Goals gets investor kicking as account errors hit profits

Fresh blow for East Kilbride company overshadows news of improved sales

By Scottish five-a-side football firm Goals Soccer Centres was shown the red card by investors yesterday after the firm warned that profits will be “materially below expectations” following the discovery of accounting errors.

The East Kilbride-based company, which operates 50 five-a-side sites in the UK and US, said the group’s board and its auditors were working to resolve certain accounting errors for the financial year to the end of 2018. In addition, they are reviewing some “accounting practices and policies”.

As a result, the firm expects full-year results to be materially below expectations and the reporting date of 12 March – this coming Tueday – will now be delayed.

In a trading update, the group, in which Mike Ashley’s Sports Direct business empire owns a significant stake, noted that while the “accountimplies ing adjustments” are of a noncash nature, it means Goals is in breach of one of its banking covenants with Bank of Scotland.

“We are in discussions with the bank with a view to agreeing re-negotiated facilities,” it added.

KPMG was the group’s auditor until June 2018, when the firm was replaced with BDO.

Yesterday’s development is a fresh blow for the company which in January warned that profits would be lower after a revamp of its offering resulted in higher costs.

In its latest stock market update, it confirmed that trading in the first two months of the year had been “strong” with an increase in like-forlike sales, in both the UK and US, over the comparable period in 2018.

Paul Hickman, an analyst at Edison Investment Research, said: “Importantly, the company says that ‘the majority’ of the accounting adjustments are non-cash, although that implies that a minority of them do affect cash.

“However, the wording that this is not a fraud issue on the lines of Patisserie Valerie.

“The restatement of accounts on other measures (such as profitability) puts Goals in breach of bank covenants, an issue that shareholders thought it had put behind it. Forced negotiations with banks in this situation invariably result in punitive terms.”

In January, Goals said that steps to improve food and drink sales in centres and its children’s birthday party offering had led to “materially higher” costs in 2018.

That resulted in a £300,000 fall in group profits in the second half. Labour costs also increased by £300,000 and other costs increased by £200,000.

The firm said that it expected investments to improve its arenas to continue to deliver increased sales but it also reduced its profit guidance in the current year by £600,000 in light of the current economic and political uncertainty in the UK.

Chief executive Andy Anson said it was frustrating that a number of cost overruns had impacted 2018 profits.

sreid@scotsman.com