GOAL.L Regulatory News (GOAL)

Goals Soccer Centres plc

Final Results for the Year Ended 31 December 2015

Goals, the market leader in outdoor small-sided soccer centres with 47 sites, including one in California, USA announces its final results for the financial year ended 31 December 2015.

Financial Highlights

· Total sales reduced 4.9% to £33.0m, against prior year (2014: £34.7m)

· Group like-for-like sales were -6.3%; UK like-for-like sales -6.7%: US like-for-like sales +8.4%

· Group EBITDA £11.8m (2014:£14.8m)

· Free cash generated of £10.6m, compared to 2014 £13.0m*

· Underlying profit before tax of £8.3m (2014:£10.6m)**

· Non cash exceptional impairment charge of £14.5m made up of goodwill, asset impairment and software development

· Underlying diluted Earnings Per Share** of 14.3p (2014: 14.5p)

· Loss before tax £6.2m (2014: Profit £6.8m). Loss per share 10.4p (2014: Profit 8.9p per share)

Corporate Highlights

· Nick Basing appointed Executive Chairman, effective today, with Keith Edelman stepping down from the Board

· Ongoing in-depth review of all aspects of the business progressing well

· 2 new sites opened in H1 2015 in Manchester and Doncaster. No further new UK sites sought in the foreseeable future

· Keith Rogers, Managing Director, has been appointed President of Goals US and International Development and relocated to Los Angeles.

· The search for a new CEO and two new non-executive directors is well advanced, with high quality candidates being considered

· No final dividend recommended this year; with the board intending to recommence dividend payments when appropriate

· Like-for-like sales for the first nine weeks of the year have returned to very modest growth.

Nick Basing said:

"2015 was undoubtedly a disappointing year, however Goals still has a very sound operating model.

I will be continuing to spearhead the ongoing review into every aspect of the business to develop a new strategy to improve performance and returns, partly based around a re-investment program to rejuvenate and grow the business.

It is pleasing to see early signs of our work so far with a return to very modest, positive like-for-like sales in the first nine weeks this year.

I would like to thank Keith Edelman for his contribution over the last three years"

14 March 2016

Enquiries:

*Free cash generated is cash from operating activities adjusted for the impact of the cash value of exceptional costs of £NIL (2014: £3.1m).

**Underlying profit before tax is profit before tax adjusted for the impact of the net exceptional cost of £14.4m (2014: £3.8m). Underlying Diluted Earnings Per Share is Diluted Earnings per Share adjusted for the net of tax impact of the exceptional costs.

Chairman's Statement

2015 was a disappointing year for the Group. Group sales decreased by 4.9% to £33.0m and underlying profit before tax reduced by 21.7% to £8.3m.

The Group now faces increased competition from new grant-aided full size 3G pitches with league operators utilising and gaining a competitive advantage through lower pricing principally because they do not have to invest capital in providing their own facilities. Goals is however, a fundamentally sound, profitable and cash generative business. With investment and management focus the Board believes that Goals can return to sustained UK sales growth.

Nick Basing was appointed to the Board in November and has been appointed Executive Chairman today. I have stepped down from the Board. Under Nick Basing's leadership all aspects of the business are being reviewed. He will report to Shareholders when this is fully completed.

Keith Rogers is now focussed on our significant opportunities in the US. The search for a new CEO is advanced and progressing well, with a short list of quality candidates being considered. In the meantime Bill Gow has taken up the position of interim Managing Director of our UK business.

Phil Burks, Non-Executive Director since 2010, has also notified the Company that he does not intend to stand for re-election at the Annual General Meeting in May 2016. Sincere gratitude is recorded for Phil's contributions over the years and we wish him well for the future.

During the second half of the year, the Board undertook a balance sheet review and concluded that a non-cash exceptional impairment charge of £14.5m relating to certain fixed assets, goodwill and software development should be made.

In light of the performance of the business particularly in the second half of the year, the Directors have concluded not to recommend the payment of a final dividend. However, subject to satisfactory trading, the Directors intend to recommence paying dividends when appropriate.

Our success depends on the enthusiasm, hard work and professionalism of our staff and I would like to thank them all for their enormous contribution. Their relentless drive to deliver results across all levels of the business is what will continue to ensure Goals remains a market leading business.

Keith Edelman

Chairman

14 March 2016

Managing Director's Review

Following a relatively successful year in 2014 with like-for-like sales growth of 1.5%, assisted by the World Cup, 2015 has proved to be more challenging in our UK business with overall sales declining by 5.1% to £31.9m (2014: £33.6m) and like-for-like sales declining by 6.7%. This was mainly driven by a significant downturn in the second half where like-for-like sales declined by 11.5%. 

Like-for-like football sales declined by 7.6% and like-for-like bar and vending sales declined by 2.5%.

Recreational football remains a popular pastime and represents 81.0% of our total revenue. The January 2015 Sport England Active People Survey shows the number of people playing football in England has risen to nearly one in five adults - 8.2 million people. 5-a-side football continues to grow in popularity with now almost twice as many regular players as 11-a-side football. The game is now fully recognised and supported by The Football Association (FA) and all Goals centres in England are FA accredited.

We have worked hard in recent years to drive improvements in value, service and quality across the business, but we are clear that more needs to be done if we are to deliver high quality experiences to our customers, in a more competitive marketplace. We need to drive significant change in the business and better position Goals for sustainable long-term growth.

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.

During the year we opened new centres in Manchester in February and in Doncaster in April. These centres have traded behind plan since opening. Further marketing has been implemented to build awareness and they are expected to contribute to Group EBITDA in 2016. We do not intend to open any new sites in the UK for the foreseeable future, however, we continue to monitor the situation closely.

During the period we pursued a diverse range of marketing activities aimed at retaining and increasing the frequency of play of our existing customers, as well as attracting new players to Goals through exciting headline activities.

With fitness being the biggest driver of football participation, we kicked-off the year with a major marketing push, with our 'Get Fit - Mind, Body and Goals' campaign which promoted the health and fitness benefits of playing 5-a-side football.

This January we uprated our campaign under our 'Who Are Ya?' theme which helped deliver an increase in enquiries this year. We continue to work on the increased level of enquiries to deliver growth in our key products and recent trading is now delivering modest like-for-like sales growth.

We continue to hold national tournaments for major corporate clients such as McDonalds, JD Wetherspoon and Odeon, and have retained a new Corporate Sales Manager.

During the period we, along with the other major providers, played host to teams across England for The FA Peoples Cup, a major 5-a-side tournament promoted by The FA and televised by the BBC. Goals Manchester was selected as the venue for the final. Again, this year, a Goals centre has been selected to host the final and Goals delivered the highest number of entries.

Goals is committed to providing the best football experience. Use of Net Promoter Scores (NPS) is now built into our staff feedback and bonus system delivering positive change in customer service and an NPS score of 52 in recent results.

In 2014 we trialled the Goals-Cam technology, which records game highlights from two different angles and makes the resulting 20 second highlights clips available to players for download or sharing across social media. Our pilot installations have proven successful and we have in 2015 extended this to 5 centres. Further sites will soon benefit from this technology including our US centre.

Digital is an evolving element of our business and we continue to invest in and develop our systems to meet the needs of our customers. Mobile phones are our players' portal of choice. A new mobile friendly website was launched in Q1 2015 in the UK and Q4 2015 in the US.

Our focus on social media over the past year has seen the number of Facebook followers and engagement both grow by 50%. In 2015 we introduced our app which has a number of key features aimed at improving the 5-a-side experience for team organisers, players and those wishing to get involved in the game. Whilst downloads have been encouraging, use of the various app functions is variable with those relying on full team interaction taking longer to be adopted than those utilised by single players. Functions such as league fixture and results are heavily accessed by players whilst team organisation and player payments have been disappointing. Our US players are far more engaged in digital platforms than those in the UK. For this reason we will be launching a US version of our app in 2016.

The popularity of soccer in the US has grown rapidly in recent years. 24 million people are playing the game in some form, and the US has the second highest number of players in the world. Growth of the game is particularly strong in California, especially amongst the Latin American population which is now the largest ethnic group. In addition, the increasing competitiveness of US Soccer in international play, and the growing popularity of Major League Soccer points to greater success for the sport overall.

Our US centre in Los Angeles has again delivered strong growth with sales up 8.4%, further demonstrating the significant potential of the US, although at only one US site.

We have developed knowledge of the southern California market. We are making excellent progress in developing strong relationships with local government at State, County and City level as well as local school districts and property developers enabling us to access well located development opportunities in geography with little open land to spare.

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.

Our Team

Our people are fundamental to the success of our business and we aim to employ and develop the best and most highly motivated people in the sector. Our objective remains to offer our players memorable experiences through the delivery of outstanding value, exceptional service and unbeatable quality, differentiated in our market by investment in innovation. We remain the brand leader in the UK, however we must constantly evolve and invest in our football offering to ensure we remain at the forefront in a market of increasing competition.

Keith Rogers

Managing Director

14 March 2016

Finance Director's Review

Group sales decreased by 4.9% (H1: -0.2%, H2 -9.2%) to £33.0m (2014: £34.7m) and Group like-for-like sales decreased by 6.3% (H1: -1.2%, H2: -11.4%). The Group has a high level of operational gearing with a drop through margin of 88.8%. As a result of this and the decline in like-for-like sales in H2, Group EBITDA from our centres declined by 15.9% to £14.9m (2014: £17.8m) and Group EBITDA declined by 20.3% to £11.8m (2014: £14.8m).

Group operating profit declined by 24.4% to £9.0m (2014: £11.9m) and the Group operating profit margin declined to 27.3% (2014: 34.3%).

Financial expenses reduced to £0.7m (2014: £1.3m) as the Group renewed its banking facilities on improved terms in the second half of 2014.

Underlying profit before income tax** reduced by 21.7% to £8.3m (2014: £10.6m) and underlying earnings per share** declined by 1.4% to 14.3p (2014: 14.5p).

The tax charge for the period is at an effective rate of -1.2% (2014: 21.2%). This rate is lower than the UK corporation tax rate due to the reduction in the UK corporation tax rate reducing our deferred tax liability. The effective rate is expected to increase in 2016 to be in line with the UK corporation tax rate.

The Group has a strong balance sheet with net assets of £72.7m (2013: £79.9m) and has a long term non-amortising bank facility with Bank of Scotland of £42.5m which expires in July 2019.

Net debt at 31 December 2015 stood at £36.7m (2014: £37.0m) and current leverage of net debt to EBITDA is 3.1 times (2014: 2.5 times). EBITDA bank interest cover was 16.3 times during the 12 months ended 31 December 2015 (2014: 11.2 times).

The IASB has issued IFRS 16 'Leases' which provides a new model for lease accounting in which all leases, other than short-term and small-ticket-item leases, will be accounted for by the recognition on the balance sheet of a right-to-use asset and a lease liability, and the subsequent amortisation of the right-to-use asset over the lease term. IFRS 16 will be effective for the group's year ending 31 December 2020 and is expected to have a significant effect on the group's financial statements, increasing the group's recognised assets and liabilities and potentially affecting the presentation and timing of recognition of certain amounts in the income statement.

Largely due to the downturn in trading in the second half of 2015 and the decision to halt further new site expansion in the UK, the Group undertook an impairment review which resulted in non-cash exceptional charges of £14.5m. These included:

· Goodwill £3.1m

· Underperforming centres £8.2m

· UK Pipeline £2.5m

· Software development costs £0.7m

The Board continues to focus on strong cash generation. Free cash flow* declined by 18.1% to £10.6m (2014: £13.0m). The Group invested £7.6m in capital expenditure (2014: £6.4m) during the period. £5.3m (2014: £4.5m) was incurred on our new centres, £0.1m on information technology, and £2.2m on upgrading our mature centres. The Group invested £0.7m on software development and call centre systems during the period.

Our head office costs increased by 4.1% to £3.1m (2014: £3.0m) as we continued to invest to support the enlarged scale of the business.

Goals UK

The performance of the UK Business was disappointing with sales declining by 5.1% to £31.9m (2014: £33.6m) and like-for-like sales declining by 6.7%. This was primarily driven by a significant downturn from the start of the summer with sales in the second half declining by 9.2% to £15.5m (2014: £17.0m) and like-for-like sales declining by 11.5%. Sales for the first half were broadly flat £16.4m (2014: £16.6m). Like-for-like football sales declined by 7.6% and like-for-like bar and vending sales declined by 2.5%.

During the year we opened new centres in Manchester in February and in Doncaster in April. These centres have traded behind plan since opening. Further marketing has been implemented to build awareness and they are expected to contribute to Group EBITDA during 2016 as they continue to mature.

Our overall gross profit margin decreased from 90% to 89% due to the increased proportion of lower margin bar and birthday party sales.

A strong focus on overhead costs was maintained throughout the year. The HR and Payroll systems implemented in 2014 resulted in a 1% reduction in payroll costs. This combined with other efficiency measures restricted the increase in our average overheads per centre to 3.3% (2015: £305,000; 2014: £295,000).

As a result of the decline in like-for-like sales Centre EBITDA declined by 16.3% to £14.4m (2014: £17.2m) and Company EBITDA declined by 20.3% to £11.4m (2014: £14.3m).

Goals US

Goals US performed well during the period with sales increasing by 8.4% to £1.2m (2014: £1.1m) and Centre EBITDA increasing by 7.1% to £0.6m (2014: £0.6m). The costs of operating the US Head Office increased by 28% to £0.1m (2014: £0.1m) and Company EBITDA increased by 3.5% to £0.5m (2014: £0.4m).

Our centre in Los Angeles is now well established in the soccer market in California and we anticipate further growth from this location. This strong growth confirms that the Goals concept is successful outside of the United Kingdom providing confidence for our future US roll out. We now have a solid pipeline of sites for future openings and expect to open further centres, subject to financial resources, in the future.

Dividend

Due to the downturn in sales in the second half of the year the Directors are not recommending a final dividend. Subject to satisfactory trading the Directors intend to recommence dividends when appropriate.

William Gow

Finance Director

14 March 2016

Consolidated income statement

for the year ended 31 December 2015

Statement of comprehensive (expense)/income

for the year ended 31 December 2015

Balance sheets

at 31 December 2015

These financial statements were approved by the board of directors on 14th March 2016 and were signed on its behalf by:

William BG Gow

Finance Director

Company registered number: SC202545

Statements of cash flow

for the year ended 31 December 2015

Statements of changes in equity

for the year ended 31 December 2015

Statements of changes in equity

for the year ended 31 December 2015

Notes

(forming part of the financial statements)

1 Accounting policies

Goals Soccer Centres plc (the "Company") is a company domiciled in the United Kingdom. The consolidated financial statements for the year ended 31 December 2015 comprise those of the company and its subsidiaries (together referred to as the Group). The parent company's financial statements present information about the company as a separate entity and not about the Group. Under section 408 of the Companies Act 2006 the company is exempt from the requirement to present its own income statement and related notes.

Statement of compliance

Both the parent company financial statements and Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs") that are effective (or available for early adoption) at 31 December 2015. Based on these adopted IFRSs, the directors have applied the accounting policies, as set out below.

The financial statements for the year ended 31 December 2015 were approved by the board of directors on 14 March 2016.

Basis of preparation

The financial statements are prepared on the historical cost basis except for derivative financial instruments which are stated at their fair value. The preparation of the financial statements requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

These financial statements of the Group and Company are presented in pounds sterling. All financial information has been rounded to the nearest thousand.

The accounting policies have been applied consistently to all periods presented, except for the adoption of the standards described below which have had no impact on the reported numbers but may affect the accounting for future transactions and events.

IFRS 10, Consolidated financial statements (effective 1 January 2015), IFRS 11, Joint arrangements (effective 1 January 2015) and IFRS 12: Disclosure of interests in other entities (effective 1 January 2015).

The Group has adopted all of the above listed standards and revisions in the current period. As there are no joint arrangements or associates within the Group, and ll subsidiaries are under 100% ownership, there has been no impact on the results and balances within the consolidated financial statements.

Going concern

The Group and Company meet their overall funding requirements through their facility arrangements. The directors have reviewed the Group and Company's forecasts and projections which indicate that the Group and Company are expected to be able to operate within their current facilities for the next twelve months.

After making enquiries, the directors have a reasonable expectation that the Group and Company has adequate resources to continue in operational existence for the next twelve months. Accordingly they continue to adopt the going concern basis in preparing the financial statements.

2 Segmental reporting

IFRS 8 'Operating Segments' requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes to the Chief Operating Decision Maker, which is the Board. For internal reporting purposes information is reported by soccer centre. As each soccer centre has similar economic characteristics, provides the same services to similar customers and operates in a similar manner they are aggregated into one segment. The directors, therefore, consider that there is one reporting segment relating to the operation of outdoor soccer centres.

Geographical information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets.

The non-current assets represent property, plant and equipment and intangible assets.

3. Operating profit/(loss)

Underlying earnings before interest, tax, depreciation and amortisation ("EBITDA") is calculated as follows:

Contained within operating expenses are the following main costs associated with the sites:

4 Exceptional items

The directors have reviewed the value in use of the software development cost incurred by the Company, goodwill incurred on the acquisition of Pro5 Soccer and the carrying value of each centre operated by the Company. This resulted in impairment charges of £750k, £3.1m and £8.1m respectively.

Following a strategic review of the group's operations, the directors have decided not to develop further centres in the UK in the short term. The costs incurred on the UK pipeline sites, totalling £2.5m have therefore been expensed.

5 Financial expense

6 Taxation

Reconciliation of effective tax rate

Income tax recognised directly in equity

The deferred tax liability at 31 December 2015 has been calculated based on the rate of 18% substantively enacted at the balance sheet date.

7 Dividends

8 Earnings per share

Basic earnings per ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year which was 58,465,060 (2014: 57,289,241).

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year plus the dilutive element of all outstanding relevant share options outstanding during the year. For the year ended 31 December 2015 this was 58,609,677 (2014: 57,463,181).

The diluted weighted average number of shares is calculated as follows:

9 Property, plant and equipment