Rank downbeat on profits outlook

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The Independent Online
Shares in Rank plunged 40.5p to 385p yesterday, their lowest for a year, after a downbeat trading statement from the Butlin's to Odeon cinemas group triggered a string of profits downgrades. Analysts shaved around pounds 15m from forecasts for the current year on news of difficult underlying trading at the Hard Rock cafe chain, on which the group is pinning its hopes for the future, and a 25 per cent slump in video duplication volumes.

The market's expectation is that profits for the current year will now be some 5 per cent below previous estimates at around pounds 315m, which would represent only modest growth from the previous year's underlying figure of pounds 297m.

Rank said underlying turnover, excluding acquisitions, had grown by 1 per cent in the first five months of the year to May. Operating profit in continuing businesses was up 7 per cent, with higher profits at Hard Rock, holidays and leisure partly offset by lower results from film and entertainment services.

The trading statement accompanied a circular to shareholders announcing completion of the deal unveiled last week to sell the group's remaining 20 per cent stake in the Rank Xerox copiers joint venture to Xerox of the US for up to pounds 1bn. It is the latest disappointment to hit Andrew Teare, the chief executive brought in 18 months ago to revitalise the group. Despite proposals to return half the initial pounds 500m payment from the Xerox deal to shareholders via a share buy-back, the initial euphoria which met last week's deal has quickly worn off.

Mr Teare plans to inject pounds 1.5bn into the leisure business over the next five years, including one new Hard Rock outlet every month, but, the market has been sceptical of Mr Teare's efforts so far. There was criticism of the pounds 95.6m price paid for the Tom Cobleigh pubs chain last year and there have been worries that, with pounds 1bn to come from Xerox, he would be tempted to splash out on a big deal.

Rank said yesterday turnover and profits at Hard Rock were significantly higher in the latest period, but only as a result of contributions from acquisitions in North America.

Elsewhere, a quiet period for video releases meant duplication volumes sank by a quarter. London casino profits were also down due to a lower win ratio, while Butlin's has seen lower bookings.