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July 15, 1993

RANK HAS CONSIDERED SELLING RANK XEROX STAKE – BUT DON’T HOLD YOUR BREATH

By CBR Staff Writer

While hotel and leisure group the Rank Organisation Plc, said it had considered selling its 49% stake in associate company Rank Xerox Ltd, it attests that it is not conducting negotiations at the moment. Chief executive Michael Gifford declared that Of course we have considered what would happen if we and Xerox reached a deal. But I wouldn’t get excited. He added, There’s almost nothing we haven’t considered. Rank Xerox specialises in photocopiers and office equipment and is 49% owned by Rank and 51% by Xerox Corp. Gifford describes it as a joint-venture relationship, which is alive and well. But he said the relationship is subject to continuous change, citing the sale of marketing rights to Rank Xerox’s affiliate company, Fuji Xerox, as one example of the partners’ changing relationship. Rank Xerox owns 50% percent of Fuji Xerox, while the rest is owned by Fuji Photo Film Co Ltd. And Gifford added, there will be more of such messing about on the edges as the relationship is not static. As for future plans, he said They are what they’ve always been. I would like to see Rank Xerox grow and provide increased contribution to the Rank Organisation. For the first six months of Rank’s fiscal year, Rank Xerox brought in profits of UKP68.5m down from UKP71.7m last year. An improved performance from Fuji Xerox was offset by poorer results from Rank Xerox itself.

Uneven and fragile

Overall, The Rank Organisation saw revenues up 6.8% to UKP965.3m, but underlying turnover was flat if changes in exchange rates are not included. This reflects the mixed market conditions being encountered by the group’s major businesses. Discontinued operations also contributed UKP4.6m this time and UKP31.6m last time. Pre-tax profits rose 383.3% to UKP95.7m, while net profits benefitted from UKP5.5m gains from the sale of properties and business operations. Some UKP73.7m losses from similar transactions last year pushed it into net losses of UKP13.3m. While chairman Leslie Fletcher said that there is now some evidence of improvement in certain Rank markets, such as casinos and nightclubs, recovery remains uneven and fragile, with markets particularly in continental Europe continuing to deteriorate. Nonetheless, the group’s shares jumped 17 pence to 784 pence yesterday morning in response to news of an enhanced share alternative for investors. The alternative is part of several changes to Rank’s dividend policy. The London-based group proposes to accelerate paying dividends to its shareholders for this financial year. And, subject to shareholder approval, it will pay the total amount as a special interim dividend of 31 pence per ordinary share on September 16. Via the enhanced share alternative, shareholders will have the chance to receive new ordinary shares with a value of 46.5 pence per existing ordinary share. The enhanced share offer is worth 50% more in cash terms than the special interim dividend. One leisure analyst said Rank decided to offer the alternative because it had to confront the problem of unrelieved Advance Corporation Tax – firms have to pay this tax on their dividends, but can only reclaim it against UK profits, so that if the bulk of profits are made overseas, it can be lost. They had to write off UKP18m last year because of unrelieved ACT: this change should be earnings-enhancing.

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