THE SCOTSMAN REPORTS
DAVID FERGUSON
THE Scottish Rugby Union has claimed its first profitable year since 2002, but admitted that this does not include a possible £1.7 million pay-out due after closing the Borders professional team nor any settlement in the dispute with Edinburgh Rugby.

The annual report was yesterday sent to clubs across Scotland, ahead of the financial meeting at Murrayfield prior to the South Africa Test on 25 August. The report outlines how the union's income dropped by £3m in 2006-07, but the management still managed to cut the debt by £3.6m to an encouraging new figure of £17.4m.

In a letter accompanying the report, Gordon McKie, the SRU chief executive, and executive board chairman Allan Munro explained this was achieved largely through putting tickets for the autumn Tests and Six Nations on sale earlier and the tighter finance and budgetary controls put in place by finance director Eamon Hegarty.

They explained: "Overall, our finances are now well under control - allowing us to move forward with confidence. We have achieved our financial targets for the year; introduced new, simplified and more modern financial systems; our bank debt at the end of the financial year was down £3.6m on last year, with the average during the course of the year down by £1.6m ... and we are projecting a small surplus in 2007-08, which is in marked contrast to the last time a Rugby World Cup disrupted our normal pattern of autumn internationals.

"Since Eamon Hegarty's arrival in September 2005, significant improvements have been made to the financial management of the business. We now have a budget which is credible and for which the management team agree they are accountable. For the first time in many years, we will enter a new financial year with a small budget surplus, which it is believed can be achieved."

Income fell by £3.1m to £25,565,000, which perhaps reveals why the board felt compelled to take the radical step of cutting the Border Reivers as part of an overall cost-cutting exercise reported to have saved the union £3m. The SRU scrapped its corporate hospitality arm, 'The Murrayfield Experience Ltd', in May 2006, handing control back to private firm Sodexho, and cut 52 staff members from the total payroll of 301, mostly professional players, to save nearly £1.3m.

In terms of where the money was spent, the international game received a £500,000 rise in funding, but though spending on professional rugby rose by £300,000 in gross expenditure, Glasgow and the Borders were within budget and met a cut of £400,000, bringing the net expenditure on the pro game down to £4.1m.

There is still work to be done before the promise of an upturn in Scottish rugby's finances can be put to bed with Edinburgh directors fighting for at least £1m to walk away from a deal which granted them £8m over five years and Gala RFC still to reach agreement on the union's abandoned pledges over the Borders team.

The figure of £1,758,000 has been put against the Borders closure, including redundancy payments and ground rental up until 2022. It is not clear how much relates to the tenancy and redundancies, but with that figure included, the union has posted a deficit for 2006-07 of £1.6m, and the SRU's net worth falls from £20.4m to £18.5m.

McKie said: "... these excellent trading results will be partly overshadowed by the Border Reivers closure decision and the audit need to provide for the anticipated total liability associated with future ground rentals, ground improvements and main pitch maintenance over the unexpired term of a 20-year commitment entered into in 2001-02 with Gala RFC.

"Whilst the number is high it is a one-off event and less than the cost of running the Reivers for a single year. It is also possible that a significant part of the cost will never be called upon."

The report again highlights how international rugby remains the chief financier of Scottish rugby, generating the majority of the SRU's £25.6m income last year. Having three home games in the Six Nations, as opposed to two in 2006, raked in an extra £1.2m, but the broadcasters' pay-out fell by £500,000 due to Scotland finishing last.

The remaining £10.9m income came from commercial sponsorship, the European Cup and Magners League revenues, grants and the merchandising, hospitality and conference activities left after the union sold out to Sodexho and merchandising firm Greaves Sports.

This article was posted on 9-Aug-2007, 07:11 by Hugh Barrow.