CVC buy-up would hit Premiership in future
I FEEL it is necessary to comment on some of the expectations from the negotiations between PRL and CVC investments.
The situation is that the Premiership clubs received a cash distribution from PRL of £43.1m in the year to June 2017. The clubs also received £25.5m from the RFU which was paid direct to the clubs not via PRL.
PRL negotiate commercial agreements on behalf of the clubs particularly with regard to media. It is important to note that the Premiership clubs are separate businesses that report their own financial accounts based on their playing costs and total income including the cash distribution from PRL.
This means that the reported £28.5m loss is after the £43.1m cash distribution.
It is my understanding that CVC previously offered £275m to purchase 50% of PRL. When 50% of the shares are sold the present shareholders will receive a cash payment of in excess of £275m. This money will be transferred to the clubs as a one-off cash payment and can be used to invest in the future or pay off existing borrowings which would include loans from their benefactors.
Going forward CVC will take 50% of the future cash distributions. This will result in a reduction of future annual income for the clubs of approximately £20m in the first year if there are no changes to the other income streams and operating costs.
This sale will result in lower initial income for the clubs potentially increasing operating losses from the present £28.5m to £48.5m per annum.
The sale of 50% of PRL will result in a oneoff windfall which may or may not be used to invest in the future of Premiership Rugby but will probably reduce the future annual incomes and increase losses for some years to come.
It is still questionable whether English professional rugby clubs can be viable without substantial subsidies from the RFU and whether the income expectations of professional rugby players can be met in the present set up.
These comments and opinions have been based on the published accounts of Premier Rugby Limited and information in the public domain.