A GOING CONCERN warning has been issued by auditors of Coventry City Football Club after fears were raised over the football club’s growing losses.
The 1987 FA Cup winners were relegated to League One from the Championship last season and recorded losses of £6.7m last year, compared with £3.1m in 2010.
Auditors from BDO said there was a “fundamental uncertainty” over a range of issues relating to its financial position, including falling revenue after relegation to League One.
In his report, auditor Julian Rye attached an ‘emphasis of matter’ note, saying he was concerned that the club was struggling to reduce its wage bill and a host of other problems.
Rye added: “These conditions … indicate the existence of a fundamental uncertainty which may cast significant doubt over the company’s ability to continue as a going concern.”
The struggling club – which was in the top flight for 32 consecutive seasons to 2001 – has recently had a transfer embargo lifted after it filed its accounts this month, five months late.
The club’s owners – a Mayfair-based hedge fund called Sisu – have been involved in negotiations to acquire a 50% stake in its home ground, the Ricoh Arena.
It has also withheld its latest instalment of rent for the stadium amid negotiations to bring down the £1.2m annual rate.
The accounts to the year ending 31 May 2011 showed that the club increased its turnover over the year in spite of a fall in match day income, but still recorded pre-tax losses of £6.7m.
BDO’s auditors expressed reservations over the club’s ability to reduce its payroll, with no conclusion reached on the matter.
The club’s directors remain committed to allowing manager Andy Thorn to compete in the transfer market, although the “realisation of cash flows is not yet certain”.
The club, though, played down fears over its immediate future.
In a statement, Tim Fisher, Coventry’s chief executive, said much of the work to rectify the situation was already underway.
He said: “I would certainly hope that no one has doubted the severity of our position and certainly the figures show the size of task we face in turning the club around and stemming the tide of historical failure stretching back longer than a decade.
“Added to this, we obviously now face a severe dip in income and we are in the midst of making business changes so we can hopefully rebuild the club in a sustainable and successful way.
“Our negotiations with the Higgs Charity and the City Council over a possible future stake in the Ricoh Arena are a vital part of that.
“We hope all supporters, local businesspeople and the city’s stakeholders will work together with us to help the club turn its fortunes around and get the club back on the path to success in the future”
Commissioning and preparing an asset valuation for financial reporting should involve a three way dialogue between the client, valuer & auditor
As a change-agent, internal audit has a lot going for it, but many internal audit functions need to upgrade their skills.
EY has been retained as auditors of Britvic following a competitive tender process, the soft drinks company has said
Audit committee chair is now very much the lynchpin of good company governance, and can consequently expect more public scrutiny