THE Rank Group gave warning that the impending smoking ban in England and Wales would hit trading at its bingo halls next year, as it reported a steep decline in profits yesterday.
The company, once Britain’s largest leisure conglomerate, also announced 240 job cuts, mostly at its Mecca bingo halls in Scotland, where it said that the smoking ban introduced in March had held back trading.
It reported group pre-tax profits, after exceptional items, of £19.9 million for the six months to the end of June, a 39 per cent decline from £32.7 million the previous year. Operating profits from its 117 Mecca bingo halls in the UK fell 17 per cent to £31.8 million, from £38.5 million in 2005.
Pre-tax profits before exceptional items was up 42.8 per cent to £46.7 million, compared with £32.7 million. The group took a charge related to refinancing costs of £14.7 million and a loss on the disposal of its investment in Universal Studios Japan.
Profits were up in Rank’s Hard Rock Cafe business — where a strategic review over its possible sale is continuing — and in its 36 Grosvenor Casinos.
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Rank’s shares fell heavily as the stock market opened but recovered to close 13¼p up at 226¾p.
The group said that it had shed 200 staff at Mecca Bingo and a further 40 jobs would be cut as it closed its London head office and merged corporate functions with its gaming division support in Maidenhead.
Ian Burke, chief executive, said: “As a result of these changes and a number of additional measures identified but not yet implemented, we expect to realise [from 2007] annual cost savings of £6 million across our combined corporate and gaming overheads.”
Mr Burke said that the smoking ban in Scotland had hurt trading in bingo halls because some customers were visiting less often and because smokers had to take breaks during sessions and were, therefore, playing fewer games. He said that he expected a similar effect when smoking bans were introduced in England and Wales next year, but added that Rank had yet to see the effect of the Scottish ban in the winter. “We’ve done quite a lot of research among our customers in England and Wales and our view is that it will be broadly similar to the impact we have seen in Scotland,” he said.
Richard Hunter, head of UK equities for Hargreaves Lansdown Stockbrokers, said that the upcoming ban in England provided further reason for Rank to cut its costs.
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“That is one of the many challenges that remain,” he said. “One thing Rank doesn’t have that other pub operators like Wetherspoons have got is that the decline in sales of liquids in pubs has been offset by the fact that more and more people are choosing to eat in pubs.”