Investment column: Rank reassures the market

Rank's shareholders breathed a sigh of relief yesterday. With chief executive Andrew Teare's recovery plan centred on the expansion of the Hard Rock Cafe chain, so much is hanging on the success or failure of the business.

A profits warning from Planet Hollywood earlier this month set alarm bells ringing. But Rank reassured the market that it had managed to avoid its main rival's problems and that profits had not fallen off a cliff. After a truly dreadful run which has seen the stock hit its lowest level since 1993 over the last few weeks, Rank's share price perked up 12.25p to 312p.

So does this mark the turning point for Rank? The simple answer is that it is too early to tell. Mr Teare's huge investment programme should not begin to bear fruit for probably the next six months at least. Until then several question marks remain over the group's strategy. Analysts believe Hard Rock's profits are still only growing at a pedestrian rate and Rank will need to do a lot better than that to convince a growing band of sceptics in the City.

The expensive revamp of Butlin's and the delayed roll-out of the Tom Cobleigh chain are also concerns. Meanwhile the Odeon cinema chain and Mecca bingo division are doing better than some rivals in the industry, but there is still plenty of work to do to get the businesses up to scratch.

It not just the market that has raised questions about Mr Teare's reforms. John Garrett, head of the group's leisure business, has been increasingly vocal in his complaints and yesterday decided to quit.

Mr Teare should be given the benefit of the doubt for now but if any of his reforms backfire he could be the next board director to lose his job. BZW forecasts 1997 profits of pounds 295m, rising to pounds 325m this year, putting the shares on a prospective p/e ratio of 13, then 11. Hold on.

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