THE SCOTSMAN REPORTS

SRU pays the price of years of mismanagement
ONE OF Scotland\'s professional rugby teams will be axed this summer unless a private investor comes forward to pump over £1 million into a team.

Gordon McKie, the chief executive of the Scottish Rugby Union, revealed yesterday that, following a wide-ranging review of the SRU\'s finances, he had discovered \"in the last two to three weeks\" that the SRU loss made in his first year at the helm would be between £2-3 million - ten times more than he expected a month ago. This could take the debt to over £26m at a time when the union\'s bankers are demanding that the burden be lowered in the wake of last year\'s leadership coup.

As a result, nothing remains sacred. One of the professional teams will no longer be with us next season, and the identities of all three are under threat if an investor wants to relocate a professional team to a new area.

The financial cuts also mean the demise of the national sevens team and the under-21s, under-19s and under-18 A squads from this summer, though Scotland may still compete on the IRB sevens circuit with a squad drawn from existing players and the under-19s in the 2007 IRB World Cup.

Melrose\'s hopes of joining the world series as a tournament host next year now depends on how many tournaments the SRU will commit to and whether or not the board deem it to be viable. The women\'s international side is also to lose funding, but a new full-time academy system and increased investment in the grassroots was passed, meaning an injection of £1m into developing young players.

McKie stated: \"I have said before that in the last six years we\'ve lost money in five, but actually it\'s worse than that. The SRU has lost money in nine of the last 11 years, and the sum total of losses is over £20m, which is mirrored in our current debt. It points out that the union has lost money consistently for the last ten years and one could argue that action should have been taken before now, but it\'s me sitting here today who has to take that action.

\"That information has only recently become known because we did not have an active handle on our cost base. We\'ve had nine ledgers in here and we now have one, as of Monday. Last month we took a zero-base approach towards budgeting - in other words assume you don\'t have any money, how much would you wish to spend - and the sum total of these demands was £3m greater than the revenue. Now knowing what we\'re dealing with, I have to take action.\"

The announcement stunned the union\'s contracted players as they learned of the news from the media just hours ahead of last night\'s Celtic League games. These remaining matches are now crucial as the Scottish team with the lowest placing in the league - Glasgow currently sit six points behind the Borders - would seem to be under greatest threat. The players may no longer be playing for mere Heineken Cup qualification, but possibly survival.

The SRU tried to portray it as an opportunity for private investors now to come on board, with a freer rein, but McKie admitted that without a \"seven-figure private investment\" or significantly improved sponsorship, one team would go this summer.

McKie said: \"We can no longer fund three teams, it\'s as simple as that. I am very disappointed because I wanted to keep three fully-funded teams, especially in the lead-up to the World Cup in 2007, but we can only do what we can afford to do and we can\'t keep three teams.

\"Ideally, rather than losing one we would like to find a partner to invest in a pro team or all the pro teams, though we would not be able to be the majority shareholder, and we will be looking for that partner with immediate effect and it is our intention to try and thrash out something sensible between now and the start of the new season.

\"If we are unable to find a strategic partner then we\'ll have to look at our budgets again and perhaps further reduce our investment in pro team rugby. I would not like to reduce funding in our teams any further, so that would probably mean losing one team.

\"Clearly, we can\'t do everything that we would like to do, but the budget we have approved is for increased investment in the community game to grow grassroots rugby and we also have to work more closely with government and other partnerships.\"

There have long been concerns that the SRU have failed to recognise the need for outside investment to fund a professional game, which has only started turning profits in England with substantially bigger crowds, sponsorship and broadcast revenues. Has McKie also taken too long to see it? One potential investor could provide him with a way out.

Graham Burgess, an Aberdeen-based businessman, told The Scotsman last night that he was still willing to take over a team - his preference was to re- locate one of the pro teams to a football stadium. He told McKie yesterday he believes it can be done this summer, with his supporters, including Kenny Logan and US multi-millionaire Roy Carver, injecting more than £1m.

He was blocked by McKie and the board who refused to give away control of the players, but McKie has performed a U-turn, and yesterday offered to take a minority role in a new partnership in order to keep three teams alive.

The timing could barely be worse, as players who could be made redundant this summer would have little chance to find jobs elsewhere. It is reminiscent of the sudden decision midway through the 1997-98 season to merge the four teams - Borders, Edinburgh, Glasgow and Caledonia - into two, less than a year after they had been launched.

Jim Hay, the chief executive of the Scottish Professional Rugby Association (SPRA), admitted last night: \"Players can\'t believe that they were not alerted to this prior to the media announcement.

\"If no new funding comes in, we could be looking at 30-40 redundancies. Regardless of what they think of rugby players, they are human beings with mortgages to pay and some are now worried they won\'t have a job in two months.

\"We will be meeting as soon as possible, and I\'ve told them to sit tight until we get a meeting with Mr McKie, but I can understand why some are contacting their agents and trying to find out what moves might be on offer. It\'s not easy being a pro in Scotland.\"

McKie remains hopeful that private investors will come forward and help the SRU out of the current mess. There is little the new board is not looking at in efforts to halt the haemorrhaging. Corporate hospitality is to be opened up to the SRU President\'s Suite on match day, formerly the exclusive preserve of the players, coaches and officials.

\"The board has passed a recommendation to allow an agreed number of corporate hospitality packages to be sold to sponsors and Scotland supporters, to attend our formal dinners after Murrayfield international matches,\" said McKie.

\"This will bring in much needed new money and offer some lucky people a very special experience in the company of both of the international teams on the night.\"

The board is also assessing which land could be sold off around Murrayfield and which SRU offices might be sold or let; sponsors who might wish their name to adorn Murrayfield will be sought; and the stadium will be available for rent more often.

McKie added: \"We\'ve been over ambitious in all that we have taken on at the elite end of the sport. This is a business after all and we can only do what we can afford to do.

\"A £23m debt just doesn\'t go away. We need to firstly stem the debt, and that is what today\'s announcement is about, but then we need to put in place plans to reduce it.

\"The board, perhaps for the first time, is now in receipt of meaningful, financial information upon which decisions can be taken. We will not shirk taking these decisions - we need to because we must stop losing money.\"

The chief executive, with a track record of turning around dying businesses, has clearly been shocked to discover the full extent of Scottish rugby\'s profit-less operation. The reality now appears to have bitten hard, and the pain is unlikely to subside any time soon.

This article was originally posted on 29-Apr-2006, 07:08 by Hugh Barrow.
Last updated by Hugh Barrow on 29-Apr-2006, 07:09.