It is time for SRU to publish their long overdue accounts

Lack of transparency from governing body creates an information vacuum into which doubt and suspicion will inevitably flow

Murrayfield Stadium. Image: ©Craig Watson - www.craigwatson.co.uk
Murrayfield Stadium. Image: ©Craig Watson - www.craigwatson.co.uk

THE Welsh Rugby Union published its 2019-20 Annual Report earlier this week with the accounts for the year up to 30th June 2020 included, revealing that turnover has dropped from £90m to £79.9m, leading to a £5.3m loss across the business (compared to a £4.3m loss the year before).   

Interim Chief Executive (and former Finance Director) Steve Phillips acknowledged that the pandemic’s full impact is not yet known, and the report raised the prospect of a £35m income loss in 2021 if both this Autumn’s Test series and next Spring’s Six Nations matches are played behind closed doors. It was a pretty sobering read but Welsh rugby clubs and supporters will be glad to have some clarity on where things stand.   
  
Meanwhile, we still haven’t had sight of the Scottish Rugby Union’s accounts for the year up to the 31st May 2020, despite the fact that the governing body’s bye-laws require the financial statements to be laid before an Annual General Meeting “within four calendar months after the Scottish Rugby Union plc’s financial year end but in any event by no later than 31 August in the calendar year, as the Scottish Rugby Board may determine”.    


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So, when will we see the SRU Annual Report and accounts for 2019-20? 

It was decided back in July that the AGM should be split in two so that the core business of electing/ratifying key office holders for the coming year could be achieved in a timely manner, while all other business would be pushed back to a yet to be specified date when Covid restrictions allow all delegates to meet in the same room. It subsequently emerged that the accounts would not be made available until part two of the AGM. 

“The accounts have been so severely affected by Covid-19 that the reporting and auditing of those accounts is going to take much more time than normal,” explained Scottish Rugby’s Chief Executive Mark Dodson at the time. “So, to give the most complete picture possible, we couldn’t hit the deadline before August 6th. Consequently, what we’re going to do is put those [accounts] out well before the second part of the AGM to give people time to understand.   

“There’s payment issues, in terms of when you get paid what you are due, but also things like the PRO14 payments – that money was received in one financial year but not actually activated until the second financial year – so there are things that are extraordinary this year which we wouldn’t normally be dealing with,” he added.   

This was hard to fathom. It might not have been possible at that time to have it all fully audited and presented in a glossy brochure surrounded by inspirational photos and encouraging passages of text, but the membership would have accepted the management accounts which have presumably been key to planning Scottish Rugby’s response to the current financial crisis.  

The WRU have had the same obstacles and less time but still managed to produce their Annual Report and Accounts – what is the financial management problem at the SRU? 

With Covid restrictions tightening once again across Scotland, and the restart of club rugby shunted back to the end of January at the earliest, it is time for the SRU to acknowledge formally that part two of the AGM is not going to be hosted in the conventional manner any time soon, meaning that a make-do alternative of another video conference has to happen as a matter of urgency given the seriousness of the issues needing addressed.   

At the very least, the accounts should be released immediately. It is worth repeating that the WRU’s financial year finished a full month after the SRU’s and they have been able to produce their accounts in timely order, so there really is no excuse now.   

This is important because the reluctance to share reinforces suspicion that the Scottish Rugby Board isn’t really interested in properly engaging with the stakeholders it is supposed to represent.

Bear in mind that the two motions which are due to be discussed in the second part of the AGM have been proposed by clubs in order to compel the Board and Council to be more transparent and accountable to their ultimate stakeholders. This is a culmination of several years of struggle between two factions who should really be working together for the betterment of the game at all levels in Scotland.   

It feels a bit like the can is being kicked down the road in terms of both the accounts and the motions, in the hope that external events will supersede their relevance.   

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What do we know? 

We have no idea how the SRU financials looked in the reporting year 2019-20. No idea of underlying losses, loans undertaken, investments accepted, made or devalued. 

Not having sight of the accounts creates an information vacuum into which doubt and suspicion will inevitably flow. Scottish Rugby is facing an existential threat from Covid and the shareholders are entitled to some understanding of how well equipped the business is to deal with the challenges ahead. The accounts would not provide all the answers but would at least give a snapshot of the true situation near the starting point of this crisis.  
  
What we do know is that Scottish Rugby’s financial model is predicated on the assumption that future ticket income, broadcast revenue, sponsorship and advertising sales will meet present operating demands, with no significant capital (cash) reserves having been built up in the time of plenty.   

How can stakeholders judge the financial impact of the pandemic without knowledge of the SRU financial case as at the 31st May 2020? 

Operating costs have grown 38.7% in the five years since 2014 and 84.1% since 2011, while the headcount has jumped from 283 in 2011 and to 401 in 2019, at an average cost for each employee of £78,524. We do not know the figures through to end of May 2020 owing to the absence of the Annual Report and accounts.   

Yet whilst the other Home Unions have addressed the impact of Covid pro-actively and with much more openness – 139 redundancies at the RFU, a £20m bank loan at the WRU – Scottish Rugby has drip-fed information which has prompted more questions than it has provided answers.

Dodson stated on 7th August that Scottish Rugby was facing an £18m hit which he believed could be off-set by the business achieving £14m in savings through belt-tightening in every department, with the rest covered by a borrowing facility secured from The Bank of Scotland. He added – unprompted – that he was determined that there would be no redundancies.    

It sounded like an encouraging start, even if the cynics were compelled to question where Dodson’s concern for protecting jobs was lurking not so long ago when he was papering the walls of Murrayfield with non-disclosure agreements.

Given that just under 52 percent of costs is on staff, no redundancies meant that an extensive programme of wage cuts was inevitable, and this was successfully negotiated for the playing staff by the end of August.

Since then, Dodson has broken cover once more, to add his voice to the push for government support for stricken sporting institutions. “If the restrictions continue until the end of the season the impact increases to £30m,” he told the BBC. “The need for government help is clear.”   

He wasn’t challenged on this being an audaciously bold position from a man who took just shy of £1m out of a £61m business during the last financial year for which the accounts have been reported, and he wasn’t asked if he has any strategy up his sleeve – apart from a government bail-out – for dealing with the doomsday scenario he had just articulated.   

Based on the information available, you don’t have to drill too deep before you start hitting landmines.    

A 25 to 30 percent cut in executive salaries and the forfeit of their bonus entitlement for the financial year 2019-20 as agreed in mid-April would save around £1m per annum – though there has, as yet, been no confirmation that these salary cuts have been extended beyond 31st August.

Pay negotiations with the players should, we understand, cut their collective wage bill by some £100k per month – or £1.2m per annum.    

We understood that three-quarters of the SRU’s 401 strong workforce went into the government’s furlough scheme, which pays 80 percent of an individual’s wage up to £2,500 per month, equating to a saving of around £850k per month for the six months from April to September – almost £4m in total – which is being picked up by the public purse.   
 
“There are going to be cuts across every single department in the business,” said Dodson back at the start of August. “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 believe that wage cuts for non-playing staff in the organisation earning over £50k per year have been continued beyond the initial end of September timeframe, but no information on this has been released. We also know that some fixed term contracts for non-playing staff – such as Scotland Women coach Philip Doyle, and scouts Alan Tait and Ian Smith – have not been renewed, but it isn’t clear how many employees this relates to. There doesn’t seem to be any academy players seconded to Stade Niçois this season, and there has been no information about the SRU investment in Old Glory DC. But it is difficult to see any such savings exceeding another £1m. 
 
So, based on the information we have, and what we can reasonably surmise, the SRU has managed savings of £7.2m in total – £6.8m short of Dodson’s projected target – and £22.8m short of his current worst-case scenario.  

Operating Costs for 2019 were £61.1m, of which employee costs were £31.5m, leaving £25.6m of non-employment costs to cover that £22.8m shortage from the worst-case scenario.  That would mean running the Union and honouring Murrayfield’s financial obligations to the club game from a residual £2.8m. This is before factoring in any as yet unreported (pre-Covid) operating losses from the 2019-20 accounts, a World Cup year.

Where are we heading? 

Dodson said in August that: “The Bank of Scotland have been tremendously supportive around helping us through this pandemic”. They have provided that borrowing facility, but how far does that support extend? They will presumably expect any loans to be repaid, which opens up a whole load of questions about terms and security and the squeeze this will put on the business for years to come.  

Or is this just a waiting game before the CVC cavalry come charging over the hill? The private equity firm have been nibbling around the edges of rugby for some time with their investments in the English Premiership and the PRO14, although recent press reports have suggested that the prospect of a government bail-out for the Unions could change the dynamic and cool the burners for a game-changer Six Nations deal.    

The SRU Annual Report and accounts are beyond late, and, without them, how can stakeholders judge the executive response to the pandemic? How can proposed lenders, investors and government agencies judge the viability of this organisation before commitment?  

If CVC are still at the table, being desperate for cash is a weak bargaining position for Scottish Rugby to be starting from. A fire sale to a private equity concern or a last-minute tax-payer bail-out might help save face and protect executive bonuses, but the focus needs to be on protecting the long-term health of Scottish Rugby. 


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David Barnes
About David Barnes 1995 Articles
David has worked as a freelance rugby journalist since 2004 covering every level of the game in Scotland for publications including The Sunday Times, The Telegraph, The Scotsman/Scotland on Sunday/Evening News, The Herald/Sunday Herald, The Daily Mail/Mail on Sunday and The Sun.

12 Comments

  1. The SRU won’t let a good crisis go to waste and I expect the accounts to come out with a spin on them which shows any and all losses are due to the pandemic’s interruption of what would otherwise have been more continued success.

    Maybe a bit harsh, but given certain hurricane-proof pay packets, deserved.

    • Deek

      I sense you are far from alone in your thinking, not helped by openness and transparency sought in the two Motions being kicked down the road with the Accounts as we see no sign of AGM2 two months on.

      If Gregor can zoom call 108 players, it is not beyond the wit of man to hold AGM2 electronically.

      My concern with the no redundancy policy is that we will simply rack up debt and return to the days the Bear referred to below, when David Mackay and Phil Anderton nearly took us under.

      “Annual income 20 pounds, annual expenditure 19 pounds 19 shillings and sixpence, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and sixpence, result misery.”

  2. I believe a lot of companies are holding back their accounts at the moment and maybe it is prudent to do so till a clearer picture emerges. I suspect the advent of the virus will have a disastrous impact on our accounts but I suspect no one, even those in charge do not know to what extent.
    It’s a pity no one took real action Or interest all these years ago when the Union was plunged into debt with no pandemic to effect our financial state.
    Great Wales have published their accounts but what do they tell us and how relevant will they be in a years time?
    My concern is the lack of rugby/ sport being played by young men and women and the potential drop off in numbers. Should sport not be continued but with club houses closed? The well being of our young athletes is as important as the finances if not more so.
    I don’t have the brains on how to run a company but I imagine it must be nearly impossible to report meaningful figures and projections under the current situation.
    I’m not saying it is not wrong for the SRU not to have published their accounts but I would question how meaningful they would be in relation to the future of our game. 🐻

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    • Iain

      The accounts relate to financial year 19/20 ending 31 May so we are talking about three months of Covid time. Getting them audited etc is the issue but it can’t be put with the wit of the accountants to do something with them.

      All company accounts are a backwards look at income and expenditure. They tell us little about how the next year will go. What we do know is that two other Unions have projected huge losses and think it will take 5-7 years to recover.

      Do you think SR are immune from that? Would it be helpful if there were some projections to clubs (the shareholders) as to what we may be looking at rather than having a cosy chat with the pet BBC reporter lining up a govt bailout?

      How about SR just tell us when they will be ready?

      I agree with your broader point on sport helping support the health and well-being of players and we need to do everything we can to get the game restarted in as safe a manner as is reasonably practical.

      The idea we can train and possibly play matches without access to changing rooms and showers seems odd to me. Our country is known for its rain. Rugby pitches for being a bit muddy. I would have to travel by myself to the match, change at my car, play the game then jump in my car to go home and shower. That doesn’t sound like a great idea. Sure it’s possible but the novelty would soon wear off. Probably commensurate with how many visits I have to make to the car valet folks to clean my seats.

      On top of that clubhouses are struggling to open even when they can do so. How do we generate the funds to support the playing of rugby? Pay for transport? Strips? Medical tape?

      It’s an extremely challenging situation for all concerned. Some honesty and transparency from Murrayfield would be most welcome at this time.

    • “It’s a pity no one took real action Or interest all these years ago when the Union was plunged into debt with no pandemic to effect our financial state.”

      Just maybe people are trying to learn from this.

      “Great Wales have published their accounts but what do they tell us and how relevant will they be in a years time?”

      The accounts aren’t supposed to forecast the future. They are supposed to show the position in the period they cover.

      What are the SRU trying to hide?

  3. Excellent journalism yet again from David, refreshing in an era of regurgitated press releases.

    As often, far more questions than answers but for me two big questions:

    Firstly just how bad was FY2019 even allowing for the commencement of Covid?
    Remember a World Cup year usually sees a dip in income of around £3m, and that before some of the WC income being already taken in the FY2018 accounts helping the debt and subsequent executive bonus positions; before reports of lavish spending on the training camp; before failure to qualify for the quarter finals; and before the small matter of a £70k fine is taken into account.

    Secondly why are we pursuing a no redundancy policy when many areas of the business will have significantly reduced workloads?
    For example up to 60 pro and semi-pro players, recently described by one former pro player as “tackle bags”, will see little or no rugby in the next four to six months.

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    • Well put, Keith.

      Another significant, if not incredible feature to be emphasised would be the CEO trumpeting the intention to achieve £14m – yes £14 million – annual bottom line cost savings by some belt-tightening and from reduced operational activity going forward, along with “no redundancies”…. Does the well-nourished Mancunian realise that he’d dropped a major clanger there? Most people would have expected the organisation to have been running already on the most cost-effective basis!

      Having seen from the inside just how much scope there is to manipulate the SRU’s annual accounts, even under the eyes of the auditors, allocating & re-allocating marginal revenues & costs between accounting periods and departments / cost centres, until the figures are most suitably presented (embellished?) one gets the feeling that feverish work has been ongoing to achieve just that on this occasion.

      We shall see, eventually…. Right now, production and approval of the SRU’s 2020 annual accounts are formally overdue and it is about time the Board and senior executive stopped sheltering behind the convenient though unconvincing excuse of Covid-19- induced delays.

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  4. These are highly unprecedented times and if there are delays with the audit then that is unfortunate. It would be highly embarrassing to release unaudited accounts where perhaps an error had been made, and if theres one organisation you can rely to make an error with the figures, it’s the blazers at EH12….

    • It’s not the errors that tend to be the issue. It’s the manipulation of the figures as evidenced in previous accounts. No debt anyone?

  5. Ooft there been a stramash in the box!

    Well put David. It’s odd that we have had no accounts or financial information from Murrayfield. Lots of misdirection from Mr Dodson though. We have saved £14M. Really? If it was that easy why were you spending that money in the first place.

    Even taking the pandemic into account, surely the preparation for the accounts should have proceeded as normal? Sure they couldn’t be audited but it wouldn’t be the first time a company released unaudited accounts due to circumstances.

    The interesting question will be what are the losses from the World Cup campaign? Trip to Japan, long pre tourny camp and getting knock out in the groups will have been expensive.

    After a flurry of activity in the early months of the pandemic, little has been seen or heard from the executives at Murrayfield except when Mr Dodson calls up Tom English to get something in the media.

    Thankfully we have the best CEO and COO in world rugby so should be a breeze.

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