21st May, 2018

UPDATED: Wasps' future 'uncertain' and evidence 'falsified', say auditors in new accounts, as bond price falls

Les Reid 3rd May, 2018 Updated: 4th May, 2018

WASPS rugby club’s auditors are uncertain about its future amid ongoing financial difficulties and “falsified” evidence, newly published accounts show – and the price for Wasps bonds propping up the club has fallen today.

Independent auditors state there is “material uncertainty” over whether Wasps can continue as a “going concern”.

It comes as Sky News reported this morning that one of the ‘big four’ auditors, PricewaterhouseCoopers (PWC), has subsequently resigned as independent auditors to the Wasps group, following the group’s previously reported accounting irregularities.

The accounts for the year up to June last year – published today on Wasps website but still marked as ‘Overdue’ on Companies House website – record operating losses of £1.4million, down from £6.2million.

Auditors PwC provided a ‘Material Uncertainty Relating to Going Concern’ statement accompanying the accounts, dated today, which states: “The directors’ financial forecasts for the 15 months from the date of signing the financial statements show that the group is dependent on continued financial support from its shareholder to remain within its committed facilities and to meet the retail bond covenants.

“There can be no certainty that this support will continue. This condition indicates the existence of a material uncertainty, which may cast significant doubt about the group and the company’s ability to continue as a going concern.

“The financial statements do not include the adjustments that would result if the group and company were unable to continue as a going concern.”

As we have reported, the accounts for Wasps Finance plc – which administers Wasps’ bond scheme – were due to be filed on December 31, and Companies House took enforcement action because of their lateness, a criminal offence.

We recently reported that five Wasps companies’ accounts were overdue after March, including for Wasps Holdings Limited – which runs the rugby club.

The bond scheme was set up in 2015 to transfer the Wasps group’s £35million debts into bonds. Anonymous people and organisations bought the bonds.

They are due to receive 6.5 per cent annual interest on the bonds, and get their money back in 2022.

The bonds can also be bought and sold on the London Stock Exchange.

The bond price fell to 87p in the pound this afternoon – from 102p on March 26 – meaning there is a heightened risk that any purchaser of the bonds would not get their money back.

As we have reported, Wasps had informed bondholders ahead of a meeting in January that it had broken a ‘covenant’ pledge to them – relating to the ability to pay back interest to bondholders of £2.2million a year.

It followed an accountancy ‘error’ found by auditors relating to £1.1million payment by shareholder Derek Richardson.

The auditors use damning language in the accounts published today, concerning “falsified” evidence.

Its ‘Material Uncertainty Relating to Going Concern’ statement adds: “The group and company are financed by a retail bond issued by Wasps Finance Plc which contains financial covenants based on the financial performance of the group.

“During the year, the group failed to meet one of these covenants following an audit adjustment which resulted from a capital contribution from the group’s shareholder being incorrectly treated as revenue based on evidence which was found to have been falsified following override of certain management controls.

“This covenant breach was subsequently waived and the covenant amended to allow shareholder contributions to be included in the covenant circulation.”

Wasps say they will strengthen the robustness of the Group’s reporting and accounting procedures.

Today’s accounts also reiterate the bonds are secured against the Ricoh Arena, which a recent valuation estimated to be worth £60million, £12million more than previously.

It is despite cracks recently been discovered in the stadium’s structure, attributed to “ground settlement”. Further covenants relate to the Ricoh’s value.

We have reported former London Wasps’ ongoing annual losses since moving to the city from Wycombe after purchasing the Ricoh Arena company on a huge 250-year lease from Coventry City Council and the Alan Edward Higgs Trust in 2014.

Today’s accounts show the pattern continues of rising revenue, but high costs eating into revenue to produce negative bottom-line figures.

We have approached Wasps for comment.

UPDATE: Wasps have now issued the following statement via a recently hired PR company, Tulchan Communications Group, based in London: “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.”

This evening, we invited a further Wasps response to the auditors’ notion that evidence was ‘falsified’, and the national report that PwC has resigned as auditor to Wasps.

The PR company told us no further statement will be issued regarding the ‘falsified’ evidence.

It provided a statement, which it issued today to the Stock Exchange, confirming Wasps’ intention to employ new auditors Mazars for the following year’s accounts, “subject to completion of Mazars’ new client procedures”.

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