RANK GROUP, the leisure operator that owns the Mecca Bingo and Hard Rock Café chains, yesterday announced its intention to sell or spin off Deluxe, its film and media services business, worth an estimated £700 million.

The mooted disposal of Deluxe, which is expected to take several months to complete, comes after two attempts to sell the business, the first just before the appointment of Mike Smith as chief executive of Rank five years ago.

One of the issues in the failure of the previous attempts was change-of-control clauses in most of its contracts. Bear Stearns, the American investment bank, suggested yesterday that Mr Smith could sidestep the problem by spinning off gaming and restaurants, leaving Deluxe within Rank.

But other analysts said that such a move would be rather convoluted, adding that the envisaged timeframe would give Rank sufficient time to discuss an outright sale with the big film studios.

Mr Smith insisted that no decision had been made on whether the separation would take the form of a demerger or an outright sale, adding that he had yet to appoint advisers. He said that the Rank name would be retained.

The group yesterday reported poor first-half figures, with pre-tax profits falling from £80.2 million to £63.9 million, from turnover up 6 per cent at £931.4 million. That excludes an exceptional hit of £31.2 million, mainly the cost of restructuring Deluxe. Earnings per share before exceptionals rose from 7.7p to 7.8p, and the interim dividend rises from 4.6p to 4.8p.

Profits from its gaming arm, principally Grosvenor Casinos and Mecca Bingo, was down 4 per cent to £54.7 million, partly owing to big wins by high-rollers at its Clermont Club in Central London, while Hard Rock fell 12.8 per cent, despite a 1.5 per cent increase in like-for-like sales.

Profits from Deluxe fell 31 per cent as its media arm suffered from the continuing decline of VHS in the face of DVD technology. In May it lost a DVD contract with Fox Entertainment while it suffered bigger seasonal losses after expansion.

Shares of Rank added 9¾p to 285¼p.