Top Ten, the UK’s third biggest bingo operator chaired by Sir Aubrey Brocklebank, has warned it will not hit full-year profit targets. It has blamed new gambling industry rules and the impact of the English smoking ban.

Over the past six weeks, the company has witnessed ‘very unpredictable’ admissions and customer spend, with levels of both falling by a greater degree than management could have expected, although ‘there are signs of stability at these lower levels’. On a more positive note, trading in Welsh clubs picked up following the initial negative impact of the ban there. Top Ten has readied its English estate for the ban by preparing outside smoking areas at larger clubs and introducing handheld bingo devices at certain clubs.

Bulls suggest that as a leading consolidator in this sector, Top Ten should be able to pick off operators that struggle following recent industry changes. The company is selling off smaller, underperforming sites and freeing up cash for potential acquisitions accordingly. Top Ten increased sales and profits in the 53-week period to 1 April – revenues rose 29% to £30.6m and profits edged up 9.3% to £2.6m.

A robust, dividend-paying concern that typically enjoys strong cash flows, Top Ten is trading at a substantial discount to year-end net assets of 89p and looks well positioned for consolidation in this sector. However, with considerable uncertainty hanging over trading, the shares represent a gamble and are best avoided for now.

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