REACTION to Goals Soccer Centre's first half results yesterday was a sign of the times. It posted a strong increase in pre-tax profits and a dividend boost, but because the figures were below expectations – albeit by a fairly slim margin – and debt was slightly higher than forecast, shares plunged.
Goals Soccer
222p -18p
Axis-Shield
326.75p +3.75 They ended up close to their lowest level in two years, with the market in no mood for unexpected bad news.
But if the market was indeed surprised, it should not have
been. After spending years telling the market that the business is, certainly in terms of a leisure sector company, largely immune to a downturn in the economy, it should come as little surprise to analysts that the East Kilbride-based group suffered from slow growth in fringe revenues, such as bar takings and children's birthday parties.
That the company has managed to grow its core football business, and even offset a portion of the struggling bar sales with a boost in corporate spending, should be seen as a strong performance, given the crumbing state of consumer confidence.
So why then did shares fall 7.5 per cent?
The reaction seems largely to stem from the fact that the company's statements may not have painted an adequate picture of the entire situation, leaving analysts to trim forecasts for the future based on the results rather than outlook statements.
Days after the company's first half ended, it predicted "excellent results", and said that it saw no evidence of a softening in demand for its core business.
This was true, but analysts may complain that, however excellent the figures may seem to the company, the statements should reflect results relative to what they are forecasting, and accordingly, when pre-tax missed what the market was expecting, the result was predictable.
Just because it may seem obvious that revenue would suffer some impact from a fall in consumer spending, that doesn't mean the company shouldn't mention it.
Has Goals learned? Yesterday it said since the start of July it had traded strongly and looked forward to the rest of the year with "confidence and enthusiasm". Even these statements led to analysts at Numis cutting its forecasts for the full year by £700,000, or 7 per cent.
Altium Securities, meanwhile, maintained its "sell" rating despite the fact that shares have already effectively halved over the last 12 months.
Previously the Aim-listed group has been something of a City darling, with everyone up to Standard Life's Harry Nimmo praising its performance.
The central investment case remains strong, but as managing director Keith Rogers stressed yesterday, the company is not recession proof, but if you had to be in a company during a recession then this is the one to be in.
With 4 per cent like-for-like growth in the current market, few could argue.
Rogers also denied the company was frustrated by the share movement and said, as long-term holders of the shares (at close to 10 per cent, he is the second-largest shareholder) the board was in it for the long term and saw major potential for the company.
Better communication with the City might help other shareholders and analysts get back to that view.
ACROSS in Dundee, however, another listed group in a very different sector is gaining favour with the City for a rather open approach to its future.
Axis-Shield, the medical diagnostics company rose to within a few pence of a two-year high yesterday as the market digests and accepts that the company has reached a new turning point, and, after two years of small profits, it is now likely to turn into a cash cow, but only if a predator doesn't get it first.
In recent months several research houses have initiated coverage, raising the likelihood of an approach – and takeover – as central to slapping target prices with healthy premiums.
After launching its Afinion point-of-care test kit, installed in doctor's offices at cost price, the company now expects to make millions from providing millions of tests kits for the device, for which it receives healthy margins.
The company appears to be making no pretence that it will try to turn itself into a major diagnostics group – despite expecting a major rise in profitability the board has promised that there will be little or no increase in research and development.
The full article contains 746 words and appears in The Scotsman newspaper.
