A quick and somewhat dirty analysis of the recently released Reds 2015 financials reveals a serious situation.
Yesterday GAGR’s facebook page posted a set of figures which revealed a disturbing financial situation north of the Tweed. The Reds have gone from a modest $350,000 profit in ten months of 2014 to an alarming $2.1 million loss in one year (the Reds only supplied 10 months of 2014 in the report).
The bad
To make the figures slightly easier for me to interpret, I spent a few minutes on excel typing the figures in and then subtracting 2015 from the ten months of 2014 to show which expenses and revenues had grown or shrunk to get a clearer picture. A screenshot of my work is below. As an example, match day expenses have shrunk over the period and this is in red text. Text in black indicates that the issue has increased and whether this is from a expenditure or revenue issue will tell you if it’s good or bad.
To summarize in big handfuls, the revenue has increased by around $1 million but expenses have increased by $3.4 million. This is, obviously, quite a lot and the areas of expenditure which have shown the most growth are “Reds Team Expenses” (presumably salaries and so forth), “Game Development and Operations” and “Corporate”.
Questions of how this has been allowed to happen are expected. Due to my own circumstances I have not had the time to get into the report in as much detail as my inner geek would like, so go nuts in the comments.
However, G&GR understands that the Game Development expenditure can be justified by the QRU having to cover some costs of some financially struggling Regional Unions plus they lost funding for their indigenous program, but wanted to keep it going. Fair enough. We all talk about grass roots and so forth.
Reds team expenses and Corporate expenses are harder to justify. It’s possible that these were new signings like JOC, Hunt, Tui et al, which might be understandable, but the $800k extra for Corporate is “pure Executive Office burning money”. We are told that every year they do a revamp of the office and last year they completely gutted one floor to remove all offices and make it completely open plan (new wiring, painting etc). They also moved the Reds back over from Ballymore so had to refit another portion of the office. None of that cash is teaching 16 year olds how to scrum and ruck.
The ugly
What didn’t appear on our facebook page was the shot of the assets and liabilities situation. It’s more telling in my view and it’s pretty dire. This year the acid test (current assets / current liabilities) is 0.32. So for every dollar they owe, they have 32 cents available to pay for it. For comparison, the 2014 and 2013 figures, each about 0.5, are there too. It’s a serious slide.
It’s a scary situation and they’ll need to fix it which the powers that be seem to be aware of. This extract from the report (below) seems to me to say that they know that they might be insolvent soon due to the current asset and cash flow problems. Trading insolvent is illegal and directors can be held personally liable for debts incurred when a firm is under the water. They seem to be pinning their hopes on more broadcast money and re-negotiating their debts with St. George. Cutting some corporate overheads might be a good idea too.
So, some interesting times ahead. Winning a few games to get the punters in would help but I am not sure the players will like smashing into rucks to pay for a sweet new office set up every year.
The QRU released a release on Saturday afternoon following their Annual General Meeting, which included the below statements with regards their financial performance this past financial year:
Queensland Rugby Union (QRU) has announced a loss of $1,483,696 before depreciation for the 2015 financial year at the Annual General Meeting at Ballymore today.
While QRU has continued to build scale and volume over the last seven years, the performance of the St.George Queensland Reds had a material effect on many of its revenues.
QRU CEO Jim Carmichael said: “Despite major challenges in 2015, we were able to put in place mitigation plans through the year whilst delivering all of our community related programs to all levels of our game as planned. This culminated in $8 million worth of Queensland Rugby direct and indirect investment into the grass roots of our code across the state.”
QRU Commitments post Budget
• The introduction of the National and State Participant contributions was a significant reform for the game. However, in consultation with QRU stakeholders, a reduction of $200,000 was agreed post budget through a reduced state contribution. Furthermore, the introduction of a casual player levy for both city and country clubs, combined with the first year of this new system, resulted in a reduction of $360,000 of revenue against forecast, once player data was accurately entered into the national registration system – Rugbylink.
• In 2015, a number of our important sub-unions experienced acute financial difficulty and it was necessary for us to protect the efforts of the Rugby community in those regions and to ensure Rugby competitions proceeded as planned. QRU committed significant human resources and $125,000 financial and legal support to provide the necessary assistance so that the code was able to deliver against its obligations.
• Additionally, QRU assumed the delivery of Junior Gold competitions in the state, the Junior State Championships and the Brisbane Junior Rugby Union competitions along with the associated costs of circa $317,000.
• Finally, midway through 2015, there were $500,000 of reductions in government grants awarded to QRU, as a result of the Federal Government’s national review of funding Indigenous programs. However, QRU felt it important to maintain its commitment to Indigenous communities in Queensland through the ongoing delivery of Indigenous programming.
