Five-a-side football business flags up accounting errors
Goals Soccer Centres, a Scottish company operating five-a-side football clubs across the UK, has revealed it now expects its 2018 full year results to be materially below expectations, after a business review identified a number of accounting errors
8 Mar 2019
Based in East Kilbride, the company operates 46 ‘small-sided’ football clubs across the UK, as well as four clubs in the US and employs over 700 people.
It has now released a statement to the Stock Exchange, saying: ‘As part of the review of the results for the financial year ending 31 December 2018, the board, together with the auditors, are working to resolve certain accounting errors, and are reviewing some accounting practices and policies.
‘It is likely that the board will take a more prudent approach both for 2018 full year results and going forward.
‘As a result, the board now expects the 2018 full year results will be materially below expectations and that the reporting date (previously 12 March 2019) will be delayed.
‘Whilst the majority of these accounting adjustments are of a non-cash nature, this does nevertheless mean that the company will have exceeded one of its banking covenants at 31 December 2018. We are in discussions with the bank with a view to agreeing re-negotiated facilities.’
In a trading update it posted in mid-January, Goals said 2018 had been ‘disappointing’, citing the impact of the lower margin in ancillary activities such as food and drink and children’s parties, and the slower-than-anticipated growth rates in the US, as well as the poor weather in the first half of the year.
At the time it forecast full year group adjusted profit for 2018 of between £4.3m to £4.5m, while net debt at the year-end was approximately £29m.
In its latest regulatory announcement, Goals said trading in the first two months of the year has been strong with an increase in like-for-like sales, in both the UK and US, over the comparable period in 2018.
The company also reported significant changes to its leadership and management. These include the appointment of Martin Johnson as interim chief financial officer, taking over in early February. Johnson was previously CFO of Great Rail Journeys Ltd.
Goals changed it auditor in July of last year, replacing KPMG with BDO. According to the 2017 annual report, KPMG was paid £50,000 for auditing the financial statements, plus an additional £27,000 for associated assurance and tax-related services.
Paul Hickman, analyst at Edison Investment Research said: 'From the brief statement it appears that there are two issues. First there are accounting errors, and secondly there are accounting practices and policies which the board is reviewing.
‘Importantly, the company says that “the majority” of the accounting adjustments are non-cash, although that implies that a minority of them do affect cash. However, the wording implies that this is not a fraud issue on the lines of Patisserie Valerie.
‘However, the restatement of accounts on other measures (such as profitability) puts Goals in breach of bank covenants, an issue that shareholders thought it had put behind it. Forced negotiations with banks in this situation invariably result in punitive terms.’
Report by Pat Sweet