IRFU income up from €84m to €116m but ‘we’ve got to live within our means’ - Potts

IRFU chief executive Kevin Potts believes the union’s finances have “stabilised” after it reported an operating surplus of €5.9 million for the year ended July 31st, 2022, at today’s agm, as against a budgeted deficit of €4.9 million.

The result was a more positive financial outcome than had been anticipated and compares with combined losses of almost €47 million in the preceding two years.

“Our key message today is that in relation to the finances of the IRFU, following a torrid period due to the impact of Covid-19, the ship has been stabilised,” said Potts.

However, he warned that the union’s assets have been diluted and that there has been negative impact on its future cash flow.

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The reasons for the better-than-anticipated surplus were twofold. Firstly, the reopening of full stadiums just in time for last year’s November games – when the union was budgeting for 25 per cent of capacity – generated €5-6 million more than anticipated.

Secondly, there was a Government grant of €18 million in December 2021 for losses during the pandemic that year.

“Without the receipt of this grant, the union would have reported an operating deficit of over €9 million for the year,” revealed Potts. “I want to acknowledge and thank the Government for their critical support during Covid, without which rugby as we know it on this island would have struggled to survive.”

There was also the first two of five annual tranches of €9 million as part of the IRFU’s “opportune” €44.6 million share of the CVC and Six Nations deal.

“However, it has to be understood that this comes at a future cost, in terms of a permanent reduction by 14 per cent of the IRFU’s future Six Nations and Autumn Nations Series income,” said Potts, adding the union is budgeting for deficits over the coming three years of about €5-6 million per year pending hoped-for improved broadcasting deals in 2026.

The union’s net assets in excess of €105 million equate with its pre-Covid €99 million of net assets, which Potts admitted is “mostly due to the union’s share of the CVC investment in Six Nations”.

The union has cash reserves of €66 million but Potts added: “If the pandemic had not happened, that cash should be at about €97 million. Our financial model is based in large part on forward-selling 10-year tickets and corporate boxes, so when those funds come in we then release it over a period of time each year over the 10 years, into our budget.

“It accounts for about 20 per cent of our budget, so that should be €97 million; the difference was that money we had received for [10-year] tickets helped us get through Covid.”

Details of the Women in Rugby Report are set to be announced in the coming weeks, with the union’s investment in the women’s game now over €5.5 million per annum, up €2.1 million on what was budgeted in previous years.

The IRFU directed €6.5 million of the Government grants into clubs during Covid, and investment in the Club and Schools game programmes will return to previous levels –almost €12 million in 2022/23.

The union’s income increased from €84 million in the previous year to €116 million, with the income from international rugby (the men’s senior team generates 80 per cent of the union’s revenues) up by €18 million due to increases in gate and hospitality receipts, arising from full houses and prize-money for a second place finish in the Six Nations.

The provinces are all planning on breaking even, we’re collaborating with them on that. That’s the key – and then the uplift hopefully in three years’ time

Commercial Income improved by €2.6 million to €12.7 million due to the reinstatement of all sponsorships. Provincial income at €20.4 million is down slightly from last year, although discounting CVC monies, revenues improved by €1.7 million to €10 million and there’s been a return to near-normal operating conditions.

Professional game costs fell from €68.1 million in 2021-22 to €60.5 million this year, primarily due to Covid-related costs at the height of the pandemic.

Regarding the extent of the projected losses over the next three years, Potts estimated: “Before depreciation we’re looking at on average about €3-4 million of a deficit. Add depreciation and you’re looking at about €6-7 million of an accounting deficit per year. From a cash perspective, you’re looking at about €2 million or €3 million broadly.”

While challenging times lay ahead, Potts was confident Irish rugby could rise to them.

“I keep saying it, but we’ve got to live within our means. That can be a challenge for all of us, especially when you’re looking at player markets, player inflation and these things.

“Keeping control of our costs, ensuring we’re all planning to break even, aside from the three-year investment I mentioned. The provinces are all planning on breaking even, we’re collaborating with them on that. That’s the key – and then the uplift hopefully in three years’ time.

“If it doesn’t happen and our revenues don’t increase, we’ll have to review our programmes.”