Rank to Cut Bingo Jobs, Shut Head Office to End Slide (Update1)
By Joyce Gatsoulis and Paul Jarvis
Sept. 1 (Bloomberg) -- Rank Group Plc, the owner of Hard Rock cafes and Grosvenor Casinos, will cut jobs at its Mecca bingo halls and close the company's headquarters to bolster efforts to end three years of deteriorating earnings.
About 200 positions will go at the bingo unit, while 40 headquarters workers will lose their jobs to help save 16 million pounds ($30.5 million) a year, Chief Executive Officer Ian Burke said today on a conference call. First-half profit at Rank rose 87 percent, partly because of a lower tax charge, the London-based company said.
Rank hasn't made money since 2003, when profit fell 30 percent. Burke, who took over in March, is seeking to complete the company's exit from its money-losing Deluxe Media DVD distribution unit and may sell the Hard Rock restaurant, hotel and casino division to concentrate on gaming in Britain, where gambling laws are being loosened.
``The new CEO is sounding all the right notes, both in repositioning the gaming business and reducing costs,'' said Anna Barnfather, an analyst at Jefferies & Co. in London with a ``speculative buy'' recommendation on Rank stock.
Shares of Rank rose 10 pence, or 4.7 percent, to 223.5 pence at 12:35 p.m. in London, reversing a drop of as much as 3.5 percent. The gain trimmed this year's slide to 27 percent.
Rank said it plans to save about 10 million pounds a year in its Mecca Bingo and Grosvenor Casinos units. Six million pounds of savings will come from head office and other functions.
Marketing Tactics
Operating profit at Rank's bingo business fell 17 percent in the first half as a smoking ban in Scotland kept some gamblers away, Burke said on the call. Half of the division's customers are smokers compared with about 25 percent of the U.K. population, he said.
Rank has conducted research indicating that a smoking ban starting next year in England may have a similar effect to that in Scotland, where sales have dropped 14 percent since the ban began, according to Burke. The company is changing marketing tactics to attract more nonsmokers in England and Scotland to replace those put off by the new nonsmoking atmosphere, he said.
Total gaming profit fell 11 percent to 46.5 million pounds as bingo's decline was partly offset by increases at the casinos and Blue Square on line gambling unit.
Revenue growth at Grosvenor Casinos has slowed ``slightly'' in the last eight weeks, Rank said in a statement.
``We continue to see a difficult trading environment for the group, with increasing gaming competition coupled with a smoking ban,'' Ian Rennardson, an analyst at Merrill Lynch & Co., wrote in a note to clients. ``Bingo remains a key concern.''
`No Conclusions'
Net income climbed to 8.4 million pounds, or 1.4 pence a share, in the first half from 4.5 million pounds, or 0.7 pence, a year earlier, Rank said. Per-share earnings were helped by lower taxes in the U.S. and proceeds from the sale of Deluxe Film, while pretax profit dropped 39 percent to 19.9 million pounds.
Rank will sell or fold the remaining units of Deluxe by the end of June 2007, Finance Director Peter Gill said today on the call. Talks are ``well under way,'' for the Deluxe sale, he said.
Management has ``made no conclusions'' on the potential sale of Hard Rock, Burke said. Operating profit at the unit rose 15 percent to 18.9 million pounds in the first half.
``The market will be disappointed by the lack of news on the Hard Rock review and the Deluxe Media disposal,'' said Nigel Parson, an analyst at Evolution Securities. ``Deluxe Media has turned from a straightforward disposal to a nightmare, with the fear that failure to sell could lead to massive closure costs.''
Rank also said it's examining ways of exiting its U.S. holidays unit, which offers time-share accommodation, camping and hotel stays in Pennsylvania. The division's operating profit was unchanged in the first half at 1.1 million pounds.
The company said it will cut the interim dividend to 2 pence a share from 5 pence a year earlier. |
