Welsh Rugby Union sees losses widen as impact of the pandemic bites

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 is was on track to break even for it last financial year to the end of June, 2020, before the pandemic struck in March, but said a number of measures taken, including putting on hold non-essential capital investment, reducing staff salaries and utilising the ��Ƶ 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 re-arranged Scotland game at the end of this month, which will almost certainly be the case, 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 match day related spending like on beer and food.

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 from international games.

Chief executive of the union, 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 — assumes it doesn’t receive any government financial support for the game, which it is hopeful of.

The cancellation of the Six Nations game against Scotland at the Principality Stadium back in March, with lost TV and related match day income, induced a £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 31st.

It also lost revenue last season through the cancellation of Judgement Day, involving derby matches featuring the four Welsh region and a Rammstein concert.

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 2018-19),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 no crowds are allowed, the two games are expected to be played in Wales. The game against Georgia has already been confirmed for Parc y Scarlets.

Mr Phillips, the former union finance director, recently succeeded Martyn Phillips as chief executive in an interim capacity.

If restrictions preventing any crowds continues into next year he said: “It’s an ongoing work stream, but if there are no crowds for the two games in the Six Nations 2021 the ballpark range is something between £12m and £14m in terms of what we would not get and would ordinarily have expected to have received if there was no Covid.

“With England and Ireland we would have full expectations of selling out both games out and on hospitality too. 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: “While we have sufficiently robust banking facilities, there is no doubt that the 2020-21 financial year is when the full impact of this pandemic could be felt.

“However, we can be proud of what we have achieved so far and, under present circumstances, 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, just as there is for all in the sports, leisure and entertainment industries, as we continue to navigate through the uncertainties arising from the current pandemic.

“Managing the impact of Covid-19 down to a £5.3m deficit would not have been possible without the efforts of the board, our commercial partners and the wider rugby family.

“We had expected to show a break even result for the current year and were on track to achieve this up until the business and economic disruption that was caused by 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 a £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 PRO14 competition.

It came after the Pro-14 league, made up of teams from Wales, Scotland, Ireland and 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 ��Ƶ Government, Mr Phillips said: “We are looking for and hopeful of government support for our sector because of crowds [lack of].We are closely talking to the Welsh Government about that. The RFU are talking to Whitehall and the SRU are talking to the Scottish Government, so there is a joined up piece of thinking, but what that could look like and when it will come is not yet known.”

He said whether any funding came directly for the ��Ƶ Government, or the Welsh Government, through a Barnett Formula consequential, formed part of the overall conversations taking place.

To support the four regions the union recently signed off on a £20m new loan facility with NatWest Bank through the ��Ƶ 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.

It will be for the four chairs of the regions to decide on the split of the £20m, but it is expected to be pretty much an equitable one.

The union also has an existing £35m lending facility with NatWest Bank 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 unexpected early end to the rugby season.

Commercial income was also up at £15.4m (2018-19 £14.2m) and income from participation in the Rugby World Cup made a significant positive contribution. However, the pandemic negatively 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.

Allocations to the three regions (Blues, Ospreys and Scarlets) amounted to £25m (2018-19; £25.4m), in accordance with the Professional Rugby Agreement signed in 2018. Total allocations to the regions, including those to Dragons, which the WRU has an 80% ownership stake in, amounted to £31.6m (2019: £31.9m).

The WRU Group welcomed 335,000 (2018:19: 393,000) rugby spectators to the Principality Stadium during the year with the average attendance per match at an increased 67,000 ( 66,000 previous financial year), which equated to an average stadium occupancy of 91%.

The average ticket income per attendee at matches held at Principality Stadium was £43 ( £49 previous year).

During the year the union had a head count of 372, with the highest executive in former CEO Martyn Phillips with a remuneration of £345,000.