RFU account reveals early effect of Covid
The week before the new national lockdown was announced, the RFU had published their Annual Report and Accounts for 2019/20.
The report highlighted the impact of COVID-19 in the final quarter in what had otherwise been a successful initial nine months. 2019/20 was budgeted to be a loss-making year within a regular four-year cycle, due to the costs of the Rugby World Cup campaign and only hosting two home Six Nations games.
Despite these factors, there was an investment in the game of £94.7m (£100.5m in 2018/19). Revenues were 22 per cent lower yearon-year at £167m (compared to £213.2m in the prior year). As a result, profit before rugby investment decreased 27 per cent yearon-year to £83.9m.
Prior to COVID-19 hitting, RFU revenues were running slightly ahead of budget, but the loss of all activity in the last quarter meant that the RFU finished the year with revenues £23m behind budget, mostly driven by lost broadcast, ticketing, hospitality and conferences and events revenues.
Despite lost revenues, the operating loss for the year was slightly better than budget - £10.8m compared to a budgeted loss of £11.5m. A great deal of work was done in the 2018/19 financial year across the organisation to keep a tight control of costs providing a good position to rein in costs as soon as COVID-19 hit.
The loss taken to reserves was £26.6m, this was worse than forecast as the decision was made to write-off the deferred tax asset, due to the impact of Covid. It is important to note that this write-off was simply an accounting adjustment and had no impact on the cash position of the RFU.
In addition to the effort across the organization to reduce costs, the Union received support from government in the form of £2m of income from the Coronavirus Job Retention Scheme (CJRS), a £0.75m rates holiday with respect to Twickenham Stadium, and were able to defer £2.1m of PAYE for the months April to June. The RFU expects to benefit from a further £1.5-2.0m CJRS income in the 2020/21 financial year, as well as a further £2.25m rates holiday.
While hitting operating budget in the face of such significant lost revenues is positive, the RFU recognises revenue losses for the coming year will be so significant that they cannot be mitigated through reduced expenditure and the Union has therefore revised longterm business plans.
Reduced resources will be allocated to very focussed and specific objectives to deliver the strategy over a period of recovery. Productivity levels have increased dramatically, and ways of working have changed through the crisis. The lessons learned will be applied against some of the reduced investment in order to operate differently while continuing to support the game.
Andy Cosslett, RFU board chair said: “COVID-19 is proving to be a huge challenge for every level of our sport and, seven months in, the environment remains highly volatile and uncertain. The RFU is not immune to the economic pressures being caused by the virus and, just like clubs, we have had to act decisively to ensure we are in as good a position as we can be to weather the storm.
“There will be significant challenges in the immediate and longterm future which the board and executive team, in partnership with the RFU Council, will work hard to meet.”
Bill Sweeney, RFU CEO said: “The long-term financial challenges of Coronavirus are significant for the entire economy. The RFU relies on revenue from matches and events at Twickenham Stadium and re-invests this back into the game. With no rugby and no events, we are looking at a potential short-term impact circa £145m in lost revenues in our ‘midcase’ scenario. We also know that there will be a much longer-term effect and are projecting a four to five-year recovery, with cumulative revenue reductions of around 20 per cent.
“The Executive team has made provisions for the long-term effects of Covid, modelling every possible scenario over two years, to protect our position as a National Governing Body and a funder of the game of rugby.
“For the last ten years the RFU has been committed to reinvesting the maximum possible amount back into rugby. This strategy has worked well with good momentum and positive developments evident across the game. Going forward, our priorities to grow the community game and build winning England teams remain the same.
“However, while the financial position of the Union remains sound, it is clear that we are going to need to adjust levels of reinvestment to reflect a new reality. In the immediate term we also have to recognise that we are not in a position to carry the whole game through an extended financial crisis.
“We have therefore requested that the government makes available a package of support for recovery funding to protect the integrity of the community game. We remain committed to our policy of reinvesting as much as we possibly can back into the game.
“2019/2020 was already budgeted to be a loss-making year within a four-year cycle, due to the costs of the 2019 Rugby World Cup campaign and only hosting two home Six Nations games. This was planned for, but nobody could have anticipated the current situation which is constantly moving.
“However, through careful financial management, we have achieved an operating loss position that is in line with budget, an excellent result given that we lost over £23m of gross revenues in March to June 2020 due to cancelled events. It was important to achieve this level of stability, given the level of losses that we now know will impact in the coming year due to Covid.”