Rank falls 11% after finance director quits

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The Independent Online

Rank Group shares dropped by more than 10 per cent yesterday as analysts concluded that the resignation of the finance director indicated no imminent takeover of the troubled entertainment company.

The shares fell 10.75p, or 10.8 per cent, to 89p following the announcement of Peter Gill's departure, with a year's salary but no job to go to, from the group which includes Mecca Bingo and Grosvenor Casinos.

A toxic cocktail of falling bingo attendance, the smoking ban, and changes to gambling legislation has taken its toll on Rank. The share price has tanked by more than two-thirds in less than 18 months; after a profits warning last October, it dropped to a seven-year low of 77.75p.

This year had seen some tentative rises thanks to buyout rumours fuelled by share-building by three different investors. The price rose nearly 10 per cent, from a low of 88.25p, in a single day earlier this month after talk of a £485m cash offer from Genting Berhad.

But the Malaysian group categorically ruled itself out yesterday. "We wish to inform that Genting Bhd has no intention to make any general offer for the shares of Rank Group,contrary to the speculative news reports," an official statement said.

And although Mr Gill's resignation does not necessarily imply a nasty financial shock around the corner, it does not suggest a rosy future.

"If there was a meaningful chance of Rank doing significantly better in the next 12 months, the finance director would be less likely to be leaving. And if the company was about to receive a bid, then he would also be hanging on for a couple of months," said Mark Reed, a leisure analyst at Landsbanki.

With the bingo sector in structural decline, smoking banned and Government plans to deregulate casinos shelved, there are questions as to who would want to buy the company at all.

"The shares look expensive even at 89p, given the prospects for business in the rest of the year. And just because they have already come down a long way doesn't mean no further slide, especially when you rule out bid speculation," Mr Reed said.

The whole industry is suffering. Top Ten Holdings issued a profits warning earlier this week. And Gala Coral's private equity owners agreed to stump up another £125m and restructure the firm's debt because of the smoking ban and the current credit climate.

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