review.
On 16 August 2019, Rank entered into a
conditional agreement to sell five Mecca
bingo clubs (Cwmbran, Greenock, Hyde Road,
Ipswich and Leith) to Club 3000 for £2.2m.
The five clubs’ contribution to Mecca’s
operating profit is not material and the
disposals are expected to be completed
over the coming months.
37
Operating review continued
International venues
38 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Key financial performance indicators
Revenue1,2 (£m)
Enracha
Grosvenor Belgium
EBITDA1,3 (£m)
Operating profit1,3 (£m)
Enracha
Grosvenor Belgium
Total revenue2
Total operating profit3
FY 2018/19
44.9
35.3
9.6
12.0
9.3
7.8
1.5
44.9
9.3
FY 2017/18
44.6
35.3
9.3
11.4
8.6
7.4
1.2
45.9
8.8
H1 YOY
1%
(1)%
6%
0%
0%
(3)%
20%
(4)%
(5)%
H2 YOY
0%
1%
0%
10%
16%
13%
29%
0%
16%
1. Excludes venue closures.
2. Before adjustments for customer incentives.
3. Before exceptional items.
Key non-financial performance indicators – Enracha only
2017/18
2,015
17.52
Customer visits (000s)4
Spend per visit (£)4
2018/19
1,977
17.86
4. Unaudited.
Since 1 July 2018, we have reported Enracha’s
venues and Grosvenor’s casino in Belgium
under International venues.
Like-for-like revenue from these venues grew
by 1% in the year.
Following a challenging first half of the year,
in which trading was negatively impacted by
a combination of regulatory change and
competitor activity, Enracha’s venues grew
revenue by 1% in H2 as the early benefits of
the transformation programme were realised.
Operating at a higher margin, Enracha’s
gaming machines and sports betting offering
(branded Enracha Stadium) performed well in
the year. This supports our decision to invest in
both the refurbishment and expansion of
non-bingo gaming and the roll out of the
stand-alone Enracha Stadium concept venues,
the first three of which are expected to open
in 2020.
The Blankenberge casino concession was
successfully renewed during the year and a
new 15-year concession will start in January
2021. Investment in electronic gaming
products continued to drive strong growth
in the year.
FY YOY
1%
0%
3%
5%
8%
5%
25%
(2)%
6%
Change
(2)%
2%
39
Operating review continuedDigital40 The Rank Group Plc Annual Report and Financial Statements 2019 Strategic report
Key financial performance indicators
Revenue1,2 (GGR, £m)
Grosvenor
Mecca
Enracha
Revenue1 (NGR, £m)
Grosvenor
Mecca
Enracha
EBITDA1,3 (£m)
Operating profit1,3 (£m)
Total revenue2
Total operating profit3
FY 2018/19
131.7
51.1
79.7
0.9
105.5
42.4
62.2
0.9
24.7
19.1
146.3
20.7
FY 2017/18
123.1
47.5
75.0
0.6
95.3
37.4
57.3
0.6
24.0
19.6
124.7
19.9
H1 YOY
5%
0%
8%
150%
7%
5%
8%
150%
(2)%
(2)%
16%
6%
H2 YOY
9%
15%
5%
0%
14%
22%
9%
0%
8%
(3)%
19%
2%
1. Excludes contribution from YoBingo.
2. Before adjustments for customer incentives.
3. Before exceptional items.
Key non-financial performance indicators (UK only)
Customers (000s)4
Grosvenor
Mecca
First time depositors
(FTDs, 000)4
Grosvenor
Mecca
4. Unaudited.
YoBingo
NGR growth
2018/19
475
147
328
230
99
131
2017/18
422
153
269
230
101
129
H1 2018/19
39%
H2 2018/19
3%
From 1 July 2018, UK digital, Enracha digital
and YoBingo were combined into a single
operating segment which is now disclosed
as Digital.
Improvements to bonusing led to strong
growth in net gaming revenue (NGR) for both
Mecca and Grosvenor in the year, up 9%
and 13% respectively.
Grosvenor One, Grosvenor’s single account
and wallet omni-channel offering, was rolled
out across all of Grosvenor’s casinos between
January and April. By the end of July 2019,
over 80,000 casino customers had registered
with Grosvenor One, of which approximately
80% were new to Grosvenor’s digital channel.
There is still plenty of work required to improve
the customer proposition, however we are
encouraged by the early results.
The success of Mecca’s new Daily Retention
Game, a spin to win bonus mechanic, helped
increase customer numbers and FTDs in the
year, and we believe increased our share of
wallet. Grosvenor’s focus on attracting and
retaining profitable customers led to a 4%
reduction in active customers in the year.
Like-for-like digital costs rose by 14% in the
year. This was due to £0.8m of incremental
RGD on player bonuses, £1.9m of additional
RGD following its increase to 21% (from 15%)
from 1 April 2019, increased investment in
people to strengthen the management team
and increased depreciation following the
roll-out of Grosvenor One single account
and wallet and the introduction of the new
in-house content management system for
Grosvenor. The increase in Digital’s cost base
led like for-like operating profit1 to reduce by
3% in the year.
The slowdown in the Spanish digital bingo
market was reflected in YoBingo’s H2
performance, with NGR growth slowing to
18% for the full year. The YoBingo
management team are now fully integrated
into the Group and, with a new technology
team based in Barcelona, are well placed to
drive revenue growth through the launch of
YoCasino.es and YoBingo.pt in Portugal
in 2019/20.
FY YOY
7%
8%
6%
50%
11%
13%
9%
50%
3%
(3)%
17%
4%
Change
13%
(4)%
22%
0%
(2)%
2%
2018/19
18%
41
Financial review
Financial
performance
£m
Revenue
Less: customer incentives
Statutory revenue
Operating profit1
Less: net finance charges1
Add: other financial gains and losses2
Adjusted profit before taxation2
Group operating profit before interest and tax
Net financing charge
Taxation
Profit from discontinued operations
Profit after taxation
Statutory earnings per share (EPS)
Adjusted earnings per share3
2018/19
746.5
(51.4)
695.1
2017/18
741.1
(50.1)
691.0
Change
1%
3%
1%
(6)%
0%
100%
(6)%
(22)%
29%
(35)%
(19)%
77.0
(2.8)
0.1
74.3
50.1
(3.4)
(10.8)
–
35.9
9.2
15.0
(20)%
(1)%
72.5
(2.8)
0.2
69.9
39.0
(4.4)
(7.0)
1.5
29.1
7.4
14.8
1. Before exceptionals as per note 2.
2. Adjusted profit before taxation is calculated as adjusted profit from continuing operations before taxation to exclude
exceptional items, the unwinding of the discount on disposal provisions and other financial gains and losses.
3. Adjusted EPS is calculated using adjusted profit which excludes exceptional items, other financial gains or losses,
unwinding of the discount on disposal provisions and the related tax effects. Adjusted earnings is one of the
business performance measures used internally by management to manage the operations of the business.
Management believes that the adjusted earnings measure assists in providing a view of the underlying performance
of the business.
For the year ended 30 June 2019, statutory
revenue increased by 1% to £695.1m reflecting
the acquisition of YoBingo and the growth in
our digital business offset by revenue decline
in our venues businesses.
Operating profit was down by 6% driven by a
£8.6m increase in the overall cost base, with
employment savings of £7.9m principally offset
by increased tax of £7.0m and other
inflationary cost increases.
The net financing charge before exceptional
items was flat in the year as surplus cash was
used to fund the contingent consideration
payment relating to the prior year acquisition of
YoBingo and transformation programme costs.
Exceptional items
In order to give a full understanding of the
Group’s performance and to aid comparability
between years, the Group reports certain items
as exceptional to normal trading.
Details of exceptional items can be found in
note 4 to the financial statements.
The key items in the year were impairments
of £11.1m on five Grosvenor casinos;
transformation costs of £10.8m; a provision
of £8.0m relating to Rank not technically
complying with the National Minimum Wage
(‘NMW’) Regulations; £2.2m for professional
fees on the potential acquisition of Stride
Gaming plc; and a charge of £2.0m for the
closure of Luda.
42 The Rank Group Plc Annual Report and Financial Statements 2019
The provision regarding the NMW Regulations
has arisen because Rank’s historic pay
averaging practice has not met the strict timing
requirements of the NMW Regulations. Rank
has not had any headline rates of pay below
the NMW and over the course of a year
colleagues will have received the correct pay.
However, in some pay periods where greater
than average hours have been worked,
colleagues will have been paid less than that
required in the NMW Regulations. The £8.0m
exceptional cost represents Rank’s current
best estimate of payments that are required to
be made for the previous six years and in fines
to HMRC. Rank continues to engage
constructively with HMRC to conclude this
matter as swiftly as possible and make good
any payments to current and former
colleagues. This process is expected to last
several more months.
Total exceptional items resulted in a £11.2m
cash outflow in the year.
Earnings per share
Statutory EPS was down 20% to 7.4 pence.
Adjusted EPS was down 1% to 14.8 pence.
For further details refer to note 9 to the
financial statements.
Taxation
The Group’s effective corporation tax rate in
the year was 17.2% (2017/18: 21.1%) based
on a tax charge of £12.0m on adjusted profit
before taxation. This is lower than the Group’s
anticipated effective tax rate of 18.5% for the
year as a result of prior year adjustments.
Further details on the taxation charge are
provided in note 6 to the financial statements.
On a statutory basis, the Group had an
effective tax rate of 20.2% (2017/18: 23.1%),
based on a tax charge of £7.0m and total profit
for the year of £34.6m.
Cash tax rate
In the year ended 30 June 2019, the Group
had an effective cash tax rate of 15.3%
(2017/18: 19.4%) on adjusted profit. The cash
tax rate is lower than the effective tax rate
mainly as a result of losses within the Group
and the timing of tax instalment payments.
Cash flow and net cash
As at 30 June 2019, net cash was £1.8m.
Net cash comprised cash at bank and in hand
of £61.8m offset by £50.0m in bank loans,
£6.9m in finance leases, and £3.1m in
overdrafts. £90.0m of revolving credit facilities
were undrawn at the end of the year.
In January 2019, Rank refinanced its £20.0m
term loan facilities to ensure sufficient facilities
were in place to cover the contingent
consideration payment regarding the
acquisition of YoBingo and certain
transformation costs. Following the refinancing,
the term loan banking facilities now total
£50.0m and comprise three bi-lateral facilities.
Two of the three facilities expire in January
2020 with the third in March 2020.
The bank facilities require the maintenance of a
minimum ratio of earnings before interest, tax,
depreciation and amortisation (EBITDA) to net
interest payable and a minimum ratio of net
debt to EBITDA, tested biannually. The Group
has complied with its banking covenants.
To facilitate the offer by Rank for Stride Gaming
plc, a five-year £128.1m term loan has been
secured. The facility is committed and will be
available for drawing once all the necessary
acquisition conditions are fulfilled or, where
applicable, waived on completion. The facility
agreement can be found at www.rank.com/uk/
investors/offer-for-stride-gaming-plc.html
Total capital expenditure of £34.0m was spent
in the year. Key capital projects included
refurbishments at the Barracuda casino in
London and Grosvenor’s casino in Sheffield,
a refresh of the Victoria casino in London and
investment into electronic roulette and new
gaming machines.
Investments continued in the period into the
Grosvenor One product, launched in H2, and
a new content management system for the
Group’s UK digital brands, with the migration
of Grosvenor’s customers commencing in H2
and completing in H1 2019/20 with Mecca to
follow during the year.
In 2019/20, the Group is planning to invest
between £35m and £40m in capital
expenditure.
Cash inflow from
operations
Net cash payments in
respect of provisions and
exceptional items
Cash generated from
operations
Capital expenditure
Acquisition of YoBingo
Net interest and tax
payments
Dividends paid
Other (including exchange
translation)
Cash inflow
Opening net (debt)
Closing net cash/(debt)
2018/19
2017/18
129.0
109.4
(15.9)
(7.0)
113.1
102.4
(34.0)
(24.2)
(13.0)
(29.1)
(1.7)
11.1
(9.3)
1.8
(37.0)
(16.5)
(16.8)
(29.1)
0.1
3.1
(12.4)
(9.3)
Acquisition of YoBingo
On 21 May 2018, Rank Digital Holdings
Limited (a wholly owned Group company)
acquired the entire share capital of QSB
Gaming Limited, the owner of YoBingo, the
leading online bingo operator in Spain for total
consideration of €52.0m. The results of that
business have been incorporated into the
digital segment. Contingent consideration of
€28.1m was subsequently paid in the year.
Taxation changes
In May 2018, it was announced that the rate
of UK Remote Gaming Duty (RGD) would be
increased to offset reduced tax revenues from
the proposed changes to the maximum stakes
of B2 gaming machines in betting shops. This
change came into effect from April 2019 and
resulted in additional RGD of £1.9m in the year.
For 2019/20 we expect a total cash tax rate
of approximately 23%. This is higher than the
standard rate of tax because of changes to the
dates of instalment payments for UK tax which
means that in 2019/20 tax payments will
include 50% of the liability for 2018/19 and
100% of the liability for 2019/20.
From 2019/20 onwards 100% of UK tax will be
payable in the year to which it relates under the
new rules.
Strategic report
More information
Responsible gambling committee
Page 73
IFRS 16 – Leases
IFRS 16 ‘Leases’ will replace IAS 17 in its
entirety and will be effective for the Group from
its 2019/20 accounting year. It will result in
most leases being recognised in the Statement
of Financial Position, with additional fixed
assets and liabilities being recognised.
The Group intends to apply the modified
retrospective approach with the cumulative
effect of initially applying IFRS 16 being
recognised as an adjustment to the opening
balance of retained earnings at the date of
initial application. The directors believe that the
new standard will have a material impact upon
the Group’s reported performance with
increases in EBITDA being offset by increases
in both depreciation and finance charges and
increases in operating profit offset by increases
in interest charges. There is no current
expectation that the Group’s cash flows will be
materially impacted. Please refer to the
accounting policies for further detail.
IFRS 9 and IFRS 15
IFRS 9 and IFRS 15 are effective for the
Group’s current accounting year, 2018/19.
There are no material impacts on the results
or net assets from the adoption of these
standards. Please refer to the accounting
policies for further detail.
Going concern
In adopting the going concern basis for
preparing the consolidated and Company
financial statements, the directors have
considered the issues impacting the
Group during the period as detailed in
the operating review and have reviewed the
Group’s projected compliance with its banking
covenants detailed in the financial review.
Based on the Group’s cash flow forecasts and
operating budgets, the directors believe that
the Group will generate sufficient cash to
meet its liabilities as they fall due for at least
12 months from the date of approval of
the financial statements and comply with
its banking covenants. Accordingly, the
adoption of the going concern basis
remains appropriate.
43
Tax fact file
Approach to tax
Rank is committed to acting responsibly
in all areas, including taxation.
Total tax contribution
In the year 2018/19 Rank paid £191.1m
(2017/18: £187.8m) to tax authorities and local
governments in irrecoverable VAT, gambling
taxes, corporate tax, employer’s national
insurance and local business rates. Rank has
provided employment to approximately 8,400
(2017/18: 10,000) people across the Group.
The broader impact of Rank’s operations,
including taxes paid by supplier companies,
is harder to quantify but no less significant.
Tax strategy
The taxation of betting and gaming is complex,
involving many different taxes and duties.
Rank’s aim is to ensure that all taxes are
correctly accounted for and that tax returns are
submitted accurately, on time and that all tax
liabilities are paid.
Rank is committed to acting with honesty
and integrity in all matters with a strong
emphasis on corporate reputation, social
responsibility and maintaining good
relationships with governments.
The Board reviews and approves the Group’s
tax strategy annually, which is published on
Rank’s website. The chief financial officer
is responsible for ensuring that the Group
complies with the documented tax strategy,
supported by appropriately trained and
qualified staff. Any significant decisions relating
to tax are taken to the Board for prior approval,
including decisions on whether to litigate and
the approach to dealing with disputes with tax
authorities. External advice is taken when
required. The Board is kept informed of future
tax changes, including potential impacts from
tax consultations.
From an accounting perspective, Rank takes a
prudent approach to areas of dispute,
providing for areas of uncertainty and not
recognising claims unless they are certain to
be received. Systems, processes and controls
are in place to ensure that tax returns are
correctly prepared, accounted for and taxes
paid. Senior Accounting Officer documentation
is reviewed and updated as appropriate on an
annual basis as a minimum and there are
procedures in place to ensure that adequate
reviews are undertaken.
Rank complies with all applicable laws,
regulations and disclosure requirements in
relation to tax, exercising professional care and
judgement in relation to decisions reached.
Such decisions are fully documented and
audited as appropriate. Rank is committed
to operating responsibly and considers the
reputational impact of transactions as well as
their direct financial implications. The Group
does not actively seek to enter into aggressive
tax avoidance transactions and any tax
planning will revolve around the commercial
needs of the business.
Tax payments by
type of tax
Tax Contribution
by Territory
Total
outgoings
Gambling taxes – venues £100.5m
Gambling taxes – digital £20.7m
Irrecoverable VAT £22.7m
Employer taxes £18.5m
Rates £18.0m
Corporate tax £10.7m
UK 83.2%
Spain 11.4%
Belgium 2.9%
Gibraltar 0.8%
Malta 1.7%
Taxation 23.9%
Employees (excluding taxation) 30.0%
Suppliers 29.1%
Depreciation/amortisation 7.5%
Other 5.8%
Shareholders 3.7%
44 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
When undertaking commercial transactions,
the Group will take advantage of tax reliefs,
incentives and exemptions in accordance
with the relevant tax legislation.
Rank’s tax risks are managed as part of
the Group’s overall comprehensive risk
management methodology, that balances
risk and opportunities to achieve strategic
objectives. Each risk is identified, mitigated,
monitored and reviewed based on its specific
facts and circumstances.
The tax team collaborates with colleagues
across the business at the start of projects to
ensure that tax costs and tax risks are taken
into consideration as part of any decision-
making process.
Where tax issues are particularly complex
or uncertain, or if it is considered that HMRC
may take a different view than that adopted by
Rank, external advice is taken by professional
advisers or tax counsel as appropriate.
Rank is committed to having an open and
honest relationship with the tax authorities, fully
cooperating with any enquiries and helping the
tax authorities to understand Rank’s business
and any significant transactions. If the Group
disagrees with a tax authority about the correct
treatment of a tax issue, the Group aims to
reach resolution as quickly as possible whilst
also defending its position robustly with a view
to protecting shareholder value and taking into
account the cost of defending audits or
assessments in relation to the amounts of tax
at stake. Rank will consider litigation provided
that the grounds of appeal stand a good
chance of success in litigation and that there
is sufficient tax at stake to warrant the cost
of litigation.
Rank actively and positively participates in all
relevant tax consultations to help shape
changes to tax legislation or policy that are
relevant to the business.
Tax rates and performance
The Group’s effective corporation tax rate in
2018/19 was 17.2% (2017/18: 21.1%) based
on a tax charge of £12.0m on adjusted profit
before taxation. This is lower than the Group’s
anticipated effective tax rate of 21%-23% for
the year as a result of prior year adjustments.
Further details on the taxation charge are
provided in note 6 to the financial statements.
In the year ended 30 June 2019 the Group had
an effective cash tax rate of 15.3% on adjusted
profit (19.4% in the year ended 30 June 2018).
The cash tax rate is lower than the effective tax
rate mainly as a result of the use of losses
within the Group and the timing of tax
instalment payments.
The effective corporation tax rate for 2019/20
is expected to be 18%-19%, being slightly
above the UK statutory tax rate as a result of
some overseas profits being taxed at higher
rates, non-deductible expenses and
depreciation of assets that do not qualify for
capital allowances, offset in part by other
overseas profits being taxed at lower rates
than the UK.
The Group is expected to have a cash tax rate
of approximately 23% in the year ended
30 June 2020. This is higher than the effective
tax rate as a result of changes to the dates of
instalment payments in the UK, which means
that all UK current tax arising is payable in the
year to which it relates, whereas previously
50% was paid in the year and 50% the
following year.
Gambling taxes
United Kingdom
Changes to Remote Gaming Duty in relation to
freeplays and non-cash prizes were effective
for Rank from October 2017. From April 2019
the rate of Remote Gaming Duty was
increased to 21% (a rate that was intended to
be revenue neutral from HMRC’s perspective
to offset reduced tax revenues from changes
to the maximum stakes of Fixed Odds Betting
Terminals (‘FOBTs’)). The taxation of freeplays
and the increase in Remote Gaming Duty has
resulted in additional tax of £5.1m in the year
ended 30 June 2019.
Rank has submitted repayment claims totalling
£13.3m to protect its position in relation to
Gaming Duty on free bet vouchers or casino
chips provided by the casino to the player free
of charge. This follows a judgment for another
casino operator, which stated that these items
should not be included in the calculation of
gross gaming yield for Gaming Duty purposes.
HMRC’s appeal was heard at the Court of
Appeal in March 2018, with the decision
finding in favour of the taxpayer. These claims
have not been recognised in the P&L and will
be discussed further with HMRC after the
Supreme Court hearing.
In 2015/16 the Group trialled an improvement
to Rank’s electronic roulette offering across the
casino estate where live or automated wheels
operated in one casino may be beamed to
electronic roulette terminals located in another
casino (referred to as ‘Rush Roulette’). This
was driven by commercial factors which
include improved customer service by being
able to offer dealer-operated tables 24 hours
a day, consistency of play for customers, more
optimal use of licensed gaming space across
the casino estate and labour cost savings
through one dealer being able to cover more
than one casino. Rank took external advice
to clarify the tax treatment of the transactions,
but HMRC did not agree with the analysis.
Rank has decided not to enter into litigation
and all amounts previously in dispute have
now been paid or provided for.
Rank considers that the current tax regime
for gaming in Great Britain remains unduly
complex resulting in an inconsistent tax
treatment for some products offered to
customers. Legislation also does not fully
reflect technological advances that are taking
place within the industry. Gaming Duty
in casinos ranges from 15% to 50%, whereas
similar games played online are subject to
Remote Gaming Duty at 21%. Rank promotes
multi-channel gaming to its customers and
is in favour of a simpler unified tax regime that
encourages sustained growth and investment.
Spain
Remote Gaming Duty was reduced to
20% of gross gambling revenue (GGR) from
1 July 2018. This differs from the taxation of
land-based businesses, which although taxed
at similar rates (of between 5% to 25%),
are taxed on stakes received rather than
revenue generated.
Belgium
As a result of the reform of the corporate
income tax regime, profits arising in Belgium
will be taxed at 29.6% in 2018/19 (34.0%
in 2017/18). The corporate income tax rate
will reduce to 25% in 2020/21. The Belgian
government introduced a taxation and licensing
framework for online gaming companies in
2011. Companies may only apply for an
online gaming licence in Belgium if they
already hold a land-based gaming licence.
Rank currently holds one digital licence that
it allows a third-party operator to use in
exchange for a revenue share. Online gaming
in Belgium is subject to Remote Gaming Duty
at a rate of 11%.
45
Tax fact file continued
VAT
As gambling is exempt from VAT in the UK, Rank pays significant amounts of irrecoverable VAT (£21.5m for the UK in 2018/19 and £20.0m for the
UK in 2017/18). Rank has withdrawn appeals relating to prior periods and all VAT assessments in relation to partial exemption have been paid. VAT
returns are filed using a turnover based method for recovery of residual VAT. Rank is in the process of agreeing a partial exemption special method
with HMRC.
VAT claims
The following VAT recovery claims are outstanding:
VAT (£m)
Status
October 2002 to
September 2005
April 2006 to January 2013
June 1973 to September 1996
December 2002 to June 2004
March 2003 to June 2009
25.2 Found in favour of HMRC at the Supreme Court in July 2015. Remitted back to the First Tier
Tribunal (‘FTT’) to consider similarities between amusement machines and fixed odds betting
terminals (‘FOBTs’). In July 2018 the FTT found in favour of Rank. HMRC’s appeal to the Upper
Tier (‘UT’) is expected to take place in January 2020.
80.4 Rank is taking litigation to the FTT in May 2020. The issue is whether certain amusement
machines were similar to FOBTs and online games which were exempt from VAT during
the period.
67.0 Bingo VAT claim found in favour of HMRC at UT. Rank has appealed to the Court of
Appeal. This matter relates to whether input VAT was correctly offset against previous bingo
VAT repayments.
Rank believes that it has a reasonable chance of success in all of the claims above, although as is the case with any litigation, there is a risk that
the courts will take a different view.
UK tax regime
Mecca – venues
Category B3 gaming machines
Category C gaming machines
Category D gaming machines
Main stage bingo
Interval bingo
Grosvenor Casinos – venues
Casino games and poker
(tax on gaming win in a six-month period)
Category B1 gaming machines
Digital
meccabingo.com*
grosvenorcasinos.com*
Sportsbook
Gaming Duty/Gross profits tax
20%
20%
5%
10%
10%
15% – £0 to £2,423.5k
20% – £2,423.5k to £4,094k
30% – £4,094k to £7,019.5k
40% – £7,019.5k to £13,195k
50% – over £13,195k
20%
21%
21%
15%
* Rank’s online business is based offshore (Alderney, Channel Islands) and has been subject to UK Remote Gaming Duty with effect from 1 December 2014.
Spanish tax regime
Bingo tax set by region
Category B2/3 gaming machines
Multi-post electronics
enracha.es and YoBingo.es
* Calculated as a percentage of stake.
** 20% with effect from 1 July 2018.
Bingo duty*
5% to 25%
–
–
–
Remote Gaming Duty**
–
–
–
20%
Licence (annual average)
–
€3,650
€10,600
–
46 The Rank Group Plc Annual Report and Financial Statements 2019
Belgian tax regime
Table games
Electronic roulette /
amusement machines
Strategic report
Gaming Duty
33% – €0 to €865k
44% – over €865k
20% – €0 to €1,200k
25% – €1,200k to €2,450k
30% – €2,450k to €3,700k
35% – €3,700k to €6,150k
40% – €6,150k to €8,650k
45% – €8,650k to €12,350k
50% – over €12,350k
Non-financial
information statement
Reporting requirement
Business model
Employees
Some of our relevant policies
Group health and safety policy
Human rights
Social matters
Anti-corruption and bribery
Environmental matters
Principal risks
Human rights policy
Modern slavery policy statement
Anti-corruption and bribery,
gifts and hospitality policy
Risk policy
Greenhouse gas emissions
Where to read more in this report
Our business model
Our people
Diversity
Equal opportunities
Health and safety
Human rights
Our communities
Governance and compliance
Carbon reporting
Description of risk processes,
risk management, risk governance.
Page(s)
12-13
28-30
30
31
67
47
48-51
Scope 1
Comprises gas use (plus gasoil in Belgium), owned transport and
fugitive F-gas emissions
Scope 2
Comprises electricity generation
Scope 32
Comprises waste, materials use, flights, electricity transmission and
distribution
Outside of scopes3
Represents the biogenic proportion of petrol and diesel
Total
Year ended 30 June 2019
Year ended 30 June 2018
Tonnes of
CO2e1
%
Tonnes of
CO2e/£m
revenue
Tonnes of
CO2e1
% Tonnes of CO2e/£m
revenue
14,534
34
16,681
34
19,694
46
8,274
20
21,798
11,077
44
22
36
42,538
–
100
57.0
28
49,584
–
100
66.9
1. CO2e is a universal unit of measurement used to indicate the global warming of greenhouse gases expressed in terms of global warming potential of one unit of carbon dioxide.
2. Well-to-tank emissions for fuels (electricity, gas, petrol, diesel and aviation fuel), which would sit within scope 3, are not included in the report.
3. This is categorised as outside scopes rather than scope 3, in line with the Defra 2015 emission factor guidance.
47
Risk management
How we
manage risks
Our risk management framework
Board
Overall responsibility for risk management
framework and processes
Sets risk appetite
Reviews the Group’s risk profile
Audit
committee
Risk
committee
Group
Internal Audit
Oversees risk management
framework and processes
Reviews corporate
risk register
Reviews action plans to
manage significant risks
Carries out ‘deep dive’
reviews into the risk
registers of specific
departments and
support functions
Identifies and manages
risks as they arise
Provides a forum to
ensure the adequate and
timely progress of
risk-mitigation actions
Develops a risk-based
internal audit programme
Audits the risk processes
across the organisation
Receives and provides
assurance on the
management of risk
Reports on the efficiency
and effectiveness of
internal controls
48 The Rank Group Plc Annual Report and Financial Statements 2019
Understanding, accepting and managing risk
are fundamental to Rank’s strategy and
success. We have an enterprise-wide risk
management approach in place, which is
integrated into our organisational management
structure and responsibilities. The principal aim
is to provide oversight and governance of the
key risks we face, as well as monitoring
upcoming and emerging risks.
Over the past year we have sought to improve
our enterprise risk management framework,
and enhance our ability to identify, mitigate,
monitor and review these principal risks. For
each risk we had identified, we assessed the
likelihood and consequence, and appointed a
‘risk owner’ who is a member of the executive
committee. The risk owner is responsible for
defining mitigations, which are reviewed for
appropriateness and monitored regularly.
Throughout the year the risk management
approach is subject to continuous review
and updated to reflect new and emerging risks,
which are themselves reviewed to understand
their potential significance to the business.
Risks are identified and monitored through
risk registers at Group level and within key
business units, ensuring both a top-down and
bottom-up approach.
The Board has overall responsibility for the risk
management framework and for establishing
the Group’s risk appetite, as well as ensuring
that the approach is embedded into the
operations of the business. The audit
committee is responsible for assessing the
ongoing effectiveness of the risk management
framework and processes, and for undertaking
an independent review of the mitigation plans
for material risks.
Additional committee working sessions are
held with departmental and divisional
management to ensure that risks are being
identified in a timely manner, mitigating controls
over identified risks are appropriate and
effective and action plans are put into place
for emerging risks. This approach ensures that
Strategic report
Our risk
management process
Identify
Mitigate
Monitor
Review
49
risks are being identified in both a ‘top-down’
and a ‘bottom-up’ manner to give assurance
that risk registers are appropriate
and comprehensive.
Group Internal Audit helps to manage risk
identification by conducting independent
reviews of both the risks to the business
and progress in performing mitigation action
plans. Their assessments are reported to
the risk committee.
Going concern
In adopting the going concern basis for
preparing the financial information, the
directors have considered the issues impacting
the Group during the period as detailed in the
operating review on pages 34 to 41 and have
reviewed the Group’s projected compliance
with its banking covenants. Based on the
Group’s cash flow forecasts and operating
budgets, the directors believe that the Group
will generate sufficient cash to meet its liabilities
as they fall due for at least 12 months from the
approval of this report and will comply with its
banking covenants.
Viability statement
In accordance with provision C.2.2 of the UK
Corporate Governance Code, the directors
make the following statement.
The directors have considered the current
position of the Group, its prospects and
longer-term viability over a period of three
years to June 2022. Although longer periods
are used when making significant strategic
decisions, three years has been used as it is
considered the longest period of time over
which suitable certainty for key assumptions in
the gambling sector can be made.
In making this statement, the directors have
performed a robust assessment of the principal
risks facing the Group which includes
consideration of both financial and non-
financial risks that may threaten the business
model, future performance, liquidity and
solvency of the Group. The principal risks
facing The Rank Group Plc and our approach
to risk management are set out on pages 50 to
51 and include consideration of the impact of
each risk, the direction of travel and actions
taken to mitigate these risks. The risks
considered included:
• a decline in retail revenue;
• adverse changes to rates of tax;
• adverse regulation;
• adverse gaming win;
• breaches of regulation;
• loss of licences; and
• technological risks (including cyber security).
The Group strategic plan is updated annually
and considers current trading trends, the
impacts from capital projects, existing debt
facilities, and expected changes to the
regulatory and competitive environment as
well as expectations for consumer disposable
income. In carrying out the assessment the
directors have reviewed and challenged key
assumptions within the Group’s strategic plan.
A number of plausible but severe downside
risks, including consideration of possible
mitigating actions, have been modelled with
particular focus on the potential impact to cash
flows, net debt headroom and covenant
compliance throughout the period of review.
A number of assumptions were included within
the assessment, including no material adverse
change to:
• gaming legislation;
• gaming duties;
• societal attitudes to gambling; and
• licences required to operate gambling.
A ‘reverse stress test’ was also carried out
in order to analyse combinations of the above
risks which could bring about insolvency; in
such cases it is anticipated that mitigation
measures (including a reduction in dividends
and capital expenditure) could be implemented
in order to forestall such an outcome.
Risk management continued
Principal risks
and uncertainties
The risks outlined in this section are the principal risks we have identified as are material to the Group. They represent a ‘point-in-time’ assessment,
as the environment in which the Group operates is constantly changing and new risks may always arise.
Additionally, the potential impact of known risks may increase or decrease, and our assessment of a risk may change over time.
The risks below are not set out in any order of priority, and do not include all risks associated with the Group’s activities. Additional risks not
presently known to management, or currently deemed less material, may also have an adverse effect on the business. Examples of other emerging
risks include ongoing changes in the macroeconomic environment including Brexit. Risks such as these are not raised as principal risks but are
nevertheless constantly monitored for their impact on the Group.
Principal risk
Change in risk/impact
Risk mitigation strategy
Link to strategy
Laws and regulations
Regulatory and legislative regimes for betting and
gaming in key markets are constantly under review
and can change at short notice. These changes could
benefit or have an adverse effect on the business and
additional costs might be incurred in order to comply.
Current key risk areas include:
• responsible gambling (including adverse impact on
brand and reputation);
• enhanced due diligence requirements in relation to
anti money laundering (AML); and
• jurisdiction management.
Increasing
With the increased focus of
regulators the risk here is
considered to be increasing, and
the impact of non-compliance
could result in the imposition of
licence conditions, the loss of
gaming licences and/or fines.
Be committed
to safe and fair
gambling
The Group ensures that it:
• actively provides and promotes a compliant
environment in which customers can play safely;
• participates in trade representations to political and
regulatory bodies to ensure that such stakeholders
clearly understand the positive contribution that the
business provides to the economy;
• works with stakeholders and customers to help
public understanding of the gaming offers it provides;
and
• engages with regulators as appropriate and examines
the learnings from, and measures adopted by, other
operators and sectors of the gambling industry.
Taxation
Changes in fiscal regimes for betting and gaming in key
markets can change at short notice. These changes
could benefit or have an adverse effect, and additional
costs might be incurred in order to comply with any
fiscal requirements.
Stable
It is envisaged that there will be
no further changes in taxation in
the immediate future.
Current key risk areas include:
• Remote Gaming Duty;
• Machine Gaming Duty; and
• Gaming Duty
The Group ensures that it:
• continues to monitor taxation legislation;
• performs regular analysis of the financial impact to
the organisation of changes to taxation rates; and
• develops organisational contingency plans
as appropriate.
50 The Rank Group Plc Annual Report and Financial Statements 2019
Strategic report
Principal risk
Change in risk/impact
Risk mitigation strategy
Link to strategy
Changing consumer needs (retail)
Progressive changes over time in retail consumer
spending habits are resulting in lower numbers of
customer visits. This can also be attributable to the
overall retail proposition declining in relevance to the
consumer and changes in the macroeconomic
environment.
Increasing
With the retail macroeconomic
environment and continuous
changes in consumer spending
habits, there is an ever-
increasing need for the Group to
focus on assessing the
relevance of our customer
proposition.
The Group monitors financial performance across the
clubs with clubs performing adversely being raised for
remedial attention with customer satisfaction metrics
being used to also monitor club performance.
Changing the club product and service offering
to have greater appeal to today’s more
leisure-oriented customer is a priority within
the transformation programme.
Consistently evolve our
venue proposition
Consistently improve
our customer
experience through
innovation
Transformation and technology projects and programmes
Key Group projects and programmes could fail to
deliver, resulting in missed market opportunities, and/or
take longer to deliver, resulting in missed synergies and
savings.
Stable
A failure to deliver key strategic
projects and programmes
impacts on customer loyalty and
the strategic growth of the
organisation.
Business continuity planning and disaster recovery
Planning and preparation of the organisation, to ensure
it could overcome serious incidents or disasters and
resume normal operations within a reasonably short
period, is critical to ensure that there is minimal impact
to its operations, customers and reputation.
Stable
The geographical nature of the
operating environment and key
risk exposures have not
changed significantly and are
known and understood.
Typical disasters might include: natural disasters such
as fires and floods, accidents impacting key people,
insolvency of key suppliers, negative media campaigns
and market upheavals.
Data management
Processing of personal customer data (including name,
address, age, bank details and betting/gaming history) is
performed and therefore must comply with strict data
protection and privacy laws in all jurisdictions in which
the Group operates, for example GDPR.
Stable
The Group has developed a
robust control environment in
relation to customer data
controls and the regulatory
requirements.
Create a compelling
multi-channel offer
Build digital capability
and scale
The Group ensures that projects and
programmes:
• are subjected to detailed management
oversight as well as having sponsorship from a
senior-level stakeholder;
• use a structured and disciplined delivery methodology
to ensure that they are robustly managed to achieve
their outcome; and
• use a comprehensive risk management
approach managed by experienced project and
programme managers.
Group business continuity plans are being refreshed for
Build digital capability
key sites and business areas.
and scale
This approach includes the development, embedding
and refinement of the incident and crisis management
approach for the Group in order to proactively manage
these incidents.
The Group addresses this risk by way of continued
programmes for awareness, ongoing training for all
colleagues and an experienced data protection officer to
oversee ongoing data regulation compliance.
A programme of activity ensures that the Group
continues to improve its control environment.
Build digital capability
and scale
Consistently improve
our customer
experience through
innovation
Cyber security and operational resilience
Cyber-attacks can disrupt and cause considerable
financial and reputational damage to the Group. If a
cyber-attack were to occur the Group could lose assets,
reputation and business, and potentially face regulatory
fines and litigation – as well as the costs of remediation.
Operations are highly dependent on technology and
advanced information systems (such as cloud
computing) and there is a risk that such technology or
systems could fail, or outages occur.
Third-party supply chain
The Group is dependent on a number of third-party
suppliers for the operation of its business. The
withdrawal or removal from the market of one or more
of these third-party suppliers, or failure of these
suppliers to comply with contractual obligations, could
adversely affect operations, especially where these
suppliers are niche.
Increasing
Due to the persistent nature of
this threat and reliance on core
technology systems, this is
considered an increasing risk to
the Group.
We have carried out external cyber benchmarking to
understand the maturity of controls, with a roadmap of
further work planned to enhance them within the current
IT estate.
A programme of work is ongoing to enhance cyber
security and resilience within the IT estate with
dedicated, specialised resources.
Stable
The third-party operating
environment and key risk
exposures remain unchanged.
• The Group has a central team in place to oversee the
process for acquisition of suppliers across the Group
together with the development of a supplier risk
management framework.
• Close communication and accountability for
relationships within the Group are in place for these
suppliers, with suppliers required to ensure that
Group requirements are met.
Build digital capability
and scale
51
Governance
Chair’s introduction
Board of directors
Corporate governance
Directors’ remuneration report
Directors’ report
Directors’ responsibilities
54
56
60
76
95
99
Responsibility
“Responsibility means creating a safe
environment for all our customers whilst
maintaining an entertaining experience
whether that’s in club or online. Our
responsibility to the communities that we
serve extends far beyond simply delivering
an entertaining gambling experience.”
Liam Smith
Director of Customer Contact, Sheffield.
Our Customer Solutions Hub in Sheffield provides a wide range of customer
services, from VIP management to safer gambling. Having these functions
integrated into one business unit allows us to manage our customers more
effectively and provides a value-add customer experience.
The Hub’s strategy is to create a customer service experience that delivers what
our customers need in a safe, exciting and entertaining way. Whether that be
supporting one of our traditional retail bingo customers, one of our new retail
customers from our entertainment events or one of our many online customers.
Looking after our customers in every respect is at the core of Customer
Solutions Hub responsibilities; from fielding service issues and giving information,
to supporting health and safety, to of course, ensuring gambling with us is
always fun. Bringing together our existing retail and digital safer gambling
support within the Hub as a newly established safer gambling team in 2019 has
provided us with a more holistic view of a customer’s play and is particularly
important for our new Grosvenor One account. The range of safer gambling
controls and safeguards present in our retail and digital businesses focus on
harm prevention and help ensure we keep pace with regulation and deliver on
our Group values.
Chairman’s introductionDear shareholderIan BurkeChairI am pleased to present this year’s directors’ and corporate governance report (‘Report’). As a Board, we remain committed to achieving the highest standards of corporate governance and integrity. We recognise the importance of a strong governance framework to underpin Rank’s strategic objectives and promote the culture that we wish to instil throughout the Group. The following pages set out detail on the composition of our Board, its corporate governance arrangements, processes and activities during the 2018/19 financial year, together with reports from each of the Board’s committees.Board compositionThere have been a number of changes to the Board’s composition. In November 2018, Bill Floydd was appointed as chief financial officer. He subsequently joined the Board on 1 May 2019. More detail on the appointment process can be found on page 71 and details of Bill’s experience and background can be found on page 58. Tang Hong Cheong joined the Board as a non-executive director on 15 January 2019, as the majority shareholder’s representative. Further detail about Hong Cheong’s appointment and his experience can be found on pages 71 and 58 respectively.In April 2019, we announced that Alan Morgan had resigned from the Company and he stepped down from the Board and left the Company on 31 July 2019. I would like to take this opportunity to thank Alan for his valuable contribution to the Company.In May 2019, the Board announced my intention to retire from the Board and step down as chairman at the annual general meeting on 17 October 2019 (‘2019 AGM’). Chris Bell, as senior independent director, led the process to appoint my successor, further to which the Board has approved the appointment of Alex Thursby as independent non-executive chairman with effect from the end of the 2019 AGM. Further detail on the process for his appointment is set out on page 70.As mentioned in our 2018 report, Clive Jennings, finance director, left the business in August 2018, and Lord Kilmorey, non- executive director, stepped down from the Board in October 2018.Continued focus on regulatory developmentsOver the past 12 months there has been a continued focus by regulators, politicians, the media and consumers on issues relating to the gambling industry, and most notably in relation to operating responsibly. Further to the findings of the UK Gambling Commission investigation in October 2018, pursuant to which the Company made a payment in lieu of financial penalty of £500,000 in respect of weaknesses in social responsibility controls, the Board has rightly continued to devote significant time to considering how the Group can raise standards in its operations. The Company recognises that conducting business responsibly is fundamental54 The Rank Group Plc Annual Report and Financial Statements 2019 Governance
More information
Operating
responsibly
Page 26
to its future success, and this is reflected in safe
and fair gambling becoming a standalone pillar
under the revised strategic pillars for the
business as set out on page 21. The Board also
welcomes the introduction of the Company’s
refreshed policy and new three-year strategy for
safer gambling (please see page 74), enabling
the conversion of this understanding into
initiatives that will embed the principles of safer
gambling throughout the Group for the benefit
of all stakeholders.
Governance – key features
During the year, The Companies (Miscellaneous
Reporting) Regulations 2018 and the FRC
Corporate Governance Code 2018 ('2018 Code')
came into effect ('Regulatory Changes'). The
Regulatory Changes seek to drive a number of
changes to companies’ underlying corporate
governance processes, and encourage
companies to demonstrate how good
governance contributes to the achievement of
long-term sustainable success and wider
objectives. The Board has reviewed the key
changes arising from the Regulatory Changes
and the process to embed such changes has
commenced. An example of this is Alex
Thursby’s appointment during the year as the
designated non-executive director responsible
for workforce engagement. We will report against
the 2018 Code in next year’s annual report.
This annual report has been prepared against
the FRC Corporate Governance Code 2016
('2016 Code') and I am pleased to report that
we were in full compliance. The table below
summarises the key features of governance
required by the 2016 Code and indicates where
more information can be found in this Report.
Board evaluation
As anticipated in last year’s annual report, during
the 2018/19 financial year, an external evaluation
was carried out in respect of our Board and its
committees (other than the finance and safer
gambling committees where it was felt that the
timing for such a review was not appropriate in
light of membership changes). I will be handing
over to my successor responsibility for the
ongoing delivery of the recommendations from a
Board perspective, and I am confident that each
committee chair is committed to
the implementation of the findings and
recommendations for their respective committee.
Further detail is set out later in this report.
Annual General Meeting
Our responsibilities as a Board include setting
the Company’s strategic aims, providing the
leadership to put them into effect and supervising
the management of the business. The Board
also takes responsibility, as a whole, for ensuring
that a satisfactory dialogue with shareholders
takes place. With this in mind, I would like to
welcome all shareholders to attend our annual
general meeting, which is scheduled for 11am
on 17 October 2019 at TOR, Saint-Cloud Way,
Maidenhead, Berkshire SL6 8BN. The meeting
provides an important opportunity for the
Board to meet with shareholders and we look
forward to seeing you there.
The 2018/19 financial year was significant
for the Company, introducing much change.
The Board made some important strategic
decisions, most notably approving the
introduction of the transformation programme
and the offer to acquire Stride Gaming plc.
As a result of such decisions, our colleagues
have had to embrace change, new challenges
and new ways of working, which has not gone
unrecognised by the Board, but which we are
confident has laid, and is enabling us to start
to build on, the foundations for a growing,
sustainable business. I would like to take this
opportunity on behalf of the Board to thank the
management team for their commitment during
the year and also to thank my fellow Board
members for their contributions and support.
In closing, it has been a privilege to serve as
chairman of the Company for the last eight
years, and before that as chief executive. This
annual report reflects the Company’s move
into the next phase of transformation and, in
conjunction with that, I feel it is the right time to
hand over the reins to a new chair. In doing so,
I am confident that Alex, as my successor, will
continue the crucial role of the chair in
promoting and supporting our strategy for the
long-term benefit of our shareholders,
customers, employees and other stakeholders.
Ian Burke
Chair
21 August 2019
Independence
Senior independent director
Composition, competence
and experience
Responsibilities and election
Attendance
Evaluation
Internal audit
External audit
Non-audit work policy
Remuneration
Over half of the Board (excluding the chairman) is made up of independent non-executive directors.
The senior independent director is Chris Bell.
The composition of the Board and all its committees complies with the 2016 Code. In particular, the
requirements for recent and relevant financial experience and sector experience and the DTRs
requirement for competence in accounting or auditing and sector competence are met.
There are clear terms of reference for the Board and its committees and there is a clear separation of
duties between the chairman and chief executive roles. All directors stand for re-election annually.
The directors have all attended an acceptable number of Board and committee meetings.
Individual director evaluations were completed. An external Board evaluation was completed during the
year under review.
Details of the internal audit function can be found in the audit committee report.
An external audit tender process took place during the year. The Board is recommending the
reappointment of Ernst & Young LLP for approval at the Company's 2019 AGM.
The Company has a policy governing the award of non-audit work to its external auditor and non-audit
work undertaken has been disclosed.
During the year, the Board and its remuneration committee have received briefings on external factors
influencing executive pay and are mindful of the need to curb excessive remuneration, to align incentives
with the long-term interests of the Company and shareholders, and to increase transparency.
Page
58
61
61-72
60-64
63
63-64
67-68
67
67
76-77
55
Board of DirectorsWilliam (Bill) FloyddChief Financial OfficerSusan HooperNon-executive DirectorSteven EsomNon-executive DirectorIan BurkeChairmanTang Hong CheongNon-executive Director56 The Rank Group Plc Annual Report and Financial Statements 2019 Alex ThursbyNon-executive DirectorLuisa WrightCompany SecretaryChris BellSenior Independent DirectorJohn O’ReillyChief ExecutiveGovernance57 Board of Directors continued
William (Bill) Floydd
Chief Financial Officer
Tang Hong Cheong
Non-executive Director
Ian Burke
Chairman
Steven Esom
Non-executive Director
Susan Hooper
Non-executive Director
Appointment May 2019
Appointment January 2019
Appointment March 2006*
Appointment March 2016
Appointment September 2015
Experience
Bill joined Rank in November
2018 as chief financial officer,
and was appointed to the Board
on 1 May 2019. Most recently,
Bill was CFO at Experian Plc’s
UK and Ireland region where he
contributed to strong revenue
and EBIT growth while
overseeing Experian’s FCA
authorisation process. Prior to
this Bill spent 12 years in a
variety of leadership positions at
Logica Plc, where he led a
turnaround of the UK business
and a transformation of the
global finance function. Bill is a
chartered accountant, having
qualified with Price Waterhouse.
Committee membership
F
Board independence
Name
Chairman
Ian Burke*
Executive
John O’Reilly
Bill Floydd
Non-executive
Chris Bell
Steven Esom
Susan Hooper
Tang Hong Cheong
Alex Thursby
Experience
Hong Cheong has over 40 years
of experience in finance,
treasury, risk management,
operations and strategic
planning. He possesses
broad-based and C-suite
expertise in investment,
manufacturing, financial services,
property development, gaming
and hospitality industries. Hong
Cheong has been with the Hong
Leong Group for more than 40
years holding various senior
management positions.
Other roles
Hong Cheong is a Director and
the President and CEO of Guoco
Group Limited and the Group
Managing Director of GL Limited
as well as a Director of
GuocoLand Limited, both listed
on the Singapore Stock
Exchange, and a non-executive
director of Lam Soon (Hong
Kong) Limited which is listed on
the Main Board of the Hong
Kong Stock Exchange. He is
also a member of the Malaysian
Institute of Accountants.
Experience
Ian has spent most of his career
in the leisure industry, initially in
bingo clubs, then hotels and
health and fitness clubs. He was
chief executive of Rank from
March 2006 to May 2014, of the
Holmes Place Group from July
2003 to February 2006 and of
Thistle Hotels plc from May 1998
to May 2003. He also held
various roles with Bass plc
between 1990 and 1998,
including managing director of
Gala Clubs and managing
director of Holiday Inns. Ian was
executive chairman of Studio
Retail Group plc (formerly Findel
plc) from January to April 2017.
Other roles
Ian is non-executive chairman of
Studio Retail Group plc (formerly
Findel plc) and chairs the
nominations committee. He is
also non-executive director of
Intu Properties Plc, where he
chairs the remuneration
committee and is a member of
the audit and nominations
committees.
Committee membership
N
F
S
Experience
Steven has extensive
commercial experience gained
within several consumer-focused
multi-site retail businesses. He
had a 12-year career at
Waitrose, the last five years of
which were as managing
director, and he has held several
other senior and non-executive
positions within the food sector.
He was chairman of The Ice
Organisation Limited from
September 2011 to August
2015 and a non-executive
director of The Carphone
Warehouse Group plc from
September 2005 to July 2009
and of Ocado Limited from
October 2000 to February 2004.
Other roles
Steven is non-executive
chairman of The Advantage
Travel Partnership, BRC Global
Standards and Sedex, as well as
the independent chairman of the
GB Boxing Board.
Committee membership
A N R
Independent
Appointed
n/a
March 2006
no
no
May 2018
May 2019
June 2015
yes
yes
March 2016
yes September 2015
January 2019
no
August 2017
yes
Experience
Susan has extensive experience
gained within large consumer-
facing businesses combined
with broad commercial
non-executive experience.
Susan was managing director of
British Gas Residential Services
from January to October 2014
and chief executive of Acromas
Group’s travel division from
March 2009 to November 2013.
Prior to 2009 she held senior
roles at Royal Caribbean
International, Avis Europe,
PepsiCo International, McKinsey
& Co, and Saatchi & Saatchi.
She has also served as a
non-executive director of
Whitbread PLC (September
2011 to January 2014); First
Choice Holidays Limited (April
2005 to September 2007); RSA
Insurance Group plc (August
2001 to March 2004); and
Courtaulds Textiles Limited
(October 1999 to June 2000).
Other roles
Susan is a non-executive
director of the Department for
Exiting the European Union
(DExEU) where she also serves
on its audit and risk assurance
committee. She is a non-
executive director of Wizz Air
Holdings Plc, Uber Britannia
Limited and Uber London
Limited and of Affinity Water
Limited where she also serves
as chairman of the remuneration
committee.
Committee membership
N R
S
*
Ian Burke was originally appointed to the Board on 6 March 2006. He resigned from the Board on 28
June 2011 and was reappointed on 3 July 2011. On 15 July 2011 he became executive chairman. On
6 May 2014 he resigned his role as chief executive and became non-executive chairman with effect
from that date.
58 The Rank Group Plc Annual Report and Financial Statements 2019
Committee key
A
N
F
R
S
Audit
Nomination
Finance
Remuneration
Safer gambling
Chair
Board
diversity
age
50-59: 5
60+: 3
Gender
Male: 7
Female: 1
John O’Reilly
Chief Executive
Alex Thursby
Non-executive Director
Appointment May 2018
Appointment August 2017
Experience
Alex has over 30 years of
experience within the banking
sector. He was chief executive
officer of National Bank of Abu
Dhabi from 2013 to 2016 and he
held senior roles at Australia and
New Zealand Banking Group
from 2007 to 2013 and at
Standard Chartered Bank from
1987 to 2007. From 2008 to
2013 he was a non-independent
non-executive director of the
Bursa Malaysia listed AMMB
Holdings Berhad, part of the
AmBank Group, one of the
largest banking groups in
Malaysia.
Other roles
Alex is non-executive director of
Barclays Bank Plc, Trustee and
Head of the Finance/Treasury
committee at Eden Rivers Trust,
and Governor and Chairman of
the Board of Governors at
Giggleswick School.
Committee membership
A N
R
Experience
John has extensive experience
within the betting and gaming
industry. He was a senior
executive at Gala Coral Group
between August 2011 and April
2015, prior to which he had a
19-year career at Ladbrokes.
During his time at Ladbrokes, he
held several senior positions,
including managing director of
remote betting and gaming, and
also served as an executive
director on the board of
Ladbrokes plc between 2006
and 2010. He was a non-
executive director of William Hill
PLC between January 2017 and
April 2018 and non-executive
chairman of Grand Parade
Limited between June 2015 and
August 2016, when Grand
Parade was sold to William Hill.
John was also a non-executive
director and chair of the
remuneration committee at
Telecity Group plc between
September 2007 and January
2016.
Other roles
John is a member of the board
of trustees of the prisoner
befriending charity, New Bridge
Foundation and is non-executive
director of Weatherbys Limited.
Committee membership
Tenure
F
S
0-3 years: 4
3-6 years: 3
6-9 years: 1
Governance
Chris Bell
Senior Independent
Director
Appointment June 2015
Experience
Chris has over 20 years’
experience in the betting and
gaming industry. He joined the
Hilton Group in 1991 and
became managing director of its
Ladbrokes Worldwide business
in 1994, he joined the board of
Hilton Group Plc in 2000 and,
following the disposal of its
hotels division, became chief
executive when it was renamed
Ladbrokes Plc where he
remained until May 2010. Prior
to joining the Hilton Group, Chris
held several senior positions at
Allied Lyons for 12 years. Chris
was a non-executive director of
Spirit Pub Company plc from
August 2011 to June 2015, a
senior independent director of
Quintain Estates & Development
plc from September 2010 to
September 2015, and chairman
of The GAME Group plc from
January 2003 to March 2012.
He was also a trustee of
Northern Racing College from
June 2014 to March 2017.
Other roles
Chris is non-executive chairman
of XLMedia PLC, where he
chairs the risk committee as well
as being a member of the audit
and remuneration committees.
He is non-executive chairman of
TechFinancials where he also
serves on the audit and
remuneration committees and of
OnTheMarket Plc where he
chairs the remuneration and
nominations committees and is
a member of the audit
committee. Chris is non-
executive chairman of Team17
Group Plc, where he chairs the
nominations committee and
serves on the audit and
remuneration committees. He is
also non-executive director of
The Royal Airforce Charitable
Trust Enterprises.
Committee membership
A N R S
Luisa Wright
Company Secretary
Appointment May 2018
Experience
Luisa was appointed interim
company secretary in May 2018,
becoming Group general
counsel and company secretary
in November 2018. Before
joining Rank, she spent six years
as group general counsel and
company secretary at
international betting technology
company Sportech PLC. Prior to
that, Luisa spent ten years at
Olswang LLP, where she
specialised in advising clients in
the gambling, sport and media
sectors.
59
Corporate governance
Rank Group – Governance structure
Structure
The Board is ultimately responsible to
shareholders for the direction, management,
performance and long-term success of the
Company. It sets the Group’s strategy and
objectives and oversees and monitors the
performance, internal controls, risk
management, principal risks, policies,
governance and viability of the Company.
The Board delegates certain matters to its
five principal committees: audit, nominations,
remuneration, safer gambling (formerly
responsible gambling) and finance. These
committees operate within defined terms of
reference, which can be obtained from our
website at www.rank.com/en/investors/
corporate-governance/terms-of-reference.html,
or by writing to the company secretary. Each
committee chair reports to the Board on the
committee’s activities following each
committee meeting. In addition, the Board from
time to time delegates specific responsibilities
to the executive directors and/or to other
committees. For example, this year an M&A
sub-committee was delegated authority to
oversee the finalisation of documents relating
to the offer to acquire Stride Gaming Plc.
The Board delegates the detailed
implementation of matters approved by the
Board and the day-to-day operational aspects
of the business to the executive directors.
The executive directors, together with the
executive committee, conduct the Company’s
business within clearly defined limits delegated
by the Board and subject to those matters
reserved to the Board.
Two other committees, the risk committee and
the compliance & responsible gambling
committee, assist and support the Board, the
audit committee and the executive committee
by ensuring that the appropriate internal
controls for risk management are implemented
and monitored.
1
Audit
Committee2
Remuneration
Committee5
Safer
Gambling
Committee6
Nominations
Committee4
Finance
Committee3
Chief Executive
--------------------------
Group General Counsel &
Company Secretary
--------------------------
Executive Committee7
Risk
Committee
Compliance & Responsible
Gambling
1. See pages 58 to 59 for a list of Board members.
2. Members are Alex Thursby (Chair), Chris Bell and Steven Esom.
3. Members are Ian Burke (Chair), John O’Reilly and Bill Floydd.
4. Members are Ian Burke (Chair), Chris Bell, Steven Esom, Susan Hooper and Alex Thursby.
5. Members are Steven Esom (Chair), Chris Bell, Susan Hooper and Alex Thursby.
6. Members are Susan Hooper (Chair), Chris Bell, Ian Burke and John O’Reilly.
7. Executive committee comprises: chief executive, chief financial officer, Group general counsel & company secretary, managing director digital, managing director international,
chief transformation officer, chief information officer, Group human resources director, director of investor relations & communications.
60 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Roles and responsibilities
There is a clear division of responsibilities between the chair and chief executive.
The chair’s role is to
The chief executive’s role is to
• manage the business of the Board, preside over meetings and
seek prompt and appropriate decisions;
• work with the company secretary to ensure directors receive
accurate and clear information for the proper execution of their
duties;
• oversee effective communication with shareholders;
• keep the Group’s progress and development under review;
• ensure the chief executive’s Group objectives, policies and
strategies are consistent with lasting shareholder value;
• evaluate the Board and its committees; and
• ensure the Group’s governance is effective and in line with
best practice.
• manage and promote the Group’s long-term profitable development;
• exercise stewardship of intellectual property, human and financial
resources and ensure that the relevant policies are implemented;
• plan strategy and prepare objectives and policies for Board approval;
• ensure action is taken to achieve strategies, objectives and
policies, as approved by the Board;
• ensure objectives, policies and strategies are adopted for each
Group business, that appropriate budgets are set for them
individually, that their performance is monitored, and that
guidance is given when needed;
• lead the executive committee;
• take responsibility for Group health and safety policies;
• make sure the Group complies with all relevant legislation; and
• lead ongoing communication with employees.
Non-executive directors
The non-executive directors support the chair and provide objective and constructive challenge to management. They are required by their role,
amongst other things, to oversee the delivery of the strategy within the risk appetite set by the Board, scrutinise the performance of management
in meeting agreed goals and objectives, monitor the reporting of performance and ensure compliance with regulatory requirements.
The senior independent director, in addition, provides a sounding board for the chair and serves as an intermediary for the chief executive and
other directors when necessary. He leads the process of evaluating the chair’s performance and is available if shareholders have any
concerns that they have been unable to resolve through the normal channels.
Company secretary
The company secretary makes sure that appropriate and timely information is provided to the Board and its committees and is responsible for
advising and supporting the chair and the Board on all governance matters. All directors have access to the company secretary and may take
independent professional advice at the Company’s expense in conducting their duties.
The Company has arranged insurance cover and indemnifies directors in respect of legal action against them to the extent permitted by law. Neither
the insurance nor the indemnity applies in situations where a director has acted fraudulently or dishonestly.
Composition of the Board
and its committees
As at the date of this report, the Board
comprises: a non-executive chairman; a non-
executive director; four independent non-
executive directors and two executive directors
– the chief executive and the chief financial
officer, as set out on page 58. The names and
biographies of all directors are published on
pages 58 to 59.
The nominations committee keeps the Board’s
size and structure under review. It considers the
Board to be well-balanced, providing a collective
competence to suit the Group’s developing
needs and an appropriate blend of executive
and non-executive skill. More than half of the
Board, excluding the chairman, is independent.
The principal terms and conditions of
appointment for each director are set out on
pages 84 to 85, and their interests in Rank
shares are detailed on page 91. All non-
executive directors are required to disclose
their other significant commitments, both
before appointment and following subsequent
changes, so that the Board can satisfy itself
that each director has sufficient time to allocate
to the Company to discharge their
responsibilities effectively. Other than pre-
existing roles expressly approved on their
appointment, executive directors are not
permitted to take up non-executive
directorships outside the Group. Notably,
during the year, Ian Burke was appointed as
a non-executive director of Intu Properties Plc
and Chris Bell was appointed as non-executive
chair of Team17 Group Plc.
The directors have a statutory duty to avoid
conflicts of interest. In accordance with the
Company’s articles of association, it has
adopted a policy and procedure for managing
and, if appropriate, authorising actual or
potential conflicts of interest. The Board also
assesses conflicts of interest before making
any new appointments.
The composition and chairmanship of the
committees are considered annually and have
been considered during the period under
review. Composition is also considered on
an ad hoc basis as required.
61
Corporate governance continued
2018/19 Board programme
The Board is responsible for ensuring that the Group is appropriately managed and achieves the strategic objectives that it sets.
The Board discharges its responsibilities through an annual programme of meetings and during the year focused on a number
of specific areas as set out in the table below.
Strategy and operational matters
Financial performance
• considered operational and business performance
• discussed opportunities for domestic and
international business growth, including approving
the offer to acquire Stride Gaming Plc
• approved the transformation programme and its 13
workstreams
• reviewed transformation programme updates against
business synergies and effectiveness against the
approved plan
• monitored business and transformation programme
progress against the revised six strategic pillars
• received updates on material communications with
regulators and considered impact of changes in
regulation and regulatory headwinds on the business
• reviewed financial performance and forecasts
• considered and approved the 2019/20 budget
• considered and agreed treasury, tax and financial
facility related matters
• approved the tax strategy
• reviewed and approved results announcements and
trading statements
• approved payment of the interim dividend and
recommended payment of the final dividend
2018/19
Board activities
Governance
Leadership and stakeholders
• reviewed and approved 2018 annual report
• approved 2019 notice of annual general meeting
• considered output from the evaluation process
• considered impact of new corporate governance
requirements, including the 2018 Code
• considered and agreed risk appetite and
principal risks
• agreed Modern Slavery Act statement
• discussed feedback from shareholders and
analysts’ reports
• approved the appointment of Bill Floydd and Tang
Hong Cheong to the Board
• approved the appointment of the interim company
secretary as group general counsel and company
secretary
• endorsed appointments to the executive committee
• discussed revised approach to workforce
engagement
• considered updates on diversity and succession
planning
62 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Board and committee meeting attendance
The directors’ attendance at formally scheduled Board and committee meetings during the year is recorded in the table below. It shows the number
of formally scheduled Board and committee meetings attended by each director against the number of such meetings that the relevant director was
eligible to attend.
Name
Chris Bell
Ian Burke
Steven Esom
Bill Floydd1
Susan Hooper
Clive Jennings2
Lord Kilmorey3
Alan Morgan4
John O’Reilly
Tang Hong Cheong
Alex Thursby
Full Board
8/8
8/8
8/8
1/1
8/8
1/1
1/3
8/8
8/8
4/4
8/8
Audit committee
4/4
n/a
4/4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4/4
Nominations
committee
2/2
2/2
2/2
n/a
2/2
n/a
0/0
n/a
n/a
n/a
2/2
Finance committee
n/a
9/9
n/a
5/6
n/a
0/1
n/a
7/9
9/9
n/a
n/a
Remuneration
committee
4/4
n/a
4/4
n/a
4/4
n/a
n/a
n/a
n/a
n/a
4/4
Safer gambling
committee
3/3
3/3
n/a
n/a
3/3
n/a
0/0
n/a
3/3
n/a
n/a
1. Bill Floydd was appointed to the Board on 1 May 2019
2. Clive Jennings resigned from the Board and left the Company on 17 August 2018
3. Lord Kilmorey resigned from the Board on 18 October 2018 choosing not to stand for re-election at the 2018 AGM
4. Alan Morgan resigned from the Board and left the Company on 31 July 2019
5. Hong Cheong was appointed to the Board on 15 January 2019
Effectiveness
Induction
All new Board members receive an induction
following their appointment to the Board, led
by the company secretary, which is made up
of both a general and a personalised
programme. The general induction includes
their duties and responsibilities as a director of
a listed company and the Company’s
corporate governance structure, whilst the
personalised induction is then devised and
tailored to each new director’s background,
experience and role. This approach was taken
upon Bill Floydd’s appointment to the Board,
bearing in mind a detailed induction took place
when he joined the Company as chief financial
officer six months prior. The induction
programme for non-executive directors
includes initial meetings with members of the
executive committee and other senior
management to explain the Company’s
business and financial structure, the
commercial and regulatory environment in
which the Company operates, our competitors,
an investor’s perspective and site visits. This
was substantially tailored in relation to Hong
Cheong’s appointment, due to his existing
familiarity with the business.
Knowledge
During the year, the directors received
information and training (amongst other things)
on regulatory developments to the UK Listing
Rules, Market Abuse Regulation (MAR),
corporate governance and the implementation
of the Shareholder Rights Directive, diversity
and gender pay gap reporting and gambling
regulatory and compliance matters. All
directors are also given regular briefings with
regard to matters affecting the Group’s
businesses, such as the political and regulatory
environment and corporate governance reform.
Additionally, at the Board’s request, the
Group’s auditor keeps the Board abreast of
key impact items such as political and
regulatory initiatives with regard to narrative
reporting, executive remuneration, going
concern and the role of the audit committee.
Directors are invited to identify to the company
secretary or Group human resources director
any desired skills and knowledge
enhancements that they require so that
appropriate additional training can be arranged.
Furthermore, once a year, the directors have an
opportunity to review and agree their respective
training and development needs during their
one-on-one meetings with the chairman.
Information and support
Assisted by the company secretary, the
chairman is responsible for ensuring that
directors receive accurate and timely
information on all relevant matters. The
directors receive a monthly report of current
and forecast trading results and treasury
positions. A rolling programme of items sets
the agenda for Board discussion. This is
regularly reviewed and updated to cover
topical issues and developments.
Comprehensive briefing papers on substantive
agenda items are circulated at least five
working days before meetings where possible.
These contain detailed background
information, thus freeing time for informed
debate. Members of the management team
also make regular presentations to the Board
to ensure a flow of operational information
reaches the directors in a timely way.
The directors are satisfied that there are proper
procedures in place to ensure that:
• they are receiving accurate and clear
information for the proper execution of their
duties;
• the Group’s objectives, policies and
strategies are consistent with enhancing
shareholder value;
• they are able to keep the Group’s progress
and development under review;
• they have an opportunity to challenge
constructively, and help develop proposals
on strategy;
• there are effective communications with all
shareholders; and
• the Group’s governance is effective.
Evaluation
The Board notes the requirement under the
Code for an independent external review of its
effectiveness, and that of its committees and
individual directors, every three years. As
anticipated in the prior year’s annual report,
during the 2018/19 financial year, an external
evaluation was carried out by Lintstock Limited
('Lintstock'). Lintstock does not provide any
other services to the Group and is considered
independent. The evaluation was carried out
over a period of three months, involving
detailed questionnaires for completion by each
Board and committee member, as well as the
company secretary. The review was designed
63
Corporate governance continued
to help the Board prepare for the future, by
building on existing strengths, considering
progress made to date particularly in relation to
the transformation programme and identifying
and preparing for challenges ahead. It also
considered the balance, skills and experience
of the Board.
The review culminated in the delivery of an
independent report outlining the Board and
each committee’s respective strengths and
weaknesses, the relevant sections of which
were presented and discussed at the Board
and each committee meeting. Individual
non-executive director reports were utilised as
part of individual private meetings held
between the chairman and each such Board
member at which feedback was given on
individual performance. Following a private
meeting of the non-executive directors, a
private meeting took place between the senior
independent director and the chairman, at
which feedback was given on the performance
of the chairman, which similarly utilised
feedback from the Linstock report.
The chairman, together with two non-executive
directors, met and evaluated the performance
of the chief executive, including the findings of
the Lintstock report in such review. The
outcome was then fed back to and discussed
with the other non-executive directors. The
content of the Lintstock report was also
considered by the chief executive in his
performance evaluation for the chief
financial officer.
The Board and each respective committee
identified from the Lintstock report a number of
actions and/or matters for particular focus for
the forthcoming year. The key areas of focus
agreed by each committee can be found in
each committee report. The Board itself
acknowledged in particular the need to focus
on (i) the transformation programme, including
supporting senior management in connection
with its delivery, (ii) continuing its dialogue with
shareholders, (iii) diversity, (iv) enabling
innovation, (v) culture and (vi) the process for
attracting, managing and developing talent.
Plans of action are being developed for each
of these areas, as appropriate, overseen by
the chair.
At year end, in addition to having considered
the outcome of the external evaluation
process, the Board considered its effectiveness
and that of the committees during the year
under review and concluded that, overall, it
had functioned effectively during this period,
and that the committees continued to
discharge their duties in line with their
respective terms of reference.
Relations with stakeholders
The Board as a whole takes responsibility for
ensuring dialogue with all key stakeholder
groups as summarised on page 17. In
particular, Alex Thursby was nominated as
the designated non-executive director
responsible for enabling the Board to
understand the views of the workforce and
ensure that such views are fed into the Board’s
decision-making process.
With respect to shareholders, the Board takes
responsibility for ensuring that satisfactory
dialogue takes place. The principal method
of communicating with all shareholders is via
the corporate website, www.rank.com.
During the year, directors received updates on
shareholder opinion, including formal briefings
on shareholder opinion after presentation of
the Company’s interim and annual results.
As at 30 June 2019, 56.15% of Rank’s shares
were held by a majority shareholder, Hong
Leong Company (Malaysia) Berhad ('Hong
Leong'), and a further 39.35% were held by 20
institutional shareholders.
Given that Rank is a 56.15% subsidiary of
Hong Leong, the chief executive and other
members of Rank’s executive management
team met with representatives of Hong Leong
four times during the year to discuss business
performance and other issues that could
impact their financial statements.
The Company liaises with its institutional
shareholders and city analysts through a
programme of investor relations and regular
meetings with principal shareholders
conducted by the chief executive, chief
financial officer and director of investor
relations and communications. During the
period under review, a total of 44 meetings
with such shareholders were attended by one
or more of the chief executive, the chief
financial officer and the chairman. In addition,
the senior independent director and chair of
the remuneration committee engaged with six
institutional investors in relation to chair
succession planning and in order to enable
them to raise any particular remuneration or
other corporate governance concerns.
Annual general meeting
The 2019 AGM will be held on 17 October
2019 and the full text of the notice of meeting,
together with explanatory notes, is set out in a
separate document at www.rank.com/en/
investors/shareholder-centre/shareholder-
meetings.html. If a shareholder has elected for
paper information, this will be enclosed with
their hard copy of this annual report.
Shareholders wishing to change that election
may do so at any time by contacting the
Company’s registrar, details of which can be
found on page 158 and on our website at
www.rank.com/en/investors/shareholder-
centre/contacts.html.
All shareholders are welcome to attend the
meeting. Private investors are encouraged to
ask questions. The chairman and chairs of
the audit and remuneration committees will all
be present.
Shareholders are invited to vote on the formal
resolutions contained in the notice of meeting,
which is published at least 20 working days
beforehand. In this regard, shareholders may
note that all new directors must stand for
election at the first annual general meeting after
their appointment. This therefore applies in
respect of Bill Floydd and Tang Hong Cheong.
Furthermore, as required by the 2016 Code
and the Company’s articles of association, all
other directors will be submitting themselves
for re-election at the meeting, save that, as
announced on 1 May 2019, Ian Burke will not
be standing for re-election.
Shareholders may use electronic means to
vote or appoint a proxy to vote on their behalf
at the annual and other general meetings of
the Company.
Following the meeting, the business
presentation, voting results and a summary
of the questions and answers are made
available at www.rank.com, or in printed format
on request.
This corporate governance statement forms
part of the directors’ report and accordingly is
approved by the Board and signed on its
behalf by the company secretary. Certain parts
of this corporate governance statement have
been reviewed by the Company’s auditors,
Ernst & Young LLP, for compliance with the
2016 Code, to the extent required.
64 The Rank Group Plc Annual Report and Financial Statements 2019
Audit committeeOther committee membersChris Bell Steven EsomOther attendeesChief executive Chief financial officer Company secretary Director of internal audit Group financial controller External auditorAlex ThursbyChairIntroductionThe role of the audit committee (the ‘Committee’) is primarily to support the Board in fulfilling its corporate governance obligations so far as they relate to the Group’s risk management systems, financial reporting and internal controls. This report provides an overview of the Committee’s remit and an insight into the activities undertaken or overseen by the Committee in fulfilling its role during the year. An important focus for the Committee this year has been a full review and refresh of the enterprise risk management framework and its ongoing effectiveness in the oversight of compliance controls within the business. These exercises, together with details of the Committee’s scrutiny of further enhancements to internal controls and financial reporting systems and processes, are covered below. In addition, during the year, the Committee completed a competitive audit contract tender, further details of which are on page 67. It also underwent an external evaluation to assess its performance as part of the wider Board evaluation process (see pages 63 to 64). Overall, the performance of the Committee was rated highly, and it was concluded by the Committee and the Board that the Committee is operating effectively. The Committee determined from such process, with a view to further improving its performance, that it might consider additional ways to support management with transformation activities from a risk and controls perspective. In addition, it determined that its key areas of focus over the forthcoming year will be building the relationship with the new external audit partner and monitoring progress on the ongoing development of the control framework (as set out in more detail below).Members and meetingsThe Committee comprises three independent non-executive directors. The company secretary acts as secretary to the Committee. Details of all members during the year are set out on page 69.The chair, Alex Thursby, has extensive banking industry experience and is considered by the Board to have recent and relevant experience as required by the FRC Corporate Governance Code 2016. Furthermore, the Board is satisfied that the Committee has the resources and expertise to fulfil its responsibilities.The Committee’s terms of reference are available from the Company’s website at www.rank.com or by writing to the company secretary. It met on four formally scheduled occasions during the year and attendance at such meetings is set out on page 63. Members of the Committee met separately during the year under review to discuss matters without the presence of management. Each of the external auditor and the internal auditor were also provided the opportunity at each meeting to discuss any issues with the Committee without the presence of executive management.AuditcommitteeGovernance65 Audit committee continued
2018/19 activity
Areas of focus
Financial
reporting
Matters discussed
• reviewed the integrity of all draft financial statements (including narrative)
• considered approval process for confirming and recommending to the Board that the 2018 annual report
Frequency
P
Internal
audit
External
auditor
is fair, balanced and understandable
• reviewed and recommended approval of the annual report
• reviewed appropriateness of accounting policies and going concern assumptions
• reviewed and recommended inclusion of the viability and going concern statements in the annual report
• reviewed and recommended approval of interim and preliminary results announcements and dividends
• reviewed Group accounting policies with particular emphasis on the impact of the IFRS 16 leasing standard
that will be effective from the start of the 2019/20 financial year
• reviewed accounting developments and their impacts and significant accounting issues
• reviewed director and officer expenses
• monitored the effectiveness of the internal audit function
• reviewed the 2018/19 annual audit plan
• reviewed major audit findings and approved remediation plans
• reviewed the scope of audit coverage and approved planned work for 2019/20
• considered the external auditor’s reports and views
• reviewed the objectivity, independence and expertise of the external auditor
• considered the auditor’s report on the 2017/18 annual results
• assessed the effectiveness of the 2017/18 external audit
• reviewed and approved the 2018/19 annual audit plan and fee proposal
• considered the initial results of the 2018/19 external audit
• reviewed audit and non-audit fees incurred during 2018/19
• undertook an audit tendering process and made a recommendation to the Board following the outcome
of that process, and recommended that the Committee agree the auditor’s remuneration
Risk and internal
control
• reviewed the risk management framework across the Group and the internal governance structure (further
detail on Rank’s approach to the management of risk, its principal risks and uncertainties and the controls
in place to mitigate them can be found on pages 48 to 51)
• reviewed and assessed the corporate risk register (including emerging risks)
• reviewed risk management reports and risk committee updates
• reviewed and monitored developments in relation to information security and data protection
• reviewed anti-money laundering matters and matters relating to source of funds and enhanced due
diligence
• oversaw the implementation of changes to internal processes as a result of matters reported as key events
to regulatory bodies and guidance published by regulatory bodies as learnings for the gaming industry
Governance and
other
• monitored general ledger system migration
• reviewed notifications made under the Group’s whistleblowing policy and code of conduct, ensured
appropriate actions are taken following investigation of notifications and requested a review of such process
• considered and approved tax strategy and reviewed tax matters
• considered litigation matters
• reviewed the Committee’s terms of reference and confirmed adherence during 2018/19
• reviewed feedback and recommendations following Committee evaluation
• reviewed internal financial controls
• met privately with the director of internal audit and the external auditors
• received corporate governance updates
A = Annual
B = Biannual
Q = Quarterly
P = Periodically
A
A
A
A
B
B
P
A
P
B
Q
A
Q
A
A
A
A
A
A
P
A
B
Q
B
B
P
Q
B
A & P
B
A
A
A
Q
P
66 The Rank Group Plc Annual Report and Financial Statements 2019
External audit tendering
EY has been the Company’s external auditor
since 2010. In accordance with its regulatory
requirements, the Committee undertook a
formal competitive tender process during the
year for the provision of statutory external audit
services with effect from October 2019.
The tender process was initiated by forming a
working group led by the chairman of the
Committee and also comprising the chief
financial officer, director of internal audit and
Group financial controller.
The working group considered a range of
firms. A request for proposal was then sent to
four prospective firms (comprising firms from
and outside of the “Big 4”) in December 2018.
Two of the four confirmed their independence
and wish to tender, one confirmed its wish to
tender but highlighted a potential conflict
(which the Committee concluded should mean
they withdraw), and one declined the
opportunity due to a conflict of interest.
Meetings with key individuals and information
sharing took place in February 2019, with
written proposal documents received the
following month (as well as the review of the
recent FRC AQR results). Both firms then
presented to the Committee in April 2019. A
detailed weighted scorecard was developed
and utilised in the decision-making process,
which prioritised the criteria considered most
important. Following completion of such
process, EY was recommended by the
chairman to the Committee to continue as the
Group’s external auditor with effect for the
financial year ending 30 June 2020, it having
been acknowledged and understood that there
will require a rotation of the current audit
engagement partner. This recommendation
was supported by the Committee and
recommended to, and subsequently approved
by, the Board on 26 June 2019, subject to
approval by shareholders at the Company’s
2019 AGM.
The Company confirms that it complied with
the provisions of The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 for the financial
year under review.
External auditor
The Company’s external auditor is engaged to
express an opinion on the financial statements.
It reviews the data contained in the financial
statements to the extent necessary to express
its opinion. It discusses with management the
reporting of operational results and the financial
position of the Group, and presents findings to
the Committee. The directors in office at the
date of this report are not aware of any relevant
information that has not been made available
to the auditor and each director has taken
steps to be aware of all such information and
to ensure it is available to the Company’s
auditor. Ernst & Young LLP’s (‘EY’) audit report
is published on page 102.
In order to assess the effectiveness and
independence of the external auditors, the
Committee carried out an assessment. This
was facilitated by use of a questionnaire which
posed questions in relation to different aspects
of the external audit process. Those individuals
employed by Rank most actively involved with
the day-to-day aspects of the audit provided
responses to certain questions asked. The
feedback was considered, discussed and
summarised by management and reported to
the Committee and Board. Having conducted
such review, and reviewed overall
performance, the Company has concluded
that EY has demonstrated appropriate
qualifications and expertise throughout the
period under review, and that the audit
process was effective.
The Committee oversees the nature and
amount of any non-audit work undertaken by
the auditor to ensure that it remains
independent. Consequently, the Committee is
required to approve in advance all non-audit
services priced above £25,000. When seeking
external accountancy advice in relation to
non-audit matters, the Group’s policy is to
invite competitive tenders where appropriate. It
is also the Group’s policy to balance the need
to maintain audit independence with the
desirability of taking advice from the leading
firm in relation to the matter concerned and
being efficient.
The total non-audit fees paid to EY during the
period under review was £58,000. Rank is
satisfied that the objectivity and independence
of the audit partner and the audit engagement
team have not been compromised by the fees
paid for the non-audit work undertaken by EY.
Rank has used the services of other
accounting firms for non-audit work during
the period under review.
Governance
Internal controls
During the year, there have been a number of
Committee activities that have focused on the
control environment, namely:
• Enterprise risk management: At the
request of the Committee, the chief financial
officer and director of internal audit led a full
review and refresh of the Company’s
enterprise risk management framework
(including a review of the effectiveness of its
first, second and third lines of defence). This
was supported by the appointment of an
enterprise and operational risk manager to
support the embedding of the refresh.
• Regulation (gambling): Following the
outcome of the UK Gambling Commission
investigation in October 2018, pursuant to
which the Company made a payment in lieu
of financial penalty of £500,000 in respect of
weaknesses in its social responsibility
controls, the Committee continued to
examine the effectiveness of the Company’s
framework of compliance controls. This
included internal audit reviews, management
biannual reports and presentations on
anti-money laundering ('AML'), consideration
of internal and external matters of potential
fraud and reviews of progress made on
areas requiring improvement. The
Committee also acknowledged the work of
the safer gambling committee in developing
a refreshed policy and new strategy for the
Group, and will monitor its impact on the
effectiveness of the Company’s internal
controls as actions are delivered.
• Regulation (HMRC): As mentioned on
page 42, some of the Company’s pay
practices, though designed to help
employees, have technically not complied
with the National Minimum Wage (NMW)
Regulations. The Committee has received
regular updates throughout the investigation
into this matter and, although the calculation
of underpayment has not yet been finalised,
has approved the £8.0m provision referred
to in note 4 on page 128 on the basis that it
represents Rank’s current best estimate of
payments that are required to be made for
the previous six years and in fines to HMRC.
• Code of conduct and whistleblowing:
The Committee monitored management
reports on employee conduct, including
whistleblowing. It requested a refresh of the
whistleblowing policy and process to ensure
that it will continue to meet the needs of the
business in line with strategy.
67
Audit committee continued
• Information security and data privacy:
At the request of the Committee, an annual
cyber benchmarking review was performed
to understand the maturity of controls within
our IT estate. This has helped to give greater
visibility of key risk areas and to support the
action required across the estate in
response. In addition, the Committee
received regular updates on the Company’s
GDPR programme and approved the
transition of such programme into business-
as-usual.
• General ledger migration: The Committee
requested periodic updates from
management on the progress being made
on, and key challenges to achieving,
migration of the general ledger.
• Transformation: The Company has
adopted a risk-based approach to the
initiatives implemented under the
transformation programme, involving all three
lines of defence. From the Committee’s
perspective, this led to a focus on areas of
the business affected by such initiatives
where changes in systems, personnel or
processes could lead to weaknesses in
internal controls.
• International: With the expansion of the
business, the Committee requested greater
central control oversight of international
activities.
The key areas of focus for the Committee
during 2019/20 in relation to internal controls
will be:
• Enterprise risk management: embedding
of the changes made to the framework;
• Regulation: Ongoing improvements in AML,
as well as safer gambling activities, and
continued oversight of the NMW matter
referred to above;
• Digital and technology: Review of ongoing
activities in relation to technology
enhancements and operational resilience;
• Transformation: ongoing oversight of
initiatives from a risk perspective; and
• International: increased controls oversight
of the International business.
Key judgements and financial reporting matters
The Committee assesses and challenges whether suitable accounting policies have been adopted and whether management has made appropriate
estimates and judgements. Key accounting judgements considered, conclusions reached by the Committee and their financial impacts during the
year under review are set out in the following table. Additionally, the Committee and the external auditors have discussed the significant issues
addressed by the Committee during the year and the areas of particular focus, as described in the independent auditor’s report on pages 103
to 106:
Key judgements and financial reporting matters 2018/19
Treatment of exceptional items
Only items that are exceptional due to size and
nature should be disclosed as an exceptional
item by the Group.
Impairment review
For goodwill and indefinite-life assets, the Group
performs an annual impairment review. In
addition, the Group reviews assets that are
subject to amortisation or depreciation for events
or changes in circumstances that indicate that
the carrying amount of an asset
or cash-generating unit may not be recoverable.
If an asset has previously been impaired the
Group considers whether there has been a
change in circumstances or event that may
indicate the impairment is no longer required.
The Group considers each venue to be a
cash-generating unit and the review
covers approximately 150 individual
cash-generating units.
Significant provisions for property leases
The nature of provisions is that they require
judgement due to uncertainty regarding their
timing and amount. The Group holds several
large provisions for onerous property leases.
In assessing the appropriate liability, the Group
must estimate cash flows associated with the
property. This may include consideration of the
forecast profitability of a club which still operates
at the site, potential sub-let income and
estimates of any dilapidation obligations.
Audit committee review and conclusions
The Committee reviewed the accounting treatment of exceptional items and agreed that the
items listed in note 4 are exceptional in size and nature in relation to the Group and therefore it
is appropriate to disclose them separately. The Committee noted that from a quality of earnings
perspective, both accretive and dilutive impacts had been recorded in exceptional items in the
current and prior years.
The Committee reviewed management’s impairment review process including, where
applicable, the potential indicators of impairment and/or reversal, cash flow projections,
growth rates and discount rates used to derive a value in use, and the sensitivity to
assumptions made.
During the year, the Committee reviewed total exceptional impairment charges of £11.1m in
respect of venues where performance has been below expectations and is not expected to
improve and challenged the long-term assessment of such venues in light of corporate risks.
The Committee concluded that the total impairment charge recognised of £11.1m was
appropriate. Further details of the impairment charges and reversals are disclosed in note 4
on pages 128 to 129.
At both the half and the full year, the Committee considered the Group’s approach to property
lease provisions, the discount rates applied and management’s recommendations, in order to
satisfy itself how management came to its best estimate of onerous property lease obligations.
The Committee noted that the Group has a number of property leasehold contracts and was of
the view that appropriate provision had been made against those property leases where the
unavoidable costs exceed the economic benefit expected to be derived from the property.
During the year, the Committee reviewed the exceptional charge from property leases of
£1.4m, the majority of which was due to the decision to close three clubs.
The Committee was of the view that the net charge was appropriate. Further details of the
property lease provisions held are disclosed in note 21 and the net exceptional charge made
in the current year are disclosed in note 4.
68 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Key judgements and financial reporting matters 2018/19
Significant tax provisions
The Group holds provisions for certain tax
matters, in addition to the normal provisions for
corporation tax.
In assessing the appropriateness of indirect tax
provisions, the Group must estimate the likely
outcome of uncertain tax positions where
judgement is subject to interpretation and
remains to be agreed with the relevant authority.
Financial impact of new
accounting standards
New accounting standards can materially impact
trading results.
Contingent assets and liabilities
In determining the accounting treatment of
potential assets and liabilities, management has
applied judgement in assessing the probability of
the occurrence or non-occurrence of one or
more uncertain future events not wholly within
the control of the Company.
Going concern
The directors must determine that the business
is a going concern for at least 12 months from
the date of signing the accounts.
Viability statement
The directors are required to make a statement
in the annual report as to the longer-term viability
of the Group.
Audit committee review and conclusions
At both the half and the full year, the Committee considered the Group’s approach to tax
provisioning, in order to satisfy itself how management came to its best estimate of the likely
outcome.
The Committee also received and considered an update paper covering the Group’s ongoing
direct and indirect tax matters. This covered both continuing operations where tax returns
submitted have been, or are likely to be, challenged by the relevant tax authority and
discontinued operations with historic tax audits.
The Committee considered that management’s best estimate of tax liabilities is appropriate.
The Committee considered the impact of new accounting standards.
It was noted there were no significant changes which impacted results in the current year with
the adoption of IFRS15–Revenue from Contracts with Customer and IFRS9–Financial
Instruments.
Except for IFRS 16 (which will apply to the Group from 1 July 2019),
it is not expected that any new accounting standards will materially impact future results.
The Committee assessed the challenge of providing a valuation of the Group’s investment in an
unlisted technology provider against readily available external benchmarks and reviewed
management’s methodology in doing so.
The Committee received updates throughout the year from management, incorporating legal
and professional advice as appropriate, on the accounting treatment for potential assets and
liabilities in relation to disclosure or recognition. The Committee was of the view that
management has appropriately treated such items in the financial statements. Details of the
liabilities are included in note 30.
The Committee conducted an annual assessment pursuant to which the directors were able to
conclude that it is appropriate to prepare the financial statements on a going concern basis, as
set out in more detail on page 43.
The Committee evaluated management’s work in conducting a robust assessment of the
Group’s longer-term viability. The Committee affirmed the reasonableness of the assumptions,
considered whether a viability period of three financial years remained most appropriate, and
confirmed that it was part of a recommendation to the Board.
For further information on the viability statement, see page 49.
Membership of Committee during year
Name
Chris Bell
Steven Esom
Alex Thursby (chair)
Committee membership since
June 2015
March 2016
August 2017
Notes
Alex Thursby became chair in October 2017
Alex Thursby
Chair of the audit committee
21 August 2019
69
Nominations committeeOther committee membersChris Bell Steven Esom Susan Hooper Alex ThursbyOther attendeesCompany secretaryIan BurkeChairIntroductionThe nominations committee (the ‘Committee’) is responsible for assisting the chairman in keeping the composition of the Board and executive committee under review, and leading the nominations process to the Board. It carries out its duties with due regard for best practice corporate governance standards.The formal terms of reference of the Committee are available on our website at www.rank.com or by written request to the company secretary.Members and meetingsThe Committee comprises the chairman and all the independent non-executive directors. The company secretary acts as secretary to the Committee. Details of all members during the year are set out on page 72. The Committee met on two formally scheduled occasions during the year under review and the attendance of its members at such meetings is set out on page 63.Process for appointment of chair On 30 April 2019, Ian Burke informed the Board of his intention to step down as chair immediately following the Company’s 2019 AGM on 17 October 2019. An announcement to this effect was made on 1 May 2019 and the Committee commenced the process for the appointment of his successor. Led by the senior independent director, the Committee (i) considered the key skills and experience desirable for a new chair, (ii) confirmed that such successor should be independent; (iii) determined the external headhunters it would engage to assist with a new appointment, being Korn Ferry, (iv) discussed with the Company’s majority shareholder and other major shareholders the skills they saw as desirable for the new chair, together with any other matters they wished to raise in connection with such appointment and the process relating to the same; and (v) considered the timetable for such process, noting the preference for there to be an orderly handover of responsibilities. Further to this, briefing sessions were held with all non-executive and executive directors, and the company secretary to review the candidate brief and assessment criteria. A long-list of 15 candidates was discussed and then narrowed down to a shortlist of six, and then three. Following interviews with the three candidates, and a presentation to the Committee by the preferred candidate, the process concluded with the recommendation to the Board by the Committee that Alex Thursby be appointed with effect from the conclusion of the 2019 AGM. Alex joined the Rank board in August 2017 and has chaired the audit committee since October 2017. Upon his appointment Alex will step down as chair of Rank’s audit committee. The search for a new audit committee chair has commenced. Details of Alex’s experience and other roles can be found on page 59.Nominationscommittee70 The Rank Group Plc Annual Report and Financial Statements 2019 Appointment of chief
financial officer
Bill Floydd was appointed as chief financial
officer, and to the executive and finance
committees, with effect from 12 November
2018. He was subsequently appointed to the
Board on 1 May 2019.
The search process for the chief financial
officer was conducted by the chief executive
officer and Group human resources director,
assisted by an external agency, Odgers
Berndtson. A long-list of candidates was
reviewed and a shortlist of five people was
interviewed. The preferred candidate was then
met by other members of the Board, including
the chairman, and members of the executive
committee, who each then provided their
feedback. Thereafter the chief executive officer
made a recommendation to the Committee.
Following a meeting of the Committee, Bill was
recommended for appointment to the role.
Details of Bill’s experience and former roles can
be found on page 58.
Appointment of
non-executive director
Following notification from the majority
shareholder that it wished to nominate a
Guoco representative to the Board (pursuant
to the Relationship Agreement between the
Company, Hong Leong and Guoco (see page
96 for more information)), Tang Hong Cheong
was appointed as a non-executive director with
effect from 15 January 2019. The chairman
sought views from other major shareholders in
relation to such appointment. The Committee
noted that Hong Cheong had been working
with the management of Rank since 2010. It
considered that Hong Cheong has appropriate
and extensive commercial experience to make
a valuable contribution to the Board and was
comfortable that such appointment will further
enhance the communication between Rank
and its majority shareholder. The Committee
therefore recommended such appointment to
the Board, which duly approved the same.
Details of Hong Cheong’s experience can be
found on page 58.
Governance
Executive committee
appointments
Following search processes conducted by the
chief executive officer and Group human
resources director, with external agency
assistance as appropriate, the Committee
recommended the following appointments to
the executive committee:
• Chief information officer – Jonathan
Greensted joined the Company in August
2018 as chief information officer. He joined
from Travelodge where he was chief
technology officer.
• Chief transformation officer – Jim Marsh
joined in October 2018 as chief
transformation officer. He joined from
McKinsey & Company where he was a
partner in the transformation team.
• Group general counsel & company secretary
– Luisa Wright, who had previously been
serving as interim company secretary, was
appointed as Group general counsel and
company secretary in November 2018.
• Retail managing director – Jonathon Swaine
will be joining in October 2019 as the retail
managing director. He will be joining from
Fullers, Smith and Turner plc where he has
been managing director of Fullers Inns
since 2012.
Board and senior
management diversity
During the period under review, the Committee
has considered the issue of diversity and
inclusion in the context of both the Board and
senior management.
The Board’s diversity and inclusion policy is to
recruit the best candidate having regard to the
skills and experience required, but with a mind
to diversity, including gender and ethnic
diversity. As at 30 June 2019, 11.11% of the
Board was female (12.5% at the date of this
report), 20% of the executive committee (25%
as at the date of this report) and 30% of direct
reports to the executive committee (35.3% as
at the date of this report). The Board currently
has one BAME director on the Board and
remains committed to ensuring this remains
the case, as recommended by the Parker
Report. The Committee continues to be
mindful of the benefits that diversity brings and
is conscious that further work is required in this
area, as referenced below as an outcome from
the Committee evaluation process.
On 4 April 2019, and in accordance with the
requirements of the Equality Act 2010, the
Company published its gender pay gap figures
for the UK Group as at 5 April 2018. This
included the four legal entities where the Group
employs more than 250 people in the UK.
Further details can be found at www.rank.com.
There are several initiatives in place to reinforce
the Company’s commitment to reduce the gap
further and increase gender diversity at a
senior level. These include a high potential
sponsorship programme focused on offering
females across the organisation appropriate
support to develop their careers; family support
policies; and enhanced maternity pay for
women in leadership/management roles or
‘pathway’ positions into senior management.
Further detail can be found on page 28 of this
report and at http://www.rank.com/en/
responsibility.html.
Further details of the gender breakdown of
directors, senior management and the Group
can be found on page 28 of this report.
Succession planning
As noted elsewhere in this report, there have
been considerable changes to personnel at an
executive committee level over the past 12
months and the Committee has, as a result,
delayed succession planning for senior
management. During the coming year, the
Committee will have renewed focus on
succession plans for senior management, as
well as the Board, so as to ensure an
appropriate balance of skills and experience is
maintained within the Company on an ongoing
basis. The process for the appointment of a
new chair is underway as outlined earlier in
this report.
Governance
During the year, the Committee received
briefings from the company secretary on
corporate governance reform, and specifically
the changes that will apply pursuant to the
FRC’s Corporate Governance Code 2018
('2018 Code'), which will apply to the Company
in respect of the 2019/20 financial year. It has
noted in particular the expansion of its
responsibilities to include reporting on its
approach to succession planning and
overseeing a diverse pipeline of talent to both
Board and senior management positions. It
has further noted the focus under the 2018
Code on Board refreshment and overboarding,
which it will also consider in more detail during
the forthcoming financial year.
71
Following such exercise, the Committee
reiterated the need for closer monitoring of
plans, actions and progress in the areas of
succession planning and diversity in the
forthcoming year, noting also the requirements
of the 2018 Code in this regard.
Nominations committee continued
Board, committee and executive
committee composition, Board
tenure and review of Board skills
The Committee keeps the Board’s size and
structure under review. The current directors
have a wide range of backgrounds and
knowledge of a number of different sectors,
including gambling and leisure, as more
particularly described in their respective
biographies on pages 58 to 59. Their skills
include business development, retail, finance,
hospitality, property, governance and risk
management. The Committee is of the view
that the Board is well balanced, providing a
collective competence to suit the Group’s
current needs and an appropriate blend of
executive and non-executive skills. However, it
is committed to keeping this under review as
such needs change. The Committee believes
that all the directors are suitably qualified to
help steer and challenge Group strategy.
The composition and chairmanship of the
Board’s committees are considered annually
and have been considered during the period
under review. Additionally, details of length of
tenure can be found on page 59.
The Committee has also, during the year,
consistently reviewed the composition of the
executive committee.
Committee evaluation
The Committee’s evaluation exercise, externally
facilitated by Lintstock Limited, concluded that
the Committee continues to operate effectively.
Having considered the findings, it was agreed
that the Committee’s effectiveness could be
further improved by:
• a renewed focus on succession planning;
and
• a review of the approach to Board and
executive committee appointments around
key additional skills and capability needs as
the business further develops, with a
renewed focus on diversity.
Committee membership during the year
Name
Chris Bell
Ian Burke (chair)
Steven Esom
Susan Hooper
Lord Kilmorey
Alex Thursby
Committee member since
July 2015
June 2014
March 2016
September 2015
February 2014
August 2017
Notes
Ian Burke will step down from the Committee in October 2019
Lord Kilmorey stood down from the Committee in October 2018
72 The Rank Group Plc Annual Report and Financial Statements 2019
Safer gambling committeeOther committee membersChris Bell Ian Burke John O’ReillyOther attendees Company secretary Director of compliance and responsible gambling Director of public affairs Head of responsible gamblingSusan HooperChairIntroductionThe safer gambling committee (the ‘Committee’) (formerly the responsible gambling committee) assists in the formulation and monitoring of the Group’s safer gambling strategy and enables particular focus to be placed on this important topic. During the year, under the new chair, the Committee challenged itself and the Company to focus on what it really means to be committed to safe and fair gambling. The Committee also acknowledged the need to ensure that such commitment, one of the Company’s strategic pillars, is truly embedded within the business as part of its culture.With this in mind, during the year, the Committee focused in particular on the development of a refreshed policy and new strategy, with the aim of ensuring Rank pro-actively pursues improvements in the promotion and delivery of safer gambling. The Committee has also endorsed the inclusion of a specific safer gambling workstream within the transformation programme to increase pace and build momentum, such that the aspirations set out in the new policy are delivered in the manner and timescales intended by this Committee.Members and meetingsThe Committee comprises two non-executive directors, the chair of the Board and the chief executive. The director of compliance and responsible gambling acts as secretary to the Committee. Details of all members during the year are set out on page 74.The Committee met on three formally scheduled occasions during the year under review and the attendance of its members at such meetings is set out on page 63. Responsibilities and activities during 2018/19The Committee’s responsibilities under its refreshed terms of reference, approved on 26 June 2019, include: •reviewing and making recommendations in relation to Rank’s strategy and policy so far as gambling regulation relating to the prevention of gambling-related harm is concerned in each of the jurisdictions and channels in which it operates; •reviewing the results of safer gambling research projects undertaken by Rank or by third parties at the request of Rank or utilising Rank’s data;Safer gamblingcommitteeGovernance73 Conclusion
Rank remains committed to providing a safe
gambling environment for customers to enjoy
the services that we provide. We are also
committed to working constructively with
regulators, including the UK Gambling
Commission, and our industry peers. The
Committee looks forward to reporting on the
advanced progress that will be made in this
area over the forthcoming year.
• overseeing the Company’s work in response
to the Department for Digital, Culture, Media
and Sport’s review of gaming machines and
social responsibility measures. The
Committee welcomed the launch in
Grosvenor casinos and Mecca bingo of a
package of controls to improve protections
on machines. These controls will continue
to develop in the coming year and the
Committee will monitor their progress
and the evaluation of their uptake
and effectiveness;
• examining the UK Gambling Commission’s
proposals for the new industry safer
gambling strategy (launched as the National
Strategy to Reduce Gambling Harms) and
advising on the Company’s response to the
corresponding consultation;
• reviewing and advising on the draft content
in respect of responsible gambling and
social responsibility that formed part of the
Group’s response to the UK Gambling
Commission’s Annual Assurance Statement;
• following initiatives launched or progressed
by the business, including the trial in five
Grosvenor casinos of the ALeRT system,
designed by Focal Research using available
machine data to detect signs of potential
at-risk and problem play; and
• refreshing its terms of reference to, amongst
other things, ensure it has an even clearer
focus and to more clearly bring the
Company’s international business within
its remit.
Safer gambling committee continued
• keeping under review Rank’s policies and
systems designed to protect children and
other vulnerable persons from being harmed
or exploited by gambling;
• keeping under review the effectiveness
of Rank’s systems for identifying and
interacting with customers who are at risk
of becoming problem gamblers;
• reviewing and making recommendations
in relation to the resources available within,
and to, Rank with the aim of ensuring that
vulnerable or potentially vulnerable persons
are identified, interacted with and, where
appropriate, promptly denied access to
Rank’s facilities for gambling; and
• reviewing and approving substantive
changes to Rank’s planned safer gambling
activity in all the jurisdictions and channels
in which it operates.
The Committee reports to the Board, which
retains principal oversight of matters relating to
gambling-related harm reduction and gambling
regulation. It also refers matters to the audit
committee as appropriate. The formal terms
of reference of the Committee are available
at www.rank.com or by written request to
the company secretary.
During the year under review, the Committee
spent significant time on the development of
the policy, which has since been
communicated throughout the business, and a
new three-year safer gambling strategy, which
is reflected in the safer gambling transformation
workstream that will engage the entire
business. Its other activities included:
• ensuring throughout the year that it is aware
of, and Rank contributes to, upcoming
developments across the industry. In
particular, the Committee continued to
monitor the progress of the UK Gambling
Commission in reviewing the sufficiency of
rules relating to online gambling. The
Committee welcomed improvements to age
and identify verification controls in the UK
and keenly follows discussions relating to
how operators may better assess customer
affordability to support the earlier
identification of those who may be gambling
beyond their means;
Committee membership during the year
Name
Chris Bell
Ian Burke
Susan Hooper (chair)
Lord Kilmorey
John O’Reilly
Committee membership since
March 2016
March 2016
July 2017
March 2016
May 2018
Notes
Ian Burke will step down from the Committee in October 2019
Susan Hooper became Committee chair in October 2018
Lord Kilmorey stepped down as chair in October 2018
74 The Rank Group Plc Annual Report and Financial Statements 2019
Finance committeeOther committee membersJohn O’Reilly Bill FloyddOther attendeesCompany secretaryIan BurkeChairIntroductionThe finance committee (the ‘Committee’) is authorised by the Board to approve capital expenditure and make financing decisions for the Group up to authorised limits. The Committee also acts as the Board’s disclosure committee for the purposes of the Market Abuse Regulation (MAR) which came into force on 3 July 2016.The Committee’s terms of reference are available from the Company’s website at www.rank.com or by writing to the company secretary.Members and meetingsThe Committee comprises the chairman, chief executive and chief financial officer. The company secretary acts as secretary to the Committee. Details of all members during the year are set out below.2018/19 activity The Committee met on nine formally scheduled occasions during the year and the issues it discussed included: •trading; •financial reporting; •estate management issues; •delegations of authority; •insurance cover and uninsured risks; •review of non-executive director fees; •review of Group subsidiaries’ board composition; •M&A opportunities; •post-completion matters relating to the YoBingo acquisition; and •commercial agreements within its delegated authority.FinancecommitteeCommittee membership during the yearNameCommittee membership since NotesIan Burke (chair)March 2006Ian Burke will step down from the Committee in October 2019Bill FloyddNovember 2018 Clive JenningsJuly 2011Clive Jennings stepped down from the Committee in August 2018Alan MorganAugust 2018Alan Morgan stepped down in July 2019James Pizey*August 2018James Pizey, who was interim chief financial officer, stepped down in November 2018John O’ReillyMay 2018 1. James Pizey attended two scheduled meetings during his period as interim chief financial officer.Governance75 Directors’ remuneration reportOther committee membersChris Bell Susan Hooper Alex ThursbyOther attendeesChief executive Company secretary Group human resources directorSteven EsomChairAnnual StatementIntroductionOn behalf of the Board, I am pleased to present Rank’s remuneration report for the year ended 30 June 2019. This report comprises my annual statement, our remuneration policy ('Policy'), which was approved at a General Meeting held on 25 April 2018, and our annual report on remuneration. This statement and the annual report on remuneration will be subject to an advisory vote at the 2019 AGM. Overview of 2018/19 The 2018/19 financial year was significant for the Company, with the launch of the Group’s transformation programme setting out the ambition of becoming a £1 billion revenue international gaming company by 2023. However, whilst the programme is starting to drive Group performance, the remuneration committee's (‘Committee’) decision-making on the performance outcomes for executive directors, as set out below, is reflective of the overall financial performance for the year. The Committee has been particularly mindful during the year of the critical need to attract and retain key talent to drive the targeted future revenue growth outlined in the strategic report. Whilst we saw a number of departures at a senior management level during the year, we also welcomed arrivals in the form of chief financial officer, chief transformation officer, chief information officer and Group general counsel & company secretary. Now that we are well over halfway through the first year of the transformation programme, there is greater clarity around the key challenges and opportunities for our business and we will continue to ensure during the forthcoming year that management is, and remains, appropriately incentivised to achieve our strategic goals.Base salariesThe Committee reviewed the executive director base salaries during the year. It determined not to increase such salaries, which therefore remained unchanged at 1 April 2019, the effective date for any increases, versus the prior year.committeeRemuneration76 The Rank Group Plc Annual Report and Financial Statements 2019 2018/19 bonus
The annual bonus for the 2018/19 financial
year was based on a challenging profit after tax
target. Performance resulted in the financial
targets under the bonus scheme not being met
and consequently no annual bonus pay-out
being recommended for the chief executive or
the chief financial officer in respect of the
2018/19 financial year. Further details on
performance against targets are outlined on
page 87.
LTIP grants during 2018/19
The Company’s long-term incentive plan
('LTIP') structure covers four financial years,
with vesting phased in three tranches. As
stated in last year’s report, a single award was
made in June 2018 to the executive directors
at that time ('2017/18 award') and no further
award was made to such directors, or will be
made, until the 2021/22 financial year.
However, a mid-period award was granted
under the LTIP to Bill Floydd, chief financial
officer, on 22 November 2018 on similar terms
to the 2017/18 award. Such award was
pro-rated to 400% of salary based on the
number of months remaining until the end of
the performance period. The performance
conditions (a mix of financial and non-financial
targets) are based on performance in 2020/21
as further detailed on page 88. The award will
vest, subject to meeting the performance
targets and continued employment, in three
tranches, with tranche 1 vesting on 22
November 2021 (being the third anniversary
of the date of grant), tranche 2 vesting on
1 October 2022 and tranche 3 vesting on
1 October 2023. No further award will be made
to Bill Floydd until the 2021/22 financial year.
Board changes
As announced on 1 May 2019, Ian Burke
notified the Company that he does not intend
to stand for re-election as chair at the AGM on
17 October 2019. The senior independent
director, Chris Bell, led the process to appoint
his successor, Alex Thursby, referring to the
Committee for approval of the remuneration for
such role.
On 1 May 2019, Bill Floydd, chief financial
officer, was appointed to the Board. The
Committee approved his remuneration prior to
his appointment as chief financial officer in
November 2018 and such terms are in
accordance with the Policy.
Tang Hong Cheong was appointed to
the Board as a non-executive director on
15 January 2019, as a representative of
the Company’s majority shareholder,
Guoco Group Limited, and no fees are
payable to Hong Cheong in connection
with such appointment.
In April 2019, the Company announced that
Alan Morgan, managing director, retail, had
resigned. He subsequently stepped down from
the Board and left the business on 31 July
2019. Alan was not eligible for any bonus
payment for the 2018/19 financial year and his
unvested LTIP awards lapsed on 31 July 2019.
As reported in last year’s report, Clive
Jennings, the former finance director,
stepped down from the Board on 8 August
2018, and subsequently left the business on
17 August 2018.
Lord Kilmorey stepped down from the Board
with effect from 18 October 2018.
The details of the termination arrangements
for all departing directors are set out on page
90, the terms of which are in accordance with
the Policy.
Governance
The Committee has taken a close interest in
the requirements of the FRC’s UK Corporate
Governance Code 2018 (‘2018 Code’) and
welcomes the increased focus on broader
stakeholders and the expanded remit of the
Committee. The Committee already has a
degree of oversight of reward policies across
the Group, and we will continue to refine and
enhance this in the coming year as we seek to
embed the principles of the 2018 Code and
the government’s package of measures on
executive pay. I look forward to providing an
update on the implementation of changes in
next year’s report.
Governance
Looking ahead
During the year, I welcomed the opportunity to
discuss remuneration matters with our majority
shareholder and, together with our senior
independent director, institutional investors.
The Company operates in an industry where
changes are bringing significant challenges as
well as opportunities. For the Committee, this
brings with it challenges from a remuneration
perspective as we seek a balance between the
expectations of investors and the formulation
of remuneration arrangements that facilitate
the recruitment, retention and motivation of
management. With this in mind, we continue to
keep remuneration arrangements under review
and will continue our dialogue with
shareholders in relation to the same. In the
meantime, I would like to thank shareholders
for the support they have given in the past and
I look forward to your continued support at the
forthcoming 2019 AGM.
Steven Esom
Chair of the remuneration committee
77
Directors’ remuneration report continued
Directors’
remuneration policy
This report sets out the Policy for the Company
which was prepared in accordance with
Schedule 8 to the Large and Medium-sized
Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013. The
Policy was adopted following a binding
shareholder vote at the General Meeting held
on 25 April 2018 and took effect from the date
of approval. This policy report has been
reproduced for information and updated to
reflect the passage of time, such as change in
tense and page references and the executive
directors’ current remuneration packages for
the purposes of the charts illustrating the
application of the Policy in the coming year.
Remuneration and components
The Committee reviews the Group’s
remuneration philosophy and structure each
year to ensure that the remuneration
framework remains effective in supporting the
Group’s strategic objectives and fairly rewards
individuals for the contribution that they make
to the business, having regard to the size and
complexity of the Group’s operations and the
need to motivate and attract employees of the
highest calibre.
Remuneration policy table
The key components of executive directors’ remuneration are summarised below:
The performance of the Company is
dependent upon the quality of its directors,
senior executives and employees and therefore
the Group seeks to attract, retain and motivate
skilled directors and senior executives of the
highest calibre. In order to attract such
individuals, the Committee needs to ensure
that the remuneration packages properly reflect
an individual’s duties and responsibilities, are
appropriate and competitive (not paying more
than is necessary), sensitive to pay elsewhere
within the Group and directly linked to
performance.
Component and link to business strategy
Base salary
To attract and retain skilled, high-calibre
individuals to deliver the Group’s strategy.
Operation
Base salaries are typically reviewed annually, with any change normally effective from 1 April.
Any increases take into account:
• the role’s scope, responsibility and accountabilities;
• market positioning, including pay levels at other gaming operators;
• general rates of increase across the Group; and
• the performance and effectiveness of the individual and the Group.
Insured and other benefits
Insured and other benefits are offered to
executive directors as part of a competitive
remuneration package.
Insured benefits may comprise private healthcare insurance for executive directors and dependants,
life assurance and permanent health insurance.
Other benefits comprise a cash car allowance and the fuel cost of all mileage (private and business).
The amount of the cash car allowance is reviewed periodically by the Committee in the light of
market conditions.
Retirement provisions
Rewards sustained contribution and
encourages retention.
Other benefits, in line with the provision to other employees, may be offered as appropriate and
travel and related expenses may be reimbursed.
The Committee retains the discretion to offer relocation assistance in the form of an allowance or
otherwise to support the movement of executive talent across the business. If provided, the
Committee aims to ensure payments are not excessive and support business needs. As such,
relocation assistance will be reviewed on a case-by-case basis taking into account factors such as
the individual’s circumstances and the geographies involved, meaning that there is no prescribed
formula for calculating the level or structure of payments. Tax equalisation and overseas tax
advisory fees may be payable.
Executive directors may participate in HMRC-approved all-employee schemes up to HMRC limits.
Executive directors are offered membership of the Rank Group Retirement Savings Plan (the
‘Pension Plan’) or a cash allowance of equivalent value to the employer’s contribution to the
Pension Plan. An executive director may be automatically enrolled in The Rank Group Workplace
Pension Scheme (the ‘Pension Scheme’) in accordance with the Company’s obligations under the
Pensions Act 2008. The Company will contribute into the Pension Plan at the rate of 10% of the
executive director’s base salary, up to any maximum contribution levels set annually by HMRC.
Either part or the full value of the annual 10% of base salary pension employer contribution may
instead be paid as a cash allowance.
The Committee retains the discretion to honour all contractual pension arrangements agreed prior
to the application of this Policy.
78 The Rank Group Plc Annual Report and Financial Statements 2019
Not applicable.
Not applicable.
Performance metrics
Maximum opportunity
Not applicable although the individual’s performance will be taken into
While there is no maximum annual increase, ordinarily any increases
account when determining the level of increase, if any.
in executive directors’ base salaries will be limited, in percentage of
base salary terms, to those received by the wider workforce during
the year.
Where the Committee considers it necessary or appropriate, larger
increases may be awarded in individual circumstances, such as a
change in scope or responsibility or alignment to market levels.
For new hires, the Committee has the flexibility to set the salary at a
below-market level initially and to realign it over the following years
as the individual gains experience in the role. In exceptional
circumstances, the Committee may agree to pay above-market
levels to secure or retain an individual who is considered by the
Committee to possess significant and relevant experience which is
critical to the delivery of the Group’s strategy.
It is anticipated that the provision of insured and other benefits will
not form a significant part of the package in financial terms.
The cost of the benefits provided may change in accordance with
market conditions or in the event of the payment of relocation
assistance.
For all new appointments, the maximum pension contribution
(defined contribution or cash supplement) will be 10% of base
salary, less the lower earnings limit.
Legacy arrangements to be honoured: Finance Directors –15% of
base salary, less the lower earnings limit.
Governance
Committee’s approach
to setting pay
The Committee intends that the base salary
and total remuneration of executive directors
should be competitive against other similar
gaming peers and companies of a broadly
similar size. Remuneration is benchmarked
against rewards available for equivalent roles in
suitable comparator companies, with the aim
of paying neither significantly above nor below
market levels for each element of remuneration
at target performance levels.
The Committee also considers general pay and
the employment conditions of all employees
within the Group and is sensitive to these, to
prevailing market and economic conditions and
to governance trends when assessing the level
of salaries and remuneration packages of
executive directors and other members of the
executive committee.
The total remuneration package links corporate
and individual performance with an appropriate
balance between short- and long-term
elements, and fixed and variable components.
The Policy is designed to incentivise executives
to meet the Group’s key objectives, and so a
significant proportion of total remuneration is
Group performance related.
The Committee will set targets for the different
components of performance-related
remuneration so that they are both appropriate
and sufficiently demanding in the context of the
business environment and the challenges
facing the Group.
Remuneration policy table
The key components of executive directors’ remuneration are summarised below:
Component and link to business strategy
Operation
Base salary
Base salaries are typically reviewed annually, with any change normally effective from 1 April.
To attract and retain skilled, high-calibre
Any increases take into account:
individuals to deliver the Group’s strategy.
• the role’s scope, responsibility and accountabilities;
• market positioning, including pay levels at other gaming operators;
• general rates of increase across the Group; and
• the performance and effectiveness of the individual and the Group.
Performance metrics
Not applicable although the individual’s performance will be taken into
account when determining the level of increase, if any.
Insured and other benefits
Insured benefits may comprise private healthcare insurance for executive directors and dependants,
Not applicable.
Insured and other benefits are offered to
life assurance and permanent health insurance.
executive directors as part of a competitive
remuneration package.
Other benefits comprise a cash car allowance and the fuel cost of all mileage (private and business).
The amount of the cash car allowance is reviewed periodically by the Committee in the light of
Maximum opportunity
While there is no maximum annual increase, ordinarily any increases
in executive directors’ base salaries will be limited, in percentage of
base salary terms, to those received by the wider workforce during
the year.
Where the Committee considers it necessary or appropriate, larger
increases may be awarded in individual circumstances, such as a
change in scope or responsibility or alignment to market levels.
For new hires, the Committee has the flexibility to set the salary at a
below-market level initially and to realign it over the following years
as the individual gains experience in the role. In exceptional
circumstances, the Committee may agree to pay above-market
levels to secure or retain an individual who is considered by the
Committee to possess significant and relevant experience which is
critical to the delivery of the Group’s strategy.
It is anticipated that the provision of insured and other benefits will
not form a significant part of the package in financial terms.
The cost of the benefits provided may change in accordance with
market conditions or in the event of the payment of relocation
assistance.
Retirement provisions
Rewards sustained contribution and
encourages retention.
Not applicable.
For all new appointments, the maximum pension contribution
(defined contribution or cash supplement) will be 10% of base
salary, less the lower earnings limit.
Legacy arrangements to be honoured: Finance Directors –15% of
base salary, less the lower earnings limit.
79
market conditions.
Other benefits, in line with the provision to other employees, may be offered as appropriate and
travel and related expenses may be reimbursed.
The Committee retains the discretion to offer relocation assistance in the form of an allowance or
otherwise to support the movement of executive talent across the business. If provided, the
Committee aims to ensure payments are not excessive and support business needs. As such,
relocation assistance will be reviewed on a case-by-case basis taking into account factors such as
the individual’s circumstances and the geographies involved, meaning that there is no prescribed
formula for calculating the level or structure of payments. Tax equalisation and overseas tax
advisory fees may be payable.
Executive directors may participate in HMRC-approved all-employee schemes up to HMRC limits.
Executive directors are offered membership of the Rank Group Retirement Savings Plan (the
‘Pension Plan’) or a cash allowance of equivalent value to the employer’s contribution to the
Pension Plan. An executive director may be automatically enrolled in The Rank Group Workplace
Pension Scheme (the ‘Pension Scheme’) in accordance with the Company’s obligations under the
Pensions Act 2008. The Company will contribute into the Pension Plan at the rate of 10% of the
executive director’s base salary, up to any maximum contribution levels set annually by HMRC.
Either part or the full value of the annual 10% of base salary pension employer contribution may
instead be paid as a cash allowance.
to the application of this Policy.
The Committee retains the discretion to honour all contractual pension arrangements agreed prior
Directors’ remuneration report continued
Remuneration policy table continued
Component and link to business strategy
Annual bonus
Motivates the achievement of annual
strategic, financial and personal performance.
Rewards individual contribution to the
success of the Group.
Operation
Rank operates an annual bonus scheme in which executive directors participate.
The bonus is based on stretching targets set annually. Bonus pay-outs are determined by the
Committee after the year end following the Committee’s assessment of performance relative to the
targets set.
To allow the Committee to assess the quality of earnings over the year and to introduce an element
of retention, any cash bonuses earned by the executive directors will be subject to a six-month
deferral period and will be paid in the December following the 30 June financial year end.
Any bonus earned by the chief executive above 100% of base salary and 80% of base salary
for other executive directors will be deferred (normally in shares) for a period of two years.
Recovery and withholding provisions apply in the event of a material misstatement, an act
of gross misconduct or an error in the assessment of performance targets.
Long-term incentive plan
The long-term incentive plan is intended to
align the interests of the executive directors
and shareholders through the creation of
shareholder value over the long term.
The Rank Group Plc 2010 Long-Term Incentive Plan (LTIP) is currently the only long-term equity-
based incentive scheme in place for the executive directors and other senior executives.
Consistent with the structure of the 2014/15 award, it was proposed that there be a single grant of
contingent share awards under the LTIP in 2017/18 to cover four years of annual grants.
Performance is measured over four years (based on targets relating to performance in 2020/21) and
awards vest in three tranches with one third in October 2021, one third in October 2022 and one
third in October 2023.
A holding period applies to the first and second vested tranches to create a five-year period
between grant and the first available opportunity to sell vested awards (save for any sale to settle
personal tax obligations).
A single block award was made to the current directors under the LTIP, in June 2018 to John
O’Reilly and in November 2018 to Bill Floydd. There will be no further grants of long-term incentives
to those directors in the next two financial years (2019/20 and 2020/21).
New employees joining during the life of this Policy may receive an award at or around the time of
joining either on similar terms as the 2017/18 grant or as annual awards of up to 200% of base
salary, and in either case with different performance criteria and a different vesting period provided
that in no case shall an award have a vesting period of less than three years.
An award under this plan may be made to a new director in any year of the three-year policy.
Clawback and malus provisions apply in the event of a material misstatement, an act of gross
misconduct or an error in the assessment of performance targets or in respect of Awards granted
on or after 25 April 2018, a material financial loss to the Group or a material deterioration in Group
profits which is inconsistent with the financial performance of the gaming industry.
Share ownership guideline
To create greater alignment between
executives and shareholders.
Subject to there being sufficient free float, a market standard 200% of base salary guideline will
apply for executive directors.
80 The Rank Group Plc Annual Report and Financial Statements 2019
Not applicable.
Performance metrics
Maximum opportunity
The bonus will be based primarily on the achievement of financial
Chief executive: 150% of base salary
performance targets and may, from time to time as considered appropriate
by the Committee, include non-financial measures and strategic and/or
Other directors: 120% of base salary
personal objectives.
of performance.
Performance below threshold will result in zero payment. Up to 25% of
the opportunity available may be payable for achieving a threshold level
A full description of the performance measures in place and performance
against them will be provided in the Annual Remuneration Report on
a retrospective basis, to the extent they are not considered to be
commercially sensitive.
The Committee retains the discretion, acting fairly and reasonably, to alter the
bonus outcome in light of the underlying performance of the Group or the
individual, taking account of any factors it considers relevant.
For the 2018/19 financial year, the bonus is based primarily on profit-
after-tax targets.
2017/18 award
For awards granted in 2017/18:
i. vesting will be based 40% on earnings per share, 7.5% on digital revenue,
7.5% on digital profit, 7.5% on Grosvenor London revenue and 7.5% on
Grosvenor London profit. The remaining 30% of the award is based
primarily on strategic measures relating to individual business units. The
measures were set out in the notice of general meeting to approve the
Policy. Performance is measured over the four-year period commencing in
2017/18 and ending in 2020/21.
ii. for each financial performance measure (covering 70% of the overall award),
performance below threshold results in zero vesting. 50% of the award may
vest for target performance with 100% vesting for achieving maximum
performance. Vesting occurs on a straight-line basis between target
and maximum.
At the end of the performance period, the Committee will have absolute
discretion to determine the extent to which the awards will vest, if at all,
taking account of underlying Group, individual and share price performance.
The Committee may, in its absolute discretion, adjust upwards or downwards
including to nil the number of shares under an award which would
otherwise vest.
If discretion is applied, the level and reasons for its application will be fully
disclosed in the following year’s Annual Remuneration Report.
If awards are granted in the second and third years of the three-year Policy
period, the Committee will determine measures and targets at the time to
ensure continuing alignment with strategy. Performance targets may relate to
both financial and non-financial measures linked to the Group’s long-term
business strategy, including but not limited to:
• Group or business unit profit;
• Group or business unit revenue;
• return on capital; and
• strategic objectives of the Group.
Not applicable.
The maximum award level for awards granted in 2017/18 has been
set at 600% of base salary for the Chief Executive and 450% of
base salary for the other directors. This is the aggregate maximum
covering four years and the intention was that the maximum award
will be granted in 2017/18 with no further awards being made until
2021/22.
For new directors, a single grant of up to 600% of base salary may
be made in the Policy period. Alternatively, annual awards of up to
200% of base salary per annum may be granted.
Annual bonus
Rank operates an annual bonus scheme in which executive directors participate.
Component and link to business strategy
Operation
Motivates the achievement of annual
strategic, financial and personal performance.
Rewards individual contribution to the
success of the Group.
targets set.
The bonus is based on stretching targets set annually. Bonus pay-outs are determined by the
Committee after the year end following the Committee’s assessment of performance relative to the
To allow the Committee to assess the quality of earnings over the year and to introduce an element
of retention, any cash bonuses earned by the executive directors will be subject to a six-month
deferral period and will be paid in the December following the 30 June financial year end.
Any bonus earned by the chief executive above 100% of base salary and 80% of base salary
for other executive directors will be deferred (normally in shares) for a period of two years.
Recovery and withholding provisions apply in the event of a material misstatement, an act
of gross misconduct or an error in the assessment of performance targets.
Long-term incentive plan
The Rank Group Plc 2010 Long-Term Incentive Plan (LTIP) is currently the only long-term equity-
The long-term incentive plan is intended to
based incentive scheme in place for the executive directors and other senior executives.
align the interests of the executive directors
and shareholders through the creation of
shareholder value over the long term.
Consistent with the structure of the 2014/15 award, it was proposed that there be a single grant of
contingent share awards under the LTIP in 2017/18 to cover four years of annual grants.
Performance is measured over four years (based on targets relating to performance in 2020/21) and
awards vest in three tranches with one third in October 2021, one third in October 2022 and one
third in October 2023.
personal tax obligations).
A holding period applies to the first and second vested tranches to create a five-year period
between grant and the first available opportunity to sell vested awards (save for any sale to settle
A single block award was made to the current directors under the LTIP, in June 2018 to John
O’Reilly and in November 2018 to Bill Floydd. There will be no further grants of long-term incentives
to those directors in the next two financial years (2019/20 and 2020/21).
New employees joining during the life of this Policy may receive an award at or around the time of
joining either on similar terms as the 2017/18 grant or as annual awards of up to 200% of base
salary, and in either case with different performance criteria and a different vesting period provided
that in no case shall an award have a vesting period of less than three years.
An award under this plan may be made to a new director in any year of the three-year policy.
Clawback and malus provisions apply in the event of a material misstatement, an act of gross
misconduct or an error in the assessment of performance targets or in respect of Awards granted
on or after 25 April 2018, a material financial loss to the Group or a material deterioration in Group
profits which is inconsistent with the financial performance of the gaming industry.
Share ownership guideline
To create greater alignment between
Subject to there being sufficient free float, a market standard 200% of base salary guideline will
executives and shareholders.
apply for executive directors.
Governance
Maximum opportunity
Chief executive: 150% of base salary
Other directors: 120% of base salary
The maximum award level for awards granted in 2017/18 has been
set at 600% of base salary for the Chief Executive and 450% of
base salary for the other directors. This is the aggregate maximum
covering four years and the intention was that the maximum award
will be granted in 2017/18 with no further awards being made until
2021/22.
For new directors, a single grant of up to 600% of base salary may
be made in the Policy period. Alternatively, annual awards of up to
200% of base salary per annum may be granted.
Not applicable.
81
Performance metrics
The bonus will be based primarily on the achievement of financial
performance targets and may, from time to time as considered appropriate
by the Committee, include non-financial measures and strategic and/or
personal objectives.
Performance below threshold will result in zero payment. Up to 25% of
the opportunity available may be payable for achieving a threshold level
of performance.
A full description of the performance measures in place and performance
against them will be provided in the Annual Remuneration Report on
a retrospective basis, to the extent they are not considered to be
commercially sensitive.
The Committee retains the discretion, acting fairly and reasonably, to alter the
bonus outcome in light of the underlying performance of the Group or the
individual, taking account of any factors it considers relevant.
For the 2018/19 financial year, the bonus is based primarily on profit-
after-tax targets.
2017/18 award
For awards granted in 2017/18:
i. vesting will be based 40% on earnings per share, 7.5% on digital revenue,
7.5% on digital profit, 7.5% on Grosvenor London revenue and 7.5% on
Grosvenor London profit. The remaining 30% of the award is based
primarily on strategic measures relating to individual business units. The
measures were set out in the notice of general meeting to approve the
Policy. Performance is measured over the four-year period commencing in
2017/18 and ending in 2020/21.
ii. for each financial performance measure (covering 70% of the overall award),
performance below threshold results in zero vesting. 50% of the award may
vest for target performance with 100% vesting for achieving maximum
performance. Vesting occurs on a straight-line basis between target
and maximum.
At the end of the performance period, the Committee will have absolute
discretion to determine the extent to which the awards will vest, if at all,
taking account of underlying Group, individual and share price performance.
The Committee may, in its absolute discretion, adjust upwards or downwards
including to nil the number of shares under an award which would
otherwise vest.
If discretion is applied, the level and reasons for its application will be fully
disclosed in the following year’s Annual Remuneration Report.
If awards are granted in the second and third years of the three-year Policy
period, the Committee will determine measures and targets at the time to
ensure continuing alignment with strategy. Performance targets may relate to
both financial and non-financial measures linked to the Group’s long-term
business strategy, including but not limited to:
• Group or business unit profit;
• Group or business unit revenue;
• return on capital; and
• strategic objectives of the Group.
Not applicable.
Differences in the Policy for
executives relative to the
broader employee population
The Policy in place for the executive directors
is informed by the structure operated for the
broader employee population. Pay levels and
components vary by organisational level but
the broad themes and philosophy remain
consistent across the Group:
• salaries are reviewed annually with regard to
the same factors as those set out in the
Policy table for executive directors;
• members of the executive committee
participate in an annual bonus plan
dependent on profit performance of
the Group. Other members of senior
management participate in the same plan,
dependent on profit performance of the
Group or EBITDA performance of brand,
according to their role and level;
• members of the senior management team
can be considered for awards under the
LTIP. This is intended to encourage share
ownership in the Company and align the
management team with the strategic
business plan; and
• eligibility for and provision of benefits and
allowances varies by level and local market
practice. It is standard for senior executives
to receive a company car allowance.
Pension provision below Board level is
overall at lower contribution rates, with the
majority of the Group’s eligible employees
now being automatically enrolled into the
NEST Workplace Pension Scheme with
contributions in line with legislative
requirements. However, a significant
proportion of employees remain in the
Group’s Retirement Savings Plan, with
contribution levels higher than
mandatorily required.
Directors’ remuneration report continued
Setting of performance
measures and targets
The Committee reviews and selects
performance measures at the beginning of
each award cycle under both the annual bonus
plan and the LTIP, being informed by the
short- and long-term priorities of the Group at
the time. The Committee considers the
Group’s key performance indicators and
strategic business plan when selecting
measures and calibrating targets. The
Committee is aware that targets for both
financial and non-financial measures should be
appropriately stretching yet achievable. Details
of these are included in the annual report each
year. Factors that the Committee may consider
include the strategic plan, the annual budget,
economic conditions, individuals’ areas of
responsibility, the Committee’s expectations
over the relevant period and input from the
major shareholder.
Committee discretion in
operation of variable pay
schemes
The Committee operates under the powers it
has been delegated by the Board. In addition,
it complies with rules that are either subject to
shareholder approval (the LTIP) or approval
from the Board (the annual bonus scheme).
These rules provide the Committee with certain
discretions which serve to ensure that the
implementation of the Policy is fair, both to the
individual director and to shareholders. The
Committee also has discretion to set
components of remuneration within a range,
from time to time. The extent of such discretion
is set out in the relevant rules, the maximum
opportunity or the performance metrics section
of the Policy table above. To ensure the
efficient administration of the variable incentive
plans outlined above, the Committee will apply
certain operational discretions. These include
the following:
• selecting the participants in the plans;
• determining the timing of grants of awards
and/or payments;
• determining the quantum of awards and/or
payments (within the limits set out in the
Policy table above);
• determining the choice of (and adjustment
of) performance measures and targets
for each incentive plan in accordance with
the Policy set out above and the rules of
each plan;
• determining the extent of vesting based on
the assessment of performance and
discretion relating to measurement of
performance in certain events such as a
change of control or reconstruction;
• whether malus and clawback shall be
applied to any award in the relevant
circumstances and, if so, the extent to which
they shall be applied;
• making appropriate adjustments required in
certain circumstances, for instance for
changes in capital structure;
• determining ‘good leaver’ status for incentive
plan purposes and applying the appropriate
treatment; and
• undertaking the annual review of weighting
of performance measures and setting targets
for the annual bonus plan, where applicable,
from year to year.
If an event occurs which results in the annual
bonus plan or LTIP performance conditions
and/or targets being deemed no longer
appropriate (e.g. material acquisition or
divestment or an unforeseen material change
in gaming regulation or taxation which was
unforeseen at the time the measures and
targets were set), the Committee will have the
ability to adjust appropriately the measures
and/or targets and alter weightings, provided
that the revised conditions are not materially
less challenging than the original conditions.
Any use of the above discretion would, where
relevant, be explained in the annual report on
remuneration and may, as appropriate, be the
subject of consultation with the Company’s
major shareholders.
Legacy arrangements
The Committee may approve payments
to satisfy commitments agreed prior to the
approval of this Policy. This includes
previous incentive awards that are currently
outstanding such as the 2014/15 LTIP award.
The Committee may also approve payments
outside of the Policy in order to satisfy legacy
arrangements made to an employee prior to
(and not in contemplation of) promotion to
the Board.
All historic awards that were granted but
remain outstanding are eligible to vest, based
on their original award terms.
82 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Potential reward opportunities at different levels of performance
The graphs below exhibit remuneration policy for existing executive directors and show indicative total remuneration levels under different
performance scenarios: minimum, on-target and maximum. The remuneration policy results in a high proportion of total remuneration being
dependent on performance, with a majority tied to the long-term performance of the Group.
)
s
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
2500
2000
1500
1000
500
0
£2,453
£2,078
£1,328
36%
46%
£578
100%
Min
28%
28%
44%
Trg
36%
31%
28%
Max
23%
Max with 50%
share price
growth for LTI
£348
100%
Min
£678
22%
27%
51%
Trg
£1,008
30%
36%
34%
Max
£1,158
39%
31%
30%
Max with 50%
share price
growth for LTI
Chief executive officer
Chief financial officer
Fixed pay
Annual bonus
Long-term incentives
Minimum: Comprises the value of fixed pay using the current base salary and pension and the value of last year’s benefits.
Target: Minimum plus assumes half of the bonus is earned and the LTIP vests at 50%.
Maximum: Minimum plus assumes full bonus is earned and the LTIP vests in full.
Actual LTIP awards made during 2017/18 to the chief executive and chief financial officer are shown on an annualised basis reflecting no grants
until 2021/22.
Remuneration for appointments
The Committee will apply the existing
Policy to new executive directors in respect of
all components of remuneration. Base salary
and benefits will be set in accordance with the
Policy and relocation assistance may
be provided for both internal and external
appointments, if necessary. In addition, the
maximum level of annual bonus which may be
earned is 150% of base salary for a
chief executive and 120% of base salary for
other executive directors.
New directors may participate in the LTIP and
receive an award of up to 600% of base salary
for a chief executive and 450% of base salary
for other directors. These are the aggregate
limits that may be made over a four-year
period. Annual grants at lower values may be
made as long as the aggregate value over a
four-year period does not exceed the limits set
out above and in the Policy table.
The Committee may also make an additional
award of cash or shares on the appointment of
a new director in order to compensate for the
forfeiture of remuneration from a previous
employer. Such awards would be made on
a comparable basis, taking account of
performance, the proportion of the
performance period remaining and
the type of award. The Committee will set
appropriate performance conditions and
vesting would be on the same time horizon
as the forfeited award.
New non-executive directors will be appointed
on the same remuneration elements as the
existing non-executive directors. It is not
intended that variable pay, day rates or benefits
in kind be offered.
83
Change of control
In the event of a change of control, the
Committee has absolute discretion as to
whether and on what basis awards should vest
under the LTIP. The Committee would
normally allow awards to vest upon a change
of control subject to satisfaction of
performance criteria and reduction on a
time-apportioned basis.
Directors’ remuneration report continued
Approach to termination payments
The Group does not believe in reward for
failure. The circumstances of a director’s
termination (including the director’s
performance) and an individual’s duty to
mitigate losses are taken into account in every
case. Rank’s policy is to stop or reduce
compensatory payments to former executive
directors to the extent that they receive
remuneration from other employment during
the compensation period.
Compensatory payments are limited to
12 months’ base salary, cash car allowance,
and defined pension contributions (or
salary supplements).
Annual bonus awards will normally lapse in
their entirety in the event an individual is no
longer employed or serving their notice period
at the time of pay-out. For certain good leaver
reasons, a bonus may become payable at the
discretion of the Committee.
If the holder of a LTIP award ceases, for any
reason, to be an executive director or
employee of a Group company, that holder’s
LTIP award shall lapse immediately upon them
ceasing to be an executive director or
employee. However, the Committee may in its
absolute discretion allow awards to continue
until the normal vesting date or for vesting to
be accelerated to the date of cessation and in
either case the extent to which that award shall
vest may be subject to the achievement of the
relevant performance conditions and pro-ration
on a time-apportioned basis at the
Committee’s discretion. Any such discretion in
respect of leavers would only be applied by the
Committee to ‘good leavers’ where it considers
that continued participation is justified, for
example, by reference to past performance to
the date of leaving.
Executive directors’ service agreements
It is the Group’s policy that executive directors have rolling service agreements.
The current executive directors’ service contracts contain the key terms shown in the table below:
Provision
Remuneration
Notice period
Termination payment
Restrictive covenants
Detailed terms
• Base salary, pension and benefits
• Cash car allowance
• Private health insurance for director and dependants
• Life assurance
• Permanent health insurance
• Participation in annual bonus plan, subject to plan rules
• Participation in LTIP, subject to plan rules
• 25 days’ paid annual leave, increasing to 30 days with length of service
Six months’ notice from both the Company and the director.
Payment in lieu of notice equal to:
• six months’ base salary
• cash car allowance
• pension supplement
All of the above would be paid in monthly instalments, subject to an obligation on the part of the
director to mitigate his loss such that payments would either reduce, or cease completely, in the
event that the director gained new employment.
During employment and for six months after leaving.
Copies of the executive directors’ service contracts are available for inspection at the Company’s registered office.
Service agreements outline the components of remuneration paid to the individual director but do not prescribe how remuneration levels may be
adjusted from year to year.
Length of service for executive directors who served on the Board during the year, together with the date of their respective service agreements, is
as follows:
Position
Chief executive
Finance director
Managing director, retail
Chief financial officer
Name
John O’Reilly
Clive Jennings
Alan Morgan
Bill Floydd
1. Clive Jennings stepped down from the Board and left the Company on 17 August 2018.
2. Alan Morgan stepped down from the Board and left the Company on 31 July 2019.
3. Bill Floydd was appointed to the Board on 1 May 2019.
84 The Rank Group Plc Annual Report and Financial Statements 2019
Date of contract
30 April 2018
27 July 2011
6 September 2016
12 November 2018
Length of Board service
as at 30 June 2019
1 year 2 months
7 years1
1 year 2 months2
2 months3
Governance
Chairman
The Company separated the role of chairman and chief executive with effect from 6 May 2014.
The chairman, Ian Burke, has a letter of engagement dated 22 April 2014 which is effective from 6 May 2014 and which replaced his service
agreement dated 6 March 2006 in respect of his former role as chief executive. He was initially engaged as non-executive chairman for a
period of three years. His appointment is terminable without compensation on three months’ notice from either side. The chairman receives
an all-encompassing fee which includes his chairmanship of the nominations and finance committees. The fee is reviewed annually by the
Committee, with reference to the size and complexity of the role and external market comparisons, in the final quarter of each calendar year with
any increase taking effect on 1 April. The chairman is not entitled to any benefits in kind and is not eligible for pension scheme membership, bonus
or incentive arrangements.
On 1 May 2019, the Company announced that it had been notified by the chair that he does not intend to stand for re-election at the Company’s
AGM on 17 October 2019 (“2019 AGM”). Following the approval of the Board, Alex Thursby will succeed Ian Burke as chair with effect from
the end of the 2019 AGM. Alex has a letter of engagement dated 21 August 2019, which is effective from 17 October 2019 and will replace
his non-executive director letter of engagement dated 21 June 2017. The terms of his appointment are the same as those that apply to the
current chair.
Policy for non-executive directors
Component
Fees
Purpose and link to business strategy
To attract and retain skilled, high-calibre
individuals to deliver the Group’s strategy.
Maximum
Aggregate annual fees limited to
£750,000 by the Company’s articles of
association.
Current fee levels are set out in the annual
report on remuneration.
Mechanics operation and performance framework
Fees are reviewed in the final quarter of
each calendar year to reflect appropriate
market conditions.
Fee increases, if applicable, are effective
from 1 April the following year.
The base fee includes membership of the
audit, remuneration, nominations and
finance committees.
Non-executive directors are not entitled to
any benefits in kind and are not eligible for
pension scheme membership, bonus or
incentive arrangements.
Non-executive directors have letters of engagement setting out their duties and the time commitment expected. They are appointed for an initial
period of three years, after which the appointment is renewable by mutual consent at intervals of not more than three years. In accordance with the
Code, all directors offer themselves for annual re-election by shareholders. The date of appointment of each non-executive director who served
during the year is set out in the below table. Non-executive director appointments are terminable without compensation.
Non-executive director
Lord Kilmorey
Chris Bell
Susan Hooper
Steven Esom
Alex Thursby
Tang Hong Cheong
Original
Date of
date of appointment
1 May 2012
1 June 2015
1 September 2015
1 March 2016
1 August 2017
15 January 2019
letter of engagement
29 March 2012
5 May 2015
11 August 2015
24 February 2016
21 June 2017
15 January 2019
Total length
of service
as at 30 June 2019
6 years 5 months1
4 years 1 month
3 years 10 months
3 years 4 months
1 year 11 months
5 months
1. Lord Kilmorey did not offer himself for re-election by shareholders at the 2018 AGM and stepped down from the Board on 18 October 2018.
Shareholder engagement
In designing the Policy, the Committee consulted with the majority shareholder and took into account the latest trends in executive pay and good
governance. While the concept of a block award as set out in the Policy is out of line with typical practice in the UK, the Committee took advice from
the majority shareholder who supports this type of structure. The Committee does, however, remain mindful of shareholders’ concerns and will keep
the block award structure under review. The Committee informs major shareholders in advance of any material changes to the Policy and will offer a
meeting to discuss these details, if required.
Statement of consideration of employment conditions elsewhere in the Group
As described in the notes to the Policy table on page 82, the overarching themes of the Policy in place for executive directors are broadly consistent
with those applied to the wider employee population. The Committee is informed of pay and conditions in the wider employee population and takes
this into account when setting senior executive pay.
85
Directors’ remuneration report continued
Annual remuneration report
The directors’ remuneration report has been prepared on behalf of the Board by the Committee, under the chairmanship of Steven Esom.
The Committee has applied the principles of good governance set out in the FRC’s Corporate Governance Code 2016 and, in preparing this report,
has complied with the requirements of the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (the ‘Regulations’). The FRC's Corporate Governance Code 2018 ('2018 Code') does not apply to this report; it will
apply to the Company in respect of its 2019/20 financial year. The Committee will review the remuneration practice during the course of 2019/20
financial year and report on how the new governance requirements and shareholder expectations will be reflected in our practice in the directors’
remuneration report for 2019.
The Company’s external auditor is required to report to shareholders on the audited information contained in this report and to state whether, in its
opinion, it has been prepared in accordance with the Regulations.
Directors’ single remuneration figure (Audited)
The table below presents a single remuneration figure for each director for the years ended 30 June 2019 and 30 June 2018 in respect of
performance during the years ended on those dates:
Pension
Sub-total
Cash bonus
Performance pay (£)
Deferred
bonus
3-year block
LTIP award
vesting
2018/19 total
remuneration
(£)
Sub-total
Salary/fees
2018/19
Executive directors
John O’Reilly
Bill Floydd1
Clive Jennings2
Alan Morgan
Non-executive directors
Chris Bell
Ian Burke
Steven Esom
Susan Hooper
Lord Kilmorey3
Tang Hong
Cheong4
Alex Thursby
500,000
50,000
32,793
375,000
52,500
160,000
57,500
52,468
16,256
n/a
59,000
Fixed pay (£)
Taxable
benefits5
30,864
3,370
3,168
23,590
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Fixed pay (£)
49,464
3,995
6,309
37,567
n/a
n/a
n/a
n/a
n/a
n/a
n/a
580,328
57,365
42,270
436,157
52,500
160,000
57,500
52,468
16,256
0
59,000
0
0
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Salary/fees
Taxable benefits5
Pension
Sub-total
Cash bonus
Deferred bonus
Performance pay (£)
3-year block LTIP
award vesting
2017/18
Executive directors
John O’Reilly
Clive Jennings6
Alan Morgan
Non-executive directors
Chris Bell
Ian Burke
Steven Esom
Susan Hooper
Lord Kilmorey
Alex Thursby
76,282
319,730
55,769
52,500
160,000
57,500
50,000
50,875
52,209
4,268
21,093
3,437
7,536
46,540
5,411
88,086
383,816
64,617
0
10,000
25,675
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
52,500
160,000
57,500
50,000
50,875
52,209
n/a
n/a
n/a
n/a
n/a
n/a
0
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
0
0
n/a
n/a
n/a
n/a
n/a
n/a
580,328
57,365
42,270
436,157
52,500
160,000
57,500
52,468
16,256
0
n/a
59,000
Sub-total
0
10,000
25,675
n/a
n/a
n/a
n/a
n/a
n/a
2017/18 total
remuneration
(£)
88,086
393,816
90,292
52,500
160,000
57,500
50,000
50,875
52,209
1. Bill Floydd was appointed to the Board on 1 May 2019.
2. Unaudited note: Clive Jennings stepped down from the Board on 17 August 2018. He received a 2014/15 LTIP award, which was a ‘block award’ covering three annual awards
with no awards made in 2015/16 and 2016/17, and a performance period ending on 30 June 2017. This structure resulted in a reported LTIP vesting value for 2016/17 once the
performance period had finished with no vesting value in 2017/18 or 2018/19. If this value was spread by reference to the tranches capable of vesting each year, the 2018/19
vesting value would be £80,658 for the finance director (reflecting the third tranche that vested early on 3 December 2018 based on the share price of £1.4153 on the date of
vesting), making his respective 2018/19 total remuneration £122,928.
3. Lord Kilmorey stepped down from the Board on 18 October 2018.
4. Tang Hong Cheong was appointed to the Board on 15 January 2019. He does not receive any payment for his role as a non-executive director.
5. Taxable benefits comprise car allowance, fuel benefit, and life, long-term disability and private medical insurances, as detailed on page 78.
6. Unaudited note: the 2014/15 LTIP award was a ‘block award’ covering three annual awards with no awards made in 2015/16 and 2016/17, and a performance period ending
on 30 June 2017. This structure resulted in a reported LTIP vesting value for 2016/17 once the performance period had finished with no vesting value in 2017/18 or 2018/19.
If this value was spread by reference to the tranches capable of vesting each year, the 2017/18 vesting value would be £148,998 for the finance director (reflecting the
second tranche that vested on 1 December 2018 based on the average share price for the three months to 30 June 2018 of £2.1787), making his respective 2017/18 total
remuneration £542,814.
86 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Non-executive directors receive fees only, details of which are provided on page 86 together with the non-executive chairman’s fees. These
amounts are within the maximum annual aggregate amount of £750,000 currently permitted by the Company’s articles of association.
The aggregate total annual amount received by all directors during the year ended 30 June 2019 is shown below:
Executive directors
Chairman and non-executive directors
Total
2018/191
£1,116,120
£397,724
£1,513,844
2017/182
£1,059,200
£441,004
£1,500,204
1. Unaudited note: Clive Jennings received a 2014/15 LTIP award, which was a ‘block award’ covering three annual awards with no awards made in 2015/16 and 2016/17, and a
performance period ending on 30 June 2017. This structure resulted in a reported LTIP vesting value for 2016/17 once the performance period had finished with no vesting value
in 2017/18 or 2018/19. If this value was spread by reference to the tranches capable of vesting each year, the 2018/19 vesting value would be £80,658 for the finance director
(reflecting the third tranche that vested early on 3 December 2018 based on the share price of £1.4153 on the date of vesting), making his respective 2018/19 total remuneration
£122,928.
2. Unaudited note: the 2014/15 LTIP award was a ‘block award’ covering three annual awards with no awards made in 2015/16 and 2016/17, and a performance period ending on
30 June 2017. This structure resulted in a reported LTIP vesting value for 2016/17 once the performance period had finished with no vesting value in 2017/18 or 2018/19. If this
value was spread by reference to the tranches capable of vesting each year, the 2017/18 vesting value would be £148,998 for the finance director (reflecting the second tranche
that vested on 1 December 2018 based on the average share price for the three months to 30 June 2018 of £2.1787), making his respective 2017/18 total remuneration
£542,814.
Base salary (Audited)
Salaries were subject to a review during the year with any increases applying from the salary review date, 1 April 2019. No increases were awarded
and therefore base salaries remain unchanged.
Chief executive
Chief financial officer
1 April 2019
£500,000
£300,000
1 April 2018
£500,000
–
% change
0%
N/A
Annual bonus plan (Audited)
The bonus for 2018/19 was based primarily on the following challenging profit-after-tax targets. Straight line vesting applies between threshold and
maximum.
Pay-out
PAT
Threshold
(0%)
£57.73m
Target
(50%)
£60.77m
Maximum
(100%)
£66.84m
Actual
£57.70m
Payout
(% of max)
0%
Alan Morgan, managing director, retail, was not eligible for a bonus in respect of the 2018/19 financial year following his notice of resignation in April
2019. Below threshold target performance meant that no payments were made to executive directors under the annual bonus plan on the basis of
these financial measures and, whilst the Committee has discretion under the Policy, acting fairly and reasonably, to alter the bonus outcome in light
of the underlying performance of the Group or an individual, taking account of any factors it considers relevant, no such discretion was exercised in
respect of the 2018/19 financial year.
Long-term incentives (Audited)
The LTIP is currently the only long-term incentive scheme in place for the executive directors and other senior executives. A single LTIP award was
granted on 28 June 2018 to John O’Reilly and Alan Morgan, and on 22 November 2018 to Bill Floydd, based on performance over the four-year
period ending 30 June 2021. The awards made will cover four years of annual grants.
Director
Single award made in 2017/18 and 2018/19
Plan
Date of grant
Number of shares comprised in award
Performance period
Earliest vest date for first instalment1
Vest date for second instalment
Vest date for third instalment
Chief executive
(John O’Reilly)
Managing director,
retail
2010 LTIP
28 June 2018
1,594,387
(Alan Morgan)2
2010 LTIP
28 June 2018
896,843
Chief financial officer
(Bill Floydd)
2010 LTIP
22 November 2018
770,713
1 July 2017 to 30 June 2021
1 October 2021 (33.3%)
1 October 2022 (33.3%)
1 October 2023 (33.4%)
1. The first instalment of Bill Floydd’s LTIP award will vest on 22 November 2021, with the following instalments vesting on the same dates as the other directors.
2. Alan Morgan left the Company on 31 July 2019 and his LTIP award, as set out in this table, lapsed on such date.
87
Directors’ remuneration report continued
70% of the award is subject to financial performance measured over the four financial years to 30 June 2021 with the remaining 30% of the award
based on strategic measures relating to individual business units, as detailed below:
Financial performance targets
Financial performance target
EPS
Digital net gaming revenue
Digital profit
London revenue
London profit
Strategic performance targets
Target
Stretch
Weighting
40%
7.5%
7.5%
7.5%
7.5%
Required
performance
21.9p
£173.9m
£41.3m
£170.3m
£34.7m
Extent of vesting of
applicable part of
award
50%
50%
50%
50%
50%
Required
performance
25.8p or above
£212m or above
£56.9m or above
£183.6m or above
£38.8m or above
Extent of vesting
of applicable part
of award
100%
100%
100%
100%
100%
Strategic performance target
CEO & Corporate Office
Capital value creation
(20%)
Digital division targets
(5%)
Retail division targets
(5%)
Strategic performance target
Digital
Capital value creation
(20%)
Digital division targets
(5%)
Retail division targets
(5%)
Strategic performance target
Retail
Capital value creation
(20%)
Digital division targets
(5%)
Retail division targets
(5%)
Measure
International revenue
Operating margin as a percentage of target
Achievement of the strategic targets for digital
(as set out below)
Achievement of the strategic targets for retail
(as set out below)
Measure
Digital revenue growth
Digital operating margin
Digital operating profit
Percentage of retail to digital customer
crossover
Measure
Retail revenue growth
Retail operating margin
Percentage of retail to digital customer
crossover
Target
Stretch
Required
performance
€85.2m
11.0%
50%
Extent of vesting
of applicable part
of award
50%
50%
50%
Required
performance
€107.0m
12.0%
100%
Extent of vesting
of applicable part
of award
100%
100%
100%
Weighting
10%
10%
5%
5%
50%
50%
100%
100%
Target
Stretch
Required
performance
£159.9m
19.5%
£32.5m
Extent of vesting
of applicable part
of award
50%
50%
50%
Required
performance
£197.3m
22.0%
£44.1m
Extent of vesting
of applicable part
of award
100%
100%
100%
Weighting
10%
10%
5%
5%
10.8%
50%
15.0%
100%
Target
Stretch
Required
performance
£572.0m
13.6%
10.8%
Extent of vesting
of applicable part
of award
50%
50%
50%
Required
performance
£573.4m
13.9%
15.0%
Extent of vesting
of applicable part
of award
100%
100%
100%
Weighting
10%
10%
5%
Retail operating profit
5%
£77.7m
50%
£79.7m
100%
Appointment of Bill Floydd as the chief financial officer
Bill Floydd was appointed as chief financial officer on 12 November 2018 and subsequently to the Board on 1 May 2019. His remuneration package
was approved by the Committee and is in line with the Policy. It comprises an annual salary of £300,000, a pension allowance of 10% of salary (less
lower earnings limit offset), and benefits in line with Policy. Bill is eligible to participate in the Company’s annual bonus, receiving a maximum bonus
opportunity of 120% of salary, and he received an LTIP award of 400% of salary (as compared to a maximum award under the Policy for new
directors of 600%).
Appointment of Tang Hong Cheong as a non-executive director
Tang Hong Cheong was appointed to the Board as a non-executive director on 15 January 2019, as a representative of the Company’s majority
shareholder, Guoco Group Limited, and no fees are payable to Hong Cheong in connection with such appointment.
88 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Historic chief executive pay and TSR chart (unaudited)
The tables below show former and current chief executive total remuneration over the last ten years and their achieved annual variable and long-
term incentive pay awards as a percentage of the plan maximum:
John O’Reilly (from 7 May 2018)
2018/19
2017/18
Henry Birch (from 6 May 2014 until 7 May 2018)
2017/18
2016/17
2015/16
2014/15
2013/14
Ian Burke (until 16 May 2014)
2013/14
2012/13
2011/12
2010
(12 months)
(2 months)
(10 months)
(12 months)
(12 months)
(12 months)
(2 months)
(10.5 months)
(12 months)
(18 months)
(12 months)
Single figure of
total remuneration
580,328
£88,086
Single figure of
total remuneration
£487,006
£886,144
£932,639
£916,010
£81,850
Single figure of
total remuneration
£663,804
£1,267,489
£3,254,0001
£1,083,000
Annual cash
bonus: actual pay
out vs. maximum
opportunity
0%
0%
Annual cash
bonus: actual pay
out vs. maximum
opportunity
0.00%
63.15%
80.00%
87.20%
0.00%
Annual cash
bonus: actual pay
out vs. maximum
opportunity
0.00%
0.00%
40.00%
63.50%
LTIP vesting rates
against maximum
opportunity
n/a
n/a
LTIP vesting rates
against maximum
opportunity
n/a
37.50%
n/a
n/a
n/a
LTIP vesting rates
against maximum
opportunity
0.00%
96.25%
100.00%
0.00%
1. This included an exceptional discretionary bonus equal to 100% of base salary to reward exceptional efforts of the then chief executive in creating additional sustainable long-
term shareholder value via the transformation of the Company’s balance sheet that was paid by three equal instalments in September 2012, April 2013 and December 2013.
The following graph illustrates the Company’s total shareholder return (‘TSR’) performance compared with the FTSE 350 index (excluding
investment trusts) for the ten years to 30 June 2019. The Committee has selected this index as the Company was a constituent of the FTSE 350 for
the entirety of this period.
Total shareholder return
500
400
300
200
100
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Rank Group plc
FTSE 350 (excluding investment trusts)
This graph shows the value, by 30 June 2019, of £100 invested in Rank Group plc on 30 June 2009, compared with the value of £100 invested in the FTSE 350
(excl. investment trusts) Index on the same date.
89
Directors’ remuneration report continued
Benefits
Executive director
John O’Reilly
Bill Floydd
Clive Jennings
Alan Morgan
Company car
£20,000
£2,125
£1,663
£12,750
Other benefits
£10,864
£1,245
£1,505
£10,840
Total benefits paid
£30,864
£3,370
£3,168
£23,590
Leaving arrangements (Audited)
As previously disclosed in last year’s report, Clive Jennings, former finance director, stepped down from the Board and left the business on 17
August 2018 ('Leaving Date'). Clive was subject to a 12-month contractual notice period. However, by agreement with the Company, his
employment terminated on the Leaving Date and he received payment in lieu of his notice period in respect of his base salary, car allowance and
pension contribution salary supplement in monthly instalments, subject to a duty to mitigate. In recognition of his loyalty to, and significant
contribution to the development of, the Company, the Committee exercised its discretion to treat Clive as a good leaver in respect of his right to
receive an annual bonus in respect of 2017/18 financial year and awarded him a bonus of £10,000 (3.13% of salary) to reflect his individual
performance during the year. No annual cash bonus would be payable to Clive for the financial year ending 30 June 2019. Also in recognition of his
loyalty to, and significant contribution to the development of, the Company, the Committee exercised its discretion to treat Clive as a 'good leaver' in
respect of the LTIP award made in 2015 to the extent it was still to vest (being 55% of such award, in two remaining tranches of 30% and 25%),
and to accelerate the vesting of the final tranche of such award such that the remaining two tranches vested together in December 2018. Such
award was not pro-rated, on the basis that the performance period in respect of such award ended on 30 June 2017. The award made in 2018
lapsed on the Leaving Date. Clive has not and will not receive any payment for loss of office. The Committee approved these arrangements, in line
with the Policy.
Lord Kilmorey stepped down from the Board on 18 October 2018. Lord Kilmorey did not receive any payment in lieu of notice or any payment for
loss of office.
Alan Morgan stepped down from the Board and left the business on 31 July 2019. His employment terminated on this date and Alan did not receive
any payment in lieu of notice or any payment for loss of office. His 2017/18 LTIP awards lapsed in full.
The position adopted in relation to such departing directors is, in each case, in accordance with the Policy.
External appointments (Unaudited)
Executive directors are not permitted to take up non-executive directorships outside the Group.
Share ownership guidelines and directors’ interests in shares (Audited)
Increased share ownership guidelines of 200% of salary for all executive directors were approved at the 2018 General Meeting, subject to there
being sufficient free float. Executives will have five years from appointment to build up shareholdings.
Shareholdings of directors of the Company and its subsidiaries are not considered to be in public hands for the purposes of determining the
sufficiency of the percentage of shares in public hands (the ‘free float’) in the context of qualification for a listing on the UKLA’s premium market.
In view of the low level of free float following the completion of Guoco Group Limited’s general offer for Rank in July 2011, the non-executive director
quarterly share purchase programme and the shareholding guidelines for executive directors and other members of the executive committee who
are directors of Rank subsidiary companies were suspended on 14 December 2011. The suspension was lifted on 2 March 2015 when free float
was comfortably in excess of 25% but the guidelines were re-suspended on 22 June 2016 pending a restoration of the Company’s free float to a
higher level. At present, such guidelines remain suspended. For further information with regard to the Company’s free float position, please see
page 97.
90 The Rank Group Plc Annual Report and Financial Statements 2019
Directors’ shareholdings as at 30 June 2019 are set out in the table below:
Name
Non-executive directors
Chris Bell
Ian Burke
Steven Esom
Susan Hooper
Lord Kilmorey
Tang Hong Cheong
Alex Thursby
Executive directors
John O’Reilly
Bill Floydd
Clive Jennings
Alan Morgan3
Governance
Ordinary shares
as at
30 June 2019
Ordinary shares
as at
30 June 2018
Ordinary
shares
as at 30 June 2017
0
579,556
0
0
21,1001
70,000
0
160,000
0
119,0712
0
0
579,556
0
0
21,100
n/a
0
160,000
n/a
119,071
0
0
763,556
0
0
21,100
n/a
n/a
n/a
n/a
62,500
n/a
1. Lord Kilmorey’s shareholding is as at 18 October 2018, when he stepped down from the Board.
2. Clive Jennings’ shareholding is as at 17 August 2018, when he stepped down from the Board.
3. Alan Morgan stepped down from the Board on 31 July 2019.
Dilution limits
The LTIP, being the Company’s only equity-based incentive plan, incorporates the current Investment Association guidelines on headroom which
provide that overall dilution under all plans should not exceed 10% over a 10-year period in relation to the Company’s issued share capital, with a
further limitation of 5% in any 10-year period for executive plans.
The Committee regularly monitors the position and prior to the making of any award considers the effect of potential vesting of awards to ensure
that the Company remains within these limits. Any awards which are required to be satisfied by market-purchased shares are excluded from the
calculations. No treasury shares were held or utilised in the year ended 30 June 2019.
Relative importance of spend on pay (Unaudited)
The table below shows the expenditure and percentage change in overall spend on employee remuneration and distributions paid to shareholders
through the dividend paid in the year and share buybacks.
Overall expenditure on pay
Dividend paid in the year
Share buyback
2018/19
£201.3m
£29.1m
nil
2017/18
£214.3m
£29.1m
nil
Percentage change
(6.1%)
0%
n/a
91
Directors’ remuneration report continued
Statement of change in pay of chief executive compared with other employees (Unaudited)
The table below sets out the chief executive’s base salary, benefits and annual bonus amounts for the year ended 30 June 2019, alongside the
average change in gross earnings for all UK employees across the Group.
Salary
Benefits
Bonus
Gross earnings2
Chief executive
All UK
employees1
12 months to 30
June 2019
£500,000
£30,864
£0
£530,864
Percentage change
(2017/18 vs 2018/19)
0.7%
4.1.%
0.0%
0.9%
Percentage change
(2017/18 vs 2018/19)
n/a
n/a
n/a
-6.87%
1. For the avoidance of doubt ‘all UK employees’ includes the chief executive. Individual compensation elements for the wider employee population are not readily available to
compare separately, hence providing gross earnings as our main comparison metric.
2. Gross earnings exclude insured benefits and pension payments.
Role and remit of the Committee (Unaudited)
The Committee assists the Board in setting the remuneration packages for the Company’s executive directors and other executive
committee members.
The Committee ordinarily has four formally scheduled meetings a year to discuss a rolling agenda of items and additional meetings are convened
as necessary. The Committee’s formal terms of reference are available on Rank’s website at www.rank.com or by written request to the
company secretary.
Committee membership during the year and attendance (Unaudited)
The Committee comprises all the independent non-executive directors. The company secretary acts as secretary to the Committee. Details of all
members during the year are set out below.
The Committee met on four formally scheduled occasions during the year under review and the attendance of its members at such meetings is set
out on page 63.
Committee activity during the year (Unaudited)
Matters discussed by the Committee during the year included the following:
• the ongoing suitability of the remuneration policy;
• shareholder feedback on the annual remuneration report and on remuneration matters following meetings with major shareholders;
• April 2019 fixed pay review;
• 2017/18 and 2018/19 annual bonus payments;
• 2019/20 annual bonus plan structure and targets;
• outcome of the 2014/15 to 2016/17 LTIP grant;
• proposed 2017/18 LTIP strategic targets;
• remuneration of new executive directors and executive committee members appointed during 2018/19;
• arrangements in relation to departing directors;
• corporate governance and regulatory matters;
• executive director shareholding guidelines and the Company’s free float position;
• review and approval of annual remuneration report;
• review and approval of the Company’s gender pay gap report; and
• the Committee’s effectiveness.
Committee membership during the year
Name
Chris Bell
Steven Esom (chair)
Susan Hooper
Alex Thursby
Committee membership since
June 2018
March 2016
September 2015
August 2017
Notes
Steven Esom became Committee chair in March 2016
92 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Advisers to the Committee (Unaudited)
The Committee has access to external information and research on market data and trends from independent consultants. The Committee is
advised by the Executive Compensation practice of Aon plc (‘Aon’), who were appointed as external remuneration advisers to the Committee in
January 2017. Aon is a founder member of the Remuneration Consultants’ Group and complies with its Code of Conduct which sets out guidelines
to ensure that its advice is independent and free of undue influence.
During the year, the Committee requested Aon to advise on all aspects of remuneration practice. Aon also provided the TSR performance graph for
the directors’ remuneration report. Aon was paid fees totalling £55,671 for services provided to the Committee during the year (fees are based on
hours spent). Aon did not provide any other services to the Group during the period under review.
Committee evaluation (Unaudited)
The Committee noted the findings of the externally facilitated committee evaluation exercise, conducted by Lintstock Limited during the financial
year. It concluded that the Committee operates effectively and identified from such findings that the main areas on which it should focus in the
forthcoming year are:
• reviewing executive incentives and reward and considering the extent to which management incentives are, and continue to be, aligned with the
Company’s strategic aims, its long-term sustainable success and the expectations of investors;
• continuing to engage with shareholders; and
• playing its part in supporting the executive to truly embrace diversity and place further focus on the reduction of pay gaps within the business.
Statement of shareholder voting (Unaudited)
The table below shows the voting outcome of the directors’ remuneration policy at the April 2018 General Meeting and the voting outcome for the
2017/18 directors’ remuneration report at the October 2018 Annual General Meeting. Votes are shown both including and excluding the Company’s
majority shareholder:
April 2018 Approval of Directors’ Remuneration Policy
Including majority shareholder
Excluding majority shareholder
1. A vote ‘withheld’ is not a vote in law.
No. of votes
‘For’ and
‘Discretionary’
296,837,071
77,416,850
% of
No. of votes
votes cast
‘Against’
91.41% 27,877,602
73.52% 27,877,602
% of votes cast
Total no. of votes
cast
8.59% 324,714,673
26.48% 105,294,452
% of total
shareholders eligible
to vote
No. of votes
‘Withheld’1
83.11% 35,361,974
61.46% 35,361,974
October 2018 2017/18 Annual Report on Directors’ remuneration
Including majority shareholder
Excluding majority shareholder
1. A vote ‘withheld’ is not a vote in law.
No. of votes
‘For’ and
‘Discretionary’
323,451,489
104,101,268
% of
No. of votes
votes cast
‘Against’
95.56% 15,018,245
87.39% 15,018,245
% of votes cast
Total no. of votes
cast
4.44% 338,469,734
12.61% 119,119,513
% of total
shareholders eligible
to vote
No. of votes
‘Withheld’1
86.64% 36,186,671
69.53% 36,186,671
Following the 2018 Annual General Meeting, the Committee reflected on the voting of its shareholders (excluding the majority shareholder) on the
2017/18 report and, during the year, the senior non-executive director and the chair of the Committee engaged with institutional investors providing
an opportunity to raise any concerns and give further feedback.
93
Directors’ remuneration report continued
Implementation of policy in 2019/20 (Unaudited)
Salaries
Salaries will be reviewed during the year with any changes effective 1 April 2020. Current base salaries are as follows:
• John O’Reilly – £500,000
• Bill Floydd – £300,000
Pension policy
There will be no change to pension arrangements:
• John O’Reilly – 10% of salary (less lower earnings limited offset)
• Bill Floydd – 10% of salary (less lower earnings limited offset)
Annual bonus
The maximum bonus potential for the chief executive is 150% of salary and 120% of salary for the chief financial officer. Performance will continue
to be based on stretching profit-after-tax targets. Disclosure of the targets is considered commercially sensitive and therefore will be disclosed
retrospectively in next year’s report. Any bonus payable in excess of 100% of salary for the chief executive and 80% of salary for the chief
financial officer will be deferred into shares for two years. The remainder will be payable in cash.
Long-term incentive
No awards will be made to existing executive directors in FY 2019/20.
Non-executive director fees
Non-executive director annual base and additional fees effective 1 April 2020 comprise:
Base non-executive annual fee
Audit committee chair
Remuneration committee chair
Safer gambling committee chair
Senior independent director
£50,000
£9,000
£7,500
£3,500
£2,500
94 The Rank Group Plc Annual Report and Financial Statements 2019
Directors’ report
Governance
Directors’ report
The directors present their report together with the audited consolidated financial statements for the year ended 30 June 2019.
The Companies Act 2006 (‘CA 2006’), the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the ‘2008
Regulations’), the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008, the Financial Reporting
Council’s UK Corporate Governance Code (April 2016) (the ‘Code’), the Financial Conduct Authority’s (FCA) Listing Rules (LR) and the FCA’s
Disclosure Rules and Transparency Rules (‘DTR’) contain mandatory disclosure requirements in relation to this annual report in respect of the year
ended 30 June 2019.
The directors’ report should be read in conjunction with the strategic report (which incorporates the operating responsibly section).
Strategic report disclosures – Information that the Board considers to be of strategic importance which would otherwise need to be disclosed in the
directors’ report has been included in the strategic report as permitted by Section 414C(11) of the CA 2006.
References to where that information can be found are provided in the index below.
Information required in the directors’ report which has been disclosed within the strategic report
Business description
Business objectives, strategies and likely future developments
Corporate responsibility: employees and community
Diversity
Dividends
Employment of disabled persons
Stakeholder engagement
Going concern and viability statement
Greenhouse gas emissions
Particulars of important events affecting the Company and its
subsidiary undertakings occurring after the year end
Principal risks and uncertainties
Profits
Research and development
Location in strategic report
Group at a glance
Strategic and key performance indicators
Operating responsibly
Operating responsibly
Chairman’s letter
Operating responsibly
Stakeholder engagement
Risk management
Non-financial information statement
Chairman’s letter
Risk management
Financial review
Our strategy
Disclosures required under LR 9.8.4 R
For the purpose of LR 9.8.4C R, details of the existence of the controlling shareholder relationship agreement, required to be disclosed in
accordance with LR 9.8.4 R, can be found on page 96. There are no other disclosures required under this Listing Rule.
Directors
The directors who served during the period under review are:
Name
Ian Burke
Chris Bell
Steven Esom
Bill Floydd
Susan Hooper
Clive Jennings
Lord Kilmorey
Alan Morgan
John O’Reilly
Tang Hong Cheong
Alex Thursby
Position
Chairman
Senior independent director
Non-executive director
Chief financial officer
Non-executive director
Finance director
Non-executive director
Managing director, retail
Chief executive
Non-executive director
Non-executive director
Notes
Ian Burke will be stepping down from the Board at the forthcoming AGM
Bill Floydd was appointed on 1 May 2019
Clive Jennings stepped down from the Board on 17 August 2018
Lord Kilmorey stepped down from the Board on 18 October 2018
Alan Morgan stepped down from the Board on 31 July 2019
Tang Hong Cheong was appointed on 15 January 2019
Page no
2–3
21-23
26-31
28
11
30
17
49
47
9-11
50-51
42
21-23
95
Directors’ report continued
Incorporation and registered office
The Rank Group Plc is incorporated in England and Wales under company registration number 03140769. Its registered office is at TOR, Saint-
Cloud Way, Maidenhead SL6 8BN.
Stock market listing
The ordinary shares of the Company have been listed on the Official List and traded on the main market of the London Stock Exchange for listed
securities since 7 October 1996 (Share Code: RNK and ISIN: GB00B1L5QH97). This is classified as a premium listing. The share registrar is
Equiniti Limited.
Share capital
The Company’s authorised share capital as at 30 June 2019 was £180m (£180m as at 30 June 2018), divided into 1,296,000,000 ordinary shares
of 138⁄9p each. The ordinary shares are listed on the London Stock Exchange and can be held in certificated or uncertificated form. There were
390,683,521 shares in issue at the period end (390,683,521 as at 30 June 2018), which were held by 9,872 registered shareholders (10,109 as at
30 June 2018).
Distribution of registered shareholders as at 30 June 2019
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 1,000,000
1,000,001 and above
Totals
Total no.
of registered
shareholders
8,433
1,084
127
149
57
22
9,872
% of
holders
85.42
10.98
1.29
1.51
0.58
0.22
Total no.
of shares
1,542,772
2,244,861
890,939
4,711,902
17,201,654
364,091,393
100.00% 390,683,521
% of issued
share capital
0.40
0.57
0.23
1.21
4.40
93.19
100.00%
Significant shareholders
Hong Leong Company (Malaysia) Berhad (‘Hong Leong’), the ultimate parent company of Guoco Group Limited (‘Guoco’), has a controlling interest
in Rank consequent upon the general offer made by its Hong-Kong-listed subsidiary company, Guoco, via its wholly-owned subsidiary, Rank Assets
Limited (then known as All Global Investments Limited), and which completed on 15 July 2011. As at 30 June 2019 and as at the date of this report,
Hong Leong’s interest is held as follows:
• 52.03% – Rank Assets Limited, a wholly-owned subsidiary of Guoco;
• 4.05% – GuoLine Overseas Limited, Guoco’s immediate parent company; and
• 0.06% – HL Management Co Sdn Bhd, a wholly-owned subsidiary of Hong Leong.
Hong Leong Group is a leading conglomerate based in Malaysia with diversified businesses in banking and financial services, manufacturing and
distribution, property development and investments and hospitality and leisure. Further information on the Hong Leong group of companies can
be found at www.hongleong.com.
Guoco is an investment holding company. The principal activities of its subsidiaries and associated companies include investment,
property development, financial services and hospitality and leisure. Further information on the Guoco group of companies can be found at
www.guoco.com.
On 10 November 2014 Rank entered into an agreement with Hong Leong and Guoco (together the ‘Controlling Shareholder’) in accordance
with the requirements of LR 9.2.2A R(2)(a) (the ‘Relationship Agreement’). During the period under review Rank has complied with the
independence provisions included in the Relationship Agreement and, so far as Rank is aware, the independence provisions included in the
Relationship Agreement have been complied with during the period under review by the Controlling Shareholder and its associates. So far as
Rank is aware, the procurement obligations included in the Relationship Agreement have been complied with during the period under review by
the Controlling Shareholder.
96 The Rank Group Plc Annual Report and Financial Statements 2019
Governance
Interests of 3% or more
As at 30 June 2019 and 31 July 2019 the following interests of 3% or more of the total voting rights attached to ordinary shares have been
disclosed in response to Section 793 of the CA 2006 notices issued by the Company.
Shareholder
Hong Leong Co. (Malaysia) Berhad
Ameriprise Financial, Inc. and its group of companies
(Threadneedle Retail Funds – Linked Strategies)
Prudential plc and subsidiary companies
JO Hambro Capital Management
Aberforth Partners
As at 30 June 2019
As at 31 July 2019
% held
Voting rights
56.15% 219,350,221
% held
Voting rights
56.15% 219,350,221
9.38%
7.68%
4.69%
3.63%
36,658,987
30,015,345
18,340,686
14,179,442
9.39%
7.67%
4.70%
3.72%
36,683,651
29,969,167
18,356,026
14,530,176
The following interests of 3% or more of the total voting rights attached to ordinary shares have been notified to the Company in accordance with
the FCA’s DTRs. Due to the fact that the DTRs only require notification where the percentage voting rights reach, exceed or fall below 3% and each
1% threshold above 3%, there is a difference between disclosures made pursuant to the DTRs and those disclosed in response to Section 793 of
the CA 2006 notices issued by the Company as set out above.
Shareholder
Hong Leong Co. (Malaysia) Berhad
Ameriprise Financial, Inc. and its group of companies
Prudential plc and subsidiary companies
Artemis Investment Management LLP
Date last notified
under DTR
28 July 2015
10 Dec 2015
9 Mar 2012
31 May 2017
As per FCA DTRs disclosures
as at 21 August 2019
% held
Voting rights
56.09% 219,120,221
29,870,389
22,878,293
19,287,793
7.65%
5.85%
4.94%
Under Listing Rule 6.1.19 R, shares held by persons who have an interest in 5% or more of a listed company’s share capital are not regarded as
being in public hands (the ‘free float’). Under this rule, the shares held by Hong Leong, Ameriprise and Prudential are not regarded as being in public
hands. The Company’s free float position as at 30 June 2019 was 26.15%.
Rights and restrictions attaching to shares
Voting rights
Each ordinary share carries the right to one vote at General Meetings of the Company.
Meeting rights
Registered holders of ordinary shares are entitled to attend and speak at General Meetings and to appoint proxies.
Information rights
Holders of ordinary shares are entitled to receive the Company’s annual report and financial statements.
Share transfer restrictions
There are no specific restrictions on the transfer of shares contained in the Company’s articles of association.
The Company is not aware of any agreements between the holders of Rank shares that may result in restrictions on the transfer of shares or that
may result in restrictions on voting rights.
Variation of rights
Subject to applicable legislation, the rights attached to Rank’s ordinary shares may be varied with the written consent of the holders of at least three-
quarters in nominal value of those shares, or by a special resolution passed at a general meeting of the ordinary shareholders.
97
Directors’ report continued
Directors’ powers in relation to shares
Allotment and issue of shares
Subject to the provisions of the CA 2006, and subject to any resolution passed by the Company pursuant to the CA 2006 and other shareholder
rights, shares in Rank may be issued with such rights and restrictions as the Company may by ordinary resolution decide. If there is no such
resolution or so far as the Company does not make specific provision, they may be issued as Rank’s Board may decide. Subject to the Company’s
articles of association, the CA 2006 and other shareholder rights, unissued shares are at the disposal of the Board.
The Company currently has no shareholder authority to allot and grant rights over any proportion of the Company’s unissued share capital, nor does
it have shareholders’ authority to allot and grant rights over ordinary shares without first making a pro rata offer to all existing ordinary shareholders.
Neither of these authorities is required for the purpose of allotting shares pursuant to employee share schemes. Since the Board has no present
intention of allotting shares for any other reason, these shareholder authorities will not be sought at the forthcoming AGM.
Market purchases of own shares
The Company currently has shareholder authority to make market purchases of its own shares to a maximum of 39,068,352 ordinary shares, which
power applies until the end of the forthcoming AGM. As the Board has no present intention of making a market share purchase of its own shares,
this shareholder approval will not be sought at the forthcoming AGM.
Directors’ other powers
Subject to legislation, the directors may exercise all the powers permitted by the Company’s memorandum and articles of association. A copy of
these can be obtained by writing to the company secretary, or from Companies House.
Change of control
The Company’s principal term loan and credit facility agreements contain provisions that, on a change of control of Rank, immediate repayment can
be demanded of all advances and any accrued interest.
The provisions of the Company’s share schemes and incentive plans may cause options and awards granted to employees to vest in the event of
a takeover.
A change of control may also affect licences to operate, as specified in the provisions of the Gambling Act 2005, Alderney eGambling Regulations
2009 (as amended), the Belgian Games of Chance Act 1999 (as amended) and the Spanish Gaming Act 2011.
Political donations
No political donations were made during the period under review.
It has been Rank’s long-standing practice not to make cash payments to political parties and the Board intends that this will remain the case.
However, the CA 2006 is very broadly drafted and could catch activities such as funding seminars and other functions to which politicians are
invited, supporting certain bodies involved in policy review and law reform and matching employees’ donations to certain charities. Accordingly, as in
previous years, the directors will be seeking shareholders’ authority for political donations and political expenditure at the forthcoming annual general
meeting in case any of Rank’s activities are inadvertently caught by the legislation.
Disclosure of information to auditor
Each of the directors of the Company at the date of this report confirms that:
• so far as the director is aware, there is no information needed by the Company’s auditor in connection with preparing their report of which the
Company’s auditor is unaware; and
• he (she) has taken all the steps that he (she) ought to have taken as a director in order to make himself (herself) aware of any information needed
by the Company’s auditor in connection with preparing their report and to establish that the Company’s auditor is aware of that information.
By order of the Board
Luisa Wright
Company Secretary
21 August 2019
98 The Rank Group Plc Annual Report and Financial Statements 2019
Directors’ responsibilities
Governance
Directors’
responsibilities
Annual report and
financial statements
The directors are responsible for preparing the
annual report (including the directors’ report,
the strategic report, the directors’ remuneration
report and the corporate governance
statement) and the financial statements of the
Group and the Company, in accordance with
applicable United Kingdom law and
regulations. Company law requires the
directors to prepare Group and Company
financial statements for each financial year.
Under that law, the directors are required to
prepare Group financial statements under
IFRSs as adopted by the European Union. As
permitted by the Companies Act 2006, the
directors have elected to prepare the Company
financial statements under IFRSs as adopted
by the European Union. Under company law
the directors must not approve the Group and
Company financial statements unless they are
satisfied that they give a true and fair view of
the state of affairs of the Group and Company
and of the profit or loss of the Group for that
period. In preparing the Group and Company
financial statements, the directors are
required to:
• present fairly the financial position, financial
performance and cash flows of the Group
and Company;
• select suitable accounting policies in
accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
and then apply them consistently;
• present information, including accounting
policies, in a manner that provides
relevant, reliable, comparable and
understandable information;
• make judgements that are reasonable;
• provide additional disclosures when
compliance with the specific requirements in
IFRSs as adopted by the European Union is
insufficient to enable users to understand the
impact of particular transactions, other
events and conditions on the Group and
Company’s financial position and final
performance; and
• state whether the financial statements have
been prepared in accordance with IFRSs as
adopted by the European Union, subject to
any material departures disclosed and
explained in the financial statements.
Accounting records
The directors must keep proper accounting
records that disclose with reasonable
accuracy, at any time, the financial position
of the Company and the Group and ensure
that the Group financial statements comply
with the Companies Act 2006 and, for the
Group financial statements, Article 4 of
the International Accounting Standard
(IAS) Regulation.
Safeguarding assets
The directors are also accountable for
safeguarding the assets of the Company
and the Group and, therefore, for taking
reasonable steps to prevent and detect fraud
and other irregularities.
Corporate website
The maintenance and integrity of Rank’s
corporate website, on which this annual
report and financial statements are published,
is the Board’s responsibility. We would draw
attention to the fact that legislation in the
UK on the preparation and publication of
financial statements may differ from that in
other jurisdictions.
Statement of
directors’ responsibilities
The annual report and financial statements are
the responsibility of, and have been approved
by, the directors.
Each of the directors named on pages 58
and 59 confirms that to the best of his/
her knowledge:
• the annual report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Group’s performance, business model
and strategy;
• the financial statements, prepared in
accordance with International Financial
Reporting Standards as adopted by the
European Union, give a true and fair view of
the assets, liabilities, financial position and
profit of the Company and the undertakings
included in the consolidation taken as a
whole; and
• the strategic report includes a review of the
development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the risks and
uncertainties that they face.
On behalf of the Board
John O’Reilly
Chief Executive
Bill Floydd
Chief Financial Officer
21 August 2019
99
Financial statementsIndependent auditor’s report102Group income statement110Group statement of comprehensive income111Balance sheets112Statements of changes in equity113Statements of cash flow114Notes to the financial statements115Unaudited appendix to the financial statementsFive year review157Other informationShareholder information158SolutionsChange can be difficult, especially when it comes quickly. Our task was to introduce a more efficient and effective operating model to Grosvenor’s casinos that would be better aligned to serving our customer’s needs. This meant changing the way people worked – especially managers – and reducing the size of the teams. Maintaining the quality of service to customers throughout the change was a top priority and we carried out weekly reviews of results and sought customer feedback. Everyone in our team had a defined role and responsibilities. Project meetings were open and honest and we encouraged a high level of challenge. We worked closely with our casino teams to understand risks, issues and local requirements in order to make sure the end result was sustainable.The programme was completed in January 2019 and delivered £8.2m of cost savings in the second half, exceeding our year 1 target.Moving forward we’ll continue to monitor the new operating model and where required amend and alter to ensure our customer’s changing needs are met.“People were front and centre of the project – whether that was team members, employees within the business or customers. We had a real sense of urgency and focus on results, but always had empathy and consideration. We’re very proud of what we delivered despite the difficult subject matter and the impact on our colleagues.”Debbie HusbandNational Operations Director, Grosvenor casinos Independent auditors report
To the members of the
Rank Group Plc
Opinion
In our opinion:
• The Rank Group Plc’s Group financial
statements and parent company financial
statements (the “financial statements”) give a
true and fair view of the state of the Group’s
and of the parent company’s affairs as at
30 June 2019 and of the Group’s profit for
the year then ended;
• the Group financial statements have been
properly prepared in accordance with IFRSs
as adopted by the European Union;
• the parent company financial statements
have been properly prepared in accordance
with IFRSs as adopted by the European
Union as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006, and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements of
The Rank Group Plc which comprise:
Parent company
• Balance sheet as
at 30 June 2019
• Statement of
changes in
equity for the
year then ended
• Statement of
cash flows for
the year then
ended
• Related notes 1
to 34 to the
financial
statements
including a
summary of
significant
accounting
policies
Group
• Balance sheet as at
30 June 2019
• Group income
statement for the
year then ended
• Group statement of
comprehensive
income for the year
then ended
• Statement of
changes in equity for
the year then ended
• Statement of cash
flow for the year then
ended
• Related notes 1 to
34 to the financial
statements,
including a summary
of significant
accounting policies
The financial reporting framework that has
been applied in their preparation is applicable
law and International Financial Reporting
Standards (IFRSs) as adopted by the European
Union and, as regards the parent company
financial statements, as applied in accordance
with the provisions of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the Auditor’s responsibilities for the audit of the
financial statements section of our report
below. We are independent of the group and
parent company in accordance with the ethical
requirements that are relevant to our audit of
the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to
principal risks, going concern
and viability statement
We have nothing to report in respect of the
following information in the annual report, in
relation to which the ISAs(UK) require us to
report to you whether we have anything
material to add or draw attention to:
• the disclosures in the annual report set out
on pages 50 to 51 that describe the principal
risks and explain how they are being
managed or mitigated;
• the directors’ confirmation set out on page
49 in the annual report that they have carried
out a robust assessment of the principal
risks facing the entity, including those that
would threaten its business model, future
performance, solvency or liquidity;
• the directors’ statement set out on page 49
in the financial statements about whether
they considered it appropriate to adopt the
going concern basis of accounting in
preparing them, and their identification of
any material uncertainties to the entity’s
ability to continue to do so over a period of
at least twelve months from the date of
approval of the financial statements
• whether the directors’ statement in relation
to going concern required under the Listing
Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit; or
• the directors’ explanation set out on page 49
in the annual report as to how they have
assessed the prospects of the entity, over
what period they have done so and why they
consider that period to be appropriate, and
their statement as to whether they have a
reasonable expectation that the entity will be
able to continue in operation and meet its
liabilities as they fall due over the period of
their assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.
Overview of our audit approach
Key audit matters • Impairment of tangible
and intangible assets
and adequacy of
property lease
provisions
• Indirect tax risk
exposure
• Exceptional items
• Revenue recognition
including the risk of
management override
• Compliance with laws
and regulations
Audit scope
• We performed an audit
of the complete financial
information of 6
components and audit
procedures on specific
balances for a further 17
components.
• The components where
we performed full or
specific audit
procedures accounted
for 98% (2017/18:99%)
of Profit before tax
adjusted for exceptional
items, 100% (2017/18:
100%) of Revenue and
99% (2017/18: 100%)
of Total Assets.
Materiality
• Overall group
materiality of
£3.4million which
represents 5% of profit
before tax adjusted for
exceptional items.
102 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
Changes from the prior year
Our key audit matters remain largely unchanged from the prior year except for the inclusion of a specific consideration relating to an ongoing
enquiry from HMRC. This has been considered as part of our existing key audit matter relating to compliance with laws and regulations.
Risk
Impairment of tangible and intangible
assets and adequacy of property
lease provisions
Refer to the Audit Committee Report (page
68); Accounting policies (page 120); and
Note 4 of the Consolidated Financial
Statements (page 128)
At 30 June 2019 the carrying value of
tangible and intangible assets was £609.3
million (2017/18: £630.6 million), £397.8
million of which relate to indefinite life
intangible assets (primarily casino and other
gaming licences) and goodwill.
Impairment of tangible and
intangible assets
This is an area of focus due to the
significance of the carrying value of the
assets being assessed and due to the level
of management judgement required in the
assumptions impacting the impairment
assessment. The main assumptions are the
future results of the business including future
cash flows, normalised earnings, growth
rates and earnings multiples applied to cash
flows as well as discount rates.
In the current year, owing to a sustained
decline in performance at certain CGUs, an
impairment charge of £11.1 million (£2.0m in
relation to tangible assets and £9.1m to
intangible assets) was recognised.
Our response to the risk
Overall Group level:
We updated our understanding of management’s annual
impairment testing process.
We validated that the methodology of the impairment
exercise continues to be consistent with the requirements of
IAS 36 Impairment of Assets. We also confirmed the
mathematical accuracy of the models.
The audit team focussed on the key judgements used by
management and work performed in conducting their
impairment review and challenged the conclusions reached.
Key observations communicated to the
Audit Committee
The impairment charge of £11.1
million is appropriately determined.
We highlighted that a reasonably
possible change in certain key
assumptions, including the
normalisation of earnings, future
cash flows, growth rates and
earnings multiples underpinning
the forecasts for certain CGUs,
could lead to additional
impairment charges.
Below we summarise the procedures performed in relation to
the key judgements for the tangible and intangible assets
impairment review.
• We analysed management’s forecasts underlying the
impairment review against current performance and
economic forecasts and corroborated them to budgets
approved by the Board. We assessed the budgets against
current performance thus providing support that the
forecasts utilised are reasonable and align with
expected results.
• Critically challenged management’s historical accuracy of
forecasting through comparing prior year actual
performance against forecast performance and
corroborating the reasons for deviations. Assessed the
adjustments made for normalisation of earnings,
comparing the adjustment for forecast win margin to
historic averages and industry data.
• We also performed sensitivity analysis on earnings
multiples for all CGUs and growth rates applied to cash
flows for certain CGUs to determine the parameters that
– should they arise – may give a different conclusion as to
the carrying values of assets assessed.
In addition, we worked with our EY internal corporate
finance valuation specialists to:
• Validate and corroborate the discount rates to
supporting evidence and corroborated these to industry
averages/trends.
• Independently calculated the discount rates and
compared them to the discount rates applied in the
models by management.
Additional procedures performed at each CGU level:
We compared the individual CGU projections to historic
performance and observable external trends and
corroborated the reasons for deviations with third party
evidence as appropriate. We also reperformed calculations in
the models to check mathematical accuracy.
103
Independent auditors report continued
Risk
Property lease provisions
In addition, the Group holds a provision for
property leases of £33.5 million (2017/18: £36
million) for unoccupied properties and
properties that are trading at a loss.
In determining the appropriate level of provision
required, management judgement is required in
assessing whether the costs provided
represent the lower of the cost of fulfilling the
contract and any compensation or penalties
arising from failure to fulfil the contract.
There is further judgement in relation to the
amount of sub-let income and the period for
which sub-let income can be obtained where
properties are vacant or the extent to which
lease obligations are covered by
earnings generated.
We therefore consider there is a higher
likelihood that a material misstatement could
arise as there is a risk that these provisions
may be measured incorrectly.
In accordance with IAS 37, management
recognised a net charge of £1.4 million for
additional provisions.
Indirect tax risk exposure (£180.4 million
contributed to indirect taxes, 2017/18:
£177 million)
Refer to the Audit Committee Report (page 69);
Accounting policies (page 122); and Note 6 of
the Consolidated Financial Statements (page
131)
Indirect tax is a complex area in the betting and
gaming industry, specifically with reference to
VAT relating to Partial exemption, Gaming
Duty, Remote Gaming Duty, Bingo Duty and
other indirect duties. We focus on this to
confirm that all changes in legislation and rates
levied have been applied correctly.
Given the judgement involved in estimating
amounts payable to regulatory authorities in
certain jurisdictions there is a risk that
additional liabilities are not identified and thus
amounts recorded related to indirect taxation
are understated.
Key observations communicated to the
Audit Committee
We concluded that the property
provisions recognised are
appropriate.
Our response to the risk
Procedures in relation to Property lease provisions:
We understood management’s process for identifying
onerous leases and validated that the inputs to the
calculations for onerous lease provisions were appropriate.
Below we summarise the procedures performed in relation to
the key judgements and validation of inputs:
• Verified underlying calculations and agreed key inputs to
third party evidence, including lease agreements and
invoices for rent and rates.
• Assessed the length of the period and recoverability of
sub-let income included in the provision.
• Compared forecast earnings per CGU to historic
performance, to determine whether appropriate provision
had been made.
• Assessed whether the appropriate discount rate had been
applied by validating the discount rate against external
market data.
We concluded that the positions
taken by management are
reasonable and that the Group’s
indirect tax exposures are
appropriately measured and
disclosed in the financial results.
• We updated our understanding of the process for
preparing the partial exemption calculation and assessed
the controls that management has in place to prevent and
detect errors in this calculation.
• We worked with our EY indirect taxation specialists to
assist us in assessing the technical analysis to support the
indirect tax submissions.
• To corroborate management’s position and assess
completeness in relation to uncertain tax positions, we
reviewed correspondence received from tax authorities
during the period. We have further involved our specialists
in assessing the implications of matters subject to
correspondence received from tax authorities.
• We performed a completeness review of effected changes
in indirect tax legislation and discussed all changes with
management to confirm that they had been considered
appropriately and, where relevant, properly reflected within
the financial statements.
104 The Rank Group Plc Annual Report and Financial Statements 2019
Risk
Exceptional items (£33.5 million, 2017/18:
£26.9 million)
Refer to the Audit Committee Report (page 68);
Accounting policies (page 122); and Note 4 of
the Consolidated Financial Statements (page
128)
The application of the Group’s accounting
policy for exceptional items requires judgement
by management and careful consideration
needs to be given to the nature and magnitude
of these items to ensure consistency in
approach between periods.
In the current year management have
recognised a net exceptional charge of £25.5
million comprising of a net impairment charge
of £11.1 million, transformation costs of £10.8
million, £8m pay provision, net charge for
property provisions of £1.4 million and
acquisition related costs of £2.2 million.
Revenue recognition (£695.1m, 2017/18:
£691m)
Refer to the Audit Committee Report (page 69);
Accounting policies (page 116); and Note 2 of
the Consolidated Financial Statements (page
125)
Our assessment is that the majority of revenue
transactions, for both the venues and digital
businesses, are non-complex, with no
judgement applied over the amount recorded.
We consider there is a potential for
management override to achieve revenue
targets via topside manual journal entries
posted to revenue.
Revenue could be stated inaccurately as
a result.
Financial statements
Our response to the risk
We agreed material exceptional items to supporting
documentation.
We also validated that the exceptional items are
appropriately classified as such in accordance with the
Group’s accounting policy.
We also performed an assessment of costs that had been
included within the exceptional transformation charge to
validate that they were directly associated to the
transformation programme and therefore classified
appropriately as an exceptional item.
Key observations communicated to the
Audit Committee
Exceptional items have been
disclosed appropriately in
accordance with the Group’s
accounting policy.
We concluded that revenue, and
adjustments to revenue, are
appropriately recognised
and recorded.
Our procedures were designed to corroborate our
assessment that revenue should be correlated closely to
cash banked (for the Retail business), and to customer
balances and cash (for the Digital business), and to
identify the manual adjustments that are made to revenue
for further testing.
We updated our understanding of the revenue processes
and tested certain key financial and IT controls over the
recognition and measurement of revenue.
• We used our computer aided analytics tools to perform a
correlation analysis to identify those revenue journals for
which the corresponding entry was not to cash (for Retail)
and customer balances (for Digital). These entries included
customer incentives, bingo duty and jackpot provisions.
• We obtained corroborating evidence for such entries. We
agreed material bingo duty entries to declarations and
bank statements. For material customer incentives we
obtained evidence that revenue was deferred correctly.
• We also verified the recognition and measurement of
revenue by tracing a sample of transactions, selected at
random throughout the year, to cash banked to verify the
accuracy of reported revenue.
• For venues, we attended and re-performed cash counts at
a sample of twenty-eight casino and bingo venues,
selected using a risk-based approach and also included a
random sample, at year end to verify the appropriate
cut-off of revenue.
• For Digital, we reconciled the year-end customer balances
to the system report, which was tested for completeness
and accuracy.
105
Independent auditors report continued
Key observations communicated to the
Audit Committee
We concluded that management
have appropriately assessed and
recorded the financial
implications for non-compliance
with laws and regulations.
Risk
Compliance with laws and regulations
Refer to the Audit Committee Report (page 68);
Accounting policies (page N/A); and Note N/A
of the Consolidated Financial Statements
(page N/A)
The legal and licensing framework for gaming
remains an area of focus for the Gambling
Commissions in the UK and Spain.
The evolving environment, with territory specific
regulations, makes compliance an increasingly
complex area with the potential for fines and or
licence withdrawal for non-compliance.
Operators are further required to meet
anti-money laundering obligations.
In addition, HMRC has opened an enquiry
relating to payroll matters which, given the
magnitude of payroll costs for this business,
heightens the risk in this area.
Our response to the risk
We have understood the Group’s process and related
controls over the identification and mitigation of regulatory
and legal risks and the related accounting.
We reviewed regulatory correspondence and enquiries made
through the year, management’s response thereto and their
assessment of potential exposure as at 30 June 2019.
We inquired of management and the Group’s internal legal
counsel regarding any instances of material breaches in
regulatory or licence compliance that needed to be disclosed
or required provisions to be recorded.
Where provisions have been raised, including the pay
provision relating to HMRC’s investigation into payroll
matters, we have assessed management’s best estimate for
the provisions against available external and internal support,
involving EY internal specialists as appropriate.
An overview of the scope of
our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for each
entity within the Group. Taken together, this
enables us to form an opinion on the
consolidated financial statements. We take into
account size, risk profile, the organisation of
the group and effectiveness of group-wide
controls, changes in the business environment
and other factors such as recent Internal audit
results when assessing the level of work to be
performed at each entity.
In assessing the risk of material misstatement
to the Group financial statements, and to
ensure we had adequate quantitative coverage
of significant accounts in the financial
statements, of the thirty-five reporting
components of the Group, we selected
twenty-three components covering entities
within the United Kingdom, Alderney, Spain,
Belgium and Gibraltar, which represent the
principal business units within the Group.
Of the twenty-three components selected, we
performed an audit of the complete financial
information of six components (“full scope
components”) which were selected based on
their size or risk characteristics. For the
remaining seventeen components (“specific
scope components”), we performed audit
procedures on specific accounts within that
component that we considered had the
potential for the greatest impact on the
significant accounts in the financial statements,
either because of the size of these accounts or
their risk profile.
Of the remaining twelve components that
together represent 2% of the Group’s profit
before tax adjusted for exceptional items, none
is individually greater than 1.5% of the Group’s
profit before tax adjusted for exceptional items.
For these components, we performed other
procedures, including analytical review,
testing of consolidation journals, intercompany
eliminations and foreign currency translations
to respond to any potential risks of material
misstatement to the Group financial
statements.
106 The Rank Group Plc Annual Report and Financial Statements 2019
The remaining eight specific components
contributing 4% of Profit before tax adjusted
for exceptional items, 5% of revenue and 5%
of total assets are based in Spain where the
work was performed by component auditors.
In relation to the specific scope components,
the Senior Statutory Auditor was also involved
in the risk assessment and determining which
accounts were in scope.
For the Enracha and YoBingo components, in
addition to location visits, the Group audit team
interacted with the component audit teams
regularly during the various stages of the audit,
reviewed the summary audit findings reported
by the component audit teams, participated in
the component team’s close meeting and
made specific enquiries of local management.
Our application of materiality
We apply the concept of materiality in planning
and performing the audit, in evaluating the
effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement
that, individually or in the aggregate, could
reasonably be expected to influence the
economic decisions of the users of the financial
statements. Materiality provides a basis for
determining the nature and extent of our
audit procedures.
We determined materiality for the Group to be
£3.4 million (2017/18: £3.7 million), which is
5% (2017/18: 5%) of profit before tax adjusted
for certain exceptional items, as listed below.
We consider this to be the most relevant
performance measure to stakeholders and is
the primary measure of earnings.
We determined materiality for the Parent
Company to be £7.4 million
(2017/18: £7.8 million), which is 1%
(2017/18: 1%) of equity. The Parent Company
has a higher materiality than the Group as the
basis of determining materiality are different.
The Parent Company is a non-trading entity
and as such, equity is the most relevant
measure to the stakeholders of the entity.
The charts below illustrate the coverage
obtained from the work performed by our
audit teams.
Total revenue
Coverage CY/(PY)
Full scope components
Specific scope components
Review scope components
89% (91%)
11% (9%)
-% (-%)
Total assets
coverage CY/(PY)
Full scope components
Specific scope components
Review scope components
72% (75%)
27% (25%)
1% (-%)
Total profit before
Tax adjusted for
exectional items
coverage CY/(PY)
Full scope components
Specific scope components
Review scope components
59% (63%)
39% (36%)
2% (1%)
Changes from the prior year
Our scoping remains unchanged from the
prior year.
Integrated team structure
In establishing our overall approach to the
Group audit, we determined the type of work
that needed to be undertaken at each of the
components by us, as the primary audit
engagement team, or by component teams
under our instruction. Of the six full scope
components, audit procedures were performed
on all six of these directly by the primary audit
team. For the seventeen specific scope
components, specific audit procedures were
performed directly by the audit team for nine of
these components.
Financial statements
Starting Basics
Profit before tax for the year ended 30 June 2019 –
£34.6 million
Adjustments
• Impairment charge – £11.1 million
• Net charge from onerous leases – £1.4 million
• Group restructuring costs – £10.8 million
• Pay provision – £8.0 million
• Other financial costs – £1.6 million
• Acquisition costs – £2.2 million
Materiality
• Profit before tax adjusted for exceptional items
(basis for materiality) – £69.7 million
• Materiality (5% of profit before tax adjusted for
exceptional items) – £3.4 million.
Performance materiality
The application of materiality at the individual
account or balance level. It is set at an amount
to reduce to an appropriately low level the
probability that the aggregate of uncorrected
and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together
with our assessment of the Group’s overall
control environment, our judgement was that
performance materiality was 50%
(2017/18: 50%) of our planning materiality,
namely £1.7m (2017/18: £1.9m). We have set
performance materiality at this percentage to
take into account the inherently high-risk
nature of the industry in which the Group
operates. We have also taken into
consideration changes within the Group and
the impact this could have on the operations of
the Group. Our objective in adopting this
approach was to conclude that undetected
audit differences in all accounts did not exceed
our planning materiality level.
Audit work at component locations for the
purpose of obtaining audit coverage over
significant financial statement accounts is
undertaken based on a percentage of total
performance materiality. The performance
materiality set for each component is based on
the relative scale and risk of the component to
the Group as a whole and our assessment of
the risk of misstatement at that component. In
the current year, the range of performance
materiality allocated to components was
£0.3 million to £0.9 million (2017/18: £0.4m
to £1.0m).
107
Independent auditors report continued
Reporting threshold
An amount below which identified
misstatements are considered as being
clearly trivial.
We agreed with the Audit Committee that we
would report to them all uncorrected audit
differences in excess of £0.2m
(2017/18: £0.2m), which is set at 5% of
planning materiality, as well as differences
below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements
against both the quantitative measures of
materiality discussed above and in light of
other relevant qualitative considerations in
forming our opinion.
Other information
The other information comprises the
information included in the annual report set
out on pages 1 to 99, including the five year
review and the shareholder information, other
than the financial statements and our auditor’s
report thereon. The directors are responsible
for the other information.
Our opinion on the financial statements does
not cover the other information and, except to
the extent otherwise explicitly stated in this
report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the
other information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements or
our knowledge obtained in the audit or
otherwise appears to be materially misstated. If
we identify such material inconsistencies or
apparent material misstatements, we are
required to determine whether there is a
material misstatement in the financial
statements or a material misstatement of the
other information. If, based on the work we
have performed, we conclude that there is a
material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report
in regard to our responsibility to specifically
address the following items in the other
information and to report as uncorrected
material misstatements of the other information
where we conclude that those items meet the
following conditions:
• Fair, balanced and understandable set
out on page 99 – the statement given by
the directors that they consider the annual
report and financial statements taken as a
whole is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the group’s
performance, business model and strategy,
is materially inconsistent with our knowledge
obtained in the audit; or
• Audit committee reporting set out on
page 65 – the section describing the work
of the audit committee does not
appropriately address matters
communicated by us to the audit committee;
or
• Directors’ statement of compliance with
the UK Corporate Governance Code set
out on page 55 – the parts of the directors’
statement required under the Listing Rules
relating to the company’s compliance with
the UK Corporate Governance Code
containing provisions specified for review by
the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK
Corporate Governance Code.
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, the part of the directors’
remuneration report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken
in the course of the audit:
• the information given in the strategic report
and the directors’ report for the financial year
for which the financial statements are
prepared is consistent with the financial
statements and those reports have been
prepared in accordance with applicable
legal requirements;
• the information about internal control and
risk management systems in relation to
financial reporting processes and about
share capital structures, given in compliance
with rules 7.2.5 and 7.2.6 in the Disclosure
Rules and Transparency Rules sourcebook
made by the Financial Conduct Authority (the
FCA Rules), is consistent with the financial
statements and has been prepared in
accordance with applicable legal
requirements; and
• information about the company’s corporate
governance code and practices and about
its administrative, management and
supervisory bodies and their committees
complies with rules 7.2.2, 7.2.3 and 7.2.7
of the FCA Rules.
Matters on which we are
required to report by exception
In the light of the knowledge and
understanding of the group and the parent
company and its environment obtained in the
course of the audit, we have not identified
material misstatements in:
• the strategic report or the directors’ report;
or
• the information about internal control and
risk management systems in relation to
financial reporting processes and about
share capital structures, given in compliance
with rules 7.2.5 and 7.2.6 of the FCA Rules
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been
kept by the parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and
the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit; or
• a Corporate Governance Statement has not
been prepared by the company.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page 99,
the directors are responsible for the
preparation of the financial statements and for
being satisfied that they give a true and fair
view, and for such internal control as the
directors determine is necessary to enable the
preparation of financial statements that are free
from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
group and parent company’s ability to continue
as a going concern, disclosing, as applicable,
matters related to going concern and using the
going concern basis of accounting unless the
directors either intend to liquidate the group or
the parent company or to cease operations, or
have no realistic alternative but to do so.
108 The Rank Group Plc Annual Report and Financial Statements 2019
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
Explanation as to what extent
the audit was considered
capable of detecting
irregularities, including fraud
The objectives of our audit, in respect to fraud,
are; to identify and assess the risks of material
misstatement of the financial statements due to
fraud; to obtain sufficient appropriate audit
evidence regarding the assessed risks of
material misstatement due to fraud, through
designing and implementing appropriate
responses; and to respond appropriately to
fraud or suspected fraud identified during the
audit. However, the primary responsibility for
the prevention and detection of fraud rests with
both those charged with governance of the
entity and management.
Our approach was as follows:
• We obtained an understanding of the legal
and regulatory frameworks that are
applicable to the group and determined that
the most significant are the Companies Act
2006, the UK Gambling Commission,
Gambling Act 2005, Money Laundering
regulations, The Alderney Gambling Control
Commission, The Spanish Gaming Act and
License Conditions & The Code of Practice
2008. In addition, we concluded that there
are certain significant laws and regulations
which may have an effect on the
determination of the amounts and
disclosures in the financial statements being
the Listing Rules of the UK Listing Authority,
and those laws and regulations relating to
data protection.
• We have included ‘compliance with laws and
regulations’ as a key audit matter and our
audit response to the legal and licensing
framework for digital gaming is set
out above.
• We understood how The Rank Group Plc is
complying with those frameworks by making
enquiries of management, internal audit,
those responsible for legal and compliance
procedures and the company secretary. We
corroborated our enquiries through our
review of board minutes, papers provided
to the Audit and Risk Committees and
correspondence received from
regulatory bodies.
• We assessed the susceptibility of the
group’s financial statements to material
misstatement, including how fraud might
occur by meeting with management within
various parts of the business to understand
where they considered there was
susceptibility to fraud. We also considered
performance targets and their influence on
efforts made by management to manage
earnings or influence the perceptions of
analysts. Where this risk was considered to
be higher, we performed audit procedures to
address each identified fraud risk. These
procedures included testing manual journals
and were designed to provide reasonable
assurance that the financial statements were
free from fraud or error.
• Based on this understanding we designed
our audit procedures to identify non-
compliance with such laws and regulations.
Our procedures included a review of board
minutes to identify any noncompliance with
laws and regulations, a review of the
reporting to the Audit Committee on
compliance with regulations, enquiries of the
Director of Legal Services and enquiries
of management.
• The Group operates in the gaming industry
which is a highly regulated environment. As
such the Senior Statutory Auditor reviewed
the experience and expertise of the
engagement team to ensure that the team
had the appropriate competence and
capabilities, which included the use of an
expert where appropriate.
• As the gaming industry is highly regulated,
we have obtained an understanding of the
regulations and the potential impact on the
Group and in assessing the control
environment we have considered the
compliance of the Group to these
regulations as part of our audit procedures,
which included a review of correspondence
received from the regulator.
A further description of our responsibilities for
the audit of the financial statements is located
on the Financial Reporting Council’s website at
http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Financial statements
Other matters we are
required to address
• We were appointed by the company on 22
April 2010 to audit the financial statements
for the year ending 31 December 2010 and
subsequent financial periods. During the year
the company undertook a formal competitive
tender process. Following completion of
such process, Ernst and Young LLP was
recommended by the chairman to the Audit
Committee to continue as the external
auditor with effect for the financial year
ending 30 June 2020. This recommendation
was approved by the Board on
26 June 2019, subject to approval by
shareholders at the Company’s 2019 Annual
General Meeting.
• The period of total uninterrupted
engagement including previous renewals
and reappointments is ten years, covering
the years ending 31 December 2010 to
30 June 2019.
• The non-audit services prohibited by the
FRC’s Ethical Standard were not provided to
the group or the parent company and we
remain independent of the group and the
parent company in conducting the audit.
Our audit opinion is consistent with our
additional report to the audit committee
explaining the results of our audit.
Use of our report
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so
that we might state to the company’s
members those matters we are required to
state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
company and the company’s members as a
body, for our audit work, for this report, or for
the opinions we have formed.
Julie Carlyle (Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor London
21 August 2019
Notes:
1. The maintenance and integrity of the Rank Group
Plc’s web site is the responsibility of the directors; the
work carried out by the auditors does not involve
consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that
may have occurred to the financial statements since
they were initially presented on the web site.
2. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
109
Group income statement for the year ended 30 June 2019
Continuing operations
Revenue before adjustment for customer incentives
Customer incentives
Revenue
Cost of sales
Gross profit
Other operating costs
Group operating profit (loss)
Financing:
• finance costs
• finance income
• other financial losses
Total net financing charge
Profit (loss) before taxation
Taxation
Profit (loss) for the year from continuing
operations
Note
2
2
2
2,3
5
6
Year ended 30 June 2019
Year ended 30 June 2018
Before
exceptional
items
£m
Exceptional
items
(note 4)
£m
Before
exceptional
items
£m
Exceptional
items
(note 4)
£m
Total
£m
746.5
(51.4)
695.1
(378.2)
316.9
(244.4)
72.5
(2.7)
0.1
(0.2)
(2.8)
69.7
(12.0)
–
–
–
–
–
(33.5)
(33.5)
(1.6)
–
–
(1.6)
(35.1)
5.0
746.5
(51.4)
695.1
(378.2)
316.9
(277.9)
39.0
(4.3)
0.1
(0.2)
(4.4)
34.6
(7.0)
741.1
(50.1)
691.0
(376.6)
314.4
(237.4)
77.0
(3.0)
0.3
(0.1)
(2.8)
74.2
(15.7)
–
–
–
–
–
(26.9)
(26.9)
(0.3)
–
(0.3)
(0.6)
(27.5)
4.9
Total
£m
741.1
(50.1)
691.0
(376.6)
314.4
(264.3)
50.1
(3.3)
0.3
(0.4)
(3.4)
46.7
(10.8)
57.7
(30.1)
27.6
58.5
(22.6)
35.9
Discontinued operations - profit
4,6
–
1.5
1.5
–
–
–
Profit (loss) for the year
57.7
(28.6)
29.1
58.5
(22.6)
35.9
Attributable to:
Equity holders of the parent
Earnings (loss) per share attributable to equity
shareholders
• basic
• diluted
Earnings (loss) per share – continuing operations
• basic
• diluted
Earnings per share – discontinued operations
• basic
• diluted
57.7
(28.6)
29.1
58.5
(22.6)
35.9
9
9
9
9
9
9
14.8p
14.8p
14.8p
14.8p
–
–
(7.4)p
(7.4)p
(7.7)p
(7.7)p
0.3p
0.3p
7.4p
7.4p
7.1p
7.1p
0.3p
0.3p
15.0p
15.0p
15.0p
15.0p
–
–
(5.8)p
(5.8)p
(5.8)p
(5.8)p
–
–
9.2p
9.2p
9.2p
9.2p
–
–
Details of dividends paid and payable to equity shareholders are disclosed in note 8.
110 The Rank Group Plc Annual Report and Financial Statements 2019
Group statement of comprehensive income for the year ended 30 June 2019
Financial statements
Comprehensive income:
Profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments net of tax
Items that will not be reclassified to profit or loss:
Actuarial gain on retirement benefits net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
The tax effect of items of comprehensive income is disclosed in note 6.
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
Note
29.1
35.9
28
1.1
–
30.2
0.8
0.1
36.8
30.2
36.8
111
Balance sheets at 30 June 2019
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments in subsidiaries
Other investments
Deferred tax assets
Other receivables
Current assets
Inventories
Other receivables
Income tax receivable
Cash and short-term deposits
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax payable
Financial liabilities
– financial guarantees
– loans and borrowings
Provisions
Net current liabilities
Non-current liabilities
Trade and other payables
Financial liabilities
– loans and borrowings
Deferred tax liabilities
Provisions
Retirement benefit obligations
Total liabilities
Net assets
Capital and reserves attributable to the Company’s equity shareholders
Share capital
Share premium
Capital redemption reserve
Exchange translation reserve
Retained earnings
Total shareholders’ equity
Note
10
11
13
13
20
15
14
15
17
24
16
17
18
18
21
16
18
20
21
28
22
Group
Company
As at
30 June
2019
£m
447.8
161.5
–
3.5
0.1
4.1
617.0
2.7
27.2
0.6
61.8
92.3
As at
30 June
2018
£m
459.1
171.5
–
3.5
0.4
3.7
638.2
2.5
29.2
–
50.4
82.1
As at
30 June
2019
£m
As at
30 June
2018
£m
–
–
1,131.8
–
–
–
1,131.8
–
–
–
–
–
–
–
1,131.8
–
–
–
1,131.8
–
–
–
0.4
0.4
709.3
720.3
1,131.8
1,132.2
(145.2)
(7.2)
–
(54.7)
(14.9)
(222.0)
(153.1)
(10.3)
–
(54.2)
(8.0)
(225.6)
(0.2)
(0.4)
(1.6)
(389.5)
(0.2)
(391.9)
(0.1)
–
(1.7)
(353.6)
(0.2)
(355.6)
(129.7)
(143.5)
(391.9)
(355.2)
(26.0)
(30.6)
–
–
(5.3)
(22.1)
(31.9)
(4.0)
(89.3)
(311.3)
(5.5)
(24.4)
(33.6)
(4.1)
(98.2)
(323.8)
–
–
(0.9)
–
(0.9)
(392.8)
–
–
(1.0)
–
(1.0)
(356.6)
398.0
396.5
739.0
775.6
54.2
98.4
33.4
17.7
194.3
398.0
54.2
98.4
33.4
16.6
193.9
396.5
54.2
98.4
33.4
–
553.0
739.0
54.2
98.4
33.4
–
589.6
775.6
The loss for the year ended 30 June 2019 for the Company was £7.5m (year ended 30 June 2018: profit of £275.9m).
These financial statements were approved by the board on 21 August 2019 and signed on its behalf by:
John O’Reilly, Chief Executive
Bill Floydd, Chief Financial Officer
112 The Rank Group Plc Annual Report and Financial Statements 2019
Statements of changes in equity for the year ended 30 June 2019
Financial statements
Group
At 1 July 2017
Comprehensive income:
Profit for the year
Other comprehensive income:
Exchange adjustments net of tax
Actuarial gain on retirement benefits net of tax
Total comprehensive income for the year
Transactions with owners:
Dividends paid to equity holders (see note 8)
Debit in respect of employee share schemes including tax
At 30 June 2018
Comprehensive income:
Profit for the year
Other comprehensive income:
Exchange adjustments net of tax
Total comprehensive income for the year
Transactions with owners:
Dividends paid to equity holders (see note 8)
Credit in respect of employee share schemes including tax
At 30 June 2019
There were no non-controlling interests in either year.
Company
At 1 July 2017
Profit and total comprehensive income for the year
Transfer of unrealised item
Transactions with owners:
Dividends paid to equity holders (see note 8)
Debit in respect of employee share schemes including tax
At 30 June 2018
Loss and total comprehensive expense for the year
Transactions with owners:
Dividends paid to equity holders (see note 8)
At 30 June 2019
Share
capital
£m
54.2
Share
premium
£m
98.4
Capital
redemption
reserve
£m
33.4
Exchange
translation
reserve
£m
15.8
–
–
–
–
–
–
54.2
–
–
–
–
–
54.2
Share
capital
£m
54.2
–
–
–
–
54.2
–
–
54.2
–
–
–
–
–
–
98.4
–
–
–
–
–
98.4
Share
premium
£m
98.4
–
–
–
–
98.4
–
–
98.4
–
–
–
–
–
–
33.4
–
–
–
–
–
33.4
–
0.8
–
0.8
–
–
16.6
–
1.1
1.1
–
–
17.7
Capital
redemption
reserve
£m
33.4
–
–
Unrealised
profit
reserve
£m
159.8
–
(159.8)
–
–
33.4
–
–
33.4
–
–
–
–
–
–
Retained
earnings
(losses)
£m
188.8
35.9
–
0.1
36.0
(29.1)
(1.8)
193.9
29.1
–
29.1
(29.1)
0.4
194.3
Retained
earnings
(losses)
£m
184.0
275.9
159.8
(29.1)
(1.0)
589.6
Total
£m
390.6
35.9
0.8
0.1
36.8
(29.1)
(1.8)
396.5
29.1
1.1
30.2
(29.1)
0.4
398.0
Total
£m
529.8
275.9
–
(29.1)
(1.0)
775.6
(7.5)
(7.5)
(29.1)
553.0
(29.1)
739.0
The unrealised profit reserve related to the Company’s investment in subsidiary undertakings which were impaired in the prior year.
113
Statements of cash flow for the year ended 30 June 2019
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax (paid) received
Discontinued operations
Net cash from operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Purchase of subsidaries (net of cash acquired)
Dividends received from subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Dividends paid to equity holders
Repayment of term loans
Drawdown of term loans
Repayment of Yankee bond
Finance lease principal payments
Amounts received from (paid to) subsidiaries
Net cash used in financing activities
Note
23
32
Net increase (decrease) in cash, cash equivalents and bank overdrafts
Effect of exchange rate changes
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
25
Group
Company
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
113.1
0.2
(2.5)
(10.2)
(0.5)
100.1
(11.1)
(22.9)
(24.2)
–
(58.2)
(29.1)
(50.0)
50.0
–
(1.2)
–
(30.3)
11.6
(0.6)
47.7
58.7
102.4
0.3
(2.7)
(14.4)
–
85.6
(11.6)
(25.4)
(16.5)
–
(53.5)
(29.1)
(20.0)
–
(10.1)
(1.4)
–
(60.6)
(28.5)
(0.3)
76.5
47.7
(0.1)
–
–
–
–
(0.1)
–
–
–
–
–
(29.1)
–
–
–
–
28.8
(0.3)
(0.4)
–
0.4
–
(0.7)
–
(13.9)
2.3
–
(12.3)
–
–
–
549.4
549.4
(29.1)
–
–
–
–
(508.0)
(537.1)
–
–
0.4
0.4
114 The Rank Group Plc Annual Report and Financial Statements 2019
Notes to the financial statements
1 General information and
accounting policies
General information
The Rank Group Plc (‘the Company’) and its subsidiaries (together ‘the
Group’) operate gaming services in Great Britain (including the Channel
Islands), Spain and Belgium.
The Company is a public limited company which is listed on the London
Stock Exchange and is incorporated and domiciled in England and
Wales under registration number 03140769. The address of its
registered office is TOR, Saint-Cloud Way, Maidenhead, SL6 8BN.
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated and Company financial statements are set out below.
These policies have been consistently applied to all periods presented.
1.1 Basis of preparation
The consolidated and Company financial statements have been
prepared under the historical cost convention.
1.1.1 Statement of compliance
The consolidated and Company financial statements have been
prepared in accordance with International Financial Reporting Standards
(‘IFRS’) and IFRIC Interpretations as adopted by the European Union,
and the Companies Act 2006 applicable to companies reporting
under IFRS.
1.1.2 Going concern
In adopting the going concern basis for preparing the consolidated and
Company financial statements, the directors have considered the issues
impacting the Group during the period as detailed in the strategic report
on pages 6 to 51 and have reviewed the Group’s projected compliance
with its banking covenants detailed in the financial review on page 43.
Based on the Group’s cash flow forecasts and operating budgets, the
directors believe that the Group will generate sufficient cash to meet its
liabilities as they fall due for at least 12 months from the date of approval
of the financial statements and comply with its banking covenants.
Accordingly, the adoption of the going concern basis
remains appropriate.
1.1.3 Accounting estimates and judgements
In the application of the Group’s accounting policies, the directors are
required to make judgements, estimates and assumptions. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the revision and
future periods if the revision affects both current and future periods.
Critical accounting judgements
The following are the critical accounting judgements, apart from those
involving estimates (which are dealt with separately below) that the
directors have made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts
recognised in the financial statements.
Financial statements
(a) Exceptional items
The Group separately discloses material one-off items as it believes it
assists shareholders to understand underlying performance and trends
between periods. Judgement is required in determining whether an item
should be classified as an exceptional item or included within underlying
results. In the current year impairment charges, business transformation
costs, pay provision costs, onerous property lease costs and acquisition
related costs have been disclosed as exceptional items. Further details
are disclosed in note 4.
(b) Income taxes
The Group is subject to income taxes in numerous jurisdictions,
including jurisdictions of now discontinued operations. Judgement must
be applied in assessing the likely outcome of certain tax matters whose
final outcome may not be determined for a number of years.
These judgements are reassessed in each period until the outcome is
finally determined through resolution with a tax authority and/or through
a legal process. Differences arising from changes in judgement or from
final resolution may be material and will be charged or credited to the
Income Statement in the relevant period.
Within the Group’s net tax liability of £6.6m (30 June 2018: £10.3m) are
amounts of £1.5m (30 June 2018: £4.9m) that relate to uncertain tax
positions. The Group evaluates uncertain items, where the tax
judgement is subject to interpretation and remains to be agreed with the
relevant tax authority. Provisions for uncertain items are made using
judgement of the most likely tax expected to be paid, based on a
qualitative assessment of all relevant information. In assessing the
appropriate provision for uncertain items, the Group considers progress
made in discussions with tax authorities, expert advice on the likely
outcome and recent developments in case law. Further details of
income tax are disclosed in note 17.
(c) Contingent assets and liabilities
Management is required to apply judgement in assessing the probability
of the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Group. This judgement is
supported by external advice and precedent case law where
appropriate and is continually assessed to ensure that developments
are appropriately reflected in the financial statements. Further details of
contingent liabilities are disclosed in note 30. There were no contingent
assets identified in the current year.
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities
are discussed below.
(a) Estimated impairment of goodwill, intangible assets and
property, plant and equipment
Details of the Group’s accounting policy in relation to impairments and
impairment reversals are disclosed in note 1.13.
115
Notes to the financial statements continued
1 General information and
accounting policies continued
The application of the policy requires the use of accounting estimates in
determining the recoverable amount of cash-generating units to which
the goodwill, intangible assets and property, plant and equipment are
associated. The recoverable amount is the higher of the fair value less
costs of disposal and value in use. Estimates of fair value less costs of
disposal are performed internally by experienced senior management
supported by knowledge of similar transactions and advice from
external experts or, if applicable, offers received. Value in use being
calculated using estimated cash flow projections from financial budgets,
discounted by selecting an appropriate rate for each cash-generating
unit. Further details of the assumptions, estimates and sensitivity are
disclosed in note 12.
The Company also tests annually the carrying value of its investments in
subsidiaries. The application of this policy requires the use of estimates
and judgements in determining the recoverable amount of the
subsidiary undertakings. The recoverable amount is determined by
applying an estimated valuation multiple to budgeted future earnings of
the subsidiary along with consideration of the underlying net assets and
is disclosed in note 13.
(b) Property related provisions
Provisions are recognised in accordance with the policy disclosed in
note 1.10. Management’s estimate is that the cost provided represents
the lower of the cost of fulfilling the contract or the cost of exiting the
contract. In calculating property lease provisions, estimates are made of
the discounted cash flows associated with the property and its
associated operations including sub-let income together with estimates
of any dilapidation obligations. Further details of provisions made are
disclosed in note 21. The majority of committed future lease expense is
for rental payments on property details of total committed lease
payments are disclosed in note 29.
(c) Determination of the fair values of intangible assets and
contingent consideration
The Group estimates the fair value of acquired intangible assets arising
from business combinations by selecting and applying appropriate
valuation methods. These include the relief from royalty and multi-period
excess earnings valuation methods, both of which require significant
estimates to be made. Examples include estimating expected cash
flows and identifying appropriate royalty and discount rates. The fair
value of each acquired intangible asset is amortised over the respective
assets estimated useful life. The Group uses projected financial
information together with comparable industry information, where
available, as well as applying its own experience and knowledge of the
industry in making such judgements and estimates.
Contingent consideration is initially recognised at fair value and
subsequently reassessed at each reporting date to reflect changes in
estimates and assumptions. The determination of fair value requires an
assessment of the future performance of a relatively immature business
operating in a high growth market and is therefore inherently volatile.
The Group has estimated the fair value using projected financial
information. The range of potential outcomes is disclosed in note 32.
1.1.4 Changes in accounting policy and disclosures
(a) Standards, amendments to and interpretations of existing
standards adopted by the Group
The Group has not been materially impacted by the adoption of any
standards and has not early adopted any standard, amendment or
interpretation that was issued but is not yet effective. The Group
applies, for the first time, IFRS 15 - Revenue from Contracts with
Customers and IFRS 9 - Financial Instruments.
IFRS15 – Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction Contracts and IAS 18
Revenue and related Interpretations and it applies to all revenue arising
from contracts with customers, unless those contracts are in the scope
of other standards. The new standard establishes a five-step model to
account for revenue arising from contracts with customers. Under IFRS
15, revenue is recognised at an amount that reflects the consideration
to which an entity expects to be entitled in exchange for transferring
goods or services to a customer. The standard requires entities to
exercise judgement, taking into consideration all of the relevant facts
and circumstances, when applying each step of the model to contracts
with their customers. The Group adopted IFRS 15 using the full
retrospective method of adoption with no material impact on the
financial statements of the Group.
(a) Gaming Win – Casino
The Group’s income earned from gaming win - casino does not fall
within the scope of IFRS 15. Income from this activity is disclosed as
revenue although is accounted for and meets the definition of a gain
under IFRS 9.
(b) Gaming Win – Bingo, Gaming Win – Poker, Food and Beverage and
Other
The Group’s income earned from the above items is recognised when
the goods or services are transferred to the customer and is within the
scope of IFRS 15.
IFRS9 – Financial Instruments
IFRS 9 replaces IAS 39 Financial Instruments: Recognition and
Measurement for annual periods beginning on or after 1 January 2018,
bringing together all three aspects of the accounting for financial
instruments: classification and measurement; impairment; and hedge
accounting. The Group has applied IFRS 9 retrospectively with no
material impact on the financial statements of the Group.
(a) Classification and measurement
The Group’s income earned from gaming win falls within the scope of
IFRS 9, the change has not resulted in a material impact on accounting
or presentation of this income. There were no changes in classification
and measurement of other financial assets and liabilities.
(b) Impairment
The adoption of IFRS 9 has changed the Group’s accounting for
impairment losses for financial assets by replacing IAS 39’s incurred
loss approach with a forward looking expected credit loss (ECL). IFRS 9
application did not result in material changes to the Group’s
financial statements.
There are no other new or amended standards or interpretations that
became effective in the period which have had a material impact upon
the values or disclosures in the interim financial information.
(b) Standards, amendments to and interpretations of existing
standards that are not yet effective
IFRS16 – Leases
IFRS 16 – Leases represents a significant change, notably for lessees,
in how leases are accounted for and reported. The standard will be
effective for the Group for the period beginning 1 July 2019 and will
replace IAS 17 ‘Leases’. IFRS 16 will require all lessees to recognise a
right-of-use asset and lease liability for all leases, except for leases with
116 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
a lease term of 12 months or less or where the underlying asset is of
low value.
There is no current expectation that the Group’s cashflows will be
materially impacted.
Lease liabilities are initially measured at the present value of the lease
payments that are not paid at the commencement date and
subsequently measured at amortised cost with interest expense
recognised within finance income (cost) in the consolidated income
statement. Right-of-use assets are initially measured at cost which
comprises the initial measurement of the lease liability, lease payments
made before or at the commencement date and any initial direct costs.
Right-of-use assets are depreciated over their useful life or over the
lease term.
The Group will apply the modified retrospective approach for IFRS 16
transition. Under this approach the Group will measure lease liabilities at
the present value of the remaining lease payments, discounted at the
incremental borrowing rate at the date of initial application. Right-of-use
assets will be recognised, on a lease by lease basis, at their carrying
amount as if the standard had been applied since the commencement
date but discounted at the incremental borrowing rate at the date of
initial application or at an amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments. The cumulative
effect of initially applying IFRS 16 will be recognised as an adjustment to
the opening balance of retained earnings at the date of initial
application. The Group intends to apply the below practical expedients
permitted under the modified retrospective approach;
• apply a single discount rate to a portfolio of leases with
similar characteristics;
• adjust the right-of-use asset on transition by the amount of any
provision for onerous leases recognised in the statement of financial
position immediately before the date of initial application;
• exclude leases for measurement and recognition where the lease
term ends within 12 months from the date of initial application and
account for these leases as short-term leases;
• exclude initial direct lease costs in the measurement of the right-of-
use asset; and
• use hindsight to determine the lease term if the contract contains
options to extend or terminate.
The estimated impacts of IFRS 16 before adjustments for tax on the
opening balance in the financial statements at 1 July 2019 are
as follows:
• opening right-of-use assets c. £185m;
• opening lease liabilities c. £255m;
• opening lease receivables c. £5m;
• release of onerous lease balances held on balance sheet prior to
transition c. £15m;
• release of rent related balances held on balance sheet prior to
transition c. £30m; and
• cumulative effect of applying IFRS 16 against retained earnings is a
decrease of c. £20m.
The estimated impacts of IFRS 16 on the financial statements for the
period ending 30 June 2020 are:
• decrease in the operating lease expense c. £40m;
• increase in EBITDA c. £40m;
• increase in depreciation c. £31m;
• increase in operating profit c. £9m;
• increase in finance costs c. £9m; and
• increase in profit before taxation c.£nil.
1.2 Consolidation
The consolidated financial statements comprise the financial statements
of the parent and its subsidiaries as at 30 June 2019. Control is
achieved when the Group is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Specifically, the Group
controls an investee if, and only if, the Group has a) power over the
investee, b) exposure, or rights, to variable returns from the investee,
and c) ability to use its power to affect those returns. The Group
re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the
three elements of control.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred. Accounting policies as applied
to subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The Group has no material associates or joint ventures.
1.3 Business combinations and goodwill
Business combinations are accounted for using the acquisition method.
The consideration transferred in a business combination is measured at
the acquisition date and represents the aggregate fair value of assets
transferred and liabilities incurred.
Amounts payable in respect of deferred or contingent consideration are
recognised at fair value at the acquisition date and included in
consideration transferred. The subsequent unwind of any discount is
recognised as an exceptional finance cost in the income statement.
Changes in the fair value of contingent consideration recognised as a
financial liability that qualify as measurement period adjustments (being
12 months from the acquisition date) are adjusted retrospectively, with
corresponding adjustments against goodwill. Material changes that do
not qualify as measurement period adjustments are recognised as an
exceptional item in the income statement.
When the Group acquires a business, it assesses the financial assets
acquired and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
Goodwill is initially measured at cost, being the excess of the aggregate
of the acquisition date fair value of the consideration transferred over the
fair value of the net identifiable amounts of the assets acquired and the
liabilities assumed in exchange for the business combination. Identifiable
intangible assets are recognised separately from goodwill.
If the aggregate of the acquisition date fair value of the consideration
transferred is lower than the fair value of the assets, liabilities and
contingent liabilities in the business acquired, the difference is
recognised through profit or loss.
117
Notes to the financial statements continued
1 General information and
accounting policies continued
If the initial accounting for a business combination is incomplete by the
end of the reporting period in which the combination occurs, the Group
reports provisional amounts for items for which the accounting is
incomplete. Those provisional amounts are adjusted during the
measurement period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would
have affected the amounts recognised at that date.
Acquisition costs incurred are expensed as exceptional items.
1.4 Revenue recognition
Revenue consists of the fair value of sales of goods and services net of
VAT, rebates and discounts.
(a) Gaming win
Revenue for casinos includes gaming win before deduction of gaming-
related duties. Revenue for bingo is net of prizes before deduction of
gaming-related duties. Revenue for poker represents the rake received.
Revenue for digital products, including interactive games, represents
gaming win before deduction of gaming-related duties. The fair value of
free bets, promotions and customer bonuses (‘customer incentives’) are
also deducted from all revenue streams.
Although disclosed as revenue, gaming win (other than from poker
and bingo) is accounted for and meets the definition of a gain under
IFRS 9 – Financial Instruments.
(b) Food and beverage
Revenue from food and beverage sales is recognised at the point of
sale.
1.5 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the management team (the composition of which is
disclosed on page 56), which makes strategic and
operational decisions.
In the current period the internal reporting of operating segments has
been modified following changes in management responsibilities. As
from 1 July 2018;
• UK Digital, Enracha Digital and YoBingo were combined into a single
operating segment which is now known as Digital,
• Grosvenor Venues now excludes our Belgium casino, and
• Enracha Venues and our Belgium casino were combined into a single
operating segment known as International Venues.
The Group now reports five segments: Grosvenor Venues, Mecca
Venues, Digital, International Venues and Central Costs. The prior
period comparative information has been restated to assist
with comparability.
1.6 Foreign currency translation
The consolidated financial statements are presented in UK sterling,
which is also the Company’s functional currency. Items included in the
financial statements of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity
operates (‘the functional currency’).
(a) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement in finance costs or income.
(b) Group companies
The results and financial position of all the Group companies (none of
which has the currency of a hyper-inflationary economy) that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
i assets and liabilities for each balance sheet presented are translated
at the closing rate on the balance sheet date. The closing euro rate
against UK sterling was 1.11 (30 June 2018: 1.13) and the closing US
dollar rate against UK sterling was 1.27 (30 June 2018: 1.32);
ii income and expenses for each income statement are translated
at average exchange rates unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses
are translated at the rates prevailing on the dates of the
transactions. The average euro rate against UK sterling
was 1.13 (year ended 30 June 2018: 1.13) and the average
US dollar rate against UK sterling in the year was 1.29
(year ended 30 June 2018: 1.35); and
iii. all resulting exchange differences are recognised as a separate
component of equity.
When a foreign operation is sold, such exchange differences are
recognised in the income statement, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
1.7 Financial assets
Financial assets within the scope of IFRS 9 are classified as financial
assets at initial recognition, as subsequently measured at amortised
cost, fair value through other comprehensive income (OCI), and fair
value through profit or loss.
The classification of financial assets at initial recognition depends on the
financial asset’s contractual cash flow characteristics and the Group’s
business model for managing them. The Group initially measures a
financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised
cost or fair value through OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level.
For purposes of subsequent measurement, financial assets are
classified in two categories:
• Financial assets designated at fair value through OCI with no recycling
of cumulative gains and losses upon derecognition (equity
instruments); and
• Financial assets at fair value through profit or loss.
118 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
(a) Financial assets designated at fair value through OCI (equity
instruments)
Upon initial recognition, the Group can elect to classify irrevocably its
equity investments as equity instruments designated at fair value
through OCI when they meet the definition of equity under IAS 32
Financial Instruments: Presentation and are not held for trading. The
classification is determined on an instrument-by-instrument basis. Gains
and losses on these financial assets are never recycled to profit or loss.
Dividends are recognised as other income in the statement of profit or
loss when the right of payment has been established, except when the
Group benefits from such proceeds as a recovery of part of the cost of
the financial asset, in which case, such gains are recorded in OCI.
Equity instruments designated at fair value through OCI are not subject
to impairment assessment. The Group elected to classify its non-listed
equity investments under this category.
(b) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial
assets held for trading, financial assets designated upon initial
recognition at fair value through profit or loss, or financial assets
mandatorily required to be measured at fair value. Financial assets are
classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. Financial assets with cash flows
that are not solely payments of principal and interest are classified and
measured at fair value through profit or loss, irrespective of the business
model. Financial assets at fair value through profit or loss are carried in
the statement of financial position at fair value with net changes in fair
value recognised in the statement of profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised (i.e.
removed from the Group’s consolidated statement of financial
position) when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in
full without material delay to a third party.
1.8 Financial liabilities
Financial liabilities within the scope of IFRS 9 are classified, at initial
recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings or payables. All financial liabilities are recognised initially
at fair value and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs. The Group’s financial liabilities
include trade and other payables and loans and borrowings including
bank overdrafts.
The subsequent measurement of financial liabilities depends on their
classification, as described below:
(a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Gains or losses on
liabilities held for trading are recognised in the statement of profit or
loss. Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated at the initial date of recognition,
and only if the criteria in IFRS 9 are satisfied.
(b) Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest
rate (EIR) method. Gains and losses are recognised in profit or loss
when the liabilities are derecognised as well as through the EIR
amortisation process. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included as
finance costs in the statement of profit or loss.
(c) Financial guarantee contracts (Company only)
Financial guarantee contracts issued by the Company are those
contracts that require a payment to be made to reimburse the holder for
a loss it incurs because the specified debtor fails to make a payment
when due in accordance with the terms of a debt instrument. Financial
guarantee contracts are initially measured at fair value by applying the
estimated probability of default to the cash outflow should default occur
and subsequently amortising over the expected length of the guarantee,
to the extent that the guarantee is not expected to be called.
Subsequently, the liability is measured at the higher of the best estimate
of the expenditure required to settle the present obligation at the
reporting date or the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability
is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of profit
or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and
there is an intention to settle on a net basis, to realise the assets and
settle the liabilities simultaneously.
1.9 Leases
Leases are tested at inception to determine whether the lease is a
finance or operating lease and treated accordingly. Property leases
comprising a lease of land and a lease of buildings within a single
contract are split into their two component parts before testing.
(a) Finance leases
Leases of property, plant and equipment which transfer substantially all
the risks and rewards of ownership to the Group are classified as
finance leases. Finance leases are capitalised at the inception of the
lease at the lower of the fair value of the leased property, plant and
equipment or the present value of minimum lease payments. Each lease
payment is allocated between the liability and finance charges so as to
achieve a constant periodic rate of interest on the remaining balance of
the liability for each period. The corresponding rental obligations, net of
finance charges, are included in loans and borrowings. Finance charges
are recognised in the income statement. Property, plant and equipment
acquired under finance leases is depreciated over the shorter of the
useful life of the asset or the lease term.
(b) Operating leases
Leases of property, plant and equipment which do not transfer
substantially all the risks and rewards of ownership to the Group are
classified as operating leases. Operating lease payments (including any
lease incentives or premiums) are recognised as an expense in the
income statement on a straight-line basis over the lease term.
119
Notes to the financial statements continued
1 General information and
accounting policies continued
1.10 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events if it is more likely than
not that an outflow of resources will be required to settle the obligation
and the amount can be reliably estimated. Provisions are measured at
the best estimate of the expenditures required to settle the obligation. If
the effect of the time value of money is material, provisions are
discounted using a pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognised as a
finance cost.
1.11 Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated
depreciation and impairment. Such cost includes expenditure that is
directly attributable to the acquisition of the items. Subsequent costs
are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. All other repairs and maintenance
are charged to the income statement during the financial period in
which they are incurred.
Depreciation is calculated on assets using the straight-line method to
allocate their cost less residual values over their estimated useful lives,
as follows:
• Freehold and leasehold property 50 years or lease term if less
• Refurbishment of property 5 to 20 years or lease term
• Fixtures, fittings, plant and machinery 3 to 20 years
Land is not depreciated.
Residual values and useful lives are reviewed at each balance sheet
date, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement.
Pre-opening costs are expensed to the income statement as incurred.
1.12 Intangible assets
(a) Goodwill
Goodwill represents the excess of the fair value of the consideration
transferred over the fair value of the Group’s share of the net identifiable
assets less the liabilities assumed at the date of acquisition. Goodwill on
acquisitions of subsidiaries is included in intangible assets. Goodwill is
tested annually for impairment and is allocated to the relevant cash-
generating unit or group of cash-generating units for the purpose of
impairment testing. A cash-generating unit is the smallest identifiable
group of assets that generates cash inflows, that are largely
independent of the cash inflows from other assets or groups of assets.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
(b) Casino and other gaming licences and concessions
The Group capitalises acquired casino and other gaming licences and
concessions. Management believes that casino and other gaming
licences have indefinite lives as there is no foreseeable limit to the period
over which the licences are expected to generate net cash inflows and
each licence holds a value outside the property in which it resides. Each
licence is reviewed annually for impairment.
In respect of the concession in Belgium, the carrying value is amortised
over the expected useful life of the concession.
(c) Software and development
Costs that are directly associated with the production and development
of identifiable and unique software products controlled by the Group,
and that are expected to generate economic benefits exceeding costs
beyond one year, are recognised as intangible assets for both externally
purchased and internally developed software. Direct costs include
specific employee costs for software development.
Software acquired as part of a business combination is recognised at
fair value at the date of acquisition.
Costs associated with maintaining computer software programs are
recognised as an expense as incurred.
(d) Brands
Represents the fair value of brands and trade-mark assets acquired in
business combinations at the acquisition date.
(e) Customer relationships
Represents the fair value of customer relations acquired in business
combinations at the acquisition date.
(f) Property contracts
Represents the fair value of favourable property contracts acquired in
business combinations at the acquisition date.
Amortisation is recognised on a straight-line basis over the estimated
useful life of intangible assets unless such lives are indefinite. The
estimated useful lives are as follows:
• Casino and other gaming licences Indefinite
• Casino concession Concession term
• Software and development 3 to 5 years
• Brands 10 years
• Customer relationships 4 years
• Property contracts Lease term
1.13 Impairment of intangible assets and property, plant
and equipment
Assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable or where they indicate a previously recognised impairment
may no longer be required.
An impairment loss is recognised as the amount by which an asset’s
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs of disposal and
value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable
cash inflows (cash-generating units). The expected cash flows
generated by the assets are discounted using appropriate discount
rates that reflect the time value of money and risks associated with the
groups of assets.
If an impairment loss is recognised, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An
120 The Rank Group Plc Annual Report and Financial Statements 2019
impairment loss is recognised as an expense in the income
statement immediately.
Any impairment is allocated pro-rata across all assets in a cash-
generating unit unless there is an indication that a class of assets should
be impaired in the first instance or a fair market value exists for one or
more assets. Once an asset has been written down to its fair value less
costs of disposal then any remaining impairment is allocated equally
amongst all other assets.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (cash-generating unit) is increased to the revised estimate
of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset
(cash-generating unit) in prior years. Reversals are allocated pro-rata
across all assets in the cash-generating unit unless there is an indication
that a class of asset should be reversed in the first instance or a fair
market value exists for one or more assets. A reversal of an impairment
loss is recognised in the income statement immediately.
An impairment loss recognised for goodwill is never reversed in
subsequent periods.
1.14 Employee benefit costs
(a) Pension obligations
The Group operates a defined contribution plan under which the Group
pays fixed contributions to a separate entity. The Group has no further
payment obligations once the contributions have been paid. The
contributions are recognised as employee benefit expense when they
are due.
The Group also has an unfunded pension commitment relating to three
former executives of the Group. The amount recognised in the balance
sheet in respect of the commitment is the present value of the obligation
at the balance sheet date, together with adjustment for actuarial gains
or losses. The Group recognises actuarial gains and losses immediately
in the statement of other comprehensive income. The interest cost
arising on the commitment is recognised in net finance costs.
(b) Share-based compensation
The cost of equity-settled transactions with employees for awards is
measured by reference to the fair value at the date on which they are
granted. The fair value is determined by using an appropriate pricing
model.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled (the vesting period).
The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the
number of equity instruments that will ultimately vest. The income
statement expense or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of
that period.
No expense is recognised for awards that do not ultimately vest, except
for equity-settled transactions where vesting is conditional upon a
market or non-vesting condition, which are treated as vesting
irrespective of whether or not the market or non-vesting condition is
satisfied, provided that all other performance and/or service conditions
are satisfied.
Where the terms of an equity-settled transaction award are modified,
the minimum expense recognised is the expense as if the terms had not
Financial statements
been modified, if the original terms of the award are met. An additional
expense is recognised for any modification that increases the total fair
value of the share-based payment transaction or is otherwise beneficial
to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on
the date of cancellation, and any expense not yet recognised for the
award is recognised immediately. This includes any award where
non-vesting conditions within the control of either the entity or the
employee are not met. However, if a new award is substituted for the
cancelled award, and designated as a replacement award on the date
that it is granted, the cancelled and new awards are treated as if they
were a modification of the original award, as described in the previous
paragraph. All cancellations of equity-settled transaction awards are
treated equally, regardless of whether the entity or the employee
cancels the award.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of diluted earnings per share.
The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium when
the options are exercised.
(c) Share-based compensation – Company
The Company operates share-based payment schemes for employees
of the Company and its subsidiaries. The fair value of shares awarded to
employees of the Company is recognised as an employee expense with
a corresponding increase in equity. The Company also makes awards
of its own shares to employees of its subsidiaries and as such
recognises an increase in the cost of investment in its subsidiaries
equivalent to the equity-settled share-based payment charge
recognised in its subsidiaries’ financial statements, with the
corresponding credit being recognised directly in equity.
(d) Bonus plans
The Group recognises a liability in respect of the best estimate of
bonuses payable where contractually obliged to do so or where a past
practice has created a constructive obligation.
1.15 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost
of inventory is determined on a ‘first-in, first-out’ basis.
The cost of finished goods comprises goods purchased for resale.
Net realisable value is the estimated selling price in the ordinary course
of business. When necessary, provision is made for obsolete and
slow-moving inventories.
121
Notes to the financial statements continued
1 General information and
accounting policies continued
1.16 Taxation
(a) Current tax
Current tax assets and liabilities for the current and prior periods are
measured as the amount expected to be paid or to be recovered from
the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted, or substantively enacted, by the
reporting date.
Current tax relating to items recognised directly in equity is recognised
in equity and not the income statement.
Management evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to
interpretation at each reporting date and establishes provisions
where appropriate.
(b) Deferred tax
Deferred tax is provided using the liability method on temporary
differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. However, if deferred
tax arises from the initial recognition of an asset or liability in a
transaction, other than a business combination, that at the time of the
transaction affects neither accounting nor taxable profit or loss, it is not
accounted for. Deferred tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred tax asset is
realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current taxation assets against current
taxation liabilities and it is the intention to settle these on a net basis.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, except where the timing of the reversal of
the temporary difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the foreseeable future.
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount of
sales tax except:
• where the sales tax incurred on a purchase of assets or services is
not recoverable from the taxation authority, in which case the sales
tax is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
• for receivables and payables that are stated with the amount of sales
tax included.
The net amount of sales tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in the
balance sheet.
1.17 Share capital
Ordinary shares are classified as equity.
1.18 Dividends
Dividends proposed by the board of directors and unpaid at the period
end are not recognised in the financial statements until they have been
approved by shareholders at the annual general meeting. Interim
dividends are recognised when paid.
1.19 Exceptional items
The Group separately discloses those items which are required to give a
full understanding of the Group’s financial performance and aid
comparability of the Group’s result between periods. Exceptional items
are considered by the directors to require separate disclosure due to
their size or nature in relation to the Group.
122 The Rank Group Plc Annual Report and Financial Statements 2019
2 Segmental reporting
a) Segment information - operating segments
Continuing operations
Revenue before adjustment for customer incentives
Customer incentives
Statutory revenue
Operating profit (loss) before exceptional items
Exceptional loss
Segment result
Finance costs
Finance income
Other financial losses
Profit before taxation
Taxation
Profit for the year from continuing operations
Other segment items - continuing operations
Capital expenditure
Depreciation and amortisation
Items disclosed as exceptional
Impairment charges
Onerous lease and other property income (costs)
Acquisition related costs
Pay provision
Business transformation costs
Financial statements
Year ended 30 June 2019
Grosvenor
Venues
£m
Mecca Venues
£m
Digital
£m
International
Venues
£m
Central Costs
£m
Total
£m
353.2
(15.0)
338.2
44.9
(21.5)
23.4
202.1
(8.6)
193.5
28.6
(5.0)
23.6
146.3
(27.8)
118.5
20.7
(0.5)
20.2
44.9
–
44.9
9.3
(0.1)
9.2
–
–
–
(31.0)
(6.4)
(37.4)
(13.2)
(19.1)
(10.7)
0.3
–
(5.0)
(6.1)
(5.5)
(10.5)
–
(1.8)
–
(3.0)
(0.2)
(7.7)
(8.8)
(0.4)
–
–
–
(0.1)
(1.6)
(2.7)
–
0.2
–
–
(0.3)
(6.0)
(4.1)
–
(0.1)
(2.2)
–
(4.1)
746.5
(51.4)
695.1
72.5
(33.5)
39.0
(4.3)
0.1
(0.2)
34.6
(7.0)
27.6
(34.0)
(45.2)
(11.1)
(1.4)
(2.2)
(8.0)
(10.8)
123
Notes to the financial statements continued
2 Segmental reporting continued
Continuing operations
Revenue before adjustment for customer incentives
Customer incentives
Statutory revenue
Operating profit (loss) before exceptional items
Exceptional (loss) profit
Segment result
Finance costs
Finance income
Other financial losses
Profit before taxation
Taxation
Profit for the year from continuing operations
Other segment items – continuing operations
Capital expenditure
Depreciation and amortisation
Items disclosed as exceptional
Impairment charges
Impairment reversals
Group restructuring including relocation costs
Onerous lease and other property (costs) income
Closure of venues
Acquisition related costs
Year ended 30 June 2018
Grosvenor
Venues
£m
Mecca Venues
£m
Digital
£m
International
Venues
£m
Central Costs
£m
Total
£m
362.4
(13.0)
349.4
47.2
(23.4)
23.8
208.1
(9.1)
199.0
28.6
(3.7)
24.9
124.7
(28.0)
96.7
19.9
0.2
20.1
45.9
–
45.9
8.8
1.2
10.0
–
–
–
(27.5)
(1.2)
(28.7)
(8.9)
(20.6)
(5.3)
(11.6)
(9.8)
–
(0.3)
(9.0)
(4.3)
–
(3.4)
–
(0.5)
(0.3)
0.5
–
(9.2)
(4.8)
–
–
0.2
–
–
–
(1.1)
(2.8)
(0.7)
1.8
–
–
0.1
–
(12.5)
(3.2)
–
–
(1.0)
0.2
–
(0.4)
741.1
(50.1)
691.0
77.0
(26.9)
50.1
(3.3)
0.3
(0.4)
46.7
(10.8)
35.9
(37.0)
(43.0)
(13.9)
1.8
(1.6)
(9.1)
(3.7)
(0.4)
The Group reports segmental information on the basis by which the chief operating decision-maker utilises internal reporting within the business. In
the current year the internal reporting of operating segments has been modified following changes in management responsibilities. As from
1 July 2018 UK Digital, Enracha Digital and YoBingo were combined into a single operating segment which is now known as Digital. Grosvenor
Venues now exclude the Belgium casino. Enracha Venues and Belgium were combined into a single operating segment which is now known as
International Venues. Prior year comparatives have been revised to reflect the new operating segments.
Assets and liabilities have not been segmented as this information is not provided to the chief operating decision-maker on a regular basis.
Capital expenditure comprises cash expenditure on property, plant and equipment and other intangible assets.
124 The Rank Group Plc Annual Report and Financial Statements 2019
b) Geographical information
The Group operates in two main geographical areas (UK and Continental Europe).
i) Revenue from external customers by geographical area based on location of customer
UK
Continental Europe
Total revenue
ii) Non-current assets by geographical area based on location of assets
UK
Continental Europe
Total non-current assets
Financial statements
Year ended
30 June
2019
£m
636.3
58.8
695.1
As at
30 June
2019
£m
535.8
81.2
617.0
With the exception of the UK no individual country contributed more than 15% of consolidated sales or assets.
c) Total revenue and profit from continuing operations
Revenue
Profit
From continuing operations
From discontinued operations
d) Total revenue by income stream
Gaming win - Casino
Gaming win - Bingo
Gaming win - Poker
Food and Beverage
Other
Total revenue
Note
4
Year ended
30 June
2019
£m
695.1
–
695.1
Year ended
30 June
2018
£m
691.0
–
691.0
Year ended
30 June
2019
£m
27.6
1.5
29.1
Year ended
30 June
2019
£m
554.3
70.1
15.5
49.3
5.9
695.1
With the exception of “Gaming win – Casino” all revenue is recognised in accordance with IFRS15 – revenue from contract with customers.
Year ended
30 June
2018
£m
643.2
47.8
691.0
As at
30 June
2018
£m
553.8
84.4
638.2
Year ended
30 June
2018
£m
35.9
–
35.9
Year ended
30 June
2018
£m
561.8
56.3
15.3
52.4
5.2
691.0
125
Notes to the financial statements continued
2 Segmental reporting continued
e) Total cost analysis by segment
To increase transparency, the Group has decided to include additional disclosure analysing total costs by type and segment. A reconciliation of total
costs, before exceptional items, by type and segment is as follows:
Employment and related costs
Taxes and duties
Direct costs
Property costs
Marketing
Depreciation and amortisation
Other
Total costs before exceptional items
Cost of sales
Operating costs
Total costs before exceptional items
Employment and related costs
Taxes and duties
Direct costs
Property costs
Marketing
Depreciation and amortisation
Other
Total costs before exceptional items
Cost of sales
Operating costs
Total costs before exceptional items
Grosvenor
Venues
£m
120.0
73.0
25.1
29.1
12.1
19.1
14.9
293.3
Mecca Venues
£m
49.0
32.4
21.7
26.4
7.6
10.5
17.3
164.9
Year ended 30 June 2019
Digital
£m
15.9
23.7
32.3
0.7
11.6
8.8
4.8
97.8
International
Venues
£m
19.0
3.7
3.3
2.2
2.5
2.7
2.2
35.6
Central Costs
£m
19.6
1.9
–
1.5
–
4.1
3.9
31.0
Grosvenor
Venues
£m
130.0
73.2
18.3
31.3
14.3
20.6
14.5
302.2
Mecca Venues
£m
52.2
33.2
20.9
26.9
8.7
11.6
16.9
170.4
Year ended 30 June 2018
Digital
£m
12.7
15.5
28.9
0.6
7.9
4.8
6.4
76.8
International
Venues
£m
19.5
4.0
3.5
2.1
1.4
2.8
3.8
37.1
Central Costs
£m
17.0
1.8
–
1.5
–
3.2
4.0
27.5
Total
£m
223.5
134.7
82.4
59.9
33.8
45.2
43.1
622.6
378.2
244.4
622.6
Total
£m
231.4
127.7
71.6
62.4
32.3
43.0
45.6
614.0
376.6
237.4
614.0
The Group reports segmental information on the basis by which the chief operating decision-maker utilises internal reporting within the business. In
the current year the internal reporting of operating segments has been modified following changes in management responsibilities. As from
1 July 2018 UK Digital, Enracha Digital and YoBingo were combined into a single operating segment which is now known as Digital. Grosvenor
Venues now exclude the Belgium casino. Enracha Venues and Belgium were combined into a single operating segment which is now known as
International Venues. Prior year comparatives have been revised to reflect the new operating segments.
126 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
3 Profit for the year – analysis by nature
The following items have been charged (credited) in arriving at the profit for the year before financing and taxation from continuing operations:
Employee benefit expense
Cost of inventories recognised as expense
Amortisation of intangibles
Depreciation of property, plant and equipment
• owned assets (including £28.2m (year ended 30 June 2018: £30.1m) within cost of sales)
• under finance leases (included within cost of sales)
Operating lease rentals payable
• minimum lease payments
• sub-lease income
Loss on disposal of property, plant and equipment
Gain on surrender of finance lease
Impairment of intangible assets
Impairment of property, plant and equipment
Exceptional operating costs (see note 4)
Auditors’ remuneration for audit services
In the year, the Group’s auditors, Ernst & Young LLP, including its network firms, earned the following fees:
Audit services
• Fees payable to the Company's auditor for the parent company and consolidated financial statements
Other services
Fees payable to the Company’s auditor and its associates for other services:
• the audit of the Company’s subsidiaries pursuant to legislation
• other services
Year ended
30 June
2019
£m
201.3
29.7
13.5
Year ended
30 June
2018
£m
214.3
29.9
9.5
30.6
1.1
47.9
(3.2)
0.2
(0.3)
–
0.3
33.5
0.5
32.3
1.2
46.9
(4.1)
0.3
–
0.3
0.2
26.9
0.5
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
0.4
0.4
0.1
0.1
0.6
0.1
0.1
0.6
£26,000 (year ended 30 June 2018: £26,000) of the audit fees related to the parent company.
It is the Group’s policy to balance the need to maintain auditor independence with the benefit of taking advice from the leading firm in the area
concerned and the desirability of being efficient.
127
Notes to the financial statements continued
4 Exceptional items
Continuing operations
Impairment charges
Impairment reversals
Group restructuring including relocation costs
Onerous lease and other property costs
Closure of venues
Acquisition related costs
Pay provision
Business transformation costs
Exceptional operating costs*
Finance costs
Other financial losses
Taxation
Exceptional items ralating to continuing operations
Exceptional items relating to discontinued operations
Taxation
Exceptional items relating to discontinued operations
Total exceptional items
*
It is Group policy to reverse exceptional costs in the same line as they were originally recognised.
Year ended 30 June 2019 exceptional items
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
Note
10,11,12
10,11,12
21
5
5
6
6
(11.1)
–
–
(1.4)
–
(2.2)
(8.0)
(10.8)
(33.5)
(1.6)
–
5.0
(30.1)
(13.9)
1.8
(1.6)
(9.1)
(3.7)
(0.4)
–
–
(26.9)
(0.3)
(0.3)
4.9
(22.6)
1.5
1.5
–
–
(28.6)
(22.6)
Impairment charges
The Group recognised impairment charges of £11.1m, of which £10.7m relate to five venues within Grosvenor Casinos. Performance at these
venues has not been in line with expectations and is not expected to significantly improve in the future. These have been presented as an
exceptional item due to both its material scale and one-off nature.
Onerous lease and other property costs
The Group has recognised a net charge of £1.4m as a result of committed onerous costs on property leases.
A charge of £2.0m has been recognised within Mecca where the decision to close three Luda venues has been made. These costs have been
presented as an exceptional item due to both its material scale and one-off nature.
Acquisition related costs
Acquisition related costs of £2.2m include one-off costs to professional service firms that have resulted from acquisitions or potential acquisitions.
The finance cost and foreign exchange loss associated with contingent consideration payable has also been recognised as an exceptional finance
cost and exceptional other financial loss. This has been presented as an exceptional item due to its one-off nature.
Pay provision
The provision regarding the National Minimum Wage (NMW) Regulations has arisen because Rank’s pay averaging practice does not meet the strict
timing requirements of the NMW Regulations. Rank does not have any headline rates of pay below the NMW and over the course of a year
colleagues will have received their contractual rate of pay. However, in some pay periods where greater than average hours are worked colleagues
will have been paid less than that required in the NMW Regulations. The £8.0m exceptional cost represents Rank’s current best estimate of
payments that are required to be made for the previous six years. Rank continues to engage constructively with HMRC to conclude this matter as
swiftly as possible and make good any payments to current and former colleagues. This process is expected to last several more months.
Business transformation costs
The Group has incurred £10.8m of exceptional costs relating to the transformation programme. This is a multi-year change programme for the
Group focussed around revenue growth, cost savings/efficiencies and ensuring the key enablers including organisational capability, core technology
and key processes and systems are in place.
128 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
Discontinued operations
The £1.5m credit in respect of discontinued operations relates to the release of excess provisions for potential tax liabilities attributable to disposed
entities with historic tax audits. The provisions have been released following payments made during the year to settle the outstanding issues with
the relevant tax authorities.
Year ended 30 June 2018 exceptional items
Impairment charges
The Group recognised impairment charges of £13.9m, of which £9.8m related to five venues within Grosvenor Casinos, £3.4m related to eight
venues within Mecca and £0.7m related to a venue within Enracha. Performance at these venues (most notably admissions) has not been in line
with expectations and is not expected to significantly improve in the future. These have been presented as an exceptional item due to both its
material scale and one-off nature.
Impairment reversals
The Group reversed a £1.8m impairment charge in Enracha due to a reduction in the local gaming tax rate which has significantly improved
performance at one venue. This has been presented as an exceptional item due to both its material scale and one-off nature.
Group restructuring including relocation costs
In the first six months of 2017/18 the Group completed its group restructuring project. The total cost of the project was £10.4m, the remaining
£1.6m has been recognised in the current financial year. Total costs include costs associated with changes to management and team structures
at both venue and central levels, the decision to centralise support functions in a new office in Maidenhead and the merging of the separately run
brand teams supporting Digital into one operational team. This has been presented as an exceptional item due to both its material scale and
one-off nature.
Onerous lease and other property income
The Group has recognised a net charge of £9.1m as a result of committed onerous costs on property leases.
A charge of £9.0m has been recognised within Grosvenor. Of this charge £8.0m is attributable to two venues where expected improvements in
trading results have not been realised and unavoidable committed costs exceed forecast future trading performance and £1.0m to a potential
tenant for a vacant site deciding not to proceed despite advance negotiations to sub-let the onerous property.
Within Mecca a £0.3m charge has been recognised as a result of an increase in expected onerous costs at four venues and a £0.2m credit has
been recognised in Central due to revisions in expected future costs and income at onerous multi-let sites. These costs have been presented as an
exceptional item due to both its material scale and one-off nature.
Closure of venues
The Group has recognised a net charge of £3.7m as a result of closed clubs.
Grosvenor has recognised a £4.3m charge due to costs associated with closing a loss-making venue for which it is not expected the remaining
lease can be sublet. Mecca has recognised a net credit of £0.5m. This is due to £0.4m of cost from closing one club having been offset by a
£0.6m surrender premium having been received in return for agreeing to exit a lease early at one site and an additional £0.3m overage payment
having been received for a site previously disposed of. Enracha has recognised a net credit of £0.1m due to it having successfully won an
employee dispute for unfair dismissal at a disposed of club. These have been presented as an exceptional item due to both its material scale and
one-off nature.
Acquisition related costs
Acquisition related costs of £0.4m include one-off costs to professional service firms that have resulted from acquisitions. The finance cost and
foreign exchange loss associated with contingent consideration payable has also been recognised as an exceptional finance cost and exceptional
other financial loss. This has been presented as an exceptional item due to its one-off nature.
129
Notes to the financial statements continued
5 Financing
Continuing operations
Finance costs:
Interest on debt and borrowings 1
Amortisation of issue costs on borrowings1
Interest payable on finance leases
Unwinding of discount in property lease provisions
Total finance costs
Finance income:
Interest income on short-term bank deposits1
Interest income on loans1
Total finance income
Other financial losses
Total net financing charge before exceptional items
Exceptional finance costs
Exceptional other financial losses
Total net financing charge
1. calculated using the effective interest method.
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
(1.4)
(0.3)
(0.5)
(0.5)
(2.7)
0.1
–
0.1
(0.2)
(2.8)
(1.6)
–
(4.4)
(1.9)
(0.4)
(0.5)
(0.2)
(3.0)
0.2
0.1
0.3
(0.1)
(2.8)
(0.3)
(0.3)
(3.4)
Other financial losses include foreign exchange losses on loans and borrowings.
Exceptional finance costs and other financial losses includes interest recognised and foreign exchange loss on contingent and deferred
consideration payable as a result of the acquisition of QSB Gaming Limited (‘YoBingo’).
A reconciliation of total net financing charge before exceptional items to adjusted net interest included in adjusted profit is disclosed below:
Total net financing charge before exceptional items
Adjust for :
Other financial losses
Adjusted net interest payable
Year ended
30 June
2019
£m
(2.8)
Year ended
30 June
2018
£m
(2.8)
0.2
(2.6)
0.1
(2.7)
130 The Rank Group Plc Annual Report and Financial Statements 2019
6 Taxation
Current income tax
Current income tax – UK
Current income tax – overseas
Current income tax on exceptional items
Amounts over provided in previous period
Amounts over provided in previous period on discontinued operations
Total current income tax charge
Deferred tax
Deferred tax – UK
Deferred tax – overseas
Deferred tax on exceptional items
Amounts under provided in previous period
Total deferred tax credit (note 20)
Tax charge in the income statement
Financial statements
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
(10.6)
(4.6)
3.3
2.8
1.5
(7.6)
(0.4)
1.3
1.7
(0.5)
2.1
(5.5)
(11.3)
(3.7)
3.0
0.1
–
(11.9)
(0.5)
–
1.9
(0.3)
1.1
(10.8)
The tax on the Group’s profit before taxation differs from the standard rate of UK corporation tax in the period of 19.00% (year ended
30 June 2018: 19.00%). The differences are explained below:
Profit before taxation on continuing operations
Tax charge calculated at 19.00% on profit before taxation (year ended 30 June 2018: 19.00%)
Effects of:
Expenses not deductible for tax purposes
Difference in overseas tax rates
Adjustments relating to prior periods
Tax charge in the income statement
Year ended
30 June
2019
£m
34.6
(6.6)
Year ended
30 June
2018
£m
46.7
(8.9)
(2.8)
0.1
3.8
(5.5)
(1.9)
0.2
(0.2)
(10.8)
The adjustments relating to prior periods include a £1.5m credit in respect of discontinued operations. This relates to the release of excess
provisions for potential tax liabilities attributable to disposed entities with historic tax audits. The provisions have been released following payments
made during the year to settle the outstanding issues with the relevant tax authorities.
The remaining adjustments relating to prior periods relate to the release of provisions in respect of uncertain tax positions following agreement of the
impacted tax returns with the relevant tax authorities.
Tax on exceptional items
The taxation impacts of exceptional items are disclosed below:
Impairment charges
Impairment reversals
Group restructuring including relocation costs
Onerous lease and other property costs
Closure of venues
Pay provision
Business transformation costs
Finance costs and other financial losses
Tax credit on exceptional items
Year ended 30 June 2019
Year ended 30 June 2018
Current income
tax
£m
0.1
–
–
0.3
–
0.8
2.0
0.1
3.3
Deferred tax
£m
1.7
–
–
–
–
–
–
–
1.7
Total
£m
1.8
–
–
0.3
–
0.8
2.0
0.1
5.0
Current income
tax
£m
–
–
0.3
1.7
0.9
–
–
0.1
3.0
Deferred tax
£m
2.3
(0.4)
–
–
–
–
–
–
1.9
Total
£m
2.3
(0.4)
0.3
1.7
0.9
–
–
0.1
4.9
131
Notes to the financial statements continued
6 Taxation continued
Tax effect of items within other comprehensive income
Current income tax credit on exchange movements offset in reserves
Total tax credit on items within other comprehensive income
Year ended
30 June
2019
£m
0.1
0.1
Year ended
30 June
2018
£m
–
–
The debit in respect of employee share schemes included within the Statement of changes in equity includes a deferred tax charge of £0.1m
(year ended 30 June 2018: £0.1m credit).
Factors affecting future taxation
UK corporation tax is calculated at 19.00% (year ended 30 June 2018: 19.00%) of the estimated assessable profit for the period. Taxation for
overseas operations is calculated at the local prevailing rates.
On 8 July 2015, the Chancellor of the Exchequer announced the reduction in the main rate of UK corporation tax to 19.00% for the year starting
1 April 2017 and a further 1.00% reduction to 18.00% from 1 April 2020. These changes were substantively enacted in October 2015.
On 16 March 2016, the Chancellor of the Exchequer announced a further 1.00% reduction to the previously announced 18.00% main rate of UK
corporation tax to 17.00% from 1 April 2020. This change was substantively enacted in September 2016.
On 26 July 2017, the Belgian Government announced the reduction in the corporation tax rate in Belgium from 33.99% to 29.58% for financial years
beginning in 2018 and to 25.00% for financial years beginning in 2020 and onwards. These changes were substantively enacted in December 2017.
7 Results attributable to the parent company
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the parent company income
statement. The loss for the year ended 30 June 2019 for the Company was £7.5m (year ended 30 June 2018: profit of £275.9m). The loss includes
receipt of a dividend of £nil (year ended 30 June 2018: £549.4m) and a net impairment charge of £nil (year ended 30 June 2018: £262.8m) in
respect of its investment in subsidiary undertakings. Further details are provided in note 13.
8 Dividends paid to equity holders
Final dividend for 2016/17 paid on 31 October 2017 - 5.30p per share
Interim dividend for 2017/18 paid on 15 March 2018 - 2.15p per share
Final dividend for 2017/18 paid on 30 October 2018 - 5.30p per share
Interim dividend for 2018/19 paid on 14 March 2019 - 2.15p per share
Dividends paid to equity holders
Year ended
30 June
2019
£m
–
–
20.7
8.4
29.1
Year ended
30 June
2018
£m
20.7
8.4
–
–
29.1
A final dividend in respect of the year ended 30 June 2019 of 5.50p per share, amounting to a total dividend of £21.5m, is to be recommended at
the Annual General Meeting on 17 October 2019. These financial statements do not reflect this dividend payable.
132 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
9 Earning per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of ordinary shares in
issue during the year.
Profit (loss) attributable to equity shareholders
Continuing operations
Discontinued operations
Total
Year ended 30 June 2019
Year ended 30 June 2018
Before
exceptional
items
Exceptional
items
£57.7m
–
£57.7m
£(30.1)m
£1.5m
£(28.6)m
Total
£27.6m
£1.5m
£29.1m
Before
exceptional
items
£58.5m
–
£58.5m
Exceptional
items
£(22.6)m
–
£(22.6)m
Total
£35.9m
–
£35.9m
Weighted average number of ordinary shares in issue
390.7m
390.7m
390.7m
390.7m
390.7m
390.7m
Basic earnings (loss) per share
Continuing operations
Discontinued operations
Total
14.8p
–
14.8p
(7.7)p
0.3p
(7.4)p
7.1p
0.3p
7.4p
15.0p
–
15.0p
(5.8)p
–
(5.8)p
9.2p
–
9.2p
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all dilutive
potential ordinary shares.
Weighted average number of ordinary shares in issue
Effect of dilutive potential ordinary shares - share awards
Number of shares used for fully diluted earnings
per share
Basic earnings (loss) per share
Continuing operations
Discontinued operations
Total
Year ended 30 June 2019
Year ended 30 June 2018
Before
exceptional
items
390.7m
0.1m
Exceptional
items
390.7m
0.1m
Total
390.7m
0.1m
Before
exceptional
items
390.7m
£0.4m
Exceptional
items
390.7m
£0.4m
Total
390.7m
£0.4m
390.8m
390.8m
390.8m
391.1m
391.1m
391.1m
14.8p
–
14.8p
(7.7)p
0.3p
(7.4)p
7.1p
0.3p
7.4p
15.0p
–
15.0p
(5.8)p
–
(5.8)p
9.2p
–
9.2p
(c) Adjusted earnings per share
Adjusted earnings is calculated by adjusting profit attributable to equity shareholders to exclude discontinued operations, exceptional items, other
financial gains or losses, unwinding of the discount in disposal provisions and the related tax effects. Adjusted earnings is one of the business
performance measures used internally by management to manage the operations of the business. Management believes that the adjusted earnings
measure assists in providing a view of the underlying performance of the business.
Adjusted net earnings attributable to equity shareholders is derived as follows:
Profit attributable to equity shareholders
Adjust for:
Discontinued operations
Exceptional items after tax
Other financial losses
Adjusted net earnings attributable to equity shareholders (£m)
Adjusted earnings per share (p) - basic
Adjusted earnings per share (p) - diluted
Year ended
30 June
2019
£m
29.1
Year ended
30 June
2018
£m
35.9
(1.5)
30.1
0.2
57.9
14.8p
14.8p
–
22.6
0.1
58.6
15.0p
15.0p
133
Notes to the financial statements continued
10 Intangible assets
Group
Cost
At 1 July 2017
Exchange adjustments
Disposals
Additions
Acquisitions
At 30 June 2018
Exchange adjustments
Disposals
Additions
Acquisitions
At 30 June 2019
Aggregate amortisation and impairment
At 1 July 2017
Exchange adjustments
Charge for the year
Impairment charges
Impairment reversals
Disposals
At 30 June 2018
Exchange adjustments
Charge for the year
Impairment charges
Disposals
At 30 June 2019
Net book value at 30 June 2017
Net book value at 30 June 2018
Net book value at 30 June 2019
Casino
and other
gaming
licences and
concessions
£m
Software
and
development
£m
Brands and
customer
relationships
£m
Property
contracts
£m
Goodwill
£m
134.3
0.4
–
–
31.9
166.6
0.5
–
–
(0.5)
166.6
–
–
–
–
–
–
–
–
–
–
–
–
277.5
0.4
–
0.5
–
278.4
0.7
–
–
–
279.1
33.0
0.2
1.2
3.3
(1.2)
–
36.5
0.5
1.2
9.1
–
47.3
134.3
166.6
166.6
244.5
241.9
231.8
49.1
–
(3.9)
11.6
3.5
60.3
–
(2.2)
11.5
–
69.6
19.0
–
7.7
0.4
–
(3.9)
23.2
0.1
9.5
0.4
(2.1)
31.1
30.1
37.1
38.5
–
0.1
–
–
11.4
11.5
0.2
–
–
11.7
–
–
0.2
–
–
–
0.2
0.1
2.5
–
–
2.8
–
11.3
8.9
3.8
–
–
–
–
3.8
–
–
0.1
–
3.9
1.2
–
0.4
–
–
–
1.6
–
0.3
–
–
1.9
2.6
2.2
2.0
Total
£m
464.7
0.9
(3.9)
12.1
46.8
520.6
1.4
(2.2)
11.6
(0.5)
530.9
53.2
0.2
9.5
3.7
(1.2)
(3.9)
61.5
0.7
13.5
9.5
(2.1)
83.1
411.5
459.1
447.8
Impairment charges for the year of £9.5m (30 June 2018: £3.7m) comprise of £9.5m (30 June 2018: £3.4m) recognised in respect of exceptional
items relating to continuing operations and £nil (30 June 2018: £0.3m) in respect of operating profit before exceptional items. There were no
impairment reversals in the current year (30 June 2018: £1.2m).
Software includes internally-generated computer software and development technology with a net book value of £23.6m (30 June 2018: £22.2m).
Property contracts, brands and customer relationships are fair value adjustments that arose on acquisition.
Included in software and development are assets in the course of construction of £3.0m (30 June 2018: £15.0m).
Indefinite life intangible assets have been reviewed for impairment as set out in note 12.
134 The Rank Group Plc Annual Report and Financial Statements 2019
11 Property, plant and equipment
Group
Cost
At 1 July 2017
Exchange adjustments
Additions
Disposals
At 30 June 2018
Exchange adjustments
Additions
Disposals
At 30 June 2019
Accumulated depreciation and impairment
At 1 July 2017
Exchange adjustments
Charge for the year
Impairment charges
Impairment reversals
Disposals
At 30 June 2018
Exchange adjustments
Charge for the year
Impairment charges
Disposals
At 30 June 2019
Net book value at 30 June 2017
Net book value at 30 June 2018
Net book value at 30 June 2019
Financial statements
Land and
buildings
£m
116.7
0.1
8.5
(0.4)
124.9
0.2
3.0
(3.7)
124.4
64.8
0.1
4.0
1.7
–
(0.1)
70.5
0.1
4.0
0.7
(3.3)
72.0
51.9
54.4
52.4
Fixtures,
fittings,
plant and
machinery
£m
433.6
0.6
18.9
(8.2)
444.9
1.0
20.7
(3.8)
462.8
297.6
0.5
29.5
9.0
(0.6)
(8.2)
327.8
0.7
27.7
1.2
(3.7)
353.7
136.0
117.1
109.1
Total
£m
550.3
0.7
27.4
(8.6)
569.8
1.2
23.7
(7.5)
587.2
362.4
0.6
33.5
10.7
(0.6)
(8.3)
398.3
0.8
31.7
1.9
(7.0)
425.7
187.9
171.5
161.5
Impairment charges for the year of £1.9m (30 June 2018: £10.7m) comprise of £1.6m (30 June 2018: £10.5m) which has been recognised in
respect of exceptional items relating to continuing operations and £0.3m (30 June 2018: £0.2m) in respect of operating profit before exceptional
items. There were no impairment reversals in the current year (30 June 2018: £0.6m).
Finance leases
The net book value of property, plant and equipment held under finance leases was:
Land and buildings
Fixtures, fittings, plant and machinery
Net book value at end of period
As at
30 June
2019
£m
2.5
0.9
3.4
As at
30 June
2018
£m
3.5
1.4
4.9
There were no additions to assets held under finance leases in the both the current and prior year. The net book value of assets held under finance
leases disposed of in the year was £0.4m (year ended 30 June 2018: £nil).
Assets under construction
Included in property, plant and equipment are assets in the course of construction of £11.9m (30 June 2018: £6.2m).
135
Notes to the financial statements continued
12 Impairment reviews
At 30 June 2019, the Group had the following goodwill and intangible assets with indefinite useful life:
Digital goodwill (UK)
Digital goodwill (Spain)
Grosvenor Venues goodwill
Total goodwill
Casino licences
Spanish bingo licences
Total casino and other gaming licences*
As at
30 June 2019
£m
£53.4
£32.3
£80.9
£166.6
As at
30 June 2018
£m
£53.4
£32.3
£80.9
£166.6
£220.1
£11.1
£231.2
£229.1
£11.0
£240.1
*
In note 10 £0.6m (30 June 2018: £1.8m) of casino and other gaming licences relate to definite life assets
The Group performs an annual impairment review for goodwill and other intangible assets with indefinite lives, by comparing the carrying amount of
these assets with their recoverable amount. The recoverable amount is determined based on the higher of the fair value less costs of disposal and
value in use. The nature of the test requires that the directors exercise judgement and estimation.
The most recent test was conducted in May 2019. Testing is carried out by allocating the carrying value of these assets to cash-generating units
(CGUs) and determining the recoverable amounts of those CGUs. Where the recoverable amount exceeds the carrying value of the assets, the
assets are considered not impaired. If there are legacy impairments for such assets, these are considered for reversal.
Value in use calculations are based upon estimates of future cash flows derived from the Group’s annual budget for the next financial year and the
Group’s strategic plan for the following two years. The budget and strategic plan are updated in the final quarter of the year and have been
approved by the board of directors. Future cash flows will also include an estimate of long term growth rates which are estimated by division.
Discount rates are applied to each CGU’s cash flows and reflect both the time value of money and the risks that apply to the cash flows of that
CGU. These are estimated by management based on typical debt and equity costs for listed gaming and betting companies with similar risk profiles.
The discount rates are calculated on a pre-tax basis and the calculations incorporate estimates of the tax rates that will apply to the future cash
flows of the applicable CGU.
The principal assumptions underlying the CGU cash flow forecasts include:
• the underlying business model will continue to operate on a comparable basis, adjusted for expected regulatory or tax changes and planned
business initiatives;
• long term growth or decline trends in customer visits and spend per visit will continue, adjusted for changes in the business model or expected
changes in the wider industry or economy;
• CGUs will achieve normal win margins, which are based upon historic experience;
• expenses are assessed separately by category through a bottom-up process. Assumptions include an extrapolation of recent cost inflation
trends, known inflation trends such as national living wage and an expectation that costs will be incurred in line with agreed contractual rates.
136 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
The other significant assumptions incorporated into impairment reviews are those relating to discount rates and long-term growth.
Grosvenor Venues*
Mecca Venues
Digital (UK)
Digital (Spain)
International Venues
Discount rate
Long term growth rate
2018/19
11.5%
11.5%
10.8%
10.0%
2017/18
11.5%
11.5%
11.0%
n/a
12.8% – 13.3% 13.0% – 13.5%
2018/19
2%
0%
2%
2%
2%
2017/18
2%
0%
2%
n/a
2%
* Discount rate and long term growth rate applied to Grosvenor Venues goodwill and casino licences.
Where a CGU does not have an indefinite life intangible, the CGU is only assessed for impairment where an indicator of impairment to the
associated definite life intangible and/or property, plant and equipment is identified.
During the period, the following indicators of impairment were identified at several CGUs:
• a sustained period of club underperformance.
During the period no indicators of an impairment reversal were identified.
The approach to determine recoverable amounts for a CGU where an indicator is present remains the same and is determined based on the higher
of fair value less costs of disposal and value in use.
As a result of the procedures outlined above, the following impairment charges and reversals were recognised during the year:
£m
Property plant and equipment
Grosvenor Venues
Mecca Venues
Intangible assets
Grosvenor Venues
Digital
Total
Impairments recognised
Exceptional loss
Continuing
operation loss
(1.6)
–
(9.1)
(0.4)
(11.1)
–
(0.3)
–
–
(0.3)
Total
(1.6)
(0.3)
(9.1)
(0.4)
(11.4)
Sensitivity of impairment review
For CGUs reviewed in May 2019, no impairment would occur under any reasonable possible changes in assumptions upon which the recoverable
amount was estimated other than within the Grosvenor Venues segment.
For Grosvenor Venues an increase of 1% in the discount rate would result in an impairment of approximately £7.0m and a decrease of 1% or more
in the growth rate would result in headroom being extinguished.
137
Notes to the financial statements continued
13 Investments
Group – equity investment
Other investment
Net book value at end of year
As at
30 June
2019
£m
3.5
3.5
As at
30 June
2018
£m
3.5
3.5
On 4 June 2018 the Group exercised its right to convert £3.5m of principal loan notes due from its digital platform provider into 17.18% of their
share capital. Due to the Group having an irrevocable right to the shares and notice having been issued pre-year end the loan was been recognised
as an investment as at 30 June 2018, share certificates were received on 6 July 2018. The Group considered whether it had significant influence
over its digital platform provider but concluded this was not the case and therefore the holding is not considered an investment in an associate.
Based on the latest known financial performance and knowledge of the intellectual property that has been developed the fair value of the investment
is considered to equate to its cost.
Company – investment in subsidiaries
Cost
At start of year
Movements
At end of year
Provision for impairment
At start of year
Impairment charge
Impairment reversal
At end of year
As at
30 June
2019
£m
1,452.3
–
1,452.3
320.5
–
–
320.5
As at
30 June
2018
£m
1,452.5
(0.2)
1,452.3
57.7
286.7
(23.9)
320.5
Net book value at end of year
1,131.8
1,131.8
In the prior year the Company recognised an impairment charge of £286.7m due to the receipt of a £549.4m dividend from a subsidiary, as part of a
project to simplify the Group’s organisational structure and to increase reserves available for distribution, and recognised an impairment reversal of
£23.9m, due to an increase in the assessed value of one of its subsidiaries. The Company also recognised a £0.2m reduction in cost which related
to the movement in fair value of services, recognised by subsidiary undertakings, arising from equity-settled share awards granted as part of the
LTIP reward by the Company.
A list of the significant company investments in subsidiaries, including the name, country of incorporation, registered office and proportion of
ownership interest is given in note 33.
14 Inventories
Finished goods
There were no write downs of inventory in either year.
Group
As at
30 June
2019
£m
2.7
As at
30 June
2018
£m
2.5
138 The Rank Group Plc Annual Report and Financial Statements 2019
15 Other receivables
Current
Other receivables
Less: provisions for impairment of other receivables
Other receivables – net
Prepayments
Non-current
Other receivables
Financial statements
Group
As at
30 June
2019
£m
8.1
(1.7)
6.4
20.8
27.2
4.1
4.1
As at
30 June
2018
£m
8.2
(0.3)
7.9
21.3
29.2
3.7
3.7
Group
The directors consider that the carrying value of other receivables and convertible loan notes approximate to their fair value.
As at 30 June 2019 other receivables of £1.6m (30 June 2018: £0.8m) were past due but not impaired.
The other classes within receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold
any collateral as security.
16 Trade and other payables
Current
Trade payables
Social security and other taxation
Contingent consideration
Deferred consideration
Other payables
Trade and other payables – current
Non-current
Deferred consideration
Other payables
Trade and other payables – non-current
Group
Company
As at
30 June
2019
£m
12.4
34.6
0.7
1.8
95.7
145.2
–
26.0
26.0
As at
30 June
2018
£m
4.9
32.0
24.0
–
92.2
153.1
1.7
28.9
30.6
As at
30 June
2019
£m
As at
30 June
2018
£m
–
–
–
–
0.2
0.2
–
–
–
–
–
–
–
0.1
0.1
–
–
–
Other payables includes £2.9m current payables (30 June 2018: £2.9m) and £26.0m non-current payables (30 June 2018: £28.9m) in respect of
above market rent property contracts acquired through business combinations.
139
Notes to the financial statements continued
17 Income tax
Income tax receivable
Income tax payable – Continuing operations
Income tax payable – Discontinued operations
Income tax payable
Net income tax payable
Group
As at
30 June
2019
£m
0.6
(7.2)
–
(7.2)
(6.6)
As at
30 June
2018
£m
–
(8.3)
(2.0)
(10.3)
(10.3)
Income tax payable on discontinued operations as at 30 June 2018 related to potential tax liabilities attributable to disposed entities with historic tax
audits. During the year a payment of £0.5m was made to settle the outstanding issues.
18 Financial assets and liabilities
(a) Interest-bearing loans and borrowings
Current interest-bearing loans and borrowings
Bank overdrafts
Obligations under finance leases
Term loans
Other current loans
Accrued interest
Unamortised facility fees
Total current interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings
Obligations under finance leases
Total non-current interest-bearing loans and borrowings
Total interest-bearing loans and borrowings
Sterling
Total interest-bearing loans and borrowings
Maturity
On demand
Various
March 2020
July 2019
Various
Various
Group
As at
30 June
2019
£m
3.1
1.6
50.0
0.1
(0.1)
54.7
5.3
5.3
60.0
60.0
60.0
As at
30 June
2018
£m
2.7
1.5
50.0
0.1
(0.1)
54.2
5.5
5.5
59.7
59.7
59.7
Bank overdrafts
Bank overdrafts are for short-term funding and are repayable on demand.
Term loan facilities
The term loan was reduced down during the first half of the year in line with the agreed amortisation profile. A total repayment of £30.0m was made
in August 2018. In January 2019, Rank refinanced its remaining £20.0m term loan facilities to ensure sufficient debt facilities were in place to cover
the deferred consideration payment regarding the acquisition of YoBingo and certain transformation costs. Following the refinancing the term loan
banking facilities now total £50.0m and comprise three bi-lateral facilities. Two of the three facilities expire in January 2020 with the third in
March 2020. Interest is payable on a periodic basis depending on the loan drawn. The facilities carry floating rates of interest which are LIBOR
dependant. The total drawn term loans at 30th June 2019 was £50.0m (30th June 2018: £50.0m).
To facilitate the offer by Rank of Stride Gaming plc, a five-year £128.1m term loan was secured in the year. The facility is committed and will be
available for drawing once all the necessary acquisition conditions are fulfilled or, where applicable, waived on completion. The facility agreement can
be found at www.rank.com/en/investors/offer-for-stride-gaming-plc.html
140 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
Revolving credit facilities
Five year facilities were signed on 29th September 2015 consisting three multi-currency revolving credit bi-lateral facilities totalling £90.0m. Interest is
payable on a periodic basis depending on the loan drawn. The facilities carry floating rates of interest which are LIBOR dependant. There were no
drawings on the multi-currency revolving credit facilities at 30 June 2019, providing the Group with £90.0m of undrawn committed facilities.
Covenants
The Group complied with all its covenants during the year.
Company
The Company did not hold any external interest bearing loans or borrowings at 30 June 2019 (30 June 2018: £nil). The Company holds interest
bearing loans with other Group companies at 30 June 2019 of £389.5m (30 June 2018: £353.6m)
(b) Hedging activities
The Group has not carried out any hedging activities in either period.
(c) Fair values
The table below is a comparison by class of the carrying amounts and fair value of the Group and Company’s financial instruments at 30 June 2019
and 30 June 2018.
Group
Financial assets:
Equity Investments
Other investment – unquoted equity shares
Loans and receivables
Other receivables
Cash and short-term deposits
Total
Financial liabilities:
Other financial liabilities
Interest bearing loans and borrowings
• Obligations under finance leases
• Floating rate borrowings
• Bank overdrafts
• Other
Trade and other payables
Property leases
Contingent consideration
Deferred consideration
Total
Carrying amount
Fair value
As at
30 June
2019
£m
As at
30 June
2018
£m
As at
30 June
2019
£m
As at
30 June
2018
£m
Fair value
hierarchy
Level 3
3.5
3.5
3.5
3.5
Level 2
Level 1
0.9
61.8
66.2
1.6
50.4
55.5
0.9
61.8
66.2
1.6
50.4
55.5
Level 2
Level 2
Level 1
Level 2
Level 2
Level 2
Level 3
Level 3
6.9
50.0
3.1
–
88.8
33.5
0.7
1.8
184.8
7.0
50.0
2.7
0.1
78.5
36.0
24.0
1.7
200.0
6.9
50.0
3.1
–
88.8
33.5
0.7
1.8
184.8
7.0
50.0
2.7
0.1
78.5
36.0
24.0
1.7
200.0
141
Notes to the financial statements continued
18 Financial assets and liabilities continued
Company
Financial assets:
Loans and receivables
Cash and short-term deposits
Total
Financial liabilities:
Other financial liabilities
Trade and other payables
Financial guarantee contracts
Amounts owed to subsidiary undertakings
Total
Fair value
hierarchy
Level 1
Carrying amount
Fair value
As at
30 June
2019
£m
As at
30 June
2018
£m
As at
30 June
2019
£m
As at
30 June
2018
£m
–
–
0.4
0.4
–
–
0.4
0.4
Level 2
Level 2
Level 2
0.2
1.6
389.5
391.3
0.1
1.7
353.6
355.4
0.2
1.6
389.5
391.3
0.1
1.7
353.6
355.4
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The following methods and assumption:
• Cash and short-term deposits, other receivables, bank overdrafts and other financial liabilities approximate to their carrying amounts largely due to
the short-term maturities of these instruments;
• The fair value of fixed rate borrowings is based on price quotations at the reporting date;
• The fair value of floating rate borrowings and obligations under finance leases approximates to their carrying amounts; and
• The fair value of onerous property leases and lease disposal settlements approximate their carrying amount as they are discounted at
current rates.
Fair value hierachy
The Group uses the following hierachy to determine the carrying value of financial instruments that are measured at fair value:
Level 1: quoted (unadjusted) prices in active markets identical assets or liabilities.
Level 2: other techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
142 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
19 Financial risk management objectives and policies
Financial risk factors
The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to
finance the Group’s operations. The Group has other receivables, and cash and short-term deposits that derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk.
The Group’s overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group’s financial performance.
The Group’s senior management oversees the management of these risks. The finance committee is supported by the Group’s senior management,
which advises on financial risks and the appropriate financial risk governance framework for the Group. The finance committee provides assurance
that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and the financial risks are identified, measured
and managed in accordance with Group policies and risk appetite.
The board of directors reviews and agrees policies for managing each of these risks, which are summarised below.
(a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Financial
instruments affected by market risk include loans and borrowings and deposits.
The sensitivity analyses in the following sections relate to the positions at 30 June 2019 and 30 June 2018.
The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating rates of the debt and the
proportion of financial instruments in foreign currencies are all constant.
(i) Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or
expense is denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.
The Group’s current policy is not to hedge foreign currency risk.
Foreign currency sensitivity
The following table demonstrates the sensitivity of a possible change in the euro, with all other variables held constant, to the Group’s profit before
tax and the Group’s equity. The Group’s exposure to foreign currency changes for all other currencies is not material.
Change in foreign exchange rates:
+10.0% euro
-10.0% euro
Effect on profit before tax
Effect on equity
As at
30 June
2019
£m
(0.1)
0.2
As at
30 June
2018
£m
(0.1)
0.1
As at
30 June
2019
£m
1.8
(1.8)
As at
30 June
2018
£m
(13.0)
13.0
(ii) Cash flow and fair value interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with floating
interest rates.
Historically the Group had managed its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. Due to the
current economic climate the Group has exercised its right to operate outside the Group policy of maintaining between 40% and 60% of its
borrowings at fixed rate of interest. At 30 June 2019, 12% of the group's borrowings were at a fixed rate of interest (30 June 2018: 12%).
(iii) Interest rate sensitivity
The table below demonstrates the sensitivity to a possible change in interest rates on income and equity for the year when this movement is applied
to the carrying value of loans, borrowings, cash and short-term deposits.
Sterling:
100 basis point increase
200 basis point increase
Effect on profit before tax
As at
30 June
2019
£m
(0.4)
(0.8)
As at
30 June
2018
£m
(0.5)
(1.0)
143
Notes to the financial statements continued
19 Financial risk management objectives and policies continued
There was no impact on equity in either year as a consequence of loan arrangements.
Due to current low interest rates, any further decline would not have a material impact on income and equity for the year. As such, sensitivity to a
decrease in interest rates has not been presented.
The Group did not enter into any fixed-to-floating or floating-to-fixed interest rate swaps in either year.
(b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
The Group is exposed to credit risk from its operating activities (primarily for other receivables) and from its financing activities, including deposits
with banks and financial institutions, foreign exchange transactions and other financial instruments.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s
policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.
Counterparty credit limits are reviewed by the Chief Financial Officer, and may be updated throughout the year subject to the approval of the
Group’s Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential
counterparty failure.
The credit worthiness of each counterparty is checked against independent credit ratings on at least a weekly basis, with a minimum rating of ‘BB’.
The Group predominantly invests with its lending banks when appropriate.
Sales to retail customers are settled in cash or using major credit and debit cards and therefore the exposure to credit risk is not
considered significant.
No credit limits were exceeded during the reporting period and management does not expect any material losses from non-performance of
its counterparties.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not have sufficient funds to meet its liabilities. Cash forecasts identifying the liquidity requirements of the
Group are produced three times a year. The cash forecasts are sensitivity tested for different scenarios and are reviewed regularly. Forecast financial
headroom and debt covenant compliance is reviewed monthly during the month-end process to ensure sufficient headroom exists for at least a
12 month period.
Due to the dynamic nature of the underlying businesses, Group treasury aims to maintain flexibility in funding by keeping committed credit lines
available. A three-year strategic forecast is prepared annually to facilitate planning for future financing needs. Management actively manages the
Group’s financing requirements and the range of maturities on its debt.
The Group’s core debt facilities are the £90.0m (30 June 2018: £90.0m) bank facility comprising three bi-lateral bank facilities which expire in
September 2020 and the £50.0m (30 June 2018: £50.0m) bank facility comprising three bi-lateral bank facilities which expire in January and March
2020. The Group proactively manages its relationships with its lending group.
The funding policy of the Group is to maintain, as far as practicable, a broad portfolio of debt diversified by source and maturity, and to maintain
committed facilities sufficient to cover seasonal peak anticipated borrowing requirements.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
At 30 June 2019
Interest-bearing loans and borrowings1
Trade and other payables
Property leases
Contingent & deferred consideration
At 30 June 2018
Interest-bearing loans and borrowings1
Trade and other payables
Property leases
Contingent & deferred consideration
Less than
Greater than
On demand
£m
12 months
£m
1 to 2 years
£m
2 to 5 years
£m
5 years
£m
3.1
–
–
–
3.1
2.7
–
–
–
2.7
52.2
88.8
6.7
2.5
150.2
52.3
78.5
6.7
25.3
162.8
1.2
–
4.8
–
6.0
1.9
–
4.3
1.8
8.0
1.9
–
10.9
–
12.8
2.9
–
11.6
–
14.5
2.2
–
17.1
–
19.3
1.8
–
20.0
–
21.8
Total
£m
60.6
88.8
39.5
2.5
191.4
61.6
78.5
42.6
27.1
209.8
1. The bank facility interest payments were based on current LIBOR as at the reporting date.
Interest payments on the interest-bearing loans and borrowings have been projected until the instruments mature.
144 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
Capital management
As a result of the difficult conditions that developed in the global capital markets in recent years, the Group’s objectives when managing capital have
been to ensure continuing access to existing debt facilities and to manage the borrowing cost of those facilities in order to minimise the Group’s
interest charge.
Consistent with others in the gaming industry, the Group monitors capital on the basis of leverage ratio. The ratio is calculated as net debt divided
by EBITDA. Net debt is calculated as total borrowings (including ‘loans and borrowings’ as shown in the consolidated balance sheet) less cash and
short-term deposits, accrued interest and unamortised facility fees. EBITDA is calculated as operating profit before exceptional items, depreciation
and amortisation from continuing operations.
The leverage ratios at 30 June 2019 and 30 June 2018 were as follows:
Total loans and borrowings (note 18)
Less: Cash and short-term deposits
Less: Accrued interest
Less: Unamortised facility fees
Net (cash) debt
Continuing operations
Operating profit before exceptional
Add: Depreciation and amortisation
EBITDA
Leverage ratio
As at
30 June
2019
£m
60.0
(61.8)
(0.1)
0.1
(1.8)
72.5
45.2
117.7
As at
30 June
2018
£m
59.7
(50.4)
(0.1)
0.1
9.3
77.0
43.0
120.0
–
0.1
Taking into consideration both the Group’s capital investment requirements and the stability of the wider economic environment, the Group
considers its progressive dividend policy to be appropriate.
Collateral
The Group did not pledge or hold any collateral at 30 June 2019 (30 June 2018: £nil).
Company
The maximum exposure to credit risk at the reporting date is the fair value of its Cash and short-term deposits of £nil (30 June 2018: £0.4m).
The Company does not have any other significant exposure to financial risks.
20 Deferred tax
The analysis of deferred tax included in the financial statements at the end of the year is as follows:
Deferred tax assets:
Accelerated capital allowances
Tax losses carried forward
Business combinations – property lease fair value adjustments
Other UK temporary differences
Deferred tax assets
Deferred tax liabilities:
Other overseas temporary differences
Business combinations – non-qualifying properties
Temporary differences on UK casino licences
Deferred tax liabilities
Net deferred tax liability
Group
As at
30 June
2019
£m
13.9
0.1
3.4
0.8
18.2
(6.6)
(0.5)
(33.1)
(40.2)
As at
30 June
2018
£m
13.6
0.4
4.0
0.8
18.8
(7.9)
(0.5)
(34.4)
(42.8)
(22.0)
(24.0)
145
Notes to the financial statements continued
20 Deferred tax continued
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and current tax liabilities and it is the
intention to settle the balances on a net basis. Deferred tax assets and liabilities of £18.1m (30 June 2018: £18.4m) have been offset and disclosed
on the balance sheet as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
Group
As at
30 June
2019
£m
0.1
(22.1)
(22.0)
As at
30 June
2018
£m
0.4
(24.4)
(24.0)
The deferred tax assets recognised are recoverable against future taxable profits that the directors consider more likely than not to occur on the
basis of management forecasts.
The Group has overseas tax losses of £nil (30 June 2018: £nil) that are carried forward for offset against suitable future taxable profits.
The Group has UK capital losses carried forward of £783m (30 June 2018: £783m). These losses have no expiry date and are available for offset
against future UK chargeable gains. No deferred tax asset (30 June 2018: £nil) has been recognised in respect of these capital losses as no further
utilisation is currently anticipated.
Temporary differences associated with Group investments
There was no deferred tax liability recognised (30 June 2018: £nil) for taxes that would be payable on the unremitted earnings of certain subsidiaries.
The Group has determined that any unremitted earnings that do not fall within the dividend exemption introduced in the Finance Act 2009 will not be
distributed in the foreseeable future and the parent company does not foresee giving such consent at the balance sheet date.
The deferred tax included in the Group income statement is as follows:
Group
Year
ended
30 June
2019
£m
0.3
(0.3)
(0.6)
1.3
1.4
2.1
Group
30 June
2019
£m
(24.0)
–
–
2.1
(0.1)
(22.0)
Year
ended
30 June
2018
£m
1.3
0.3
(0.3)
0.3
(0.5)
1.1
30 June
2018
£m
(19.8)
(0.1)
(5.3)
1.1
0.1
(24.0)
Deferred tax in the income statement
Accelerated capital allowances
Tax losses
Business combinations – property lease fair value adjustments
Temporary differences on UK casino licences
Other temporary differences
Total deferred tax credit
The deferred tax movement on the balance sheet is as follows:
As at start of year
Exchange adjustments
Acquisition of QSB Gaming Limited ('YoBingo')
Deferred tax credit in the income statement
Deferred tax (charge) credit to other comprehensive income and equity
As at end of year
146 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
21 Provisions
Group
At 1 July 2018
Unwinding of discount
Charge to the income statement – exceptional
Release to the income statement – exceptional
Utilised in year
At 30 June 2019
Current
Non-current
Total
Property
lease
provisions
£m
36.0
0.5
2.3
(0.9)
(4.4)
33.5
5.3
28.2
33.5
Disposal
provisions
£m
4.0
–
–
–
(0.1)
3.9
0.2
3.7
3.9
Restructuring
provisions
£m
0.4
–
–
–
(0.2)
0.2
0.2
–
0.2
Indirect tax
provision
£m
1.2
–
–
–
–
1.2
1.2
–
1.2
Pay
provision
£m
–
–
8.0
–
–
8.0
8.0
–
8.0
Total
£m
41.6
0.5
10.3
(0.9)
(4.7)
46.8
14.9
31.9
46.8
Provisions have been made based on management’s best estimate of the future cash flows, taking into account the risks associated with
each obligation.
Property lease provisions
The Group is party to a number of leasehold property contracts. Provision has been made against those leases where the property or part of the
property is now vacant and the unavoidable costs under the lease exceed the economic benefit expected to be derived from potential sub-letting
arrangements. Provision has also been made against leases where impairment testing has indicated that, after recognising an impairment charge,
the estimated discounted cash flows derived from the property and its associated operations are insufficient to cover the unavoidable lease costs
and the lease is therefore deemed onerous. These leases have a weighted average unexpired life of 10 years (30 June 2018: 10 years). Of the
provision totalling £33.5m, it is estimated £19.3m will be utilised over periods ranging from one to five years, £9.5m will be utilised over periods
ranging from five to 10 years; and the remaining £4.7m will be utilised over periods in excess of 10 years.
Disposal provisions
Provision has been made for legacy industrial disease and personal injury claims, deferred payments arising from the settlement of property lease
obligations and other directly attributable costs arising as a consequence of the sale or closure of the businesses. The timing of any personal injury
claims is uncertain and therefore these claims have been included in the maturity analysis based on management’s best estimates. The disposal
provisions held comprise the following:
Legacy industrial disease and personal injury claims
Other
Total disposal provisions
As at
30 June
2019
£m
3.8
0.1
3.9
As at
30 June
2018
£m
3.8
0.2
4.0
Restructuring provisions
A provision of £0.2m (30 June 2018: £0.4m) has been made for remaining exceptional restructuring and relocation costs.
Indirect tax provision
The indirect tax provision relates to an amusement machine licence duty claim by HMRC. The balance of £1.2m represents the directors’ best
estimate of the outflow likely to arise.
Pay provision
The provision regarding the National Minimum Wage (NMW) Regulations has arisen because Rank’s pay averaging practice does not meet the strict
timing requirements of the NMW Regulations. Rank does not have any headline rates of pay below the NMW and over the course of a year
colleagues will have received their contractual rate of pay. However, in some pay periods where greater than average hours are worked colleagues
will have been paid less than that required in the NMW Regulations. The £8.0m exceptional cost represents Rank’s current best estimate of
payments that are required to be made for the previous six years. Rank continues to engage constructively with HMRC to conclude this matter as
swiftly as possible and make good any payments to current and former colleagues. This process is expected to last several more months.
147
Notes to the financial statements continued
21 Provisions continued
Company
Provision has been made for legacy industrial disease and personal injury claims. The timing of any personal injury claims is uncertain and therefore
these claims have been included in the maturity analysis based on management’s best estimates. The disposal provisions held comprise the following:
Legacy industrial disease and personal injury claims
Other
Disposal provisions
Current
Non-current
Total
22 Share capital
Authorised ordinary shares of 13 8/9p each
As at 30 June 2018 and 30 June 2019 – issued and fully paid
23 Notes to cash flow
Reconciliation of operating profit to cash generated from continuing operations:
Continuing operations
Operating profit (loss)
Exceptional items
Operating profit before exceptional items
Depreciation and amortisation
Settlement of share based payments
Share-based payments
Loss on disposal of property, plant and equipment
Gain on surrender of finance lease
Impairment of intangible assets
Impairment of property, plant and equipment
(Increase) decrease in inventories
Decrease (increase) in other receivables
Increase (decrease) in trade and other payables
Cash utilisation of provisions (see note 21)
Cash payments in respect of exceptional items
Cash generated from operations
148 The Rank Group Plc Annual Report and Financial Statements 2019
As at
30 June
2019
£m
1.1
–
1.1
0.2
0.9
1.1
As at 30 June 2019
As at 30 June 2018
Number
m
1,296.0
Nominal
value
£m
180.0
Number
m
1,296.0
As at 30 June 2019
As at 30 June 2018
Number
m
390.7
Nominal
value
£m
54.2
Number
m
390.7
As at
30 June
2018
£m
1.1
0.1
1.2
0.2
1.0
1.2
Nominal
value
£m
180.0
Nominal
value
£m
54.2
Group
Company
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
Year ended
30 June
2019
£m
Year ended
30 June
2018
£m
39.0
33.5
72.5
45.2
(0.4)
1.1
0.2
(0.3)
–
0.3
(0.2)
3.7
6.9
129.0
(4.7)
(11.2)
113.1
50.1
26.9
77.0
43.0
(1.7)
(0.2)
0.3
–
0.3
0.2
0.3
(3.4)
(6.4)
109.4
(5.8)
(1.2)
102.4
0.1
–
0.1
–
–
–
–
–
–
–
–
–
(0.1)
–
(0.1)
–
(0.1)
(261.8)
262.8
1.0
–
(0.6)
(0.2)
–
–
–
–
–
–
(0.8)
(0.6)
(0.1)
–
(0.7)
24 Cash and short-term deposits
Cash at bank and on hand
Short-term deposits
Total
The analysis of cash and short-term deposits by currency is as follows:
Sterling
Euro
Total
Financial statements
Group
As at
30 June
2019
£m
52.3
9.5
61.8
Group
As at
30 June
2019
£m
53.1
8.7
61.8
As at
30 June
2018
£m
49.4
1.0
50.4
As at
30 June
2018
£m
42.7
7.7
50.4
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods depending on the
immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
Company
At 30 June 2019 the Company had cash and short-term deposits of £nil (30 June 2018: £0.4m).
25 Reconciliation of cash flow from financing activities
Reconciliation of net debt:
Cash and cash equivalents
Borrowings
Net cash (debt)
For the purpose of the statements of cash flow, cash and cash equivalents comprise the following:
Cash at bank and on hand
Short-term deposits
Bank overdrafts
Total
Changes in liabilities arising from financing activities:
Obligations under finance leases
Term loans
Total borrowings
Group
As at
30 June
2019
£m
58.7
(56.9)
1.8
Group
As at
30 June
2019
£m
52.3
9.5
61.8
(3.1)
58.7
As at
30 June
2018
£m
47.7
(57.0)
(9.3)
As at
30 June
2018
£m
49.4
1.0
50.4
(2.7)
47.7
Transactions year ended
30 June 2019
As at 30 June
2019
£m
6.9
50.0
56.9
Cash flow
1.2
–
1.2
Non-cash
changes
(1.1)
–
(1.1)
As at 30 June
2018
£m
7.0
50.0
57.0
149
Notes to the financial statements continued
26 Employees and directors
(a) Employee benefit expense for the Group during the year
Wages and salaries
Social security costs
Pension costs
Share-based payments
The Company has no employees (year ended 30 June 2018: nil).
(b) Average monthly number of employees
Grosvenor Venues
Mecca Venues
Digital
International Venues
Central Costs
(c) Key management compensation
Full-time
Year ended
30 June
2019
3,435
594
246
539
326
5,140
Part-time
Year ended
30 June
2019
1,593
2,079
14
105
48
3,839
Total
Year ended
30 June
2019
5,028
2,673
260
644
374
8,979
Full-time
Year ended
30 June
2018
4,025
597
187
502
328
5,639
Salaries and short-term employee benefits (including social security costs)
Termination benefits
Post-employment benefits
Share-based payments
Year ended
30 June
2019
£m
178.8
16.5
4.9
1.1
201.3
Part-time
Year ended
30 June
2018
1,752
2,330
11
98
38
4,229
Year ended
30 June
2019
£m
3.5
0.7
0.3
0.9
5.4
Year ended
30 June
2018
£m
192.0
18.0
4.5
(0.2)
214.3
Total
Year ended
30 June
2018
5,777
2,927
198
600
366
9,868
Year ended
30 June
2018
£m
3.4
0.4
0.3
(0.3)
3.8
Included in key management compensation are bonuses of £nil in respect of the current year (year ended 30 June 2018: £0.2m).
Key management is defined as the directors of the Group and the management team, details of which are set out on page 28. Further details of
emoluments received by directors are included in the remuneration report.
(d) Directors’ interests
The directors’ interests in shares of the Company, including conditional awards under the Long-Term Incentive Plan, are detailed in the
remuneration report.
(e) Total emoluments of the directors of The Rank Group plc
Salaries and short-term employee benefits (including social security costs)
Termination benefits
Post-employment benefits
Share-based payments
Year ended
30 June
2019
£m
1.6
0.5
0.1
0.5
2.7
Year ended
30 June
2018
£m
1.7
–
0.1
(0.1)
1.7
No director accrued benefits under defined benefit pension schemes in either year. One director (year ended 30 June 2018: one) is a member of the
Group’s defined contribution pension plan at the year end. Further details of emoluments received by directors, including the aggregate amount of
gains made by directors upon the vesting of conditional share awards, are disclosed in the remuneration report on page 86.
150 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
27 Share-based payments
During the year ended 30 June 2019, the Company operated an equity settled Long-Term Incentive Plan (‘LTIP’). Further details of the LTIP are
included in the remuneration report on page 80. The LTIP is an equity settled scheme and details of the movements in the number of shares are
shown below:
Outstanding at start of the year
Granted
Exercised
Expired
Forfeited
Outstanding at end of the year
Weighted average remaining life
Weighted average fair value for shares granted during the year (p)
There are two LTIP awards currently in issue.
As at
30 June
2019
6,956,752
2,014,042
(272,550)
(286,357)
(2,941,298)
5,470,589
As at
30 June
2018
4,155,814
6,094,993
(719,549)
(1,082,428)
(1,492,078)
6,956,752
As at
30 June
2019
3.2 years
154.1
As at
30 June
2018
3.8 years
159.2
LTIP – 2014/15 award
Vests in three tranches; 45% in December 2017, 30% in December 2018 and 25% in December 2019. All LTIP awards have £nil exercise price.
The fair value of the LTIP awards granted in the previous years was based on the market value of the share award at grant date less the expected
value of dividends forgone.
To the extent that grants were subject to non-market based performance conditions, the expense recognised was based on expectations of these
conditions being met. The current scheme’s non-market performance conditions were subject to results as at 30 June 2017 as well as future
service. During the year the second tranche of shares vested and 0.3m shares were exerised and settled. The total equity cost of settlement was
£0.4m and the weighted average share price at the date of issue £1.59. As at 30 June 2018, 0.1m shares are oustanding and still subject to to
future service conditions.
The Group recognised £0.1m charge (30 June 2018: £0.2m credit) in operating profit from accounting for share-based payments and related
national insurance in accordance with IFRS 2.
LTIP – 2017/18 award
Vests in three tranches; 33.3% in October 2021, 33.3% in October 2022 and 33.3% in October 2023. All LTIP awards have £nil exercise price.
The number of LTIP awards and the fair value per share of the LTIP awards granted during the year were as follows:
Number
Weighted average fair value per share
30 June
2019
2,014,042
154.1p
30 June
2018
6,094,993
154.1p
The fair value of the LTIP awards granted during the year is based on the market value of the share award at grant date less the expected value of
dividends forgone. The following table lists the inputs used in assessing the fair value of the share awards:
Dividend yield (%)
Vesting period (Years)
Weighted average share price (p)
30 June
2019
4.10
4.26
183.2
30 June
2018
4.10
4.26
183.2
To the extent that grants are subject to non-market based performance conditions, the expense recognised is based on expectations of these
conditions being met, which are reassessed at each balance sheet date. The Group recognised £1.0m charge (30 June 2018: £nil) in operating
profit for costs of the new scheme in the current year.
151
Notes to the financial statements continued
28 Retirement benefits
Defined contribution scheme
The Group operates the Rank Group Stakeholder Pension Plan (‘the Plan’) which is externally funded and the Plan’s assets are held separately from
Group assets. During the year ended 30 June 2019, the Group contributed a total of £4.9m (year ended 30 June 2018: £4.5m) to the Plan. There
were no significant contributions outstanding at the balance sheet date in either year.
Other pension commitment
The Group has an unfunded pension commitment relating to three former executives of the Group. At 30 June 2019, the Group’s commitment was
£4.0m (30 June 2018: £4.1m). The Group paid £0.2m (year ended 30 June 2018: £0.2m) in pension payments during the year. The actuarial gain
arising on the commitment, resulting from the changes in assumptions outlined below in the year, was £nil (year ended 30 June 2018: £0.1m) before
taxation and £nil after taxation (year ended 30 June 2018: £0.1m).
Discount rate
Pension increases
The obligation has been calculated using the S2 mortality tables with a 1.5% per annum improvement in life expectancy.
30 June
2019
% p.a.
2.3
3.2
30 June
2018
% p.a.
2.7
3.2
29 Commitments
Group
Operating lease commitments – Group as lessee
The Group has entered into commercial leases on certain properties, plant and items of machinery. These leases have durations of from under one
year to 35 years (30 June 2018: one to 22 years)
Future minimum rentals payable under non-cancellable operating leases are as follows:
Not later than one year
After one year but not more than five years
After five years
Total future minimum sub-lease payments expected to be received under non-cancellable sub-leases
As at
30 June
2019
£m
45.6
133.7
123.6
302.9
As at
30 June
2019
£m
8.9
As at
30 June
2018
£m
47.4
155.3
128.0
330.7
As at
30 June
2018
£m
15.8
Finance lease commitments – Group as lessee
The minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows:
Not later than one year
After one year but not more than five years
More than five years
Less future finance charges
Present value of minimum lease payments
Minimum
lease payments
Present value of minimum
lease payments
30 June
2019
£m
1.7
3.8
4.3
9.8
(2.9)
6.9
30 June
2018
£m
2.0
4.8
1.8
8.6
(1.6)
7.0
30 June
2019
£m
1.6
3.1
2.2
6.9
30 June
2018
£m
1.5
4.2
1.3
7.0
Capital commitments
At 30 June 2019, the Group has contracts placed for future capital expenditure of £3.4m (30 June 2018: £1.0m).
152 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
30 Contingent liabilities
Group
Property leases
Concurrent to the £211.0m sale and leaseback in 2006, the Group transferred the rights and obligations but not the legal titles of 44 property leases
to a third party. The Group remains potentially liable in the event of default by the third party. Should default occur then the Group would have
recourse to two guarantors. It is understood that, of the original 44 leases transferred, seven of these have not expired or been surrendered. These
seven leases have durations of between three and 94 years and a current annual rental obligation (net of sub-let income) of approximately £0.4m.
During 2014, the Group became aware of certain information in respect of a change in the financial position of the third party and one of the
guarantors. However, the Group has not to date been notified of any default, or intention to default, in respect of the transferred leases.
Company
At 30 June 2019, the Company has made guarantees to subsidiary undertakings of £50.4m (30 June 2018: £50.8m).
31 Related party transactions
Group
Details of compensation paid to key management are disclosed in note 26.
Entities with significant influence over the Group
Guoco Group Limited (Guoco), a company incorporated in Bermuda, and listed on the Hong Kong stock exchange has a controlling interest in The
Rank Group Plc. The ultimate parent undertaking of Guoco is Hong Leong Company (Malaysia) Berhad (Hong Leong) which is incorporated in
Malaysia. At 30 June 2019, entities controlled by Hong Leong owned 56.1% of the Company’s shares, including 52.0% through Guoco’s wholly-
owned subsidiary, Rank Assets Limited, the Company’s immediate parent undertaking.
Company
The following transactions with subsidiaries occurred in the year:
Interest payable to subsidiary undertaking
Year ended
30 June
2019
£m
(8.8)
Year ended
30 June
2018
£m
(13.9)
During the year, Rank Group Finance Plc, a subsidiary of the Company, provided additional cash to the Company of £28.8m (year ended
30 June 2018: £27.5m).
153
Notes to the financial statements continued
32 Acquisition of subsidiary undertakings
On 21 May 2018, the Group acquired 100 per cent of the issued share capital of QSB Gaming Limited and its subsidiaries (‘YoBingo’) for an initial
consideration of €23.1m. Of the initial consideration, €21.1m was paid in cash on completion and €2.0m was deferred for 24 months. Further
contingent consideration was payable in cash, subject to 2018 calendar year performance, up to a total consideration cap of €52.0m. During the
course of the 2018/19 financial year contingent consideration totalling €28.1m (£24.2m) was paid in cash based upon the 2018 calendar year
performance. In the prior year total consideration of £16.5m was paid and included in investing activities in the Group cash flow statement.
YoBingo.es is a leading digital bingo business in the high growth regulated Spanish gaming market. The acquisition provides the Group with a
nationally recognised brand, an established customer base and a proprietary platform including bingo, roulette and video bingo content for the
Spanish market. The acquisition also provides the potential to accelerate the multi-channel strategy of Rank’s established Enracha brand and
operate in other regulated markets.
In the year to 30 June 2019 completion accounts were finalised with a net adjustment to goodwill of £0.5m.
The final fair value of the assets acquired and liabilities assumed, goodwill and consideration are outlined below.
Intangible assets
Trade and other receivables
Cash and short-term deposits
Trade and other payables
Income tax receivable
Deferred tax liability
Net assets acquired
Goodwill
Total consideration
The fair value of each component of consideration is analysed as:
Cash
Deferred cash consideration
Contingent cash consideration
Completion account adjustment
Total consideration
The identified intangible assets recognised separately from goodwill are as follows:
Customer Relationships
Brand
Software and technology
Total intangible assets
£m
14.9
1.3
1.9
(0.9)
0.2
(5.2)
12.2
31.4
43.6
£m
18.4
1.7
23.4
0.1
43.6
£m
8.6
2.8
3.5
14.9
The fair value of trade and other receivables of £1.3m corresponds to the book value at which all receivables were received.
The goodwill consists of future revenue opportunities, the assembled workforce (including marketing and technological expertise) and the deferred
tax liability recognised on certain fair value adjustments. No amount of the goodwill recognised is expected to be deductible for tax purposes.
Acquisition related costs of £0.4m were recognised as an exceptionals finance cost in the Group income statement in the prior year.
In the year ended 30 June 2018, QSB Gaming Limited ‘YoBingo’ contributed statutory revenue of £1.4m and £0.3m of profit before tax. If the
Acquisition had occurred at the beginning of the year, the continuing statutory revenues of the combined entity in the 12 months to 30 June 2018
would have been £702.0m and profit before tax would have been £47.7m.
154 The Rank Group Plc Annual Report and Financial Statements 2019
Financial statements
33 Subsidiaries
The Company owns directly or indirectly 100% of the ordinary share capital and voting rights of the following companies:
Name
Rank Digital Gaming (Alderney)
Limited
Blankenberge Casino-Kursaal NV
Country of incorporation
Alderney
Principal activities
Interactive gaming
Belgium
Casino
QSB Gaming Limited
Channel islands
Intermediary holding company
Mindful Media Limited
Channel islands
Rank Leisure Limited
England and Wales
Grosvenor Casinos Limited
England and Wales
Support services to interactive
gaming
Adult gaming centres in Mecca and
Grosvenor Casinos venues
Casinos
Grosvenor Casinos (GC) Limited
England and Wales
The Gaming Group Limited
England and Wales
Casinos
Casinos
Rank Group Finance Plc1
England and Wales
Funding operations for the Group
England and Wales
Intermediary holding company
Rank Nemo (Twenty-Five)
Limited(1)
Rank Leisure Holdings Limited
England and Wales
Rank Digital Holdings Limited
England and Wales
Rank (U.K.) Holdings Limited
England and Wales
Rank Overseas Holdings Limited
England and Wales
Rank Group Gaming Division
Limited
England and Wales
Rank Casino Holdings Limited
England and Wales
Mecca Bingo Limited
England and Wales
Rank Digital Limited
England and Wales
Upperline Marketing Limited
England and Wales
Luda Bingo Limited
England and Wales
Linkco Limited
England and Wales
MRC Developments Limited
England and Wales
Rank Group Holdings Limited
England and Wales
Rank Leisure Machine Services
Limited
The Rank Organisation Limited
England and Wales
England and Wales
RO Nominees Limited
England and Wales
Intermediary holding company and
corporate activities
Intermediary holding company for
digital entities
Intermediary holding company for
legacy entities
Intermediary holding company for
overseas entities
Intermediary holding company for
UK bingo entities and provision of
shared services
Intermediary holding company for
UK casino entities
Social and bingo clubs
Support services to interactive
gaming
Support services to interactive
gaming
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Registered office address
La Corvee House, La Corvee,
Alderney, GY9 3TQ
Zeedijk (Casino), B-8430
Middelkerke, Belgium
La Corvee House, La Corvee,
Alderney, GY9 3TQ
Kingsway House, Havilland Street,
St Peter Port, Guernsey, GY1 2QE
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
TOR, Saint-Cloud Way,
Maidenhead SL6 8BN
155
Notes to the financial statements continued
33 Subsidiaries continued
Name
Associated Leisure France SARL
Country of incorporation
France
Associated Leisure France
Properties SCI
Rank Digital Services (Gibraltar)
Limited
Bingosoft Plc
Rank Digital España SA
Rank Holding España SA
Conticin SL
Gotfor SA
Rank Cataluña SA
Rank Centro SA
Top Rank Andalucia SA
Verdiales SA
France
Gibraltar
Malta
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Principal activities
Dormant
Dormant
Support services to interactive
gaming
Interactive gaming
Interactive gaming
Intermediary holding company
Social and bingo clubs
Social and bingo clubs
Social and bingo clubs
Social and bingo clubs
Social and bingo clubs
Social and bingo clubs
Rank Stadium Andalucia, S.L.
Spain
Arcade and sports betting
Rank America Inc.
U.S.A.
Dormant
Registered office address
4 Rue Joseph Monier, 92859 Rueil
Malmaison, Cades, France
Zi Sud, 12 Rue des Petits Champs,
35400, St Malo, France
Second Floor, Icom House, 1/5
Irish Town, Gibraltar
Vault 14, Level 2, Valletta
Waterfront, Floriana, FRN 1914,
Malta
Calle Balmes Nº 268-270 1st Floor,
08006, Barcelona, Spain
Calle Balmes Nº 268-270 1st Floor,
08006, Barcelona, Spain
Calle Balmes Nº 268-270 1st Floor,
08006, Barcelona, Spain
Carrer del Papa Pius XI, 114,
08208 Sabadell, Barcelona, Spain
Calle Balmes Nº 268-270 1st Floor,
08006, Barcelona, Spain
Calle Espoz y mina Nº 8, 1st centro,
28012, Madrid, Spain
Conde Robledo 1, 14008,
Cordoba, Spain
Sala Andalucía, Ronda, Capuchinos
19, 41008, Sevilla, Spain
Calle Balmes Nº 268-270 1st Floor,
08006, Barcelona, Spain
The Corporation Trust Company,
1209 Orange Street, Wilmington,
DE 19801, USA
1. Directly held by the Company.
The principal activities are carried out in the country of incorporation as indicated above. All subsidiary undertakings have a 30 June year end.
34 Post balance sheet event
Subsequent to year end, the shareholders of Stride Gaming plc voted to accept the offer by The Rank Group Plc of £115.3m for all of the share
capital of Stride Gaming plc. The transaction is awaiting regulatory approval.
156 The Rank Group Plc Annual Report and Financial Statements 2019
Five year review
Financial statements
Continuing operations
Revenue before adjustment for customer incentives
Customer incentives
Revenue
Operating profit before exceptional items
Exceptional items (charged) credited against operating profit
Group operating profit
Year
ended
30 June
2019
£m
746.5
(51.4)
695.1
72.5
(33.5)
39.0
Year
ended
30 June
2018
£m
741.1
(50.1)
691.0
77.0
(26.9)
50.1
Year
ended
30 June
2017
£m
755.1
(47.9)
707.2
83.5
1.0
84.5
Year
ended
30 June
2016
£m
753.0
(44.5)
708.5
82.4
9.3
91.7
Year
ended
30 June
2015
£m
738.3
(37.6)
700.7
84.0
2.1
86.1
Total net financing charge
(4.4)
(3.4)
(4.8)
(6.2)
(11.6)
Profit before taxation
Taxation
Profit after taxation from continuing operations
Discontinued operations
Profit for the year
Adjusted earnings per share – basic
Basic earnings per ordinary share
Basic earnings per ordinary share before exceptional items
34.6
46.7
79.7
85.5
74.5
(7.0)
(10.8)
(16.8)
(14.4)
(15.5)
27.6
1.5
29.1
14.8p
7.4p
14.8p
35.9
62.9
–
–
35.9
62.9
15.0p
9.2p
15.0p
16.0p
16.1p
16.2p
71.1
3.6
74.7
15.4p
19.1p
15.7p
59.0
15.8
74.8
14.6p
19.1p
14.6p
Total ordinary dividend (including proposed) per ordinary share
7.65p
7.45p
7.30p
6.50p
5.60p
Group funds employed
Intangible assets and property, plant and equipment
Provisions
Other net liabilities
Total funds employed at year-end
Financed by
Ordinary share capital and reserves
Net (cash) debt
609.3
(46.8)
(166.3)
396.2
398.0
(1.8)
396.2
630.6
(41.6)
(183.2)
405.8
396.5
9.3
405.8
599.4
(33.7)
(162.7)
403.0
390.6
12.4
403.0
606.3
(50.1)
(162.4)
393.8
352.6
41.2
393.8
599.1
(53.6)
(198.2)
347.3
294.4
52.9
347.3
Average number of employees (000s)
9.0
9.9
10.4
10.6
10.7
157
Shareholder information
2019/20 financial calendar
30 January 2020
20 September 2019
17 October 2019
29 October 2019
Interim results
announcement
Record date for
2018/19 final dividend
Annual general
meeting and interim
management statement
Payment date for
2018/19 final dividend
Registrar
All administrative enquiries relating to shares
should, in the first instance, be directed to
the Company’s registrar (quoting reference
number 1235) and clearly state the registered
shareholder’s name and address. Please write
to The Rank Group Plc registrar,
Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA (Tel: from
the UK 0371 384 20981 and from outside the
UK +44 121 415 7047).
There is a text phone available on 0371 384
22551 for shareholders with hearing difficulties.
1. Lines are open 08:30 to 17:30, Monday to Friday
(excluding public holidays in England and Wales).
Shareview
The Shareview portfolio service from the
Company’s registrar gives shareholders more
control of their Rank shares and other
investments including:
• direct access to data held for them on the
share register including recent share
movements and dividend details;
• a recent valuation of their portfolio; and
• a range of information and practical help for
shareholders including how they can elect to
receive communications electronically.
It is easy and free to set up a portfolio –
shareholders will just need the shareholder
reference printed on their proxy form or
dividend stationery. Please visit the
following website for more details:
www.shareview.co.uk.
Payment of dividends
The Company is no longer operating a dividend
re-investment plan. Shareholders may find it
more convenient to make arrangements to
have dividends paid directly to their bank
account. The advantages of this are that the
dividend is credited to a shareholder’s bank
account on the payment date, there is no need
to present cheques for payment and there is
no risk of cheques being lost in the post.
To set up a dividend mandate or to change
an existing mandate please contact Equiniti
Limited, our registrar, whose contact details
are above. Alternatively, shareholders who
use Equiniti’s Shareview can log on to
www.shareview.co.uk and follow the
online instructions.
Shareholder information
A wide range of information for shareholders
and investors is available in the Investors area
of the Rank Group website: www.rank.com.
Frequently asked questions
We have a shareholder ‘frequently asked
questions’ section on our website which
provides answers to many questions that
shareholders have: http://www.rank.com/en/
investors/shareholder-centre/faqs.html.
Capital gains tax
For the purpose of calculating UK capital gains
tax on a disposal of ordinary shares in the
Company held since 31 March 1982 (including
shares held in the predecessor company, The
Rank Organisation Plc), the price of the
Company’s ordinary shares at that date was
190p per share. This price should be adjusted
for the effects of the rights issue in January
1990, the enhanced share alternative in July
1993, the sub-division and consolidation of
shares in March 1994, the enhanced scrip
dividend in March 1998, and the 18 for 25 sub-
division and share consolidation (aligned with
the 65p special dividend payment) which took
place in March 2007. More information
regarding these adjustments is available on the
www.rank.com website.
Shareholder security
We are aware that some of our shareholders
have received unsolicited telephone calls
concerning their Rank shares. These
communications tend to be from overseas-
based ‘brokers’ who offer a premium price for
your Rank shares but ask you to make an
upfront payment, typically in the form of an
insurance bond. We recommend that before
paying any money you:
• obtain the name of the person and firm
contacting you;
• check the FCA register at www.fca.org.uk/
register/to ensure they are authorised;
• use the details on the FCA register to
contact the firm;
• call the FCA Consumer Helpline on 0800
111 6768 if there are no contact details on
the FCA register or you are told they are out
of date; and
• search the FCA’s list of unauthorised firms
and individuals to avoid doing business with:
www.fca.org.uk/consumers/protect-yourself/
unauthorised-firms/unauthorised-firms-
to-avoid
158 The Rank Group Plc Annual Report and Financial Statements 2019
Financials
If you use an unauthorised firm to buy or sell
shares or other investments, you will not have
access to the Financial Ombudsman Service or
Financial Services Compensation Scheme
(FSCS) if things go wrong.
Below, please find the link to the FCA’s
website which gives information on scams
and swindles, which shareholders may find
helpful: www.fca.org.uk/consumers/protect-
yourself-scams
Further information on fraud can be found at
www.actionfraud.police.uk
Action Fraud’s helpline is 0300 123 2040.
We recommend that you report any attempted
share frauds to the authorities, since providing
information with regard to how the fraudsters
have contacted and dealt with you will assist
the authorities in understanding the fraudsters’
way of operating so as to enable them to
disrupt and prevent these activities and
prosecute them.
ShareGift
Shareholders with a very small number of
shares, the value of which may make it
uneconomical to sell, may wish to consider
donating them to charity through ShareGift,
a registered charity administered by The Orr
Mackintosh Foundation.
Further information about ShareGift is available
at www.sharegift.org or by writing to:
ShareGift
PO Box 72253
London SW1P 9LQ
Tel: 020 7930 3737
For any other information please
contact the following at our
registered office:
Luisa Wright, company secretary
Sarah Powell, communications director
Registered office
The Rank Group Plc,
TOR, Saint-Cloud Way, Maidenhead SL6 8BN
Tel: 01628 504 000
The Rank Group Plc
Registered in England and Wales N° 03140769
159
For more information, visit our website.www.rank.comPrinted by Park Communications on FSC® certified paper.Park is an EMAS certified company and its Environmental Management System is certified to ISO 14001.100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled.This document is printed on Magno Satin, Splendorgel EW and Driftwood Grey, paper containing virgin fibre sourced from well managed, responsible, FSC® certified forests and other controlled sources. The pulp is bleached using both Elemental Chlorine Free (ECF) and Totally Chlorine Free (TCF) processes.Designed and produced by Black Sun Plc The Rank Group Plc
TOR
Saint-Cloud Way
Maidenhead
SL6 8BN
Tel: 01628 504 000
Web: www.rank.com
Company registration number: 03140769