The ARU annual report – what are we to make of it?
With very little fanfare, the ARU recently released its annual report, which can read here. As a wallaby fan, I’m interested in what the ARU do with the hard earned I put their way so I’m going to look at the numbers and the longer term of the ARU, based on what their report of 2011 does and doesn’t say.
Revenue
In 2011, revenue dropped to $68 Million and expenses were $72 million, leaving an operating loss of about $4 million. This is down from the $3 million profit in 2010. The world cup is the cause as there were no in coming tours. For some time, the ARU have been campaigning at the IRB to get some extra money to cover this but they didn’t get all they wanted.
While big John might be pissed at the IRB for not giving him all he asked for, there isn’t reason to panic. Firstly, the ARU have been warning of this for years, which is good. Were there any investors, they would have adjusted their positions accordingly and not be surprised – there is nothing the stock market hates more than a surprise profit warning. Well done ARU.
Secondly, the ARU is a healthy concern though as its cash position is pretty solid. The acid test (current assets / current liabilities) gives 1.85 – the ARU has enough cash to pay its debts 1.85 times over. In 2010, the figure was nearly 2.8 which means a shit load of cash was being held but given they’ve taken a hit in 2011, it was a wise decision. For comparison, the Brisbane Broncos have a figure of 2.5 at the moment so the ARU’s figures are quite typical. In my view it’s another well done and some longer inbound tours will sort this out.
The ARU has a pretty uncertain revenue stream. All sporting crowds are fickle and in Australia they will go elsewhere if a touring side is weakened or the home side is not performing. The ARU needs a lot of cash around for rainy days, without this, John would be off to the banks cap in hand. Another “well done”.
Stakeholders
Of interest to the any stakeholder is the coaching shake up. After unsatisfactory results, Dingo’s old team was broken up. In corporate speak, the Vice President of the company’s highest profile product has had his management team replaced but not been replaced himself. Where does the buck stop?
The annual report would also disappoint investors with its comments on the world cup. This is the equivalent of going for a really big, profitable deal and fucking it up only to say “we are disappointed” – no shit. The much discussed internal review is also not in the annual report and we are told it will not be made available In the real world this would probably would trigger a shareholder revolt. It’s certainly not ethical, in my view, to deny your stakeholders (the ticket buyers) an explanation of where it all went wrong. Overall – disappointing.
Longer Term
More players are playing rugby than ever before. On its own, this good news but what I can’t see is a plan to do something with these increased numbers. The ARU has a vision to “sustainably develop more mass entertainment”. Fine, but these players should be invested in and I am talking about a third tier. Executives talk about “securing long term profitability” which means making investments. It’s no good having player growth if there is no recognized pipe to get them to the top. We can’t rely on the mungos to develop talent we need to re tread. Overall, a mixed bag. Well done, there are more players –now give them a third tier!
Comparison
The AFL has revenues of around 300 Million and the poms do about 215 Million. The Brisbane Broncos revenue is about 30 million (one club – almost half the ARU’s size). The chart on the right depicts the ratio of registered players to dollars, to show an efficiency level. The NZRU spends more per player but they have a third tier (and depth we dream of). Question, why can the New Zealanders afford a third tier on about the same revenue as us? Buggered if I know. I reckon the English appear so efficient per player as their players not centrally contracted to the RFU so the figures are skewed accordingly – or is it economies of scale?
What it means.
Overall, from a financial perspective the ARU is reasonably well run – I give it 3 out of 5. The world is littered with sporting organizations who have tried to buy success and have ended up in debt and buggered – I’m pleased the ARU is not like that. Were I a shareholder (I reckon the shares would be worth about 10 cents each) I would be unenthused and not expecting any dividends but I wouldn’t panic. I do question about the long term plans of the organization and some of their appointments and I want to read that bloody world cup review! Oh, and did say I want a third tier?!
