Bottom Line: First Leisure bowls along nicely

A PRICE fall of 19p to 289p greeted a highly acceptable 15.6 per cent rise in First Leisure's half-time pre-tax profits to pounds 14.1m.

Not perhaps surprising after the shares have outperformed the market by 20 per cent this year. But the group's proven defensive qualities are under fresh pressure.

Bowling is being particularly squeezed on prices, and with little opportunity to cut costs without sacrificing quality this means a blanket discounting policy.

It remains to be seen whether this will boost attendance levels enough to put a floor under the division's operating profit margins, which fell sharply from 43.9 to 34.9 per cent.

First Leisure's discos have already been through this mill, and, while admission and bar prices remain static, the numbers through the doors have risen by 9 per cent. Profit margins have crept up from 32.9 to 33.2 per cent with spend per head rising 2 per cent.

The two new legs to the group - bingo clubs and a health and fitness centre - have performed well. Several analysts have sliced up to 5 per cent off previous profit predictions for this year to about pounds 37m pre-tax.

NatWest is sticking with pounds 38.5m, giving earnings per share of 17p and a price/earnings ratio of 17. The yield, assuming total dividends of 7p, is 3 per cent. The premium rating is justified.