Some clubs cannot get a break. Newco’s costly retail deal with Elite, which Sports Direct successfully challenged in court, is now in trouble, with the Ibrox club unable to collect £2.84m from Elite Corporation’s subsidiary, LBJ Sports Apparel. The club served proceedings on LBJ for recovery of the money.
There are two principle reasons debts are not met: the debtor believes they can escape without obligation, or the debtor is unable to meet their obligations.
LBJ’s last accounts at Companies House, for the year to 31 December 2018, show the business changed significantly from a year earlier:
Stock increased from £1.7m to £5.1m.
Money due in from debtors increased from £1.2m to £3.2m
While amount due to creditors increase from £1.9m to £7.5m
In short, the business expanded significantly in 2018.
LJB’s most recent financial year was due to end on 31 December 2019, however, the company extended their accounting period until 31 March 2020. They will now not have to report their trading position until 31 December 2020.
£2.84m is a lot of money to LBJ Sports Apparel, on 31 December 2018 they had £587k in the bank and net assets of £1.5m (which includes that £5.1m stock). The company had only £1k of share capital.
And in case you are wondering, at their last reporting date (also 31 December 2018), the parent company, Elite Corporation, had £100 cash and total shareholders’ funds of £200. That’s not £200k, or £200m, just £200. Brains Optional FC saw no red flags here.
Can you imagine what the due diligence report on Elite looked like? This stuff is too easy to avoid. We should all be suitably shocked it is heading for the courts.
And yes, if you buy from Newco’s online store, you are transacting directly with Elite – even now!!