Hamptons Takes A Huge Financial Hit
The 2021 accounts for Hamptons Sports and Leisure Ltd have been filed online, you can view the full version here. They cover the Covid lockdown, and as you would expect, the club took a massive hit financially.
But here’s the main details, and we’ve noticed two areas of concern.
A.The Intangible Assets Have Been Revalued
An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets. Intangible assets exist in opposition to tangible assets, which include land, vehicles, equipment, and inventory.
We’re really struggling to think what could’ve been added to the intangible assets (during lockdown) to raise the valuation from £25k to £541K
There are various ways of assessing Intangible Assets, some are a lot more accurate than others. We would suggest that the £541k valuation is a way over the top, and exists mainly to make the balance sheet look less alarming to donors.
B.Retained Earnings Continues In It’s Negative Trend
Retained earnings are an important concept in accounting. The term refers to the historical profits earned by a company, minus any dividends it paid in the past. The word "retained" captures the fact that because those earnings were not paid out to shareholders as dividends they were instead retained by the company. For this reason, retained earnings decrease when a company either loses money or pays dividends, and increase when new profits are created.
In Hampton’s case the Retained Earnings indicate a further loss over the reporting period of £192, 844, that’s an eye popping £3,727.77 per week.
And that’s with a further loss of another 8 jobs, with the Furlough Scheme paying a huge chunk of the remaining staff wages, and grants or loans from the government to help businesses.
Alarm Bells Should Be Ringing
Generally speaking, a company with a negative retained earnings balance would signal weakness because it indicates that the company has experienced losses in one or more previous years.
A similar loss in the next reporting period, would reduce the value of the generous donor’s £2.35 million investment to little more than the value of the land and property (£1.4 million)
Shutting down the primary revenue stream (the bars) without a reliable replacement, means that the business is not sustainable.
It’s clear to us that the company directors are influenced by their faith, and continue to make poor business decisions.
Does the latest controversy help the business ?
Of course it doesn’t. And copping an attitude on social media doesn’t either. Here’s a free tip for the owners:
Learn to communicate with your customers and neighbours
Be open and transparent
Address the concerns of residents.
Even then it may be too late
KBO