Rank's new chief executive Andrew Teare poured cold water yesterday on over-optimistic expectations for consumer spending this year. The tone of the traditional first-half trading statement from Britain's biggest leisure company caught investors on the hop and Rank's shares closed 33p lower at 498p.
Describing trading in the first five months only as "satisfactory", Mr Teare's comments jarred against his predecessor's, Michael Gifford, confident valedictory forecast in February that "prospects for the future hold considerable promise".
Mr Teare is understood to be unwilling to raise his head above the parapet until he has had a chance to properly review all of Ranks's varied film, leisure and holiday operations. With no experience in the leisure world, having previously worked in minerals, chemicals and cement businesses, his appointment was greeted by scepticism in some quarters.
He inherits a business that has been likened to a super-tanker with a pounds 1.25bn capital expenditure programme, much of it defensive spending to help Rank catch up with smaller rivals.
Worst hit in the first half was the film and television division where lower video prices had undone much of the benefit of higher demand from Hollywood studios, the operation's biggest customers. Andrew Hunter, an analyst at ABN Amro Hoare Govett, said: "Most people were expecting slightly better trading news." Another analyst commented: "Given the fact that we were looking for a strong improvement in consumer spending to benefit Rank, the report was a little downbeat."
During the first five months to the beginning of June, Rank said, sales at constant exchange rates had risen by 6 per cent. Profits, however, were only marginally better once a one-off pounds 15m profit, struck from recovered research and development costs in an engineering subsidiary, were stripped out.
Elsewhere revenues from Rank's minority interest in Rank Xerox, the office equipment business, increased thanks to currency swings, but were 2 per cent lower on an underlying basis compared with a strong first-quarter last year. France, Germany and Russia dragged the group down and restructuring costs led to an 11 per cent decline in total profits attributable to Rank.
In Recreation, which includes most of Rank's UK leisure activities, casinos and the Odeon cinema chain performed well, with the release of popular films such as Toy Story, Sense and Sensibility and Trainspotting attracting good audiences.
Bingo continued to be hit by the impact of the National Lottery, especially the first year of scratchcards since their launch in March 1995. New-style bingo clubs fared better and nightclubs fared well.
Earlier this month, in Mr Teare's first acquisition since he arrived from English China Clays, Rank acquired Peter Morton's Hard Rock cafes for $410m, completing the group's grip on the American-style restaurant chain around the world. Sales at Hard Rock, despite no new openings, were higher but margins lower.
Holiday bookings in the UK are currently higher and retail spending at Rank's resorts, which include Butlin's and Oasis Villages, has been good.