Rank is planning to sever its last link with its celluloid heritage with the sale or demerger of its Deluxe film-making arm.
The group yesterday said it would investigate "separating" Deluxe from its core Mecca bingo and Hard Rock business after reporting a sharp fall in interim profits. The announcement came less than two months after its joint broker, Deutsche Bank, said a break-up of Rank was on the cards.
Shares in Rank rallied 9.75p to 285.25p on City hopes that the group would be worth more as a focused leisure business. Analysts' valuations of the film and video business veered between £400m to £800m.
Despite a poor first half for Deluxe, Mike Smith, the chief executive, said the business had just renewed all its major contracts so was poised for growth. He said the move would allow Rank to concentrate on developing its core leisure operations ahead of the impending deregulation of the UK casino industry. No plans had been taken on whether to sell or demerge Deluxe, he added.
Rank last tried to sell Deluxe three years ago, when it sold off a host of disparate leisure interests from pubs to Butlins holiday parks.
Several analysts disputed Rank's assertion that the timing was right to sell or spin off Deluxe. Mark Reed, at Teather & Greenwood, said: "This looks to be driven from a position of weakness rather than to unlock any hidden value or achieve a re-rating of what its left."
Analysts at CSFB said they were "still far away from [a separation] becoming feasible", querying how much Rank would have to pay its customers to be released from change of control clauses governing its contracts.
Selling Deluxe would bring the curtain down on more than 60 years of cinematic history for the group that was founded in the 1940s by J Arthur Rank and still uses the "man with the gong" as its company emblem. The group quickly became a leading UK film producer and cinema owner, helping to launch the career of such starlets as Joan Collins.
Mr Smith said the company had no plans to change its name despite its lack of relevance. Elsewhere in the leisure sector, Whitbread, which now runs novelty restaurants and hotels, has retained its name despite selling its core brewing business three years ago.
Rank took the decision to separate Deluxe last month but said it had yet to appoint an investment bank to advise it on the process. It intends to update the market in the first quarter of 2005.
Deluxe, which lost a key deal to make and distribute DVDs for Fox in Europe in March, had a poor six months; its operating profit fell 36 per cent to £17.1m. The division, which produced titles such as Spider-Man 2 and Kill Bill Volume 2 during the first half, has been re-orientating itself to take advantage of the booming DVD market.
News of Rank's plans came as the group announced a 46 per cent fall in interim profits to £29m. Excluding goodwill and exceptional items, pre-tax profits fell to £63.9m from £80.2m. All of Rank's three arms reported lower operating profits, with the casino arm suffering a £2m hit from a run of punters' luck at its Claremont casino.
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