Rank Group "reviews" loss making Blue Square
Unprofitable sports betting legacy brand Blue Square "unlikely to continue in its current form", a source tells eGaming Review with options to either close, sell or sell the business and white label it back all possibilities.
The Rank Group will “undertake a review” of its Blue Square Bet sports betting business following a sustained period of losses and is “unlikely to continue in its current form” a source at the company has told eGaming Review.
In a surprise three line statement to the stock market and staff Rank this morning said that while carrying out the Blue Square review it would focus its resources on “further developing Grosvenor Casino and Mecca as multi-channel brands meeting customer needs in gaming-based entertainment via venues, online and through mobile devices”.
A source told eGR that Blue Square has continually been under review but that late last year Rank Group’s senior management team made a concerted effort to take the loss making business to break-even point, however the action plan was “unsuccessful”, the spokesman explained.
“We are going to sit down and work out what the options are”, the source added, but it unlikely to continue in its current form and we will take the next two months to decide what to do”.
The source said there are three basic options open to the management team when deciding Blue Square’s fate; closing it down, selling it to a third party, or selling it to a third party and white labelling back the sports betting brand in order to continue to serve its customers.
“As the business is structured at the moment it is not going to make a profit and it has a very high cost base.” The business has around 60 permanent staff including managing director Mark A Jones as well as a number of outsourced employees.
“Someone maybe be better positioned to operate the trading side of the business and then we could perhaps white label it back,” the source added.
Peel Hunt analyst Nick Batram said the Blue Square review “should not come as a total surprise” adding that the sports betting brand is Rank’s smallest business and that it has been a “drag on earnings and a distraction for management” and that today’s news should be viewed “positively” by investors.
Rank Group acquired Blue Square in 2003 in an effort to accelerate its development in online gaming and betting and the company rapidly became the vehicle for the online distribution of its gaming brands including its now more successful sister brand meccabingo.com.
In 2008 Rank Group renamed its online divison Rank Interactive which today comprises meccabingo.com, GCasino.com and Bluesq.com, however the sports betting arm has faced an enormous amount of competition over the years from the likes of larger and more successful brands including bet365, William Hill Online and Paddy Power who businesses have scaled across largely regulated markets while Blue Square’s UK market share has diminished considerably.
Rank this year also celebrates its 75th anniversary.
Today’s announcement comes just two months after Rank said its betting brand had achieved a 19% increase in revenue during the 15-week period to 14 October last year. This was partly driven, it said, by a £2m brand awareness campaign including television advertising which it added would impact its first half profitability.
However a Rank Group spokesman today told eGR that the ad campaign had been “unsuccessful”. In October last year Rank also said it would commit £3.5m to Blue Square in a bid to upgrade its sports products and “accommodate an expected shift in sports betting customers to mobile as a device of choice”. This, it said, would support its “no nonsense” brand proposition.
The investment included a partnership with sports platform software provider Openbet, the creation of a “faster and more flexible multi-channel experience” to enable Blue Square to offer sports products to more than two million active customers of the other Rank brands and to “improve the quality, content and range of its sports products”.
The spokesman today clarified that not all of the £3.5m had been spent but that the Openbet contract was “across its interactive brands” and also covered back office functions including customer wallet and accounting.
Blue Square currently sponsors the football league conference. It is unclear how today’s statement will affect this and its other sponsorship deals, namely in horse racing. The spokesman, however added the company would “honour any contractual obligations”.