It’s time to take a look at the annual financial performance of the ARU. Most of us know things are not rosy (as Green and Gold Rugby reported last year here) and it’s a major focus of the new CEO to fix things. So let’s see how the situation is.
Financial
It’s well known that the Lions tour saved the ARU’s financial bacon and without that windfall, things would’ve got pretty ugly. Last year, they were in overall deficit by $2.75 million. What’s worse was the state of the 2012 current acid test figures (acid test is current assets / current liabilities where “current” means payable in one fiscal year) which was in deficit by $8.3 million. That’s bad and would’ve probably involved going to debtors, extending loans and paying more interest as a result. Without the Lions, it’d be a vicious circle.
This year the figures are little more comforting. Total Assets – Total Liabilities is in credit by $9.9 million and the current asset/liability is in credit by $7.05 Million. That said, the NZRU have a current acid test figure of 2.24 whereas the ARU are at 1.14. That means for every dollar owed in this fiscal year, the ARU has 14 cents spare. The NZRU have NZ$1.24. In 2010 the ARU’s figures were 2.8. It’s an alarming slide.
In short, things are moving in the right direction but they have some way to go before they can be considered healthy.
Revenue
Revenue is a strong part of the ARUs game and it’s been on the up since 2011. The Lions tour bought in $47.8 million in revenue.
In total the ARU received $145 million and spent $119 million, leaving an operating profit $26 million. For comparison the NZRU had figures in $109 million income and $106.5 million expenditure.
Looking deeper, if we factor out the $47.8 million revenue the ARU claim was attributable to the Lions tour, then revenue was around $98 million. If we also remove the associated expenses incurred and add in the growth in “corporate overheads” (more on that in a moment) the expenses would be $104.5 million, or $6 million in the red. This is an inexact method but what’s not in doubt is that without the Lions tour, the situation would be grimmer than last year. Costs have risen but the revenue to cover them has not.
Overheads and Expenditure
Last year it became clear that expenses are an issue. The ARU seems to have no trouble on the revenue side but the way the cash is spent must be better. Overall, most of the costs incurred in 2013 have stayed about the same as 2012, if we factor the increases needed for the Lions tour.
Green and Gold Rugby highlighted last year that since 2005, “corporate overheads” have increased from $8.6million in 2010 to $16.9 million in 2012. The figure for 2013 is an eye-watering (to me) $19.1 million, an increase of $2,2 million when we’re cutting costs elsewhere, such as player salaries.
“Corporate overheads” includes the CEO and coaches salaries which are not publicly disclosed but that does not explain such a massive increase and sadly the annual report sheds no detail on what this money is for. I have tried to find out what these are and they are not the only issue facing the ARU but the annual report is very little on detail. Grants to Super sides and the loan to the rebels are all explained elsewhere in the report.
I could go on about the growth in these costs for a while. “Community rugby” has been cut by approximately $300K, players have taken pay cuts and are in the cross hairs of Top 14 clubs, we’ve only just got a 3rd tier whose future is far from secure. All this and more while these mysterious overheads rise and rise.
My fear at the moment is that unless expenses are reigned in, we’ll back to the situation of 2012 soon. If there is a mutual non-disparagement clause between the ARU and J O’Neill, then this would be one reason.
The Future
If, dear readers, I have not made you concerned enough, during the editing of this article, Matt reminded me that due to RWC 2015, there are no in-coming tours next year, just the Rugby Championship. That’s gonna knock a chunk off the revenue. This will be compensated to some degree by some money from the IRB like last time (in 2011 it was $4.2M) but I am sure we are all hoping it’s not swallowed by another rise in “overheads”.
The graph shows the pattern of revenue and expenses over the last 3 years as well as the growth of overheads. Using the growth of these figures and some reasonable assumptions of the likely revenue (I used 2011 figures when there were no in-coming tours either with some inflation and an estimated $5M from the IRB which is reasonable given they got $4.2M in 2011) I have shown the likely situation for next year. As you can see, they are still in the black by method but it will be close and to be honest, it would not surprise me if expenses were larger than revenue next year.
Conclusion
The Lions tour saved the ARU from the abyss but to me we are not yet seeing a truly fundamental reform of the way the money is spent. I expect the Bill Pulver will do all he can to rectify these and it’s quite possible that the commitments that the ARU has entered into cannot be changed for some time which is delaying the undoubted changes from taking effect.
Next year’s report will give us more of an indication of where things really are as by then, the decisions of the past management won’t be much of an excuse anymore. What is not in debate is that costs are still too high and revenue to low to comfortably cover them. The ARU is still very near to financial disaster.
