For whom the gong tolls

What has Rank's next chief executive got in mind for Britain's most diverse leisure group?

INVESTORS hate interregnums. Handing over the levers of corporate control to a new incumbent can, if the process is protracted and handled badly, lead to an information void, a policy vacuum and - worst of all - a drifting share price.

It is a danger that diversified leisure group Rank risks running. Michael Gifford, the gruff, no-nonsense chief executive who has run Rank for the last dozen years bows out next month to be replaced by the former English China Clays' boss Andrew Teare.

The key question for shareholders is whether the arrival of a new broom will herald a change in strategic direction.

Rank, whose interests span film studios, bingo and Butlins holidays, is widely regarded as a mixed assortment of businesses with little obvious commercial overlap. And as the recent urge to de-merge indicates, the City regards conglomerates in whatever shape or form as rather passe and ripe for breaking up to unlock so-called hidden value.

Nobody at Rank is prepared to say if such fashionable ideas are being entertained. Mr Gifford, it would seem, does not want to map out a future of the company where he will no longer have day-to-day involvement; Mr Teare, already a Rank non-executive, does not want to say anything before he steps into Mr Gifford's shoes; and other board members are unwilling to go against the wishes of their boss - past, present or future. Hence the unfortunate hiatus.

Whether Rank should continue in its present incarnation is, of course, a moot point. Under Mr Gifford's aegis, it has become a prodigious cash generator whose balance sheet was considerably strengthened by last year's sale of 40 per cent of Rank's stake in document processor Xerox for pounds 620m.

Mistakes were made along the way, notably buying Mecca at the top of the leisure cycle, but as recent results show Rank is in a good position to exploit the improved outlook for leisure spending caused by lower interest rates and chunky building society windfalls.

Falling sales of National Lottery scratchcards should arrest the recent decline in bingo profits while proposed changes to Britain's archaic gaming laws, including looser membership rules and more slot machines - the real money-spinners in US casinos - ought to pull more punters into Rank's bingo halls, the largest in the land. Film and leisure, which takes in the Pine-wood studios, had a record year while the Hard Rock Cafe chain goes from strength to strength.

Nevertheless, some outstanding issues remain. For example, Rank failed to use the Xerox cash to buy the MGM cinema chain, splashing out pounds 300m instead to develop Oasis, a holiday theme village to rival CenterParcs. Rank still has many old, converted high-street picture houses which are suffering from falling admissions as cinema-goers decamp en masse to out- of-town multiplexes.

A year ago, this column noted that the decision to keep the remaining Xerox stake (and its knotty tax problems) was taken to avoid creating the impression that Rank was flush with cash and therefore attractive to a potential predators. Mr Gifford countered by saying the complex scheme whereby Rank legitimately avoided paying capital gains tax required that it did not sell its entire holding, which it has been steadily reducing for more than 30 years.

Whatever the real reason, Mr. Teare's arrival may pave the way for other moves to ensure Rank's continued independence.

Although he has no experience of the leisure and entertainment worlds, and his tenure at ECC corresponded with a lacklustre share price performance, Mr Teare was instrumental in spinning off building materials group Camas in 1994.

Several candidates within the Rank empire could come in for similar treatment from Mr. Teare. The video duplication arm, buried in Rank's film and television division, is the most obvious business that could be hived off. Similarly, the true worth of a leading brand like the Hard Rock Cafe, tucked away in the Rank's leisure portfolio, could be realised if sold off or floated separately.

All that may be in the future. In the meantime, analysts seem content to upgrade their forecasts and reiterate broadly positive recommendations. The verdict from US investment bank Merrill Lynch is fairly typical: "On a market average rating for 1996, Rank Organisation shares offer a sound way into the improving leisure scene, providing the broadest coverage of leisure activities of any company in the sector."

The shares closed at 490p on Friday. Investors who took our advice a year ago and bought the shares at 381p may want to take advantage of their recent strength to lock in some profits given the fuzzy strategic picture.

Rank Organisation

Share price 490p

Prospective p/e* 14

Gross yield* 4.2%

Year to 31 Dec 1994** 1995 1996* 1997*

Turnover pounds 2.20bn pounds 2.31bn pounds 2.44bn pounds 2.56bn

Pre-tax profits pounds 317m pounds 407m pounds 461m pounds 516m

Earnings p/share 21.2p 30.2p 34.1p 38.2p

Dividend p/share 13.3p 15.5p 16.5p 17.5p

* Merrill Lynch estimates **Year to 31 October

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?