Levy cut causes Arena Leisure stumble

12th Nov 2010 16:16

Racecourses operator Arena Leisure stumbled Friday after it highlighted the impact of the £10m reduction of funding for the horse racing industry in 2011 from the Levy Board. This reduction is based on an estimate of the likely Levy yield and is made in the absence of an agreement for the 2011/12 scheme that has now been referred to the UK Government for determination. At this time, therefore, there is a degree of uncertainty on the funding impact on Arena's racecourses in 2011, the company said.There was also disappointing news relating to the group's Marriott Hotel and Country Club at Lingfield Park. The club opened six months ago and while it had a good summer, trading has turned down in the autumn in line with the experience of many hotels outside London.On the bright side attendances at racing fixtures this year are ahead of last year, while income from media rights to licensed betting offices has continued to be resilient."Overall we expect to deliver a result for the full year in line with market expectations," the company said. Broker KBC Peel Hunt adjusted its full year 2011 earnings estimate by 21% and is now assuming pre-tax profit will be unchanged from last year. "We are downgrading our 2012 forecast from £15.9m to £15m, EPS 4.1p," the broker added.Despite the disappointing 2011 Levy cut the broker remains a fan of the shares and says any short term weakness should be taken as a buying opportunity. "We still expect earnings to quadruple in 2012, on Arena's new media contract, taking PER [price/earnings ratio] from 28x to 7x," the broker said.