Rank Disappoints With Profits And Share Buyback

Leisure conglomerate Rank Group reported a 14 percent fall in annual profit on Friday and said it would spend 200 million pounds buying back its shares.

The owner of Mecca bingo halls and Hard Rock cafes said it had been unable to sell its loss-making Deluxe Media division, which makes DVDs and CDs, and would consider breaking it up and selling the assets separately.

It also announced a rebasing of its dividend following the 420 million pounds sale of its Deluxe Film division in January 2006.

Analysts at Morgan Stanley said the new dividend policy would lead to a 50 percent cut in 2006. They said profits and the buyback had not lived up to their expectations, and they were disappointed by a write-down in the value of Deluxe Media.

"Rank has written down Deluxe Media by another 80 million pounds to a negative value of 57 million - i.e. it will have to pay the buyer to take it off them," they said in a research note.

Rank shares fell 3.1 percent to 238-3/4 pence by 0916 GMT - the biggest drop on the midcap index - valuing the group at just under 1.5 billion pounds.

"Revenue growth in our gaming division has not been sufficient to offset the combination of operating cost increases and Blue Square's lower (betting) win margins," said Chief Executive Mike Smith.

"However, Hard Rock grew revenues and profits as a result of increased contribution from its hotels and gaming interests and the continued improvement of company-owned cafes," he added.

Rank said it made an adjusted pretax profit of 85.4 million pounds in 2005 on revenue up 2.9 percent to 810 million pounds.

Operating profit from gaming fell 10 percent to 106 million pounds, while Hard Rock increased operating profit by a quarter to 35 million pounds.

For the first time, Internet poker and casino exceeded sports betting at Blue Square, but the division was hit by the industry-wide problem of unfavourable sporting results and it reported a 1.7 million pounds loss.

UK casino membership rose 46 percent to over 455,000 after the government relaxed strict regulations, but the new wave of visitors spent less money than the traditional hard core of gamblers, knocking 7.7 percent off average spend.

Hard Rock Hotels and Casinos helped boost revenues under the Hard Rock brand by 8 percent to 250 million pounds.

Rank said Deluxe Media made an underlying operating loss of 16 million pounds, with exceptional charges of 137 million after it decided the business was worth less than first thought.

"We have not yet been able to sell Deluxe Media but remain committed to this course of action," said Smith. "We are pursuing an exit and this may take the form of either a sale of the business in its entirety or, more probably, the separate disposals of individual businesses or assets," he added.

The final dividend was set at 10.3 pence, making the total dividend 4.8 percent higher at 15.3 pence.