Powerleague - 44p

The majority of smaller listed companies have seen their share price slashed in recent months and Powerleague is no different.

In some cases the falls have been warranted, looking at weakened fundamentals. However, Powerleague is very much in growth mode and although a downturn in the economy is far from good news, it should be put into context for a company with excellent long-term prospects.

Those willing to wait should see strong capital growth from the current share price although this may take time.

Powerleague is a leading operator of five-a-side football centres, with locations all around the UK and joined AIM in 2005. There is a large market in the UK for this type of football and the English Football Association says the number of adults who play small-sided football in England grew from 4.4 million in 2002 to 6 million in 2006. There are now more adults playing this type of football than the full 11-a-side game.

In February this year Powerleague announced that it had agreed to buy JJB's entire estate of Soccer Domes for a total of £17.4m, which comprised five sites and 69 pitches. This included a centre in Manchester that is the largest five-a-side centre in the world with 19 indoor pitches. Upon completion, this took the number of sites the company operated to 43.

Results for the six months ended December 29, 2007, were released in March and they were perhaps a little flat. Revenue increased by four per cent to £11.3m (2006: £10.9m) but like-for-like revenue increased by just two per cent, mainly due to falling bar income at its sites.

Profit before tax came in at £1.86m versus £1.6m last time, which translates into earnings per share of 1.47p (2006: 1.52p). In isolation this looks uninspiring but there were pre-opening costs, depreciation and interest arising from new site openings and capital expenditure that were not incurred in the comparative period.

Powerleague has a proven track record of growth and this looks set to continue. The shares have fallen from a high of 115p in July last year even though the company has continued to make great progress.

This seems mainly due to the poor performance of smaller companies in general and so at this level provides investors with a great buying opportunity in our view.

  • WARNING: Opinions expressed are the writers' judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.