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It's the debt that gets you
Discussion started by Innings , 06 August, 2020 13:34
It's the debt that gets you
Innings 06 August, 2020 13:34
Any business that goes broke is almost always finally sunk by debt. When it's easy to borrow and nobody worries about your covenant, the business borrows whatever the banks are willing to lend. When recession comes you flail around, cutting costs, jobs, commitments, delaying payments to suppliers. Ultimately, none of it works, and the business either disappears altogether or swoons into the clutches of new owners.

The RFU annual accounts suggest that for years the ship has been kept afloat on a sea of borrowed money. The 2019 accounts suggest that net equity is actually negative. The significant new partnership with BA as stadium sponsors has to be in serious doubt of continuation beyond its legal commitment. This is likely to have been the most significant single source of income after ticket revenue and TV income. With the business model seemingly no longer viable, the RFU drops support for women's rugby, regional development, sevens, the Championship and any other activity that can be abandoned. How long before the money runs out and we see CVC or other 'partners' taking over the RFU altogether?


Points win matches: tries win hearts and minds.

Re: It's the debt that gets you
Duncan96 06 August, 2020 17:46
Do you know if most other Unions are in the same same pickle?
If they are, one solution is to play a vastly increased number of international matches. It would take a cartel of them to take on the French and English clubs to ram this through though

Re: It's the debt that gets you
Innings 06 August, 2020 19:30
I have no idea of what will happen next. However, I very much doubt that the future can be any sort of return to the far-off days of January 2020.


Points win matches: tries win hearts and minds.

Re: It's the debt that gets you
Duncan96 08 August, 2020 21:41
With the Championship becoming semi pro and ring fencing themselves from the Premiership that is certainly true

Re: It's the debt that gets you
Innings 09 August, 2020 11:12
The RFU seems to be taking a very narrow view of its obligations, driven by debt and over-expansion. The entire game for them is reduced to one team. Could there be a re-alignment that involved a complete rift between the RFU and Premiership on one side and the rest of England rugby on the other? Who would then legitimately claim to speak for english rugby?


Points win matches: tries win hearts and minds.

Re: It's the debt that gets you
myleftboot 09 August, 2020 14:18
Innings, in this scenario, who got the cash?!!

Re: It's the debt that gets you
Innings 09 August, 2020 17:26
If you mean the overall situation of money in and money out, have a look at the accounts.
> Over-spend on the England rugby set-up - 70 million a year -, increase of 11% between 2017-18 and 2018-19
> Spend on rugby development- 34 million year, reduced by 1% in the same periods
> Pressure to keep on servicing bank debt, which now exceeds 125 million
> 580 on the pay-roll, most the 250 in 'rugby development' now gone of course.
> Lavish pay and allowances for the executives at Twickenham, non executive directors' pay increased by 47% in 2018-19

all might deserve attention. The underlying ethos seemed to be that if they could borrow it they should do so. In the 2018-19 accounts they seem to be suggesting that a new 100 million drawdown facility, on top of existing debt, was available to keep the ship afloat. The reality was that there were no effective reserves, proportionate to the revenue and costs streams. That meant that when the recession arrived there was nothing available to avoid the crisis gap between income and expenditure. Emergency measures were therefore extreme, because there was no plan for any sort of set-back.

An ignorant outsider might think that entire golden galleon floated on the money generated by about 15-20 days of business every year with the addition of extra borrowing each year. Losing one or two days at Twickenham would have been grim, four or five critical, and to lose the whole lot was almost terminal. Reported losses in the previous two reporting years could have been the result of accounting matters. However, the ultimate reality check is cash-flow, which shows that cash went out faster than it came in during both years 2017-18 and 2018-19. By the end of 2018-19 period, cash in hand amounted to less than six weeks' worth of cash-flow.

This is a case where the auditors got it right, but there were no shareholders to hold the board to account.

And finally: Apart from the 200+ staff involved in "Stadium, commercial and administration", what do the 114 paid for 'professional rugby' actually do? After all, the players are not employees of the RUF, and do they need four times as many employees as match day squad size?


Points win matches: tries win hearts and minds.

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