Liverpool and the Auditors
Posted by John Beech on June 11, 2009
KPMG, the auditors of Liverpool, have warned of a “material uncertainty which may cast significant doubt upon the group’s ability to continue as a going concern” (1).
So, what does the qualification of a company’s accounts by its auditors imply? With a conventional business it would certainly be a cause for concern, and an indicator to potential investors to steer clear. But football is not a conventional business. In particular, a club may have its finances structured around ‘soft debt’ – long-term debt which it is not under pressure to repay, a loan from its benefactor for example.
In the Premier League, for comparison with Liverpool, here are the number of instances of the qualification of accounts in the most recently available sets of accounts:
Arsenal Football Club plc – 0 in 10 years
Aston Villa Football Club Ltd – 0 in 8 years
Blackburn Rovers Football & Athletic plc – 0 in 8 years
Bolton Wanderers Football & Athletic Co Ltd – 1 in 10 years
Chelsea Football Club Ltd – 0 in 10 years
Everton Football Club Ltd – 0 in 10 years
Fulham Football Club (1987) Ltd – 8 in 10 years (2 most recent are unqualified)
Hull City Association Football Club (Tigers) Ltd – 0 in 7 years
Liverpool: Kop Football (Holdings) Ltd – 0 in 1 year; previously Liverpool Football Club and Athletic Grounds Ltd 0 in 10 years
Manchester City Football Club Ltd – 0 in 10 years
Manchester United Football Club Ltd – 0 in 10 years
Middlesbrough Football and Athletic (1986) Ltd – 0 in 10 years
Newcastle United Football Co Ltd – 0 in 10 years
Portsmouth City Football Club – 0 in 10 years
Stoke City Football Club Ltd – 3 in 10 years
Sunderland Association Football Club Ltd – 0 in 10 years
Tottenham Hotspur plc – 0 in 10 years
West Bromwich Albion Football Club Ltd – 0 in 10 years
West Ham United Football Club plc – 0 in 10 years
Wigan Athletic AFC Ltd – 5 in 10 years (5 most recent are unqualified)
Liverpool is thus in the minority of Premier League clubs, but certainly not unique.
The most extreme case I have come across is at Hereford United, where, regular readers will recall, Chairman Graham Turner was swift to attack the business operations of Stockport County (2), and which is about to move down to League 2. For the last ten years, the club’s auditors have qualified the published annual accounts on every single occasion.
It is not simply the fact that Liverpool’s accounts have been qualified that is a cause for concern – it is the specific underlying reason for the qualification. That reason is of course the uncertainty hanging over the renewal of the loan facility for £350m due to be made next month, debt which is certainly not ‘soft’.
Nonetheless, it seems unlikely that Liverpool as a club is really in any serious danger. If Hicks and Gillett do find themselves in a position where they were forced to sell the club, it would be a more attractive club to purchase than almost any of the other clubs which are currently seeking a purchaser. There may well be some sticky moments in the next few months, but Liverpool will undoubtedly survive.