16 August 2013
Rugby Unions back in black
Deloitte ‘State of the Unions’ report shows the first combined surplus in six years
The ITM Cup rugby unions have achieved a combined annual surplus of around $0.5 million, the first surplus in at least six years, according to the second edition of the Deloitte Sports Review ‘State of the Unions’ report released today.
The report examines the annual financial accounts over the last six years of the 14 semi-professional and amateur rugby unions competing in the ITM cup. It shows that there has been an overall improvement in financial performance in 2012, delivering a collective surplus with lower costs outweighing decreasing revenues.
The combined revenue earned by the 14 rugby unions competing in the ITM Cup (adjusting for the financial restructure of the Otago Rugby Union) dropped 2% from $68 million in FY11 to $67 million in FY12. This is 20% down on the $84 million earned six years ago. Over the last year, total costs have dropped from $68 million in FY11 to $66 million in FY12.
Deloitte partner Grant Jarrold says that the small surplus is largely a result of a focus on cutting costs, in particular administration costs and team and match related costs.
“It is encouraging that the unions have not cut costs associated with growing the game, which actually increased by $0.7 million in FY12 from FY11. While the unions have been able to cut back on total expenditure they have not compromised their investment in the grass roots game which forms such a vital part in the health of New Zealand rugby,” says Mr Jarrold.
Operating expenditure has decreased by approximately $2.2 million over the past year, and from $85 million in FY07 to $66 million in FY12, equivalent to a 22% decrease over six years. The breakdown of expenses for FY12 was 48% for team and match related costs, 30% for growing the game and 22% for administration.
According to Mr Jarrold, even though the unions are collectively ‘back in black,’ there is still room for further improvement.
“While careful management of key costs must continue, the unions must also pay special attention to future challenges and not only see these as threats, but also as opportunities to grow the game and secure its future success. Ultimately, the fight for the hearts, minds and wallets of local community supporters may prove to be more important than simple prudent cost management,” says Mr Jarrold.
“The balance between enhancing the match day experience and offering a truly value added competitor to the at home viewing option is one that will require careful planning between stadium owners and their rugby union tenants,” he adds.
In FY12, 9 out of 14 unions made a surplus. Even after adjusting for the restructure package, the Otago union generated a small surplus of $0.2 million in FY12.
Canterbury lead the way with most revenue earned for FY12 with $9.5 million, followed by Auckland ($9.1 million) & Wellington ($8 million). The above three unions also rank top 3 in total operating expenditure. These three unions along with Waikato and Otago make up the home bases for New Zealand’s five super franchises and collectively earned 52% of total revenues for FY12.
Some unions are still struggling with 5 showing a deficit for FY12. The biggest deficit was Waikato ($0.2 million) followed by Southland, Taranaki, North Harbour and Tasman respectively.
The unions that have spent the highest proportion of their funds on growing the game over the last six years on average are Auckland at 48%, followed by Canterbury (39%) and Bay of Plenty (31%).
“The ITM Cup starts this weekend and as the weather starts to improve, teams will be looking to their supporters to get along to their games and help their unions’ quest for success both on and off the field,” says Mr Jarrold.
“As we get ready for this weekend’s first Bledisloe Cup test, the importance that our provincial rugby unions hold for the on-going success of our national team should not be forgotten as they are responsible for fostering the development of the game and its players throughout New Zealand,” Mr Jarrold concludes.
The full State of the Unions Deloitte Sports Review can be found at www.deloitte.com/nz/stateoftheunions.