ITM Cup rugby unions produce third surplus in a row

Rugby unions competing in the ITM Cup have produced a combined annual surplus for the third year in a row, although down on the year before.

The Deloitte Sports Review ‘State of the Unions’ report, which examines the annual financial accounts of the 14 semi-professional and amateur rugby unions competing in the ITM Cup, shows a collective surplus of $1.2 million for the 2014 financial year.

There was a $3.2 million surplus in 2013 and $500,000 in 2012, after a run of five successive years of losses between 2007 and 2011.

The combined revenue of the 14 unions was $67.8 million, a 2% decrease on the 2013 results and an 11.5% drop in the past five years.

Total operating expenditure for 2014 was slightly up from the previous year, increasing 0.3% to $66 million.  However, operating expenditure remains down from five years ago, dropping 14.7% since 2010.

The operating expenses included 47.1% for match related expenditure, 28.9% for growing the game expenditure and 24.0% for administrative expenses.

Deloitte partner Grant Jarrold says a third year in a row of collective surpluses shows a turnaround for the rugby unions and is due to tight control being kept on expenditure, despite a slight drop in revenue.

“The positive trend of financial results demonstrates that the unions have settled into a pattern of controlling their expenses to achieve surpluses.

“It is especially heartening to see that the unions have been able to keep operating costs at a manageable level while continuing to provide community level grass roots rugby with financial support.”

The unions invested $19.1 million in 2014 and $103.5 million in the past five years to improve facilities and develop the game at grassroots level.

Mr Jarrold says the unions’ prudent financial management means a number of them can now take advantage of the capital bases they have accumulated and further invest in the game.

“By leveraging their cash, investments and other assets, the unions now have an opportunity to explore initiatives to grow and diversify their revenue streams that may have previously proved difficult to fund.”

Grants and sponsorships provide biggest boost

Deloitte found 68.7% of revenue is from grants and sponsorships (mainly from New Zealand Rugby and grants from non-casino gaming trusts), 16.1% is from things such as administration fees and 15.2% is from match-related income.

Match-related income decreased 5.5% to $10.3 million in 2014, while revenue from grants and sponsorships increased 0.9% to $46.7 million. Over the past five years, both these income streams have decreased 31.1% and 8.8% respectively, and Deloitte notes unions must keep developing match day experience and fan engagement. 

Overall equity increased $1.2 million from 2013, although Deloitte warns that despite these encouraging results many unions remain in precarious equity positions.

“Half of the unions have less than $1 million in equity, which could be wiped out in a couple of bad years of financial performance.”

Debt was reduced by 22% down to $1.8 million in the past year, and has reduced 42% in the past five years.

Revenue is dominated by the unions that are home to Super Rugby franchises, with the exception of Otago.

Auckland earned the most revenue with $10.6 million, followed by Canterbury’s $7.8 million, Wellington’s $6.3 million and Waikato’s $5.3 million.

Hawkes Bay came fifth after receiving a boost from winning the Ranfurly Shield, while Bay of Plenty came sixth, closely followed by Taranaki, the first province outside the ‘big five’ to win the ITM Cup Premiership since 1992.

The 12 Heartland Championship unions were also analysed for the first time, and Deloitte found them to be living within their means and performing as expected of small not-for-profit organisations.