Stanley Leisure lowers annual profit forecast

Gabrielle Monaghan

Thursday, Jan. 6, 2005 | 9:29 a.m.

Stanley Leisure Plc, the largest U.K. casino operator, cut its annual profit forecast because of unfavorable sports results that hurt the betting business and unpaid gaming debts. The stock slid 12 percent, the sharpest decline in 21 months.

Pretax profit excluding one-time items and goodwill for the year through May 1 will be "broadly in line" with the prior period's 41.8 million pounds ($78 million), Noemie de Andia, a company spokeswoman, said today. Analysts had expected profit of 52 million pounds, according to the average of 23 estimates compiled by Stanley Leisure.

Results of horse races and European soccer games in the six weeks starting Nov. 1 crimped earnings, Liverpool, England-based Stanley Leisure said. The company, which operates 634 betting shops, also paid out about 3 million pounds to a big casino winner in London and is uncertain whether it can collect unpaid debts from losing casino players by the end of the fiscal year, de Andia said.

"We see few catalysts for growth across the group beyond a normalization of win margins," Paul Leyland, an analyst at Seymour Pierce in London, wrote in a research report. Seymour Pierce recommends that investors sell the stock.

Stanley Leisure shares have fallen 20 percent since Dec. 16, the day the U.K. government limited to 24 the number of new casinos that can be built under deregulation of Britain's gambling industry. U.K. casino operators had been overhauling and extending existing clubs, as well as planning consolidation, in anticipation of easing of the country's 37-year-old gaming laws.

The stock slumped 49.75 pence to 381.25 pence in London today, reducing Stanley Leisure's market value to 483.2 million pounds.

Shares of William Hill Plc, the second-largest U.K. bookmaker, dropped 28 pence, or 4.8 percent, to 555 pence in London. Hilton Group Plc, the owner of Ladbrokes, operator of the world's biggest betting-shop chain, fell 7.25 pence, or 2.5 percent, to 278.25 pence. Paddy Power Plc, the No. 1 bookmaker in Ireland, slid 30 cents, or 2.8 percent, to 10.60 euros in Dublin.

Stanley Leisure, which has been in the betting business since the 1950s, said higher profits from fixed-odd betting terminals, on which customers can play computerized versions of games such as roulette in betting shops, failed to offset the downturn at its whole bookmaking business.

"Profits can change very quickly and are heavily dependent on sporting results and win margins in our casinos," the company said in a Regulatory News Service statement.

Stanley Leisure is the owner of Crockfords, which is among the most exclusive casinos in London. It serves about 100 people a day, compared with about 400 at the Colony Club, according to Stanley Leisure, which also operates the Mint and Palm Beach casinos in the English capital.

The gaming company agreed in November to team up with Malaysia's Genting Berhad to develop large casinos in Britain. The joint venture will control Stanley Leisure's option in a planned 125 million-pound casino in Leeds, England.

Stanley Leisure said it will give a more detailed outlook for full-year earnings when it reports fiscal first-half earnings on Jan. 26.