Goals Soccer Centre accounting ‘black hole’ deepens

Goals Soccer Centre plc, which de-listed from AIM following the discovery of irregularities in its accounts, has warned the VAT misdeclarations could be ‘materially higher’ than the £12m originally announced

At the time the accounting ‘black hole’ was uncovered in March, Goals said it believed the misdeclaration of VAT was estimated at £12m, excluding interest and penalties.

The East Kilbride-based company then conducted an investigation into the historic accounting policies and practices in the recognition of revenue and the preparation of financial statements. This found evidence of ‘improper behaviour within the company’, involving ‘a number of individuals for a period since at least 2010’.

In an August update, the company’s statement named Keith Gow, who co-founded Goals and led its 2004 float before stepping down as CEO in 2017, and  Bill Rogers, who was CFO until early February this year, as among those executives whose actions were being questioned.

Now, Goals has said its investigations indicate the actual liability ‘may be materially higher than that previously announced dependent on the approach and working assumptions that could be adopted by HMRC in assessing the misdeclaration.  Finalisation of the amount of the liability will ultimately require agreement with HMRC or determination by a competent tribunal.’

Late financial statements delayed

The company is also unable to provide a definitive timetable regarding publication of its full year 2018 audited financial statements, because of the complexities brought up by the investigation.

The key complexity revolves around the significant number and quantity of material correcting accounting entries required to enable full re-statement of the December 2016, 2017, and 2018 balance sheets.  Goals says this workstream requires significant resource and time due to the nature, quantum and time period covered by the accounting issues identified.

Goals changed its 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.

The forensic division of BDO has been asked to analyse historical accounting errors and policies. In addition, Goals has hired RSM and a specialist VAT consultant to assist in its ongoing discussions with HMRC. More recently, it took on Deloitte to work alongside its advisers and lenders in assessing its future corporate options.

Earlier this month, Goals announced it had received a ‘preliminary and highly caveated’ possible cash offer from Sports Direct International at 5p per share, well below the 27.2p closing price on Goals’ last day of trading. Sports Direct CEO Mike Ashley is the largest shareholder in Goals with a stake of just under 19%. The discussions about the bid are ongoing and are unaffected by the de-listing.

 

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