Staff at Rank Organisation have been in a state of shock since Andrew Teare took over as chief executive in April. Used to what commentators tend euphemistically to call the “autocratic” style of predecessor Michael Gifford, executives have had the unnerving experience of having their opinions heard and considered.
That is not to say that Gifford was a solo act. But it is said, to use another phrase beloved of those describing people who frighten them, that he didn’t suffer fools gladly. Teare, by contrast, can’t get enough of them. No, that’s not fair, although it is correct to say that there has been a change in management style at Rank and that there is a new glasnost between the company, its investors and the media.
By Thursday, we will have a clearer view through the breached walls which have surrounded Rank during its cold war, of what Teare intends to do with the leviathan structure he inherited.
His plans have already been well flagged. He is expected to announce a disposal programme aimed at raising as much as 300m, which will include the sale of Precision Industries, which makes equipment for the entertainment industry. It will also put its 29 per cent stake in its office equipment joint venture, Rank Xerox, into a distinctly arm’s length position, the better to avoid capital gains on its intended disposal.
Add to this pot pourri the proposed sale of Shearings, the coach holiday company, to former holidays division managing director Angus Crichton-Miller, and the City is beginning to see the action that it has been drumming its manicured fingernails for.
Whether this will prove to be enough to remains a moot point but there are two factors that are probably worth considering once Rank has unveiled its interim figures this Thursday and its directors have packed their buckets and spades and headed for Butlin’s, or whichever Rank-owned leisure facility they prefer. The first concerns elements of the human factor to which I have already referred, and the second relates to the corporate structure that Teare intends to bring to Rank.
Sir Denys Henderson, erstwhile ICI chairman and now in the chair at Rank, set out last year to identify a chief executive who could grasp the Rank nettle.
Teare had built a formidable reputation as a company doctor at Rugby Cement, before a rather less glittering time at English China Clays. Still, he had demonstrated there that he could spin off peripheral assets, so he was probably the man to dissect Rank, in Henderson’s view.
The effect of the lack of communicat ion from Rank should not be underesti mated. There has been considerable anti Rank sentiment among analysts and there are those who have remained bears of the stock simply because they had Rank marked as their “sell of the year” and were disin clined to abandon an entrenched position.
Teare could not simply skip up to the microphone and sing them a new song. And the degree to which there is scant sympathy for Rank was more than apparent when its shares tumbled in the wake of his bearish trading in June. The shares showed no underpinning that the new man was taking decisive action.
Now, Teare has to convince the City that the shares are worth revisiting. There will be little or no patience, however sound his past record, should he be tardy in explaining, as the good communicator we are told he is, the rationale behind his emerging structure for Rank. When it comes to reconstructions, carve-ups and demergers- call them what you will – the passage of time can be a cruel master. Ask Liam Strong at Sears.
Which brings me to the new construct for Rank. It is a brave man who disposes of an interest from which historical earnings have been derived, in favour of the development of a flaky sector that is subject to the current uncertainties of consumer spending.
In this respect, Teare is evidently not short of guts. One of the first Rank actions over which he presided was the purchase of the rump interest in Hard Rock cafÃ©s, that it did not already own, for a consideration of some 270m. And – as we know – Rank Xerox has been despatched to the departure lounge.
For my part, I think the Hard Rock deal is considerably more attractive than Whitbread’s som what alarming purchase of Pelican, along with CafÃ© Rouge and DÃ´me, last week for a massively goodwill enhanced 133m. Hard Rock is not only an international brand, it is highly metropolitan. My feeling is that Pelican will have trouble matching that kind of brand strength. Whitbread may have been better advised to have spent less building its own operation.
That said, Hard Rock is going to have its work cut out in uncertain consumer climates. Much the same applies across all Ranks’ four main divisions – holidays, recreation, leisure and film and television – so Teare will be ripping out some overheads too. Moreover, we should not be at all surprised to see a demerger or sale of film and television.
All of this is possible. Much is probable. But there are quarters of the City that are mightily sick of Rank. Time is of the essence.