Stakis gambles on its machines

The Investment Column

The stock market's renewed love affair with hotels in the wake of Granada's takeover of Forte should have done no harm to Stakis, the Glasgow-based leisure group. Indeed, after marking time for two years, the shares have outperformed the rest of the market by 29 per cent since the start of 1996, even after yesterday's 3p fall to 108p.

But paradoxically, that leap had more to do with the prospects for the group's casinos arm, which had a turgid 1995, rather than hotels, whose sparkling performance helped to rescue last year's figures. Pre-tax profits just inched ahead 4 per cent to pounds 12m in the half-year to March, restrained by the gaming division. Stakis has been warning of problems there for some time, so, while disappointing, the profits slide from pounds 6.46m to pounds 5.05m came as little surprise. After an exceptionally good end to 1994, the punters appear to have gone to sleep for most of 1995, distracted in part perhaps by National Lottery scratch cards. But the group also seems to have taken its eye off the ball a little, with a pounds 2m hoist in branch costs taking a chunk out of profits.

Things have started to pick up since January, while Stakis has shown its determination to address the problems with Jim McCarvill, managing director of casinos, being dropped on Friday. The real bonanza will come, however, if the gaming machine proposals in the Government's green paper on deregulating the industry show any sign of becoming law. That could see the current limit of six slot-machines per outlet becoming one or two per table. The result could be an uplift of as much as 50 per cent to the profits of the business or anything between pounds 4m and pounds 6m.

Meanwhile, hotels are tanking ahead, with profits jumping from pounds 13m to pounds 17m in the latest half year. On the back of the current buoyancy in the market, the group is enjoying the virtuous circle of more bedrooms, higher occupancy and an increase in average room rates. The sum of those parts raised the yield per room by 13 per cent to pounds 32.61. At these levels, every extra point on the occupancy level, now 71 per cent, or pound on room rates pretty well falls through to the bottom line in the hotels division, which has the more prosperous second half to look forward to.

Stakis has achieved that rare feat of moving from recovery to growth without hiccup under chief executive David Michels. Despite the group's relative financial strength, he is moving with commendable caution in expanding the group, ruling out any acquisition of the Queens Moat assets currently up for sale. The expansion of the health clubs side through last month's pounds 20m LivingWell acquisition could prove an interesting higher growth area.

But a forward multiple of 17, based on profits of pounds 31m this year, suggests the shares are up with events. Hold.

News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
Extras
indybest
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Travel
Dinosaurs Unleashed at the Eden Project
travel
Arts and Entertainment
music
Sport
football
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home