Going Concern Modifications Issued to Large European Companies amid Pandemic

Posted by Jessica McKeon - Dec 03, 2020

This analysis was originally posted by Audit Analytics.


Going concern modifications have been more common during the COVID-19 pandemic than in recent years. The number of large companies worldwide whose future is uncertain has been staggering, but not surprising due to the lockdowns and other difficulties the pandemic has brought in 2020.

In this post, we look at the largest companies by market cap listed on European stock exchanges with going concern modifications in their audit opinions since the pandemic hit.

European Companies with Going Concern Modifications


Travel Restrictions

Atlantia SpA [ITA:ATL], the Italian infrastructure holding company, had its first going concern modification signed on 29 April 2020. The opinion, signed by Deloitte, cites legal issues “regarding the revocation, forfeiture or termination of motorway concession arrangements…as well as liquidity and financial risks due to COVID-19 travel restrictions” as the causes of uncertainty relating to going concern.

The company has been under fire in recent months, as the former CEO and two former managers are under house arrest pending fraud and transportation safety charges relating to a bridge collapse that took over 40 lives in 2018. Despite these troubles, and a reported loss of €718 million in the first nine months of 2020, Atlantia has rejected at least one offer from investor group CDP for Atlantia’s 88% interest in Autostrade per l’Italia, the motorway management arm of the Atlantia Group.

Supply Chain and Customer Demand

Aston Martin Lagonda Global Holdings PLC [LON:AML], a luxury sports car manufacturer, received its first going concern modification in EY’s opinion signed 26 February 2020. While the President and CEO named COVID-19 as having the “potential to impact both the supply chain and customer demand in China and other markets,” the auditor’s going concern modification was based solely on the need for approval by shareholders of a £317.6 million capital raise.

In late October, Aston Martin announced a technology and shareholding partnership with Mercedes-Benz AG. In exchange for access to certain Mercedes-Benz technologies, including “next generation hybrid and electric powertrains,” Mercedes will be granted new shares in Aston Martin over three years with a maximum holding of 20% and a total value of £286 million.

Challenges from the UK Lockdown 

The lockdown has hit the hospitality industry especially hard. Grant Thornton issued a going concern modification on 16 October 2020 for FTSE 250-listed pub and hotel chain, J.D. Wetherspoon [LON:JDW]. 

“…due to the impact of the Covid-19 virus on the economy and the hospitality industry and the ongoing uncertainty surrounding current operating restrictions, such as social distancing measures and reduced pub opening times. The Company has agreed replacement covenant tests up to and including 25 July 2021 but beyond this date, there is material uncertainty as to whether financial covenant tests will be satisfied, or whether further waivers will be agreed by lenders.”


For the financial year ended 26 July 2020, Wetherspoon reported losses before tax of £34.1 million compared to a profit in the previous year of £102.5 million. On 11 November 2020, they reported a 15 week like-for-like sales decrease of 27.6%. 

When PwC signed the Cineworld [LON:CINE] opinion on March 12, the lockdown had not yet begun. PwC referenced the Cineplex deal that was in progress that resulted in $2.3 billion in increased borrowings and stated,

“In the event that admissions were to be restricted or cinemas were to be closed…then the group would be in breach of its covenants and would need to negotiate a waiver…”


The Cineplex deal was terminated on June 12 following lockdown, but the company continued to search for the necessary liquidity to continue.  On 23 November 2020, they announced that they had obtained sufficient liquidity to continue through the COVID-related closures.


Pressure due to Oil Prices

Finally, Tullow Oil PLC [LON:TLW], a British crude oil producer, was issued its first going concern modification on 11 March 2020 for the financial year ended 31 December 2019.  Deloitte referenced generation of sufficient cash flows to meet loan repayments and covenants as well as cash flow pressure due to oil price volatility. Tullow has managed the crisis by selling their Ugandan assets to French firm, Total [XPAR:FP] for $575 million, after 16 years of involvement in the region. 

The wording of Tullow’s 2019 going concern modification is strikingly similar to the 2015 key audit matter “Going concern” also signed by Deloitte. From 2016 to 2018, Deloitte issued going concern KAMs, however, those did not refer to the liquidity risk and cash flow pressures that were mentioned in 2015 and 2019. 

This analysis uses data from the Europe Audit Opinions database, powered by Audit Analytics.

For more information about Audit Analytics or this analysis, please contact us.

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