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Auditors query Coventry City FC as a going concern

AUDITORS of Coventry City FC have issued an emphasis of matter over the club’s ability to continue as a going concern over the next 12 months, despite moves to stabilise the club’s financial footing.

Concerns were raised by auditors from BDO over the beleaguered League One side’s ability to service its debt if its creditors were to call in what they are owed.

While the club has received written assurances from group shareholders of their intention to continue their support by not demanding repayment of the £9.3m debt and to provide or source funding, there is “no contractual certainty” that funding will be made available nor that loans will be called for immediate repayment.

Despite that, the club’s debt position has been significantly improved, with hedge fund owner Sisu Capital wiping £61m of debt as part of the agreement that allowed the club to keep its Football League membership – the Golden Share – after one of the club’s subsidiary companies, Coventry City Football Club Ltd, went into liquidation during a bitter rent dispute with the former owners of the Ricoh Arena stadium, where the club plays.

The accounts show that debt to the owners now sits at £9.3m, while almost £2.1m of loan interest has built up. The accounts show the club intends to retain BDO as its auditor at its next AGM.

The rent dispute – over the club’s £1m per-annum-tariff and lack of access to food and beverage sales – saw the club move 35 miles down the road to a ground-share with Northampton Town FC during the 2013/14 season and into the start of this season before returning to the Ricoh.

The club suffered an operating loss of £6.87m during the year up until 31 May, 2014 – a period when the club had left the Ricoh Arena to play “home” matches at Northampton – down on the £6.93m loss for the season before at the Ricoh Arena.

However, turnover – the figure considered by the Football League when it comes to clubs setting playing budgets – was drastically down at Northampton to £3.75m for the year, compared to £6.57m at the Ricoh in the previous season.

There was an overall loss of £8.5m, compared to £7.1m the previous year, which the club puts down to “a reduction in matchday and commercial turnover arising from the ground-share situation”.

However, greatly improved terms at the Ricoh Arena offer an improved outlook for the current financial year. The current short-term deal includes £100,000 annual rent, access to half of food and drink revenue, and a portion of parking fees on matchdays.

Correction

Accountancy Age had referred to £5.6m of administration expenses incurred. Instead, they were administrative expenses. The reference has been removed. Accountancy Age apologises for any confusion caused.

 

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