Finance

Pandemic wipes £22m off Welsh Rugby Union revenues


The impact of the pandemic with no spectators at the Principality Stadium and the loss of lucrative hospitality income saw the Welsh Rugby Union taking a year-on-year £22m hit to its revenues, according to its latest end year accounts.

The union, which is optimistic on the outlook with strong ticket sales for the forthcoming autumn international series and concerts returning to the Principality Stadium, was able, through cost mitigation, to post a small pre-tax profit of £400,000 (£7.9m loss in the previous year) for its last financial year to the end of June, 2021.

Without 350,000 spectators the union generated revenues of £58.1m compared to a year earlier of £79.9m – although that was also pandemic impacted with the cancellation of Wales’ last game in the Six Nations against Scotland, which was then played behind closed doors last autumn.

Pre-pandemic, in the WRU’s 2018-19 financial year, and when like last season Wales had two home games in the Six Nations, the union generated revenues of £90.5m.

Revenues losses last year were offset across the group by a significant reduction in operational business costs, down to £27.2m (2020: £40.3m), and business and administration costs, which were down by 30% to £6.9m.

The majority of the group’s income, 69% (2020: 78%), is derived from staging international matches and associated commercial activities.

Match income was down to £22.6m (2020: £33m) as all home fixtures were played behind closed doors, although commercial income increased to £20.2m (2020: £15.4m).

As a result of its revenue hit, investment in the game at all levels decreased to £34.6m (2020: £47.5m).

The three regions – Gwent Dragons are owned by the WRU – in the, Ospreys, Scarlets and Cardiff Rugby, were originally faced with a total £3m settlement, but a £2m union payment and the making up of a shortfall from competition income, saw them sharing £12.5m (£25m a year earlier). The union was also able to pass on £20m in Covid response lending it negotiated on behalf of all four regions.

This consisted of £18m Coronavirus Large Business Interruption Scheme (CLBILS) funding from its existing banker in NatWest Bank, alongside £2m in funding from World Rugby.

Under the terms of CLBILS, set out by the Treasury, the amount has to repaid in three years.

The WRU said it is confidence of refinancing both loans with the Welsh Government, with a new term on a par with clubs in England which has been offered loans by the UK Government repayable over 20 years.

On the latest accounts WRU Group finance director Tim Moss said: “The group’s result for year end 2021 has again been significantly impacted by disruption caused by the Covid-19 pandemic.

“This included all Six Nations and Autumn Nations Cup games being held behind closed doors and no third-party events being hosted.

“We have retained a small profit, which goes some way to offsetting the significant losses from the prior year. To record this small profit has been an achievement in itself and is largely due to the efforts of our employees, our mitigation of cost efforts and support from Welsh Government.

“During this period of unprecedented disruption, the group took decisive actions. Non-essential costs were reduced and non-essential and non-committed capital expenditure was cut. We sought to protect the long-term health of the business by reducing salaries of senior management and most other employees by between 10%-25%.

We utilised the UK Government’s furlough scheme and sought support from other government grant sources.

“We also obtained rates relief for the group’s properties and together with the natural reduction in costs arising from the curtailment of rugby activities, in aggregate, these measures contributed around £16.3m for the year, in contrast to approximately £1.9m for the year prior.”

On refinancing of the £20m CLBILS loan passed through to the regions he said: “Conversations are ongoing with the Welsh Government to refinance the £18m finance with NatWest, that is repayable over three years, but also including the loan with World Rugby.

“It is going to be a struggle for us to repay £20m in three years, which is why these conversations are ongoing to put that onto a more sustainable repayment plan. We want something comparable to what the RFU and Premiership Rugby have with their 20-year funding terms.”

The Welsh Government could potentially refinance the £20m with long-term repayable and low interest loans through so called financial transactions capital. This is where it can provide finance, and it has given significant investment to the Development Bank of Wales in this regard, providing it can secure interest payments in return.

The first repayment of the CLBILS loan to NatWest, which the regions were liable for, was covered by the WRU, on the expectation that it will be able to refinance the debt. That amounted to just over £5m.

With the New Zealand game in October already a sellout, Mr Moss said games against South Africa and Australia also have the potential for capacity crowds.

He added: “We are definitely optimistic for the coming year and there is a huge amount of positivity around at the moment. Our autumn sales are going incredibly well. New Zealand is sold out and South Africa and Australia are also tracking really well. There is definitely a chance we will sell out, even there is a fair bit to do to achieve that. The fact that New Zealand is sold out already will help push sales for two incredibly attractive fixtures.

” So, we are very pleased with where we are currently on sales, especially as there is still a pandemic going on. If we get to somewhere in the high sixties (60,000s) we will all be pleased with that. If we can push that higher, which there is a chance of doing, then I think we will all be ecstatic.

“Looking forward pass the autumn we have also announced two concerts with Tom Jones and the Stereophonics. It also shows the versatility of the stadium in that we can have the autumn internationals and then a few weeks later turning it around to having two nights of concerts.”

The union’s net debt, which is defined as bank loans, debenture loans, finance lease obligations less cash balances, as at 30 June 2021 was £114.4m (2020: £75.6m). The increase in the year was primarily a result of the CLBILS loan alongside finance lease funding specifically for the union’s Parkgate Hotel development next to thet Principality Stadium. The hotel, which will be operated by the Celtic Manor, with its cost financed with long-term repayable funding of more than £40m from financial services giant L&G, will open next month.

The WRU is confident that the hotel can regenerate a profit, close to £1m a year, after taking account of annaul repayments to L&G and a hotel management fee for the Celtic Manor Resort.

Mr Moss said that all facets of the game in Wales has pulled together to ensure its survival during the pandemic.

He added: “The fact that we still have the same number of clubs that we had when we went into the pandemic, is an amazing testament to the volunteers and people within those clubs that make them tick.

”It is the efforts of everybody across Welsh rugby, whether that is community clubs and volunteers, the regions, our players who took pay cuts and WRU staff, that helped us get us through the last year. Whilst we are not out of it by any stretch there is a lot of optimism going forward.”

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