Borders UK auditor Ernst & Young raised doubts about the ability of the bookseller to continue as a going concern, according to accounts filed at Companies House.
Former owner of Borders UK, Luke Johnson of Risk Capital Partners, resigned from the group on July 16, according to the accounts. At that time, Hilco’s investment fund Valco, backed a deal to acquire a majority shareholding in Borders UK’s parent company Bookshop Acquisitions. It said banking facilities with Landsbanki have also been replaced with facilities provided by Valco.
The accounts are for the year ending February 2, 2008. They were signed off by Ernst & Young on July 31 this year.
Ernst & Young said Borders UK faced a number of uncertainties, including that it operated in a highly competitive sector, and the sales performance was difficult to forecast, according to the Financial Times.
The retailer had a significant quarterly rent cost, which it had negotiated with the majority of landlords to a monthly rent payment. It also required the continuing support of major publishers and suppliers and the availability of credit insurance.
Ernst & Young said: “These events and conditions indicate the existence of material uncertainties which may cast doubt about the group’s ability to continue as a going concern.”
Borders UK said it had prepared the accounts on a going concern basis that assumes that the group will be able to meet its liabilities as and when they fall due for the foreseeable future.
The accounts said Borders UK’s pre-tax loss rose from £10.3m in 2007 to £13.6m in 2008. Turnover rose from £215m to £218.2m. It also showed the write-off of loans made by Borders Inc, the US group, totalling £77.9m.