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Goals Soccer Centres – “trading in H2 has started well”, enough to suggest the shares a buy?

By Steve Moore | Thursday 13 September 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Goals Soccer Centres (GOAL) has announced results for the first half of 2018, noting a “challenging H1” but “trading in H2 has started well” and “delighted by the underlying performance of the sites where we have invested”

The “challenging H1” was emphasised as “due to the impact of the challenging weather conditions”, though also noted is an increase in UK overheads “due to statutory increases in Living Wage and Business Rates”. The result was, on revenue 7% lower than in the corresponding 2017 period, at £16.2 million, an adjusted pre-tax profit of £1.61 million, down from £2.60 million. After particularly a net working capital outflow, net debt increased by £0.4 million to £30.2 million.

The sites ‘where it has invested’ comprise 260 of 460 arenas already fully modernised and “planned investment of £3m in upgrading a further 78 arenas is underway and will be complete by early October”. April-joined CEO Andy Anson emphasised “greatly encouraged by our performance in recent weeks” and the company is “optimistic with respect to the trading outlook for the remainder of the year”.

However, in the US, “initial trading at Pomona, which opened in 2017, and Rancho Cucamonga has been below our expectations as it is taking longer than planned to convert existing 11-a-side players to 5-a-side players” and also noted is overall “current leverage of Net Debt/EBITDA increased to 3.19 times (2017: 2.7 times) due to the decline in underlying group EBITDA. Our lenders, Bank of Scotland, agreed to amend the Net Debt/EBITDA covenant from 3.0x to 3.25x, to provide additional headroom in the quarterly tests until September 2018, after which the covenant will reduce back to 3.0x. The group intends to reduce Net Debt/EBITDA throughout H2 2018… Non-amortising bank facility with Bank of Scotland of £42.5m which expires in July 2019. The directors plan to renew this facility during Q1 2019”.

Hmmm. It can ‘intend to reduce’ and ‘plan to renew’ all it wants, but there is clear risk here. This is also with CFO Bill Gow to depart to join his family business pending a successor. There is also a stated £114.9 million of “property, plant and equipment” on the balance sheet, but overall this is currently a situation I continue to avoid.

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