Stanley shrugs off scratch threat

Worries over the impact of the National Lottery's scratch cards hit shares in Stanley Leisure, the UK's fourth-biggest bookie, in May. They recovered some lost ground yesterday, adding 23p to 367p after the chairman, Leonard Steinberg, hinted that the worst of the problem could already be over.

Announcing a 37 per cent surge in pre-tax profits to a record pounds 17m for the year to April, Mr Steinberg said interest in the cards may be waning. In any case, hard ground underfoot at the nation's racecourses is likely to have a bigger impact on this half's results. Dry conditions are shortening fields, making favourites more likely winners and cutting margins in the process.

These are the sort of problems Stanley can take in its stride. The main betting shop division shrugged aside the start of the National Lottery itself last year, raising the average stake by 4 per cent and operating profits by 30 per cent to pounds 10.2m.

It continues to squeeze good margins from acquired shops, of which 11 were picked up in the year. A further two in Scotland have come aboard since the year-end, taking the total to 425.

Casinos, up from pounds 9.07m to pounds 9.83m, are already recovering some of the margin lost last year and the "drop" - the amount staked per head - is said to be well ahead of the average pounds 93 bet in 1994-95.

Any knock from the National Lottery this year looks set to be more than offset by expected government liberalisation of the industry, allowing fruit machines into betting shops for the first time. Best-case assumptions suggest fruit machines could be worth at least an extra pounds 3.5m on the bottom line.

Profits of pounds 19m this year would put the shares on a prospective multiple of nearly 16. Reasonable value, but the market in the shares is tight.