Rank suffers from lack of hit films

SIR DENYS HENDERSON, chairman of Rank, told the troubled company's shareholders at the annual meeting yesterday that a combination of a lack of blockbuster films screened at its Odeon cinemas, the rise in gaming duty in the 1998 budget, and the increase in rental payments after the group's sale-and-leaseback programme accounted for a slowdown in profits in the first quarter of the current year.

Turnover was similar to last year's, with shortfalls in the holidays and leisure divisions offset by growth in other businesses, particularly in Deluxe, the film and video processing and distribution division.

Operating profits were in line with expectations, but lower than last year's first-quarter figure of pounds 21m, Sir Denys said.

Fortunately for shareholders, the first quarter is traditionally Rank's weakest period, largely because the holiday division - which accounted for 20 per cent of last year's profits - is at a seasonally low ebb. Profits have been reduced still further by the need to refurbish and convert some of the Butlins holiday camps.

However, the outlook remains satisfactory, Sir Denys said. Bookings at the refurbished Butlins are running 10 per cent ahead of last year, with the new Sony US film processing contract boosting Deluxe, which generated 30 per cent of last year's profit.

New merchandise lifted profits at Hard Rock, while the cinemas have high hopes of a surge in business when a new run of films beginning with the new Star Wars epic comes to screens in June.

But the group's pounds 50m-a-year interest bill remains a burden, and analysts are in no hurry to alter current forecasts of around pounds 247m and earnings of 23p this year, rising to pounds 265m and 23.3p next year - a far cry from the pounds 376m in 1994. The shares have rallied from their low of 186p in February, helped by vague takeover talk, but they dipped 16.5p to 262p yesterday.