Troubled Goals acquired by rival and private equity firm
Firm has pitches in UK and US
Troubled five-a-side- football pitch operator Goals Soccer Centres has been acquired in a pre-pack administration safeguarding the jobs of 750 staff.
Northwind 5s, a new company backed by Inflexion Private Equity and Soccerworld has bought the business after Deloitte was appointed to sell it.
The board and management of Goals have been attempting to resolve a misdeclaration of VAT and other serious accounting issues, dating back several years.
In a statement the company said: “Every avenue has been fully explored to deliver the best possible outcome for all stakeholders in the business.
“However, ultimately the only available solution, given the indebtedness of the company, the unresolved VAT situation and inappropriate accounting, was to accept that the company needed to delist and for the company to undertake an accelerated M&A process to seek a buyer for the business and its assets.
The board believes mis-declaration amounted to £13.2 million, plus interest and any penalties HMRC deem appropriate.
A separate team of forensic auditors from BDO, consequently carried out a detailed investigation of Goals’ historical accounts and the final report was received by the board in late September.
In parallel with this investigation, an internal investigation was carried out by the company’s new interim CFO.
These reports identified some very serious issues dating back to 2009. This included the apparent creation of false fixed assets, false revenues and fake invoices. They also identified the wrongful payment of cheques to individuals associated with the company, in 2014. The board now believes that the profits of the business may have been overstated by as much as £40 million since 2009.
This series of reports, written by the company’s tax advisers, RSM and an independent tax consultant, BDO and its interim CFO were only completed in early October. This was due to the complex nature of the work involved and the on-going discovery of new issues. The reports have recently been handed over in full to the relevant regulatory authorities and law enforcement agencies.
As a result of these findings, the expected EBITDA for 2019 is now around £3.8 million excluding significant advisor fees associated with managing the current issues. This takes into account the required changes in accounting methodologies.
Goals bank debt is approximately £30 million, provided by lenders Bank of Scotland. The company has been in breach of key banking covenants for some months, as previously disclosed. The board of Goals has therefore been working closely with both its lenders, and its lawyers, BDB Pitmans, throughout this time.
The board was given clear advice in August that the business appeared to be technically insolvent and that on-going trading was wholly reliant on the support of the Bank of Scotland. As such, the board was advised that “creditors’ interest” duties had arisen. The board was therefore required to consider the interests of creditors as well as those of the company.
Goals said it had received a preliminary, but “highly caveated” offer, for the shares of the company from Sports Direct International. The board, advised by Canaccord Genuity and assisted by BDB Pitmans, its lawyers, co-operated fully with Sports Direct International and provided them with access to the board members, key personnel, the bank, all financial information (including financial projections) and other relevant information to permit them to formulate an offer as prescribed by the Takeover Code.
Despite this full co-operation and the provision of all relevant information to Sports Direct International, “regretfully no offer was made.”
It is with regret that the funds generated through the sale do not fully compensate even the lenders to the company.– Goals statement
The board also engaged Deloitte to advise on all options available to the company and to plan for the contingency of a possible administration of the company. The board concluded in late August, with recommendations from Deloitte, that the only feasible outcome was a sale of the business of the Company and its assets. This was exacerbated by the uncertain nature of the VAT-related issues and amounts owing to creditors.
The board said: “It is with regret that the funds generated through the sale do not fully compensate even the lenders to the company.”
It has already taken steps to preserve the company’s legal rights to compensation from parties who might be liable through negligence or more direct involvement, and entered into standstill agreements with former directors and also with its auditors of 15 years, KPMG.
The board is hopeful that action will be taken to hold those responsible to account, where appropriate. The board members would be supportive of any such action.
It is very unlikely that shareholders of Goals will receive any value for their shares.
“This outcome is a matter of deep regret for the board, but as previously outlined the nature of the inappropriate accounting (going back to at least 2009) and the VAT-related issues means the business has been significantly less profitable than previously believed.
“At each and every step of the way the board has done everything in its power in combination with its advisers to ensure that it took steps to deliver the best outcome for the company and its stakeholders.”