Rank results dampen shares: Leisure group offers enhanced scrip alternative to dividends

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DISAPPOINTING half-time results and a downbeat statement on trading prospects depressed shares in Rank Organisation, the international leisure group, by 20p to 747p yesterday.

Pre-tax profits for the six months to 15 May were pounds 95.7m compared with pounds 19.8m, restated from a previously reported pounds 94m to reflect changes in accounting policy on disposals and the introduction of the accounting standard FRS3. The interim dividend is unchanged at 10.25p.

Turnover from continuing operations was 7 per cent ahead at pounds 965.3m, but was flat excluding the effects of exchange rates. Similarly, trading profit was up from pounds 64m to pounds 66.2m but only marginally ahead after stripping out currency movements.

Dealers responded initially with enthusiasm to news that Rank was offering a 50 per cent enhanced share alternative instead of both the interim and final dividends, and accelerating payment of the final from next April to this September, when a special interim dividend of 31p will be paid.

Shareholders can elect to receive shares worth 46.5p instead of the special interim payment, a 50 per cent uplift. If taken up in its entirety the scheme will save Rank pounds 124m in cash including pounds 28m of advance corporation tax that would otherwise be written off.

But analysts later paid more attention to comments from Michael Gifford, the chief executive, that recovery in Rank's markets remained 'uneven and fragile'.

He warned that it was unclear if there would be any material improvement in its markets for the rest of the financial year, while the pace of recovery in Rank's important US market had slackened. This led analysts to downgrade their profit forecasts for the year to October.

Mark Finnie of NatWest Securities has lowered his estimate of pre-tax profits from pounds 267m to pounds 254m against a 1991/2 figure restated from pounds 230m to pounds 126m.

During the first half gains in Rank's leisure and recreation divisions broadly offset shortfalls in holidays and hotels and film. The contribution from Rank Xerox, its office equipment associate, fell from pounds 71.7m to pounds 68.5m. Mr Gifford played down speculation that Rank would sell its 49 per cent stake in Rank Xerox to clear its pounds 1.09bn debts. Universal Studios in Florida, which is due to open a new Jaws theme park ride this year, helped to lift other associate income from pounds 3.1m to pounds 4.1m.

Driven by new openings of the Hard Rock Cafe in the US and a pounds 2m exchange gain, leisure profits rose by pounds 6.5m to pounds 22.3m. In the UK, night club admissions rose 14 per cent but average spend was flat.

A recovery in casinos boosted recreation profits by pounds 3.7m to pounds 32.7m but holiday and hotel profits almost halved to pounds 7.2m.

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