The Rank Group Plc (RNKA.F) Earnings Call Transcript & Summary

Okay, John, over to you.

Right. Thanks, Alex. Good morning, everyone. I'm Johnny Riley. I'd like to welcome you to The Rank Group's results presentation for the half year ended December 31, 2020. Thank you for joining us this morning. When we presented the results back in September, the full year results, I said, hopefully, by the time we get to the interim results in January, we'd be back to some degree of normality. And unfortunately, that certainly hasn't been the case. But hopefully, we're now seeing some light at the end of the tunnel. I'm going to begin with an update on the progress we're making in navigating the impacts of the pandemic and covering perhaps the 2 key areas of interest. First is the balance sheet, our liquidity and our ability to get through to the reopening of our venues and their return to form. And secondly, what's happening in our digital business since we updated the market in November at the time of the equity raise. Bill Floydd, our group's CFO, will then take you through the half year numbers and provide more details on our liquidity and on our cash flows. I'll then provide you an update on the next phase of the transformation of the group, transformation 2.0 and we'll then take any questions that you have. It's been clearly been a very challenging first half for the group. Our venues, which contributed 78% of group revenues in the first half of last year saw revenues down 70% as a result of the lockdowns, tiering closures, curfew, capacity restrictions and in our casinos the impact of social distancing measures on table gaming. Digital revenues were down 14% on a pro forma basis, including stride, up 1% on a like-for-like basis. Our underlying operating loss in the half was GBP 41.8 million, down from a profit of GBP 58.7 million in the first half of last year. Now inevitably, our primary focus has been on preserving cash. And whilst we thought right through last summer that, we could trade our way through the pandemic the introduction of a nationwide 10:00 curfew on hospitality venues in September meant that we needed to strengthen the balance sheet through the GBP 70 million equity placement we successfully concluded in November. We ended up closing the half with GBP 128.3 million of cash and facilities, and we're confident that we have sufficient liquidity even under plausible downside scenarios. Our transformation 2.0 program has galvanized the team. It supported our cost-saving initiatives and with them our liquidity, and the program is positioning the group for a strong recovery. The pandemic and the resultant in forced closures and other restrictions have inevitably had a huge impact on our venues businesses. Here's the impact in the half of Grosvenor and Mecca. And as you can see, Grosvenor has been even harder hit because reopening Grosvenor was only permitted in England in mid-August rather than the fourth of July when nearly all of the hospitality sector was allowed to open. Now that in my view that 110 casino properties in the U.K. couldn't open in July alongside 40-odd thousand pubs didn't make a lot of sense, but we're now at least grouped to the same tier as pubs and restaurants as we come out of lockdown. So for Grosvenor, we had 0 days in the half, inevitably, where we traded under normal conditions. We had just 19% of days in which we were open with reduced occupancy and social distancing. For 20% of the days, we had the impact of reduced occupancy, social distancing and a 10 o'clock curfew. And that 10 o'clock curfew had a very material effect on casinos because half of our revenues are taken after 10 o'clock at night. And if you know a casino is going to shut at 10 o'clock, will you bother going at all? We're open to just 5% of the half year with the 11 o'clock curfew, which helped a little, and we were shut for 56% of days in the half. Our grown of revenues were consequently down 78% in the half. Mecca obviously fared slightly better with revenues down 56%. We were able to reopen Mecca on hospitality's independent stay on the fourth of July. And we successfully avoided closure in some of the regional tiering restrictions before the government eventually grouped all hospitality venues in the same restrictions in late November. Hopefully, when we emerge from the current lockdown into tiering, which seems to be the most likely outcome, the same price material will be maintained so that when pubs and restaurants can reopen so to and quite rightly combing on casinos. In Rancho, our Spanish Bingo electronic gaming business also suffered as a result of closures from tight occupancy restrictions and from early closing, and revenue there was down 53% in the half. Now trading has been surprisingly good whenever we've been open. And despite the inevitable confusion amongst consumers as to what is open and what is closed. Our customers have certainly recognized the lengths to which our colleagues have gone to ensure our venues are COVID safe with strong social distancing measures such as Flexiglass dividers, creating safe spaces, on gaming machines and on our electronic roulette terminals, rigorous cleaning regimes, ensuring customers have personalized and sanitized gaming chips and playing cards. Overall, a ratio supported by Public Health Finland and reinforced by independent scientific review. Our best days have been just before new closures have been implemented with customers want to enjoy some safe fund before heading back into lockdown. Now when we could open without curfew in late August through to late September, grown performed broadly at cash breakeven as did Mecca and Enracha. And we're very confident that our revenues will grow back quickly when our venues reopen and restrictions are removed. I have to say that Rank's team has been amazing. Our colleagues have taken on the challenge with gusto and have shown huge professionalism and commitment despite the ever-changing restrictions and the yoyo in and out of furlough sometimes with just a few hours notice. Our focus has been on protecting jobs. Unfortunately, the transformation initiatives we took in 2018/'19 to rightsize our operating model has meant that we've had few redundancies to make. We have, however, further cut our central costs. I'd like to thank my colleagues for the amazing work they've done in the pandemic, whether open or closed in support and local communities. We've continued our community kitchen initiative now having served nearly 100,000 meals to vulnerable members of society, plus to NHS and emergency service workers who've been battling the pandemic on the front line. Our Mecca colleagues initiated and Everyone Deserves a Christmas campaign, which delivered thousands of hampus and ED families at Christmas, receiving a lot of support from MP from across the house, to whom we're very grateful. There's been lockdown initiatives Gala in support of Rank's corporate charity, the Cares trust. And in addition to offering Mecca Venues and Mecca and Groban car parks as vaccine centers, large numbers of our colleagues have been joining the Suns Jams Army volunteer force to help with the stewarding of vaccination centers. I mean, all around, it's been an amazing effort and one which will certainly support our recovery. So the question of liquidity. Fortunately, we entered the pandemic with a strong balance sheet. But with venues so critical to our revenues and with them being closed or seriously impeded by restrictions since the 20th of months last year, liquidity has been our key focus. And we took measures very quickly to preserve cash, and we continue to cut expenditure to the bone. We've had good support from our suppliers and for most of our landlords to cut or defer costs. Our biggest cost payroll has had the support of treasury, of course, through the coronavirus job retention scheme. Right now, we have all of our venues colleagues in furlough, with just a very small number in part-time furlough to maintain their venues and prepare for the reopening when it comes. With a GBP 70 million equity placement concluded in November and GBP 25 million from the sale of Casino Blankenberg in Belgium, which remains subject to regulatory clearance, and we expect to receive that very soon. We're confident that despite a GBP 15 million negative cash flow every month that our Venetas shut, we meet -- we can meet our liquidity tests regardless the COVID restrictions in the second half of the year. Our U.K. digital performance has been disappointing in the first half, but I'm confident we've been taking the right measures, both to turn this around and to prepare the ground for the growth we will deliver through our own proprietary technology platform moving forward. Overall, pro forma digital net gaming revenue was down 14% in the year or in the half year, up 1% on a like-for-like basis, excluding the Stride brands. Our U.K. pro forma NGR was down 18%, down 5%, excluding Stride. The U.K. facing business has been largely impacted by the application of stringent affordability limits on our customers. 1 in 4 of our customers and particularly our active higher staking customers now have deposit limits set or imposed. We've taken a tough position. The table here shows you the impact of affordability measures on the average revenue per customer compared with last year. In Grosvenor, active customers grew 13% in the half, but the average revenue per customer was down 21% from GBP 204 to GBP 162. In Mecca, active customers grew 36% in the half, but the revenue per customer was down 28% from GBP 166 to GBP 120. Now that's not to suggest that the customers for whom we've applied restrictions based upon affordability estimates have previously been at risk of problem gambling. The reality is that vast majority of customers, indeed, around 90% of all customers are simply not prepared to prove their level of affordability. Now whilst the obligation to take into account, our customers' affordability already exists within U.K. regulation, the license conditions and code of practice. The Gamble and commission are currently consulting on a proposal to prescribe affordability restrictions on U.K. license operators. We've already taken a stringent line. The sharper decline in Grosvenor revenues relative to Mecca also reflects the closure of Grosvenor revenues -- of, sorry, Grosvenor's venues and the resulting impact of that on the flow of new customers into digital. And it has an impact on the omnichannel benefits derived by growing customers. NGR from Stride brands was down 42% in the half as a result of the harmonization of safer gambling measures with those of the rank business. This impact has been more significant than we'd expected, but we are now rebuilding revenues into these brands. So a tough first half, but with revenues growing 8% from Q1 through to Q2, and we'd expect that to continue through the second half. The YoBingo! and YoCasino brands in Spain have performed very strongly, growing 52% in the first half. Now we're making good progress with the development of our proprietary technology in readiness for the migration of Mecca and Grosvenor, which we expect to complete within this calendar year. The first ranked brand, Belle Casino, a commercial partnership with Bowel media was successfully migrated to our proprietary platform in November, and that's been a major milestone for us. But we have a lot of work still to do, but we're on track. Bringing our digital technology in-house gives us agility and capability for rapid deployment of new brands, new features benefits for our customers, as evidenced by the launch of the Mecca game site in November, a site that from start to finish, we put up in about 9 weeks. The priority for the team right now is preparing for the migration of Mecca and Grosvenor, but once complete, in addition to realizing the full synergies, which we expect to be GBP 15 million annualized, we will have in-house capability and the platform with which to drive our digital growth, both within the U.K. and internationally. And now I'll hand over to Bill.

Okay. Thank you, John, and good morning, everyone. I'll start by taking you through a summary of the H1 numbers and then provide some more color on our liquidity position. The closure of our venues for much of the half results in a 55% reduction in revenue to GBP 177.6 million and an underlying operating loss of GBP 41.8 billion. That results in an underlying loss per share of 0.98p and excluding the contribution from the discontinued Belgium business. We took decisive action to conserve cash and protect the balance sheet. Cash and available facilities at the end of the half were GBP 128.3 million marginally better than our expectations when we undertook the placing. In the interest of time, I'll not take you through the detail of the venue's performance as the commentary for those businesses is self-evident. Our usual slides are in the appendix, and John has already shown you the analysis on open and close days. Digital trading has clearly been difficult with overall revenues down by 14% on a pro forma basis and up just 1% on a like-for-like basis, which excludes stride. Q2 was, however, an improvement on Q1, giving us confidence that we're turning the corner. On Grosvenor, NGR was down 10% in H1, but Q2 was 31% better than Q1. The improvement in Q2 was driven by customer journey enhancements, and we expect to improve from here on a sequential basis. Mecca has also been impacted by the affordability restrictions. Revenue was down 1% in the half, with Q2, 4% up on Q1. With ARPUs heavily impacted across both brands, the increase in the number of active players does provide a healthy leisure base of players for the future. The Yo business continued to perform well with excellent growth on both the Bingo and Casino sites. The like-for-like year-on-year profit decline is a result of us investing more heavily in the marketing of the Spanish brands to drive the NGR growth. On Stride, the safer gambling measures implemented to align with rank Standards have materially impacted the H1 performance with a 41% decline in NGR. Performance has modestly improved in the first few weeks of Q3. The decline in profitability reflects both the significant impact of the NGR decline alongside continued marketing spend, a disciplined approach to tech capitalization and some dual running costs as we migrate more activity offshore. The first major milestone of migrating the Bella brand onto the stride platforms being achieved, and we expect to migrate macro in H2 and Grosvenor in H1 of FY '22, in line with our integration plan. Cost synergies of GBP 15 million in year 3 remain on track. Moving to the income statement. The reported operating loss was GBP 41.8 million. The interest charge of GBP 6.5 million is an increase on borrowing costs being offset by a reduction in the cost of leases. I would expect a similar charge in H2. Separately disclosed items covers GBP 5.9 million of acquisition-related intangible amortization of GBP 5.2 million of transformation and integration costs, which substantially relates to redundancies. In the second half, there will be a similar charge for the acquired intangible amortization, some further transformation and integration costs and potentially the cost of some club closures. These would be offset by a profit of around GBP 20 million when the Belgium disposal completes. I'm expecting the full year tax rate to be 23% to 25% due to the mix of profits in Malta and the losses in U.K. and Spain. We were able to offset the proportion of these current year tax losses against prior year profits that will result in a refund of around GBP 5 million in the FY '22 financial year. The balance of the losses would be deductible against future profits. On cash flow, the cash used in operations was GBP 17.5 million. Interest paid was GBP 5.9 million and tax paid was GBP 1.8 million. There was GBP 11.2 million of CapEx as we pulled back on Venues investment but continue to invest in digital, largely the tech integration. I'm expecting full year CapEx of around GBP 25 million, with continued tech investments and also a length of some investments in the Venues estate. The net plating proceeds were GBP 68.1 million, net debt was GBP 268.3 million, with GBP 223.1 million due on leases and GBP 45.2 million, excluding the leases. Here, I've set out a few points to help with modeling cash and liquidity in the second half. As a reminder, the normal covenants have been waived until March 2022 and replace with a minimum liquidity test of GBP 50 million, which is tested quarterly. There are a number of peaks and troughs in the monthly cash flow, largely due to the timing of duty payments and rent. However, the average monthly cash burn in the period of closure is GBP 15 million. With all venues open, then we would expect to return to positive cash flow very quickly given the actions we have taken on the cost base during lockdown. In between, there are obviously a myriad of potential modeling scenarios, and I'll set out a few here, both with and without an 11:00 pm curfew. We're working on the assumption that will be closed in Q3, but hope that with the vaccine rollout program continuing to deliver successfully, but there may be the opportunity to open after Easter. And our base case is for half of clubs to be open under curve view in April, and 75% of clubs to be opened in May and June also under curfew. From a balance sheet perspective, GBP 5.9 million of CJRS relating to December was received earlier in January. And the entire GBP 37.5 million deferred gaming duty is now being paid. Red deferrals at the half year was GBP 17.3 million, with most of that under agreed payment plans. We would expect the Belgium casino disposal to receive final regulatory approval in Q3. And following a supreme call ruling in favor of another taxpayer on the treatments of game duty on free chips, we're in dialogue with HMRC on our associated GBP 13.3 million claim. The first term loan amortization repayments of GBP 19.7 million is due in May and I'm expecting that we will make that payment. Further capital expenditure constraints and deferrals are achievable if the circumstances required us to take those actions. As a result, we believe we can manage at least 6 months of closure and still make the minimum banking liquidity tests. Before I hand you back to John, a reminder of the key points. We've taken decisive action to conserve cash and protect the balance sheet. It's been a challenging period of digital, but we're turning the corner, and we have the liquidity in place to see us through a further prolonged block down. John, back to you.

Right. Thanks, Bill. So despite the closure of our venues and the need to conserve cash, we've been making good progress in planning for transformation 2.0, which is the reset of the group's transformation with a 3-year aspiration. We've used the program to identify and emphasize additional cost efficiencies. But with the groundwork largely focused on revenue growth as we reopen, and we begin generating cash and also on investment opportunities for the business going forward. We've got 7 key work streams; our Grosvenor venues, Mecca venues, our International Business, Enracha, omnichannel, our digital, safer gambling and other critical enablers, particularly focused on our organizational capabilities. On the next few charts, we provided just a flavor of some of those work streams. We've also provided an update here on some of the initiatives, which we have already delivered and some of those which are in train. And in Grosvenor work stream, Enracha, we have work ongoing and developing the brand proposition and how that reflects our venues, in our products, in our promotions and in our interaction with customers through mail, through online and, of course, in venue for our colleagues. We're busy preparing evidence for the government's review of the gambling regulation in the U.K., in particular, a question around harmonization of the 2005 act casino regulations with those are the vast bulk of casinos in the U.K., which are still operating under the 1968 ACT regulations, which, as you know, restricts game in machine numbers just 20 or venue. We're also advanced with the employee value proposition for our colleagues with new recruitment and training programs and with clear career paths. We plan to launch new game concepts and new jackpot variants to deliver further refurbishment investments across the estate, taking the learnings from the success of the recent investments. And we have an initiative to deliver an improved business forecasting tool at venues level to further optimize our operating costs. Within the Mecca work stream in the first half, we've been focusing on developments to the customer proposition. We've been making really good progress in our pilot venues. And we're reporting -- we're beginning to port many of those developments across the wider estate. In train, we have a refresh of the Mecca brand. The rollout of a new food and beverage concept, we have been performing well in our test sites. And with the increasing popularity of online booking of seats in our Mecca venues and the ordering of Bingo Books food and beverage using cash payments, we're about to launch the new Mecca app. And we plan to trial a new venue concept for Mecca to launch a new employee value proposition and an update of our gaming machine offering. In Enracha, we've been making good progress developing our electronic gaming machine offering across the estate, In Train is a new loyalty program to increase our permissions to contact our customers. We've got further investment in the gaming machine offer in planning, as is the development of the omni-channel service for Enracha customers. Our omnichannel remains central to our strategy for growth. In Mecca, we're close to offering joint liquidity games, both in our venues and online. We're working on how we present sports more effectively in our casinos. And we'll be launching the bic.com in the next couple of months, our first venue specific omnichannel site. In planning, we have a single sign up for Mecca customers, both online and in venues. Additional streaming from venues online, and further developments to our wallet and to support cashless payments in venues, which we hope will be further enabled through the gambling review. In digital, our overriding priority has obviously been the development of our proprietary platform in preparation for the migration later this year of the Mecca and Grosvenor brands. We'll be launching Mecca Raffle, a proposition, which we believe will have great appeal to online Bingo customers. And we've got developments in train for the Grosvenor Sports website. We have a program of work underway using our in-house development team to improve the design and functionality the Grosvenor website, and we're making big improvements to YoBingo! CRM capabilities. And we're expecting to launch into the Portuguese market with a Yo branded offering in the coming months with our site and games currently working their way through the regulatory approval process. In planning, we've got further in-sourcing of development as we complete the migrations to the proprietary platform. The launch of additional venue specific omnichannel sites, further improvements to our sports book, international B2B joint ventures, now they're particularly focused on our omnichannel capabilities. And after the inevitable emphasis on the migration process of Mecca and Grosvenor, the freeing up of the development teams to deliver new brands, new products, new features, enhanced customer journeys and so on. And that is the exciting opportunity for us once this phase of the integration program is complete. Within Yo, our transformation plans include building out our product range within both the YoBingo! and YoCasino Casino brands. In the safer gambling work stream, we'll be introducing deposit and time limits for our gaming machine players when we reopen our casinos. Having introduced ID scanning technology at entry in all of our Grosvenor casinos before we reopened in August so we now know who is in our venues and when they're in avenues. We're now linking this technology to our casino management system so that we can better monitor customer play. We've launched a project-focused on improving real-time risk management of customer plate online, which we anticipate will help replace some of the hard stops on customer play based upon limits and triggers. With work underway aligned to develop to the development of our proprietary technology platform to deliver cross-channel and brand single customer view, which will support a holistic view of our customers. We're working on a refresh of the keep-in-fun program, and we've got further developments in training for our colleagues using -- including using lift experience in a program to further develop the culture of safer gambling and custom protection within the rank group. And finally, in terms of our organizational capability, in line with bringing technology in house, we're also in-sourcing our creative work. We're establishing an innovations team to drive new growth opportunities for the group, including international partnerships, and we're further tightening our procurement processes to ensure we maximize the value from our suppliers. And at the planning phase, the development of our talent strategy, including recruitment and how we further realize internal capabilities, increasing automation of processes in finance and reporting, and developments to our internal communications model. So we've got plenty of initiatives in train and lots of opportunities for investment as soon as our venues are open, and we're back generating cash. And that broadly summarizes the outlook. We're seeing an improving performance across the U.K. facing digital business, and we're seeing very good growth continuing in the Yo brands. The outlook for the group reflects the successful rollout of the vaccine, obviously. And the speed with which hospitality reopens and restrictions are eased. Hopefully, by the summer will be fully open. Our colleagues will be back at work doing what they do best, will be cash-generative again, and we can recommence investing in the many opportunities, which to the transformation 2.0 program will drive the group's growth. At which point, I think we'll turn to questions.

[Operator Instructions] First question we have comes from Gav Kelleher at Goodbody.

Just a few for me, please. Just on the affordability kind of checks and stricter measures in online. And you alluded to -- you've kind of gone very strict on those. Any sense of where you are versus your peers at the moment? And then in terms of the gambling commission proposals, would you be in line with the proposals that they came out with pre-Christmas back in November? That's my first one. And then just on the online migrations. Can you give us a bit more detail around the Bella Casino launch, how that went? And how confident you are about the Mecca and Grosvenor migrations? And then just finally, on the new role for ATAM Boyd, the CIO role and then this international B2B, JV, omnichannel opportunities, could you just give us a bit more color on those and your international growth aspirations for digital, please?

Right. Let me start with the affordability. Gavin, thanks for the questions too. So look, we -- it's difficult to know where we stand relative to peers, actually. My view is we've taken a stringent approach. The Gambling Commission are currently consulting. They've issued a question here this morning actually, asking consumers for their views about this very topic. And in there, they report average households or the average person in the U.K. having less than GBP 500 per month in, if you like, discretionary expenditure or available for non essential items, let me put it that way. So that -- so it's difficult to quite know where the gambling commission are going to land on this. I think if they are too prescriptive about measures, then there's a risk. I mean, we've got to find the right balance here between ensuring that the vulnerable are protected on the one hand and the average consumer can enjoy, which is the vast bulk of us can enjoy gambling with any problems whatsoever. And that's a difficult balance to take. You have seen from enforcement actions over the last year that for that -- some of those enforcement actions are happening at much lower levels of consumer expenditure. We decided that the right approach following the introduction of the change in life of this encodes a practice around affordability, which kind of happened towards the back end of 2019, we decided that we would take a stringent line. We implemented it in the back end of former financial year, and that has an impact on our revenues in Q1. And as we're coming out of that, dip in Q2. Now at one end of the Gambling Commission's consultation, one read through is that the Gambling commission will require source of funds information, documented source of funds information at levels as low as GBP 125 a month in losses. And I do not think that is realistic. And I suspect that when common central vans that is not where the gambling and commission will end up. But I do think they will put the owners on operators to ensure that customers are not spending beyond, therefore, their levels of affordability. And if they end up in that sensible position, I think we've taken the right measures already. In terms of online migration, look, it was a big -- the migration of Bella. I mean we talked about it as being a sort of a dress rehearsal for the bigger migrations, but actually, it was a major milestone for us because it meant that largely we were code complete. That's not that we're not still writing code, we are. We still got a lot of development to deliver. But the core functionality of the platform and the integration of the front end Bella into, which is based on our own in-house content management system, into our platform, proprietary platform worked brilliantly well, and we were absolutely delighted to deliver it in the time scale that we did. So we're on track. We've got -- still got a lot of work to do. There's a lot more integration to do of gaming content, a lot of performance testing before because Mecca clearly is significantly more sizable than the level of transactions we currently have running through the platform. So we've got a lot more work to do, but it's a very, very good, good start on, great milestone, and we are expecting to deliver both those migrations during the year. The speed on this is that as soon as we deliver the migrations, it just frees up to get on with all the development that we want to deliver onto the platform, all of the new things we want to deliver for our customers. It just frees up that resource. But really good progress so far. I'm delighted. And the teams all around the world, actually the teams that are working on this delivered extraordinarily well, and albeit a lot of hard work ahead of us. International B2B growth, that's one of the things that is freed up by -- we have the capability post the migration. We can't do it today, but we're not too far away. And we're already beginning -- we're advanced in discussions with a couple of operators around the world looking at how we might help support their omnichannel ambitions. I think typically, bricks-and-mortar operators looking to develop add digital revenues to their venues revenue business. And I think that is -- that is going to be an important part of Rank's future in the digital space, which is we go back a couple of years without technology, I think we were restricted in our ability to grow our business internationally. I think, now with technology in-house and omnichannel capability that demonstrable omnichannel capability, we're in a good place to start growing out that as a new kind of growth and revenue vector for this group.

Our next question comes from Ivor Jones at Peel Hunt.

Can I follow up on Gav's question around affordability? John, I think when you talked to Slide 8, you attributed the decline in NGR per customer to the implementation of affordability checks. I guess it must be hard to please that apart from just the fact you've picked up more recreational players with lower spend. So I wonder if you could just talk a bit more about exactly what affordability checks were imposed and then how that affected some customers. And I didn't quite catch something you said about 90% of customers decline affordability checks. Could you just go back over what that was? And what it is that you've development that lets you know that and what implications that has for the business? Are you talking about higher -- much higher spending VIP customers? You talked about deposit limits being set. Could you just clarify exactly what they are. As a consumer, I play the dose, you can see that there are things that I can -- I have a fair degree of control over these hard limits that are but aren't changeable. And then on Stride, reporting the GBP 8.5 million loss, is that a kind of accounting hair shirt that forces you to put a lot of costs in the stride line? Or was there a lot of continuing marketing in Stride, which perhaps didn't get the return that was hoped for? So is the issue with Stride accounting or costs being too high or just the way affordability in the revenue? And then the last thing is you mentioned Mecca rafal. And I'm just interested to know what that is, is that essentially a lottery.

Thank let me start with affordability. I thank you for the questions, too. It is difficult to tease apart all of those elements, which impact upon revenue per plane clearly but we know the single biggest impact, and it might be greater than the impact demonstrated by -- I showed you in the numbers has been the affordability restrictions that we've implemented. And those -- I think I made the point that those particularly hit the highest spending players. And our loss in revenue in the year is from higher spending players. And the way in which I mentioned 90% -- the 90% either, is 1 -- only 1 in 10 customers are currently prepared to respond to questions about affordability with documentation. And of those, roughly 7 in 10 pass, if that makes sense. So about 7% of customers will have positive documentation, which will enable a higher level of affordability, which supports a higher level of affordability.

So John, are you saying that VIPs essentially -- are you saying that you've lost 90% of the VIP players base because they won't ask for documentation checks?

No, no, no. So backtrack for a second. Only 1 in 10 customers. It's fair to say, typically at the higher end, customers are more willing to provide documentation. But across the piece, it's 1 in 10. It's 1 in 10 is our experience. It's also 1 in 10 from primary research. If you ask customers, would you be prepared to broadly 1 in 10 prepared to provide documentation. And that's the reality for the current discussion about affordability checks in the U.K. So they are the numbers. Now through -- if everybody is asking for affordability for documentation at an early level in a customer's lifetime, maybe that behavior patent will change. I suspect there is quite a high level of intrusion in asking for -- there is a high level of intrusion asking for bank statements for P60s for Payslips. A lot of customers are just unwilling to provide, particularly if they can play elsewhere. So in terms of our numbers, we know where our impact -- where our revenue has been most impacted has been at the higher spending customer level. That's where we've lost revenue across all the brands. That's where we've lost revenue. And we're building, which is great. But nonetheless, that's had the impact on our revenues, in particularly in Q1, we're building out a bit in Q2, and that will continue.

You've lost revenue because you've lost the customer because they now on subject themselves to documentation checks or lower revenue levels.

Well, in 2 ways. One is if -- in the absence of documentation supporting higher expenditure levels, we impose and we impose a deposit limit on the customer. So we now have 1 in 4 of our customers have deposit limits either set by the customer or more likely imposed by us. And that's in line with the regulations. Now all companies, as I mentioned, all companies will be doing this differently. Is -- the challenge is without third-party data or with good -- without data from the consumer, we're relying upon third-party data. And that third-party data is not that accurate. We're relying upon data from ONS data effectively, which is providing depravation levels at a postcode level. And it's data at a postcode level, which we're having to apply in the absence of having evidence from the consumer. So it's a sensible kind of risk-based approach to implementing affordability. But it has its impact on higher spending customers, and that's clear from the data. Let me move to -- and so the deposit mix, I've made the point deposit limits. We apply a deposit limit it's a monthly deposit in IBRA should add. We do set some at a shorter time frame. But for most of our customers, it's a monthly deposit limit. Let me touch on Mecca Rafale, and then I'm going to ask Bill to pick up the Stride cost piece. Mecca Rafale, it's a new proposition, a number of these sites. Been given quite have grown quite significantly over the past kind of 12 or '18, not just in the U.K. but around the work, particularly strong in the U.S. actually, and we've been looking at the growth of these sites. They're effectively free price draws. You can pay or you can play for free. And we think it offers a lot of opportunity for it. It's a sort thing our customers in Mecca really, really like. We do lots of this already. So we're branding a Mecca rattle site, and it will be live in the coming few months, and it's not going to be kind of revenue levels of Mecca Bingo, clearly, but it's a nice addition and demonstrates sort of thing which we can now implement quite quickly with more in-house capability.

Bill, maybe you pick up. I'll pick up the accounting hair question. So Ian, that one. Most of the costs across the digital business are very clearly attributable to the right part of the business. So we know the RGD by business. We know the tech spend by business because the teams fill in time sheets. We know what they're attributed to. Clearly, we know the marketing spend by each brand because we track that very closely all the way through. So kind of the costs are landing, where the costs are landing. There's a little bit of back-office blurring of the lines, but that's all spread out fairly. In terms of the value for money piece on this year, we haven't had the return on the marketing spend that we wanted, but we felt that it was important to keep the marketing spend going we take a pretty stringent line on what we capitalize, so that we will have depreciation going up because of the investment we're putting into this. So we want to keep that as clean as we possibly can. So yes, what we can't justify as capitalizable, we don't capitalize it.

So in light of what happened in the period, will the marketing within Strive B cutback and allocated elsewhere?

Well, we want to keep the strike business and brands going. We will try and get the best return we can across the portfolio, obviously, and the team do increase in some areas and reducing others. But we're trying to keep the drive brands going.

Our next question comes from Greg Johnson at Shore Capital.

Three questions, please. Just following up on levers on Stride. Are you confident you can get it back to profitability before synergies? And what needs to be done to achieve this? Secondly, given sort of the pandemic and the issues, wider issues, would you be keen to add to the growth in the estate going forward where conditions allow? And finally, obviously, Casinos and Bingo were later to reopen last some of the others areas of hospitality. In your conversations with government, do you think it will be a different approach this time?

Greg thank you for the questions, too. Look, I think we are confident about the strive business. I certainly haven't lost any confidence. We -- what we discovered. We've discovered that we've acquired a platform that's probably stronger than we thought when we were acquiring it. So that we -- we did a lot of de diets around the platform, but I think we're delighted with the platform and the progress that we're making with the development. That's been extremely good news. I think we certainly discovered that there was a bigger impact from harmonizing safer gambling standards between Stride and the ranked business than we thought at the time of the acquisition. And I think the third thing I'd say is that the benefit of bringing these 2 teams together has been enormously valuable for us. We have got much stronger management team as a consequence of the acquisition and the process that we've been working through to merge these teams together. It's also delivered us a very strong offshoring capability in Mauritius. And actually, it's strong offshoring capability for development. We've got development teams in Mexico. We've got a very strong team and growing team in Cape Town. Together with, obviously, the team that we've got in London. So I think we walked into this with our eyes open. And yes, you always learn a few things, but I think we're in reasonable shape. The biggest impact, as I'm saying, has been from harmonizing safer gambling measures across the brands. But we're through that. And those we are now starting to grow those brands. And we've been learning quite a bit about returns on marketing monies in those brands, and we're working on how those brands position most effectively in the market, and we are generating somewhat slightly different positions for each of those brands. So spin and win will be targeted at a particular part of the casino market. We've got some clear marketing propositions around the lucky VIP site. And we've got some interesting proposals for ideas for what we're going to do with the Bingo sites going forward. So a lot of energy, a lot of effort going into how we rebuild revenues into those brands. Well we get to profitability, of course, you will, no question. The GBP 15 million is an annualized number. We probably have been a bit harsher in the way we've handled costs in this half, but I think it's the right thing to do. I don't think we want to be burdening ourselves with Capex, anything higher with capital spend or depreciation any higher than we need to going forward. So there's been an element of that, as Bill has kind of explained. In terms of the growing estate, would we like to add to the estate, yes, we would. And will those opportunities are, are going to have to wait and see. Clearly, the competition ruling that came through the acquisition of Gala clubs back in 2011 makes it more challenging for us to acquire because of the ruling that the CMA -- it wasn't CMA at the time, but you know what I mean, our arrived at. So that presumably still a clients. We haven't tested it, but it presumably would still apply. So that does restrict our ability. But certainly, if venues are available to us in the right locations, we would be keen with the right at the point we're generating the right level of cash to be growing our estate. And we continue to look at license opportunities, and we have work on license opportunities as part of Transformation 2.0 in the Grosvenor work stream, but not something we're going to press on with until we get to the point when we are back open and generating cash, but we have opportunities around licenses and their in-house licenses that are either being user segmentalize or dormant licenses today. And in terms of reopening, I think we've had enormous support for DCMS. We've had enormous support from Nigel Hunston and Minister at DCMS. I think we have a phone call with Nigel once every month or thereabouts and more regular contact with the officials. They are very keen to ensure that we can open as soon as we possibly can. Look, I think it was a mistake that was made last year in separating casinos from the rest of the hospitality sector that was unhelpful. And then I think when it came to initially i tiering to single gambling venues in the way that we were singled out was also -- I mean, I took the view at the time it was unfair. I think people understood my views at the time. And that was certainly recognized by and we are now in the same tier. But we came into the current lockdown in the same tier as pubs and restaurants. And I suspect that's where we're going to be when we reemerge and lockdown, but that isn't clearly an ongoing discussion with government, but we are expecting that to be the case.

We don't have any further questions. So over to you for any final remarks.

Not too much for me. Many thanks for taking the time to join us this morning. It's been a tough half, but we can -- there are some lines at the end of the tunnel, hopefully, by the time we get to the full year, we'll be long since open with all about our vaccines. And almost just as importantly, I have had a haircut. Many thanks, and look forward to seeing you all soon.

Thanks, all. Bye-bye.