Yorkshire County Cricket Club: 2023 Accounts
Into the snake pit.
Yorkshire have now published their accounts for the period to 31 December 2023. This post analyses the 2023 accounts and a recent financial update to members from new Yorkshire County Cricket Club (YCCC) chairman, Colin Graves.
I’ve split YCCC’s financial position into three separate crises. A liquidity crisis, a funding crisis and a profitability crisis and look at each in turn. Of course, the three crises approach is just a device to pull out the different problems Yorkshire are facing, in reality the three crises are all going on at the same time and feed into each other, producing one big crisis.
The Liquidity Crisis
This is the short term crisis that has YCCC struggling to pay its immediate debts. In 2023 the county incurred a loss of just over £7m, which must be a county championship record . Of this, £4.3m was a write down of the value of the Headingley ground and is an accounting adjustment rather than a cash cost.
But even excluding the write down YCCC made a 2023 loss of £2.7m, with £1.9m described as exceptional items. £0.8m of the 2023 exceptional costs related to the ongoing resolution of the Rafiq affair, possibly the settlement of legal action by the company of Wayne Morton, Yorkshire’s former physio, came in higher than provided for at the end of 2022. There were £0.2m of various items that don’t sound very exceptional and the balance of the exceptional item was £0.9m of costs associated with the attempted refinancing of the county although this failed to find a solution to the funding crisis discussed below.
Given a total loss of £7m, £4.3m of write downs and £1.9m of “exceptional” costs there was a “normal” loss of £0.8m in 2023. That is an alarming result in a year with an Ashes Test Match at Headingley, which would normally be the high point in YCCC’s financial cycle. So how did an Ashes hosting county manage to make a loss in 2023? The county was faced with some rising costs outside its control, for instance hikes to interest rates increased the cost of YCCC’s payments to The Graves Trust and HSBC bank by £0.5m.
I’m conscious that it’s always easy easy to cast aspersions and throw stones from outside an organisation but it seems cost control has been an issue for YCCC under former chairman Lord Patel of Bradford and current chief executive Stephen Vaughan. Evidence for this is an increase in salary costs of 16%, payments to Key Management Personnel (i.e. senior management) of £1.3m, a 36% increase on the 2022 figure. A particularly unwelcome development is that board members have begun to award themselves fees, only £0.04m in 2023 but perhaps indicative of a general malaise.
The 2023 accounts show trade creditors of just under £4m compared to £1.1m at the end of 2022 and YCCC was in an informal administration at the end of 2023 with significant suppliers not being paid. With the Graves’ Trusts and HSBC bank having security over Headingley Ground (apart, I think from the Howard stand which is subject to another set of, very complicated ,arrangements) and indoor cricket school the unsecured trade creditors probably wouldn’t get paid in full in the event of YCCC going into administration making them prepared to accept deferred payment.
Another factor keeping YCCC going in 2023 was the generosity of the England and Wales Cricket Board (ECB). During the year the county acquired fixed assets for just over £1.0m but £0.8m of the cost was met by capital grants from the ECB.
Clearly shoving the gas bill down the back of the sofa isn’t a sustainable long term plan and post the year end some actions have been taken to alleviate the liquidity crunch experienced at the end of 2023. The accounts disclose that Colin Graves and another director, Philip Hodson, have leant YCCC £1m each. These loans have a hefty rate of interest, currently 9.375%, but they are unsecured, meaning both directors are at risk of financial loss if YCCC were to be wound up and the loans don’t have a set repayment date making the funds available to pay suppliers. The accounts refer to another £5.25m of funding the county hoped to receive in 2024, Graves’ recent communication to members talks of new financing of £4m obtained in the first quarter. It’s tricky to match up all of the different statements about funding but I’d guess the £4m is the £2m from Graves and Hodson, plus £2m from unidentified lenders, meaning that of the £5.25m additional funding referred to in the accounts, £3.25m remains outstanding and the accounts make it clear there is no legal commitment for these amounts to be advanced.
The £4m advanced to date is roughly equal to the unpaid creditors at the end of 2023 and, with money coming in from advance sales of tickets for the 2025 India Test, might have been enough to pull YCCC through its liquidity crunch in a normal year. But it never rains but it pours and in 2024 YCCC don’t have a Test match making it another year of losses. Graves’ members communication states that a further £5m is required if YCCC is to be sustainable. I’m a little cynical about this, the county has just signed Sri Lankan bowler Vishwa Fernando on a 3 match deal which doesn’t seem appropriate if YCCC can’t be certain of meeting its debts.
The 2023 accounts were prepared on a going concern basis in part because: “In the event that sufficient funding is not obtained (which I take to mean the £5.25m), Colin Graves has undertaken to provide the necessary support.” Provided Graves has the resources and is prepared to make good on this undertaking YCCC should be able to get through to 2025 and the India Test and if the “Costcutter” entrepreneur can get a grip on YCCC’s burgeoning cost base, maybe just maybe the liquidity crisis can be overcome. Is there light at the end of the tunnel?
Funding Crisis
No, not really. Because even if YCCC can get through the liquidity crisis it runs slap into a refinancing crisis. The various Graves’ Trusts are owed just shy of £15m by YCCC due in October 2024 although there is an “agreement in principle” (which I think means not an agreement) to defer this until 2025. It was a feature of the Graves’ loans that most of the repayments were due on a set date and this was always going to be problematic. Of course the liquidity and profitability crisis have only exacerbated the inevitable repayment crisis.
I thought one advantage of Graves returning as YCCC chairman is he would be able to ease the county past the repayment crisis by getting the Graves’ trust trustees to agree to an extension of the loans, after all they are currently getting 9.375% interest on a loan with pretty good security. So, say, push back the repayment by five years or so and hope for better times. But for whatever reason this doesn’t seem to be happening at the moment and Graves is headed back down the funding route seemingly exhausted last year. In his May communication to members Graves rattles on about being “currently engaged in discussions with several credible potential funding partners” and suggesting YCCC should cease to be a member’s organisation to facilitate the potential external investment. Graves has always explained that the trustees of the Graves’ trust are independent and it might be the case that they have reached a point where they not prepared to accept an extension of the loan, or at least no extension beyond the “agreed in principle” extension until 2025. Leaving YCCC dependent on raising external finance to repay the trusts.
It’s not clear whether that external investment would be from a third party (IPL franchise holders are often mentioned) or from Graves and his associates. If Graves is proposing to be a significant shareholder in a privatised YCCC it means he will, as chairman of YCCC, be considering his own bid.
Profitability Crisis
Privatisation might provide a solution to YCCC’s problems but I have my doubts. As set out in this post YCCC have struggled to make consistent profits from the redeveloped Headingley. The £4.3m write off of the value of the ground in the 2023 accounts wasn’t a cash cost but it did reflect that Headingley wasn’t worth the amount shown in the 2022 accounts and there were no serious offers to buy the ground in the 2023 refinancing. The Rafiq affair was the immediate cause of YCCC’s problems but the county had a financial crisis in 2010, was always stretched in years without a Test match and was susceptible to financial difficulties.
The potential gift of a 50% share in the Hundred Teams to staging counties might attract investors to YCCC. But in 2023 YCCC received staging fees and a cut of Hundred ticket sales of £0.5m. Assuming that’s before costs the profit to the county might be £0.4m? And selling the rights to that profit would reduce future profitability. But there does seem to be a belief that the Hundred franchises have a value of £400m plus and the ECB is clearly prepared to give the staging counties a better deal than the non - staging first class counties with the national (AKA minor) counties seemingly getting nothing. This is all very strange and we will have to wait to see if the Hundred sale does significantly improve Yorkshire’s financial position.
In terms of YCCC being sold to a 3rd party I don’t know any Indian businessmen but my working assumption is they are no keener on investing at a loss than businessmen from anywhere else. If that’s the case then I don’t see funding coming from this source. That doesn’t rule out a bid to take YCCC private headed by Colin Graves who I don’t think sees YCCC as a financial investment. And maybe something will be possible here, particularly if the Graves Trust can be persuaded to extend repayment beyond 2025. But it should be borne in mind that to date Graves and associates have only come up with £4m of investment against oustanding loans to HSBC and The Graves Trust of £16m or so, plus an additional £5m “working capital” Graves believes is required to get to the end of 2024.
If big business isn’t interested and Graves can’t rustle up enough funding then YCCC’s next option might be (another) ECB bail out. The ECB’s accounts for the year to 31 January 2024 show roughly £89m of cash plus investments on the balance sheet and perhaps some of this could be loaned to YCCC or used to buy either the county or Headingley stadium. There would be a lot of issues to overcome and I’m sure other counties would be uneasy with the ECB being dependent on YCCC’s success. But the ECB have been helping YCCC out for years - it might be helpful for the assistance to be formalised and within tight budgets on playing staff.
Conclusion
What should YCCC do? - It’s like the joke where a lost man asks for directions and the local says: “Well I wouldn’t start from here.” There are, as far as I can see no unambiguously good outcomes. But cricketing Yorkshire is such a big and significant county that I think it will continue in some form. Given Colin Graves’ skill in accumulating power perhaps the most likely outcome is him (part) owning a privatised YCCC. If Graves can’t stitch together a deal then it seems, given Richard Gould’s evidence to the DCMS committee that the ECB would step in. I can’t see being run as an outpost of the ECB being popular with Yorkshire members but as Durham have shown there is life after ECB special measures.