ank blamed the smoking ban, which came into effect on July 1 in England, and the implementation of the Gambling Act on September 1, which excluded certain fruit machines from clubs.
Its CEO Ian Burke said margins would suffer from the loss of 984 us$ 1,018 payout machines, which contribute us$ 1 million a week. Machines make up about 29 per cent of revenues to Rank.
Revenue at Grosvenor Casinos has fallen 9 per cent in the past five weeks, with spend per head down 8 per cent. Admissions are 1 per cent lower. Rank's Mecca Bingo clubs have seen revenues fall 19 per cent since September 1, while admissions are down 13 per cent. Spend per head is down 7 per cent.
Group operating profit would be considerably lower than the us$ 157 million of 2006 if these trading levels continued to the end of the year, Rank said in a trading update brought forward from next week. Rank, which has a market capitalization of us$ 994 million, has tried to mitigate the impact of the smoking ban with outside shelters.
In spite of its declining value, Rank's woes will make it unattractive to bidders. Rival bingo operators are likely to be hamstrung by competition concerns, and casino operators worried about oversupply in the market.
Dan Waugh, head of investor relations, said customers appeared “to be staying away” from the clubs. “Not surprisingly they are fed up, and the government appears to show indifference.” Industry insiders admitted the combination of the smoking ban and the loss of gaming machines had “definitely hurt” businesses.
But they said the government was starting to get the message that the smoking ban in particular was causing bingo club closures and having a detrimental effect on communities. “The Treasury is keen to engage with the bingo industry,” one insider said.
Rank's profits warning was in contrast to a reasonably upbeat half-year report in August, when it revealed a 26 per cent rise in underlying operating profit. Group like-for-like revenue was up 2 per cent for the 40 weeks to October 7, but down 2 per cent at Mecca Bingo and flat at Grosvenor Casinos.
The one silver lining was the performance of Blue Square, the interactive businesses, where like-for-like revenues were up 38 per cent for the 40-week period.