Auditing own-goal sees Goals Soccer Centres issue profit warning
Scottish five-a-side football firm Goals Soccer Centres has seen its share price slump, following its issue of a second profit warning in the wake of uncovered accounting errors. The company replaced long-time auditor KPMG with BDO in the Summer of 2018, with the newcomers soon making significant adjustments to the level of profit expected for the financial year.
In June 2018, Goals Soccer Centres announced that following a competitive tender process, it had appointed BDO as its auditor with immediate effect. Less than a year later, the firm has issued a second profit warning, following the uncovering of accounting errors. Shares in the pitch operator, which has more than 50 sites in the UK and California, crashed by 46% in initial trading in response to the news.
According to the release from the company, its 2018 full-year results are due to come in at "materially below expectations", while its intended reporting date of 12 March has be delayed. Goals Soccer Centres is a leading operator of outdoor small-sided soccer centres with over 50 sites in the UK and California.
Sports Direct boss Mike Ashley holds a significant stake in the East Kilbride-based firm, which had already cut its profit guidance for the full-year 2018, as of January. The firm said it believed that figure to be between £4.3 million and £4.5 million on an adjusted basis, following a review from BDO on how the firm’s accounts are calculated. Going forward, Goals said it would also be more prudent in how it calculates its numbers.
Those estimates are now also in question, and with substantial debts to its name, the footballing company could be in a tricky situation. Goals Soccer Centres has about £29 million of debt, but is allowed by its bank to have borrowings of three times its earnings before tax and other adjustments. Should it see a dip in those earnings, that agreement could be imperilled.
After confirming the "accounting adjustments" were of a non-cash nature, Goals issued a statement on its relationship with the Bank of Scotland. It confirmed Goals is in “discussions with the bank with a view to agreeing renegotiated facilities.”
Prior to the appointment of BDO, KPMG was the long-time auditor of Goals. With a myriad of accounting scandals having hit the Big Four operator over the last year, KPMG can surely expect more awkward questions to be asked of its auditing performance. Just months earlier, a long-anticipated review by the Financial Reporting Council stated it saw no need to break up the Big Four in terms of potential conflicts between their accounting and consulting wings – but with the watchdog in line to be replaced with a new statutory regulator, another case like this will likely see that debate re-emerge in the near future.
