John McGuigan prioritises raising revenue – ahead of cutting costs

Scottish Rugby Chairman says the goal is to return to a profit position by 2026 and grow turnover from £68m to £100m per year

Chairman John McGuigan is bullish about Scottish Rugby's future despite the significant challenges the sport in this country faces. Image: © Craig Watson - www.craigwatson.co.uk
Chairman John McGuigan is bullish about Scottish Rugby's future despite the significant challenges the sport in this country faces. Image: © Craig Watson - www.craigwatson.co.uk

THE new Chief Executive of Scottish Rugby will be appointed in the next four to five weeks, with the next Performance Director to be confirmed as soon as possible after that.

Meanwhile, Scottish Rugby Chairman John McGuigan has promised that budgets will not be slashed as Scottish Rugby seeks to turn round a £10.5m loss last year to reach a profit-making position by 2026, with the primary goal of the new CEO being to drive up income by about £30m (eventually).

“From a CEO point of view, subject to everybody adhering to the dates we’ve put into people’s diaries, we’ll be done by the end of April, or first week in May latest, when we’ll have made a decision as a Board about who we are going to select,” said McGuigan, who also confirmed that previous CEO Mark Dodson has already worked his last day for Scottish Rugby.


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“We’re down to a shortlist of five. I’ve got one person on that list who could start in May, and three people who are on three months [notice]. So, you’re talking about someone starting immediately or in the summer.

“At that point, the individual [new CEO] will be engaged with us on the Performance Director. We’re running that process in parallel so we’ll be down to two or three people [by then], but we’ll want the new CEO to play their part in making the final decision on who they can work with, because the way these two people work together is going to be really critical.

“I don’t need them to get on, but I need them to be two people who have got the right chemistry to drive really high-level performance.

“I want the CEO to run the business and I want the Performance Director to run the rugby, and these two things cross over at certain points.

“For me, if I had to call out two priorities, it would be for the Performance Director to make sure the pathway stuff really starts to work. My biggest frustration at the moment is that we’ve got a glaring gap in terms of our ability to develop players and we need to sort that, and that’s that person’s job.

“And the CEO’s job is to work with me and the Board to manage the cost base but principally drive more commercial success in the business and grow up the revenue number.

“There will be lots of other things they have to do, but, for me, those are the two fundamentals.

“There is a relationship there. If I’ve got two really mature people there, I’m not expecting one to feel they are being managed by the other. Technically, maybe, if it came to it, you could argue that the Chief Executive and Board can agree to the Performance Director being removed, but on a day-to-day basis, I’m not seeing it that way.

“Ultimately, I’m not wanting to be in a position where one of these people says to the other, ‘remember, I’m your boss’. They’re both answerable to the Board and they’ve got very specific tasks. It works best if they recognise that they will be judged on the critical objectives that they have.”

What does the ideal CEO look like?

Later in this afternoon’s media briefing at Murrayfield, McGuigan gave a telling insight into the qualities he expects to see in the new CEO.

“The net has been cast wide and it’s been been cast outside of sport as well,” he explained. “I’m looking for somebody who has got strong leadership, who can think strategically about the sport, who can stand firm in the Six Nations and World Rugby arena and fight the corner if necessary for Scotland, but also be a contributor in terms of how we evolve the sport – so has got that creativity to do that.

“[Someone] who has got a strong commercial background, because that is going to be really critical in terms of how we evolve the game and drive revenues; has got a pretty low ego as an individual – it’s not all about them, it’s about how do we work with other people; and can build a team around them so that folk believe in them as an individual to provide that leadership.

“And [they’ve got two have] a bit of an edge about them. I don’t want somebody just to make everyone feel great because most things in life require you to be collegiate but know where to draw a line and say ‘that’s not good enough, we need to do better than that and set a standard’. That’s the type of person I’m looking for.”

Can revenue really rise to £100m?

Scottish Rugby’s turnover in the last financial year was just shy of £68m, and McGuigan says the goal of raising that figure to £100m is ambitious but realistic.

“It’s what we need in order to succeed, otherwise it will be constantly cutting and compromising,” he reasoned. “Is that the game we want to be in? It can’t be. We’re here to be ambitious, expansive and the best nation we can be.

“I don’t know any other nation that’s done that on the back of just cutting costs. We do need to find the revenue to do it.”

He added that there are other ways of pushing up income beyond raising ticket prices and hoping for better broadcast deals.

“The Nations Cup is another potential revenue stream, how we develop the stadium, how we develop our commercial work harder than we are at the moment – we need to do a lot more on the commercial side,” he said.

“It’s an aspiration to get to £100m from where we are, and it’s not going to be in one leap, but we need to get there in order to have a business that can continue to perform, and where we can have the expectations we all want around winning things, having successful professional teams, supporting women’s rugby, making sure we have the right pathways and best coaches. We’ll need £100m to do that.”

Is pro rugby in Scotland sustainable?

Dodson’s determination to ‘super-charge’ the pro teams with Scottish Rugby’s Covid-support and private equity windfalls saw Edinburgh and Glasgow’s player budgets grow to in the ballpark of £8m, which is significantly higher than rival clubs in the English Premiership are allowed to spend, with no tangible return in terms of silverware or significant boost in the teams’ profile.

McGuigan acknowledged that savings can and should be made in this area but pushed back at the suggestion that squad sizes and player wages will need to be slashed as Scottish Rugby battles to get back on an even keel.

He even hinted that redeveloping Edinburgh’s Hive Stadium is on his radar as he looks to maximise the revenue generating potential of the Murrayfield campus by being able to host a wider range of events.

“I think they [the pro teams] will accept that there is always opportunity for them to make some savings, so they will carry some of the pain as we make immediate changes in our cost profile, but longer term I want to continue to invest in them to ensure that they play the wider part they can play in terms of development of Scottish-registered players, Scottish-qualified players and also development of the women’s game,” he said.

“I think progress has been made, they are developing stronger brands, [but] we’ve got the Hive with a limited capacity, so we have to look at whether or not there is a bigger opportunity with more capacity. We’re between the Hive with a limited capacity and the international stadium next door which is too big, so it is how you manage that.

“I like the fact that we are attaching the women’s teams to them now and creating a brand for women’s rugby, and if we can develop the [male] pathways through Edinburgh and Glasgow as well then that adds value.

“We need to look at the role that they play in a broader sense, beyond what they bring in through gate receipts. It is the central part they play in terms of how we evolve the game which makes the investment worthwhile.”

 

 

Pushed on whether it is a dangerous game to try to match rivals with deeper pockets, McGuigan expressed his confidence that market forces will ultimately help to bring spiralling player wages back to more manageable levels.

“Every day, when we are looking at players, we are pushing back on what we’re having to pay, but we’re in a market which is pretty challenging at the moment in terms of keeping your best players,” he explained.

“You are going to go one of two ways: you are going to say ‘we can’t compete with these guys so we are going to have to accept the fact that we can’t play at that level’, and we are not there yet; or you have to be realistic around player salaries so we’re being as considered as we possibly can be but we‘re in a very competitive market, particularly with France and Japan.”

“But you are in a market and you look at what’s happening in the Premiership right now with £25m accumulated losses last year, so there is something down there which needs to be adjusted. France have probably got a bit longer before it feels the pain, but I get the sense that the market will adjust.

“I’m just not prepared to be in a situation where we’re not giving it the best crack we can in terms of our two teams being successful, but I’m [also] not going to get to a place where I’ve disproportionately supported them to the detriment of anything else. So, that’s why they‘ll have to play their part in terms of managing costs alongside everyone else.”

While McGuigan indicated that calls for a third pro team based in Aberdeen are fanciful in the current financial climate, he did add that he likes the idea of Edinburgh and Glasgow playing home games outside the central belt from time to time.

“I think it is a good suggestion, we should take it away and think about it, because having that opportunity to see people closer to your home is a good thing,” he said.

Where’s all the money gone?

McGuigan was asked about where the cash received from the Scottish Government Covid bail-out [£20m] and from the sale of Six Nations and URC commercial rights to CVC private equity house [nearly £40m to date] has gone.

“Yeah, I know … it’s been spent!” he said. “There are things you can point to. The women’s game is pretty expensive, you’ve got a significant investment in the pro teams. If other people are on £5m and ours are on £8m, that’s significant. There has been an uplift in player salaries, so you can start to understand where some of the money has gone.

“That’s okay as long as you’ve got a line of sight towards a future revenue stream that gives you extra confidence about the extra money you’re deploying into things which are effectively day-to-day running costs – not strategic investments, extra confidence that you’ve found a revenue stream that allows that to continue for the long term.

“[But] that’s the piece that’s missing in the jigsaw puzzle. How do we get to a place where the revenue stream offsets the fact that we will no longer have these opportunities through CVC and government grants? That’s the piece we’ve got to fix, that’s the piece that’s very urgent and why we are sitting with losses every year.

“We’ve been running a business hot in terms of costs, with an underlying revenue stream that doesn’t support that level of costs.”

Asked for his overall assessment of how the business has been run in recent years, he replied: “If we are to perform in the future, all of these things need to be sharper than they currently are. Irrespective of what’s gone before, what we’re doing currently won’t get us to where we need to get to. That is what needs to change.

“We need to set ourselves a much higher standard. If we are demanding of players and coaches that they are performing at their absolute best, then the management team in the organisation needs to be a mirror image of that. All the things we say we want to happen on the pitch – the professionalism focus, the mental strength – needs to be in the building as well.

“From that point of view, I look more towards the organisation we need to be for the future, and that definitely means we’re going to have to really step up our performance.”


A whistle-stop tour of Mark Dodson’s 12 tumultuous years in Murrayfield hot-seat

About David Barnes 3891 Articles
David has worked as a freelance rugby journalist since 2004 covering every level of the game in Scotland for publications including he Herald/Sunday Herald, The Sunday Times, The Telegraph, The Scotsman/Scotland on Sunday/Evening News, The Daily Record, The Daily Mail/Mail on Sunday and The Sun.

24 Comments

  1. 1. Mr McGuigan and his lightweight marketing-speak waffle may be well-intentioned, but as what appears to be a fish out of water, or more correctly, as an out-of-depth swimmer who knows only the doggy-paddle – he is going to struggle.
    2. The omens for SR are unfavourable, with existential threats looming on all sides – particularly in rugby (all at levels) and in finance.
    3. Chairman John has made it clear that instead of seeking to create the much needed critical mass throughout Scottish rugby and its peripheral necessities, his focus is going to be on increasing revenues rather than on reducing costs – surprising, from the heid bummer of the most bloated Union in terms of head-count (aka the dead wood factor) and its 2 wholly-owned & controlled cash-burning ProTeams, between them returning a combined LOSS last FY of c£16 million (from a total “investment”, a favourite term at EH12, of c£25.7 million).
    4. Yep – critical mass and sustainability, or the Game’s a bogey!
    Cheers,
    Albert

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  2. Well, I have to say, if I was reliant on Murrayfield for an income, then I’d probably be dusting down the CV following this piece – topped off by:
    “We’ve been running a business hot in terms of costs, with an underlying revenue stream that doesn’t support that level of costs.”

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  3. It’s excellent that John McGuigan is fronting up. Let’s hope that he continues this way. Obv there have been previous (very) big hitters from business on the board and involved governance reviews. So he needs to keep up and the good work and communications.

    A few observations.

    The fact that the 6N private equity money has gone without foundations for the future is a major missed opportunity and damning of previous management and the board.

    It would appear that the previous management spent the money on signing big players. A well known strategy in football. It works if it achieves success. First round knock out in World Cup, 4th in 6N (or even 3rd) and a team in semi final of URC or final of the lower European cup is not the level of success required to generate momentum from this strategy. The strategy has failed.

    It sounds like financial discipline is missing. The next CEO must have this as a skill. That’s not always easy to find in outside appointments who can find it easy to promise and harder to deliver.

    I like that John McGuigan has a framework for spending – must have a strong prospect of revenues covering the costs. I think, like any business, there must be long term investments. The pathway is clearly one. And it’s needed if I am right that the strategy was to spend our way to success.

    The next stage will be difficult. Good luck to those who get the roles. As I hum and haw over whether I want to pay double for my Scotland season ticket, Mr McGuigan has probably done enough to convince me for now. The Edinburgh season ticket may be a casualty though.

    • Some good points Richard. Regards financial discipline expertise being hard to find – I disagree. It’s really not rocket science when you have such a predictable revenue stream. You simply need to set your expenditure to match and then closely manage your costs as you progress through the year. The SRU seem to just spend and then discover at the year end they have a £10 m loss. It’s as if they don’t do any financial forecasting.

      • Ross

        When you put it like that, it’s easy. The reality is that when running a business, you have to take risks when under pressure to grow revenues. And it usually takes several years to know if the bet has paid off.

        CEOs by nature are optimistic and believe in their ability to get ‘growth’ decisions right. They are often willing to bet on their own abilities. When they don’t have a significant ownership stake in their organisation, that’s easy to do. And they can move on (often ‘dressing up’ their impact) if it doesn’t pay off. This is why a board needs proper oversight.

        And CEOs who genuinely get things right and put an organisation’s need ahead of their own (assuming they anre not owner managers) are very difficult to find.

  4. That’s a very ambitious target 100 million! Nearly a 50% increase on current turnover so that will need enormous changes to achieve.
    Random thoughts:
    Our pro teams budget-at c.8m-appear much higher than English Prem teams a ,what, c.5.6m.That suggests a lot of players are being paid well above the “market rate” surely? So much for the comfort zones often talked about up here (usually referring to Edinburgh.
    No real insight into how this increase is going to happen.Can’t all come from the idea that supporters will spend longer at the ground on the day and spend money otherwise destrined for West End/Roseburn hostelries.
    Seems generally accepted that Murrayfield Stadium needs a “spruce up” pretty soon.Where is the capital to come from for this sort of spend (likely north of 10m I’d guesss)?

    • I agree the comparison between our pro teams and English Premier teams takes a bit of understanding if the £8m figure is purely player salaries? Some of their squads seem to have more depth than ours so clearly cant be paying them as much. The one difference in their salary cost is that they are allowed I think 2 marquee players who are outwith the £5m. Finn is apparently on £750k at Bath but even with the marquee players they still will have less in total than the £8m. Definitely suggests some of our players getting paid more than their equivalents in England.

      • We need to ensure we’re comparing ‘apples with apples’ as I suspect the English club wage cap is purely for 1st team squad players (excluding the ‘marquee players) & not all the additional staff, coaches & academy players that are possibly included in the Scottish pro teams’ amounts.

        Once the SRU gets the youth pathway system effective then hopefully a lot more young, & lower paid, players will come through & displace the higher earners, which in turn will reduce the overall cost. If the high earners are forced to ply their trade abroad then this will expand their experience & skills, which will benefit the national team. The downside will be in the competitiveness of the two pro teams, with gate receipts & sponsorship possibly being affected.

  5. The imperative is to build critical mass in every meaningful facet of Scottish rugby (small “r”).

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  6. This is a good start with some challenging aspirations though as always setting the course for the sun is the east bit, getting there much more difficult.

    Growing revenues to over £100m is a courageous stance. Interesting that it’s eventually! Ticket prices are increasing 5% for 2024 6N matches but that can’t be a sustainable stream to keep on ratcheting up. Redevelop The Hive? I suppose we can add some extra containers. That allegedly cost £5M to construct so any increase will require money to do so.

    No mention of what redeveloping Murrayfield will cost or the vision for that.

    Profitable by 2026 is a much more challenging target from the current position. As Ross Kinnear points out – two home games and a World Cup make it a very delicate financial year. Notable that Murrayfield has extended its reporting year as well. As the saying goes – revenue is vanity, profit is sanity. Squeezing more out of the assets will be difficult and Mr McGuigans thoughts on this from the AGM fell flat.

    The headline that the focus on revenue over cutting costs doesn’t make much sense in the context of the overall piece. Both things will have to happen if the goal of profit by 2026 is to be realised. The hints are there with the cost of the pro teams vis others. “so they will carry some of the pain as we make immediate changes in our cost profile”.

    The more damning information here is the commentary on runaway costs by the previous regime. We were assured that these were all “strategic investments” despite questioning the logic of these statements. Indeed there was even an attempt to claim that increases to pro costs were just a one off correction based on strategic investment. Last I looked, increases in salary costs aren’t strategic anything. Just straight cost increase.

    I’m thankful we have serious business people in board and the required medicine is being administered. This will not be easy but I wish all concerned best fortune n these challenging times.

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  7. As a supporter my priority has to be getting the finances back under control. Without financial security the whole sport in Scotland , including the community game,is under threat. It is all very well having the aspiration to grow revenue but costs across the budget need to be brought back under control. The 2 Pro teams are prime candidates for cuts.

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    • The pro teams are more important than ever, we cant afford to cut their budgets. If we are going to have more ‘A’ games etc we will need a bigger pool of players so they will need more money. The bigger pool of players is essential to getting our U20’s pathway sorted. Getting rid of the Super 6 will help to balance the books.

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      • They need to stop signing players outwith Scotland. Cutting budgets will focus attention on pathways and be more sustainable in long run. It’s not as if the foreign legion have brought success is it??? One trophy for millions wasted and generations of young players lost to the game. Short term pain may be the only way to truly move forward.

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      • I agree with you, we should have a quota of at least 75% of the squad being SQ players in both the professional teams. You still want a bit of foreign influence to help develop players with different ideas etc but cutting budgets wont achieve this it will just limit the opportunities of young players.

    • It’s a sight more sustainable than S6, DC Glory, Stade Nicois and the vast SH scouting network we have which have all failed and been money pits. The crowds for both the Celtic challenge and 6N are increasing at a very healthy rate alongside performance. Something that certainly can’t be said for the men’s teams. Even with decent form there’s a worrying amount of empty seats at Glasgow games. Prior to being behind a paywall tickets for Glasgow matches were very difficult to come by. The Dodson era really has been Rome burning in every possible facet of managing the sport. Despite this Edinburgh still signing a 29 yr old journeyman prop whilst pathway players continue to be ignored. I fear it’s going to take a good deal more tenacity at reigning in the spending in the men’s game. One trophy in the entire history of pro rugby for the money that’s been spent stopping Scots getting game time is nothing short of disgraceful. 30 years of short termism has been a disaster.

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    • So you suggest getting rid of a team that has improved loads over the last couple of seasons, generates a lot more interest from the previously neglected women’s sport and gets exposure on free to air TV? Maybe we just get rid of any club or team that doesn’t make money – oops, there goes the whole SRU and everything with it.

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    • £20m Government bail-out & £40m CVC money has been frittered away over a matter of a few seasons.
      This is not the result of investment in the womens game – it’s a direct result of chucking cash into the ever-deepening pro rugby money pit – a global arms race we will not win.

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      • Agreed, Paul. Chairman John appears to be clutching at straws, as the entire vessel struggles to avoid sinking below the plimsoll lines of reality and sustainability.

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  8. Seems to be making the right noises and a nice dig at the Strategic investments” of the recent past.

    Pity my season ticket has doubled tho.

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  9. Interesting article. Based on the last set of financials which led to the £10m loss I think whilst it is always nice to improve revenue you do need to keep a tight reign on costs which has not happened. If the 2 pro teams salary ads up to £16m then there is another £60m of costs outwith this. This grew massively over the last 10 years dwarfing the rise in revenue. I would love to understand which areas that are being targeted for revenue increase if not just increasing ticket prices. I would have expected more to be said about this. The last year which led to the £10m loss we had full houses at all games and 3 home 6 Nations so for a business that gets nearly all its revenue from international matches then where is it going to some from. I actually fear that the current year with only 2 home 6 nations games will result in >£10m loss and so the challenge will be greater. A lot of nice words from John but feels rather aspirational with no detail. If anyone had really had their eye on the numbers this wouldn’t have happened in the first place.

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