WRU faces £35m loss if Six Nations hit by coronavirus
THE Welsh Rugby Union Group has reported losses of £5.3m fuelled by the impact of having to postpone the Six Nations match against Scotland, but said if all of Wales’ forthcoming autumn games and home matches in next year’s Six Nations have to be played behind closed doors, it could hit income by £35m.
The union said it was on track to break even for its last financial year to the end of June 2020, before the pandemic struck in March, but said a number of measures taken, including putting non-essential capital investment on hold, reducing staff salaries and utilising the UK Government Coronavirus Job Retention scheme, helped to mitigate the financial hit.
While there remains uncertainty, with numerous outcomes still possible, based on a scenario of no crowds for the rearranged Scotland game this month and the three home games in the Autumn Nations Cup, the WRU could see a loss of revenue of up to £21m from ticket, hospitality and other matchday spending.
If Covid restrictions continue into next year, with the two Six Nations games at the Principality Stadium against England and Ireland having to also be played behind closed doors, that could result in a further up to £14m loss in revenue – resulting in a total £35m revenue hit.
The union’s chief executive Steve Phillips said that, based on no crowds for home international games this season, this could see the union making losses of another £5m for the current financial year. The cancellation of the game against Scotland in March, with lost TV and related matchday income, induced an £8.1m revenue hit for the union.
The television income from the game will though flow into this year’s financial accounts, with the match being played at Parc y Scarlets on October 31.
For the year, it posted a turnover of £79.9m (£90.5m 2018-19) with pre-tax losses increasing to £7.9m (£4.2m losses 2018-19). The union’s retained loss for the year was £5.3m (£4.3m loss in 201819) following deferred and tax credits of £2.6m.
Mr Phillips said a decision on whether the home game against England in the Autumn Nations Cup, as well as the finals day game of the competition, will be played in London or in Wales, should be known in around two weeks’ time.
If restrictions preventing any crowds continue into next year, he said: “The range is something between £12m and £14m in terms of what we would have expected if there was no Covid.
“If you look at the Scotland game and three home Autumn Nations Cup games, that would be a loss of revenue on what we would have ordinarily expected of around £19m to £21m.”
On losses for the current financial year, he said: “If you assume no crowds and government support, we could lose up to another £5m, but there are so many ‘what ifs’ in that.”
He added: “However, we can be proud of what we have achieved so far and only making a £5.3m loss in year end 2020 can be viewed in a positive light, but there is also much hard work ahead.
“We had expected to show a break even result for the current year and were on track to achieve this up until the pandemic.
“Its impact on the group has meant an unanticipated loss, but we expect to be able to retain profits over the medium term to be able to offset this loss and return net assets to previous levels.
“The group has a healthy business, with a strong balance sheet and adequate liquidity. Immediate measures were taken to reduce costs and protect our financial position.”
During the last financial year, the WRU successfully reached agreement with debenture holders to extend and refinance debentures, providing an £8.6m cash boost which was used to help keep its net bank debt position at year end to £5.7m, which otherwise would have been far higher. It also called on £5.3m in reserves, which decreased to £18.1m.
It was also boosted by a first tranche £4.9m payment from CVC Capital Partners’ investment in the Pro-14 competition.
It came after the Pro-14 league, made up of teams from Wales, Scotland, Ireland, Italy and South Africa, struck a deal which saw the private equity firm agreeing to pay £120m in return for a minority equity stake of 28%.
The WRU will draw down its guaranteed £30m of funding from the deal over the next four years, with CVC’s equity interest being ratcheted up accordingly. The next draw-down of £3m will be received by the union later this month.
On the potential for government support for the game, with Rugby League having already received a £16m emergency loan from the UK Government, Mr Phillips said: “We are looking for and hopeful of government support for our sector because of [the lack of] crowds. We are closely talking to the Welsh Government about that.”
To support the four regions, the union recently signed off on a £20m new loan facility with NatWest Bank through the UK Government’s Coronavirus Large Business Interruption Loan Scheme.
The capital on the fund will be repaid by the union, but the regions will be liable for the interest.
The union also has an existing £35m lending facility with NatWestBank where agreement has also been reached allowing it to move some of the £15m for Ebitda (earnings before interest, taxes and amortisation) enhancing capital projects, into the revolving credit facility.
In its last financial year, investment in community rugby increased to £4.6m (from £4.5m in 2018-19) and, although overall investment in the game decreased to £47.5m from £49.6m, that was largely due to the early end to the rugby season.
Commercial income was also up at £15.4m (from £14.2m in 2018-19) and income from participation in the Rugby World Cup made a significant positive contribution.
However, the pandemic affected competition income, which was down to £7.1m from £11.9m a year earlier, as well as event income, down to £1.1m from £2.4m.
At the Principality Stadium, hospitality and catering income was down to £9.3m from £14m.
During the year the union had a headcount of 372 – with the highest executive, former CEO Martyn Phillips, with a remuneration of £345,000.