US Edition Goals Soccer Centres
222½p+9½p
Questor says SELL
FIVE-a-side football pitch operator Goals [LON:GOAL] has reported a 3pc increase in like-for-like sales during the first six months of the year and, following a major restructuring of the group’s finances, Questor has decided to take a closer look.
In fact it was almost four years to the day since Questor last looked at the shares in Goals Soccer Centres and back then we were lamenting England’s exit from the World Cup and it seems little has changed in the intervening period for the national team.
However, Goals has undergone a significant restructuring in the first half of the year to try to bring its debt pile under control.
In March of this year the company raised £11m through a placing and agreed a new £42.5m borrowing facility with Bank of Scotland. Most of the cash went to repay debts, with net debt falling to £36.6m at the end of June, down from £48.1m at the same stage last year.
The company is still generating plenty of cash and made £5.7m in cash from operations during the first half of the year. The reduced debt pile will also lower interest costs by more than £1m a year.
The restructuring didn’t come cheaply though. Once bankers’ fees are added to the cost of exiting interest rate swap agreements, the total first-half exceptional costs came to £3.8m. That meant first-half reported pre-tax profits were £600,000, down from £4.1m at the same stage last year.
The trading performance at the company improved during the first half. Underlying pre-tax profits increased by 9pc to £4.1m and the group plans to build two new centres by the end of the year with another three in 2015.
The company currently operates 44 centres across the UK and one in Los Angeles. Almost three quarters of the group’s total sales come from pitch hire, which increased 3pc during the first six months.
Market consensus is for full-year, underlying pre-tax profits of £10.5m, on revenue of £35m, giving 14.3p in earnings per share.
The company maintained its first-half dividend at 0.675p, which is now unchanged for the past five years.
Questor last recommended buying Goals shares at 123p and the returns of 81pc have been decent since then.
The shares are now trading on 15 times earnings, falling to 13 times next year and offer a prospective dividend yield of less than 1pc.
That looks expensive for a company that is only delivering single-digit, earnings-per-share growth. So, after a decent run, it is time to take profits. Sell.