It sits under parent company Wasps Holdings Group (WHL), which also consists of Wasps Holdings Limited, which runs the rugby club, Ricoh arena business Arena Coventry Limited and events company IEC Experience Limited.
Wasps was also criticised by the auditors over “falsified” information concerning a financial irregularity that saw the accounts delayed by more than three months. Wasps Group, which runs the rugby club and the Ricoh Arena , overstated its earnings after declaring a £1.1million cash injection from “ultimate shareholder” Derek Richardson as revenue instead of as a capital contribution.
The report said: “During the year, WHL [Wasps Group] recognised income of £1.1m relating to a risk mitigation contract.
“Management considered that this arrangement was with an independent third party, and that there was commercial substance to the transaction.
“We focused on this transaction as our initial audit procedures identified that receipts from this arrangement came from Derek Richardson, the company’s ultimate controlling party, and we had questions as to the commercial substance of the transaction. In the course of our audit enquiries into the above, we were provided with evidence which our testing revealed to have been falsified.
“We undertook additional audit procedures to establish the facts behind the transaction and to determine whether other key audit evidence was reliable.
“Our extended testing did not identify any other issues with the evidence supporting the financial statements of WHL.”
The report also revealed that one of the group’s auditors – PricewaterhouseCoopers – had announced it was “resigning” following the accounting irregularities.
The discrepancy was picked up by auditors – who also decided the payment came too late to go in the 2017 accounts and delayed the filing of accounts for Wasps Finance Plc for the year ending June 30, 2017.
The accounts should have been with Companies House by the end of 2017.
And because they were not it also meant the group had breached the rules of its £35million bonds scheme – which have been popular with investors who earn a fixed gross interest of 6.5 per cent a year until 2022, paid semi-annually.
Wasps Finance Plc, which was set up to handle the bond scheme launched in April 2015, had to ask bondholders to waive the breach in its rules on the ratio of earnings to costs at a meeting and replenish the interest reserve account by way of shareholder investment on January 19, delaying the accounts.
Talking about the falsified evidence, a spokesman for the club said: “This was an isolated incident, entirely at odds with our policy of maintaining the highest standards of governance. The matter has been addressed directly and as we announced in December, a number of measures have been put in place to strengthen the robustness of the Group’s reporting and accounting procedures.”
The receipt of interest receivable and compliance with the Retail Bond financial covenants for Wasps Finance Plc are dependent upon the performance of parent group – Wasps Holdings Group (WHG). The group has net assets of £13.6million but made a loss of £3,809,000 in the current year. Last year, losses totalled £6,370,000. WHG has current net liabilities of £7,877,000, up from £7,202,000 at the end of 2016.
The amount of cash held by Wasps Finance Plc at the bank and in hand fell slightly from £1,772,000 at the end of 2016 to £1,139,000 at the end of 2017.
Its debt consists of a £35million tradeable bond held on the LSE Retail Bond market.
This was an isolated incident, entirely at odds with our policy of maintaining the highest standards of governance.