Prudent strategy strengthened SA Rugby for COVID-19 strike

Posted on June 3, 2020  /  Issued by SA Rugby
#SouthAfrica2019

SA Rugby reported a post-tax profit of R8.5m at the end of 2019 through prudent management in an environment of major challenges it announced at the Annual General Meeting on Wednesday.

Those challenges have subsequently been dwarfed by the COVID-19 virus, said the Union, however the strict financial discipline the organisation had practiced in recent years meant it was able to face the pandemic from a position of relative strength, said Jurie Roux, CEO.

“The measures that we have implemented in recent years allowed us to deliver a very satisfactory result at the end of 2019. We improved our overall solvency and financial position through fully impairing all loans, investments or receivables where the recovery of such was in doubt,” said Roux.

“That meant that when the crisis struck our improved financial position allowed us the required time to formulate corrective measures to address the financial challenges unencumbered by any underlying weakness that could have worsened what is an extremely threatening situation.

“If this crisis had hit us two of three years ago it might have been a very different story.

“The pandemic has had the effect of tearing up all our approved budgetary plans but we have taken an aggressive approach to the potential impact of the virus. We have agreed our Industry Financial Impact Plan, which will cut R1,2bn from the budget of the entire South African rugby industry if required.

“It will be painful to endure for all rugby businesses, but it will mean that we will walk from the burning building still intact.”

The pandemic has overshadowed what was another exemplary piece of financial management by SA Rugby, considering the major challenges other rugby federations and sporting bodies have encountered, even prior to the onset of Covid-19.

Revenues increased by 2.5% to R1.29bn (2018 – R1.26bn) with increases in broadcasting, sponsorship, grants, insurance proceeds, royalties and the HSBC Cape Town Sevens event offset by a reduction in test guarantees due to fewer test matches, Rugby World Cup performance obligations and the closure of the Springbok Experience Rugby Museum.

Roux said operations continued to be funded by way of a bank overdraft for significant parts of the year and solutions had had to be found to address a number of issues including the loss of a broadcasting partner, budgeted Lottery income that did not materialise, further loan impairments and the R62m required to honour player and management performance commitments for winning RWC 2019.

However, the significant RWC 2019 obligation was offset by insurance mitigation plans while the investment in the rugby department (R372m in total) was rewarded with a Rugby World Cup victory in Japan.

Financial support for the 14 member unions and player welfare, through the use of player imagery and injury insurance, accounted for another 32% of operating expenditure (R275m).

Roux said: “One of the benefits of our approach is that we go into this crisis with a level of comfort that we can expect the financial support of our bank and key stakeholders in these difficult times.

“We reduced the overdraft from R68m to R7m but we have subsequently agreed an increased facility for 2020 to manage the inevitable cashflow issues create by the pandemic.”

In an electronic ballot for positions on the Executive Council, Mr Pat Kuhn and Mr Jannie Louw, were elected for four-year terms and Mr Schalk Liebenberg for a  two-year term (the latter filling a vacant position).

Mr Francois Davids was re-elected as deputy president for a four-year term in a contest with Mr Jerry Segwaba.

In other business, accepted into associate membership of the South African Rugby Union were: The South African Rugby Referees’ Association; the South African National Department of Correctional Services Rugby Association and the South African National Police Services Rugby Association.