Goals Soccer Centres - trading update

Soccer centre company GOAL released a trading statement today (http://is.gd/HDVdKK), sending its shares down 15%. The RNS said “trading in the UK business over the summer holiday period had been challenging. Whilst we have made progress since 9 September, delivering week-on-week sales improvements, the speed of this recovery has not been at the level anticipated.”

The company has a market cap less than £90m. Its last-reported net debt was £37m, with a net profit of £5.1m. I consider the debt levels to be too high. It issued £10.6m worth of stock in 2014 to facilitate growth and improve its capital structure.

It spent £1.7m on software development and call centre systems during the period. Those costs were capitalised.

The company has an mean 6-year ROCE of 8.5%. I consider that to be mediocre.

I wrote about GOAL in September 2012 (http://is.gd/Vj8vsc), saying that its ROCE was unexciting at 11.1%. I also said that “it may be hitting its capital buffers”. With the benefit of hindsight, I was clearly right to be concerned about its over-reliance on debt.

The share price was 117.99p at the time, meaning that they have gained 10.6% since then. The ASX has increased 6.1% over the same period. So, despite my reservations, the shares have shown a slight outperformance.

The shares are now in the bottom decile of RS6m, which is dangerous territory.

I still maintain my scepticism about the company.

As ever, we shall see.