Sunday, October 2, 2011

Diary: GOAL

I came  across this growth share idea at Sharecropper, and I thought I's share my reaction.

GOAL - Goal Soccer Centres 102.8p/£50m
It's business is simple enough, according to Google Finance:
Goals Soccer Centres plc (Goals) is a United Kingdom-based company engaged in the operation of outdoor soccer centers. As of December 31, 2010, the Company operated in 41 centers across the United Kingdom. As of December 31, 2010, the Company had one active subsidiary, Goals Soccer Centres Inc.
It is trading on a PER of 8, PBV  1.03, and analysts forecast an EPS of 14.36p  (+11% growth) for 2012. A quick squint at LSE quickly reveals the likely cause of ostensible cheapness of the shares in its interim results for 6 m/e 30-Jun-2011, published 05-Sep-2011:
Following a satisfactory performance in the first half of 2011 which saw sales, with the exception of April, grow month on month throughout the period, we have since experienced softer than expected trading during the second half of July and through August.

 My gut reaction is: this company's activities seem too "unconventional"; you know, they don't build houses, have shops, or even run an airline (however undesirable that may be) - things that you see in the mainstream market. I see the growth driver to this company as: take on debt, build pitches, earn revenue. The problem here is that the business model seems inherently capital-intensive. You can only "grow" by essentially taking on more debt. The company's operating profit margins do look fairly good, though.

And speaking of debt ... the company has a gearing of 112% - far too high, IMO. It has an interest cover of 4.2, and maybe I'd insist on a cover of at least 5 for such a company. Also, I see that net debt is 54.4m against PAT of 5.3m for y/e 31-Dec-2010. I am unhappy about this situation, and see it as dangerous. (SCHE - Southern Cross, anyone?).

Worth mentioning is that it is an AIM minnow, which increases risk.

In my mind, this share is a clear avoid.


Team Dave said...

Yep, stay well away. I play five-a-side every week (although not at a Goal centre). Three years ago, you couldn't get a court at our centre at any time during the week - they were all booked up. Now, we are the only team of guys at our time - and there is only one team before us and no-one after us.

I took my boy to a birthday party at a Powerleague centre in Slough. Again 3 courts - just one of them booked and busy. No-one after us or before us.

Sport is either dead or is priced too much for people to afford these days. It is one of the first 'nice things' to go.

Liam said...

You're calling them courts, so your opinion is why I don't value.

Goals doing pretty well in Liverpool. I think their prices however, are close to extortionate.