Lucky Winners Hit Stanley Leisure Profits
Shares in Britain's biggest UK casino operator, Stanley Leisure slumped to a five-month low last week following the company's warning that its 2004 results could be down on last year. Phil Martin reports on how its financial performance could yet be saved by recovery of money owed.
Stanley Leisure said performance has been mixed during its current financial year and that with strong trading in its Licensed Betting Offices, it has been subdued trading at its casinos, which have caused the downturn. The company has blamed too many lucky gamblers winning money at its main London casinos and the large level of investment in its Star City project as the main reasons it was uncertain whether 2004 pre-tax profits, before goodwill, amortisation and exceptionals, would be above last year's £41.3m. It is due to publish its preliminary results for the year ending May 2 2004 on July 21. A spokesperson for the Liverpool born business said: "The performance of the provincial estate was satisfactory, despite limited industry turnover growth. Star City, as anticipated, traded at a loss. In London, as a result of losses to major players, Crockfords experienced a low win margin for the whole year. This also extended to the Colony Club in the second half. At Crockfords and the Colony Club it is not unusual at any point in time to have a significant level of collectable debts from major players. As at today's date, in excess of £3m of such debts are outstanding from last year's trading. The Group's accounting treatment is to provide fully against these debts at the year-end date unless they are received in advance of the Group's preliminary results. The Board is confident of the recovery of substantially all of the debts in due course but it is not certain that this will be before this date. The Palm Beach traded to expectations in the period."
Earlier this year, chief executive Bob Wiper said: "This is not an issue of attendance or of drop. It is simply an unusual run of bad luck." Rival operator Rank Group last month reported a similar run of poor luck for the house at its Clermont Club on Berkeley Square. The adverse win margin and level of collectable debts in London mean that what should have been a satisfactory outcome for Stanley may now prove to be below the last financial year. However, Wiper said that a profit of slightly above last year's figure of £41.3m remains possible but will depend upon the level of debt recovery over the next two months. The performance of the betting division in the second half of the financial year followed the positive trends seen in the first half and trading has exceeded expectations in all three of its businesses. The spokesperson added: "Results on horseracing and other sporting events were much more favourable to bookmakers than they were in the second half of the previous financial year. Profits from Fixed Odds Betting Terminals grew at an attractive rate and the international operations continued to perform well."
The company is also expected to make an impairment write-down of the remaining value of the goodwill arising on the acquisition of the internet casinos in March 2000 - this results in a non-cash one-off cost of £4.6m. Greg Feehely, an analyst at Altium Securities, described Stanley's performance last year as 'super normal' and stressed that "lots of people have had a lot of luck at Stanley's casinos this year." He predicted that Stanley's London casino estate, including the Palm Beach which it acquired from London Clubs last year, will make less than £10m profits this year, against £20m last year. Stanley Leisure said the performance of its provincial casino estate had been held back by increased competition from rivals, who have enhanced their game ahead of the pending deregulation. Analysts, though,still believe the group will make a pre-tax profit of between £39m and £42m for the year to May 2,depending on receipt of the collectables.
