Companies: AUG    AXD    GOAL    MXM    SPI    TSTL   

Goals Soccer Centres, tipped here as a strong buy at 262p in May, may trade slightly below our recommendation level at 257p, but the company has played a blinder since floating on AIM in December 2004.

We remain convinced about the five-a-side soccer group’s growth prospects, with football still the most popular sport in the UK and the small-sided game growing rapidly as a commercial activity.

Goals’ half time figures to June were strong indeed, with pre-tax profits powering ahead 72 per cent to £2.1 million, on sales lifted 35 per cent to £7.5 million, sending basic earnings 70 per cent north to 3.2p. The strong financial performance was driven by like-for-like sales growth of five per cent and new site openings, and there was also a maiden interim dividend of 0.3p a share.

Managing director Keith Rogers flagged up bumper demand in the market for the group’s ‘next generation’ site concept, and said that since the group’s flotation, it had opened ten new centres and now boasts 21 up and running across the UK. He also said the pipeline of new sites was looking strong.

Altium Securities has initiated coverage on Goals with a ‘buy’ recommendation and a 330p target price for the shares. This year the broker predicts growth in pre-tax profits from £2.9 million to £4.8 million, shooting earnings per share 70 per cent higher to 7.8p. For 2007 investors could expect profits of £7.1 million, and 49 per cent earnings growth to 11.6p, placing Goals on forward multiples of 33 and 22.1.

For most companies those multiples would look exceptionally pricey, but remember, earnings are growing at an exciting 70 per cent and near-50 per cent, leaving Goals on budget PEG (price earning growth) ratios of 0.4 for the next two years. We remain fervent fans.

Sixth move from hungry Maxima
Maxima, the deal-hungry IT solutions and managed services play recommended on these pages at 160p, provides a good illustration of the merits of our long-term investment approach.

Though Maxima breached our stop loss at 144.8p in January, the shares have undergone a dramatic revival, and the group’s latest £7.4 million acquisition sent it to fresh highs.

Cheltenham-based Cognition, the group’s sixth acquisition since flotation in 2004, came with cash balances of £3.3 million, so Maxima effectively paid a net £4.1 million, only 3.4 times Cognition’s pre-tax profits in the year to June.

Cognition supplies software and services to the construction and facilities management sectors, areas that are growing faster than other Maxima sectors such as industry and the public sector, and should enhance earnings in the current year to May.

Boasting a 300-strong customer base, with clients ranging from Alfred McAlpine to smaller construction companies and local authorities, Cognition should also bring cross-selling benefits, with customers having already expressed interest in Maxima’s other services.

Maxima is a consolidation play in the fragmented IT services market and chief executive Kelvin Harrison argues the group’s understanding of software suites such as Oracle, Microsoft and SAP translates into quality service, strong customer relationships and high retention rates.

Numbers issued over the summer for the year to May were strong, revealing 36 per cent revenue growth to £19.1 million and normalised pre-tax profits of £3.3 million. Upgraded forecasts for this year suggest profits of £5.6 million from sales of £30.3 million and earnings of 23.2p, placing the 190p shares on a modest 8.2 times forward earnings. Considering its yield attractions, Maxima is a solid investment with further excitement to come from acquisitions. Keep buying.

Alexandra still in fashion
Alexandra, the supplier of corporate uniforms and work wear to the likes of First Group, Vodafone and Transco, featured as our Company Profile at 162.5p earlier this year.

Bristol-headquartered but sourcing garments from overseas, the company stitched up a 20.6 per cent profits push to £2.7 million for the half to July, with growth powered by earlier acquisitions Prima and de Baer. There was 13.7 per cent growth at the top line to over £40.7 million, boosted by acquisitions, and investors were treated to a 10.5 per cent improvement in the half-time payout at 2.1p.

Despite margin gains exceeding City forecasts – thanks to savvier product sourcing and supply chain efficiencies – Alexandra disappointed with slower than expected rates of organic growth, which chief executive Julian Budd attributed to the integration process eating into more management time than expected. Due to the temporary lull in organic growth, house broker Evolution has pegged back its full year turnover forecast from £85.7 million to £83.5 million and its pre-tax estimate from £6.9 million to £6.6 million, giving earnings of 13.6p.

The shares, currently priced at 156p, trade on a modest forward multiple of 11.5, and boast robust yield attractions. Gearing, which rose following the debt-funded acquisitions, should reduce in the second half, and the group looks better placed now to deliver profitable growth in tough markets, with the full benefits of integration set to shine through at the bottom line.

If you bought on our advice, now is not the time to sell the shares, which reached 178.5p in the wake of our recommendation. Alexandra is a well-managed group with good underlying earnings, and has longer-term ambitions on the Continent, with consolidation of the UK market now ‘largely complete’. Add.

Tristel to clean up
Having just delivered a sevenfold increase in profits, hospital disinfection specialist Tristel is concentrating on four areas that could multiply future figures. The group has a portfolio of proprietary chemicals that includes the UK market-leading product for sterilising endoscopic instruments, as well as a host of other infection-control wipes and washers.

Growth will come from spreading the company’s capabilities into other parts of the hospital – water, floors and walls – as well as exploiting foreign markets.

June purchase Vernagene specialises in treating hospital water systems to control such bugs as legionella. Chief executive Paul Swinney plans to ‘rev up’ this business and has broadened the company's brush onto the wide expanses of hospital floors and walls, by developing a market-leading burstable sachet that can be easily added to cleaners’ buckets.

Since the end of 2005 Tristel has been going through the slow process of building an international distribution network, some elements of which have made first sales. Tristel will seek to build sales for its new endoscope-disinfecting tray, a much cheaper alternative to the hugely expensive ‘washing machines’ that price out ‘80-90 per cent’ of the world’s hospitals.

The aquisition contributed £94,000 towards sales that rose 24 per cent to £3.75 million in the year to June, with profits up from £100,000 to £720,000. For the current year, house broker Teather & Greenwood expects pre-tax profits of £1 million and earnings of 3.1p a share, placing the shares on a modest forward rating of 15.9. Although Tristel is substantially down from our 60.5p recommendation price, it is well worth holding.

Augean disappoints
Augean, the leading manager of hazardous waste named after the cleaned-out stables of Greek mythology, was backed here at 169p in September 2005. Unfortunately, the group has just warned on 2006 profits – not its one and only hiccup either – although management insists the longer-term prognosis is positive.

The group has admitted that total hazardous waste landfill volumes for calendar year 2006 will be lower than expected, prompting a downgrade in 2006 ‘adjusted’ pre-tax profits from £5.5 million to £3.5 million, and pulling estimated earnings back from 5.6p to 5.1p a share. For 2007, the numbers were pegged back from £7.6 million to £6 million, reducing the earnings estimate from 7.8p to 6.1p.

We understand that this setback is essentially more about timing issues than anything fundamental, and agree that prospects are underpinned by developments in the market. Stricter rules defining hazardous waste are to be enforced by the Environment Agency (EA) from 1 November and the EA also plans to get tough with regard to ‘sham treatment’ – the dilution down of hazardous waste to non-hazardous waste.

Augean claims to be talking to major waste management operators and producers to take burgeoning volumes to its sites, though the real benefits won’t be felt until 2007. ‘Conscious of the impact of the slower rate of growth on shareholder value,’ the board says it is reviewing strategic options, with the share price having fallen from highs of 270p, and with half time losses in at £3.7 million on £13.9 million turnover.

We still like this story long-term, but we are also unnerved by the unpredictability of volumes and what is now becoming a chequered track record. With the 137.75p shares trading on pricey forward multiples of 27 and 22.6, investors should consider offloading their already shrunken holdings. Sell.

Top-slice at Spice
Our last comment on Spice Holdings was that the company looked undervalued on a forward p/e of less than 18 times at 293.75p. We said a pause for breath was needed after a strong share price performance, though Spice was well worth holding.

Since then, there has been no let up in Spice’s price appreciation, and the company now boasts a £163 million market price tag at 329.5p. Spice boasts exposure to a growing industry (outsourced maintenance and facilities management) and offers defensive qualities with most of its customers from the utilities sector.

However, we feel Spice has raced ahead a bit too quickly, and current earnings estimates suggest the shares are slightly overvalued. The consensus forecast is for Spice to produce earnings of 17.5p this year and 19.7p in 2008, placing the 329.5p shares on forward multiples of 18.8 and 16.7, despite the fact that earnings are set to grow at a rate of between 12.5 per cent and 13 per cent. Reduce.