Final Results

Rank Group PLC 2 March 2001 2 March 2001 The Rank Group Plc Preliminary announcement for the year ended 31 December 2000 Rank announces significant progress in continuing operations in a year of fundamental change - creating a strong platform for future growth (£m unless otherwise stated) 2000 1999 Continuing operations Turnover 1,404.1 1,330.0 Operating profit* 210.4 196.0 Profit before tax** 186.0 227.7 Earnings per share** 17.3p 19.9p Operating cash flow 233.5 (38.0) Net debt 319.9 1,161.9 Final dividend per share 8.0p 8.0p * Before exceptional items and FRS 15 ** Before exceptional items * Operating profit* up 7% * Record year for Gaming, with profit* up 29% * Return to growth for Hard Rock, with profit* up 13% * Strong result in Deluxe film, decline in video * Net cash flow before acquisitions and disposals of £57.9m - first year of net cash generation since 1994 * Sale of UK Holidays division brings disposal proceeds to over £1.4 billion in last 18 months * Net debt reduced by over £1 billion from its peak and £300m returned to shareholders Mike Smith, Chief Executive, said: '2000 was a year of fundamental change. We radically restructured the Group, strengthened our balance sheet and reinvigorated our trading performance. More than that, we believe that 2000 will prove to be a watershed for the Group as we have come a long way in bringing more focus to our activities thereby establishing a core for 'new Rank' based increasingly on Gaming and the Hard Rock brand. Deluxe remains a strong contributor. We now have the financial and managerial capacity to develop more aggressively. We are confident that our approach will add significantly to shareholder value. Trading for the first part of 2001 is in line with our expectations.' Enquiries: The Rank Group: Tel: 020 7706 1111 Mike Smith, Chief Executive Ian Dyson, Finance Director Martin Rowland, Investor Relations Press enquiries: The Maitland Consultancy: Tel: 020 7379 5151 Angus Maitland Laura Frost Conference call details: Friday 2 March 2001 - the meeting starts at 9.30am - call in at 9.20am UK dial in number - 020 8781 0577, European dial in number - +44 (0)20 8781 0577 USA dial in number - +1 303 267 1002 Instant replay number - available at anytime from the end of the meeting on 2 March to 9 March 2001. UK dial in number - 020 82884459 - Access code 618262 European dial in number - +44 (0)20 82884459 - Access code 618262 USA dial in number - +1 303 804 1855 - Access code 930050 CHIEF EXECUTIVE'S REVIEW 2000 was a year of fundamental change for The Rank Group. Twelve months ago, we were a sprawling conglomerate with too many competing claims on our financial resources and management expertise. We have come a long way in bringing more focus to our activities and establishing a core for 'new Rank' whilst also improving our results. This improvement in results is already being delivered. We achieved our declared financial targets and improved the financial profile of the Group. We have reinvigorated our trading performance and strengthened our balance sheet. In the past 18 months we have sold businesses for a value above £1.4 billion. We have used these funds to reduce debt by some £1 billion from its peak and to return £300m of capital to shareholders via share purchases which have totalled 23.5% of the Group's equity. Equally important, we had a positive cash flow before acquisitions and disposals in 2000 for the first time in many years. In 2001 we will repeat this with all three major businesses - Gaming, Hard Rock and Deluxe - being cash positive after funding their respective capital expenditures and their share of financing costs. The Gaming division had a record trading year within both its casino and bingo activities. In 2001 and beyond we will continue with our proven formula of relocation combined with new developments and acquisitions. The acquisition of the London Park Tower casino has been successful and the business is performing well. We have announced plans for a Hard Rock casino in Manchester (adjacent to the new cafe which opened in November), which, subject to regulatory approval, will open in 2001. Casino web sites will also be launched in 2001 using our current Grosvenor brands and introducing one featuring the Hard Rock brand. Hard Rock improved sales trends and recorded a stronger financial performance in 2000. We trialled several new marketing approaches and cafe reconfigurations both to refresh the offering to customers and to tailor to local conditions. The favourable outcome of our trials and the fact that we have achieved positive like for like sales in European markets in 2000 means that we can accelerate development in the UK and continental Europe. The strength of the Hard Rock brand and its ability to endorse activities outside of its restaurant business was proved again in 2000. Receipts for royalties and licence fees matched our all time high. Significant new franchise agreements for cafes, hotels and, for the first time, casinos were all agreed during the year. The Hard Rock hotel in Orlando, adjacent to the Universal Studios Escape theme park, opened in January 2001. We also substantially improved the Hard Rock website in 2000 and its added sophistication enabled us to negotiate commercial arrangements that further our links to music. We are confident that more Hard Rock branded developments will be consummated in 2001. Deluxe had a mixed trading pattern in 2000, with a strong result in film processing offset by a decline in video duplication which required a substantial restructuring. In film, developments centred on building the film laboratory in Rome and planning for a replacement film laboratory in Toronto to open in 2002. Both will add to the technical proficiency, operating efficiency and capacity of our film processing business where we are still number one in the world. In video, our North American business is now centred on our low cost Arkansas plant and limited rationalisation of our facilities will take place in Europe in 2001 to further reduce cost and improve efficiency. In 2000 we also acquired a DVD facility in California. The changes wrought in the past 18 months have not been without disruption or cost but we can now look forward to what we are building and not back at problems that needed solving. I have said previously that we are regaining our confidence at Rank and to this we can add the enthusiasm engendered by our improved financial results, proven development initiatives and stronger balance sheet. We now have the financial and managerial capacity to develop our increasingly focused activities more aggressively. There is no great financial pressure to sell more businesses but we will continue to appraise the prospect for recycling capital within our portfolio. Our intention anyway is to allocate more of our self generated resources towards Gaming and Hard Rock to drive higher growth in these businesses in support of 'new Rank'. We are confident that this approach will drive further improvement in our financial results and add significantly to shareholder value. OPERATING AND FINANCIAL REVIEW Turnover Profit before tax 2000 1999 2000 1999 £m £m £m £m Gaming 442.6 405.9 82.4 69.1 Hard Rock 260.2 239.9 46.3 41.5 Deluxe 651.1 636.8 73.3 84.4 US Holidays 50.2 47.4 10.0 8.5 Central costs and other - - (8.9) (7.5) Continuing operations 1,404.1 1,330.0 203.1 196.0 Discontinued operations 389.3 711.4 59.7 111.0 1,793.4 2,041.4 262.8 307.0 Net loss from associates and (9.4) (0.1) joint ventures Managed businesses' interest (67.4) (79.2) Profit before tax and exceptional 186.0 227.7 items Exceptional items (527.1) (120.1) Profit (loss) before tax (341.1) 107.6 Earnings per share 17.3p 19.9p Basis of Reporting The Group's results for 2000 have been prepared using the same accounting policies as last year with the exception of the implementation of Financial Reporting Standard ('FRS') 15 'Tangible Fixed Assets'. The effect of FRS 15 is to reduce 2000 profit before tax and exceptional items by £16.7m, comprising Gaming £6.9m (Mecca Bingo £5.8m, Grosvenor Casinos £1.1m), Hard Rock £0.4m and discontinued operations £9.4m. Summary of Results Turnover from continuing operations was 6% ahead of 1999. All divisions reported increases in turnover, although both Deluxe and Hard Rock benefited from favourable movements in exchange rates. Excluding the impact of exchange rate movements, turnover was up 2%. Operating profit from continuing operations, before exceptional items and FRS 15, was 7% ahead of 1999. Gaming and Hard Rock results were very strong, together representing 23% growth on 1999 before FRS 15. In Deluxe, further progress in film was more than offset by reduced profit in video, leaving overall results behind 1999. Operating profit from discontinued operations was £59.7m (1999 - £111.0m), of which UK Holidays contributed £51.8m. An indication of the scale of the Group's disposal programme is evident from the fact that discontinued operations represent 35% of 1999 turnover and 36% of operating profit. Profit before tax and exceptional items was £186.0m (1999 - £227.7m). The growth in continuing operations was more than offset by the impact of the substantial reshaping of the Group during the past year, the FRS 15 charge of £16.7m and a loss of £11.5m from Universal Studios Escape prior to its disposal in July (1999 - net loss of £2.2m). Earnings per share before exceptional items, based on average shares of 695.6m compared to a year end figure of 591.8m, was 17.3p (1999 - 19.9p). The Group incurred an exceptional charge after tax of £461.4m in 2000, due largely to the net loss arising from the significant disposal activity in the year. An analysis of the exceptional charge is set out on page 12. DIVISIONS All references to operating profit are before exceptional items. Gaming Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Mecca Bingo 232.5 229.8 58.5 50.2 Grosvenor Casinos 157.6 122.5 21.7 17.5 Rank Leisure Machine Services 52.5 53.6 2.2 1.4 442.6 405.9 82.4 69.1 The Gaming Division had an excellent year with operating profit up 19% and 29% before a FRS 15 charge of £6.9m. Mecca Bingo increased operating profit by 28% before FRS 15. Turnover was up 1% with continued growth in spend per head (up 8%) more than offsetting the decline in admissions. Continued focus on product mix and cost control resulted in an operating profit margin of 25% (1999 - 22%). The Spanish bingo clubs performed well with profit up 23% to £3.6m. Grosvenor Casinos turnover was up 29% and operating profit was up 30% before FRS 15. The increase in turnover reflects generally strong trading across the estate and, in particular, exceptionally strong business in the first half of the year at the Clermont. The effect of this business has not fully translated into operating profit as a significant part of the win has still not been received in cash and has been provided for. Actions are in hand to recover the amounts due. The Park Tower, acquired in May for £14.0m, contributed £1.7m in the eight months following its acquisition. The Group's other London casinos performed well with admissions up 1.7% and handle per head up 7.4%. Outside London, admissions were up 4.7% and handle per head was up 7.1%. Following the success in relocating the casinos in Newcastle and Southampton, licences have been granted for further relocations in Blackpool, Birmingham, Brighton and Great Yarmouth. Plans have been announced for a Hard Rock branded casino in Manchester (adjacent to the recently opened Hard Rock cafe), and we are actively seeking additional sites for Hard Rock themed casinos in the UK. A range of internet casino products will be launched during 2001, using both the Grosvenor and Hard Rock brands. Rank Leisure Machine Services increased operating profit by 57% to £2.2m. Hard Rock Turnover* Operating Profit* 2000 1999 2000 1999 £m £m £m £m Owned cafes 248.6 230.1 54.3 51.6 Franchise and other income 11.6 9.8 12.4 12.5 Advertising - - (5.0) (1.9) Overheads - - (15.4) (20.7) 260.2 239.9 46.3 41.5 * Results for 2000 are for 53 weeks (1999 - 52 weeks) Hard Rock turnover was 8% ahead of 1999 with operating profit 13% ahead before FRS 15. Like for like revenues within owned cafes were 3.5% down on 1999 (on a comparable 52 week trading period), a significant improvement on the trend experienced in recent years. Further improvement has been experienced in the early part of 2001, with like for like revenues up 0.2% for the first seven weeks. Improved margins throughout the estate, the contribution from new openings and the effect of the additional trading week, offset the like for like revenue decline to leave owned cafe operating profit 5% ahead of 1999. Franchise and other income was £12.4m, including a £1.3m up front fee from the Seminole Indian Nation deal (see below). Overheads reduced by £5.3m following the restructuring in the second half of 1999. This reduction was offset by the costs of the expanded advertising campaign undertaken during the year. A number of actions were taken in 2000 aimed at revitalising the Hard Rock brand and the owned cafe estate. A reconfigured cafe style has been developed which includes a larger bar area and a stage providing for evening entertainment with live bands. Chicago and Houston were both successfully re-launched in this style and further cafes will undergo similar reconfiguration during 2001. In Europe the new Manchester cafe, also in the reconfigured style, opened in November and, following its success, plans are in place to develop new Hard Rock cafes in other major UK centres. Plans are also in hand to accelerate development of new cafes in continental Europe, where like for like revenues were 1.4% up in 2000. The Hardrock.com web site was relaunched and has proved to be very popular. Alliances have been entered into with eBay, Music Choice and CDNow, all aimed at giving Hard Rock low cost access to a new customer base. Hard Rock is continuing to explore the use of its brand name within the hospitality sector, in particular in hotels and casinos. An agreement has been signed to develop two Hard Rock casino based resorts on Seminole Indian Nation reservation land in Florida. Investment by Hard Rock is limited to the construction of two cafes within the resorts. The Hard Rock hotel in Orlando opened on 19 January 2001. Further opportunities are being pursued in this area and reinforce our belief that the brand can profitably lend itself to expansion outside of the restaurant operations. Deluxe Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Film Processing 300.2 266.0 48.6 48.0 Video Duplication 350.9 370.8 24.7 36.4 651.1 636.8 73.3 84.4 Film processing had another successful year. Film footage was up 12% to almost 3.6 billion feet and operating profit was up 9% before a one-off charge of £ 3.7m relating to the planned relocation of the Toronto laboratory (see below). Films processed during the year included 'Erin Brokovich', 'Castaway', 'Charlie's Angels' and 'Gone in 60 Seconds'. The Rome laboratory will open shortly and plans are in place to relocate the Toronto laboratory to new state of the art premises with opening scheduled for early 2002. These new low cost facilities, allied to the enhanced contractual position following the award of the Fox International film contract, leave the business very well positioned for the future. The decision to relocate the Toronto laboratory has resulted in a write-off of certain leasehold improvements and other assets of £3.7m, which has been charged against operating profit before exceptional items. Video duplication turnover declined by 5% and operating profit was down to £ 24.7m. The results were particularly affected by the loss of the Fox Home Entertainment contract in North America in August and a net loss of £4.7m, including the write-off of start up costs, incurred by the DVD facility acquired in February. A substantial restructuring of the video duplication and distribution business in the USA was completed during the year. Following this restructuring, the business is now operating at substantially lower cost and much improved service levels, with duplication now concentrated in Arkansas and distribution concentrated around Chicago. The costs incurred in effecting these changes and the write-off of assets relating to the ending of the Fox Home Entertainment contract have resulted in an exceptional charge of £41.3m. In Europe, volume and turnover increased, helped by the duplication of 'Star Wars: The Phantom Menace' and a large publishing project in Spain. Operating profit was, however, behind last year due to higher material costs and higher depreciation charges following the expenditure on new information systems over the past two years. Plans are currently being formulated to rationalise the duplication business in Europe in order to concentrate volumes within the lower cost facilities. Deluxe replicated 3.3m DVDs in 2000 (1999 - nil). Excess supply in the market led to lower volumes than had been anticipated and this, together with start up costs, resulted in a net loss of £4.7m from this business. Deluxe distributed 56m DVDs during 2000 (1999 - 30m). US Holidays US Holidays increased operating profit by 18% to £10.0m and generated net cash of £13.6m. Central Costs and Other 2000 1999 £m £m Central costs (10.6) (11.1) Other income 1.7 3.6 (8.9) (7.5) Central costs were down to £10.6m, which includes certain one-off costs of £ 1.7m. The true reduction in costs is therefore £2.2m, reflecting the restructuring undertaken in 1999. Other income relates to property profits associated with the Group's remaining non-trading property portfolio. Discontinued Operations Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Nightscene - 75.4 - 12.1 Odeon Cinemas 19.6 142.5 1.8 22.4 Pinewood Studios 1.4 15.3 0.1 5.3 Tom Cobleigh 43.1 58.8 6.0 8.1 UK Holidays 325.2 419.4 51.8 63.1 389.3 711.4 59.7 111.0 Associates and Joint Ventures Associates and joint ventures principally comprises the Group's interest in Universal Studios Escape and the British Land joint venture. The Group suffered a net loss of £11.5m from Universal Studios Escape in the period to its disposal on 28 July 2000 (1999 - net loss of £2.2m). The Group's interest in the British Land joint venture contributed a net profit of £1.9m in 2000 (1999 - £2.3m). Interest 2000 1999 £m £m Interest incurred 67.4 95.8 Interest capitalised - (10.8) Amortisation of discount on Xerox proceeds - (7.8) Amortisation of capitalised interest - 2.0 Managed businesses interest 67.4 79.2 Net debt 319.9 1,161.9 Interest incurred was 30% below 1999 as a result of substantially lower debt levels. The average interest rate was 7.5% (1999 - 7.3%). The increase is due to the lower rate of interest received on cash deposits held by the Group following completion of the disposal of the UK Holidays division. The average interest rate on gross debt was 7.3% (1999 - 7.3%). Interest cover, expressed as the ratio of Group operating profit before exceptional items to managed businesses interest, was 3.9 times (1999 - 3.9 times). The fixed charge cover, excluding lease commitments, was 3.0 times (1999 - 3.9 times). Exchange rates The net translation effect of changes in average exchange rates between 1999 and 2000 was to increase turnover by £46.7m and profit before tax and exceptional items by £3.4m. The increase in profit before tax comprises an increase of £6.4m in operating profit (Deluxe £4.5m, Hard Rock £1.9m) offset by higher interest payable of £3.0m. The average rates of the principal operating currencies were: US dollar 1.50 (1999 - 1.62); Euro 1.66 (1999 - 1.53) and Canadian dollar 2.21 (1999 - 2.41). Taxation The effective tax rate on Rank managed businesses, excluding exceptional items, is 21.5% (1999 - 22.4%). On a pre-FRS 15 basis the rate is 19.8%. The effective rate continues to benefit from prior year capital allowance disclaimers, US tax losses and reflects a repayment of UK tax relating to previous years. Exceptional Items £m Exceptional items within operating profit Restructuring charge at Deluxe Video USA (41.3) Group restructuring charge (2.2) (43.5) Exceptional items within Associates (13.8) Non-operating exceptional items (449.5) Exceptional items within interest payable (20.3) (527.1) Tax 65.7 Exceptional items after tax (461.4) In April 2000, the Group announced plans to restructure the Deluxe video business in the USA. This resulted in an exceptional charge of £41.3m, comprising redundancy costs of £4.7m, costs associated with the closure of facilities of £6.7m and certain asset write-offs totalling £29.9m. The Group restructuring charge of £2.2m relates to costs associated with the restructuring announced in August 1999 which did not qualify to be recorded last year under FRS 12. The exceptional item within Associates is a provision for impairment of the carrying value of the Group's 25% interest in the Universal hotels joint venture. This reflects the trading performance of the Universal Studios Escape theme park. The non-operating exceptional item consists of the profit/(loss) on the disposal of the following businesses: £m Odeon Cinemas 130.4 Pinewood Studios 35.0 Tom Cobleigh (102.1) Universal Studios Escape (195.7) UK Holidays (315.5) Other (1.6) (449.5) Odeon Cinemas was sold on 19 February 2000 to Cinven for a consideration of £ 280m. Pinewood Studios was sold on 22 February 2000 to a consortium led by Michael Grade, and backed by 3i Plc, for a consideration of £62m. Tom Cobleigh was sold on 4 September 2000 to Electra Partners Europe for a consideration of £90m. The Group's interest in the theme park assets held by Universal Studios Escape was sold on 28 July 2000 to Blackstone Capital Partners III LP for cash consideration of US$275m (£182m). There is an additional payment of US$75m (£ 50m) due, contingent upon Blackstone achieving a certain level of return on its investment measured at the time of exit. The contingent payment has not been included within proceeds for the purpose of calculating the loss on disposal. The UK Holidays division, comprising Butlins, Haven, Oasis and Warner, was sold on 23 October 2000 to Bourne Leisure Group for a consideration of up to £ 700m. The consideration comprised cash on closing of £650m, adjusted for net working capital as at the date of completion, plus a further payment of up to £50m due on 31 March 2003, contingent upon the profitability of Butlins for the two years ending 31 December 2002. The additional £50m payment has not been included within proceeds for the purpose of calculating the loss on disposal of this business. The total net loss on disposal of £449.5m includes £108.1m of goodwill previously written off to reserves, comprising Universal Studios Escape £ 16.9m, Tom Cobleigh £56.7m and UK Holidays £34.5m. Following the completion of the sale of UK Holidays, the Group reviewed the structure of its substantially lower level of debt. A decision was taken to repay the outstanding US$252m of private placement debt. This debt had an average maturity of 4.5 years and an average cost of 9.85%. The prepayment gave rise to a penalty charge of £20.3m, which has been shown as an exceptional item within interest payable. An exceptional tax credit of £65.7m arose during the year, principally related to the disposal of UK Holidays. Cash Flow 2000 1999 £m £m Cash inflow from operating activities 358.0 315.8 Capital expenditure (144.6) (385.0) Fixed assets disposals 20.1 31.2 Operating cash flow 233.5 (38.0) Distributions from associates 2.6 16.3 Acquisitions (25.7) (10.6) Investments (19.6) (85.5) Disposals 1,212.9 374.9 1,403.7 257.1 Interest, tax and dividend payments (178.2) (331.2) 1,225.5 (74.1) Purchase of Ordinary share capital (304.3) - 921.2 (74.1) The Group generated net cash of £921.2m in the year (1999 - net outflow of £ 74.1m). This is largely a result of the substantial disposal proceeds received during the year, but also reflects a substantial improvement in the underlying cash profile of the Group. Excluding acquisitions, investments and disposals, the Group generated £57.9m of cash, the first year since 1994 that the Group has been cash positive at this level. This was due to a combination of improved operating cash flow and significantly lower interest, tax and dividend payments. Operating cash flow was £233.5m (1999 - net outflow of £38.0m). This reflects the measures put in place during 1999, in particular: - capital expenditure has been more effectively controlled with net spend (after sundry disposals) of £124.5m, compared to £353.8m in 1999; and - working capital was a net inflow of £6.6m, compared to an outflow of £95.4m in 1999. The reduction of £153.0m in interest, tax and dividends is due to a net tax repayment of £12.8m (1999 - payment of £51.5m), and lower levels of dividend payments as a result of the reduction in the dividend per share in 1999, lower number of shares in issue and the deferred payment of the 1998 interim dividend. Capital expenditure by division was as follows: 2000 1999 £m £m Gaming 34.3 43.9 Hard Rock 13.9 31.8 Deluxe 24.2 44.4 US Holidays 1.1 0.9 73.5 121.0 Discontinued 71.1 264.0 144.6 385.0 Acquisitions were the Park Tower Casino in London and the Pioneer DVD facility in Los Angeles. Investments include further equity injections in respect of Universal Studios Escape (including the hotels) and Universal Studios Japan. Disposals comprise the proceeds from the sale of Odeon Cinemas, Pinewood Studios, Tom Cobleigh, Universal Studios Escape and UK Holidays. Of the net proceeds of £1,212.9m an amount of £304.3m was used to purchase 181.8m Ordinary shares, amounting to 23.5% of the issued share capital as at 1 January 2000. Borrowings At 31 December 2000, net debt was £319.9m compared with £1,161.9m at 31 December 1999. The majority of net debt was denominated in US dollars, with most of the balance in sterling. Net debt as a percentage of shareholders' funds was 58% compared with 98% at 31 December 1999. Shareholders' Funds Shareholders' funds were £556.3m at 31 December 2000 (1999 - £1,183.8m). The reduction reflects the net loss incurred by the Group, principally due to the disposal programme, and the purchase of Ordinary share capital during the year. SHAREHOLDER INFORMATION Accounting Policies Accounting policies are consistent with those used in 1999 except for the adoption of Financial Reporting Standard ('FRS') 15 ('Tangible fixed assets'). In previous years no depreciation was charged in respect of certain operating buildings held as freehold or with leasehold interest in excess of 20 years. Following the implementation of FRS 15, depreciation is now charged on these assets. This has resulted in an additional depreciation charge of £16.7m (1999 - nil). If the standard had been implemented in 1999, the reported profits would have been £18.2m lower in the year to 31 December 1999. Dividend The proposed final dividend of 8.0p per Ordinary share, together with the interim dividend of 4.0p per Ordinary share, makes a total for the year of 12.0p per Ordinary share (1999 - 12.0p). The total dividend for 2000 will be covered 1.7 times by earnings before exceptional items, based on 591.8m Ordinary shares outstanding at 31 December 2000. The record date for the final dividend is 6 April 2001 and the payment date is 4 May 2001. Annual General Meeting The AGM will be held at 11:30am on Thursday 26 April 2001 at the Royal Garden Hotel, 2-24 Kensington High Street, London, W8 4PT. Report and Accounts The Report and Accounts and the Notice of the Annual General Meeting will be posted to shareholders towards the end of March. Copies will be available from the Secretary, The Rank Group Plc, 6 Connaught Place, London W2 2EZ. General The financial information contained in this announcement is based on that contained in the full audited financial statements for the year ended 31 December 2000 dated 1 March 2001. The Directors approved this announcement on 1 March 2001. This announcement does not constitute full accounts within the meaning of S.240 Companies Act 1985. The 1999 accounts for The Rank Group Plc have been delivered to the Registrar of Companies. The 2000 accounts for The Rank Group Plc have not yet been delivered to the Registrar of Companies. GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December 2000 Before Exceptional Exceptional Items Total Items £m £m £m Turnover Continuing operations 1,393.1 1,393.1 Acquisitions 11.0 11.0 1,404.1 1,404.1 Discontinued operations 389.3 389.3 1,793.4 1,793.4 Operating profit Continuing operations (Notes 1&2) 206.1 (43.5) 162.6 Acquisitions (3.0) - (3.0) 203.1 (43.5) 159.6 Discontinued operations 59.7 - 59.7 262.8 (43.5) 219.3 Share of associates and joint ventures (Note 2) 17.7 (13.8) 3.9 280.5 (57.3) 223.2 Non-operating items (Note 2) - (449.5) (449.5) Profit (loss) before interest 280.5 (506.8) (226.3) Interest: Group (67.4) (20.3) (87.7) Share of associates and joint ventures (27.1) - (27.1) (94.5) (20.3) (114.8) Profit (loss) before tax 186.0 (527.1) (341.1) Tax (Note 3) (42.0) 65.7 23.7 Profit (loss) after tax 144.0 (461.4) (317.4) Minority interests (3.0) - (3.0) Preference dividends (21.0) - (21.0) Earnings (loss) 120.0 (461.4) (341.4) Earnings (loss) per Ordinary share 17.3p (66.4)p (49.1)p (Note 4) GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December (continued) 1999 Before Exceptional Exceptional Items Total £m £m £m Turnover Continuing operations 1,330.0 1,330.0 Acquisitions - - 1,330.0 1,330.0 Discontinued operations 711.4 711.4 2,041.4 2,041.4 Operating profit Continuing operations (Notes 1&2) 196.0 (85.6) 110.4 Acquisitions - - - 196.0 (85.6) 110.4 Discontinued operations 111.0 (12.8) 98.2 307.0 (98.4) 208.6 Share of associates and joint ventures (Note 2) 27.5 (45.7) (18.2) 334.5 (144.1) 190.4 Non-operating items (Note 2) - 32.5 32.5 Profit (loss) before interest 334.5 (111.6) 222.9 Interest: Group (79.2) (8.5) (87.7) Share of associates and joint ventures (27.6) - (27.6) (106.8) (8.5) (115.3) Profit (loss) before tax 227.7 (120.1) 107.6 Tax (Note 3) (51.0) 13.2 (37.8) Profit (loss) after tax 176.7 (106.9) 69.8 Minority interests (1.7) - (1.7) Preference dividends (21.0) - (21.0) Earnings (loss) 154.0 (106.9) 47.1 Earnings (loss) per Ordinary share 19.9p (13.8)p 6.1p (Note 4) GROUP BALANCE SHEET At 31 December 2000 1999 £m £m Fixed assets Intangible assets 7.6 4.1 Tangible assets 775.8 1,938.5 Investments 56.3 389.7 839.7 2,332.3 Current assets Stocks 65.2 88.6 Debtors (including amounts falling due after more than one year) 486.1 523.0 Investments 11.7 12.8 Cash and deposits 156.0 94.2 719.0 718.6 Creditors (amounts falling due within one year) Loan capital and borrowings (42.6) (126.9) Other (341.3) (458.6) (383.9) (585.5) Net current assets 335.1 133.1 Total assets less current liabilities 1,174.8 2,465.4 Creditors (amounts falling due after more than one year) Loan capital and borrowings (445.0) (1,142.0) Other including provisions (157.6) (126.0) 572.2 1,197.4 Capital and reserves Called up share capital 104.6 122.8 Share premium account 8.5 8.5 Other reserves 443.2 1,052.5 Shareholders' funds 556.3 1,183.8 Equity interests 334.1 963.8 Non-equity interests 222.2 220.0 Minority interests (including non-equity interests) 15.9 13.6 572.2 1,197.4 GROUP CASH FLOW STATEMENT For the year ended 31 December 2000 1999 £m £m Net cash inflow from operating activities (Note 5) 358.0 315.8 Distributions from joint ventures and associated undertakings 2.6 16.3 Returns on investment and servicing of finance Interest received 8.3 9.3 Interest paid (96.5)(108.5) Dividends paid to preference shareholders and minorities (19.1) (19.0) (107.3)(118.2) Tax received (paid) 12.8 (51.5) Capital expenditure and financial investment Purchase of investments (6.2) (3.7) Purchase of tangible fixed assets (144.6)(385.0) Sale of fixed assets and assets held for disposal 20.1 31.2 (130.7)(357.5) Acquisitions and disposals Purchase of subsidiaries (25.9) (10.6) Investments in associates and joint ventures (13.4) (81.8) Sale of businesses and investments 1,219.3 378.1 Net cash disposed/acquired (6.2) (3.2) 1,173.8 282.5 Ordinary dividends paid (83.7)(161.5) Cash inflow (outflow) before use of liquid resources and financing 1,225.5 (74.1) Management of liquid resources 1.1 3.3 Financing Purchase of Ordinary share capital (304.3) - Payment (to)/from minority interests (1.3) 0.2 Changes in debt and lease financing Net (decrease) increase in loans and borrowings (829.2) 88.4 Capital element of finance lease rental payments (19.4) (10.2) Increase in cash (Note 6) 72.4 7.6 GROUP RECOGNISED GAINS AND LOSSES For the year ended 31 December 2000 1999 £m £m Profit (loss) for the financial year (320.4) 68.1 Currency translation differences on foreign currency net (22.9) (8.7) investments Total recognised gains and losses for the year (343.3) 59.4 MOVEMENTS IN SHAREHOLDERS' FUNDS For the year ended 31 December 2000 1999 £m £m Profit (loss) for the financial year (320.4) 68.1 Dividends payable (88.0) (111.5) Retained loss for the year (408.4) (43.4) Other recognised gains and losses (net) (22.9) (8.7) Purchase of Ordinary share capital (304.3) - Goodwill realised on disposal 108.1 6.0 Net movement in shareholders' funds (627.5) (46.1) Opening shareholders' funds 1,183.8 1,229.9 Closing shareholders' funds 556.3 1,183.8 1. Geographical analysis of continuing operations, before exceptional items: Turnover by origin Operating Profit by origin 2000 1999 2000 1999 £m £m £m £m United Kingdom 531.3 480.6 77.7 72.0 North America 743.6 735.9 103.9 103.8 Rest of the World 129.2 113.5 21.5 20.2 Continuing operations 1,404.1 1,330.0 203.1 196.0 2. Exceptional and non-operating items: 2000 1999 £m £m Exceptional items: Restructuring charge at Deluxe Video US (41.3) - Group restructuring charge (2.2) (51.8) Hard Rock reorganisation and impairment - (46.6) (43.5) (98.4) Exceptional item within associates (13.8) (45.7) (57.3) (144.1) Non-operating items: Net loss on disposal of continuing operations (0.6) (0.5) Net profit (loss) on disposal of discontinued operations (448.9) 33.0 (449.5) 32.5 3. The tax charge before exceptional items may be analysed as follows: 2000 1999 £m £m Rank managed businesses 42.0 51.0 Associates and joint ventures - - 42.0 51.0 4. The weighted average number of Ordinary shares used in the calculation of earnings per share is 695.6m (1999 - 773.2m). The number of Ordinary shares as at 31 December 2000 was 591.8m. 5. Reconciliation of operating profit to cash flow from operating activities: 2000 1999 £m £m Operating profit 219.3 208.6 Exceptional costs charged 43.5 98.4 262.8 307.0 Cash payments in respect of exceptional costs and (49.6) (37.4) Provisions Depreciation 134.0 139.4 Decrease (increase) in working capital 6.6 (95.4) Other items 4.2 2.2 Net cash inflow from operating activities 358.0 315.8 6. Reconciliation to net debt: 2000 1999 £m £m Increase in cash 72.4 7.6 Decrease (increase) in loans, borrowings and finance leases 848.6 (78.2) Decrease in liquid resources (1.1) (3.3) Decrease (increase) in net debt from cash flows 919.9 (73.9) New finance leases (2.0) (12.0) Foreign exchange difference (75.9) (18.8) 842.0 (104.7) Net debt at 1 January (1,161.9) (1,057.2) Net debt at 31 December (319.9) (1,161.9)

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