Sceptre Leisure

While trading in a market that is suffering from ongoing pub closures amusement machines supplier Sceptre Leisure is working hard to hold its own. The AIM quoted firm is the leading operator with over 22,500 machines but retail conditions remain tough.

In the six months to October sales dipped 7% to £19.7m largely due to the recent sale of its fixed-odds betting business for £3.7m. Pre-tax profits fell as expected by 33% to £609,000 however the second half should improve thanks to two recent acquisitions and new contracts such as a major deal with Punch.

Sceptre was the first to launch banknote payouts in fruit machines and has developed online capabilities that allow it to remotely monitor its systems. This yields big savings as faults can be fixed online, avoiding unnecessary engineer visits. Amusement machines remain an important source of income for pub operators with takings averaging as much as £10,000 a year.

The lottery business Lotteryking has expanded its estate and now sells 55m tickets a year. With 570 competitors Sceptre is on the lookout for further acquisitions to help consolidate its market. Indeed chief executive Ken Turner reckons there is scope to double the size of the group in two years.

Sceptre joined AIM following a reverse into cash shell Gamingking so as this was effectively an introduction it has no institutional support. Research house Edison predicts flat 2011 pre-tax profits of £2.4m and EPS of 3.2p. The shares have proved poor performers and are currently trading at a year low of 25.5p. At this level they offer recovery appeal. Long-term buy.