Creation of a focused gaming business Hard Rock disposal 7th December 2006.
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Creation of afocused gaming
businessHard Rock disposal
7th December 2006
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Ian BurkeChief executive,The Rank Group
Plc
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Agenda
• Transaction overview• Strategic rationale• Financial impact and use of proceeds• Ongoing Rank Group
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Transaction overview
• Agreement to sell Hard Rock to Seminole Hard Rock Entertainment Inc for $965m (£490m) in cash
• £460m net proceeds, after transaction costs and tax
• £350m to be returned to shareholders via special dividend
• Shareholder approval at EGM required• Rank’s transformation into focused gaming
group essentially complete
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Expected timetable & process • Sale of Hard Rock announced 07/12/06• Circular posted to shareholders 15/12/06• EGM 08/01/07• Sale completes 05/03/07• Special dividend paid to shareholders April
2007• Share consolidation effective* April 2007
* Share consolidation ratio to be published within class 1 circular
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Overview of Hard Rock• £250.1m revenue*• £48.1m EBITDA* • £34.8m operating profit*• Active in restaurants, hotels and casinos
markets• Merchandise retail core to business model• >130 Hard Rock branded outlets world-wide
* Rank Group 2005 accounts NB - transaction does not include Hard Rock Casino, London which will be retained by Rank and re-branded
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Rationale for disposal
• Thorough review undertaken• Sale of Hard Rock right action for maximising value
– Limited synergies with Rank Gaming– Future growth requires significant capital investment– Competitive auction process captured future value
• Exciting opportunities exist in Gaming– Desire to focus management resources at critical
juncture– Group now entirely focused on operational
performance
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Use of proceeds and capital structure• $965m (£490m) gross proceeds from transaction• £460m net proceeds• £350m to be returned to shareholders via
payment of special dividend (65 pence per share)• £110m to be used to reduce borrowings• Balance sheet policies remain unchanged over
medium term• No change to expected level of final dividend for
year to 31 December 2006
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Strategic Transformationessentially complete
Operating profit 1998
Rank Group 1998 - 2006Pro forma operating
profit H1 2006Gaming
Hard Rock
Deluxe
Holidays
Entertainment
EscapeGaming
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Strategic Transformationessentially complete
Strategic priority ProgressExamine strategic options for Hard Rock
$965m Hard Rock sale agreed
Exit Deluxe Media and other non-core interests
DMS exit in Europe (including UK)Complete exit by June 2007
$32.5m US Holidays sale agreedEstablish appropriate group cost structure
Actions taken to deliver £16m overhead and operational cost savings
Complete balance sheet restructuring
£200m share buy-back completedGaming property portfolio rationalised£350m special dividend determined
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Rank Group- a focused gaming business• Integrated gaming model with established
brands and track record of responsible operation– Bingo - Mecca Bingo & Top Rank Espana– Casinos - Grosvenor– Interactive - Blue Square
• Significant distribution footprint– 113 Mecca Bingo clubs across UK– 11 Top Rank Espana bingo clubs in Spain– 35 Casinos in UK and Belgium– On-line distribution of gaming expertise and
sportsbook through Blue Square
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Rank Group- a focused gaming business
• £529.8m revenue*• £133.0m EBITDA*• £105.7m operating profit
* Pro forma Rank Group 2005 accounts, excludes Hard Rock, US Holidays, Deluxe Media Services and Group overhead
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The UK Gaming market• A growing market
– UK betting and gaming expenditure expected to grow by 30% by 2010*
• A changing market– Full implementation of 2005 Gambling Act to
spur product evolution– Clear potential for further regulatory evolution
• Attractive fundamentals– Healthy cash flows and operating margins– Customer bases already substantial
* source: Key Note Betting & Gaming Market Report 2006
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Current trading & directorate
• 48 week trading statement issued today– good progress in underlying business– near term challenge from smoking ban
• Appointment of chairman– Peter Johnson appointed as Rank Group
chairman from 1 March 2007
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Summary
• Rank is a leading UK gaming group with strong market positions
• Long term dynamics of gaming market remain attractive
• Well positioned to capitalise on opportunities as gaming market develops
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