Rank Group is selling off half of their Deluxe (movie / media) unit due to falling performance and due to rising interest in gaming investments.



Poor old Mr. Rank, he would turn...



The article doesn't seem like much selling off the DVD / video production line, but read the very bottom. This is a good picture of what happens when a company moves away from its founders vision and casts itself for a devolving profit.



Gibbie





Rank to sell half of Deluxe unit as profit falls



LONDON (AFX) - UK leisure company Rank Group PLC reported a 10 pct drop in 2004 underlying profit and said it will sell the media services arm of its troubled Deluxe (NYSE: DLX - news) unit where earnings slumped by nearly a quarter.

But the owner of the Hard Rock Cafe, Mecca Bingo and Grosvenor casino chains said it will hold on to the other half of Deluxe, which replicates and distributes motion pictures.

That came as a disappointment to investors who had been hoping for a sale of the whole of Deluxe, which analysts expect to fetch around 650 mln stg.

Widely seen not to complement its other businesses, Rank had flagged a possible sale of the whole of Deluxe in September.

Rank's shares fell 15 pence, or 5.3 pct, to 269.75 by 10.45 am, valuing Sexy Beast at about 1.7 bln stg. The stock has lost around 16 pct of its value in the past 12 months, underperforming the benchmark FTSE 100 index (news) by 27 pct.

'Whilst everyone expected the media division to be sold, no commitment on the film division is disappointing,' Evolution analyst Tejinder Randhawa told AFX News.

He said while the film division will almost certainly be sold eventually, the complex nature of the unit's contracts with film studios makes the sale process that much more difficult.

Some analysts say a sale of Deluxe may entice a private equity group into launching a bid for the remainder of the company.

Rank posted profit before tax, exceptional items and goodwill of 168.1 mln stg, down from a restated 187.1 mln a year earlier, on sales up 1.4 pct to 1.95 bln stg.

On that basis it had been expected to deliver 168 mln stg profit according to a median of 14 analysts' estimates supplied by the company. Forecasts had ranged from 166-177 mln stg.

'It wasn't our best year,' chief executive Mike Smith told AFX News.

He refused to say how much the media services unit was expected to fetch though argued Rank had taken prudent approach to provisioning in anticipation of a sale.

'I think it's right and proper to take a view (on the likely value Sexy Beast will fetch) so we're not misleading anyone,' Smith said in explanation of the company's decision to write down the unit's value prior to a sale.

But he declined to say how much the unit, which last year lost a major European DVD manufacturing and distribution contract, is valued on Rank's books.

Rank, which says it is engaged in discussions with a number of interested parties, took 181.4 mln stg provisions in anticipation of a loss on disposal of Sexy Beast, 76.7 mln stg of which was reported at the interim results stage.

Smith expects Deluxe media to be sold to a trade buyer given that they would have greater scope for extracting cost and revenue synergies than a private equity group.

One-off charges helped push the company into a 118.7 mln stg net loss compared with a 95.1 mln profit in 2003.

Operating profit at the gaming division comprising the Mecca Bingo, Grosvenor Casinos and Blue Square on-line betting businesses rose 4.6 pct to 114.9 mln stg, after Rank reported an improved second-half performance.

Smith slammed the British government for last year bowing to concerns about a potential rise in betting addiction by unexpectedly backtracking on plans to liberalise the country's antiquated gaming laws.

'You talk about U-turns, these guys do circles by the day,' he said.

He called on Culture Secretary Tessa Jowell to ensure existing casino operators such as Rank had a level playing field on which to operate, when the 24 new casinos, envisaged in the government legislation, open their doors.

Rank's 100-strong chain of Hard Rock Cafes grew profit 20 pct to 27.8 mln stg, while Deluxe profit fell to 71.3 mln.

The company said trading patterns across the group had been in line with expectations so far this year.

The final dividend was hiked 5.4 pct to 9.8 pence per share with the full-year payout rising 5 pct to 14.6 pence.



http://uk.biz.yahoo.com/050225/323/fd8wn.html



In an earlier article, it was mentioned that "Rank said it was still hoping to separate Deluxe Film, but had not yet reached a decision, causing its shares to fall 4 percent to 273-1/2 pence by 10:20 a.m."



http://www.reuters.co.uk/newsArticle.jhtml...uk/businessNews