MARK DODSON says that latest calculations predict that Scottish Rugby faces an £18million hit in revenue due to Covid-19 lockdown/social-distancing measures, but he believes that this can be offset by the business achieving £14million in savings through belt-tightening in every department, and he is determined that there will be no redundancies.
An overdraft facility has been secured with The Bank of Scotland to ease the inevitable cashflow squeeze caused by the ongoing crisis.
While the forecasts coming out of Twickenham have been catastrophic, with over 100 community coaches and rugby development officers being cut adrift and the England Sevens programme being scrapped, the news emanating from Murrayfield earlier today [Friday] was of a far more optimistic flavour.
The Chief Executive acknowledged that the situation is serious but stressed his commitment to ensuring that the governing body is in good shape so that it can quickly bounce back once the storm subsides.
“We’ve got a good handle, I think, on what kind of shortfall we’ll be looking at this year – we’re looking at an £18million shortfall in our revenue position – so it’s a serious situation as far as we’re concerned, and we’re taking all the appropriate steps to manage that,” said Dodson, during a wide-ranging media briefing conducted by video link
“I would say it’s a current case,” he replied, when asked if this figure was a worst-case scenario. “It’s very realistic. We’re being very prudent in our measures. We’re trying to take advantage of all the data that’s there. I would say that the £18m is more at the harsh end, but again, it only needs the Six Nations to be cancelled and then we’re into a whole new scenario.”
Scottish Rugby’s total turnover for the year up to the end of May 2019 was £61million, so we are looking at a hit of almost one-third of annual sales, however Dodson – who was speaking publicly for the first time since 13th June – insisted that there will not need to be the same sort of sweeping cutbacks as has been witnessed elsewhere across the globe.
The importance of bounce-back-ability
“As I’ve said before, our ambition is not to lose a body as we go through this whole process – not to make redundancies – and the reason for that is because we want to maintain the capability to bounce back once this pandemic is over, and not cut our ability to do that,” he said.
“It is quite clear that we will have a cashflow problem as we go through this pandemic, but we have to come out of it fairly swiftly and have a robust infrastructure to make sure we can grow back revenues as soon as possible.
“To give you some idea of what is taking place, there are going to be cuts across every single department in the business. Some of those budget reductions will take place largely through a lack of activity – if you are not playing games then you are losing revenue but you are saving on expenditure as well in terms of travel, preparation and so on.
“We are also going to have less age-grade games but we are going to keep the Under-20s in a certain programme that will be reduced because of the nature of Covid and the travel that can take place.
Protecting the grassroots
“We have tried to protect our grassroots game through our ‘Rugby Development’ department,” he added. “Our mission is not to cut that department as deeply as we would normally do for the simple reason that we believe our clubs need our support as we work through this pandemic. And we think our community development officers and regional support framework will be needed to make sure that we can get rugby played as soon as we possibly can.
“But we are going to be taking roughly £14million of costs out the business this year.”
The season structure for domestic rugby has not yet been agreed, and the level of direct funding to clubs is unclear. In fairness, he wasn’t asked specifically about this. What Scottish Rugby calls ‘Club Support & Development’ cost the governing body £2.9million last year.
Meanwhile, with staff costs accounting for 52 percent of expenditure, it appears inevitable that the current programme of wage cuts for higher earning SRU staff will have to extend in some form beyond the initial 1st September deadline, but Dodson was not giving too much away.
“We’re currently talking to our people about that,” he said. “As you know, we have asked our employees earning over £50k per year to take pay cuts, and we are humbled and respectful of how they have dealt with that up until now with their willingness to work with us through this crisis.
“So that has been a meaningful contribution to the overall number [level of savings], but it is also about activity and things we are no longer doing, it is about budgets being trimmed across our commercial and other operations. We are making sure that this is a blended solution across the whole piece, without losing staff as we go because we are going to need them as we come back.”
Saving the 7s
Dodson added that there are no plans to cut the Scotland 7s programme, even though there will not be any HSBC World Series tournaments to play in during the remainder of 2020.
“The big issue here is that we see 7s slightly differently from the other Home Nations,” he explained. “When we made the changes in 2015, we turned the 7s programme into a development pathway for our club teams and academy players.
“We believe very strongly in our 7s programme for bringing players back from injury, for giving people the opportunity to regain form, and giving players the first opportunity to play on the international stage. So, while we have no objection to coming together as a GB team for the Olympics, we still believe very strongly in our ability to play independently as Scotland on the World Sevens circuit and at the Commonwealth Games.
“Some of our 7s players will come in and start training with our professional teams while we are finding out what is happening with the global circuit.
“One of the things we found the last time we looked at our 7s involvement was that there wasn’t any great appetite for Scotland to lose that capability – I think that came through loud and clear from the public, and it came loud and clear from our internal stakeholders. So, although the ‘business school solution’ would be to cut back on things that are extra to the core business, we have taken note of what was said in 2015 and I don’t think that will change any time soon given the Ned Haig and Melrose connection.”
Money makes the world go round
On the revenue side, Dodson said the full value of the extended Autumn Test schedule – which will see Scotland play six matches, including Georgia, France and Japan at home, plus potentially one more match at Murrayfield on 5th December – remains unclear.
“If we have crowds during the Nations Cup matches that would have a positive effect, and if our broadcast revenue from the Nations Cup exceeds what our normal Autumn broadcast deal would be then that would be a big positive – but when you consider we had New Zealand as part of our Autumn schedule this year, that was a good proposition for our broadcasters, so we have to see how the whole Nations Cup concept is viewed.”
He is hopeful that CVC Partners private equity house will have bought their slice of the international game by that point, in a deal which is reported to be worth in the region of £300million.
“The negotiations are going well,” he said. “They’re thorough and based upon a new world, but also recognising the value of our sport. We’ll hopefully be able to bring those negotiations to some kind of a conclusion by the end of the summer.
“What that conclusion will be, it’s far too early for me to say. I can only say that the conversations are good, solid and very honest.”
He was asked if this CVC money will be ring-fenced in the same way as the proceeds from the deal with the PRO14 league was back in May.
“We’ve got to get the money first,” he replied. “If money comes in, we’ll deal with it at that time, but most of our stakeholders see anything to do with Six Nations as being part of the clubs.
“The Pro14 money is seen as being generated by the pro game, by new entities and a new competition. Anything from the Six Nations is going to be seen as being much more fundamental to our stakeholders and our union.
“There will be a period of reflection as to what we do with that money.”
In the meantime, the Bank of Scotland will help make sure that the lights stay on.
“We’ve got to do what everybody else is doing as we face a cashflow issue. We haven’t had any meaningful revenue since February – and that is a tragedy because we were trading incredibly well up to then – so we have been talking to the banks for the last three or four weeks and the reason for only talking [publicly] about this now is that we wanted to wait until we had secured our bank facility, which we have now done. Bank of Scotland have been tremendously supportive around helping us through this pandemic.
“What we found is that [due to] our track record of increasing revenues and reducing debt in our recent history, the bank recognise that we are well run and sound on a financial perspective, so that has given them confidence to provide this facility to take us through our pandemic.
“But it will mean that we are indebted again and we will have to trade ourselves out of it, by doing the same thing we did previously which is aggressively pay down debt and increase revenues at the same time.
“The management have got a track-record of delivering that – the bank recognises that – and I am very confident that we will trade through this pandemic to come out the other side with a sustainable, competitive and sound business.”