New accounts signed off

[Simon Pieman]

No, the accounts are approved by the director(s)

Auditors give an opinion on the accounts, whether they give a "true and fair view" and are not "materially misstated". This opinion may be qualified, unqualified or adverse.

It doesn't sound right, but the unqualified opinon is the best one.

[Simon Pieman]

Interesting...unqualified with an "emphasis of matter paragraph" which draws attention to note 1 of the financial statements but does not affect the audit opinion.

The company's ability to continue as a going concern is dependent on the support of the family of the controlling party, the support of other creditors, and the success of the compnay voluntary arrangement (CVA) which is due to complete in August 2007 with a final payment of £900,000 payable by the 30th June 2007. The Company is considered unlikely to meet this deadline, but the CVA supervisor has stated that the company can apply for approval from the CVA creditors to revise and extend the arrangement to deal with this expected shortfall. These conditions indicate the existence of a material uncertainty as to the company's ability to continue as a going concern. In view of the significance of this uncertainty we consider that it should be drawn to your attention but our opinion is not qualified in this respect.

In our opinion the financial statements give a true and fair view of the state of affairs of the compnay as at £! May 2005 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985.

NOTE 1 in the accounts:

These finanical statements have been prepared on a going concern basis.

In August 2002 the company entered into a five year Company Voluntary Arrangement (CVA). To date, all the accounts due under the CVA have been paid. If the CVA successfully completes in August 2007, approximately £900,000 of the compnay's liabilites will be written off. However, if the CVA fails at any point in time, the CVA liabilities will be due immediately in full [this refers to the full £5,383,334]. Therefore, these liabilities are included in full as amounts due within one year in the financial statements.

The company is unlikely to have sufficient funds to pay the CVA instalment of £900,000 by 30th June 2007. However, the directors have taken advice from the CVA supervisor, who has stated that the company can apply for approval from its CVA creditors to revise the arrangement to deal with the expected shortfall in funds.

The company is a subsidiary of Swindon Town FC Limited. The company has a Facility Agreement with Swindon Town FC Limited, by which the company has unlimited access to funds for working capital until 30th August 2008. Sir Seton Wills has, within the same agreement, guarenteed to a third party the obligations of Swindon Town FC Limited to the company and has confirmed his intention to use his best endevours to provide financial support to Swindon Town FC Limited to tnable it to meet its obligations to the company under the Facility Agreement.

Note 10:

Included in creditors due within one year are liabilities of £5,383,334 (2004 £5,383,334) which are part of the Company Voluntary Arrangement (CVA) as described in note 1. Under the terms of the CVA £100,000 of this is payable within one year from the year end. Should the CVA fail, the whole amount becomes due immediately.

[Simon Pieman]

The holding company accounts make for interesting reading. Firstly the auditors have given an adverse opinion. To quote the Auditing Practices Board para.39 of (International Standard on Auditing) ISA 700
"an adverse opinion should be expressed when the effect of a disagreement [with the management] is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements"

Secondly, the adverse audit opinion for the year ended 31 May 2005 shows the shares held in STFC to be worth ZERO. Secondly, it suggests that the loans from STFC and Shaw Park Developments are wholly irrecoverable:

ADVERSE OPINION

Included in investments are shares held in the company's subsidiary of £1,081,890. In our opinion the value of the investment should be reduced to zero based on the severe net liability position of the subsidiary. Included in other debtors after more than one year are loans of £835,033 and £974,950 receivable from the company's subsidiary Swindon Town Football Company Limited and joint benture company Shaw Park Developments Limited respectively. In our opinion a full provision should be made against the value of these loans because they are considered to be wholly irrecoverable. This is based on the fact that both companies are loss making with net liability positions, and that included in the assets of Shaw Park Developments Limited are substantial loans dues from Swindon Town Football Company Limited. If provisions had been recognised against these amounts, the effect would have been to increase the loss for the year ended 31 May 2005 by £2,891,873 and to create a balance sheet defecit of £1,576,504.

In view of the effect of the failure to recognise provisions against the assets referred to above, in our opinion the financial statements do not show a true and fair view of the company's state of affairs as at 31 May 2005 and of its loss for the year ended. In all other respects, in our opinion  the financial statements have been properly prepared in accordance with the Companies Act 1985.

[Samdy Gray]

They're certainly cutting the CVA fine then, just over a month and if they haven't paid it or renegotiatied then we have to cough up £5 million. Fucking great.

[Simon Pieman]

Um to try and explain in simpler terms (someone asked)...

The STFC accounts are unqualified...this means they present a 'true and fair view' i.e. they are an accurate reflection into the state of affairs of the company at that given time. There is an "emphasis of matter" paragraph (about the CVA) which is just there to further emphasise a point, although it doesn't change the fairness of the accounts.

It states the club cannot pay the £900k CVA payment but are able to continue as a "going concern" (trade for the forceable future) because the CVA supervisor says he will be able to renegotiate it. Should it fail however, the club is liable for over £5m.



The holding company accounts give an "adverse opinion". This means that the auditors have disagreed with the management (Directors) over items in the accounts, to the extent that it means they do not give a true and fair view. In other words, according to the auditors the holding compnay accounts are bogus. This is worse than a "qualified opinion" which would state apart from a particular item(s) the accounts provide a true and fair view.

The points referring to the adverse opinion is the investment (share value) of the holding in STFC. The auditors say it should be reduced to zero (i.e. worthless) because of the substantial net liability of the football club (they owe shit loads of money to many creditors). Furthermore, the auditors feel the holding co should have written off the loans (money owed to the holding company) from STFC and SPD. This is because they are unlikely to be paid. So basically the holding company should accept those loans are gone as they won't be paid.

If all of these were written off, then the holding co would have an increased loss of £2.9m and would make a negative balance sheet position of £1.6m.

[jayohaitchenn]

uuurururrrggg braiiiiiiiiiiiiiiin freeeeeeeeeeeeeeeeeeeeeeezeeee

[RobertT]

Si Pie, as an acocuntant, would you be advising a company in that situation to cut and run?

Looking at those statements makes me think we are in real trouble and given we should really combine the two companies to get the overall picture they would present what I think must be the worst set of accounts ever to have been produced by STFC.

Holding co making a £2.9m loss and subsidiary making £1.2m operating loss, clubs shares worthless, £5m+ maybe due in a few months.

[Fred Elliot]

Thats about the long and short of it Rob

[pauld]

Si Pie, as an acocuntant, would you be advising a company in that situation to cut and run?

Looking at those statements makes me think we are in real trouble and given we should really combine the two companies to get the overall picture they would present what I think must be the worst set of accounts ever to have been produced by STFC.

Holding co making a £2.9m loss and subsidiary making £1.2m operating loss, clubs shares worthless, £5m+ maybe due in a few months.

 :shock: Leaving aside the fact the club appears to be well up the creek for one moment, what's the impact of the disagreement between the company and the auditors? Is it as simple as that - ie a disagreement - or are the auditors saying the directors of the holding co have basically misrepresented their financial position in the accounts? And if the latter, erm, isn't that quite a serious matter?

[Fred Elliot]

Si Pie, as an acocuntant, would you be advising a company in that situation to cut and run?

Looking at those statements makes me think we are in real trouble and given we should really combine the two companies to get the overall picture they would present what I think must be the worst set of accounts ever to have been produced by STFC.

Holding co making a £2.9m loss and subsidiary making £1.2m operating loss, clubs shares worthless, £5m+ maybe due in a few months.

 :shock: Leaving aside the fact the club appears to be well up the creek for one moment, what's the impact of the disagreement between the company and the auditors? Is it as simple as that - ie a disagreement - or are the auditors saying the directors of the holding co have basically misrepresented their financial position in the accounts? And if the latter, erm, isn't that quite a serious matter?

Massively massively serious Paul *shudder*

[sonic youth]

A little bit of "financial re-engineering" and everything will be fine :?

[genf_stfc]

let me see if i have this right:

does this then mean that the holding company is actually worth less than the club, although both of them are actually worth less than 0 ?  so in any potential takeover, would the buyer buy the club off the holding company (enabling the holding company to perhaps carry on trading), or buy the holding company (which has more liabilities and is a bigger risk, so should cost less up front) ?  or something.

I suppose as well that this is the clubs status at end of 2005 if i'm correct, so presumably the situation now could be completely different and probably lots worse..

[Fred Elliot]

No

Any viable take over SHOULD include the holding company as well.

[Samdy Gray]

The holding company still own the shares (albeit they are worthless) so any takeover would need to buyout SSW and the holding company.

[genf_stfc]

but couldn't the holding company flog off the club as a going concern, or whatever its called ?