Post by lancsdes on Apr 27, 2020 22:05:01 GMT
Four Levels of Pain at Lancashire
Lancashire have prepared four scenarios, each with different levels of financial pain.
Mike Atherton.
The Times.
Monday, 27 April 2020.
PTG 3101-15341.
“It was the start of the week of March 16 when the phone just stopped ringing. We have people ringing constantly, for tickets, events, conferences, but the phone literally stopped ringing overnight. And when it did ring it was for someone to cancel an event. I’ve never seen anything like it”, said Lancashire chief executive Daniel Gidney. “It was like tumbleweed in the offices. Our annual budget was £UK4 million ($A7.7m) ebitda [earnings before interest, tax, depreciation and amortization], which would have been a record for the club other than last year, but it disappeared in five days. I’ve never seen anything like that, either”.
Six weeks on from the crisis causing businesses to hit a brick wall, there is still an echo of the shock of those first few days in Gidney’s retelling of it, with his focus on Lancashire, the club he has run as chief executive for the past seven years, and the Old Trafford stadium, which had been rebuilt and redesigned to protect the club’s future by diversifying its revenue streams away from cricket.
It is a cruel irony that the hotel and conference centre that contributed, along with an Ashes Test and World Cup bonanza, to record turnover and profits last year, and that were regarded as a source of the club’s growing financial independence — their greatest strength in other words — should suddenly become their biggest weakness.
Counties are far from a homogenous group and while it was initially thought that this crisis would hit the smaller clubs hardest, it is the bigger counties with debts and big payrolls to service (all Lancashire’s non-cricketing income is serviced in-house through their payroll, as opposed to outsourcing elements such as catering) and no money coming in, who are suffering the most (PTG 3100-15335, 26 April 2020). Smaller counties, with furloughed staffs and fewer overheads, find themselves with fewer headaches.
A couple of 80-hour weeks followed the initial arrival of the crisis, as Gidney and his team put emergency measures in place, securing the safety of the ground and staff before full-scale lockdown on March 23, cutting all costs except for emergency ground preparation (the start of the season hadn’t been abandoned at this stage) and suspending the purchase order system. “With no cash coming in, we turned the taps off”, Gidney said.
These are uncharted waters for county chief executives. “Recessions have a playbook, but with this we were writing it as we went along”, Gidney said. “In recession you have a permanent turnover drop, and you’ve got to make people redundant. But this is different because if I made a lot of people redundant, how are we going to remobilise quickly? It’s an entirely different problem to solve. You’ve got to keep as many people around as you can, but you’ve got to find a way of funding the cash flow".
No matter what the summer brings, though, Gidney is confident Lancashire can weather the storm, and he has modelled four scenarios involving different levels of financial pain, from the most optimistic (and very unlikely), which includes cricket with crowds from July and a conference and events season for the last quarter, to the least optimistic, which involves neither, and would involve significant contingency plans and “emergency triggers that I don’t want to have to pull”.
That relative optimism is a measure of how far the club have come. “If this had happened in 2014 or 2015 we would have gone bust, because we were still in recovery mode. Two things have helped us through: we’ve rebuilt a lot of cash reserves because of a record year in 2019 and secondly, we’d already done a massive Metro Bank refinance, which halved our interest rate”.
“Metro have been fantastic: they phoned us immediately and said, ‘We’ll give you a capital repayment holiday, if you need a short-term working capital facility we’re there for you. You’ve got a sustainable business, and you will be back’. Without the refinancing that we had done, and the cash regeneration through 2019, we would have been in dire, dire trouble”.
Swift action from the government and the England and Wales Cricket Board (EWCB) helped too. “Governing bodies and governments can often be criticised for not moving quickly and being overly bureaucratic and generally those criticisms are fair, but in this situation, the government and the [EWCB] really stepped up. Tom [Harrison, the chief executive] showed leadership, he got it and bringing forward money was what we needed”.
Lancashire are one of two counties — Surrey the other — not to furlough their players and while Gidney is quick not to lecture other clubs, it is a decision with which Lancashire are comfortable. As well as being uncertain of the validity of the financial arguments for furloughing, they also wanted to remain in touch with their players, for mental and physical reasons, and have been using them imaginatively, phoning elderly members and providing community coaching online.
Unlike the vast majority of Professional Cricketers’ Association (PCA) members, who agreed a union-wide reduction of about 17 per cent salary for April and May through a complex calculation of salary sacrifice, pension and prizemoney giveaways, Lancashire’s players negotiated with the club directly. “They wanted to share the same pain as the rest of our staff, which shows you what kind of men they are — utterly fantastic”. A straight reduction of 20 per cent of salary was the result.
Through it all, Gidney has been operating without a permanent chairman, because of the loss to Covid-19 of David Hodgkiss, who was laid to rest last Thursday, and the former chairman’s business acumen has been missed (PTG 3068-15191, 31 March 2020). “He ran a highly successful business and I miss his calmness, ability to see through the fog and, above all, his optimism”. he said. “He’d expect this great club to bounce back”.
The initial shock of lockdown has subsided and now the club are in the desktop planning stages of how to host bio-secure cricket when, once again, having a hotel on site could become an advantage rather than a liability (PTG 3099-15329, 26 April 2020). “We’re looking very, very closely at how we would make that work. How do we create clean entrances? How do we keep as many people on site? Do we bring in containers that have beds and showers that could have staff stay on site for the three-week period?”
“Health has to come first. We’ve got people still dying, the death rates are still high. Health has to come first and I would really struggle with the idea of elite athletes getting tested before frontline personnel, but we’ve got to be ready for when it comes. Sport has a huge role to play in any recovery”.
Lancashire have prepared four scenarios, each with different levels of financial pain.
Mike Atherton.
The Times.
Monday, 27 April 2020.
PTG 3101-15341.
“It was the start of the week of March 16 when the phone just stopped ringing. We have people ringing constantly, for tickets, events, conferences, but the phone literally stopped ringing overnight. And when it did ring it was for someone to cancel an event. I’ve never seen anything like it”, said Lancashire chief executive Daniel Gidney. “It was like tumbleweed in the offices. Our annual budget was £UK4 million ($A7.7m) ebitda [earnings before interest, tax, depreciation and amortization], which would have been a record for the club other than last year, but it disappeared in five days. I’ve never seen anything like that, either”.
Six weeks on from the crisis causing businesses to hit a brick wall, there is still an echo of the shock of those first few days in Gidney’s retelling of it, with his focus on Lancashire, the club he has run as chief executive for the past seven years, and the Old Trafford stadium, which had been rebuilt and redesigned to protect the club’s future by diversifying its revenue streams away from cricket.
It is a cruel irony that the hotel and conference centre that contributed, along with an Ashes Test and World Cup bonanza, to record turnover and profits last year, and that were regarded as a source of the club’s growing financial independence — their greatest strength in other words — should suddenly become their biggest weakness.
Counties are far from a homogenous group and while it was initially thought that this crisis would hit the smaller clubs hardest, it is the bigger counties with debts and big payrolls to service (all Lancashire’s non-cricketing income is serviced in-house through their payroll, as opposed to outsourcing elements such as catering) and no money coming in, who are suffering the most (PTG 3100-15335, 26 April 2020). Smaller counties, with furloughed staffs and fewer overheads, find themselves with fewer headaches.
A couple of 80-hour weeks followed the initial arrival of the crisis, as Gidney and his team put emergency measures in place, securing the safety of the ground and staff before full-scale lockdown on March 23, cutting all costs except for emergency ground preparation (the start of the season hadn’t been abandoned at this stage) and suspending the purchase order system. “With no cash coming in, we turned the taps off”, Gidney said.
These are uncharted waters for county chief executives. “Recessions have a playbook, but with this we were writing it as we went along”, Gidney said. “In recession you have a permanent turnover drop, and you’ve got to make people redundant. But this is different because if I made a lot of people redundant, how are we going to remobilise quickly? It’s an entirely different problem to solve. You’ve got to keep as many people around as you can, but you’ve got to find a way of funding the cash flow".
No matter what the summer brings, though, Gidney is confident Lancashire can weather the storm, and he has modelled four scenarios involving different levels of financial pain, from the most optimistic (and very unlikely), which includes cricket with crowds from July and a conference and events season for the last quarter, to the least optimistic, which involves neither, and would involve significant contingency plans and “emergency triggers that I don’t want to have to pull”.
That relative optimism is a measure of how far the club have come. “If this had happened in 2014 or 2015 we would have gone bust, because we were still in recovery mode. Two things have helped us through: we’ve rebuilt a lot of cash reserves because of a record year in 2019 and secondly, we’d already done a massive Metro Bank refinance, which halved our interest rate”.
“Metro have been fantastic: they phoned us immediately and said, ‘We’ll give you a capital repayment holiday, if you need a short-term working capital facility we’re there for you. You’ve got a sustainable business, and you will be back’. Without the refinancing that we had done, and the cash regeneration through 2019, we would have been in dire, dire trouble”.
Swift action from the government and the England and Wales Cricket Board (EWCB) helped too. “Governing bodies and governments can often be criticised for not moving quickly and being overly bureaucratic and generally those criticisms are fair, but in this situation, the government and the [EWCB] really stepped up. Tom [Harrison, the chief executive] showed leadership, he got it and bringing forward money was what we needed”.
Lancashire are one of two counties — Surrey the other — not to furlough their players and while Gidney is quick not to lecture other clubs, it is a decision with which Lancashire are comfortable. As well as being uncertain of the validity of the financial arguments for furloughing, they also wanted to remain in touch with their players, for mental and physical reasons, and have been using them imaginatively, phoning elderly members and providing community coaching online.
Unlike the vast majority of Professional Cricketers’ Association (PCA) members, who agreed a union-wide reduction of about 17 per cent salary for April and May through a complex calculation of salary sacrifice, pension and prizemoney giveaways, Lancashire’s players negotiated with the club directly. “They wanted to share the same pain as the rest of our staff, which shows you what kind of men they are — utterly fantastic”. A straight reduction of 20 per cent of salary was the result.
Through it all, Gidney has been operating without a permanent chairman, because of the loss to Covid-19 of David Hodgkiss, who was laid to rest last Thursday, and the former chairman’s business acumen has been missed (PTG 3068-15191, 31 March 2020). “He ran a highly successful business and I miss his calmness, ability to see through the fog and, above all, his optimism”. he said. “He’d expect this great club to bounce back”.
The initial shock of lockdown has subsided and now the club are in the desktop planning stages of how to host bio-secure cricket when, once again, having a hotel on site could become an advantage rather than a liability (PTG 3099-15329, 26 April 2020). “We’re looking very, very closely at how we would make that work. How do we create clean entrances? How do we keep as many people on site? Do we bring in containers that have beds and showers that could have staff stay on site for the three-week period?”
“Health has to come first. We’ve got people still dying, the death rates are still high. Health has to come first and I would really struggle with the idea of elite athletes getting tested before frontline personnel, but we’ve got to be ready for when it comes. Sport has a huge role to play in any recovery”.