The Warwickshire website includes the club's accounts for the period to 30 September 2017
This post looks at the accounts and comments on Warwickshire's financial position. I've also taken the opportunity to go into a bit more detail on how I prepared the Bentley - Forbes Consulting Rankings
If you don't want to get into all the detail, I'm giving Warwickshire a 4/10 mark for its financial position. Here's why:
You can judge an organisation's financial position in two ways:
A profit and loss account - How much money has the organisation made (or lost) in the last year.
A balance sheet - what is the cash and money due less the money owing at the end of the year.
Taking each in turn:
Profit and loss
Warwickshire made a loss in the year to 30 September 2017 of £929,000. This compares to a loss of £2,298,000 in 2016 and a profit! in 2015 of £59,000. So on average Warwickshire loses £1 million or so a year. In 2016 Warwickshire had the biggest losses of any of the 17 counties I looked at. And it looks like Warwickshire will be bottom of the pile, again, in 2017.
I would point out though that Warwickshire's cash performance is not as bad as it's loss for the period would suggest. The county actually had a net cash inflow (before debt repayments) of £506,000 in 2017. So how could a company which loses £900,000 have cash coming in?
The main reason for this is depreciation, which is a tricky thing to explain but let's try. Say you know that in 10 years time you will have to replace your boiler and a new boiler will cost £1,000. If you were one of life's natural accountants you might save £100 for the next 10 years to make sure you had the cash you would need. Those £100s are like depreciation (kind of).
In 2017 Warwickshire had depreciation of £1,435,000 but it only spent £518,000 on fixed assets in 2017 and the difference, £917,000 is part of the reason why cash performance is better than the loss for the year. But you have to be careful with adjusting the loss for depreciation, just as I am going to have to replace my boiler Warwickshire will, one day, have to replace its stands etc and if it keeps on dipping into the depreciation savings pot it won't have the money to do so. And it will have to borrow to meet the cost of the new work.
Which takes us onto the balance sheet.
Balance Sheet
Again this does not make for good reading but there are some compensating factors.
At the end of 2017 there is a net deficit on members funds of £651,000. That is if you add up all of the money the county owes it exceeds all of its assets by £651,000. Not good. And in reality things are worse than that. Of the assets, £23,295,000* are tied up in the ground etc and could only be sold if the county stopped being a cricket club. A further £752,000 are deferred tax assets, (I'm not even going to try and explain deferred tax, it's basically something invented by accountants to drive themselves mad and bears no relation to anything real.) So the club's true excess of liabilities over assets is £24,698,000.
For 2016 Warwickshire came 15 out of 17 counties for excess of liabilities over assets, that is only two counties carried more net debt (Lancashire and Yorkshire). Warwickshire's net debt figure for 2017 is similar to the 2016 figure so it is hard to see it moving out of the bottom three in 2017. I also did a ranking for net liabilities divided by fixed assets (as a county with a larger asset base may be able to finance higher debt). Warwickshire came 15 on this criteria too.
But as I said there is some good news. Warwickshire owes £21,822,000 to Birmingham City Council and the loan is repayable on easy terms, over 23 years from 2020. This in itself is a good thing (it's always better to owe money in two years time rather than now). The easy terms of the loan from the council meant Warwickshire came fifth best out of 17 counties on liabilities due in the next five years divided by assets.
And there is reason to be hopeful for additional revenues from 2020. The ECB has undertaken to pay each county £1,300,000 from the new, city based, 20/20 competition and will be flush with money from its media rights deal, some of which may trickle down to the counties. So there are grounds for optimism that there will be the money necessary to repay the council. It also looks like the repayment schedule for the council's debt is dependent on revenues earned providing flexibility if the county hits hard times in the future.
This is quite encouraging for county cricket as a whole. In my financial rankings Warwickshire came sixteenth out of seventeen counties surveyed. So if I'm right and its in a bad, but not desperate, position there is hope for all of the first class counties.
Having said that not everything in the garden is rosy. A few negative points.
- The loan from the council originally provided for loan repayments from day 1, it was only subsequently restructured so looan repayments started in 2020. Without the council's forbearance Warwickshire could have been in a lot of trouble, which makes you wonder about the quality of financial decision making (My 4/10 mark is really for where the county is, not how it got there).
- Being financially dependent restricts non financial independence. In recent years the county has called the 20/20 side The Birmingham Bears (pleasing The Council) and voted in favour of a city based 20/20 competition proposed by the ECB. It's my impression the chief executives involved in both decisions were genuinely enthusiastic, but even if they hadn't been they couldn't have put the county's interests above those of the ECB and The Council. (Its noticeable both Essex and Surrey, the number 1 counties in the financial rankings were against a city based 20/20.)
- As set out above the county is raiding its depreciation savings account to pay ongoing costs. So when it next wants to update the ground its unlikely to have the reserves to do so. Which will mean back to borrowing and the attendant risks.
* Fixed assets net of grants of other deferred income.
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