WASPS rugby club’s future remains ‘uncertain’ according to new accounts showing operating losses have trebled and debts have risen to £55.8million.
We exclusively revealed in May this year that the late-filed accounts for last year showed Wasps had falsified evidence to massage the accounts.
Auditors had intervened and breaches of important covenant pledges to bondholders were revealed concerning Wasps’ ability to pay the bondholders.
Now the newly published accounts for the Wasps group for the year up to June this year suggest ongoing problems for the former London club and the bond scheme.
Anonymous bondholders – who include ordinary fans and unknown investors – had bought out £35million of the club’s debts. They expect to receive total interest payments of £2.3million a year, and get their money back by 2022.
The covenant pledges include commitments that Wasps’ pre-tax earnings and other measures will stay at a certain ratio above those interest payments due.
Pledges were waived by bondholders in January this year after the revelations uncovered by auditor Price WaterhouseCoopers, which subsequently resigned.
But the new accounts show Wasps group’s operating losses rose to £6.3million, compared with £2.1million (‘re-stated’ after some adjustments) last year.
The net debt of £55.8million rose from £48.3million last year. It includes the bond debt, and £18.6million owned to owner and “ultimate shareholder” Derek Richardson, up from £12.9million last year.
The accounts also show Wasps’ revenues are now flatlining at around £33million, and remain offset by high expenditure including the now £13.3million wage bill.
Revenues had until now been increasing since Wasps moved to Coventry after the city council and the Alan Edward Higgs Trust’s controversial Ricoh Arena sale in 2014.
As with last year’s accounts, the new 2017/8 accounts again make clear the club remains dependent on Mr Richardson to continue to plug the ongoing losses.
New auditors Mazars have written in a statement accompanying the accounts, which are published on Wasps’ website, that there is still a “material uncertainty” that Wasps can continue as a “going concern”.
It states this is because of “uncertainty regarding the ongoing support of the company’s ultimate shareholder.”
It adds: “..Medium term forecasts show that Wasps Holdings Limited continues to be dependent on the financial support of its ultimate shareholder, Derek
Richardson, with financial contributions needed to fund ongoing cash flow requirements and to meet bond covenants.
“The directors are satisfied that ultimate shareholder support will continue to be forthcoming for the foreseeable future. The directors of Wasps Holding Limited have obtained a letter of support from the ultimate shareholder.”
The auditors add that the letter is not “legally binding”.
The auditors also state in the new accounts for the bond scheme company Wasps Finance plc that, following Wasps’ internal review, the auditors “have not identified any breaches of the bond covenants from the work performed.”
An accompanying statement in the group accounts from Mr Richardson states: “This was our third full year at the Ricoh Arena, a year which saw the Wasps Group continue to invest and mature as a business.
“We have built on the foundations established in the previous years and I am happy with the progress made during the year.
“Total revenue as reported is flat, at £32.8m (2017 as restated: £33.0m), but with underlying revenue (excluding the impact of knock-out games of £1.6m in 2017) having increased by £1.4m.”
He adds an “internal review” had been conducted after bondholders waived the covenant, adding: “The result of this review gives us confidence that our balance sheet is in a robust position to continue to support our ambitions to invest in and grow the business.”
Group chief executive Nick Eastwood maintains in the accounts report that “underlying business is strong” despite the losses.
He adds: “The change in reported profit is due to a number of specific reasons; primarily the impact of knock-out games in 2017, an increased investment in the rugby squad to ensure that the team remain competitive at the highest level, and a number of one-off items and balance sheet movements, the total of all these items being £3.5m.”
Those ‘one-off’ items in the accounts included £400,000 in legal costs to fight ongoing court action by Coventry City Football Club’s owners Sisu concerning the council’s Ricoh Arena sale to Wasps.
The accounts state the Ricoh Arena remains independently valued at £60million.
Coventry City pay £100,000 as tenants and want to continue arrangements after the latest short-term deal expires at the end of the current 2018/9 season.