Goals Soccer Centres Share Discussion Threads

[arthur_lame_stocks] 09/3/2016 11:15

Is anyone still here?

The price just keeps on falling. I'm tempted to buy some more at these levels. As far as I can see they are now on a p/e of about 10* this years expected profit (according to the most recent guidance) yet this year has not been great for them. Could be an opportunity.

[eastbourne1982] 26/1/2016 22:57

Well I've actually started buying these this week, bought yesterday and today, averaging around £1.15, happy to add a few more if the price heads towards £1, I've done my research and I'm happy to hold these for 6 - 18 months, pencilled in a target price of £1.60ish.

The US is what could send this much higher at some point imho, could be a slow burn though.

For the record I just think this is one of those shares that trades up and down between a range because it's profits are relatively stable it , i.e. £1 - £2.50, I think people read too much into volatility in shares, at the end of the day is the company 50% worse than it was in Feb / March 2015, certainly not imho, to get back up there it needs to rise circa 100%, I love the irrational moves of the stock market ! I find if you read too much into movements you miss a lot of opportunities.

[arthur_lame_stocks] 26/1/2016 19:25

I don't know what the reason for the fall is. It seems to me that even with no real growth these shares are not bad value, especially at this price. I just can't see their problems being structural, I mean they sell beer and football for god's sake. If that isn't a winning combination then I don't know what is.

I would also hazard a guess that with a constant number of centres that profit is always going to fluctuate with the vagaries of the weather etc.

As for the states, the first centre seems to have been a great success, hopefully they can repeat this with more centres it seems their best hope for growth as there can't be too many places in the UK for them to open.

I could imagine the rate of growth slowing though. It seems with the current management resources they can open about two sites a year so about %5 growth in numbers at the moment but unless the rate of openings goes up the rate of growth will decrease over time.

I'm still happy to hold, I expect them to continue making good profits for years to come, I just don't see any reason why they shouldn't.

Arthur

[pugugly] 25/1/2016 11:40

Down again today - Looks to be no buying support at the moment - If fall is not a result of a sell tip then (imo) possibly momentum driven by the fear of results and or current usage being below expectations - Recent weather conditions rain - fog - snow cannot be helping.

At the rate of fall over the last few weeks could possibly break the 100p barrier.

Could one of the reasons for the fall be that the marginal net contribution from each new centre may be arithmetic with very little gearing ?

OR a worry about the planned expansion in the US which has been the graveyard of very many British coys eg: Tesco for 1 . I am sure readers of this thread can post many other examples -

[eastbourne1982] 21/1/2016 23:48

Hi Arthur,

Thanks for your reply.

I nearly bought a couple of months ago at around £1.30 however I missed the boat and it ran up quite quickly.

I quite like the business and it's a pretty easy one to understand which is always good when investing.

Personally I think the main upside here is in the USA with new sites gradually opening, obviously the company believes this as well, I think the business is quite well protected in terms of competition, there wouldn't be much point in rivals opening in the same locations etc.

I'd be happier if they had a little less debt however this has improved a lot over the years and isn't a big concern, as an investor I'd rather they didn't pay a dividend as you don't really buy this kind of thing for it's income, I'd rather they put that in the bank and built up some cash.

The price is drifting lower on small sales at the moment so I will see how this plays out, I may look to build a position over time, the wider markets don't bother me too much with this kind of share / business, it's pretty much halved from a peak around £2.40 as well.

Very interested but waiting.

Cheers

[arthur_lame_stocks] 21/1/2016 23:25

HI Eastbourne.

Yes I'm still holding. Obviously it would have been better to have taken a quick 25% and then bought back in but that's the way it goes.

I'm not planning on buying any more however, as I am hoping that the market will keep falling and throw up some really interesting opportunities so I'm hanging on to my cash. I still like GOAL and have seen all sorts of arguments that their problems are structural and so on but I can't see it myself. Playing and watching football (and for that matter drinking) remains a very popular pastime amongst millions of people and I can't see that changing any time soon. If they're going to make ~£8m pre tax this year then after tax it should be ~£6.5m leaving them on a p/ of around 11-12 which is hardly lofty. If expansion into America is a success as it appears to have been with the maiden centre then there is plenty of scope for growth in the medium term.

And I also don't agree that the TNAV is not a useful metric. Whilst it's true that their properties are long leasehold and not freehold it does give an indication of the sort of capital that would be required to replicate the business, ie it's not a business where the key staff can just walk out and set up in competition. It's not as though they're going out of business anyway. And of course it takes time to find suitable sites, get planning permission etc.

Just a few of my thoughts, I think if you get the chance to buy them at £1 then I think you'd be daft not to give it some serious thought.

What do you think Eastbourne?

Arthur

[eastbourne1982] 21/1/2016 21:01

Now dropped into the £1.20's and back on my radar, wonder if these will head towards £1.

Are you still holding / topping up Arthur_Lame_Stocks ??

Cheers

[killieboy] 16/11/2015 18:55

............ and Mike Ashley is no fool, whatever you may think of him!

[arthur_lame_stocks] 16/11/2015 17:41

Mike Ashley has just bought 5%.

[arthur_lame_stocks] 15/11/2015 14:31

I've bought a few of these at these levels, because I think any problems they have are temporary and the expansion into America offers real prospects for profitable growth. Even on the reduced profit expectation they are on a modest P/E at these prices and trading at about TNAV. I can't see football going away as a popular sport to both watch and play for a very long time and I have been to one of their centres with work colleagues and it was an enjoyable experience.

It's also nice to see Chris Mills building a stake here as I have a lot of time for him, he's very shrewd.

Remember they still expect to make a substantial profit this year, margins are good and they should be able to fund expansion out of operational cashflow.

Just my thoughts

Arthur

[eastbourne1982] 10/11/2015 01:07

I think some of those trades showing as sells were actually buys as I put a few dummy trades through, I don't own any yet however these are on my watchlist now as I think there could be some value here going forward.

[rambutan2] 14/9/2015 15:53

Harwood still a buyer, and now at 17.5%.

[tsmith2] 09/9/2015 08:27

Too high a multiple at £1 May be of interest

[gerdmuller] 09/9/2015 08:03

Not held for a while. Looks like poor results but on train so difficult to get full picture. Maybe at these levels they are worth looking at.

[liam wilson] 04/9/2014 08:39

Time to take profits in Goals - GOAL, Questor share tips
- Today, 9:36 AM
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 five-a-side pitch hire - GOAL, Questor share tips

[praipus] 01/5/2014 11:00

Bad weather made most grass pitches unplayable at grass roots, youth and local league levels. Many players switching to 5/6 asdide and Futsal. Both of which dont need a grass pitch run by short term and short sighted council at the mercy of the weather. Should be good for GOAL.

[mark of the rushes] 10/3/2014 11:34

They clearly have a good story to tell when they don't have to discount to get a placing away.

[killieboy] 23/1/2014 19:46

Bullish article in "Shares" mag today.

[alfreton] 16/1/2014 10:20

We hold a long position in this security. Nothing in this write-up constitutes investment advice. This note reflects my own views and does not necessarily reflect the views of my employer.

FUNDAMENTALS
Situation

Goals Soccer Centres plc is a UK based operator of five-a-side soccer facilities with 44 sites. 43 are in the UK and 1 is in Los Angeles and all are leased on long term leases from local municipalities. The company is run by the founder, who pioneered commercial five-a-side soccer in the UK and is currently one of the largest holders with 7.9% of the company's stock.

Multiple short term problems have been obscuring the durable earnings power of this business. These issues are resolving and we think EBITDA will increase 33% between now and the end of 2015. This will allow deleveraging and further growth at high returns on capital. As a result, we expect an IRR of close to 30% on the position through 2015 with no increase in the company's EV/EBITDA rating and potentially attractive continuing growth thereafter.

We began looking at it after the stock suffered when shareholders rejected a private equity bid in July 2012 and instead undertook a placing in September 2012 to pay down debt, which had grown significantly to a peak of 4.5x EBITDA due to site rollout and one off factors that were depressing earnings.

These factors included:
1. A large pipeline of immature sites that price at up to a 25% discount to mature sites for the first five years of their existence.

2. Significant weather related disruptions in soccer play as the UK has had the worst winter in the previous 50 years each of the last 3 years (with each one obviously worse than the last).

3. The effects of the recession, which were disproportionately felt by the young men who are Goals's prime customers. This had the biggest effect on their ancillary revenues from bar use and birthday/corporate parties rather than regular game play.

4. An increase in taxes that raised taxes from 0% to 20% on league soccer games that was applied in 2011. Goals absorbed half of this and passed half to the customers. This tax increase was subsequently fully overturned on appeal in September 2012.

We expect net debt to be below 3.0x EBITDA by year end due to debt paydown and higher earnings, and this will enable them to resume expansion. Three sites are already underway.

Business Description and Competitive Position

Goals operates 43 UK sites and Power League, their other large (and PE owned) competitor has 46 facilities (there is also a much smaller third operator with 14 sites). These companies partner with municipal authorities and schools to develop facilities that are used by community groups during non-peak hours. Since municipal authorities are not primarily concerned with profit maximisation, Goals is able to secure rental terms of over 50 years at low rates and their reputation and track record of working well in communities and in close proximity to children acts as a significant barrier to new entrants. No new companies have entered the market since 2004, even though the number of sites across the country has more than doubled since then, which shows the significant barriers to new entrants. These new sites are often in better cities than the old ones, since the concept is now more accepted by local governments.

This lack of competition for sites and ability to build facilities on public property without paying market rents for scarce UK land has allowed Goals to deploy capital at a post tax return of over 11% historically. Sites typically break even within a month of opening and generate close to £400k of EBITDA on revenues of about £850k. New sites cost £1.5 million, (down from £2.2 million thanks to modularization) and have low maintenance capital needs so cash on cash returns are excellent.

There are approximately 2.0 million weekly players of soccer in the United Kingdom and in recent years the smaller five-a-side format has been gaining share. Soccer play, especially by members of leagues, who are the largest customer group, is very economically resilient. Like for like football revenues fell only 5% during the post 2007 recession, though economic conditions do impact the speed at which new sites ramp up and the ancillary revenues from bar use, birthday parties, and corporate events.

The business has raised prices by an average 2-3% a year since its 2004 IPO and sees no change in player activity in response to this rate of price increases. The company's pricing power was underscored when the government imposed a 20% sales tax on league football games in 2011. The company passed through half of the expense but utilization did not fall, though that was the only year the company didn't raise its own prices. We have tracked the pricing at every site for Goals and Powerleague across the UK in recent months and note that the company raised prices successfully in October 2013 at all its sites, especially at its more immature ones. This price increase is yet to be reflected in reported earnings or analyst reports, which are expecting flat revenues.

Current Valuation and Earnings Normalization:

Goals currently has a market cap of close to £100 million and earns close to £9.0 million of free cashflow ex growth capex. LTM EBITDA is £14.0 million on a company with an EV of £151.4 (£100 million of equity and £51.4 million net debt) yields an EV/EBITDA of 10.8. We believe Goals's EBITDA will increase 33% over the next several years from several factors.

1. Price increases: Completed price increases, maturing of new sites to match pricing on old sites and raising mature site prices again by 2% (less than historical averages) each year mid year will raise 2015 EBITDA by £2.4 million. This is realistic in light of their historical pricing power and the quality of their immature site locations, which we have analysed.

2. Utilization normalizing: A recovery in the existing sites to pre-recession volume levels after the 5% drop and an increase in new sites to match the volume of old sites should increase EBITDA by £1.4 million. We believe this is realistic if economic and weather conditions normalize.

3. Partially offsetting this, costs will also rise. Using a cost inflation of 3.5% per year (which is above the rate historically) on all costs including from rent resets on sites coming up for rent repricing (which is struck based on CPI every five years) reduces 2015 EBITDA by £1.7 million. This implies shrinking margins on mature sites, which we think is conservative.

4. The least certain but potentially very juicy piece of return would be a recovery in ancillary revenues. As the British economy recovers, revenues from bar sales and birthday parties, which are more cyclical, are likely to recover somewhat. If they recovered to peak levels (which we don't expect) it would increase EBITDA a further £3.4 million.

Analyst estimates show flat earnings despite the fact that these factors should drive significant revenue growth at very high incremental margins (close to 100% for non ancillary revenue). Further, analysts are penalizing the company for capital expenditures spent on new sites without adding any corresponding revenue. In light of Goals's significant growth pipeline, we think this is a mistake.

Growth and debt paydown

In fact, there is further scope for expansion at even higher returns on capital than in the past. The company is deploying a new modular site format that cuts capital required to build a new site from £2.2 million to £1.5 million, which raises post tax returns on capital to 17%. An analysis of all UK metro areas suggests the industry has scope for at least 40 more sites, which will likely be split evenly between Goals and Power League. Right now Goals is speaking with a number of local governments and has agreements with municipalities for 3 new sites, which will raise EBITDA by almost £1.0 million in the first full year they open and over £1.3 million at maturity. These will cost £4.5 million in capital expenditures, which Goals can easily afford while still paying down debt by at least £18.0 million, all of which value should accrue to the current equity holders (on a current £100 million market cap) between now and year end 2015. We have analysed catchment areas and site locations for each of the competitors across the UK. Given the complexities of the zoning process and the amount of population not yet served, we expect to have many more years of roll out at high returns, which could make the stock interesting for many years to come.

Return Bridge based on 30 June 2014 financials and 13 January 2014 market cap (in millions):
LTM EBITDA: £14.0
Net Debt: £51.4
Market Cap: £99.7
EV: £151.0
EV/EBITDA = 10.8
+ Price Increases of £2.4
+ Volume Normalization of £1.4
+ EBITDA from 3 new immature sites of £1.0
+50% of peak ancillary EBITDA recovery of £1.7 (50% of £3.7 peak to trough decline)
- Cost inflation of £1.7
Ending EBITDA: £18.6
EV at 10.8 multiple: £201.1
+FCF of £9.0 for 2.5 years (from mid 2013) of £22.5
-Growth Capital Expenditures of 3 sites at £4.5
= Cash for debt paydown of £18.0
Ending net debt £33.4, Ending equity of £167.7, Equity IRR = 30.4%

Assumptions: (1) Rent increase at RPI of 3.5% applied to site on 5 year anniversary. (2) RPI cost inflation (3) Modular build cost of GBP 1.5M/site on the announced 3 new sites (4) GBP 9.0M of paydown for 2.5yrs (5) Immature EBITDA of 300k/site per announced site (6) 3% price increase (7)Price increase of 15% on 9 immature sites on football revs (8) volume increases of 5% (9) 5% volume LFL recovery (10) 2% price increases on existing estate each September after this (11)Ancillary revenue expands halfway back to the historical peak of 28% of total UK revenue from 26% today vs peak of 30%.

[davebowler] 03/1/2014 15:44

Citywire tip;
Finally, investors must not overlook the most important event of 2014: the World Cup. Leigh Himsworth, head of UK equities at City Financial, has some ideas on who will win.

'The bookmakers are in line to trade well given the football World Cup, but which will get the Golden Boot? GVC is the largest online gaming company in Latin America and has already ramped up its TV ads in anticipation of a busy summer.

Goals Soccer Centres, operator of outdoor football centres in the UK and now with an established presence in the USA with a site in Los Angeles, is outperforming its two major competitors and looks set to benefit from the soccer boom in America. With a more favourable winter climate compared to last year, and a boost from the World Cup, it could easily see earnings growth exceed expectations.

[praipus] 08/10/2013 14:26

Any thoughts on FUTSAL taking off in the UK one day? FA backing it to some extent already.

Very difficult to find pitches for training during winter months of any type. Council wont let you on grass. Sports halls and schools fully booked.