Warwickshire recently released its accounts for the year to 30 September 2018. I commented on the accounts for the year to 30 September 2017 here and this post looks at the 2018 accounts in more detail.
On the face of it things are grim. Although the club tries to focus attention on something called "operating EBITDA", the accounts show a loss of £1.5m for the year, even worse than 2017 when the county lost £0.9m. The year on year losses take a toll on the financial condition and the Balance Sheet shows the club has liabilities £2.5m in excess of its assets.
The loss for the period is maybe not quite as bad as you would think as it includes £1.5m of depreciation which is effectively an accounting measure of the cost of replacing the existing stands etc.(See my previous post if you want to read about depreciation.) Of course we won't have to do this for years to come and you might argue that a more accurate figure would replace the depreciation cost with the £0.5m of cash spent on the stadium in the year. This would give you a "true" loss of £0.5m (i.e. £1.5m in the accounts, less £1.5m depreciation plus £0.5m cash spend)
But even on an adjusted basis the club is losing money and at some stage the "new" stands will become old stands and the £0.5m of cash spend will rise. It is clear the expansion of the ground has not been a financial success. It cost the county £31m to build a new pavilion and stands, financed by a £9m land sale and £22m of borrowings but the revenues from the expansion cannot cover the costs of funding and depreciating the development. We sometimes hear about running the club as a business but on that criteria the Board have failed. In my opinion this isn't because they are incompetent but because it's very hard for a county cricket club to make money from an international ground.
An example of the issues is in note 21 to the accounts (right at the back) which discloses that the County paid £629,871 to it's four Key Management Personnel who are Ashley plus:
Neil Snowball Chief Executive,
CR Findall Chief Operating Officer and
GDK Roberts Commercial Director
I don't have a problem with the amounts being paid to our big men (all men, I think, so they might want to look at their diversity.): the ECB pays its chief executive Tom Harrison over £600k so they could argue we are getting three administrators for less than the price of one. But it does illustrate that expanding a ground brings with it all sorts of costs. Some of those costs, getting extra people in to pull a pint on big match days, for instance, are obvious but others, like the expansion of the administration, tend to sneak up on you.
So with the club having more liabilities than assets, losing money year on year and with the first payment of its loan to Birmingham City Council due in 2020 things do look grim. But there are shafts of sunlight piercing the gloom.
The first is that the club's debts are due to the Council which has deferred repayment and interest due in the past effectively bailing us out. Repayment of the loan is on relatively easy terms with £18m being deferred for more than 5 years. I suspect there would be a similar extend and pretend exercise if we can't make repayments in the future but, of course, the political weather can change very suddenly.
Secondly we have a good year coming up, the combination of a World Cup and an ashes series promises bumper revenues.
And finally there is the ECB. In my last blog on the accounts I suggested that additional funding as a result of the ECB's media rights deal starting in 2020 might be a lifeline for Warwickshire. Commenting on the Bears Fans Forum, club chairman, Norman Gasgoigne, said this might not be the case. Well a better man than me wouldn't say I told you so because the ECB has announced £450m of county funding for the five years of the broadcasting deal which, by my maths, is £5m a county a year, twice what we are receiving at the moment (and is about £1,666 a member a year). If, and its a big if, the club can control its costs it can use the extra couple of million of revenue to pay off a good slice of the council money (which reduces the annual interest cost making future repayments easier).
So we're not dead yet. But should we have redeveloped the ground when and as we did? I'm sure many members will look at the new facilities, their world cup semi - final and ashes tickets and say, "money well spent". I can't help thinking of what that £31m would have done if put towards the things a county cricket club should be concerned about, developing: the community it is based in, cricket as a game and the team it puts on the pitch. I still think some splitting of the club from the ground to allow the ground to be run as a business and The Club as a club would be for the best.
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