SCOTTISH RUGBY’S Annual Review, which was issued to clubs last Thursday, was high on gloss and low on substance. Along with President Ian Barr’s welcome, there is a ‘review’ from Interim Chairman John Jeffrey, and two further ‘reports’ from Chief Executive Mark Dodson and Chief Operating Officer Dominic McKay, yet no detail on the two critical issues of funding and player numbers – and no mention whatsoever on strategy or budget.
We are told that –
- “Your Board and Council have had to plan for every conceivable scenario around the financial implications of matches played behind closed doors with reduced number of supporters.”
- “That planning has been and continues to be robust.”
- “Radical and tough decisions were made.”
- “As a result, our audited statements are still being finalised and will be contained in our Annual Report which will be circulated as soon as possible.”
- “We are not out of the woods yet, but with a fair wind we have the correct plan in place.”
Sounds great, but –
- What are the detailed financial implications of matches being played behind closed doors?
- What were the radical and tough decisions that were made?
- When exactly will the financial statements be circulated?
- What is this plan?
We already knew that the accounts would not be available in time for tomorrow [Thursday] night’s AGM2.1, but we have been promised a presentation on the current financial position. The clubs will be expecting something more meaningful than the management speak in this document.
“The deal with CVC to become a partner in PRO14 not only provided funds to Scottish rugby at a time when cash flow was restricted , but by working with commercial investors , we hope to drive new levels of fan engagement and experience across the game.”
What does that mean?
Vice-President Colin Rigby’s note to the clubs following the Council meeting on 12th November tells us that –
“Whilst the accounts had been prepared and were well advanced, additional steps were needed before the accounts could be signed off. It was noted that none of the additional requirements were a cause for concern, and indeed would provide an additional level of assurance in the current pandemic.”
Does the Board’s Audit & Risk Committee, chaired by Lesley Thomson QC, share this view – and will she be saying so at the meeting?
Certainly, Scottish Rugby was ill prepared for the coronavirus pandemic. The financial model was predicated on the assumption that future ticket income, broadcast revenue, sponsorship and advertising sales would meet present operating needs. Net current liabilities were shown as £6.9m in May 2019 statutory accounts.
As TOL warned on 15th August 2019: “The Operating Surplus for 2019 was down to just 0.9% of turnover which is simply unsustainable. There are no Capital Cash Reserves whatsoever.” And that was before anybody had heard of Covid-19.
Yet whilst the other Home Unions have addressed the Covid threat pragmatically and propitiously – 139 redundancies at the RFU, a £20m bank loan at WRU and government support for the IRFU –
all we have heard from Dodson has been the suggestion on 7th August that he could save £14m through belt-tightening and that there would be no need for redundancies. That seemed fanciful at the time for a business which directed 52 percent of last year’s £60m costs towards wages, and now we learn that the headcount has jumped from 401 in May 2019 to 458 in May 2020 (compared to 295 in 2012).
The missing accounts
It is now six months since the financial year-end and despite the four month requirement stipulated in the Union’s bye-laws, the clubs have still not had sight of the accounts.
The Annual Review tells us that the Chief Financial Officer has missed nine out of the last 18 Board meetings. We wish Andrew Healy well, but this is a problem which needs to be addressed, and if it has been addressed then the stakeholders should be told who is the nominated individual managing the finances at one of Scotland’s key sporting institutions. Is he/she speaking tomorrow when we receive the update? Has assistance been sought from external accountants/auditors?
The clubs also need to know when they are going to see hard audited figures – especially as the three-month extension of filing deadlines granted by Companies House now means that the statutory accounts need not now be lodged until the end of May 2021.
There has been a change in policy this year in the decision to publish details of director remuneration prior to lodging the accounts at Companies House.
We are told –
“Remuneration of Executive Directors is decided by the Remuneration Committee [currently comprising David McMillan (chair), William Gardner & Lesley Thomson] with core remuneration packages consisting of base salary, allowances and pension entitlements. Packages are designed to be competitive in the marketplace taking account of the skills and experience of the individuals but without paying more than is considered by the Committee to be necessary or appropriate to attract and retain the individual.”
Mark Dodson’s package dropped from £933k to £454K – but he remains the highest paid CEO in the Home Unions, even though the SRU’s total revenues are the least of the four Unions.
The non-executive directors (David McMillan, Lesley Thomson & Julia Bracewell) and the Council directors (Graeme Scott, William Gardner & Dee Bradbury) appear to have taken a 20% ‘Covid’ cut in their £15,529 fees – but, interestingly, the WRU accounts reveal that their counterparts in Wales give their time and knowledge free gratis, for the love of the game.
Chief Operating Officer Dominic McKay, we are advised, has been appointed a non-executive director of Old Glory DC – ‘the recently founded Major League Rugby team based in Washington DC’ – but there is no indication of how much SRU cash has headed across the Atlantic.
The Annual Review also reveals the criteria for Dodson’s notorious Long Term Incentive Plan (LTIP) – but whilst the detail is welcome it raises huge questions over the process. You can put lipstick on a pig, but it is still a pig – and likely to be a serious problem if/when Scottish Rugby eventually heads towards Holyrood, begging bowl in hand.
The Remuneration Committee has “substantial discretion over how the LTIP operates” and we are told that targets were agreed against the objectives set in the strategic plan, but we can only draw our own conclusions on the rationale applied –
- Winning Team: ‘Consistent improvement in men’s and women’s international XVs and the pro teams over the 5-year period and measured against specific tournament outcomes and rankings’
- In the 2019 Six Nations, the Men’s, Women’s and Under-20s Scotland teams played 15 games with two wins, one draw and 12 losses. The U20s finished last in the World Championship in Argentina last summer (meaning relegation to the second tier World Trophy competition), and the senior men’s team then failed to qualify for the knock-out stages of the World Cup in Japan, leaving them rated 9th in the world last November. They rallied during the Six Nations with two wins over Italy and France to climb to eighth in the world when lockdown arrived.
- Revenue and Asset Growth: ‘Consistent growth in revenue and generation of surplus in accordance with a rolling 5-year plan.’
- In the four years to 2019, WRU enjoyed revenue growth of 20.1%, the RFU 15.3%, IRFU 12.7% – and SRU only 11.1%. As JFK pointed out: ‘A rising tide lifts all boats’.
- Net Operating Surplus dropped from 6.3% in 2011 when Dodson took over, to 0.9% in 2019.
- Developing Talent: ‘Delivery and development of the new Academy structures and pathways, coaching and referee development pathways and internal employee development and succession planning.’
- The two pro-teams continue rely heavily on non-Scottish journeymen, and the national side on project players.
- Both pro-teams are coached by non-Scots.
- Scotland now has more referees (and refereeing appointments) in the PRO14 Elite Referee Squad, but has still not produced a men’s international referee since Malcolm Changleng oversaw South Africa versus Samoa in 2007 (although Mike Adamson was down to do England versus the Barbarians last month before a Covid breach intervened). Hollie Davidson is now a regular on the women’s international circuit.
- Growth of the Domestic Game: ‘Creation and development of new Youth and Schools programme structures and the women’s programme.’
- The Schools and Youth Conferences have been up and running since 2014, but not really evolved over the last six years.
- The women’s programme appears to be focussed on finding English clubs for top Scottish players. The women’s domestic season got a new structure in 2018 and now has a winter break, which is nice. Meanwhile, Murrayfield Wanderers – a longtime the benchmark of the women’s club game in Scotland – fell off the side of a cliff when the club was evicted from Murrayfield two years ago.
- Sustainable Clubs: ‘Consistent growth in club support and development funding together with delivery and development of various sustainability programmes including Agenda 3 projects, club sustainability awards and the club sustainability fund.’
- Club Support & Development dropped from 6.3% of turnover in 2016 to 5.1% in 2019 – compared to 13.3% in Ireland and 6.8% in Wales.
- Male adult playing numbers have dropped 26.6% from 7,275 in 2012-13 to 5,340 in 2018-19.