Small Cap Report (30 Apr) - GOAL, DEMG, PUR, AVCT, HVN, PURI

Tuesday, Apr 30 2013 by

Pre 8 a.m. comments

5-a-side football centre operator, Goals Soccer Centres (LON:GOAL) issues an in line trading statement this morning, in advance of its AGM at 10:30 a.m.. Bank debt has been reduced marginally from £50.2m to £48.75m between 31 Dec 2012 and 29 Apr 2013. I've always rather liked the underlying business here, which generates tremendous cashflow, but the level of debt is still too high for comfort, in my opinion.

The problem with highly indebted companies is that as an equity investor you're very much playing second fiddle. It only takes the whim of the Bank to suddenly shift from feeling comfortable to feeling nervous, and all of a sudden you have a crisis, where the Bank can impose all manner of demands, and ultimately even force the business into an emergency Rights Issue, or even into Administration.

Just because the Banks are under political pressure to preserve jobs in the short term by allowing zombie companies to continue trading, doesn't mean that the risk has gone, it's just hidden. I feel that many investors are therefore becoming too complacent about companies with excessive debt, and may get a nasty shock if & when the attitude of the banks change.

I might look again at GOAL once the debt has reduced by a material amount. To my mind an acceptable level of debt is around 1.5 times EBITDA. That's not set in stone, it's just a finger in the air type of number that feels about right to me. At the moment EBITDA at GOAL looks to be about £13m p.a., so their net debt is way above that, although in fairness they do have substantial fixed assets to support the balance sheet.

The problem is also that you cannot refinance easily at the moment either. So if the existing Bank stop playing ball (geddit?!!) then where do you go?

Goal's Chairman is stepping down after 10 years, but this appears to have been pre-announced, so does not seem cause for alarm.


Deltex Medical (LON:DEMG) issues its pre-AGM statement too, and it all reads pretty well. I hold a few shares in this one personally, which I bought recently after a positive announcement concerning the USA Govt approving the Deltex product for fast-track electronic payments to reimburse physicians who use it.…

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Goals Soccer Centres plc is a United Kingdom-based company engaged in the operation of outdoor soccer centers. The Company operates in the United Kingdom and United States, and operates in the operation of soccer centers segment. The Company offers 5-a-side soccer centers across approximately 50 centers in the United Kingdom and one in Los Angeles, the United States. The Company's centers are in locations, including Aberdeen, Beckenham North, Beckenham South, Chingford , Coventry, Sheffield, Norwich, Sunderland, Teeside, Bexleyheath, Birmingham (Perry Barr), Birmingham (Star City), Black Country (Wolverhampton), Kingston (Tolworth), Bradford, Bristol North, Bristol South, Glasgow South, Wimbledon, Plymouth and Heathrow, among others. The Company's subsidiary includes Goals Soccer Centres Inc, which is engaged in the trading business. more »

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Deltex Medical Group plc is a United Kingdom-based haemodynamic management company, which manufactures fluid management devices. The Company's segments are Probes and Other. The Company's Esophageal Doppler Simulator (EDS) enables clinicians to practice probe insertion, focussing and waveform interpretation outside of a patient setting. The Company's CardioQ-EDM and CardioQ-EDM+ esophageal Doppler monitors (EDM) are designed to allow clinicians to guide fluid and drug administration during surgery. The Company's oesophageal Doppler haemodynamic monitoring (ODM) uses ultrasound to measure blood flows in the central circulation of patients, and allows doctors to fine tune the circulation. Its probes include surgical probes, such as I2S and I2P, and critical care probes, such as I2C and EDP240. Its I2S and I2P are used in patients who are anesthetized, sedated or awake. Its EDP240 is used in patients under anesthesia or full sedation. It has operations in Spain and Canada, among others. more »

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  Is LON:GOAL fundamentally strong or weak? Find out More »

5 Comments on this Article show/hide all

Chris12nz 30th Apr '13 1 of 5

Re placements. Many nz and australian companies also do a share purchase plan for smaller shareholders at the same price as the placement. This is limited to $15000. No prospectus is required and costs are low.

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Paul Scott 30th Apr '13 2 of 5

In reply to post #72910

Thanks Chris, that is very interesting indeed.

I've always thought that our UK system is hopelessly outdated. We should just all be able to register our details electronically with the company/registrar, and then when the company wants to do a fund-raising, it just suspends its shares for a couple of days, and an electronic auction takes place for existing shareholders first, then outside shareholders, to bid for new shares in an electronic fund-raising.

A simple document explaining the reasons for the fund-raising is all that should be needed.
Everyone can take part, and we set the price. What could be simpler?

We've had a supposedly business-friendly Govt in place for 3 years now, that doesn't even seem to be aware of the impediments to smaller listed companies getting hold of capital, let alone done anything about it!

Regards, Paul.

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bobdouglas 30th Apr '13 3 of 5

Agree with points flagged up regarding Harvey Nash - held shares here in the past but my concerns were and are that the company seems to be growing on the back of rising debtors.

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dangersimpson 30th Apr '13 4 of 5

Hi Paul,

Re:Harvey Nash (LON:HVN) - although some window dressing may be at work here I think the results during the year help give a fuller picture.

Net debt at the interims was £14.1m and the reason given was:

The Group has no long-term structural debt. However, owing mainly to an increase in working capital to support greater revenues, the Group has net current borrowing of £14.1m compared to net cash in the prior year of £1.8m.

Trade and other receivables rose by £15.2m (16%) to £113.2m (2011: £98.0m) owing to substantially higher levels of trading in the contracting and temporary recruitment division combined with an increase in debtor days. Debtor days increased during the period to 45.5 (2011: 41.6), an increase of 9%. Debtors are tightly managed, but as we saw at the beginning of the financial crisis in 2008, some clients in the UK and Europe are delaying payments. Accordingly, we have seen debtor days rise throughout the year to date related predominantly, we believe, to macroeconomic concerns in the Eurozone. We are implementing actions to bring back debtor days by the year end, as we did successfully in 2008.

This clearly worried the market however they showed significant progress at their 30th Nov interim managment statement:

The Board is delighted to report that despite the seasonally stronger trading levels since the half year, cash generation has been robust and actions taken to reduce debtor days have been successful resulting in net borrowings reducing to £11.6m as at 31st October 2012 (31st July 2012: £14.1m).

The Group has no long-term debt and continues to enjoy good levels of headroom in relation to its working capital facilities.

Then today's statement:

The balance sheet remained strong with net cash of £5.0m (2012: £5.2m). Although the Group has no long-term debt, short-term working capital funding of circa £50m is available on a rolling twelve month basis to finance growth in the contracting and outsourcing payroll.

So while I agree that this working capital variation will continue to be a feature with high turnover, low margin business, Harvey Nash (LON:HVN) does seem to be one that has good control of their business & sales ledger.



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jraitt 30th Apr '13 5 of 5

A little off topic but wondered if you had read Mr Woodbine Parish's latest Chairmans Report. He gets going after the "housekeeping" bits
Worth a read

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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