Sta£e of the Nation - County Cricket Finances

Not a high risk investment if the loan is secured against the ground, which is what most, if not all, of the heavily indebted counties seem to have done - as set out in  Canterbury City Council's published 'risk assessment register'  covering its loans to Kent CCC, for example.

Depreciation clearly is an accounting technicality - Yorkshire have proved it to be so by the way they apply varying depreciation terms at will. And the auditors have signed off on the Yorks accounts without qualification, so it must be acceptable accounting practice to do so.

Sussex should use the technicality and change its depreciation period to 125 years. That would make the accounts look much healthier!

In the case of the inappropriately named Carnegie Pavilion it probably will last 125 years since it is in virtually pristine condition because the Yorkshire Members are not allowed anywhere near it!

Kent show Sussex how to put a positive spin on the annual accounts.

Headline announcement today: profit for 2014 of £1,250,655.

However, this is an EBITDA figure and so doesn't include any sum for for depreciation.

In the small print the figure after depreciation reduces the 'profit' to £658,430.

But this 'profit' also converts the full £1 million ECB soft loan into income, rather than showing it as an exceptional item, or apportioning it over the four year period over which I believe it is clawed back.

Take out the ECB 'soft' loan and add in the depreciation charge... well, you can do the math but the colour of the ink changes from black to red.

But full credit to Kent for presenting the figures in such a positive light at a time when county cricket and its viability going forward is in desperate need of talking up rather than talking down. I wish Sussex would follow Kent's example.

Seems like Kent are in a bit of trouble over the Canterbury council loans, though. The £1.5 million short term loan made in 2012 that should have been repaid this month has been exteded for a maximum of a further 12 months - but the conditions imposed are draconian, and include bringing forward repayments on a substantial proportion of their second loan (originally made on a 30 year term) to 2018 and 2020.

As a result, Kent will be the only one of the 18 counties not to employ an overseas star in 2015. Chairman George Kennedy says: “We’ll not have an overseas player this year – we simply can’t afford it. An overseas player would cost way in excess of £100,000 by the time you pay, match fees, accommodation, travel, a car. It’s very expensive.”

He goes on to say that bringing back Matt Coles is as good as signing an overseas star. No pressure on young Matt there, then!

But not signing a Test quality opening bowler is a real blow because I was hoping Kent would challenge for promotion out of Div Two this season. Sadly I fear their toothless bowling attack means they haven't got a hope in hell against the likes of Lancs, Surrey and Essex. However good a season Coles has - and as you know, I believe him to be a potential England player - he can't do it all on his own. And as Rob Key said on Sky the other day, Kent's young players would benefit enormously from playing with a top overseas Test star; he noted that in his early career at Kent, he'd had people like Steve Waugh to learn from and then ruefully added, "These days they have to make do with me".

Given that all of the other bottom feeders have made big name signings - Derbys have Guptil, Dilshan and Rimmngton, Leics have Cosgrove, Elliott and Clint McKay and Northants have Kkleinveldt, Afridi and Richard Levi -it's a bitter pill to swallow for Kent supporters who were hoping that after years of austerity, 2015 might have seen the first green shoots of recovery.

Equally businesses need to present a confident narrative if they are to attract the customers and sponsors necessary for them to survive and grow. I'd say that's what Kent is doing.

It's all a matter of presentation. Anyone who reads beyond the headline figure in both the Sussex and Kent accounts can find the EBITDA figure and the figure after depreciation etc. So both counties are 'telling the truth' ; they're just looking at the  two sets of figures through opposite ends of the telescope, one emphasising the positive and the other  emphasising a more negative calculation.

My fear would be that county cricket clubs risk going out of business if they present their annual accounts in a way that casts doubt on whether they will  still be around in a year's time; it becomes a self-fulfilling, shoot-yourself-in-the-foot prophecy  because spectators, sponsors and suppliers alike are going to walk away from something that is perceived as a failing enterprise.

I have plenty of criticisms of the poor decision-making that has characterised Kent CCC over the past half dozen years; but the positive way they present their accounts is, in my view, one of the things they've got right. (Although  I'd have to agree that there is a reality disconnect in claiming a £1.2 million annual profit and at the same time announcing that you haven't got £100k to sign an overseas player!)

BM - at the risk of getting technical, it's time someone blew the whistle on EBITDA.

Here is a very brief critique from an investment house:

www.investopedia.com/terms/e/ebitda.asp

Note that EBITDA is not a recognised measure by normal accounting standards, and this extract is noteworthy:

"Consequently, EBITDA is often used as an accounting gimmick to dress up a company's earnings. When using this metric, it's key that investors also focus on other performance measures to make sure the company is not trying to hide something with EBITDA."

I foolishly watched the excellent accompanying video that goes with the Glamorgan "city council ransom" story before going to
bed last night and felt so incensed, I had difficulty falling asleep.

Have you watched that video?

Glamorgan CCC have made a complete mockery of business, fair practice and economic prudence. Due to their disastrous financial
dealings, over-borrowing, lack of management skills and business acumen and bidding far too high for Test matches, they find
themselves £16m in debt, on the brink of administration, and so have to ransom their City Council and creditors - "bail us out or we
go bust!"

Meanwhile, the council has already gone over annual budget by £9m with a £41m shortfall forecast for next year and the local taxpayers
find their council tax has soared by 5% and their public services widely cut.

It is a joke!

And why has this come about? Apart from appalling and pie in the sky financial management, let us blame the ECB... again!

It was they who wanted a Test ground in Wales; it was they who wanted the invisible (W) in ECB to come to the international
party; it was they who put pressure on the sleepy backwater Glamorgan through the influence of the ECB 'Tafia Mafia' via Morgan and
later Morris et al, to turn the under performing county into a prosperous Category A ground.

The club hierarchy were thrown to the lions as they borrowed more and more money on a venture that was way above their remit and
experience. And so in 2015, the council, who in hindsight foolishly lent them over £6.4m, have to write down £4.4m or 70% of their debt,
otherwise they won't see the return of their remaining £2m.

It is now clear why Hugh Morris left his ECB position and returned to Glamorgan as CEO in an attempt to sort this terrible mess out. Otherwise,
the county would have gone into administration leaving the ECB with egg all over their face - especially after the recent hubris from Gordon
Hollins and Giles Clarke stating no county would go under during their watch.

An absolute disgrace!

No doubt, the creditors were told that in future, Glamorgan would be given preferential treatment with Test matches and the like. They were 
given all the blarney about international games bringing large invisible earnings to the area which seem to vary from £1m a day to £5m a day
depending on the imagination and guile of the salesman... What do the Cardiff taxpayers think of it all when they pay their 5% extra council tax
and see their public services cut, partly because of the money their Council has lost to 'The Swalec'?

Sorry, rant over... no, but wait...

Where does this leave such prudent county clubs like Sussex? Our new club President, David Bowden, and the museum volunteers work their
socks off to attract money to develop our excellent museum. What did Glamorgan do? They gained £mms from the National Heritage fund and
then borrowed the rest to create theirs. Now, the debt has been swallowed up by a council afraid to put 'The Swalec' into bankruptcy.

My humble suggestion to Sussex CCC is "borrow, borrow, borrow" until the sun ends, throw caution to the wind, two-fingers to financial prudence,
because it is now obvious, no British council has the balls to place their county cricket ground into administration.