Speaking to EGR following his first analyst call as permanent CEO of Rank Group, Richard Harris is not minded to pulling his punches.
The former CFO of the Grosvenor and Mecca parent used his first results presentation at the helm to take aim at “tax proposals from anti-gambling campaigners” that “continue to cast clouds over a regulated industry”.
Besides calls by the Social Market Foundation to double machine games duty on Category B machines from 20% to 40%, the think tank may have played an influential role in the Treasury’s decision to hike remote gaming duty to 40% from 1 April, having called for a 50% rate last year.
Still, there is underlying growth in this FTSE 250 business, and the stock is up almost 17% the past six months. “This is a good business that has strong foundations which we’re fine-tuning to allow us to flourish even further,” Harris tells EGR. The regulatory headwinds battering this UK-centric business will certainly test the robustness of those foundations.
EGR: You took on the post permanently from July. How has the transition to CEO been for you? How was your first earnings call?
Richard Harris (RH): Fortunately, I’ve done a few of those alongside John [O’Reilly] in the past, so I know the ropes, but it was good to get the first one out the way. I’m delighted to be given the opportunity. It’s great to have support of the board. I’ve been in the interim role for about six months or so, and I’ve worked alongside John for around four years. The main thing I come back to is Rank is an amazing business with some great brands. That’s an attractive opportunity for anybody.
I loved working with John, but it’s also good from my point of view to have the opportunity to put my own stamp on it. We do some really good things, so there’s a really strong foundation. This is about evolution. It’s not like we need open-heart surgery. This is a good business that has strong foundations which we’re fine-tuning to allow us to flourish even further. I’m loving it so far and keen to get stuck in even further with a great bunch of colleagues.
EGR: I wanted to unpack your comment around anti-gambling reforms “casting a cloud on the regulated industry”. Those are strong words. How much of a threat is the industry facing from this push?
RH: I think it’s fair to say that over the last few years, operators in the industry have become accustomed to the fact that from a regulatory perspective, from a tax perspective, and also from a broader macroeconomic conditions perspective, it’s unlikely things are going to be materially in our favour in the future.
So, you do become accustomed to the backdrop we’ve got, and you do have to learn to operate your business in that context. I point to the mitigative actions we took when [the UK tax hike] was announced in November and implemented from April. We understood what we needed to do. There are some difficult things we’ve had to do in that process, but we were pretty decisive with it.
I’m really proud of the things we do in this business. In Grosvenor and Mecca, we’ve got some real community assets. They’re in the heart of local towns and cities across the country. It’s highly supervised enjoyment for customers. They’re really loyal. They come back because they have a great experience, and we look after them. It’s frustrating some people don’t see it in quite the same way I do in that regard.
EGR: You said on the earnings call it is about “getting used to operating in an environment” that is moving towards heavier regulation. Do you think Andy Burnham’s government is set on further restrictions?
RH: I’m thinking about it in a broader context, whether that be regulatory tightening or higher taxes, or even coming out of the pandemic and the energy cost inflation. I think, that as a highly regulated sector like ours in the space we operate, it’s highly unlikely that all of a sudden we’re going to switch to heavy tailwinds.
You do have to realise you’re operating in a different, difficult, challenging market backdrop. But that’s why the kind of results we’ve seen over the course of the last 12 months and the last couple of years are really pleasing because despite all that, we’ve demonstrated we can grow revenues well.
We can continue to grow profitability. We can improve our cash generation. We continue to invest. We continue to return to shareholders. I’m really proud of the way the business has managed through the last few years, and I expect to do the same looking forward. We are very focused on what we can do to manage this business better in the future.
The positive we have is the abolition of the bingo duty. The previous gambling minister [Baroness Twycross] said they wanted bingo to thrive, not survive. You’d like to think they’d take that into account when making any further policy decisions around tax or anything else.
The reforms we’ve had in casinos are actually helping to modernise the casino industry. Do I wake up every day worrying about this? No, I don’t. But is it something we are extremely conscious of and want to get our point of view across? Absolutely, because these are good businesses. They’re well run, highly supervised gambling environments that customers really enjoy and we’re really proud of them.
EGR: The report noted that retaining the machine games duty (MGD) rate at 20% was “critical”. How significant would it be if the rate doubled to 40%?
RH: Were it to double, it would have a pretty material impact on the group. You’ve got to speak about this in the context of the broader industry. You’ve got to think about the impact it would have on betting shops. You’ve got to think about the impact it would have on Adult Gaming Centres and, obviously from our perspective, casinos and bingo halls.
At 40%, is it likely to lead to further venue closures, significant job losses and a net reduction in tax receipts over a 12-month period? Yes. You would theoretically get higher MGD payments, but we would have to close venues in that context where we are economically rational. Then, if there are businesses that become unviable, we would close them. There are lots of taxes that those businesses pay that you would lose in the context of MGD going up.
EGR: We have seen in other jurisdictions, such as the Netherlands, that when the tax rate went up, tax yield went down. Is there a disconnect between the policy proposal and the reality?
RH: It is clear that when tax rates go up, particularly in venue-based businesses, tax receipts do go down. I think the angle [linked to the policy] is about reducing gambling harm. Well, it’s a very small proportion of customers who suffer from gambling-related harm and, in all likelihood, if we were to close venues, that gambling harm will be displaced to less favourable locations than ours. We are highly supervised. We look after our customers. It would be disappointing from my perspective if customers were pushed towards playing in different locations that don’t have the same standards.
EGR: On the digital side of the business, NGR was up 8% and ARPU rose 10%. What’s working for the digital side of the business?
RH: While we took those strong mitigating actions, we also made sure we continued to invest in the customer proposition. We’ve actually dialled up performance marketing investment. So, in a world where above-the-line marketing spend has come down, we have protected some areas and invested in other areas to compensate.
The technical performance, speed and stability aspects of our platform have improved, and you can see that in the numbers. The way you see that come through is in the ARPU. These are customers who play with us already. We’ve invested in those areas, and therefore those customers, those same customers, are now spending more with us. And given they’ve got a wallet that is spread across a number of operators, that’s an opportunity for us to increase a share of that wallet.
EGR: On the omnichannel proposition, is it an attainable goal to have a complete seamless experience both online and in a land-based venue?
RH: It’s the direction of travel you have to go in; whether the end vision is 100% achievable is kind of irrelevant. It’s the principle of wanting to make that experience as seamless as possible for customers which is most important. We made some good improvements this year in terms of the Mecca app, and we’re going to be rolling out our Mecca unified membership system soon.
That is what customers demand. They want to interact with physical locations in a seamless digital way, and that’s what we’re providing to our customers. Should that have a material benefit to our digital business over time? Yes, it should. Are we fantastic at the moment? No, which is why we think we’ve got loads of runways. Will we ever get to 100% perfect? Probably not. But it’s the vision and the mindset that’s most appropriate.p of Form
EGR: Sports betting is a small part of the business, but did you have any success amid the World Cup in terms of cross-sell?
RH: Our sportsbook is typically for Grosvenor Casino online customers who want to bet on sport and want it to be convenient as part of their gaming proposition. Grosvenor is their first port of call. That is different to how sportsbook operators work. Was the tournament a reasonable trade period for us? Yes, it was. Is it going to fundamentally change how we think about our sportsbook, which is a relatively small proportion of our offering, in the future? Not really. It was good, but nothing to get carried away about.
More interestingly, perhaps, is in the venue-based business. In Grosvenor, we’ve recently been allowed to add sports betting. We’ve got sports betting terminals in 24 venues. We’ve got some full sports lounges in a couple of venues. The World Cup was a good time for us to test some of those concepts with customers. I’m pretty pleased with how that went and I expect it to build over a period of time.
The post MGD hike would cause “further closures, significant job losses and net reduction in tax receipts,” warns Rank CEO first appeared on EGR Intel.
Richard Harris speaks with EGR following the operator’s 2025-26 earnings, as he sounds the alarm over higher taxes and explains why the business doesn’t require “open-heart surgery”
The post MGD hike would cause “further closures, significant job losses and net reduction in tax receipts,” warns Rank CEO first appeared on EGR Intel.