Rank plays down threat from video-on-demand: Film duplication helps half-year operating profits to pounds 96m

RANK ORGANISATION yesterday played down the commercial threat to its video duplication operations from the imminent launch by Warner in the US of the first video-on-demand service into people's homes.

Video duplication was one of the driving forces behind Rank's better-than-expected half-year operating profits of pounds 96.3m, up from pounds 72.6m. After a pounds 62m share of restructuring charges at the Rank Xerox photocopier associate, pre- tax profits fell from pounds 96.1m to pounds 16.3m.

Michael Gifford, chief executive, said: 'We don't see any impact for a couple of years.' He believes that video-on-demand companies will be further down the pecking order than Rank when film studios decide who to do business with. 'I think the showing of films on video-on-demand will come after they have been released on video,' he added.

Leisure analysts backed Rank's arguments, but said it would be foolish to dismiss lightly the possible impact from video-on-demand. Around 80 per cent of videos from Rank are sold through high street shops and are mainly children's and health and fitness films which tend to be watched repeatedly.

Rank's 28-week interim period to the middle of May saw an improvement in underlying trading, Mr Gifford said. 'The recovery is under way in many of our main markets. We remain encouraged by the prospects for the group.'

After an initial 17.5p rise to 409p the shares fell back to 404.5p at the close, even though analysts upgraded profit projections for the year by pounds 15m to around pounds 337m.

'It is difficult to see this as a bullish play because there are no signs in the figures of a strong upturn in the leisure cycle,' one analyst said.

Mr Gifford said the four main divisions lifted operating profits 16.5 per cent to pounds 86m. Profits from film and television rose 84 per cent to pounds 24.5m, and from the Haven and Butlin's holiday businesses by 25 per cent to pounds 7m.

Recreation, mainly social and bingo clubs, rose from pounds 32.7m to pounds 34.2m, and leisure, which takes in Hard Rock Cafes and nightclubs, declined from pounds 22.3m to pounds 20.4m, mainly due to adverse weather in the US.

The share of profits from Rank Xerox recovered from pounds 68.5m to pounds 94.6m. Other associates, which include the Universal Studios theme park in Florida, dipped from pounds 4.1m to pounds 3.7m.

Earnings per share were 7.8p against an adjusted 4.9p last time, reflecting the subdivision of ordinary shares in March and the effect of the 1993 enhanced share alternative. The interim dividend is raised 5.5 per cent to 4.25p.

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