PUBLICATION on Thursday night of Scottish Rugby’s unaudited accounts for the year to 31st May 2020 confirmed an income of £8.381m from CVC Partners private equity firm as partial payment for their share in the sale of a 28% stake in the Guinness PRO14.
But, strangely, the Welsh Rugby Union in their audited accounts for the year to 30th June 2020 only show an income of £4.9m from CVC in respect of PRO14, and the Irish Rugby Football Union only show £5m (€5.6m) to 31st July 2020.
Scottish Rugby have not yet responded to a request for an explanation of this difference in sums drawn by the three Unions.
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The CVC deal was announced on 22nd May – nine days before the end of Scottish Rugby’s financial year-end – when Chief Executive Mark Dodson stated that it would inject “north of £20m” into the game in this country, with the cash arriving in unspecified instalments and the first tranche due “almost immediately”.
Dodson also promised at that time that the money would be ring-fenced until the full impact of the pandemic had been assessed and a recovery plan had been formulated.
“I want to be really clear about the money itself,” he said. “The money itself is going to be safe-guarded – it’s going to be ring-fenced in the account – we’re not going to be rushed to spend this money. We are going to make sure that this money sits on our balance sheet and supports the work we are doing to look at the impact of Covid-19 on our business.”
The deal is understood to be worth more to the IRFU and WRU on the basis that they run four teams competing in the tournament as opposed to Scotland’s two. IRFU Chief Executive Philip Browne stated when the deal was announced that: “The total value to Irish rugby is in the order of £30m sterling (net of costs), with an initial sum expected today [22nd May] of approximately £5m.”
Speaking at last Thursday’s AGM [part 2.1], Dodson said: “Since the year end, we’ve also received a second payment of PRO14 proceeds which will positively impact the results from this current financial year, 2021, helping to offset a serious and sustained drop in income.
“Despite this welcome injection of cash, we still expect the 2020-21 financial year will show a significant financial loss. The initial proceeds of the PRO14 investment have been retained within the business to provide financial security which allows us to trade through the worst effects of the pandemic.”
Whether CVC acceded to a request from Scottish Rugby for an early draw down in funds or whether WRU and IRFU have taken a different approach to financial reporting is unclear – but what is clear is that the CVC payment of £8.4m and the increased bank borrowings of £2.4m have not been enough to pay the bills for 2019-2020, with net current liabilities having risen by 55% (£3.8m) to £10.4m, and short-term creditors coming in at £24.7m (45% of turnover).
Interestingly, the Balance Sheet shows cash-at-bank of £5.5m, but shows no bank loan, yet the cash & borrowing analysis shows the same cash-at-bank figure but also a bank loan of £5.4m – so, effectively, the money in the bank shown on the Balance Sheet belongs to the bank.
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Meanwhile, Scottish Rugby spent £661k last year purchasing a 28.4 percent share of Old Glory DC, a Washington-based franchise which plays in MLR, a fledgling professional rugby competition in the United States.
“During the year, in accordance with the subscription agreement entered into, the group’s main trading vehicle, Scottish Rugby Union Limited, acquired a shareholding in Washington DC Professional Rugby LLC through a wholly owned subsidiary, Scottish Rugby (USA) LLC. At 31 May 2020, the group’s resultant shareholding in Washington DC Professional Rugby LLC was 28.4%, acquired at a total cost incurred over the year, including professional fees, of £661k,” said an explanatory note on page 7.
“The group’s share of this company’s profit for the year was nil. The group’s share of this company’s net assets at 31 May 2020 was nil. There is the expectation that this company will generate positive future cash flows and, as such, no impairment charge has been made against the group’s investment in this company.” This seems optimistic in the current economic climate.
To read the unaudited accounts, click HERE.
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On reflection, it looks very much that unlike WRU & IRFU, in order to massage the 2020 bottom line, they’ve included 2 tranches of CVC monies in respect of the investment company’s buy-in to Pro14.
Does anyone know why “Development Income & Grants” is £9.2m higher in 2019/20 than 2018/19 – don’t see it in the blurb.
“a recognised net cost to the organisation in the area of professional rugby which amounted to £11.6m”
Excellent analysis, asking all the right questions.
The net current liabilities position, overburdened by debts due within one year is a particular worry, especially if the SRU is to be viewed on the “going concern” basis – which can only be achieved by an injection of substantial funds, because the business won’t be able to generate such dosh from operations. Sugar daddy or increased bank borrowing?
I have to say that I am absolutely certain that Mr. Dodson will have an explanation: whether anybody believes it is another matter entirely.
As you say, excellent analysis and the correct questions being asked, mind you I’m not holding my breath for a credible answer.
Never mind the CVC drawings, what about the “medium-term funding package” that’s required to be agreed to enable the audited accounts to be issued to the membership.