Reds 2015 Financials - running deep in it - Green and Gold Rugby
Queensland Reds

Reds 2015 Financials – running deep in it

Reds 2015 Financials – running deep in it

A quick and somewhat dirty analysis of the recently released Reds 2015 financials reveals a serious situation.

Yesterday GAGR’s facebook page posted a set of figures which revealed a disturbing financial situation north of the Tweed.  The Reds have gone from a modest $350,000 profit in ten months of 2014 to an alarming $2.1 million loss in one year (the Reds only supplied 10 months of 2014 in the report).

The bad

To make the figures slightly easier for me to interpret, I spent a few minutes on excel typing the figures in and then subtracting 2015 from the ten months of 2014 to show which expenses and revenues had grown or shrunk to get a clearer picture.  A screenshot of my work is below. As an example, match day expenses have shrunk over the period and this is in red text. Text in black indicates that the issue has increased and whether this is from a expenditure or revenue issue will tell you if it’s good or bad.

reds financials 2015

 

To summarize in big handfuls, the revenue has increased by around $1 million but expenses have increased by $3.4 million.  This is, obviously, quite a lot and the areas of expenditure which have shown the most growth are “Reds Team Expenses” (presumably salaries and so forth), “Game Development and Operations” and “Corporate”.

Questions of how this has been allowed to happen are expected.  Due to my own circumstances I have not had the time to get into the report in as much detail as my inner geek would like, so go nuts in the comments.

However, G&GR understands that the Game Development expenditure can be justified by the QRU having to cover some costs of some financially struggling Regional Unions plus they lost funding for their indigenous program, but wanted to keep it going. Fair enough. We all talk about grass roots and so forth.

 

Reds team expenses and Corporate expenses are harder to justify.  It’s possible that these were new signings like JOC, Hunt, Tui et al, which might be understandable, but the $800k extra for Corporate is “pure Executive Office burning money”.  We are told that every year they do a revamp of the office and last year they completely gutted one floor to remove all offices and make it completely open plan (new wiring, painting etc). They also moved the Reds back over from Ballymore so had to refit another portion of the office.  None of that cash is teaching 16 year olds how to scrum and ruck.

The ugly

What didn’t appear on our facebook page was the shot of the assets and liabilities situation.  It’s more telling in my view and it’s pretty dire.   This year the acid test (current assets / current liabilities) is 0.32. So for every dollar they owe, they have 32 cents available to pay for it. For comparison, the 2014 and 2013 figures, each about 0.5, are there too.  It’s a serious slide.

acid test

 

It’s a scary situation and they’ll need to fix it which the powers that be seem to be aware of.  This extract from the report (below) seems to me to say that they know that they might be insolvent soon due to the current asset and cash flow problems.  Trading insolvent is illegal and directors can be held personally liable for debts incurred when a firm is under the water.  They seem to be pinning their hopes on more broadcast money and re-negotiating their debts with St. George.  Cutting some corporate overheads might be a good idea too.

going concern statement reds 2015

 

So, some interesting times ahead.  Winning a few games to get the punters in would help but I am not sure the players will like smashing into rucks to pay for a sweet new office set up every year.


 

The QRU released a release on Saturday afternoon following their Annual General Meeting, which included the below statements with regards their financial performance this past financial year:

Queensland Rugby Union (QRU) has announced a loss of $1,483,696 before depreciation for the 2015 financial year at the Annual General Meeting at Ballymore today.

While QRU has continued to build scale and volume over the last seven years, the performance of the St.George Queensland Reds had a material effect on many of its revenues.

QRU CEO Jim Carmichael said: “Despite major challenges in 2015, we were able to put in place mitigation plans through the year whilst delivering all of our community related programs to all levels of our game as planned. This culminated in $8 million worth of Queensland Rugby direct and indirect investment into the grass roots of our code across the state.”

QRU Commitments post Budget
• The introduction of the National and State Participant contributions was a significant reform for the game. However, in consultation with QRU stakeholders, a reduction of $200,000 was agreed post budget through a reduced state contribution. Furthermore, the introduction of a casual player levy for both city and country clubs, combined with the first year of this new system, resulted in a reduction of $360,000 of revenue against forecast, once player data was accurately entered into the national registration system – Rugbylink.

• In 2015, a number of our important sub-unions experienced acute financial difficulty and it was necessary for us to protect the efforts of the Rugby community in those regions and to ensure Rugby competitions proceeded as planned. QRU committed significant human resources and $125,000 financial and legal support to provide the necessary assistance so that the code was able to deliver against its obligations.

• Additionally, QRU assumed the delivery of Junior Gold competitions in the state, the Junior State Championships and the Brisbane Junior Rugby Union competitions along with the associated costs of circa $317,000.

• Finally, midway through 2015, there were $500,000 of reductions in government grants awarded to QRU, as a result of the Federal Government’s national review of funding Indigenous programs. However, QRU felt it important to maintain its commitment to Indigenous communities in Queensland through the ongoing delivery of Indigenous programming.

 

  • Meh

    It doesn’t really come as a surprise that the biggest drops in revenue is match day. Thousands upon thousands of empty seats will do that.
    Interesting that the Team expenses have gone up by so much. I’m pretty clueless about this sort of stuff, what would those expenses include? I that player payment?

  • Simon

    These figures show how farcical it was to reappoint RG.

    I feel some obligation to keep buying tickets to games now in order to do my bit, but I’m seriously PISSED if I am doing this so Jim gets a swanky new office from which to mail out Goromaru membership packs. October can’t come soon enough for me.

    • John Tynan

      I reckon this is actually the main reason they kept him on. To pay out his last year of contract and then pay a new coach his first year was a double dip. Which is fine, except then they put more levels of management over top of him anyway….and then you end up with the membership side of it (which smells fishy, to be honest – maybe the additional two months hides everyone’s renewals at the start of the year).

      • They didn’t have to pay him out. His contract was up and they renewed it.

        • John Tynan

          In all the hyperbole I never realised that Sully!

        • ROCKY

          He was already reappointed prior to the loss to Canterbury last year. It was a shambolic PR exercise to go through a “process” when he was already locked in. A board that was evenly split on RG to stay or go post that. The anti RG sentiment was overwhelming and it will
          Conmercially have cost the QRU $$ and will take some years to recover.
          How in the space of 5 years from title holders to $$ loss has this happened. Board ineffective and REDS have slipped on field form. A lethal combination.

          Sad the negative sentiment is so strong.

  • Bokdrol

    Massive increase in Affiliate Fee Revenue as well, or is this skewed due to the missing 2 months? 300K to 2mil is quite a jump.

    • Brendan Hume

      I’m assuming that’s the fees paid by club rugby participants.

    • John Tynan

      Junior rugby tax, I think.

  • Who?

    The situation with the GCDRU is farcical, and they’re not the only region who needed to be taken into administration. It’s significant money the QRU couldn’t afford – they’d have struggled to afford it any year. But the reappointment of Richard Graham, with fans having already called for his head publicly at games and threatened ending memberships for a year, was financial suicide. Carmichael’s done a lot of good, but that one decision helped to spoil his legacy, which is now a legacy of leaving the QRU in the red.
    And, still, my region is without a development officer… Which means that very little of the ‘Game Development Expenses’ are being spent round here.
    Interesting to see the massive drop in ‘Game Day Expenses’. And I’d like to know the reason why ‘Commercial’ increased by 1/3.

  • Owen McCaffrey

    They need some consultants like PwC or KPMG to come in and tell them what fat to cut. This is the kind of situation when not only Carmichael but the whole board should be looking for new jobs. Who appoints them? Number of huge mistakes in recent years there and final buck stops at the board. Will be an interesting next meeting. Hopefully a few accountants apply. I read that one of the issues with NRL clubs was too many were run by ex-league players who new so much about the game but when it comes to balancing books…not so much.

Queensland Reds
@skandahooligan

G&GR’s chief economics and business reporter at large who is now allowed to write the odd match related article. A player who always preferred to social aspect of the game to training and was therefore a tragic loss to the professional ranks. Tweets can be seen at @skandahooligan

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