Investment Column: Slot machine woes make Luminar an unsafe bet

You don't often hear nightclub owners asking for an end to binge drinking. But Steve Thomas, the chief executive of Luminar, said exactly that this week. While this was bound to win him favours with a Government keen to crack down on problem drinking, it caused cynics in the City to expect a profits warning.

You don't often hear nightclub owners asking for an end to binge drinking. But Steve Thomas, the chief executive of Luminar, said exactly that this week. While this was bound to win him favours with a Government keen to crack down on problem drinking, it caused cynics in the City to expect a profits warning.

For Luminar, whose clubs include Chicago Rock Café, Oceana and Liquid, to call time on discounting drink prices was a signal that margins were disappearing. Euro 2004, during which drinkers stayed in pubs watching television, was also thought to be having an effect.

But Luminar yesterday said that despite worsening like-for-like sales - down 4 per cent to the end of June - it was still trading in line with expectations. It even said margins had improved.

It has been involved in a £100m expansion plan and had planned to build casinos in its venues. But the Government's changes to the gambling laws have not gone in its favour, restricting the number of slot machines it would be allowed to install. This may make its casino plans less viable.

There may be further Government action against bars and changes to licensing laws to allow more venues to open late will not help Luminar, as drinkers will have other late-night options.

Luminar is cash generative, has a strong balance sheet, and on a forward multiple of seven, it looks cheap. But there are too many uncertainties ahead. The shares closed up 18p at 418p yesterday. Avoid.