Rise of a Rank outsider

The leisure group's concrete classicist should win over the shareholder s, says Richard Halstead; profile; Andrew Teare
Click to follow
The Independent Online
When Andrew Teare stood up at the Rank Organisation annual general meeting in April this year to be introduced as the company's new chief executive, the shareholders were understandably nervous. Michael Gifford, the outgoing chief executive, was a known quantity: a quiet-spoken industrialist under whose guidance Rank had grown large and rich over the previous 12 years in leisure and film distribution. His replacement was a burly fellow from the West Country who had never held an executive post outside the building and industrial materials trade, and who had just spent six years restructuring English China Clays, a supplier of raw materials to the paper industry. What on earth was Rank doing?

In the event the shareholders' fears were assuaged. The burly builder revealed himself to be a thoughtful classicist, a closet Jane Austen fan, and the type of fellow who would not shrink in the face of a challenge. To that end, he was confronted with an acid question from one shareholder: what film had Teare seen most recently at the cinema - was it Chariots of Fire? "No, it was Sense and Sensibility," he shot back with a smile. "In a Rank cinema."

It was a useful lesson for Teare's colleagues on the Rank board, including the chairman, Sir Denys Henderson, whose 35-year career at ICI could hardly be called good training for the film and leisure business either. In their new chief executive they have a man with the reputation of a cost-cutting pragmatist who has built a career out of restructuring flagging industrial businesses in mature markets. But Andrew Teare also carries the billing of a deep thinker and strategist; one who can come up with a far-reaching business plan and communicate it effectively.

The first test of these traits will come next week when Teare stands up at Rank's interim results news conference on Thursday and outlines his proposals for the leisure giant's future.

The reasons for the strategy shake-up are clear. The Rank Organisation Teare has inherited is a leisure conglomerate that has plenty of assets but less direction. It holds such diverse properties as Pinewood studios, the Hard Rock Cafe chain, Odeon cinemas, a stake in Rank Xerox, the document business, and factories that duplicate videotapes and make cathode ray tubes, among other things. Hitherto, this quasi-conglomerate business combination has not hindered Rank's ability to generate good returns for shareholders. Under Michael Gifford, the company realised pounds 400m from disposals and spent pounds 1.3bn, including the pounds 900m purchase of Mecca, the bingo and casino empire, in 1990. The company's pre-tax profit has grown from pounds 69m to pounds 650m since 1984 and its market value multiplied 12 times.

But a closer look at the most recent results reveals a slightly different story. Much of the profit increase was attributed to a one-off gain from the disposal of 40 per cent of the Rank Xerox stake. Stripping that out, operating profits rose by a more stately 6 per cent to pounds 253m.

In recent months, institutional investors, who hold a remarkable 96 per cent of Rank's equity, have begun to grow uncomfortable with the apparent sluggishness of Rank's core businesses. They were particularly concerned when Teare announced in June that Rank would only see profit growth in the first half of the year from a one-off gain in the lighting division. The profits warning immediately knocked 6 per cent off the share price. Teare's most pressing task is to restore some sparkle to Rank's home-grown bottom line.

Will he be up to the task? In many ways the 54-year-old Teare is an industrialist of the old school. The eldest son of a roving Methodist preacher, he developed an early aptitude for Latin and Greek, which he pursued into higher education, graduating with honours from University College, London in 1964. He married his teenage sweetheart, Janet, shortly afterwards. They have three sons, all now in their 20s and starting their own business careers.

Until Rank, Teare had spent his career in heavy industry. He started off running cement factories for Turner & Newall in the 1960s. At Cement Roadstone in the 1970s, he placed himself quickly on the management fast- track, becoming European general manager by the time he was 36. In 1983 he moved to another building materials company, Rugby Group, as managing director, and came to the notice of the investment community. "We started to see an 'Andrew Teare Groupie Factor' in the share price," says Charles Pick, a Panmure Gordon analyst who has tracked Teare's career since the mid-1980s.

Teare carried the City seal of approval into English China Clays, then a troubled mini-conglomerate that was trying to extract itself from some ill-advised investments in the building trade and return to its core business of supplying minerals to the paper industry. Former colleagues recall being impressed with the way Teare quickly assimilated the position of the company and led it through a crucial deal to buy Georgia Kaolin, a large US minerals producer. "He has a clean mind, and sums things up very quickly," says Bob Carlton-Porter, Teare's former finance director at English China Clays.

Teare also established a reputation for toughness. The picturesque company headquarters in St Austell, Cornwall, were abandoned for a smaller office building in Reading. At the same time, he made a thousand claypit workers in Devon and Cornwall redundant, prompting angry protests and a rash of "Wanted" posters with his face on. His name still evokes anger among some Cornish residents, who viewed the company's move as a betrayal of its Cornish roots.

It is significant, however, that despite his cost-cutting reputation, former colleagues and observers find it hard to say a bad word about him. "Friendly", "intelligent", and "charming" all fall from the lips of his peers, along with a widespread respect for his strategic ability. "He's very amiable, smiles a lot, but underneath he is hard man, and difficult to know well," says one seasoned Teare-watcher.

The only blot on his copybook was English China Clays' purchase of Calgon, a specialty chemicals business, from Merck in 1993. So far it has failed to live up to expectations, and is now delivering returns of only 6 per cent. Not surprisingly, therefore, the verdict on Teare's tenure at English China Clays is mixed. "By most measures his restructuring could not be called successful," says Pick. "But if he hadn't been there, things could have been much worse."

Speculation has been swirling over what direction Teare intends to take at Rank, but until recently few hints have been dropped. Some things have become public, however. In June, Rank purchased the part of the Hard Rock Cafe business that it did not already own, and it was forced to announce that it would be selling the Shearings coach holiday operation after the holiday division chief, Angus Crichton-Miller, announced he was resigning as a director to lead a management buyout bid for the business.

This move has led to speculation that the whole holiday division of Rank, which includes Butlins holiday camps, will be up for sale. Sources close to the company have played down those suggestions, though it is likely that Teare will announce a scaling back of the company's ambitious Oasis Holiday Village venture, which aims to rival Center Parcs for "holidays- under-glass" in the UK.

Teare has also said he would prefer to have direct control over Rank's assets. Analysts have taken this to be a hint that he wants to unload the stake in Rank Xerox, which still accounts for 40 per cent of the company's products, and could be worth pounds 1bn.

Teare's thinking could also influence Rank's joint venture with MCA for the Universal Studios theme park in Florida. So far this has amounted to a reasonably successful investment over which Rank has limited management input. It is now being expanded (using pounds 257m of Rank's cash) to include more hotels and attractions.

Moving Rank in a new direction will not be easy, the level-headed preacher's son admits,and will probably involve stepping on a few toes. His aim will be to appear at the next AGM having convinced shareholders that a former industrial materials man - and classics scholar - was the sensible choice for Rank.

Comments