Warwickshire 2021 Accounts

Warwickshire have published accounts for the period to 30 September 2021.  What follows is my review of those accounts. Warwickshire  are one of the first counties to publish 2021 accounts which give us a peek at cricket's finances as the sport began to come out of lock down.  

Results in Brief

My review of the 2020 accounts can be found here and by following the links on that piece you can work your back to the 2017 accounts.  As you will see from the review, 2020 was a bad year financially for Warwickshire with the county taking on an additional £3.5m of debt. This was largely  as a result of the coronavirus but there were some worrying indications the county was in financial difficulties even before lock down .  

The accounts for 2021 show an improvement from 2020.  Revenues were up, losses were reduced and cash flow was strong leaving the county with almost £8m (before taking debt into account) on the balance sheet.

But the Bears aren't out of the woods, although revenues were up to £18m compared to £12m in 2020 they were still down from the £27m achieved in 2019.  The county made a loss of £0.4m for the period (I've ignored a tax charge of £0.2m in this as it's just accounting gobbledygook).  Cash flow was strong but much of that was due to one off factors (creditors increasing by more than debtors,  cash inflows from 2022 ticket sales and the deferral of dividends from the catering joint venture.)

One of my measures for a cricket county's financial sustainability is it's profit for the period adjusted to remove depreciation and replace it with the cash cost of fixed asset additions.  The idea being this provides a good estimate of medium term cash flows.  For 2021 this figure is a loss of £1.1m, the fixed asset adjusted loss is greater than the accounting loss as the amount spent on fixed assets was higher than the depreciation charge.  

My rule of thumb for county accounts is that in a perfect world a county should make an accounting profit of £0, then it would cover its costs including depreciation so that it is in position to buy new stands etc. as the old assets decay.  At a minimum, a county should break even on a fixed asset adjusted basis, otherwise cash is flowing out of the club and that is not sustainable. So it's concerning Warwickshire has made a loss on both an accounting and a cash flow basis in 2021.  In mitigation quite a lot of 2021's fixed asset spend was connected to the new development (a nasty little kicker from the sale of a tranche of car parking space to part fund the pavilion development) and hopefully should not be repeated.  The graph of my two profit measures now looks like this.

  

What Does The Future Hold

Readers may remember my review of 2019's accounts was distinctively positive.  But on the chart 2019 now looks like an outlier rather than a sign of better times to come. Warwickshire struggles to remain cash flow positive and in 2020 additional borrowing of £3.5m was taken on.  In part my over optimism in 2019 was down to coronavirus, but I also  hadn't fully appreciated how the 30th September (the date accounts are made up to) is a high water mark for Warwickshire's finances which get worse as winter draws on.  

And it's not hard to see additional problems looming.  Warwickshire has a debt pile of £25m, £5m of that falls due in 2023.  It's quite possible that 2023 could be a crunch year with Warwickshire either getting into financial difficulties and  / or Birmingham City Council having to acknowledge that some of its £22m loan financing has gone to money heaven.

But maybe we will muddle through.  The ECB is roughly half way through its current TV deal  - I've no idea what the next deal will look like but hopefully the replacement arrangement will be on similar or even better terms.  As we learn to live with (and die of) coronavirus, international match and conference revenues might increase.  Birmingham City Council might for the umpteenth time roll over its loan, we might pull through.

Edgbaston Stadium Plan  

But rather than talk of muddling through the accounts include a line "We are currently working on our plans for the next phase of stadium development and hope to share our vision with members during 2022."  

So the the board have looked at debt of £25m (£22m incurred as part of the cost of the pavilion in 2008 and £3m subsequently) and thought "not enough goddammit, not enough".  Unlike me they aren't hoping to pull through they are looking to thrive  And joking aside there's a logic to the dash for victory approach.  Surrey have certainly built big and built successful, Lancashire may have done the same although it will be interesting to see their 2021 accounts.  

Maybe Warwickshire's new pavilion, built with the old pavilion in danger of falling down, was only ever a half way house.  It gave Warwickshire a Test match standard ground, but was too rushed to provide the ancillary revenues required to support that ground.

Final Thoughts

All we can do as members and friends of Warwickshire is cross our fingers and hope for the best.  The club's constitution is as jury rigged as that old pavilion and we have no check on the board - no way to put a hold on future borrowing.  But I am wary of additional expansion at Warwickshire - at least within the existing county structure.  There are three reasons for this.

1.  Us middle aged accountants aren't big on risk and risk there certainly is.  

2.  I think there's a more philosophical point here, membership organisations are a joint enterprise, not just between the current members but also with those long dead members who founded the county in 1882 and those who will be members in the future.  You don't risk that on the turn of a card.

3.  The distraction point.  Running a cricketing county is very hard and quite important.  Cricket was the team sport of British imperialism and, post world war II, the game was in a unique position to play a (small) part in building a post colonial society that dealt more fairly with the boundaries of class and ethnicity.  Cricket failed to take that chance  - failed completely but, maybe, not irretrievably.  

There are many reasons for that failure - journalists (and sometimes us bloggers no - one reads) subscribe to "those morons at the ECB" theory, and cricket has its fair share of morons and a few downright knaves.  But the bigger reason for failure was that the task was really, really hard.  You can't just write a paper, or tick a box there has has to be dull, day to day concentration on intractable facts.  

And a county cricket club can't have that single focus if it's also trying to run a medium sized business as a side line alongside building a new hotel. County cricket clubs should be clubs not businesses - indeed it is illegal for a cooperative society to be run as a business.  Even under the current state of expansion Edgbaston the ground eclipses Warwickshire County Cricket Club and even Birmingham Phoenix.  If Warwickshire's board want to further expand the ground they should do so in a way that protects the cricket club from the risks of failure and sets up a a cricket structure that can get on with its job, separate from the business of Edgbaston.