Smoking ban bites at Rank

The company behind Mecca Bingo and Grosvenor Casinos has been on the slide all year as the smoking ban and falling consumer confidence has taken a hefty toll on gambling revenues.

Today Rank ditched its final dividend and warned that the future looks bleak, while attempting to reassure the City that it is not about to breach banking covenants.

Although it still believes it will meet profit forecasts for the year of around £65 million, there is little sign that business will improve any time soon.

Rank has recently closed a number of bingo halls, including several in London. One sign of the times is that the buyers of the property have often been churches. "They seem to be the ones with the money at the moment," said chief executive Ian Burke.

The former Holmes Place and Thistle Hotels boss who joined Rank in March 2006 said of the decision not to pay a dividend: "It is one of a package of measures we have taken to be in the best possible shape for 2008. The key point is that we have stabilised revenues."

The shares, already at seven-year lows, fell another 6p to 1011/2p.

Rank will slash capital spending from £50 million to £20 million next year as it tries to cut costs and stay on the right side of its lenders. It insists it will not breach banking covenants "assuming that trading continues broadly in line with current levels".

In the 49 weeks to 9 December, like-for-like sales across the group limped up 1%, largely thanks to the growth of the internet arm Blue Square.

Mecca Bingo sales are down 4% with Grosvenor Casino's dead level. Trading in the past few weeks has been miserable - sales at Mecca are 18% lower since 1 September, a result Burke says is "shared by the wider bingo market".

Rank is rolling out electronic bingo games at pace, hoping they will boost revenues.

The Spanish arm, Top Rank Espana, is doing well, though the rate of growth there has also slowed in recent weeks.

Rank now enters a tough Christmas period, when customers typically stay away from gambling shops and spend their cash on presents and food.

The company has been at the centre of takeover speculation lately after Malaysian gaming business Genting revealed it has a 9.4% stake.

Genting already owns the UK's largest casino operator, Stanley Leisure, which it bought for £639 million last year. It would easily have the firepower to snap up Rank and merge it with the bigger firm - an outcome analysts say would be increasingly welcome.

Burke says he welcomes Genting on the shareholder register and adds that talks with the new investors have been constructive.

The City values Rank, which employs 7000 people across the UK, at £396 million.