March 2, 2007 / 7:33 AM / 11 years ago

UPDATE 3-Rank hit by smoking ban, eyes new casinos

(Adds detail, chief executive comment, background)

By Marc Jones

LONDON, March 2 (Reuters) - Leisure group Rank (RNK.L) said it was mulling bids for all of Britain’s new casino licenses, including a Las Vegas-style supercasino, after its 2006 profit dropped as Scotland’s smoking ban sapped its bingo revenues.

Rank, which runs Mecca bingo clubs and Grosvenor casinos, said on Friday that pretax profit from its ongoing business fell 12 percent as it swallowed 9 million pounds ($17.6 million) of costs after selling large chunks of its business and Scotland’s smoking ban knocked bingo revenues there by 15 percent.

Chief Executive Ian Burke said the firm was looking at all of Britain’s new casino licenses including the supercasino planned for Manchester.

“We are looking quite hard at all 17.. We think we are well placed to win a number of these licenses,” he said.

“We think we can make a strong case to the local authorities if and when we need to.”

He added that Rank expected the soon-to-be-imposed smoking bans in England and Wales to have a similar impact on its bingo halls as the Scottish ban.

“There is no reason to believe the impact would be any different from that in Scotland, however we are better prepared when it comes in in Wales and England.”

Smoking bans hit bingo halls in a number of ways.

Firstly some smokers stop going as they know they can’t smoke and secondly smokers who do go, take the breaks in-between the main bingo games as a chance to nip outside for a cigarette. This means they are not playing fruit machines or higher-margin games run during the main-game intervals, which can provide bingo clubs with up to 75 percent of their revenue.

    CAUTION AHEAD

    Adjusted profit before tax fell to 44.4 million pounds for the year to end December from 50.5 million a year ago despite revenue from ongoing operations rising 3.5 percent to 549.6 million pounds.

    This compared with an average forecast of 45.95 million pounds from revenue of 548.8 million, according to a survey of six analysts polled by Reuters.

    Rank said the company was set for a rocky ride in the next few months as the smoking ban is extended into England and Wales.

    “In the short term we recognise that our businesses face a number of challenges.”

    Rank’s cautious tone worried analysts.

    “The cautious current trading statement and lack of evidence of improvements in bingo is a concern,” said analysts at Morgan Stanley.

    “Current trading described as `challenging’, and revenue declines in Scotland are still accelerating,” they added.

    Rank’s shares, which have fallen around 20 percent in the last year, were up 1.8 percent at 222 pence at 1112 GMT, valuing the business at around 1.18 billion pounds.

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