Yorkshire 2021 Accounts

This is a post on Yorkshire's 2021 accounts.

Financially Yorkshire are in a pickle. The accounts disclose there is a "material uncertainty" over whether it will be a going concern in twelve months time. I look at why that is and speculate how likely it is that Yorkshire will go bust.. 

There are two reasons for Yorkshire's financial pickle. 

The first, as you probably guessed, is the fall out from the Azeem Rafiq affair.  To recap, Yorkshire have accepted some of the allegations of racism and bullying are correct and have reached a financial settlement with Rafiq.  They  also sacked 16 members of "staff" and terminated a contract with the physiotherapy company owned by Wayne Morton. (This is a bit confusing, there are statements that 6 of the 16 sacked, were employed by Wayne Morton's company but, if you look at the accounts at Companies House, Morton's company, Pavilion Physiotherapy, only had one employee, Wayne Morton.)  Six of the 16 sacked staff, including former captain and coach, Andrew Gale, have taken a claim for unfair dismissal to an employment tribunal and on the 8th June 2022 a consent judgement determined the six had a "well founded" case which would now move on to "what remedies can be agreed or determined". Other sacked employees have already reached agreement with Yorkshire.   

This has all had an effect on the 2021 accounts.  Yorkshire made pre tax loss of £565k, but this breaks down as a profit on "normal" activities of £1,327k and a exceptional loss, relating to the Rafiq settlement and associated fall out, of £1,892k.  Those additional costs led to a cash flow squeeze, the final instalment of a loan repayment due to HSBC was missed (technically converted into an overdraft) and, in 2022, the ECB has advanced payments due to the county.  Not the first time the ECB has bailed out Yorkshire.

The £1,892k of exceptional payments includes a provision for future costs of £535k but there are further costs from this imbroglio, not provided for, which will be included in the 2022 accounts.  As a very rough guess I'd say the £535k provided for would probably pay most of the costs of reaching a settlement with the six hold out sacked employees (employment tribunal decisions are generally pretty modest.)  So what other costs might be expected in 2022?   Note 19 to the accounts might give us a bit of a clue here - it refers to a contingent liability (i.e. one that you don't provide for but think you should mention) with a former supplier.  The note doesn't provide much information but the former supplier might be physio Wayne Morton's company, Pavilion Physiotherapy.  If that's the case then this might not be that significant a liability, the company made a profit in the period to 31 December 2021 of just £40k so its hard to believe any final settlement would top £100k.  But if that's that case it's a bit weird that a contingent liability has been disclosed. Perhaps the claim from Wayne Morton's Pavilion Physiotherapy is larger than I imagine or is it a dispute with some other supplier that is being referred to?

Still it is perhaps unlikely that remediation costs in 2022 will match the £1.9m incurred in 2021.  If that is the case and Yorkshire's finances were in a normal position the county would be squeezed in 2022, but hopefully, would be able to respond to the Rafiq affair and emerge a better and still solvent organisation.  However, these are not normal times for Yorkshire - to understand why they are in such a pickle we need to look at the debt they owe to various family trusts set up by, former ECB and Yorkshire chairman, Colin Graves.  

In total Yorkshire owes the Graves family just shy of £14m.  All of this amount is due, in instalments, between 1 January 2022 and October 2024. Additionally Yorkshire need to repay  £1m to  HSBC that should have been repaid in 2021. Even in the best of circumstances Yorkshire would have struggled to meet this schedule of repayments, but the additional costs from the Azeem Rafiq investigation and associated settlements make repayment in full pretty much an impossibility. Just to add to their difficulties the interest payable on the Graves family loans increases when Bank of England base rate goes above 0.75% (it's recently gone up to 1.25%) and Yorkshire have only spent £70k on fixed asset additions in the last two years and at some point will have to spend a bit of cash on the ground.

What Can Yorkshire Do?

The answer is to "refinance"; swap, the existing debt for new debt. Refinancing certainly can work in cricket, Lancashire successfully replaced the short term / high interest debt used to rebuild / ruin Old Trafford with longer term lower interest debt.  But that was pre - covid, pre post covid inflation and Lancashire didn't have a racism scandal and the attendant financial fall out raining down on them.  It's possible a bank may be prepared to step in and take on the  Graves' family trusts lending but I don't think it's a given.  Indeed if it were easy to refinance it would have been done and dusted before Yorkshire produced their 2021 accounts.

A sign of Yorkshire's uncertain future is that the audit report prepared by accountants, Azets Audit services, emphasises a "material uncertainty" over the county being a going concern.  So their answer to the question of whether Yorkshire will be in business in a year's time is 🤷 don't ask us.  

Is This a Big Deal?

So, is this a big deal?  I tend to be sanguine about  county cricket finance, professional cricket has, allegedly, been on the brink of bankruptcy for a century but never gone over the edge.  But this is, in my opinion, quite a big deal. You learn about qualifications for going concern in your audit exams, but it's not something you come across very often in the wild.  The Graves' family loans are secured against the Headingley ground and so it's not impossible this could end with the Graves family trust owning Headingley and the ECB deciding..... well who knows what they would decide.

How does this end

Colin Graves and his family trusts will be key to the resolution of Yorkshire's precarious financial position.  What's less clear is Graves' attitude to the current Yorkshire hierarchy, headed by chairman, Lord Patel of Bradford.  Graves refused to answer questions from the Department for Digital, Culture Media & Sport select committee hearings on racism in cricket, claiming he had no involvement in Yorkshire county cricket.  Yorkshire's former chairman, Roger Hutton wrote to the select committee alleging Graves and representatives of the Graves' trusts had attempted to use their powers to veto incoming directors to prevent removal of executive directors who, in Hutton's opinion, "were not prepared to accept Yorkshire had a problem with race and were resistant to change."

To be fair to Graves, Lord Patel, who replaced Roger Hutton as Yorkshire chairman says that he did not encounter any obstruction from Graves (or his trustees) and Graves supported the recent changes to Yorkshire's articles of association, which included removing the Graves' trusts right to veto board appointments.

Still there are other snippets which perhaps suggest Graves is less than enamoured of the current direction of events at Yorkshire.  There's email correspondence to him from (yet another - do these people never die) former Yorkshire chairman Robin Smith.  Smith is one of a small group of members who believes the county's problems stem from the unreasonableness of Rafiq and the ECB.  But again if you read the whole article it's clear Smith emailed Graves - there's no indication Graves emailed him back.

This article in the Telegraph claims four previous Yorkshire chairmen including Graves (four! what is it with these people - is Yorkshire run by a vampire sect -oh my God - he's called Graves - they're hiding in plain sight)  launched a blistering attack on the ECB for their handling of the Rafiq affair.  Although when quoted, Graves says he "supports" the investigation at the same time as being "very disappointed" that it is going ahead.  Finally Graves has been in touch with the Yorkshire Post to let them know he would like to be one of the elected board members at Yorkshire CC.

It's a bit hard to find a consistent thread in Graves' statements on the Rafiq affair and I think you have to be a bit sceptical of articles in the Daily Mail and Telegraph who have their own, grubby, agenda.  But I don't think it's unreasonable to think Graves has some "reservations" over events at Yorkshire and in particular the ECB's involvement.  But is he pissed off enough to refuse to reschedule the monies owed to the Graves' family trusts and to demand the county sell Headingley or transfer it to the trusts to meet the amounts owing?

I think this is unlikely.  Graves must have some feeling for Yorkshire and cricket more widely, given the time he has spent (unpaid) in the game so to plunge both into chaos would be a strange decision.  Even if that doesn't weigh with him some plan to defer repayment of the loans until after all of the liabilities from the Rafiq scandal have been quantified and settled is probably the surest (and definitely the most hassle free) way for the trusts to get their money back.  

What Could Go Wrong?

But as we all know people make dumb decisions.  There's certainly the potential for crisis in Yorkshire  - England's cricketing heartland.  All it would take is for two men ,  Yorkshire men - closely associated with Yorkshire cricket, to become so entrenched in a dispute that they continue to pursue it, to the point where it diminishes both of them and the county they claim to support.  And how likely is that?