14 Jan 2019 07:00
Goals Soccer Centres plc
("Goals", the "Company" or the "Group")
Post close trading update
14 January 2019
Goals Soccer Centres plc, a leading operator of outdoor small-sided soccer centres with 50 sites, including four in California, North America, today reports on its trading for the financial year ending 31 December 2018 in advance of the release of the Company's final results on 12 March 2019.
Underlying sales(1) for the year ended 31 December 2018 rose +0.5% to £32.4m (2017: £32.2m), with positive growth in H2, reflecting the success of the further arena investment. This follows a weak first half, impacted by adverse weather conditions. Underlying sales(1) grew approximately 4% in H2, predominately as a result of the benefits of the investment programme being realised, with 39 of our 46 UK clubs now operating with five or more pitches upgraded.
During the period, Goals has expanded its ancillary revenue streams, implementing an enhanced food and beverage offering to customers, including a new premium coffee service and a range of new F&B products. Goals also introduced a new, improved children's party product, which also provides an enhanced food offering, with greater levels of customer service. Both of these initiatives were introduced during Q3 and Q4 to drive sales. These initiatives generated sales growth of approximately 9% (£0.3m) during H2.
In the U.S., our South Gate club continues to perform well and is now our best performing site globally. Growth in trading at the new clubs in Pomona and Rancho is slower than initially anticipated, although we are now materially growing game count through changes in management and our marketing strategy. These clubs will however take additional time to reach their full potential. This has resulted in non-recurring start-up losses of £0.8m, of which Goals' share is £0.4m. Our fourth U.S. club in Covina opened in December 2018 and initial trading is encouraging. Due to recent exchange rate movements non-recurring losses of £0.2m have been incurred on translation of our U.S. Dollar loans at the year end.
Margin and Exceptional items
Whilst costs on the core football product have been tightly controlled, the introduction of the ancillary food and beverage and children's birthday party enhancements has led to materially higher initial cost of sales in these areas, resulting in a decline in Group profitability in H2 of £0.3m and an overall reduction in Gross Profit of 3%. In addition, labour costs increased by £0.3m (8%) and other costs increased by £0.2m partly driven by the increased staffing requirements in these areas. Mitigating measures were implemented at the end of Q4 to reduce these increased costs. Since December, the new pricing, product offering, and staffing requirements have been reviewed and a new stock management system is now in place to provide more effective management in this area of the business, ensuring costs are properly controlled going forward.
Goals anticipates that exceptional costs for the year ended 31 December 2018 will be approximately £5.5m (H1 £2.7m, H2 £2.8m) comprising of non-cash asset impairments of £4.6m and restructuring costs of £0.9m. The non-cash impairments primarily relate to reductions in the carrying value of 3 clubs and the previously announced sale of our Beckenham North club to Crystal Palace Football Club for use in a non-competing activity.
Balance sheet
Net debt at the year-end was approximately £29m. Goals has agreed with its lenders to amend its Net Debt/EBITDA covenant from 3.0x to 3.4x at 31 December 2018 and is at an advanced stage of discussions to amend the quarterly tests in March and June 2019 to 3.25x to provide additional headroom after which the covenant will reduce back to 3.0x. It is anticipated that during 2019, considerable headroom will be generated.
Management
There has been significant change and improvement in the operational management team over the last few months, with a combination of external hires and internal promotions. The team is now focused on growing the business in a more disciplined manner.
Outcome for 2018 and outlook for 2019
Whilst we have seen positive growth in football and other revenues in H2, the outturn for 2018 is disappointing and has been impacted by both the lower margin in ancillary activities and the slower-than-anticipated growth rates in the US. Goals therefore expects full year Group Adjusted Profit for 2018 of between £4.3m to £4.5m.
Looking forward to 2019, we expect our investments in modernisation of arenas to continue to deliver increased sales, and with stronger systems we anticipate a return to more normalised margins in ancillary income, however, we have reduced our profit guidance for Goals UK by £0.6m in light of the current economic and political uncertainty.
In light of the slower rate of growth at Pomona and Rancho, we have revised our estimate of trading from the two new U.S. sites during their initial two years. This has resulted in Goals' potential share of U.S. profits being £0.7m lower than anticipated in 2019 and 2020.
Strategically, we have a number of projects in development. In the US, in Q2 2019, we will be launching a new academy product with Manchester City F.C., whilst in the UK we are exploring a series of initiatives, around coaching and sponsorship which will drive improved performance.
Andy Anson, Chief Executive Officer said:
"The investment strategy that is being executed is improving the underlying performance of the clubs, which is demonstrated in our H2 sales results. Frustratingly, a number of cost overruns have impacted 2018 profits. It is disappointing that well-conceived initiatives to drive revenue have been delivered at the expense of margin.
However, we have already taken action to tighten cost control, and processes and procedures are now in place to augment and support margin management. The benefits of these changes will be felt in the current year, as will the effect of the new management team.
We will continue to turn Goals around to deliver the performance that the management know the Company can achieve."
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Enquiries:
Goals Soccer Centres plc Andy Anson, Chief Executive Officer Bill Gow, Chief Financial Officer
| 01355 234 800 |
Canaccord Genuity Limited (Nominated Adviser and Broker) Chris Connors Martin Davison Richard Andrews
| 020 7523 8350 |
Instinctif Partners Matthew Smallwood Andy Low | 020 7457 2020 |
1. Underlying Sales
Total sales in 2018 consist of 12 months of UK sales and no US sales as the financial results of Goals Soccer Centers Inc have been accounted for using the equity method of accounting since July 2017 when the Joint Venture with City Football Group was completed. Therefore, it is necessary to introduce alternative performance measures that allow a greater degree of comparability between years. Underlying Sales and Underlying Like-for-Like Sales comparatives have been calculated assuming the same ownership structure in place at 31 December 2018 was in place at 31 December 2017 i.e. that sales from Goals US are excluded from both.