Gamble of the week: Make money from football

This provider of five-a-side football pitches has disappointed investors, says Phil Oakley. But the shares still look worth a shot.

Goals Soccer Centres is a good example of what can happen to share prices when a company disappoints investors on growth.

As the leading provider of branded five-a-side football pitches in Britain, with a 42% share of the market, five years ago its shares changed hands for 20 times earnings as investors became very bullish about its growth prospects. Now they trade on 9.6 times. But I think that at current levels they are well worth a look.

Goals's footprint has grown a lot. It has added 19 new football centres across Britain since 2008 and now has 43 of them. The trouble is that profits have not grown as quickly. In 2007, each soccer centre had an average profit before depreciation (EBITDA) of £500,000. In 2012, that figure was £377,000.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

648_P12_Goals

Yet I see reasons to be optimistic. There is a solid business here. Five-a-side football remains a popular leisure activity, with Goals having 100,000 players using its pitches every week. It looks fairly good value too with each player paying around £5 (or less) for an hour's use of the facilities, depending on when they play.

What's encouraging is that the management has a plan to improve the returns of the business. Thankfully, it's not going to be building any more new centres and will concentrate instead on getting more out of its existing ones, generating cash and paying down debt.

Profit per centre has the potential to increase as newer centres are still reaching maturity. A three-year branding partnership with sports radio station TalkSport should also help build awareness of the business and get more people through the doors.

But what's most attractive about Goals now is the price of its shares. Trading at today's lower valuation, they price in little expectation of future growth. If management can turn this business around then the shares look worth a punt.

Verdict: speculative buy at 137p

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for Moneyweek in 2010.

Follow Phil on Google+.