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The sum total of desperation

A statement was recently released by the WRU purporting to outline its philosophy and success with debt. I’m no accountant but I do have an MBA which makes me very good at spotting a bullshitter.

Here is their statement in full:-

WRU Bulletin to clubs – bank debt

The Welsh Rugby Union, in response to questions from its member clubs, has decided to address recent comment about its debt management policies since 2006, suggesting they are hindering re-investment into the game. This is not the case as this note clearly outlines.

Through negotiation with the bank since 2006 the WRU has:

– reduced its interest rates by 58% from 6.5% to 4.1%

– kept its cash repayments at exactly the same levels
- achieved a course to become debt free by 2021
– boosted reinvestment into rugby by 86% from £11.8m to £22m a year

The negotiated drop in interest rates has, between 2006 and 2013, reduced the interest costs by £1.8m which is now available to plough back into Welsh rugby year on year.

By sound financial management and ensuring compliance with the banking terms, the WRU wishes to avoid the conditions of repayment of the original £10m loan being met.

Since 2006 the WRU has carried out two successful renegotiations with Barclays Bank plc which have allowed the governing body to make its banking arrangement far more flexible and to reduce its interest costs. The overall bank debt stood at just below £19.5m in 2013 down from its 2006 level of £39.1m.

It is important to note that the fundamental priority of the WRU is not to become debt free but to manage its loans in an efficient and flexible manner to drive down its interest costs to promote further re-investment in the game.

If the WRU were to seek to renegotiate its current debt structure the interest rate of 4.1% would probably rise meaning that money currently invested in the game would be paid in interest instead each year and the term of the arrangement would reduce.

In simple terms the current debt repayment structure is a valuable business asset in that it helps us invest more money into the game year on year.

The successful bank negotiations mean that the vastly improved loan terms have been achieved without a penny increase in the annual cash repayments since 2006.

One core reason why the banks now have renewed confidence in the WRU is that since 2006 our turnover has gone up by 32% from £46.1m to £61m.

The increased turnover and revised banking arrangements have helped the reinvestment into the game since 2006 rise 102% into the Regional game, 50% into the Premiership Division and 48% into the community game. The revised banking arrangements have very much aided the re-investment and not hindered it.

In figures those increases are:

- from £8.3m to £16.8m for the Regions
– from £0.8m to £1.2m for the Premiership
– and from £2.7m to £4.0m for the community game

The WRU wants to put on record its gratitude to Barclays Bank for the confidence it shows in the governing body and continued support.

ENDS

So, do they want to be debt free or not? They think they are some kind of financial wizard ‘negotiating’ with Barclays Bank but have only managed to do this twice in 8 years!

The genius of the maths is the reduction in interest rates. The WRU think moving interest from 6.5% to 4.1% is a 58% reduction. I may have an MBA but my 12 year old will put them right on this, it’s actually 37%.

This begs the question, are they competent enough to manage a business turning over £61 million? Or are they being smart, thinking they can kid every one with their bluster?

So the WRU don’t know if they want to be debt free or not, don’t know how to calculate simple percentages and can only manage bank negotiations every four years. And why do they still think they are “investing” £16.8 million in the regional game when > more than 10 million is just broadcasting money which is passed straight through to the regions.

Either, the WRU are fools OR they think we are. Unfortunately I think it’s both.