Rank puts £30m projects on hold
13 December 2007

Mecca Bingo owner Rank deferred £30m of spending on building projects yesterday as it braced itself for another difficult year.The group, which has two Mecca bingo halls in Norwich and one in Yarmouth, also owns Grosvenor Casinos and the Blue Square betting firm.

It has pulled its dividend for 2007 after the UK smoking ban, changes to gaming rules and weaker consumer confidence left it facing an “uncertain” 2008.Rank postponed a number of major projects, mainly casino extensions, as it cut planned capital expenditure for next year from £50m to £20m.

Mecca's like-for-like revenues declined by 18pc in the 14 weeks from September 1, but it pointed out this represented a stabilisation of its performance.Shares still fell 5pc yesterday as investors reacted to the scrapping of the final dividend.

The 2006 payout of 4p a share cost Rank £15.6 million.The company's shares have more than halved this year following a series of disappointing trading updates.However, the stock received some support earlier this month when it emerged that emerged Malaysian gambling group Genting had a 9.4pc stake in the firm, fuelling takeover speculation.

Genting is already the UK's biggest casino operator after it acquired Stanley Leisure last year.Ivor Jones, an analyst at Evolution Securities, said cutting the dividend and capital expenditure was the right thing to do.

He added: “Clearly it is a sign of the pressures on the business but it should reassure the market that the risks of breaching banking covenants are reduced.”

Rank said revenues from its entire estate, including Blue Square betting and Grosvenor Casinos, showed a 2pc fall in the 49 weeks to December 9, leading to a 1pc rise when changes to trading space are stripped out.

Mecca's drop since September came after the introduction of laws limiting the number of high-value jackpot machines across Rank's 102 halls.

Mecca's gaming machines contributed more than £70 million to Rank's revenues last year. Each club had 13 £500 jackpot machines, but this has been reduced to four under the new rules.

Rank was braced for some impact, but since September its admissions have fallen 15pc.Initiatives to revive the Mecca business have included the rollout of electronic bingo, with more than 5,000 units deployed across 99 clubs.

It has also accelerated the deployment of licensed outdoor gaming areas so smokers can carry on playing.At Grosvenor Casinos, Rank said like-for-like revenues declined 7pc in the 14 weeks from September 1.

This reflected a 5pc fall in admissions and a 2pc drop in spend per head, as the business faces up to the smoking ban and the loss of gaming terminals because of the 2005 Gambling Act.

The company said today: "The effects of the smoking ban, recent restrictive changes to gambling regulations and a weakening in consumer confidence have resulted in an uncertain outlook for 2008."

Consequently, the board has taken a number of actions which it considers appropriate in view of these challenging conditions, including the decision not to pay a final dividend for 2007.'It said the development of a casino and bingo club in Thanet, Kent and a new casino in Aberdeen were not affected by the changes to expenditure plans.