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Bluechip: Rank's unhappy campers

Was news of a much-needed spruce-up for Butlin's, once the most popular of British institutions, a wake-up call for the City too? Rank, the owner of Butlin's, headed by Andrew Teare, has promised much, but the City has yet to reach a verdict on the leisure conglomerate.

The shares, at 351.5p, are no higher than they were about four years ago. Long-suffering shareholders have seen a precipitous price decline over the past few months from a peak of 538p in the first quarter of last year.

What went wrong? Simply, the arrival of Mr Teare raised unsustainable expectations. When he took the reins last year, the City was in honeymoon mood as he unveiled his plans. These included: driving the Hard Rock brand as far as it could go: selling its remaining stake in the Xerox photocopier group, worth roughly pounds 1bn,: and raising pounds 300m over the next few years from other disposals. The "core" leisure brands - Butlin's, Hard Rock and Mecca, the bingo halls operator - would be grouped in one division. While this was going on, Mr Teare would also be out pounding the acquisition trail, to reinvest the funds pouring in.

It may sound simple in practice, but as the strategy has unfolded, doubts have crept in. The first major stumbling block came with Rank's first big buy, the pounds 113m it splashed out on pub chain Tom Cobleigh. Fine and dandy, said the City, but the price paid was over the top for a group with 61 pubs.

Meanwhile, the disposals programme has crawled along. So far only Precision Engineering, for pounds 72m, and a handful of other businesses have been sold. With the Xerox sale expected shortly, the pressure for some significant buys will grow.

One option - share buy-backs - at least returns funds to shareholders, but has done nothing to halt the share decline. Poor interims last month didn't help.

So back to Butlin's. Mr Teare has earmarked pounds 139m for the tired old brand to rejuvenate it for a younger crowd. In will come Harry Ramsden fish 'n' chip bars, Burger Kings and Haagen Dazs Cafes, all housed in "skyline" pavilions. Holiday camps at Skegness, Bognor Regis and Minehead will undergo the transformation. Expensive for Rank, and for the punters; a family of four could pay pounds 720 a week in peak season, against less than pounds 300 for today's lowest offers.

It also raises the question of just how much money is needed to rejuvenate the bingo halls and Odeon cinemas; serious questions the group has yet to answer. For Rank, the turnaround remains in the offing; the shares are best avoided.