Rank Group swung back to a profit in the 12 months to end-June, but warned of challenging times ahead as high prices hit consumer spending and input costs rise.

The U.K.-listed company posted statutory net profit after tax of ￡74.3 million compared with a loss on that basis of ￡85.6 million. Underlying profit was ￡40.3 million. Reported gaming revenue jumped 95 percent to ￡644 million.

The group said its second-half performance was hit by underperformance in its Grosvenor venues, particularly in London, due to the slow return of international tourism. Digital net gaming revenue was up 4 percent year-on-year with a six-fold increase in underlying digital operation profit to ￡18.7 million, thanks to synergies from technology integration following the acquisition of Stride in 2019.

In the first seven weeks of the 2022/23 financial year, underlying digital net gaming revenue is up 12 percent, while venues are down 1 percent. Although Grosvenor revenues are down 4 percent, the average weekly NGR is ahead of the fourth quarter as tourists began to return to London, offsetting weaker conditions outside of the capital.

“It was a challenging year for our UK venues businesses, with unexpectedly softer trading across the Grosvenor estate in the second half of the year,” said group CEO John O’Reilly. “Our nine London casinos, which account for over 38 percent of Grosvenor’s revenue in normal trading conditions, have seen very weak customer volumes with overseas visitors few in number, and only starting to return in the final few weeks of the year.”

“The lower than expected Grosvenor trading in H2 led us to reset full year operating profit expectations as announced in Q4.”

“Whilst we have been seeing improvements in London in recent weeks, the trading environment across the UK is likely to remain difficult in the months ahead with inflationary pressures squeezing consumer discretionary expenditure and cost increases, particularly in energy prices, putting pressure on profit margins,” he said.

Performance in the digital business has continued to improve and Rank expects a strong improvement in margins as its Grosvenor brand follows the Rank brand in migrating to a proprietary technology platform.

Rank also said it was disappointed with the delay to the U.K. government’s publication of its white paper on gambling regulation. It said the country’s land-based and bingo sectors are in need of a long overdue modernisation when it comes to regulation.

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