Outlook: Rank Group

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The Independent Online
THE BRIEFEST glance at Rank's third quarter figures reveals why the leisure group's beleaguered chief executive, Andrew Teare, had to go. The downturn in profits at Hard rock and Butlins, the poor performance from casinos and the Mecca bingo halls, the depressed outlook for the group's hotchpotch of other leisure activities - all these things were perhaps to have been expected given the atrocious summer weather and the sogginess in consumer spending.

What came as a bolt out of the blue, however, was the collapse in profits at the group's Deluxe video distribution business. This was supposed to be booming on the back of the largest order ever received for a single title, Titanic. Unfortunately Rank wasn't up to the task and had to subcontract a substantial part of the duplication and packaging, causing profits to plummet.

This is nothing to do with acts of God or economic circumstance beyond the company's control; it is plain old fashioned mismanagement. After two and a half years of more or less perpetual disappointment and loss of shareholder value, it is no wonder Mr Teare felt obliged to fall on his sword. But what comes next?

The blame for this debacle might equally well be heaped on Sir Denys Henderson, chairman, and the rest of the Rank board. It is all very well for them to accuse Mr Teare after the event of a lack of leadership, and of the situation requiring "an even more determined approach", but they were the people who appointed him, watched over him, and approved and implemented his strategy. Too much faith is all too often invested in the chief executive as a miracle worker.

Rank seems a case in point. Mr Teare inherited a set of underperforming assets that would have taxed even the most inspired of business leaders. Neither he, nor the City, appreciated quite how bad it was. On the other hand, Sir Denys and the rest of the board must have had some inkling.

The new kid on the block has to expect hostility and opposition from the old guard. Mr Teare experienced it in spades; he was never able to make much of an impression on an entrenched and obstinate corporate culture. For all that, it is true that there was a lack of urgency, a laid back and jovial quality about his stewardship, which infuriated the City and made him a target almost from the moment he was appointed.

Throwing the skipper overboard is one thing; having no clear idea of an alternative is quite another. The rest of the board seem to be as clueless about what to do next as Mr Teare. They don't even have a replacement. Sir Denys takes the view that once pursued with a little more vigour, the existing strategy will eventually come good. In truth a much more radical approach is called for, possibly a complete breakup. Rank needs to move quickly and radically, for the share price is at such a low level that it could easily pay someone else to do the job instead.