The Welsh Rugby Union has posted revenues of £94.3 million, with its chief executive Steve Phillips taking home £359,000, the latest accounts reveal.
The union, currently embroiled in protracted talks with Wales' four men's professional sides over a financial strategy for the future, saw their own fiscal performance return to pre-Covid levels and invested £62.9 million back into the game at all levels.
This year also saw the first instalment of the the WRU's £40.6 million payment from CVC Capital Partners after they bought a minority stake in the Six Nations. The first payment of £6 million helped the union post a profit of £3.2 million, however it remains committed to putting the money from the Six Nations deal towards capital projects like the Principality Stadium roof walk, which the union now insist will be operational by 2024.
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Meanwhile, the union's finance director, Tim Moss, said: “Our stated financial strategy continues to be to reinvest the maximum amount we can in rugby, which means we look to break even and not make any profits. A variation to this strategy arises from the proceeds from the recent private equity (CVC) investment into the Six Nations. The retained profit of £3.2m in year end 2022 is driven by the first tranche of the capital receipt arising from this sale of equity."
International matches at the Principality Stadium generated 46% (2021: 39%) of the group’s income. In fact, some 72% (2021: 69%) of the group’s total income is derived from staging these matches and the commercial activities associated with senior Welsh teams.
The average attendance per match was 66,000, including the best-attended Autumn Nations Series since 2008 - this equates to an average of 90% of the stadium’s capacity - and the average ticket income per attendee was £52.
CEO Steve Phillips added: “It is vitally important for me to stress again, as the governing body of the game in Wales, it is our ambition to re-invest as much profit as possible into the game whilst living within our means.
“Re-investment levels are back where we need them to be across the whole game in Wales. The group must continue to work hard on ensuring financial security for our game as it evolves on a global scale and we have our own investment strategy in place to achieve this aim."
Roof walk attraction
Mr Moss also confirmed the WRU is looking seriously at a stadium roof walk attraction, one of a number of capital-enhancing projects envisaged from the CVC payments. The union is also looking at an interactive museum attraction.
On a roof walk, Moss said: "There are a number of projects we are looking at, but that one is where we are most advanced on. Personally, I would love to see that on top of the stadium as it would be a fantastic draw. It is just getting the conversions to work on that and that is something we are working on at the moment.
“As it would be an attraction on the roof of the stadium and it is clearly going to be restricted to the elements when trying to build it, winter is not going to be a good time to start. That limits our build opportunity to probably spring next year at the earliest, but if we are going to do it I would be very hopeful it would be operational by summer 2024 at the latest.”
If the roof walk project happens, the plan would be to appoint an external operator to run it. Mr Moss said: “The current thinking is that we would bring someone else in. There are a number of firms out there who have got experience in this with firms like Zip World, but also the firm that runs the Tottenham experience, and there is the O2 as well. So, there are a number of firms out there who can do this but our business is rugby and we would look to delegate something like this to someone that operates in the space, although I cannot be definitive on that.”
The Parkgate Hotel
Last autumn the Parkgate Hotel next to the Principality Stadium - in which the WRU has a 75% equity stake - opened. It is operated under a management fee by the Celtic Collection whose hotel portfolio includes the Celtic Manor Resort in Newport.
Despite the loss of trading in the key Christmas December and January trading period, due to Welsh Government Covid restrictions, the hotel - financed with long-term borrowing of £47.6m from financial services giant L&G - has moved into a positive cash generative position.
The hotel generated revenues of £5.7m against costs of £4.2m, which included the management fee to the Celtic Collection but not the lease finance payment to L&G. Based on a finance lease charge for six months (not charged during restrictions) from October to June, the cost was £850,000, giving a retained profit margin from the hotel estimated at more than £600,000. Property developer firm Rightacres has a 25% stake in the company.
In the current financial year, the hotel has been trading strongly with no Covid restrictions, The WRU wouldn’t discuss what its projected profit for the hotel will be for its current financial year, but it is understood they are confident of securing at least £1m and hope it would rise further in the years ahead.
Mr Moss said: “It is fair to say we are very pleased with how the Parkgate Hotel has performed this year and was significantly cash generative for the eight months. We were restricted between December and January and that did hit a lot of our Christmas trade. However, it did bounce back in February, especially around the Six Nations.”
Debentures
The union hoped to raise £3m from the issuing of 500 new debentures at the stadium at the cost of £6,000 each, which guaranteed holders the option to buy tickets in the same seats up to 2050. At the end of June the issue had raised just £100,000. However the debenture offer didn’t close until September.
Mr Moss said: “We are still processing through the applications. We offered 500 and being honest we are not going to have sold 500. However, it is definitely going to be in the hundreds and not too far off and I would be disappointed if we are less than half.”
Refinancing Covid loans for the regions
During the year the WRU successfully refinanced its Coronavirus Large Business Interruption Loan Scheme (CLBILS) funding of £18m with Natwest, which was passed through to the four regions and was repayable in just three years, with the Welsh Government. The new debt arrangement carries an interest rate of 2.25%, plus the Bank of England base rate - which is now increasing as the central bank seeks to bring inflation back to its 2.5% target. The funding, which is repayable by 2040, was almost evenly split between the four regions, which are now liable for interest and capital repayments of several hundred thousand pounds a year. The WRU secured a loan of £2m with World Rugby, repayable in 2024 at 1% plus the base rate.
The WRU has yet to strike a new funding deal with the regions through the Professional Rugby Board.
Asked if the WRU would look to take on the financing of the Welsh Government loan to support the regions, Mr Moss said: “The problem with that is if we took it on that we would essentially be writing off £18m and with an immediate hit to our P&L. The agreement with the regions is that the WRU seeks to break even, so it ends up being circular and would just reduce the available funding. It is not just an agreement with the regions, but our banking arrangements that we have to break even. So, if we have an £18m write-off then that restricts our ability to what we can fund going forward. It’s net nil really as it is all circular and it is Welsh rugby that is paying for that.”
CVC money
He said the CVC Six Nations funding - for which the full amount will be drawn down over five years - will be used to finance capital enhancing projects (the hotel was funded by L&G) but with an element also being invested back into the game.
Mr Moss said: “We are selling a future proportion of Six Nations revenues to CVC, so taking this money up-front means there is offset in that we are going to get a reduced income going forward. So, we need to do something to preserve that. If we were to spend all of that money today on whatever that might be, that money will then be gone and we have no opportunity to make a return on that, so in four or five years' time when the money (from CVC) is fully invested we will be getting diluted revenues from the Six Nations.
"However, there is a bit of balance as we are investing some of that money back into the regional game.”
Mr Moss added: “Our current banking covenant allows us to invest one-eight (12.5%) back into the regional game, so it is not as though we are keeping everything (CVC Six Nations money). And we have invested a significant amount in rugby full stop across the year, including professional rugby.”
However, wasn’t part of the rationale of the deal with CVC, which has a long history of investing in major sports, that their commercial expertise would be leveraged to make up the diluted position for the various unions in the Six Nations tournament?
Mr Moss said: “That is the reason you bring private equity in as you would hope they will help grow the pie so when you are diluted you are from a bigger pie, but there is risk in that strategy as you are banking on that growth coming in. So, you need a protection against that... but are not investing everything into EBITDA (earnings before interest, taxes, depreciation, and amortization) enhancing projects with some of that going into regional rugby investment.”
Over the last few years the union has successfully negotiated with debentures to extend the date of repayments.
The next significant repayment schedule of debenture holders is in 2024 when £8m is due. Mr Moss said the union would continue to look to agree with debentures to extend repayments beyond that. The union has been successful in recent years in pushing debenture repayments further out. Only a few years back the 2024 repayment schedule was at £24m.
The finance director said whatever the final repayment schedule in 2024, the union pre-Covid has set aside £11m for debenture repayment purposes.
With its lease finance with L&G, debenture repayment obligations and its banking debt, at year end the WRU had a total net debt position of £110.8m - after a £11.2m cash offset.
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