Great morning, everybody. Good morning. I'm Johnny O'Reilly, Rank Group's rather croaky this morning CEO. Apologies for that in advance. Delighted to welcome you to the group's results presentation for the six months to 31st December 2022. Great to be doing this back face-to-face. It's the first time since January 2020. Many thanks for taking the time to join us this morning. Many thanks too for those of you joining us online. Very welcome. I'm gonna provide a summary of the group's first half performance. Richard Harris, Rank Group's CFO, will then run through the half-year numbers in a bit more detail and provide some guidance for the second half.
I'll then provide a quick update on the transformation program, the delivery of our key strategic initiatives, including the progress we're making with our ESG agenda, and where we might be with a vitally important government review of U.K. gambling legislation and regulation. For our U.K. Venues businesses, Grosvenor and Mecca, it's been a tough first half. The Grosvenor business was flying, performance-wise, before the pandemic and before lockdown. Given the very significant contribution it makes when performance is strong, the group was heading towards an operating profit of over GBP 120 million when lockdown struck in March 2020. Both Grosvenor and Mecca have been slow to recover from the pandemic.
Plus, of course, the impact of the tightened jobs market, high wage inflation, the huge increase in energy costs, general cost inflation, and the economic squeeze on the consumer caused by much of the above. Our focus is to get these businesses back to where they were in terms of profitability before the pandemic.
Conversely, our digital business continues to perform very strongly with good growth in revenues and a resultant significant growth in profitability. However, given the pressures on our U.K. Venues businesses, Rank's underlying like-for-like profitability in half one was GBP 4.2 million, and that's down from GBP 24.9 million in half one last year. The sharp fall in profitability was wholly within the Grosvenor business, which has been very heavily impacted by the huge increase in energy costs and significant wage increases for our colleagues, alongside softer than expected revenues.
I've mentioned the good growth in the digital business, here we're really benefiting from the movement of the Rank brands onto our proprietary technology platform, which we call RIDE, which we acquired through the Stride acquisition back in late 2019. We've got a strong balance sheet which is enabling us to continue to invest in our strategic priorities through the transformation program.
Whilst it's been a tough half, we've seen good trading across all businesses over Christmas and New Year, which has created good momentum going into the second half of the year. Getting into a little more detail, I'll start with Grosvenor, the Grosvenor Casinos business, the health of which is obviously key to the overall performance of the group. In half one, like-for-like revenue was down 5% on the first half of last year at GBP 153.4 million.
More positively, revenue was up 15% on the second half of last year, which I see as the nadir period for the Grosvenor business. You can see on the chart the quarter on quarter revenues since reopening. I'll remind you, we reopened in England in May 2021. It was a bit later in Scotland and Wales, I kind of view Q1 FY 2022, July to September 2021, as the first real kind of quarter post the pandemic. In Q2 and into Q3, particularly Q3 last year, we were hit by Omicron. We had seen only a very slow return of Middle Eastern customers back into London and Far Eastern customers who've not been traveling. Working from home in major cities continues to impact after-work trade.
General economic pressures on the consumer continue to grow, we've also had a tightening of regulation, particularly around ensuring that customers can afford their level of expenditure. All these factors have weighed heavily. In Q4 last year, where average weekly revenues were down at just GBP 5.1 million per week. Revenue was hit by very few international customers coming into London, and more significantly, the full impact of affordability restrictions affecting customers who can well afford to play at their level, but were not or are not prepared to put up with a high level of personal intrusion.
Now, we've vastly improved our management of customer risk across the Grosvenor estate, just as we've done across the digital business through investment in technology, in processes, and in the capabilities of our colleagues to deliver positive interactions with our customers early in the customer's life cycle and before those interactions become negative interventions. Average weekly revenue grew 14% in Q1 on the prior quarter, Q4, but the growth rate slowed in Q2, and that was partly the impact of the World Cup, I think, which is positive for some of our venues. I mean, no better place to watch a football match than many of our casinos. But it also keeps players off the tables. And the cold snap in December, which coincided with the World Cup, produced two very soft weeks.
Performance across the Grosvenor estate has been quite variable in the half, with my summary being that our recently invested properties have been our strongest performers. We continue to invest in our properties with refurbishments completed to the Bayswater Casino in Queensway, Merchant City in Glasgow, further improvements to Pier Nine in Brighton, and a complete refurbishment to our Gloucester Road casino, which will complete in the next few weeks.
Looks marvelous too. We've also been continuing to invest in our systems, our products, and very importantly, in our people. We're a hospitality business, and our 3,600 colleagues across the Grosvenor estate create the experience, the fun, the entertainment for our customers. We entered the first half with acute staffing issues, but the position is now much better, having gradually improved through the half as attrition rates have dropped and applications have risen.
Clearly, investing in our people is helping retention, as well as attracting higher volumes of quality applicants. We have strong career paths for our colleagues with our gaming academies operating at full speed up and down the country, training tomorrow's skilled and licensed croupiers. The significantly higher energy costs and wage costs result in underlying like-for-like operating profit down from GBP 29.8 million to GBP 4.3 million this year.
This includes a reapportionment of costs previously categorized as central costs, on which Richard will provide a fuller explanation in a moment. With 51 casinos, 3,600 colleagues, and 24-hour opening, Grosvenor is a business with a high operating leverage. As we get revenues growing, the conversion rate to profit is high, and that is our very clear priority. On that note, we had a very strong Christmas and New Year trading period.
Revenue in the 10 days from the 24th of December to the 2nd of January was up 19% on last year, and we have lots of activity to drive revenue underway and in the pipeline for the second half. The Bingo sector was weak before the pandemic. The step-down in visits and customers, particularly amongst the older cohort of customers, has taken its toll on the sector. Mecca's like-for-like net gaming revenue of GBP 65.5 million was up 4% on half one FY 2022. That still leaves it 20% behind pre-pandemic 2019 levels. We're confident that we've been making market share gains. Our NGR growth continues to slowly improve period on period, but as the chart shows, it stepped back in December as the cold weather snap severely hit Bingo attendance.
Snow and ice is not good for Bingo, I can tell you that. Visits in half one were up 4% against last year, but that's a decline of 28% on pre-pandemic levels back in 2019. We are seeing strong volumes of new customers, but the visit frequency of new younger Bingo players just isn't sufficient to offset the decline we've seen amongst the older cohort. Bingo is growing, which is positive, but from a much lower base, and that cannot sustain the number of venues across the sector.
Consequently, the land-based Bingo sector is under considerable pressure, and that reflects in Mecca's half one like-for-like operating loss of GBP 4.9 million, which compares with an operating loss of GBP 4 million in the prior year. Again, both after the reapportionment of costs previously categorized as central costs.
We closed seven Mecca venues in the period, taking the estate down to 64. We've announced the closure of a further eight venues in the coming weeks, taking the estate down to 56 venues. Nevertheless, I would say despite the sharp increase in energy costs and wage inflation, 25 Mecca venues grew profitability in the half. Bingo, as you know, it's a liquidity game. The bigger the game, the bigger the prize is. The bigger the prize is, the bigger the audience. Of course, it works the same in reverse, unfortunately. The stronger venues benefit from weakness amongst their local competitors. We've been managing our lease portfolio very carefully over, well, many years to give us the flexibility we need as trading conditions deteriorate for some of our smaller attendance venues.
Our focus is on concentrating on our profitable venues, giving great value and service to our customers, and seeking to ensure that we can sustain as many of these very important social amenities within the local communities in which we operate. Now, like casinos, land-based Bingo, needs regulatory change through the government's gambling review and, to better meet the needs of today's consumer. I'll say a bit more about that later on, but we're hopeful of some movement in the coming weeks. Our Enracha business, which is nine Spanish Bingo and gaming machine venues, has recovered very strongly from the pandemic. Half one like for like revenues of EUR 17.7 million, up 25% on last year.
Actually up 11% on H1 FY2020, i.e., before the impact of the pandemic and the long periods of lockdowns we had in Spain, restrictions on opening hours, restrictions on capacity in the venues and other restrictions on food and all sorts of things. Customer visits are still down 14% on pre-pandemic levels, but they're continuing to improve against last year. Visits were up 16% in the half, so you can see the shape of that improvement curve. Our Bingo revenues are now just 1% behind where they were prior to the pandemic. But gaming machines, an area of the business in which we've been heavily focused and investing, have seen revenues grow 39% in the half and up a very similar level to that against 2019.
The underlying like-for-like operating profit of GBP 3.9 million is up 18% on last year, despite the impact of higher energy costs. It's a super and very well-managed business with flagship locations in the cities and towns in which we operate. In the digital business, we have continued to make good progress across technology, revenue growth and operating profit growth. Many of our competitors reported challenging conditions in the U.K. as affordability constraints have hurt revenues. We've been well ahead of that curve, and also now have the very significant benefits of proprietary technology underpinning our brands.
H1 like-for-like revenue of GBP 100.8 million was up 9% from the prior year. The operating leverage in the digital business resulted in underlying profit of GBP 9.9 million, or GBP 7.4 million after the central cost allocation, well ahead of last year. In September, the Grosvenor brand successfully migrated onto the RIDE technology platform we secured in the acquisition of the Stride Gaming business. That completes the program with all Rank brands now as successfully migrated. The development teams are now focusing on delivering new cross-channel products and services, greater personalization for the customer, improvements to customer journeys, strengthening the platform and our database capability, particularly in terms of using real-time data to deliver great experiences for our customers. That work also supports our safer gambling focus.
As our customer affordability journeys continue to improve, consistent with the Grosvenor Venues business, we're removing friction for those customers who are playing well within their means and do not welcome a negative intervention. Very importantly, we're delivering revenue growth across each of our digital businesses. In Spain, we grew 9%, helped by the successful launch of YoSports in September. Passion Gaming, the Indian-run business in which we have a 51% shareholding, grew 68% in the half, and that was primarily down to removal of some restrictions in some states and a corresponding increase in marketing investment.
We spent three years reaching a position with our digital business and technology from which we can now really push on and drive growth. To bring this to life for everyone, analysts and investors, and to showcase what we're doing, we'll be organizing an event later in the year away from results presentations and more details on that to follow. Now over to Richard, if I may, to take you through the financial numbers.
Thank you, John, and good morning, everybody. I'm gonna start by walking you through the key financial points for the first half. Top left-hand side here, overall, like-for-like net gaming revenue is GBP 337.4 million, up 2%, as John mentioned. Within this, the digital business grew 9% and venues businesses declined by 1%. Whilst revenue improved quarter-on-quarter in the first half, it did remain below our expectations, and this then fed into the lower operating profits. Underlying like-for-like operating profit was GBP 4.2 million, compared with a profit of GBP 24.9 million last year, and I've got a slide that will take you through the moving parts of that in a moment.
The lower profits pushed underlying EPS to a loss of GBP 0.008 per share, versus a positive GBP 0.028 per share in the first half of last year. Net free cash flow was an outflow of GBP 5.7 million. Again, I'll take you through the various inflows and outflows on a later slide. The prior year position on net cash flow benefited from the VAT receipt. Finally, we ended the year with a net cash balance excluding leases of GBP 10.9 million. This cash balance continues to provide us with the protection against the uncertain macroeconomic and trading environment. It's also allowed us to continue to invest in the first half and positions us well for when the trading conditions continue to normalize.
Overall, the post-pandemic recovery in the venues businesses has been slower than anticipated. This, along with inflationary increases in key cost lines, has impacted first half profitability. That point is best evidenced by the following chart, I think, which shows a year-on-year movement. Revenue growth of 2% contributes an additional GBP 1.3 million to first half profit. That takes into account the associated taxes and duties as well as direct cost of sales. Salaries and wages are up GBP 10.5 million, with average increases of 8% across the group. Energy costs are up 44%, or GBP 4.5 million in the first half, to GBP 14.7 million. This was with the benefit of the government support scheme for businesses in the second quarter.
We'll come back to energy costs in terms of our forward projections later in the slides. The prior year benefited from GBP 4.9 million of COVID-related support, which has not been repeated in the first half. That's things like furlough income, rates relief, et cetera. Other costs are up GBP 2.1 million, with inflationary pressures across the board. Overall, like-for-like underlying profit declined to GBP 4.2 million. Looking at how that makeup of profit is reported, we have made a change this year, as John O'Reilly mentioned earlier. Historically, the group has managed a number of cost categories centrally on behalf of the business units, particularly the U.K. venue businesses, but also in part the digital business.
In the first half, we've conducted a review of these costs that are centrally managed and concluded it's more appropriate to allocate a significant portion to the business units that benefited from the services provided. For the full financial year 2023, we expect these centrally managed costs to total GBP 35 million, of which approximately GBP 24 million, so two-thirds, are related to services that are provided to the business units. There are GBP 11 million costs in the fully that will continue to be reported centrally. They include costs of the board, company secretary, investor relations, group finance, and our head office in Maidenhead, among others.
Specifically looking at the first half, total central costs were GBP 19.5 million, and GBP 13 million of these have been allocated out to the businesses, leaving GBP 6.5 million in the center. We've reported performance in the first half on the old basis and on the updated basis in the interim statement, and we'll do this again at the year-end before fully transitioning to the new basis of reporting thereafter. For full transparency, we include quite a few details on the allocation in the interim statement. Having been through the allocation process, the aim is ultimately to increase the focus on these costs and drive efficiencies where we can. Each of our managing directors is now fully accountable for all of the costs in our P&L from top to bottom. Okay.
Having been through the drivers of like-for-like profitability, this chart walks you through the full income statement in a bit of detail. I'm just gonna pull your attention to a few items. There's a GBP 1 million charge relating to the reopening of one Mecca club in Luton and one closure in Grosvenor and the closure of seven Mecca clubs in the first half.
We're focused on actively managing the Mecca estate to improve the overall profitability of that business. The first half saw a net financing charge of GBP 6 million, of which GBP 2.8 million is net external interest payable and GBP 3.2 million relates to lease liabilities. Separately disclosed items total a very significant GBP 104 million, the vast majority of which is non-cash. I'll take you through that in the breakdown on the next slide.
Finally, on tax, the underlying effective tax charge was GBP 1.1 million, driven by overseas profits. There was a tax credit on separately disclosed items of GBP 7 million. Here you can see the breakdown of separately disclosed items, which were significant in the first half for several reasons. The largest component part is impairment charges, which totaled GBP 95.4 million.
That splits to GBP 52.3 million Mecca, GBP 43.1 million in Grosvenor. The main driver of the impairment is the rebasing of the forecasts for current and future years. We've taken a more cautious approach to our internal forecasting. This has inevitably had an impact on the cash flows of the individual clubs that are expected. The WACC rate also increased in the period. That was a relatively small proportion of the total impairment charge.
Costs associated with the closure of venues is at GBP 7.3 million in the first half. These are mainly associated with Mecca closures and one Grosvenor casino in the first half. Amortization of GBP 4.4 million relates primarily to the acquisition of the Stride Gaming and the YoBingo brand in previous years. The charge is reducing year-over-year due to some of the assets now being fully amortized. There are a number of smaller items there that I won't go through, but are listed on the side just for completeness. Overall, separately disclosed items were GBP 104.2. You can see again the tax credit of GBP 7 million against these losses. Moving on to cash flow.
You can see here a bridge from operating profit through to net free cash flow and ultimately through to our closing net cash position. The net outflow in the period was GBP 5.7 million, driven by the lower than expected profits in the first half. Principal lease payments were GBP 20 million, and the full year outflow will be broadly double that. Working capital inflow in the period was GBP 16 million, and the majority of this will unwind in the second half of the year. Tax and interest at GBP 10 million includes a tax cash charge of GBP 2.5 million and net external interest of GBP 4.3 million.
Capital expenditure in the period was GBP 24.2 million, and this related to the refurbishment of casinos, investment in new electronic terminals, gaming machines and tables, and we also continued our investment in the development and enhancement of our digital platforms. The cash outflows on separately disclosed items were GBP 2.6 million, and all of that feeds through on the right-hand side to a closing net cash position of GBP 10.9 million at the end of the half. This slide gives a brief overview of our current liquidity position. We ended the year with total cash and facilities of GBP 448 million, which is a strong financial position to be in at this stage and has enabled us to continue to our investment in the business, as I outlined a moment ago.
You can see from the debt maturity profile on the right-hand side that we have some of our facilities maturing over the next 18 months, and we'll also be repaying the final tranches of the term loan in the same timeframe. With this in mind, we plan to commence the refinancing of the business in the second half to ensure we retain good liquidity, and we'll update on progress on this later in the year.
Finally, to confirm, we expect to remain well within the two covenant limits that are in place across both the facilities and the term loan. The last slide in my section summarizes our key financial guidance. Total CapEx for the year will be around GBP 40 million, with further spend on the upgrading of our venues businesses and the enhancement of our digital platform.
John will talk to our H2 initiatives on that shortly. Energy costs for FY 2023 are now expected to be GBP 31 million, and that's on like-for-like volumes. This reflects the lower energy prices seen in the market currently. Just for context, that number has been as high as GBP 60 million at various different points in the year and sometimes beyond for very small periods. A significant reduction from where we had been. To that point, over the last few weeks, we've sought to lock in the impact of the lower prices for the balance of this year. Our energy consumption for the third quarter is 100% hedged and benefiting from the government support scheme for businesses.
We've also now hedged 75% of our fourth quarter consumption, so we've got a good level of certainty for the remainder of this financial year on our energy costs. Going forward, we're taking a more proactive approach to managing energy consumption and energy costs. With 20% of our electricity consumption for next year is hedged, and that relates directly to a PPA contract that starts in October 2023. We also have a small proportion of our gas consumption that's hedged for FY 2024. Based on current market prices, we expect our energy costs in FY 2024 to be GBP 26 million, and we'll continue to build our hedge position as we go through the next few months.
There are some restraints on liquidity in the market at the moment, and that does drive some additional premiums in the market price, but we'll manage through that, and we'll continue to build that hedge. As part of our updated electricity supply agreement, we now source all of our electricity volume from renewable sources, so good step forward there. Finally, just to summarize, as you know, we announced revised like-for-like underlying profit guidance of GBP 10 million-GBP 20 million on the 16th of December, and that remains unchanged today. They are the key points from me. Happy to answer any questions after the session. In the meantime, I'm gonna hand back to John for the strategic update and outlook.
Thank you, Richard. Right. The group strategy is delivered through the transformation program, as you know, and that framework ensures our key initiatives are properly prioritized, they're resourced, tightly monitored, and they progress through to delivery. Actually, this is a shot of one of the bars at Merchant City, which is the best casino in Glasgow, which received a significant investment to improve the facilities, the products and the proposition. If you're looking to locate a casino in Glasgow, this is where you'd put it, I should add. It's now a fabulous property, and it's got a fabulous team. Just one of the initiatives delivered in the half and a sample of the half one initiatives from the transformation program is included in the slide deck at the back.
Here are the highlights of what we're planning in half two, what is gonna get delivered. In Grosvenor, we are commencing upgrading the external appearance of 10 prominent casinos. We also have two refurbishment projects to complete. We've been trialing a new progressive jackpot electronic roulette game, which will roll out to all venues, with a huge multi-site jackpots up for grabs, which leverages the scale of the Grosvenor estate. We're continuing with a program of lapsed customer reactivations, which is delivering good success for us. In Mecca, we're making investments to the external appearance of f urther four venues. We're rolling out a new fixed odds Bingo game and a progressive jackpot interval game. We're continuing a program of modernizing our gaming machine offering, enhancing the layouts and improving the product offering.
In Enracha, we're hoping, subject to planning, to be on site with two further refurbishments, with a particular focus on the gaming machine offering there at Sabadell, in Catalonia and in Seville. We're completing the rollout of our loyalty program, with player tracking and with ticket in, ticket out and rewards for customers, plus further gaming machine enhancements, including some amazing jackpot displays that we've started to put into the Enracha estate. Within the cross-channel work stream, we've been expanding live-streaming from our Grosvenor venues, that continues in the half. That's increasing live-streaming from our venues into our, to our online customers and also introducing a new studio, live-streaming service.
We're rolling out the joint liquidity game, Fortune, across the Mecca estate and online with improved functionality and community jackpots. We're beginning the development of unified membership for Mecca customers on the RIDE platform. Also in digital, now the hard work has been largely done. We're moving the RIDE platform onto the cloud to increase scalability and deliver further efficiencies. We're launching new apps for Mecca and Grosvenor. We're introducing additional gaming personalization journeys amongst a whole raft of developments which reflect the completion of migration onto the RIDE platform. The work stream to improve organizational capability continues to receive a considerable management focus with second half initiatives, including enhanced workforce planning capabilities for the Grosvenor business, which optimizes table openings and minimum chip sizes.
Further investment in our Cape Town technology hub and our operational support hub in Mauritius to deliver both stronger capabilities and efficiencies, and the rollout of the group's new employee value proposition. That's a kind of sample of what's happening within the business to restore the group to the trajectory we were on before the pandemic hit. Here is an outline of the progress that we're making specifically within the ESG transformation work stream. In terms of the customer, we've made a number of improvements to the management of customer risk across the Grosvenor business. Over 850 Grosvenor colleagues have completed face-to-face training programs to deliver improved customer interaction skills. We've developed and are currently trialing a safer gambling app to support colleagues in both delivering and capturing timely information from customer interactions.
We're a good way through rolling out a system called Playsafe across the Mecca Gaming estate, which provides stronger real-time customer monitoring. We've developed a new markers of harm model within the digital business. Within the colleague work stream, we continue to focus heavily on engagement scores across the estate and digital business, and we've seen good improvement in engagement levels and in our ENPS scores in our most recent employee opinion survey.
In terms of the environment, we're midway through the rollout of LED lighting across the Mecca and Grosvenor estate. Program will complete in the second half of the year. All of our electricity, as Richard mentioned, is now sourced from renewables. All of our electricity, I should say, rather, energy is now sourced from renewables, and our power purchase agreement commences in October.
From a community perspective, another busy half with colleagues across the group working hard to raise money for Carers Trust. Our Mecca colleagues contributed to the preparation of literally thousands, I can tell you, of Christmas hampers in what was another hugely successful Everyone Deserves a Christmas campaign. There's been a whole host of other local community causes that our teams have been supporting with amazing energy and commitment up and down the country. Perhaps a little more strategically, we've been focusing on determining our ESG KPIs and ensuring we have the metrics in place, but we're now beginning to set down our key ESG targets for the group, which we intend publishing at the year-end. Everyone is well aware of the delays the UK government's review of gambling legislation and regulation.
The draft paper was very close to being published when the then Prime Minister Boris Johnson resigned last July. Ultimately, publication didn't happen, of course. We now have a new ministerial team who've picked up the review with the intention of seeing it through to its conclusion. From our perspective, that conclusion just can't come soon enough. Here, just by way of reminder, the key regulatory changes sought by land-based casinos and Bingo. Most importantly, harmonization of the 2005 Act experiment in casinos with those casinos regulated under the 1968 Act, which would enable up to 80 gaming machines in U.K. casinos from the current restriction of 20 machines per license. Similarly, the opportunity to offer sports betting, which applies to the 2005 Act casinos.
We want to be able to offer a broader range of table games like blackjack and other games on electronic terminals, so as to provide lower staking opportunities for customers. Plus, we'd like to see the removal of the unnecessary restrictions on electronic payments for gaming in our casinos and in our Bingo venues too. In Bingo, we're hoping to see the removal of what has become an increasingly outdated 80/20 rule, which restricts Bingo in a venue to no more than 20% of the number of machines being the B3 variety, which accounts for the best part of 80% of our revenues. We'd also like the opportunity to provide side games on the main stage Bingo game to provide customers with more chances to win. The White Paper is again close.
This morning, DCMS questions started after prayers in the House. I haven't checked so far, but I don't think there's anything come through so far, so nothing so far. I do expect publication in the coming weeks. Then we need good progress with secondary legislation to make some very positive changes for land-based gaming in the UK, changes which are not politically sensitive and which have broad parliamentary support. Just a few words on current trading and the outlook. We've had as I've said, strong period of trading across Christmas and the New Year. That's provided good momentum going into the second half of the year. However, we're conscious that cost of living pressures will likely continue to bite on our UK venues customers over the coming months.
Digital business in a particularly good spot. We expect strong growth in half two. Balance sheet remains in a healthy position with plenty investment opportunities to drive growth and in preparation for the regulatory reform from the government's Gambling Review when it comes. There are lots of opportunities for us, but I'm cognizant of the pressures on the consumer.
As a result, as Richard said, we're maintaining our year-end like-for-like operating guidance of between GBP 10 million and GBP 20 million for the year to the end of June 2023. It's been a tough first half, but the good news to my mind is, you know, we're the market leaders in what we do. Tough market conditions are tough, but they hit our competitors harder than they hit us in truth. The consumer business has significant operating leverage, which drives profitability as the market improves.
We have the ability to invest, and we have a digital business in increasingly good shape. I'm also lucky to have a very talented team that's committed to maximize the opportunities open to us. We've had a lot thrown at us, we may be not through it all yet, of course, but we're very well placed to bounce back. Right, to questions. We're going to take questions from the room first, I think. I'll have a first hand. If you have a question, raise your hand like Ivor has.
We'll get a mic to you. For those online, if Ivor, you wouldn't mind letting them know who you are so everyone knows who the question is from. If you're joining us online, you'd like to ask a question, you can. You can type the question into the Q&A box and we will pick up any questions at the end. After we've had the question in the room, we'll pick up any question that we've not answered from those that came in online. Okay.
Thanks, John. Ivor Jones from Peel Hunt. I wanted to ask about CapEx to get a sense of what's going to pay off in the future. The total was about GBP 24 million and a half. I think in the statement you've only called out about GBP 7 and a bit million in Grosvenor, and then you said it's maintenance only in Mecca. Where did the rest go, so we can think about the payback? As a subset of that, the GBP 3.5 million that went into new gaming machines, wheels, et cetera, in Grosvenor. Can you talk about the payback on that? 'Cause you've been doing it for some time. Can you talk about the positive consequences you get from that specific bit of CapEx?
The final thing I wanted to ask was, obviously there are ebbs and flows in the Grosvenor business with seasonality and the flows of international customers. It's been phenomenal trading since Christmas. When do foreign visitors come? When do they come and spend significant money? How does weather affect growth? How do we think about the balance of this half and into next year so that when you're next communicating, we know what the comp is like? Thank you.
Why don't I take the last of those, and then if you pick up CapEx, Rich, if you wouldn't mind.
Yeah.
Let me start in reverse. Travel back into London particularly, but it extends beyond London, but it's particularly a London phenomenon, has been clearly slower than we would have liked. We had a, in the end, a not bad summer, but well behind where we would historically have been. At Christmas was much improved, still behind where we've been. You can track, you know, the number of customers coming into Heathrow and where they're flying from. Middle Eastern customers are back, not at the number that was the case pre-pandemic, but nonetheless, Middle Eastern customers are now traveling back into London. Interestingly, we had a lot of customers from Qatar who were escaping the World Cup and decided they wanna be here rather than in Qatar.
They didn't wanna be in Doha for the World Cup. They'd rather be in London. That was helpful. Far Eastern customers, and you will have seen this, have just started to travel and so we are starting to see the return of Far Eastern customers, but it's early days still for Far Eastern customers to be traveling. I'm hopeful of a positive pickup as we progress in beyond Easter and into the summer months. I think we're gonna have a much more positive summer coming up.
The CapEx of GBP 24 million also includes spend on things like investment in our digital platform. You know, we transitioned across to the RIDE platform in Grosvenor in the first half. We've got quite a lot of investment in development resource that goes into improving the platform. That'd be one component part, and you can see that in terms of the performance, the growth in, of 9% is being supported by that investment in development resource. You've mentioned the investment in the property sites, gaming machines, terminals, et cetera. In addition, we have got some maintenance spend. We've got investment in areas, things like energy efficiency, which will start to pay off in the second half of the financial year.
In terms of, you know, what's the investment that we've made in the first half, the ones in the venues that have been invested in are clearly performing better than the rest. You know, If I think about the Bayswater Casino as a great example where we've had a really good start with that one, but we continue to expect that to improve over the next 12 months or so.
Equally, the Gloucester Road venue that will launch in the second half of the year, there'll be long-term benefits coming from that as well. There's quite a lot of investment there in things that are gonna drive improved performance in the long run, whether that be on the digital side or the venue side. There are actually some improvements in Mecca as well, so some investment in technology, the Mecca Max tablets, et cetera, and some maintenance spend, as I mentioned.
Is the majority Sorry. Is the majority of the 24 in Grosvenor?
just under half is in Grosvenor.
yeah, and then digital and in Mecca, too.
Hi, David Brohan. Goodbody. three questions, two on venues, one on the White Paper. Firstly, on that decline in spend per visit that you talk about in Grosvenor, is there any noticeable difference between London and the regions and, with the regions in that? Secondly, on the affordability checks, can you just give us a flavor in terms of what these checks are and how they are implemented across the venues business? Finally, on the White Paper, you know, the changes that have been sought in the U.K., can these all be achieved through secondary legislation? If so, you know, what's the likely timeline before we start seeing that come through in numbers? Thanks, guys.
Decline in spend per visit pretty much across the board, I would say. Linked actually to affordability checks, inevitably. You know, affordability checks. You know, when you the extreme end of it, which is, you know, documentary evidence of source of income and source of funds, clearly is something that only applies to the highest spender. Yeah, it's inevitable, I think, that those spend per visit rates decline in line with affordability checks increasing. We came out of the pandemic and introduced ID scanning on, in all of our venues, so we know who's in our venue when they're there. We don't have an open door policy across the estate. We introduced an affordability model across our business.
We were trialing it at the point of reopening, actually, and we then introduced it across the estate November of last year. I think the impact of that was most seen through the second half of last year. I think you can see that from the chart, actually. You know, there were other factors going into Q4, particularly in regards, Middle Eastern travel was at a very low point actually in the year at that point last year. I think affordability checks have clearly had an impact. You know, we saw this going back in time with the digital business too. You have to get through it, and you have to improve the skills of delivery, and you have to improve the processes.
All these things, you know, you, you, when you implement them, you are consistently finding ways of honing and improving what you do. In the extreme case of the Stride business, when we put in a number of measures to bring that business into compliance back in 2020, we saw that business decline from annualized revenue of GBP 23 million down to an annualized revenue of GBP 8 million. You've seen from the numbers today how that business is, has been successfully regrown as a consequence, even with those tougher compliance measures in place. I think much the same is happening with the Grosvenor business.
We're through the difficult, hard and hard yards, and are now improving the skills of our colleagues, the processes, in particular, the quality of real-time information we're giving our colleagues, which is helping them manage those situations. Turning, you know, what are otherwise quite negative interventions with a customer into a positive interaction. Gradually, gradually improving and coming out the other side. Having spent much of Christmas and New Year, I think I've been to 15 or 16 casinos over that time, you can visibly see the skill levels improving and the confidence of our colleagues, and that's the important thing. You introduce something new across 3,600 people, however well it's implemented, you're never gonna do it quite as well as you'd like to.
I think we're now seeing the positive momentum coming back into the business. Will it recover spend per head, to, or spend per visit to the levels that we were seeing pre-pandemic? I don't know. We'll have to wait and see. I think we'll see those gradually improve. The secondary legislation point. Look, I think none of us can know. I am hopeful that the government recognizes, and certainly the minister recognizes, that the White Paper is a part of the journey, and thereafter, there's then a need for the implementation phase. No doubt there will be elements of the White Paper that will require further consultation. I mean, I'd ask that we have been discussing this for a very long time.
There aren't too many more words that can be spoken on some of these items. Not too much to consult on, and I'm hopeful that a number of these measures can be implemented by government and indeed by the Gambling Commission fairly quickly. There are some measures that we've described here which may require primary legislation. That's partly in the hands of the team at DCMS and their legal advice. Much of it can be delivered through secondary legislation. The most important of all for the casino sector is machine harmonization, which can be delivered through secondary legislation. It could happen quickly, but it requires the will of government to deliver it. Much needed, David. Much needed.
Thanks, John. Some from the online audience. Richard, to you first. Please can you discuss if there are any cost synergies to still be realized from full switch over to the RIDE platform? Secondly, wages increased 8% in the first half. Will you need to increase wages by a further 10% in April when the National Living Wage increases again, or are you now paying in excess of that April level?
Yep. Taking the cost synergies. There are some synergies that unwind in the remainder of this year, and then a very small amount, residual amount that will come in the first half of next year, just because we had about three to four months worth of spend on some of the development resource that was handed over from the Bede platform to the RIDE platform with Grosvenor. There'll be low single-digit GBP millions left to come. On the wage inflation side, minimum wage going up by 9.7% from April, which has been factored into our operating profit guidance for the current year.
Our expectation is that we will have to increase, certainly at the lower end of the pay scale, we'll have to increase by broadly that amount. In some cases we are at minimum wage level, in some cases we're slightly above. Broadly we would expect to have to increase by that, around that 10% at the lower end of our pay rates.
Excellent, thank you. For John. Encouraging comments regarding Christmas and current trading. Interested in your thoughts on why the pickup over Christmas, and has that continued into January?
Well, I'd say I kind of think it was good to go out and see venues, and I saw lots of venues over Christmas and New Year and it's great to see people out having fun and enjoying themselves. I think people recognize they didn't have a Christmas for two years and wanted to go out and have some fun. It was very much, we were really busy, that has continued into January. To date, we've had a good run in January, and let's hope it continues. I mean, clearly recognize there are pressures on the consumer, in some cases those pressures are gonna increase from where they are today, with interest rates and so on.
Look, I think people have people want experiences and we're delivering great, exciting and fun experiences to people in our venues. In the Grosvenor estate where we have invested, it magnifies the quality of that experience for customers, and you can visibly see it. I think that will continue.
Thank you. Turning to Mecca. Great to see some top line growth, albeit small. Can this be sustained despite the rationalization to 56 venues as you currently plan?
I think I've probably made the point here, which is that, you know, the stronger venues are performing strongly, and the weaker venues, for reasons of liquidity, when visits across the board are down at the level they are compared to pre-pandemic, the weaker venues become weaker quite quickly. That, that's the liquidity challenge in Bingo. There are too many Bingo venues in the UK. We're in a strong position and I reflect that in our market share. Our market share exceeds the, our share of venues. We've got typically stronger, bigger, better venues with stronger liquidity. We've been very much focused on delivering good value to our customers with big prize boards and running probably I mean, the very affordable Bingo.
We're running a January sale currently, which is half-price Bingo Monday through Thursday, which has been hugely popular with customers. So popular we'll continue that much of that through into February on certain days of the week, sessions of the week. We're seeing in our stronger venues, we're seeing strong performance. In our weaker venues, it's much, much tougher, and that reflects the broader sector. We do need change in the White Paper. These are really important community assets.
You know, I was reading that piece by Daniel Finkelstein in The Times yesterday about what makes us happy in life, and a human connection is the thing that makes us most happy. For a lot of our customers, do you know, their human connection in the week is their visit to Mecca. Our responsibility, our job is to ensure we maintain as many of these venues as we possibly can, and that's certainly our target.
Looking at Luton, that's the only casino operating under the 2005 license. How much more profitable is Luton versus a similar casino that operates under the more restricted 1968 license?
There are so many factors that determine a property's profitability that it's difficult to say. I don't think you can comment in that, in that way. If you visit Luton, you know, the 2005 Act got some things wrong, and that reflects in Luton, and the government are, DCMS are well aware of the things that need to change from the licensing conditions of the 2005 Act, and you can visibly see that from the Luton property.
It's a super property, performing very strongly. Just had a brand-new sports book facility put in there, and it was jumping during the World Cup. It was also jumping for the Eubank fight at the weekend. It's a great place to go and watch sport, I can tell you that. With a little bit more money to spend, we are looking at improving the poker facilities, in Luton over the coming months, so more work to do in Luton.
Thank you. Lastly, from the online audience, sorry, from central cost to the specific divisions, what's been the response from your divisional CEOs, and how incentivized are they to focus on reducing or leveraging that new cost base going forward?
I think it's fair to say mixed response in the sense of that nobody wants additional cost added into their profitability so that they see it as a personal reflection on their performance, so mixed response. At the same time, it does drive the right change in behavior, I think, whereby where they have got that full P&L responsibility and an additional focus to make sure they're getting true value for money out of those services. I think it's the right thing to do. It gives us a better reflection of the true underlying profitability of the businesses, and in the medium term should help to drive out some cost from those areas.
Any more questions?
Ivor Jones from Peel Hunt. I never like to draw attention to myself, but if there is space to ask you some more questions. You, you said at the beginning that you'd like to get back to the 120 that you might have GBP 120 million of profit that you might have made. Is that sort of an aspiration in the distance, or is that something you think you're planning towards based on the business you've got at the moment?
The second thing is back to that point about central cost allocation. Mecca's got more cost, if Mecca's site numbers were to shrink further, does that additional Mecca operating cost shrink along with site numbers, or has it got a very difficult target to make in order to get to material profitability?
On digital, John, you went through it in detail in your part of the presentation, but could you give us a sense of how much all of that strategic development in digital has still got to pay off? You talked about having made the transition, but I think you're saying that all the benefits of that transition haven't yet come through. More than just the synergies, but the revenue opportunity. What, what should we be thinking about as payoff from now on in digital? Thank you.
I'll do it in that order. Maybe pick up the Mecca one for me.
Yeah.
Yeah, GBP 120 million, that's where we were headed. I think we can be headed there again. I wouldn't wanna put a timeframe on it today, but I think that's where we, this group should be headed. You know, we need some good fortune along the way. We certainly need, and I don't think this is good fortune, we certainly need the change in regulation that we talked to this morning, which is gonna hopefully enormously help the fortunes of land-based gaming in the U.K. Land-based gaming in the U.K. has been left behind by. These opportunities don't come around very often.
You know, government inevitably doesn't wanna look at gambling regulation legislation too often, and when it does, it's kind of a once in a generation in my experience, and I've been through therefore quite a few of them. This is an opportunity and not an opportunity to be missed. I'm hopeful of really some positive change, much needed change for land-based gaming in the UK, which will help Bingo and sustain more venues, coming onto the Mecca point, but will more particularly enable the casino sector to flourish more than it can today and meet the needs of the customer, which is what we should be aiming to do, of course. Do you wanna talk to them, Mecca?
Yeah. I think the first thing to say, as you rightly point out, Ivor, it loses around GBP 5 million on a true now fully allocated cost basis. We've already taken some action, we closed the seven venues in the first half of the year with some further closures coming in the second half of the year. There's a recognition from our side that we do have to address what the estate in Mecca looks like.
I think there's one other factor that we shouldn't lose sight of is that we're looking at that as a Mecca venues business in isolation. There is undoubtedly some value to the digital business from the fact we have got a Mecca estate, either just from a kind of a top of mind how people think about Mecca brand or an opportunity in terms of converting customers to be multichannel customers. There's something to think about in all of that. To the specific point around the fixed bit of allocated cost from the center, there is some of that that can be varied with the number of venues. I think having the total cost now in their P&L makes them think about the total cost base in entirety rather than different people thinking about different costs. components.
I think it's the right thing to do, and it will drive the right level of visibility and focus. Is there gonna be radical reductions in that central cost base over the next 12 months? I don't think it's gonna be more of a medium-term drive to improve that profitability.
In terms of the digital business, I think we have spent the best 3 years effectively working to one single aim, which is to migrate, to develop out the right platform for the migration of the Rank brands. It was a huge piece of work. We had pretty much, I don't wanna say 100% 'cause there's always other development, but the large part of our development effort and capability was focused on migrating the brands and preparing the platform for the migration of the Rank brands. We're through that. What that does is effectively frees up a lot of... Not all, because we've still got a lot of development resource focused on platform enhancements, platform scalability.
We've got more core development to do because what we've delivered so far is we've delivered the platform for our digital business. What we now need to do is deliver the platform for our business across the board and including our Venues business, because that shapes the. I mean, we do two things. One is shaping the platform for supporting our business in its entirety, and number two, we're developing out very quickly, developing out what we call a kinda customer engagement platform, which is moving all of our multiple customer databases, we've got more customer databases than you can shake a sticker, onto a single central engagement or customer engagement platform, which delivers real-time information to our colleagues, on customer behavior, in a real-time, much more timely way than we can today. Across channel.
That's important for... I mean, very important in terms of the way in which we manage interactions with customers, both commercially and in terms of safer gambling. There's lots of developments down the pipeline. Nonetheless, having delivered what we've delivered, it frees up a lot of development capability now focused on improving the user experience online, new products, new journeys. We are very focused on that roadmap.
That's what we'll show you when we hopefully have an opportunity later in the year to invite you in and to showcase what we're doing in the digital business. Many thanks. I'm gonna draw stumps if that's okay. Many thanks for joining us this morning, and look forward to seeing you. Well, I'll see you before our next set of results, but many thanks for joining us this morning.
Thank you.