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

All right. Good morning, everyone. I'm John O'Reilly, Rank Group CEO. And I'd like to welcome you to Rank Group's Results Presentation for the year ended June 30, 2021. Thank you for joining us this morning. Much appreciated. When we presented our interim results at the end of January, I think I said that we were hopefully getting back towards some normality, and talked about there's been light at the end of the tunnel. And as it turned out, it was a very long tunnel. But we are back up for business. And as you'll hear more about this morning, the early weeks of trading have been good, and we're back to generating cash, which is great. In terms of the ordering of this. I'm going to begin with a summary of what was our review for the Group, but then focus on the 3 key areas perhaps of most interest. How we've been performing since reopening in May and what progress is being made in the digital business. Will, then take you through the full year numbers and provide the details of our cash flow and liquidity position, and I'll then provide an update on the next phase of the transformation of the Group, transformation 2.0, which is critical to returning the business to the growth -- the strong growth trajectory, we were on before the pandemic struck. I'll give you a sense of what to expect next in terms of growth initiatives and also touch on the government's gambling review, and we'll then take any questions as Alex has already said. Well, 2021 was a horrid year, as I've said, and a very challenging 1 in terms of navigating the impacts of the pandemic, and doing everything possible to ensure we would emerge in a strong position. I've been in the gaming business for a long time, and I've seen most things over the years, but 2021 was something else entirely. And in sort of the lead table of the most impacted business, we were right at the top I think, certainly high up that league. But recovery is now underway. And I can tell you the management team is wholly committed to getting this business back to that strong growth trajectory we were on in 2019, '20, before the pandemic struck. Our venues contribute 80% of our revenues when open, and opened without restrictions. And with U.K. venues being open for just 38% of available days in the year. Our revenues were at 45% of those of calendar year 2019. So -- which is the last full year with our pandemic-related restrictions. In fact, we didn't have a day in the year with normal trading, which is kind of bizarre but the reality. And that resulted in an underlying operating profit in the year of GBP 84.5 million. Like-for-like, digital revenue was down 6% and the result of venues being closed for most of the year and the result of lack of customer flow through from venues and the impact of affordability measures, and where we've taken a stringent line. Now since the pandemic forced the closure of our venues in March 2020, we've been very focused, inevitably on cash preservation. Liquidity has been key to ensuring we emerge strongly from the past, now, what, 17 months. And we ended June with GBP 98 million of cash and available facilities, which has been a good outcome. Now we're back open. Customer demand has been strong. We were trading cash positively, immediately following the opening in England on the 17th of May and the additional removal of restrictions on the 19th of July, and with Scotland ending curfew on the 9th of August, those have further benefited the trading. And very importantly, by the way of an overview, we haven't lost sight of the transformation program. Indeed, we focused on it during the extended period of lockdown to ensure this will be positioning the Group for a strong recovery. Just some stats here on the impact of the pandemic. And we didn't trade under normal conditions, as I've said, on any day during the year. Even when we were open, we were working with reduced occupancy, social distancing restrictions, sometimes with curfew. All those things having a material impact on the casino business, but particularly, obviously, when we're closed, and we were closed for 66% of available kind of trading days. As it turned out as not available trading days in Grosvenor. So 66% of the time we were closed, we're close to 58% of the time in Mecca, and 30% Enracha in Spain. As a result, Grosvenor revenue was down 71% on the prior year, and just 22% of 2019, pre-COVID calendar year revenue. Mecca was down 57%, 31% of 2019, and Enracha was down 35%, up 49% of 2019 revenue. Put what has been a horrid year behind us and move on. And here are some metrics on trading since we reopened on the 17th of May this year. Our performance in Grosvenor has been good. Certainly much stronger than when we reopened last August. I expected that to be the case, but undoubtedly has been the case. Consumers much more confident now than when we reopened last summer. Average weekly revenue in the 13 weeks to last Sunday, the 15th of August, is running at GBP 5.7 million and growing. Visits are down 37% on 2019 levels right before the pandemic, but revenue down just 19% or at 81% of 2019 revenues. And then London typically accounts 42% of Grosvenor's revenue. And here, our 9 venues are down 40% on 2019, which is primarily the result of the absence of international tourists in London. And these months are, of course, the peak season for this part of our business. There's fewer office workers and reduced late-night public transport in the capital, as it also suffered demand in London. In our 5 venues in Scotland, revenue is down 43% on 2019, as a result of the extended closures, particularly in Glasgow, but curfew across Scotland, which only ended on the 9th of August. So just 1 week of trading post curfew in those comparable numbers. And the rest of our U.K. casinos have seen revenues down just 2% on 2019. That was so broadly on par with where we were, before we hit the pandemic, and which is -- that's over the 13 weeks of the 15th of August. So a good start. Clearly, some [indiscernible] work to do in London, but a good start. Mecca performance is also encouraging with revenue at 79% of 2019 levels and very much stronger again than when we reopened in last summer. Visits down 34%, but with a strong spend per head coming through. Our average weekly revenue in the 13 weeks since we reopened is GBP 2.6 million, which is about -- which is above our breakeven GBP 2.4 million. And performance is improving following the removal of restrictions across our English venues on the 19th of July. Since when average weekly revenues jumped over -- in the entire period to GBP 2.7 million. So 20% down on 2019. In readiness for reopening, we've been focusing on enlivening the main stage Bingo game and improving our food and beverage menus and service quality in line with customer insights. There are more propositional changes underway in our test locations, but the 20% increase in spend per head and the strong NPS scores, which we're seeing are showing good customer response to the changes that we've made. Plus undoubtedly, as is the case with Grosvenor and Mecca customers are just delighted to be back. And clearly, we've got more work to do, particularly amongst that older cohort of customers, some of whom remain reticent in regards hospitality -- indoor hospitality venues generally. In Enracha, various regional restrictions are still in place, but we're trading profitably with revenues at 73% of 2019 levels over the period from the 17th of May through to the 15th of August last Sunday. Now across the businesses, I would say, good start, growing confidence amongst consumers. And clearly, those consumers who've returned have been enjoying the experience with strong levels of expenditure per head. The performance of our digital business has been disappointing. Pro forma revenue down 17% on the prior year at GBP 177.4 million and down 6% on a like-for-like basis at GBP 136.3 million. The closure of our U.K. venues has heavily impacted the flow-through of omnichannel customers to our digital brands. In Grosvenor, omnichannel revenues, or omnichannel customer revenues in digital declined by GBP 12 million in the year. And in Mecca, omnichannel customer revenues in digital fell by GBP 9 million. And the second factor impacting the performance. And this is across all of our U.K. facing brands, including those acquired in the Stride acquisition, has been the impact of the strong application of affordability restrictions on customers. And it goes through in the average NGR that you can see here per customer. And it's declined by 42% for Grosvenor, less so, but nonetheless, by 14% from Mecca. And we've delivered good strong growth in active customers, but not sufficiently to offset those levels of declining customer expenditure. And the U.K. facing digital business is very important to the Group and we are fully focused on getting this back to the growth levels, we were delivering in 2019. We've taken a number of key actions already and have a good pipeline of initiatives to turn this around. Now 2021 performance is disappointing, but I'm very confident we have the team and the plans in place to quickly get this business back into strong growth. And I'll say a little more about digital transformation plans a bit later on. In many ways, this has been a year of transition for the U.K. digital business with lots of intense effort going into developing the proprietary platform that was acquired through the acquisition of Stride Gaming. And that's for the migration of Rank brands, Mecca and Grosvenor. We are making good progress, but we've decided to delay the Mecca migration until early Q3 '21, '22, to make further improvements through affordability journeys before going live. And much of the safer gambling interactions on the current B platform are manually triggered. On the proprietary RIDE platform, the customer journeys are being largely automated, which further improves the control environment, obviously, but also ensures interaction with the customer is at the most appropriate time to encourage the best customer response. So we -- in terms of synergies, we've now delivered GBP 8.2 million of annualized synergies with a further GBP 6.8 million to come, so GBP 15 million in total, and that will be released on completion of the migration of the Rank brands. And the cost to achieve are in line with the acquisition budget. The development of the RIDE platform is a major step for perhaps the major step forward for the Group in terms of our digital capability, and is the key to driving future revenue and profitability growth, both in the U.K. and internationally. The Stride business has incurred a fine, which we've announced this morning of GBP 5.85 million imposed by the Gambling Commission's Regulatory Panel, which has been booked in the year-end accounts. And the Commission imposed a fine of GBP 3 million following a compliance assessment of the Stride business in early March 2020, which was 5 months after completion of the acquisition. We thought the fine was unfair as it penalized Rank for compliance breaches within Stride prior to the acquisition, and we worked very hard to ensure we brought the business into a position of strong compliance. The Commission argued that the license entity was Daub Alderney Limited, wholly owned subsidiary of Stride. And the Rank now on the business, the fact that we're[indiscernible] right now in the business that was irrelevant, other than that by virtue of owning it. We have to pay the fine. And we appealed the decision to the regulatory panel but they surprisingly decided to penalize Rank further and raised the GBP million to GBP 5.85 million. Now there's no suggestion from the Commission that Rank is in any way at full. And we've appealed the fine to the tribunal. And finally, Spanish business, digital business comprising YoBingo and YoCasino has performed very well in the year. NGR growth of 30% to GBP 20 million. Now before getting into the detailed results numbers with Will. Let me just add a few words of thanks to the Rank team who've shown huge commitment during what has obviously been a difficult year for us all. The team has shown outstanding commitment, drive and energy in supporting our local communities, in supporting each other. Very importantly, in taking tough measures to protect the Group's liquidity and working incredibly hard and smartly to prepare our businesses for their successful reopening. 91% of Rank colleagues have been in furlough during the year, but they are delighted to now be back doing what they do best, in delivering excitement and entertainment to our customers. We kept our kitchens open, wherever possible, and our teams have served over 210,000 meals supplied to vulnerable members of our communities. During what has been a very difficult time for the more disadvantaged. And we supported the NHS and emergency service workers in providing meals, car parking facilities, and in volunteering with the vaccination effort. And I'm delighted that with the support of the government's furlough scheme, we've been able to protect jobs right across our venues. And many thanks to all of those colleagues who worked hard to get us reopen and delivering great entertainment for our customers. And Will?

Thank you, John, and good morning, everyone. I'll start by taking you through a quick summary of the FY '21 numbers and then provide you with some more detail on the reopening performance and our liquidity position. The forced closure of our venues for much of the year, resulted in a sobering sets of financial results. Revenue was down by 48% even on last year's pandemic impacted results. The operating loss for the year of GBP 84.5 million was better than we anticipated, as costs continue to be well controlled throughout the second half. The underlying loss per share for the year was GBP 0.203, excluding the contribution from the discontinued Belgium business and other separately disclosed items. We took decisive action to conserve cash and protect the balance sheet. Cash and available facilities at year-end were GBP 98 million, better than our expectations as we manage costs tightly, and we increased our facilities by a further GBP 25 million in early July with a new 2-year RCF. As we remain in a banking covenant waiver period, we're unable to pay a dividend. We know the importance of the dividend to many shareholders, and will review the approach to the dividend as we return to normal banking covenants. I'll come on to venues performance for the period since reopening later, but in the interest of time, I'll not take you through the venues performance in the year, as the commentary on those businesses is self-evident. Our usual slides are in the back with all the details. Digital trading has clearly been challenged with overall revenues down by 17% on a pro forma basis, and down by 6% on a like-for-like basis, which excludes Stride. On both Grosvenor and Mecca, our financial performance suffered from the closure of much of the year of the venues businesses. Revenue from omnichannel players was down by over GBP 20 million. The application of affordability controls further hampered the business with ARPUs down by an average of 18%. The Yo business, continued to perform well with year-on-year growth of 30%, driven by good performance on both the Bingo and Casino sites. Growth slowed in Q4 and the first few weeks of the new financial year, when the Spanish government introduced the prohibition of incentives to new players. The like-for-like year-on-year profit decline results from a combination of the revenue decline, and continued investment in the marketing of the Spanish brands to drive the NGR growth. On Stride, the safer gambling measures implemented to align to Rank standards, materially impacted performance with a 39% decline on a pro forma basis. The decline in profitability reflects both the significant impact of the NGR decline, alongside continued marketing spend, and the expenses of the GBP 5.9 million fine that John also talked with you through earlier. Cost synergies delivered to date to GBP 8.2 million on an annualized basis, and we expect to deliver GBP 10 million in the year ahead. We remain confident that the annualized cost synergies of GBP 15 million will be delivered on completion of the tech migration, and that should all be recognized in FY '23. Moving on to the income statement. The underlying operating loss was GBP 84.5 million. The interest charge was GBP 14.4 million, and I would anticipate a similar charge in the year ahead. Separately, disclosed items on continuing operations, which excludes Belgium, totaled a loss of GBP 8.4 million, and I will take you through the detail of those on the next slide. The underlying effective tax rate was 15.6% due to a mix of profits in Malta and losses in the U.K., Gibraltar and Spain. We're able to offset a portion of our current year tax losses against prior year profits that will result in a refund of around GBP 5.6 million in the FY '22 financial year. The balance will be deductible against future profits and likely be fully utilized in FY '23. The effective tax rate on underlying profit for the year ahead is expected to be between 17% and 19%. On separately disclosed items, the key income item here is a refund of GBP 13.6 million with duty paid on free chips given to casino customers in prior years. Amortization of acquisition intangibles increased to GBP 11.8 million with the full year impact of the Stride acquisition now hitting the books. Transformation and integration costs were GBP 7.9 million, and this is largely central office redundancy costs. There is a GBP 2.3 million provision from the closure on 5 Mecca venues, where we will exit the leases in September. These costs are mostly for property dilapidations. And the profit on the disposal of Belgium was GBP 23.8 million. On cash flow, the cash used in operations was GBP 15.3 million. Interest paid was GBP 14.9 million and tax paid of GBP 1.4 million. There was GBP 22.2 million of CapEx, as we pulled back on venues investment during the year, but we continue to invest in digital largely the tech integration. In recent weeks, we recommenced investment in venues mostly in Grosvenor, on small projects with a fast payback such as new slot machines and new roulette wheels. We also intend to carry out a small number of light touch casino and bingo venue refurbishments in H1 of the new year. With the potential for more ambitious projects in the second half as and when circumstances permits. CapEx in the year ahead will depend on the rate at which we return to prepandemic revenue levels. But at this stage, I'm targeting full year CapEx of around GBP 40 million. And if we get confident that we can move faster than we will, and we'll aim to spend GBP 50 million. GBP 25.2 million was raised from the Belgium disposal and the net placing proceeds was GBP 68.1 million. We made the first term loan amortization payments of GBP 19.7 million, on schedule in May. And I expect us to make all future repayments on time. The May '22, amortization payment is GBP 29.6 million. Year-end net debt was GBP 256.7 million, so GBP 40 million lower than last year. IFRS 16 lease liabilities reduced by GBP 33.6 million to GBP 206.9 million. Underlying net debt on a pre-IFRS 16 basis was GBP 49.8 million, a reduction of GBP 7.2 million. Here, I've given you a summary of the average weekly trading in the venues businesses for the 6-week period between 17th of May and 27th of June. And then the 7-week period from the 28th of June to the 15th of August. In Grosvenor, we're making good progress. The 5 Scottish casinos were released from social distancing and curfew constraints in the last week of this period, and we saw a decent bounce as a results. Grosvenor venues in England and Wales, outside London are operating at revenue levels very close to those achieved in the comparative weeks of 2019. London continues to be impacted by low levels of overseas visitors. After a very strong opening week in Mecca, we have more muted trading. But in the last 3 weeks of this 13-week period, we've seen stronger visit and revenue performance. Indicating that Mecca customers are gaining in confidence to return to our venues and that we're benefiting from the removal of restrictions on the 19th of July. Enracha has been is trading consistently with a gradual trend of improvement, but remains hampered by capacity and opening hours constraints. As you can see, the aggregate of all businesses trading well above the cash breakeven points. Here, I've given you a few more points to help with modeling cash and liquidity in the year ahead. As a reminder, the normal covenants have been waived up to and including March 2022, and replaced with a minimum liquidity test of GBP 50 million, which is tested quarterly, and all the details of the covenant waiver is in the appendix. The CJRS is winding down, and we will have minimal claims between no,w, and the scheme ending in September. Rent deferrals at year-end were GBP 12.2 million, a reduction of GBP 5.1 million in the second half and with most deferrals now under agreed payment plans. This will largely unwind by March '22. And as I expect, we will pay other rents on time as we go forward. You will have noted that the First-tier Tribunal, found in Rank's favor, on our claims to be refunded around GBP 80 million of VAT paid on slot machines in the period of 2006 to 2013. We've submitted the detailed calculations of our claim to HMRC, and we await their response. So in summary, before I hand it back to John, a quick recap. This has been a very challenging year for Rank, but it's now behind us. Venues have been open for 13 weeks. Our trading comfortably above cash breakeven, and the revenue trajectory is improving. We're confident that the Group will continue to meet its liquidity covenants, and we'll return to regular banking covenants by the year-end. John, back to you.

Thanks, Will. So despite the closure of our venues and the need to conserve cash, we've been making good progress with both developing out and starting to implement some of the key initiatives within transformation 2.0, which is the reset of the Group's transformation plan with a 3-year aspiration. We've used the program to identify and to drive additional cost efficiencies. But the plan is largely focused on driving revenue growth. And as we're now back generating cash and investment opportunities. The program has 7 work streams, which are Grosvenor venues, Mecca venues, and Enracha, omnichannel, digital, safer gambling and organizational capability. And as in previous presentations, I had a few charts to provide a flavor of the work stream initiatives in terms of examples of what's been delivered, examples of what's in train and examples of what is at the planning stage. So I'll start with Grosvenor. Grosvenor work stream, we've completed a terrific investment at The Vic. The Chart builder showed included a picture of the loft, which involves further improving the first floor gaming area, and adding the Loft and external gaming terrace, which are already performing despite the weakness in London is already performing ahead of our CapEx target. We reopened with Reel King Roulette, a electronic terminal roulette variant, which adds some additional fun to playing roulette electronic terminal in the venues. We've conducted brand proposition research with our customers and prospective customers with some useful insights, both for the brand and for the experience that customers want in our venues. In train, we have a program of 4 casino refurbishments that are underway, all unique to the local customer base and marketplace. We have a new employee value proposition in place to ensure we recruit, retain, and provide the right career plans for our colleagues. And we've rolled out a new customer experience measurement tool in both -- actually across both Grosvenor and in Mecca. In planning within Grosvenor, we have a program of further refurbishments across the estate. We're close to delivering a new demand forecasting and rostering tool to ensure that we optimize for customer flow by offering the right mix of gaming tables and staking levels at the right time. And we have a new food and beverage proposition currently performing well in trial, which will be segmented by venue and by markets. At the Mecca, we've modernized the brand guidance, developed a new creative platform for the brand in terms of color pallet, design, style, and tone and voice, and that runs cross channel. We've been running a very successful Mecca Bingo Academy during lockdown for our bingo callers. As part of the proposition of work to inline from the core main stage Bingo Game. And we've launched My Mecca app, which now has over 68,000 customer downloads, which enables our customers to book seats, buy their Bingo Books, buy tickets for our events nights, received promotional launches, order meals and drinks from the table, using cashless payment and of course, to access meccabingo.com. Soon to be delivered. Is a joint liquidity game, enabling customers to play in the same big price game, both online and in our venues. And we've already enabled customers to play our online games in venue using the Mecca Max terminals. And over the next few months, we'll be launched some big money joint liquidity games. We're in the process of rolling out the successful new food and beverage menus, we've been developing in our test venues. And we're on site in Luton building a wholly new concept venue, taking many of the learnings from both customer search and from the trial venues, and we expect to open in Luton before Christmas. In planning, further enhancements to main stage Bingo, further rollout of successful elements of the propositional trials and investment into the gaming machine estate. In Enracha, we along the customer actually providing membership details for easy access for customers, but also a loyalty program, which will deliver much greater levels of customer contact for us. Customer contact levels are low in Spain. That will significantly increase customer contact from the trials that we've been running. We're continuing to invest in the machine estate. Our investment has been delivering strong returns, and we're about to roll out our new machine management system, which will provide much better data, to improve both the proposition and the efficiency of our machine estate. And the Enracha Stadium concept is a mix of electronic roulette gaming machines and sports betting, which we typically cite between the reception area and the Bingo hall within the Enracha venue. And we'll be trialing that in Enracha Stadium as a standalone concept and with Torremolinos, the first such site. And we'll soon be launching the Enracha Digital service onto our proprietary Yo platform. And the next step from there is to develop the omnichannel service for Enracha venues customers. In the U.K., omnichannel work stream, we've launched single sign up with further journey improvements to be delivered, so that when you sign up to Grosvenor in any channel, you're recognized in all channels. We've also recently launched TheVic.com. It's our first omnichannel venue site on the RIDE platform. We're trialing some enhanced sports viewing facilities in our venues ahead of hopefully being able to offer sports betting through the government's review of gambling legislation. And it's also delivering better customer access to Grosvenor Sports, our online sports offering. In planning is a single sign-up to Mecca, across channel wallet developments to support cashless payments and further microsites and venues, with a Mecca trial to follow on from TheVic.com. I've mentioned the strong focus on the transformation program for the digital business. And here, we strengthened the management team in the U.K. facing business, particularly the appointment of John Martin as Managing Director. We finished the migration of our RIDE platform brands onto a new in-house content management system. We launched Mecca Raffle and completed the transition of the planned elements of our admin, and customer support functions to the Mauritius operations that we acquired through the Stride acquisition. In the Yo business, we've introduced a fully automated CRM program and we've redefined the Bingo customer proposition. In train, and all importantly, we have the migration of Mecca onto the RIDE platform. And we got new above-the-line campaigns for both Mecca and Grosvenor brands, which launched in September. Licenses for Stride and Rank are being harmonized with the business located in Gibraltar. Further improvements to affordability journeys to smooth the process for customers and the launch of YoBingo in Portugal. And once Mecca is migrated to RIDE, the focus moves to finalizing development performance testing for the launch of Grosvenor. And thereafter, we've got a program development, new features, new products and improved customer journeys. I'm very much a focus on real-time and relevant customer -- real-time and relevant customer interaction, improved journeys and improved access to data in real-time is one of the key developments, that will be rolled out on the RIDE platform. We have further work to refresh our app strategy, focusing on the omni customer experience. And with all brands operating on the RIDE proprietary platform, it's time to focus on international partnerships to extend our marketplace. In Yo, we will launch sports betting on the Yo platform. And with a strong pipeline of new Bingo and Casino product developments. The emphasis on safer gambling continues to be a primary focus. In addition to the work on affordability. We now have loss and time limits on all machines and terminals in Grosvenor. We've improved customer journeys and KYC data via integrating the ID scanning technology on entry into the Grosvenor venue, with our customer membership and monitoring system that is NEON. And we've delivered a new program of behavioral training across all Grosvenor venues. We're trialing a more player-centric and risk-based customer assessment model in Grosvenor, which we will see rolled out across the estate. We've delivered Hawkeye, a real-time customer monitoring tool in digital, with further enhancements to be added over the next few months. And we've begun a program of measurement of safer gambling, cultural change across the group. In the pipeline, we have the delivery of a real-time single customer view, work that's been ongoing for a while, a big project that will further enhance customer protections. And we're working to improve the quality of our customer interaction evaluation framework. And in terms of improving organizational capabilities, an ongoing focus within the transformation program, we've made some key hires. We've created a new innovations team under Eitan Boyd and assign clearer accountabilities for supplier relationships and contract management. In train, we have an initiative, focused on developing our approach to recruitment, retention and the development of talent with it in Rank. Financial transformation is well progressed now with further work to standardize processes across the Group. And we're reviewing our marketing function operating model, to improve customer centricity and the effectiveness of our marketing investment across the channel. We have a couple of key hires away from finalizing our new technology structure, and with further automation of processes in finance and in procurement, and work to further improve our internal communications. So launched in December 2020, as you know, the government's review of gambling legislation and it's expected to result in a white paper, outlining the legislative and regulatory proposals before the end of this calendar year. The review focuses heavily on digital gambling. As you know, where a new line in the sand is needed, in my view to provide greater certainty for operators. The government has also recognized the need to ensure the regulation of land-based gambling is appropriate for today's consumer. And that it's equitable relative to online regulation. The 2005 Gambling Act, created an experiment of 16 new casino licenses, operating under very different regulations to every other casino in the U.K., which continues to be regulated under the 1968 Gaming Act. And the key regulatory requirements or regulatory changes sought by the casino sector. And by the way of modernization of casino regulations in the U.K. are the harmonization of the 1968 Act of casinos with those of the 2005 backed, enabling up to 80 gaming machines from the current restriction on 20 and the ability to offer sports betting. Secondly, the ability to provide table games on electronic terminals based upon a random number generator as occurs online rather than necessarily on a live gaming event, which would enable Blackjack and other games to be offered at lower stakes that we can deliver to customers on live gaming tables. And the ability to enable customers to access cashless gaming transactions in a way that we do in any other retail environment. For the Bingo sector, the key changes are the removal of the current requirement that no more than 20% of gaming machines are category B3, which are by far the most popular machines with our customers. And that's something we just has to get in my view, because it is a bizarre clause in the current regulation. Enabling the provision of additional site games within Bingo alongside Mainstage -- the Mainstage Game and as per -- as with casinos, the provision of cashless gaming. To the outlook, we've reopened successfully and with the improvement in the confidence of consumers to visit indoor hospitality venues and the gradual improvement and return of international tourism. We expect to gradually return to prepandemic level -- trading levels across our venues businesses. The transformation 2.0 program is gaining momentum now. Now that we're back open for business with identified opportunities to drive future growth. And the current financial performance is in line with management's expectations, and we're optimistic about the outturn for '21, '22. And now we will move, Alex, if you'd be so kind to any questions that anybody may have for us.

Thanks, gentlemen. [Operator Instructions] Our first question comes from Ivor Jones, Peel Hunt.

John, Will, can you hear me?

We can.

Very good. A couple of things. Any sign of problems getting staff or the hospitality businesses you have talked about? Could you just fill it in a bit more detail about the changes you've made to the Mainstage Bingo Game and the internal games. And sticking with Mecca, you described some of the customers as reticent -- Is that based on surveys, -- Do you know they would like to come back to Bingo, while they're worried about COVID? Or are you just observing that they're not coming back to not coming back to Bingo. And last 1, so it will not take up too much of your time. You've talked about the decline in omnichannel revenue online in grosvenor.com and in Mecca. So I guess that must be from players who have signed up in both the news and digital. So what's the corresponding number? What is the total remaining revenue within the FY '21 revenue, that was from omnichannel players. So how much is it -- how much is there potential for us to recover, I guess.

Okay. Let me try and take them in order. I think. Any signs that have problems in terms of recruiting numbers. We're recruiting. So I mean, I think there are several things at play here, Ivor. 1 thing at play is that is the impact of Brexit, which we knew we'd be hit by, and we are hit by, but we've been preparing for it. So we'd be running, training schools for gaming colleagues up and down the country. I think we've got 12 different training schools in place regionally up down the country. Where we are recruiting, but also we're creating a career path, so that colleagues who join us to maybe work front of house. If they choose to be 1 to become 1 of our gaming colleagues, they can apply and we put them to a training school. And so -- and gaming colleagues clearly is the more critical short-term issue because you have to be licensed to be able to deal cards or spin a roulette wheel or take cash from consumers in our casino venue. So we've been ahead of the game on that, but nonetheless, -- so that's created some ongoing challenges for us that were inevitable. We were planned them and ready for it, but we're working our way through it. We've been suffering at the hands of the pandemic alongside everybody else. So at the worst, we were at 8% of colleagues self-isolating, was our worst. We're now this week down to 4%. The changes that came in on Monday has helped that matters. It was coming down over the last couple of weeks, and we're now down to about 4% of colleagues that are self-isolating. So that position is much improved. But that has had an impact because it is a localized issue. So we've had our worst example would be Aberdeen, where we had to -- we've had very, very limited table gaming in Aberdeen because the impact of the pandemic on colleagues there. So it's been operating largely as a food and beverage, electronic gaming venue. Now back to where it should be happily. So I wouldn't stop anybody visiting Aberdeen venue, if you want to play the tables because you can. But nonetheless, we've had those local issues. In terms of recruitment, -- we are -- we're succeeding in recruiting, okay. We've got some localized issues, but we're succeeding in recruiting, okay. So no major impact as yet. Mainstage Bingo Game, this is work in progress. What we've done so far is put much more emphasis on Mainstage. And we've got further work to do around price and price board, which we're doing in a segmented way across the estate. What we're recognizing is the need to provide greater clarity to customers, about price and price board. So there's more work going on. We put all of our colleagues through the Mecca Bingo Academy, as I've mentioned, which is training of bingo callers. We're delivering much more engagement between the callers and colleagues, we're slowing the game down and we are putting as a result, less emphasis on the interval game. The impact on the interval game spend is significant, but it's more than offset by benefits that we're seeing in Mainstage, and in food and beverage because we're giving consumers time to enjoy the experience of being one of our venues. So they've got time to eat and drink as opposed to the rush, rush, rush of Bingo. We've been slowing that down accordingly. We've got more entertainment to add to it, we are now trialing that post July 19. We've been trialing more entertainment elements within Bingo within our test venues. So more work to do, but good progress really pleased with the progress, and it's coming through in spend per head and it's coming through an NPS scores. And very clearly, customers are enjoying the experience. There is some residence in -- amongst our older cohort of Mecca customers. It's varied. I mean it's not clearly, not across the board. We've got some wonderful customers in the '90s, so they are coming on a very regular basis and why wouldn't they? Because it's their social outlet and they've been clearly missing it since March 2020, and are delighted to be back enjoying what they do. During -- I think during lockdown, we've done something like 11,000 calls to customers from colleagues. And what is clear from those calls and what's clear from that ongoing program of contact with customers is that for some of our older cohort of customers, there is a reticence, not just come back to Bingo but for any kind of indoor activity, hospitality, even concerned about shopping for some customers. So I think it's going to be a gradual return. There's no 1 silver bullet to fixing them. I think that's just going to be a gradual improvement in confidence over time. And the decline in omnichannel revenue. Yes, we -- I mean, if we stood still year-on-year, and we wouldn't have sit still because we were growing omnichannel revenue quickly. If we stood still, then we would have been GBP 12 million better off in Grosvenor, at GBP 9 million better off in Mecca of the numbers. But clearly, we wouldn't have stood still because omnichannel is a key part of our revenues. It's a bit more than 50% -- coming prior to lockdown, it was a bit more than 50% of our revenue in Grosvenor and circa 30% of our revenue in Mecca comes from customers who play across channel. And if you take the market as a whole, then just over 50% of bricks and mortar casino players, are play online. And in Bingo, about 1/3 of bricks and mortar Bingo players play online, and that is the sweet spot for both Grosvenor and Mecca clearly. That's where we compete most effectively. That's where we recruit customers most cheaply. That's where we get the strongest retention rates. That's where we get the greatest customer loyalty and therefore, the greatest share of wallet and that has been a sweet spot that we've been missing in the last 12 months.

Thank you, Ivor. Our next question comes from Greg Johnson at Shore Capital. Greg, if you want to take yourself off mute. Then please go ahead.

A couple of questions. Just a follow-up from Ives there on the omnichannel revenue loss last year. With the venues now open, are we starting to see that build back. And secondly, I think if we -- from a venue perspective, assuming the market sort of gets back to where it was, given the sort of transformational 2.0 as cost savings you put through, and sort of the market structure, do you imagine your sales being much more profitable if the market was to return back to historic levels?

Let me answer the following 1 in yes, but let Will provide the detail on that after I answer the first question about that. As always, I should have said more at nice to talk to you. Omnichannel, the important thing in getting our venues reopened, was getting our venues reopened. So initially, we didn't have any focus on omnichannel within our venues at the point of reopening because it was all about just ensuring that both our colleagues and customers were back and enjoying doing what they were doing. So that has been our focus. And because this has been -- over 90% of our colleagues have been during -- have been on furlough during the year. So we brought colleagues back early in kind of late April before we got to May 17, to prepare, lots of training and development, lots of kind of redoing, reexperiencing what they've been used to doing. But -- and quite a big step for customers to come for people all of our colleagues to come back, but delighted to be back, and delighted when we could open the doors and get customers back in. But that has been our focus, getting customers back. Ensuring that happy enduring doing what they're doing. In the past 4 weeks, we've started to step up the omnichannel focus within Grosvenor. And in the last 2 weeks within Mecca, and it's early days, but the numbers are improving week by week by week, and we would expect that to continue as we go forward. Lots of initiatives in place, lots of promotional activity in place and a lot more to do, but great engagement from colleagues and across the venues businesses. And we'll be making a lot of progress on our omnichannel activities as the year progresses.

Okay. So a bit more color on the profitability point, Greg. Good morning. So on Grosvenor, the -- we are a kind of back prepandemic revenue levels on lower visit numbers in the rest of England and Wales. I think the opportunity rather than thinking about the cost savings is the revenue growth. So investment, as you have said, in roulette wheels, slot machines is underway. The refurbishment of a small number of venues to start off with but just improving the look and feel and improving the pit layout, improving the restaurant, food and beverage offer. But the opportunity in Grosvenor is very much on the revenue growth side, I think. And if we can continue to be more efficient then we absolutely will be. But the focus is very much on the revenue growth. On Mecca, I think it's probably a slower return to prepandemic levels. But I'm very confident we can get there. It's -- but it's going to be about the change in the proposition and getting more people back through the doors and the cost is less, less of a focus at the current time.

Thanks, Greg. Our next question comes from David Brown at Goodbody. David, if you could take yourself off mute. And please go ahead.

And a couple of questions for me is 1 in hand. Firstly, on platform migration. So obviously in the pipeline on the kind of aggression of growth on migration to platform there is a read on when customers start to see new products. And that's the first question. Secondly, in terms of the appealed to Gambling Commission. What is the timeline on the First-tier Tax Tribunal appeal. And then just finally, on [indiscernible] recovery. So as kind of a key factor in how important about office markers they are not in trouble to that kind of recovery and grow there.

Okay. David, thank you for those. Can do any on that?

Yes, sorry, David. It wasn't the best. If you can put yourself on mute.

I think -- it was a difficult idea. I think I've got the question. platform migration. We've -- I've decided to delay. We could have gone ahead and migrated earlier, but the reason for the delay is that I would rather -- that when we migrate Mecca, we've done it with as little customer friction around those affordability journeys as possible. So that -- there's a development program that we put in place to ensure that when we deliver Mecca onto the RIDE platform. We're delivering with the least friction to customers. And there will be further work thereafter because this is going to be continuous learning and work in progress. So there's further work to be delivered. But we'll be delivering Mecca onto the RIDE platform when we've got it in very good order in terms of those customer journeys. And that wasn't in the original scope. So we've added that rightly, the right thing to do, but it's extended the time to. It's not extended the cost because the program of work has been coming out below what we anticipated at the time of the acquisition. So we'll be on budget or thereabouts as a result of the additional work. And that additional work, is work that we would have done post migration. So I'm happy enough with that, but it does extend the time frame of the program. Synergy is also coming in as we anticipated. So we're sort of, as we mentioned earlier, the GBP 15 million mark. So look, the platform is critical to the future success of the digital business, and I'm pleased with the progress. There's a lot of hard work that's going into this. It is a very intense program of work. I'm but delighted with the support and input from all the team that are working on it. It's a great team effort to get us to where we are today. And as I say, we expect to be delivering during the second half of the year, both Mecca and Grosvenor. So in a pretty good shape. But I think pleased with where we are. In terms of the Gambling Commission fine, I think the question was around the timetable. And we don't really know because it's kind of moved from a Gambling Commission process to now into a sort of semi-legal priorities, really because the appeal is to the Tribunal. That is the Gambling Commission process. It's the Gambling Commission and then for the Gambling Commission, you can appeal to the regulatory panel. And then from the regulatory panel, your recourse is to the Tribunal. And so we've made an appeal. We would expect to get a court date at some point over the next kind of 6 months or thereabouts, I would have thought, but we'll just wait and see how that process is kind of a legal process, and we'll see how it pans out. I mean, we're not arguing that there weren't breaches. Our argument is that we have cleaned the operation, and we -- there's no thought on Rank's part, but Rank are being required to pay the fine. And now the fine has been increased from the original fine, which just seems unfair on us. So it's not a big debating point with the Commission. I understand their position, but we do think it's worthy of consideration by Tribunal. And in terms of London casinos, the critical thing, and I think your question. I think the answer is in the question really, the critical key thing for London is the return of international tourists, particularly from the Middle East and the Far East. And our casino business in London is we got 9 venues in London and out of our 52 Grosvenor venues, 9 are in London. And in a typical year, it's 42% of our growth in revenue. So it's critical to the business. And it is very critical. And those 9 venues -- we don't operate at the very high end of the market. So we're not the [ Mayfair market ]. But nonetheless, we're still very dependent upon international visits to a particularly from the Middle East and the Far East to come to London, amongst other things to shop and to play. And that's what our business in London is very much about. So we are seeing good numbers of U.K. business back in London. If you're in Leicester Square at 11:00 o'clock now, it's got busy again and -- which is great, but it's not as material for our business as the need for international tourism. Office workers, I think, will come back in September, and that will help further. And clearly, that late night travel is an issue for people in London. It does affect the late-night economy. And the Mayor's office has said consistently that the late night economy is the fastest part of the growth -- faster growth part of the economy in London and has been coming into the pandemic, clearly hasn't been during the pandemic. But to get London back firing at night, we need the travel -- ease of public transport is important for customers, and we haven't quite got that yet. We haven't returned to that yet. As a consultation out on the congestion charge of reducing the time and the congestion charge and a positive result there would also help actually because that's a challenge, both for customers and for our colleagues in London actually, so that would further help. But -- so I think London will be a gradual return. We are -- once we get through the summer and the summer is the peak for us then, that the reliance upon international travel, international players does reduce a little bit outside of the core kind of hot summer season. So as we get through that, it's less of an impact. But hopefully, by the time we get into the spring, we're seeing people traveling back into London again. United Arab Emirates came out. [indiscernible]. I think, a week last Sunday. So as a gradual movement in international travel, it will certainly help us. And that's the most critical of those 3 variables in other.

Thanks, John. That was David through questions. So we don't currently have any further questions just to the audience if anyone does want to raise their hand. Oh, Ivor ever has come back to the floor. Ivor please to takes it from you. Go ahead.

There are a couple of other quick things. You said the GBP 5.9 million fine, John, have been booked to the accounts, but have you paid it in cash or not yet? That was the first thing. What would get you to the upper end of Will's range of CapEx for this year as trading improves? What are the things you'd like to be spending on but won't commit to at this stage? Just I should know this. When you talk about the cash breakeven rates of trading, is that including the benefits of the CGRS and business rates? Or is that sort of against a normalized 2022 cost base? We -- you talked about an aspiration to have electronic RNG-based games in casinos. Would you expect them to be within the higher machine limit numbers that you were targeting? Or how might those numbers be limited in an ideal world? Bellecasino, successful use of the platform, starting to work. You didn't -- you mentioned the last time you didn't mention this time. And I promise this is the last 1. On Stride, slightly oddly, mathematically, second half revenue and operating loss seem exactly the same as the first half operating loss. Is there something mechanical about Stride? I don't understand, given that it continued to performing quite a loss-making way with no apparent uplift in revenue. Why didn't you turn off the marketing tap? So there is some reason why that wasn't possible to put a cap on the Stride losses? And I promise I'll shut up now.

Will, do you want to start with the...

So I start then you take over on RNG, and I can come back at the end or you can do that. We take the way you want to do it. So the fine is not yet paid either, but it's in all of our forecasts -- So it kind of doesn't impact any of the liquidity pieces. On CapEx, this is about the business performing, continuing to improve. And I think most crucially, our confidence that we're going to stay open. We are all extremely hopeful that the pandemic is completely behind us. But we're also -- we just have to be mindful of, is there going to be another wave, is there going to be some sort of winter lockdown? Are they going to be capacity constraints or anything put in place over the winter flu, much more widespread flu. I think we've just got to be -- continue to be a little bit cautious. But the things that we would do, that would accelerate it, would largely be casino and possibly, to a lesser extent, Bingo refurbishment. And there's just this kind of just a rate of how much we can actually get done from a management bandwidth point of view as well. We're very focused on getting those things done but getting them done well. And I would rather go a bit more slowly and do it well than rush at it, and have to enough to do some of them again. And then on the cash breakeven point, the cash breakeven is normal trading conditions and also includes CapEx of the budget of the kind of GBP 40 million level, interest and corporation tax. Those kind of all.

Thanks. The RNG-based gaming, I mean, I think this is an mechanism really, that we can offer roulette rules can't offer Blackjack, or other games because it has to be -- a terminal can only be played on a live event. There's no restriction under the current law on the number of terminals we can offer to consumers to play on the live event because the law takes it as it's just another way of playing on the live table. So why would there be any restriction in the number of terminals that you have. But there is a restriction on the number of terminals for an automated wheel. If we have an automated wheel in a venue, so it's a wheel, but it's automated. We're restricted to if it's not a live dealer event, it's live, but it's not a live dealer event, it's an automated event in venues. So you've seen automated wheels in venue. Then that's restricted to 40 terminals in a casino today under the regulations. And we would expect -- I mean it would be -- we would like to have that restriction of 40 relaxed somewhat, but we'd operate very successfully with 40. What we'd like to do is just to give our customers in venues. And bear in mind, this is electronic terminal, not gaming machines. So nothing to do with the restriction of 20 gaming machines because these terminals are not gaming machines. I know that's a nuance, but nonetheless, an important nuance. So we'd like to have more than 40. But if we restricted to table gaming, RNG-based table gaming on the 40 that we're allowed currently in our venues, then that would be a big step forward for our customers. Because not every customer wants to play GBP 10 a hand at Blackjack or GBP 20 a hand of Blackjack on a busy Saturday night. People want to play at lower stakes, why wouldn't you? And the best way to allow customers to play at lower stakes is to remove the live dealer element of it. Live dealer is not to replace live dealers. Live dealers are the theater of a casino. So we don't want to change that but we do want to give customers the opportunity to play at lower stakes if they choose to play at lower stakes. So that's the emphasis. Bella performing okay and on the new platform performing fine. So I mean some learnings from that. But the migration was very successful. The business has continued to tick over quite nicely. It's a secondary brand, but it's ticking over nicely. So no concerns from a platform perspective. No concerns in that regard at all. Performing well. And the Stride second half versus first half, I think a couple of things there. 1 is the Stride P&L kind of carries quite a bit of the integration cost inevitably, and the cost that we're not capitalizing in that is being carried in the Stride business. And in terms of marketing, we've been experimenting quite a bit in the second half of the year. I think we've learned a lot about return on investment in the Rank brands as we make further improvements to the platform in readiness for migration. We're seeing better returns on that investment. And as long as we're getting returns, we're going to continue to invest. I think the losses in that are a function of it's got a high carrying cost base until we complete the migration. I mean, is the primary cost that business work quickly because it will be -- complete the migration, it becomes 1 P&L, it all gets merged into 1, and we'll quickly see, I think, those brands delivering to the bottom line, albeit they're not delivering to the bottom line today, but that will change.

Is the GBP 16.4 million loss this year after the GBP 5.9 million fine?

It includes the GBP 5.9 million fine, yes. And some legal costs on top -- because obviously, the it's actually GBP 5.85 million, that's just defined. But obviously, we've incurred some legal costs and we'll continue to incur some legal costs, which have also been charged.

Okay. So on operating basis. I was wrong to say it was the same losses in the first half?

Yes, you are actually because of [ GBP 5.8 million ], the cost plus legal costs have gone into the second half.

Thanks, Ivor. Gentlemen, we have no further questions. So John, over to you for any closing comments.

Many thanks, everybody. Thanks for joining us this morning. We are emerging, coming out of it. We're in a pretty strong position. I take quite a bit of pride in the way the team have managed to navigate the pandemic in the way that they have. And I think we're on a pretty good platform and a good strong upward trajectory. So all to play for over the coming weeks and months and look forward to seeing you next time around when hopefully we'll be delivering some decent numbers of recovery. And many thanks for your time this morning. Thank you.