Losses put game at risk, warns O'Neill
At the end of the day they all seem like fair and reasonable costs associated with a variable market business.
Perhaps O'Neill should try a business that also has to deal with drought, flood and over supply from competitors for a while...
Losses put game at risk, warns O'Neill
Rupert Guinness | August 28, 2007
THE Australian Rugby Union will seek to boost its depleted "rainy-day" reserves to $25 million in the aftermath of a predicted loss of $7.4 million this financial year.
ARU chief executive John O'Neill yesterday said reserves had dropped to under $16million, short of the the $20million minimum set by the ARU board in April 2004. "We are well below the [$20 million] limit, and we need to restore it, and we need to restore it pretty quickly," O'Neill said.
"Unless the ARU remains financially whole and stable, the rest of rugby is at a risk. Many of the smaller states are principally funded by us. If we are not strong financially, then the game could be at risk.
"It is a painful loss. That means the capital position by the end of this year will move to just under $16 million."
O'Neill said the ARU board had again ruled that the minimum reserve be returned to $20 million.
"I would prefer to be closer to $25 million than $20 million, but even in the period I have been away figures that can go wrong are still there … probably more of them," he said. "Rainy-day money - a strong balance sheet - is an absolute no-brainer for the ARU. We need to be eternally conscious … that we don't whittle away under $20 million."
The ARU hopes to be back up to $20 million within two years, and $25 million after the 2011 World Cup in New Zealand.
O'Neill yesterday said the union would look at following Australian Olympic Committee boss John Coates's example and deposit reserves in an investment trust.
After the Sydney 2000 Olympics, the AOC deposited its $99 million from the Games in a trust account, and used only the money earned from interest to support AOC sports.
O'Neill was unable to convince the ARU to do the same with money from the 2003 World Cup in Australia. The initial figure of $45 million in reserve was later revalued at $35.7 million.
But when asked yesterday if he would again consider pushing for a trust set-up, O'Neill said: "There is no reason why not.
"If we got to $25 million, you would look at it. Then you would say: 'OK, we are going to lock it up, put it into an investment foundation and the interest income will go into the community game."'
O'Neill said the ARU's reserves fell to $23 million at the end of last year - due in part to $18 million put into World Cup legacy programs.
He said the forecast blow-out to a $7.4 million loss this financial year came down to several factors, which included:
■ A $3 million loss forecast for the 2006-07 financial year, influenced by the 2007 Tri Nations program being reduced from nine to six Tests to accommodate the World Cup;
■ Gate takings at domestic Tests being $1.1 million short of estimates because second-string sides toured from Wales and South Africa;
■ Foreign exchange fluctuations caused by the increased value of the Australian dollar that have cost $1.5 million in receipts from the SANZAR broadcasting deal, which was made in US dollars;
■ Restructuring costs of $1.5million at the ARU that include pay settlements to staff who have left, and Pat Howard's appointment as high-performance manager, and;
■ $300,000 in ancillary costs.
The ARU, which is conducting a fundamental business review, will be assisted next year by a nine-Test Tri Nations series that includes two crowd-pulling Bledisloe Cup Tests in Australia.
O'Neill said the ARU, at an International Rugby Board meeting in November to discuss a proposed integrated season, would state, "We clearly don't want, and won't accept, understrength teams coming here."
Other revenue-building measures the ARU is considering include: encouraging greater service sharing between it and the states; demanding Australian teams not only win, but entertain; looking at including "new content" in the next SANZAR agreement when talks start in 2010, and; introducing a stricter player-payment system.
An added strain for the ARU will be costs associated with the Australian Rugby Championships, estimated at $2.5 million a year.
WHERE IT ALL WENT
The $7.4 million loss■ Reduced Tri Nations fixtures from nine to six - $3 million■ Foreign exchange due to rising $A value - $1.5m■ Poor revenue returns (including Test gates) - $1.1m■ Restructuring costs in new administration - $1.5m■ Other costs - $0.3m
