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Goals Soccer Centres plunges into full year loss

Discussion in 'Market News' started by Lily, Mar 14, 2016.

  1. Lily

    Lily Forum Member

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    5-a-side specialist hit by growing competition in the UK and £14.5m write-off

    Goals Soccer Centres is following in the footsteps of Stephen Gerrard and Frank Lampard and pinning its hopes on the US as its UK performance runs out of steam.

    The 5-a-side specialist has reported its first annual pretax loss in 12 years, dropping into the red to the tune of £6.2m after a £6.8m profit in the previous year. The 2014 figures were boosted by the enthusiasm generated by the World Cup, but since then the business has faced growing competition, and has also taken a £14.5m impairment charge, including a write-off of £8.2m on underperforming centres.

    We have built a strong football brand and have pioneered the game in the UK. However, we are not blind to the challenges we face in a fast evolving market. The development of full size artificial pitches on school and local authority sites has fuelled increasing competition to our league offering and players now have more choice on where to play their game. This has impacted our business significantly recently.

    Our confidence in and enthusiasm for the US market continues to grow. We have made significant progress on our US site pipeline, with one site having completed legals and all necessary consents and another four sites at an advanced stage.

    2015 finals are broadly in line with our significantly reduced expectations and as feared, contain an asset impairment exercise. Judging by the tenor of the results the new executive chairman and new chief executive (still to be finalised) have an enormous challenge to revive a flagging UK business. This is evidenced by a clear admission that the UK business is under-invested and with much increased competition.

    Given a stretched balance sheet, we would not rule out another equity raise to back the new management’s strategic review, which we understand is likely to be unveiled at the annual meeting stage on 5 May. Current trading would suggest a degree of like for like stability rather than a good recovery. We are unlikely to make any material forecast changes post today’s finals and maintain a buy in the belief that the new team can unlock shareholder value.

    There’s no denying that 2015 was a disappointment as the promise from the hard work of 2014 melted away in the second half of 2015. A New Year brings a new season where like for like sales are fractionally up, a new executive chairman, a board that is changing and a renewed focus on cash generation. UK roll-out has stopped and the dividend has been cancelled but the US plans remain intact. We have trimmed our earnings per share forecasts by -1.8% to 11.4p for 2016 and by -9.6% to 12.2p for 2017. We retain our hold recommendation and nudge down our target price to 135p (was 140p) to reflect the forecast changes.

    Mr Basing’s appointment to the post of executive chairman and the relocation of Mr Rogers to spearhead the US development brings fresh vigour to the group and a stronger focus on the US. Mr Basing expects to complete his strategic review of the business by May’s annual meeting which will be an important date for shareholders. The reality is that the results of the US initiative will drive the share price in the longer term, in the shorter term, the need to turn around the UK operations is key.

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