Bottom Line: Rank smiles through

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WHEN an eternal pessimist such as Michael Gifford, chief executive of Rank Organisation, punctuates his typically lugubrious trading review with the odd smile, things can only be looking up for the company. Or are they?

Rank's profits for 1992/93 certainly left analysts' forecasts in the shade, but the company is not out of the woods yet. Recovery in consumer spending on leisure will remain slow.

In Rank's favour is that its businesses offer the best products in their respective areas. And there is evidence to support its claim that underlying trading has improved, although the scope for price increases remains limited.

Another brake on this year's profits growth will be applied by a pounds 36m share of the pounds 460m reorganisation bill at its associate Xerox. Trading in Rank Xerox's main European markets and in Japan remains difficult.

There are other niggly problems, notably Precision Industries, which continues to incur losses, and the Shearings holiday business, affected by a cut in spending by its predominantly elderly customer base.

Group profits this year should nevertheless advance from pounds 277m to about pounds 285m after the Rank Xerox hit. That implies an underlying price/earnings ratio of 18 which, coupled with a projected yield of 4 per cent on a 1p dividend increase to 32p, makes the current, pre-split share price of pounds 10 fair value for money.

This seems a full enough rating.