Interim Results

Rank Group PLC 8 September 2000 THE RANK GROUP PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2000 - Turnover* up 10% to £853.2m - Operating profit*, before FRS15, up 24% - Proforma pre-tax profit** up 9% to £65.1m - Proforma earnings per share** up 17% to 5.4p - Operating cash inflow of £109.3m (1999 - outflow of £140.1m) - Interim dividend per share unchanged at 4.0p - Disposals totalling £760m completed in the past 12 months - 10% share repurchase completed * on continuing operations and before exceptional items ** before FRS15, contribution from Universal Studios Escape and interest capitalised Commenting on the results, Mike Smith, Chief Executive, said: 'The Group continues to make progress both in terms of improving operating performance and reducing its span of activities. Underlying operating profit is significantly improved and our operating cash flow is now very positive. The sales of Universal Studios Escape and Tom Cobleigh are further evidence of our commitment to refocus our activities and to reduce debt. We are down to four, large, credible business groupings but there will be more re-shaping of the Group in the coming months as we continue to pursue improved shareholder value.' Enquiries: The Rank Group - Tel: 020 7706 1111 Mike Smith, Chief Executive Ian Dyson, Finance Director Kate Ellis-Jones, Investor Relations Press Enquiries: The Maitland Consultancy - Tel: 020 7379 5151 Angus Maitland Laura Frost Conference call details: Friday 8 September 2000 - the meeting starts at 9.30am - call in at 9.20am quoting The Rank Group Plc UK dial in number - 020 8781 0598 International dial in number - +44 (0) 20 8781 0598 Instant reply number - available at anytime from the end of the meeting on 8 September for 7 days UK dial in number - 020 8288 4459 - Access code 600132 International dial in number - +44 (0) 20 8288 4459 - Access code 600132 CHIEF EXECUTIVE'S REVIEW The first half of 2000 has brought further significant change at Rank as we continue with the twin processes of reinvigorating our trading performance and re-focussing our activities through structural change. The trading results when adjusted for business disposals and the newly implemented FRS 15 are much improved compared with the first half of 1999. The results reflect the improvements in margins and costs initiated last year combined now with a push for business growth. Deluxe has experienced margin pressure across all its activities but film continues to show growth and will improve its financial performance; video is weak but a major restructuring to be completed this year will stabilise the situation; our small DVD acquisition is being integrated into Deluxe and expanded. Gaming continues to improve and is now very strong with increased sales and profits in both Mecca and Grosvenor Casinos. Hard Rock profits are up following the reshaping last year and are now driven by a marked improvement in like for like sales. Holidays shows general improvement and Oasis was strong but Butlins was disappointing during this period. Tom Cobleigh showed a consistent performance facilitated by positive like for like sales. We undertook to change the operating cash profile of the Group given that we had been cash negative since 1994. Our actions in improving trading profits, tightly managing working capital, restricting capital expenditure following the recent heavy investments and re-basing the dividend have been successful. The Group was cash positive at both the operating and net level during this trading period. The most difficult trading outcome for Rank was the significant loss attributable to our 50% holding in Universal Studios Escape, Florida. The sale of our shareholding, announced in June, means that our future results will no longer be subject to the vagaries of the park's performance. For the time being we have retained shareholdings in associated Universal investments in hotels in Florida and a theme park development in Japan. The value of the investment in hotels has been written down to a level that we believe is realistic in the longer term. Tom Cobleigh was sold earlier this month as we recognised that we were too small in this market. We are now reduced to four credible business groupings, each of which is at a different point in its cycle of development. Deluxe will seek new contracts within its established capabilities. Holidays will continue the process of optimising results from its recent investments. We are confident that our Gaming interests can be extended; in particular, we are in discussions regarding internet opportunities. Equally, Hard Rock has demonstrated its resilience and brand strength. The possibilities for further development of Hard Rock are shown by the deals consummated recently. We believe that we have demonstrated our ability to improve performance and our determination to add focus to the Group. However, we recognise that much remains to be done and that speed of execution is essential. There will be more change in the coming months. In this regard we confirm that we have been approached by a number of parties who are interested in acquiring our UK Holidays business. One of the parties is advanced in its discussions with us but no agreement has yet been concluded. PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS Turnover Profit before exceptional items 2000 1999 2000 1999 £m £m £m restated * £m DELUXE 303.3 278.3 23.5 26.4 GAMING 226.9 199.9 39.5 31.4 HARD ROCK 127.6 118.8 21.9 18.2 HOLIDAYS 195.4 178.6 12.0 9.4 CENTRAL COSTS AND OTHER - - (6.3) (6.0) ------ ------ ------ ------ Continuing operations 853.2 775.6 90.6 79.4 Discontinued 52.9 140.1 5.7 21.0 operations** ------ ------ ------ ------ 906.1 915.7 96.3 100.4 ====== ====== NET (LOSS)/INCOME FROM (13.6) 11.6 ASSOCIATES MANAGED BUSINESSES (40.6) (31.5) INTEREST ------ ------ PROFIT BEFORE TAX AND 42.1 80.5 EXCEPTIONAL ITEMS * an analysis of the 1999 restatement is set out in Note 1 ** discontinued operations includes the results for Nightscene, Odeon Cinemas, Pinewood Studios and Tom Cobleigh BASIS OF REPORTING The presentation of the Group's 2000 interim results reflects the following changes: - Disclosure of divisional results before allocation of central costs and other income; and - Implementation of FRS15 'Tangible Fixed Assets' The first item has no impact on operating profit but changes the divisional breakdown. An analysis of the impact is shown in Note 1. The effect of FRS15 is to reduce 2000 profit before exceptional items by £8.4m, comprising Gaming £2.9m, Holidays £4.8m and Tom Cobleigh £0.7m. SUMMARY OF RESULTS Operating profit from continuing operations, before exceptional items, was 24% ahead of 1999 before FRS15. This reflects strong revenue growth across all divisions and the benefits of the restructuring programme announced in August 1999. The performance of each division is analysed below. The encouraging operating profit performance within our managed businesses was offset by a very disappointing operating performance from Universal Studios Escape, prior to its disposal, and associated higher interest charges, largely due to the cessation of capitalisation of interest following the opening of Islands of Adventure in May 1999. As a consequence, profit before tax was £42.1m against £80.5m in 1999. Excluding the impact of FRS15, the net profit/loss of Universal Studios Escape and interest capitalised in 1999, results in a proforma profit before tax of £65.1m, 9% ahead of 1999. Proforma earnings per share would be up 17% to 5.4p, calculated on the same basis (1999 - 4.6p). EXCEPTIONAL ITEMS £m Exceptional items within operating profit Restructuring charge at Deluxe (39.5) Video USA Group restructuring charge (2.8) Exceptional item within (13.2) Associates Non-operating exceptional items (129.1) ------- (184.6) ======= The Group has previously announced plans to restructure the Deluxe video business in the USA, in particular to enable greater utilisation of the lower cost Arkansas facility. Following the agreement to end the contract to duplicate and distribute videos for Fox Home Entertainment in the USA, Deluxe broadened its restructuring plans as set out in the commentary on Deluxe's results on page 8. An exceptional charge of £39.5m has been made to cover the costs of this restructuring. This comprises redundancy costs of £4.5m, costs associated with closure of facilities of £6.4m and certain asset write-offs totalling £28.6m. The Group restructuring charge of £2.8m relates to costs associated with the restructuring announced in August 1999, that did not qualify to be recorded last year under FRS12. 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 disappointing trading performance of the theme park (see comments on Universal Studios Escape on pages 12 and 13). The Group's interest has been reclassified as a trade investment in the balance sheet at 30 June 2000. The non-operating exceptional item consists of the profit/(loss) on the disposal of the following operations: £m Odeon Cinemas 136.4 Pinewood Studios 35.0 Universal Studios Escape (192.2) Tom Cobleigh (105.0) Other (3.3) ------- (129.1) ======= The disposals of Odeon Cinemas and Pinewood Studios were completed on 19 February 2000 and 22 February 2000 respectively. The disposals of the Group's interest in Universal Studios Escape and Tom Cobleigh were both completed subsequent to 30 June 2000. Universal Studios Escape has been classified as a current asset investment as at 30 June 2000 and a provision for the loss on disposal, which includes goodwill previously written off to reserves of £15.8m, has been made. The provision for loss on disposal of Tom Cobleigh includes £56.7m of goodwill previously written off to reserves. DIVISIONS DELUXE Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Film Processing 135.6 125.0 22.7 21.8 Video Duplication 167.7 153.3 0.8 4.6 ------- ------- ------- ------- 303.3 278.3 23.5 26.4 ======= ======= ======= ======= Film processing had a good first half with film footage up 15%, reflecting strong film releases, particularly in the first quarter. Operating profit, which was 4% ahead of last year, was affected by lower average pricing. Films processed in the period included 'Erin Brockovich', 'The Patriot', 'Mission Impossible 2' and 'X-Men'. In July, Deluxe was awarded the Fox International Film contract, enhancing its already strong contractual position. Much of the production from this contract will be undertaken at the new, lower cost laboratory in Rome which is due to open by the end of the year. Plans are also in hand for further expansion of the North American facilities. Video duplication in the USA had a disappointing first half with turnover and operating profit both lower than last year. The results were also affected by the start-up costs of DVD. In Europe, volume and turnover increased, helped by the production of 'Star Wars: The Phantom Menace', and a large publishing project in Spain. At this stage, whilst there will be the usual seasonal uplift, the outlook for the second half remains unsettled. In order to reduce costs and improve distribution and service at Deluxe's video duplication and distribution business in the USA, a substantial restructuring programme is in progress. This programme was accelerated when an agreement was reached to end the video duplication and distribution contract with Fox Home Entertainment, with effect from August. The restructuring and streamlining of the business, which is expected to be complete by the end of the year, includes the closure of a number of facilities in order to concentrate video duplication into the cost-effective Arkansas facility and distribution into Illinois. The costs incurred in effecting these changes and the write-off of assets relating to the ending of the Fox Home Entertainment contract has resulted in an exceptional item of £39.5m. Deluxe is a major distributor of DVDs, distributing 25.5m in the first half. Production of DVDs at the Pioneer facility, acquired in February, has not been significant to date. Deluxe is investing limited funds to increase production capacity to strengthen its position in DVD. Deluxe is actively and aggressively seeking new contracts across its range of activities. GAMING Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Mecca Bingo 117.9 113.0 28.2 22.3 Grosvenor Casinos 84.5 62.4 10.8 9.1 Rank Leisure Machine Services 24.5 24.5 0.5 - ------- ------- ------- ------- 226.9 199.9 39.5 31.4 ======= ======= ======= ======= The Gaming Division had a very strong first half with operating profit up by 35%, before FRS15. The split of FRS15 for each business is: Mecca Bingo £2.4m and Grosvenor Casinos £0.5m. Mecca Bingo increased operating profit by 37% reflecting strict control of costs and careful management of the sales mix. Spend per head increased by 8% partly due to an increase in the proportion of younger members who attend less frequently but have a higher spend per visit. Mecca launched its exclusive multiple bingo game under the newly awarded license to a positive response from customers. The Spanish bingo clubs have traded well with profit increasing by 26% to £1.8m. Grosvenor Casinos turnover was up 35%, reflecting solid progress across the estate and, in particular, some exceptional trading at the Clermont. This has not fully translated into an equivalent operating profit increase as a significant part of the Clermont win has not yet been received in cash. We remain confident that these funds will be received in due course. Grosvenor's other London casinos performed well with admissions up 7.7% and handle per head up 13.4%. The acquisition of the Park Tower casino for £14m in May will enhance the Group's position in this key market. The provincial casinos also performed well with admissions up 5.7% and handle per head up 10.7%, helped by last year's new openings in Walsall and Salford and the relocation of the Newcastle casino. We are actively pursuing opportunities to develop our Gaming businesses, in particular in relation to the supply of gaming products via the internet and interactive television. HARD ROCK Turnover* Operating Profit* 2000 1999 2000 1999 £m £m £m £m Owned Cafes 123.3 114.0 26.7 24.4 Franchise and other 4.3 4.8 4.3 4.8 income Advertising and (3.0) - promotion Overheads (6.1) (11.0) ------- ------- ------- ------- 127.6 118.8 21.9 18.2 ======= ======= ======= ======= * Results for 2000 are for 27 weeks (1999 - 26 weeks) The changes made at Hard Rock in the second half of 1999 have resulted in a significantly improved performance with turnover up 7% and operating profit up 20%. Like for like cafe comparisons have improved from down 9.2% in full year 1999 to down 3.3% in the first half of 2000, assisted by an extended advertising campaign following the trial in late 1999. The improved turnover performance was supported by continued focus on margins, resulting in owned cafe operating profit increasing by 9%. Overall operating profit was helped by significantly reduced overheads which was partly offset by the £3.0m cost of the advertising campaign. Franchised cafe openings include Malta later this year and four in 2001 including Osaka, at Universal Studios Japan. As part of the aim to revitalise the brand, a reconfigured cafe style has been developed which includes a larger bar area, a stage and a dance floor providing for evening entertainment with live bands. The Houston cafe was relocated and refurbished in the new style. Customer response has been positive and turnover and operating profit have increased significantly. Further new styled cafes are planned in Chicago, which is currently being refurbished, and Manchester, England, which will open later this year. Depending on the success of these venues further cafes will be considered for reconfiguration. Hard Rock is acquiring the digital rights to contracted live concerts which can be screened across the cafes. In order to promote the core business and increase brand awareness, Hard Rock has launched a new HardRock.com web-site and is entering into a number of internet alliances, mainly music related, which will give Hard Rock low cost access to high volume consumer sites. These include eBay (the largest US auction site) and Music Choice (digital music channel). An internet and cafe driven customer loyalty programme will also be introduced later this year. Initiatives to diversify the Hard Rock business have been concentrated on the use of the brand name within the hospitality sector, in particular in hotels and casinos. The Hard Rock hotel in Orlando, at Universal Studios Escape, will open in early 2001. A letter of intent has been signed for a Hard Rock hotel in Chicago and an agreement has been reached for the development of two Hard Rock branded casino-based resorts on Indian reservation land in Florida. These developments reinforce our belief that the brand can be sensibly expanded outside of the traditional cafe operations. HOLIDAYS Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Haven 90.2 84.9 4.8 4.6 Butlins 35.3 32.6 (10.1) (5.6) Warner 29.3 24.1 5.1 4.3 Oasis 19.8 15.3 4.0 1.2 Intra-group and other (4.1) (0.6) - - ------- ------- ------- ------- UK Holidays 170.5 156.3 3.8 4.5 Resorts USA 24.9 22.3 8.2 4.9 ------- ------- ------- ------- 195.4 178.6 12.0 9.4 ======= ======= ======= ======= Holidays operating profit before FRS15 was £16.8m, an increase of 79% over 1999, albeit in this seasonally less important half of the year. The split of FRS15 for each business is: Haven £1.6m, Butlins £1.2m, Warner £0.9m and Oasis £1.1m. Haven benefited from strong promotional activity in May and June which increased volume in these quieter months. Although this led to a lower average tariff, total tariff and retail spend increased. Caravan sales increased by 2%. Butlins was open for the full six months compared to the shorter soft-opening period last year. Bookings were slow in the early part of the year and results were impacted by increased operating costs and, in particular, increased depreciation. Fresh marketing initiatives are already in hand for the remainder of the year and 2001, and bookings have improved since the TV advertising and new brochure launch in July. Warner performed well with volume, tariff and retail spend all higher than last year. Cricket St Thomas opened in September 1999. Thoresby Hall in Nottinghamshire opened on 25 August 2000. Oasis continued to perform exceptionally well with volume up over 30%. Resorts USA increased profits to £8.2m and generated net cash of £12.5m. CENTRAL COSTS AND OTHER INCOME Central costs and other income are £0.3m higher than 1999. This reflects a reduction in central costs of £1.8m as a result of the restructuring programme announced in August 1999, offset by the inclusion of one-off income of £2.1m in 1999. DISCONTINUED BUSINESSES Turnover Operating Profit 2000 1999 2000 1999 £m £m £m £m Pinewood Studios 1.4 8.2 0.1 3.2 Odeon Cinemas 19.7 61.9 1.6 6.5 Nightscene - 41.4 - 6.5 Tom Cobleigh 31.8 28.6 4.0 4.8 ------- ------- ------- ------- 52.9 140.1 5.7 21.0 ======= ======= ======= ======= Odeon Cinemas was sold on 19 February 2000 to Cinven for £280m; Pinewood Studios was sold on 22 February 2000 to a consortium led by Michael Grade for £62m; Universal Studios Escape (excluding hotels) was sold on 28 July 2000 to Blackstone Capital Partners III LP for $275m (£182m) and Tom Cobleigh was sold on 4 September 2000 to Electra Partners Europe for £90m. ASSOCIATES 2000 1999 £m £m Operating Profit Universal Studios Escape 5.2 16.6 British Land joint venture 2.8 3.0 ------- ------- 8.0 19.6 ------- ------- Interest Universal Studios Escape (19.8) (6.2) British Land joint venture (1.8) (1.8) ------- ------- (21.6) (8.0) ------- ------- Net income Universal Studios Escape (14.6) 10.4 British Land joint venture 1.0 1.2 ------- ------- (13.6) 11.6 ======= ======= On 28 July 2000, the Group sold its interest in the theme park assets held by Universal Studios Escape to Blackstone Capital Partners III LP for cash consideration of $275m (£182m). There is an additional payment of $75m (£50m) due, contingent upon Blackstone achieving a certain level of return on its investment measured at the time of exit. The Group has retained its interests in the Universal hotels joint venture and in Universal Studios Japan. The performance of the theme park was very disappointing in the first half of the year with operating profit of £5.2m against £16.6m in 1999, despite the opening of Islands of Adventure at the end of May 1999. Rank's operating profit for the first full year since the opening of Islands of Adventure to 30 June 2000 was £8.9m. Rank's share of the interest costs on the £1 billion joint venture debt (excluding hotels) was £19.8m against £6.2m in 1999, reflecting the cessation of capitalisation of interest following the opening of Islands of Adventure. The net impact on the Group is a first half loss of £14.6m, an adverse swing of £25.0m when compared to 1999. As set out above, the Group has written down its interest in Universal hotels to £11.9m and reclassified it as a trade investment. DIVIDEND An interim dividend of 4.0p per Ordinary share will be paid on 13 October 2000 to those shareholders on the register on 22 September 2000. INTEREST 2000 1999 £m £m Interest incurred 40.6 49.7 Capitalised - (10.4) Discount on Xerox proceeds - (7.8) ------- ------- Managed businesses (before 40.6 31.5 exceptionals) ======= ======= Net Debt 1,048.7 1,257.3 Net interest incurred was 18.3% below 1999 as a result of lower average debt levels and lower average interest rates. The average interest rate for the period was 7.2% (1999 - 7.5%). EXCHANGE RATES The net effect of changes in foreign currencies was not material to profit before tax and exceptional items. TAXATION The tax rate on the Group's managed businesses, excluding exceptional items, is 22.5%. On a pre FRS15 basis, the effective tax rate is 20.0% (1999 - 22.1%). The effective rate continues to benefit from previous capital allowance disclaimers and reflects a £16.0m repayment of prior year UK corporation tax received in July. CASH FLOW 2000 1999 £m £m Cash inflow from operating 181.3 90.8 activities Capital expenditure (82.3) (253.4) Fixed asset disposals 10.3 22.5 ------- ------- Operating cash flow 109.3 (140.1) Distributions from Associates 1.2 10.1 Acquisitions (25.3) (0.4) Investments (6.7) (62.3) Disposals 340.0 225.7 ------- ------- 418.5 33.0 Interest, tax and dividend (122.6) (192.5) payments ------- ------- 295.9 (159.5) Repurchase of Ordinary share (119.8) - capital ------- ------- 176.1 (159.5) ======= ======= The Group generated net cash flow of £176.1m in the first half of the year (1999 - net outflow of £159.5m). This reflects the high level of disposal activity and the measures put in place last year to improve operating cash flow. Operating cash flow is £249.4m ahead of 1999 reflecting: - Strong operating results, resulting in EBITDA (before Associates) being broadly in line with 1999; - Control of capital expenditure, with investment of £82.3m (1999 - £253.4m); and - Enhanced focus on working capital which, together with a lower level of advance payments in Deluxe, has led to an inflow of £32.0m in the half year (1999 - outflow of £73.5m). The Group remains on target to be cash positive, before acquisitions and disposals, in 2000. In addition to these operational improvements, a total of £340m has been realised from disposals, principally Odeon Cinemas and Pinewood Studios. Of this amount, £119.8m has been used to buy back Ordinary shares and £25.3m was spent on the acquisitions of the Pioneer DVD facility in Los Angeles and the Park Tower casino in London. Subsequent to 30 June 2000, the Group has received £182m from the sale of its interest in Universal Studios Escape and £90m from the sale of Tom Cobleigh. Dividends paid were £55.9m (1999 - £130.6m) reflecting the lower 1999 final dividend payment and the deferred payment of the 1998 interim dividend. NET DEBT Net debt at 30 June 2000 was £1,048.7m compared with £1,257.3m last year and £1,161.9m at 31 December 1999. The net cash inflow of £176.1m offset by an exchange loss of £54.7m, reflecting the Group's relatively high proportion of net debt denominated in US and Canadian dollars, and an increase in finance leases of £8.2m. Net debt as a percentage of shareholders funds was 111% (30 June 1999 - 105%, 31 December 1999 - 98%). This is a misleading figure as it incorporates the exceptional losses arising from the disposals of Universal Studios Escape and Tom Cobleigh but does not reflect the receipt of cash for these disposals. Proforma net debt, after adjusting for the cash receipts, is £776.7m at 30 June 2000. Proforma gearing is 82%. GROUP PROFIT AND LOSS ACCOUNT (unaudited) 6 months to 30.6.00 6 months to 30.6.99 Before Except- Total Before Except- Total Except- ional £m Except- ional £m ional Items ional Items Items £m Items £m £m £m TURNOVER Continuing 853.2 - 853.2 775.6 - 775.6 operations Discontinued 52.9 - 52.9 140.1 - 140.1 operations ------ ------ ------ ------ 906.1 - 906.1 915.7 915.7 OPERATING PROFIT Continuing 90.6 (42.3) 48.3 79.4 - 79.4 operations Discontinued 5.7 - 5.7 21.0 - 21.0 operations ------ ------ ------ ------ ------ ------ 96.3 (42.3) 54.0 100.4 - 100.4 NON-OPERATING - (129.1) (129.1) - 2.8 2.8 ITEMS (Note 3) SHARE OF OPERATING PROFIT (LOSS) IN ASSOCIATES AND JOINT VENTURES: Universal 5.2 (13.2) (8.0) 16.6 (44.4) (27.8) Studios Escape Other 2.8 - 2.8 3.0 - 3.0 ------ ------ ------ ------ ------ ------ PROFIT (LOSS) 104.3 (184.6) (80.3) 120.0 (41.6) 78.4 BEFORE INTEREST Net interest: Managed (40.6) - (40.6) (31.5) (8.5) (40.0) businesses Universal (19.8) - (19.8) (6.2) - (6.2) Studios Escape Other (1.8) - (1.8) (1.8) - (1.8) ------ ------ ------ ------ ------ ------ PROFIT (LOSS) 42.1 (184.6) (142.5) 80.5 (50.1) 30.4 BEFORE TAX Tax (Note 4) (12.6) 3.0 (9.6) (15.6) 1.7 (13.9) ------ ------ ------ ------ ------ ------ PROFIT (LOSS) 29.5 (181.6) (152.1) 64.9 (48.4) 16.5 AFTER TAX Minority (1.5) - (1.5) - - - interests Preference (10.5) - (10.5) (10.5) - (10.5) dividends ------ ------ ------ ------ ------ ------ EARNINGS 17.5 (181.6) (164.1) 54.4 (48.4) 6.0 (LOSS) ====== ====== ====== ====== ====== ====== Basic and 2.5p (25.6)p (23.1)p 7.0p (6.2)p 0.8p fully diluted earnings (loss) per Ordinary share (Note 5) Net Dividend 4.0p 4.0p per Ordinary share GROUP PROFIT AND LOSS ACCOUNT (unaudited) 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m TURNOVER Continuing operations 853.2 775.6 1,749.4 Discontinued operations 52.9 140.1 292.0 ------- ------- ------- 906.1 915.7 2,041.4 OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS Continuing operations 90.6 79.4 259.0 Discontinued operations 5.7 21.0 48.0 ------- ------- ------- 96.3 100.4 307.0 EXCEPTIONAL ITEMS WITHIN (42.3) - (98.4) OPERATING PROFIT NON-OPERATING ITEMS (Note 3) (129.1) 2.8 32.5 SHARE OF OPERATING PROFIT (LOSS) IN ASSOCIATES AND JOINT VENTURES: Universal Studios Escape 5.2 16.6 21.1 Other 2.8 3.0 6.4 Exceptional items (13.2) (44.4) (45.7) ------- ------- ------- (LOSS) PROFIT BEFORE INTEREST (80.3) 78.4 222.9 Net interest: Managed businesses (40.6) (31.5) (79.2) Associates and joint ventures (21.6) (8.0) (27.6) Exceptional charge on repayment - (8.5) (8.5) of fixed rate debt ------- ------- ------- (LOSS) PROFIT BEFORE TAX (142.5) 30.4 107.6 Profit before tax and 42.1 80.5 227.6 exceptional items Tax (Note 4) (9.6) (13.9) (37.8) ------- ------- ------- (LOSS) PROFIT AFTER TAX (152.1) 16.5 69.8 Minority interests (1.5) - (1.7) Preference dividends (10.5) (10.5) (21.0) ------- ------- ------- (LOSS) EARNINGS (164.1) 6.0 47.1 ======= ======= ======= EARNINGS BEFORE EXCEPTIONAL 17.5 54.4 154.1 ITEMS ======= ======= ======= Basic and fully diluted earnings (23.1)p 0.8p 6.1p (loss) per Ordinary share (Note 5) - before exceptional items 2.5p 7.0p 19.9p Net Dividend per Ordinary share 4.0p 4.0p 12.0p GROUP BALANCE SHEET (unaudited) As at As at As at 30.6.00 30.6.99 31.12.99 £m £m £m FIXED ASSETS Intangible assets 10.4 3.5 4.1 Tangible assets 1,755.2 2,018.0 1,938.5 Investments 49.4 387.2 389.7 ------- ------- ------- 1,815.0 2,408.7 2,332.3 ------- ------- ------- CURRENT ASSETS Stocks 102.0 82.6 88.6 Debtors (including amounts 542.9 546.6 523.1 falling due after one year) Investments 164.9 15.8 12.8 Cash and deposits 103.1 86.4 94.1 ------- ------- ------- 912.9 731.4 718.6 CREDITORS (amounts falling due within one year) Loan capital and borrowings (14.8) (226.2) (126.9) Other (518.9) (514.9) (458.6) ------- ------- ------- (533.7) (741.1) (585.5) NET CURRENT ASSETS 379.2 (9.7) 133.1 ------- ------- ------- TOTAL ASSETS LESS CURRENT 2,194.2 2,399.0 2,465.4 LIABILITIES CREDITORS (amounts falling due after more than one year) Loan capital and borrowings (1,137.0) (1,133.4) (1,142.0) Other creditors and provisions (95.4) (57.6) (126.0) ------- ------- ------- 961.8 1,208.0 1,197.4 ======= ======= ======= CAPITAL AND RESERVES Called up share capital 115.1 122.9 122.8 Share premium account 8.5 8.4 8.5 Other reserves 822.2 1,064.5 1,052.5 ------- ------- ------- SHAREHOLDERS' FUNDS 945.8 1,195.8 1,183.8 Equity interests 725.8 976.9 963.8 Non-equity interests 220.0 218.9 220.0 MINORITY INTERESTS (including 16.0 12.2 13.6 non-equity interests) ------- ------- ------- 961.8 1,208.0 1,197.4 ======= ======= ======= NET DEBT 1,048.7 1,257.3 1,161.9 ======= ======= ======= GROUP CASH FLOW (unaudited) 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m NET CASH INFLOW FROM OPERATING 181.3 90.8 315.8 ACTIVITIES (Note 6) DISTRIBUTIONS FROM JOINT 1.2 10.1 16.3 VENTURES AND ASSOCIATED UNDERTAKINGS RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest (net) (54.0) (45.7) (99.1) Dividends paid to preference (9.4) (9.4) (19.0) shareholders and minorities (63.4) (55.1) (118.1) TAX PAID (NET) (3.3) (6.8) (51.5) CAPITAL EXPENDITURE Purchase of tangible fixed (82.3) (253.4) (385.0) assets Purchase of investments (1.5) - (3.7) Investments in associates and (5.2) (62.3) (81.8) joint ventures Sale of fixed assets and assets 10.3 22.5 31.2 held for disposal (78.7) (293.2) (439.3) ACQUISITIONS AND DISPOSALS Purchase of subsidiaries (25.3) (0.4) (10.6) Sale of businesses and 344.4 225.7 378.1 investments Net cash disposed (4.4) - (3.2) 314.7 225.3 364.3 ORDINARY DIVIDENDS PAID (55.9) (130.6) (161.5) ------- ------- ------- CASH INFLOW (OUTFLOW) BEFORE USE 295.9 (159.5) (74.0) OF LIQUID RESOURCES AND FINANCING ======= ======= ======= MOVEMENTS IN NET DEBT Cash inflow (outflow) before use 295.9 (159.5) (74.0) of liquid resources and financing Repurchase of Ordinary share (119.8) - - capital Increase in finance leases (8.2) (0.5) (9.8) Net debt of acquired - - (2.0) subsidiaries Foreign exchange differences (54.7) (40.1) (18.9) ------- ------- ------- Decrease (increase) in net debt 113.2 (200.1) (104.7) Net debt at beginning of period (1,161.9) (1,057.2) (1,057.2) -------- -------- -------- Net debt at end of period (1,048.7) (1,257.3) (1,161.9) ======== ======== ======== GROUP RECOGNISED GAINS AND LOSSES 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m (Loss) profit for the financial (153.6) 16.5 68.1 period Currency translation differences 0.1 (8.3) (8.0) on foreign currency net investments ------- ------- ------- TOTAL RECOGNISED GAINS AND (153.5) 8.2 60.1 LOSSES FOR THE PERIOD ------- ------- ------- Prior year adjustments Implementation of FRS12 - (30.8) (36.3) Write off of Universal Studios - (35.1) (37.1) Escape pre-opening costs Write off of other pre-opening - (23.0) (25.4) costs Tax effect of the above - - 12.3 ------- ------- ------- - (88.9) (86.5) ------- ------- ------- TOTAL RECOGNISED GAINS AND (153.5) (80.7) (26.4) LOSSES SINCE PREVIOUS ANNUAL REPORT ======= ======= ======= MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m (Loss) profit for the financial (153.6) 16.5 68.1 period Dividends payable (37.2) (39.9) (111.5) Other recognised gains and 0.1 (8.3) (8.0) losses (net) Repurchase of Ordinary share (119.8) - - capital Goodwill realised on closure or 72.5 - 5.3 disposal ------- ------- ------- NET MOVEMENT IN SHAREHOLDERS' (238.0) (31.7) (46.1) FUNDS ------- ------- ------- OPENING SHAREHOLDERS' FUNDS AS 1,183.8 1,316.4 1,316.4 PREVIOUSLY STATED Prior year adjustments Implementation of FRS12 - (30.8) (36.3) Write off of Universal Studios - (35.1) (37.1) Escape pre-opening costs Write off of other pre-opening - (23.0) (25.4) costs Tax effect of the above - - 12.3 ------- ------- ------- OPENING SHAREHOLDERS' FUNDS AS 1,183.8 1,227.5 1,229.9 RESTATED ------- ------- ------- ------- ------- ------- CLOSING SHAREHOLDERS' FUNDS 945.8 1,195.8 1,183.8 ======= ======= ======= NOTES TO THE INTERIM STATEMENTS (unaudited) 1.ACCOUNTING POLICIES (i) FRS15 The Group has adopted Financial Reporting Standard 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 FRS15, depreciation is now charged on these assets. This has resulted in an additional depreciation charge of £8.4m (1999 - nil). If the standard had been implemented in 1999, the reported profits would have been £6.4m lower in the half year to 30 June 1999. (ii) Reporting of Divisional Results The Group has changed the basis of reporting central costs. The 1999 interim divisional operating profit before exceptional items has been restated to reflect this change as set out below: As Central As Reported Costs restated £m £m £m Deluxe 24.3 2.1 26.4 Gaming 29.9 1.5 31.4 Hard Rock 16.8 1.4 18.2 Holidays 7.6 1.8 9.4 ------- ------- ------- 78.6 6.8 85.4 Central costs and other income 1.9 (7.9) (6.0) ------- ------- ------- Continuing operations 80.5 (1.1) 79.4 Discontinued operations 19.9 1.1 21.0 ------- ------- ------- 100.4 - 100.4 ======= ======= ======= 2.SEGMENTAL ANALYSIS OF CONTINUING OPERATIONS BY GEOGRAPHICAL AREA OF ORIGIN 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m TURNOVER United Kingdom 430.2 386.1 887.9 North America 354.5 337.3 735.9 Rest of the World 68.5 52.2 125.6 ------- ------- ------- 853.2 775.6 1,749.4 ======= ======= ======= OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS United Kingdom 38.3 32.1 133.0 North America 43.6 39.3 103.7 Rest of the World 8.7 8.0 22.3 ------- ------- ------- 90.6 79.4 259.0 ======= ======= ======= 3.NON-OPERATING ITEMS Non-operating items comprise: 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m NON-OPERATING ITEMS: Profit (loss) on disposal of 1.2 2.8 (0.5) continuing operations Provision for loss on disposal (297.2) - - of discontinued operations Profit on disposal of 166.9 - 33.0 discontinued operations ------- ------- ------- NON-OPERATING ITEMS BEFORE TAX (129.1) 2.8 32.5 Tax on non-operating items - - - ------- ------- ------- NON-OPERATING ITEMS AFTER TAX (129.1) 2.8 32.5 ======= ======= ======= 4.TAX CHARGE The tax charge may be analysed as follows: 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m Rank subsidiaries 12.3 15.2 51.0 Associates and investments 0.3 0.4 - ------- ------- ------- 12.6 15.6 51.0 ======= ======= ======= Exceptional tax credit (3.0) (1.7) (13.2) ======= ======= ======= The tax charge for the Rank subsidiaries for the six months ended 30 June 2000 has been calculated by reference to the forecast tax rate for the year ending 31 December 2000. 5.WEIGHTED AVERAGE NUMBER OF SHARES The weighted average number of shares used in the calculation of basic earnings per share is 709.8m (1999 first half: 773.2m, full year: 773.2m). 6.RECONCILIATION OF OPERATING PROFIT TO CASH FLOW 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 £m £m £m Operating profit 96.3 100.4 208.6 Exceptional operating costs and (42.3) - 98.4 provisions Cash payments in respect of (9.2) - (22.5) exceptional costs Depreciation 70.0 68.8 139.4 (Profit) loss on sales of fixed (2.2) (3.3) 1.1 assets Decrease/(Increase) in working 32.0 (73.5) (95.4) capital Provisions charged to the profit 26.7 0.2 1.6 and loss account Other items 10.0 (1.8) (15.4) ------- ------- ------- NET CASH INFLOW FROM OPERATING 181.3 90.8 315.8 ACTIVITIES ======= ======= ======= 7.EXCHANGE RATES The US$/£ exchange rates for the relevant accounting periods are: 6 months 6 months Year to to to 31.12.99 30.6.00 30.6.99 US$/£ Average 1.57 1.61 1.62 Period-end 1.51 1.58 1.61 8.BASIS OF PREPARATION The interim financial statements have been prepared on the basis of the accounting policies set out in the Company's statutory accounts for the financial period ended 31 December 1999 except as stated in Note 1. The figures for the year ended 31 December 1999 have been extracted from the statutory accounts which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. INDEPENDENT REVIEW REPORT TO THE RANK GROUP PLC INTRODUCTION We have been instructed by the Company to review the financial information set out on pages 16 to 23 and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information. DIRECTORS' RESPONSIBILITIES The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. PricewaterhouseCoopers Chartered Accountants London 8 September 2000

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