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
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower