K Club auditors issue warning over failure to write down assets
THE failure by the K Club to write down the value of its assets led auditors KPMG to warn the latest set of results may overstate the value of the company that owns the club.
New accounts just filed with the Companies Office show that Bishopscourt Investments and subsidiaries, which operates the five-star Co Kildare resort, recorded a pre-tax loss of €7m in 2010 following pre-tax losses of €6.5m in 2009.
The 2010 loss at the home of the 2006 Ryder Cup came as group revenues tumbled 12pc to €9.8m. Since 2010, the directors say "the group has incurred further losses on ordinary activities after interest".
In its audit report, KPMG says that the group's fixed assets are valued at €90.4m and no provision has been made for impairment. The €90.4m valuation includes a €56m value on land and buildings and €10.2m on golf course construction.
The auditors state that failure to write down the assets "is likely to materially overstate the carrying value of the group's fixed assets, understate its loss for the year and overstate retained earnings at December 31, 2010".
The auditors also state that "published information concerning comparable properties indicates very significant reductions in value have been experienced".
In its report, dated December 14 last year, KPMG says that in view of the failure to provide for the impairment, in their opinion, the financial statements do not give a true and fair view of the state of the group's affairs.
However, a separate note attached to the accounts states that the directors, including Michael Smurfit, believe that "the current market conditions are not relevant to the value of the fixed assets as they do not intend to dispose of them in the short-term, but retain them for a future date when market sentiment is more favourable".
Last year, Dr Smurfit purchased developer Gerry Gannon's 49pc stake in the K Club for a reported €40m to give him full control of the business.
A note attached to the accounts states that in April 2012 the company successfully concluded discussions with NAMA in relation to the debt facilities included in the company's balance sheet.
The business had bank loans totalling €55m at the end of December 2010.
However, the directors' report, dated December 14, 2012, states that the group now no longer has external bank debt arising from a loan "from certain of the shareholders (sic)".
The filings show that the group recorded a €4.8m operating loss in 2010 and interest payments of €2.2m added to the losses.
The K Club did not respond to a request for comment.