What is revealed in Rugby Australia's 2019 financial results

One of Raelene Castle and the Rugby Australia board's worst calls in recent months was to keep the 2019 financial results a secret from their members and the general public.

Sure, they are unaudited, and will remain that way until the end of the month, when RA will receive a likely $16 million rescue package from World Rugby that is expected to allow the directors and KPMG to attest to the business being a going concern.

But there was nothing to stop Castle, at that point still chief executive, with the support of the board, from providing the unaudited results at the organisation's March 30 annual general meeting, held a fortnight after the coronavirus pandemic had forced the suspension of Super Rugby and, eventually, all professional sport around the world.

The organisation's secrecy - fuelled by Castle's distrust of the member unions and stakeholders, including the players' union - spawned a thousand theories of what horrors lurked within the books.

Distrust bred distrust and cost Castle support from a shrinking pool of allies. She resigned less than a month later after learning the board planned to sack her within a week.

Now the secret is out, after News Corp obtained a summary of the results.

The irony of the situation? The numbers are ugly but there are no dirty secrets. No financial bogeyman.

Then-Rugby Australia chief executive Raelene Castle along with the board kept a lid on the organisation's 2019 results.Credit: AAP

With the notable exceptions of a $4 million blowout in "player costs and RUPA" expenditure and a $3.8 million hike in "corporate costs", there is nothing startling in the results other than the cost of RA's battle with Israel Folau and further evidence that the professional model is not fit for purpose.

Revenue was down by $8 million to $111.7 million, in line with a World Cup year that halved the number of Australia's money-making home Tests. RA did announce a $9.4 million loss after the AGM, lower than the last two comparable years in the modern-day cycle of World Cup losses (2015, 2011), British and Irish Lions year cash bonanzas (2013, 2001) and small profits in between.

It didn't drop everywhere. The organisation upped its sponsorship revenue by almost $5 million last year, but huge drops in match day and broadcasting revenue - the typical World Cup hit - took their toll.

Expenditure was up by $7 million to $117 million, fuelled by the Folau battle, an executive hiring spree, a rich new contract for Australian captain Michael Hooper and the cost of bringing back Test halfback Nic White.

RA parked the entire amount of their portion of the Folau settlement (approximately $2.2 million) under "player costs", as well as the first year of Hooper's $1.2 million per year deal and a new contract for White, who was brought back by then-Wallabies coach Michael Cheika for the World Cup.

Their legal bills for the Folau stoush were parked in corporate costs, as well as the cost of hiring spin doctors Bastion Reputation Management to advise them through the eight-month crisis. Salaries for three new executives were also only fully counted last year: director of rugby Scott Johnson on a rumoured $650,000 per year, chief business officer Simon Rabbitt and chief commercial officer Cameron Murray. Consultants Michael Tange and Shane Mattiske also contributed to the $3.8 million blowout as RA attempted to strike a deal for the game's broadcast rights for 2021-2025.

Folau crops up again in the creditors column, as he and RA agreed a payment program that is likely recorded in the results under current liabilities. Total liabilities rose by $2 million to $45 million last year, after a $13.5 million spike on 2017 figures.

In that overall figure, there is $11m owed to creditors, believed to include legal bills for the Folau case. That's up from $9.9 million in trade liabilities in 2018, which included $3.7 million owing to "trade creditors" and $5.4 million owed to "other creditors".

A $7 million currency hedge contract with HSBC was also included, which was started by Castle's predecessor Bill Pulver when the game faced the solvency issues that led it to axe the Western Force.

The value of that HSBC "foreign exchange forward contract" has not changed substantially on last year and the debt will not crystallise until the end of the year. Under normal operating conditions it is likely RA would have had the revenue to meet its obligations. If an abridged Super Rugby competition gets underway as planned on July 4, and New Zealand and South Africa are also able to re-start their competitions, triggering payments from broadcasters, it is likely RA will be able to pay the contracts when they're due.

It is also unlikely that HSBC, as RA's official banking partner and a major sponsor of rugby internationally, would call in the debt before giving the organisation every opportunity to meet its obligations.

The British and Irish Lions Tour of 2025 will be Rugby Australia's next big money-spinner.Credit: Getty

As interim chief executive Rob Clarke put it last week, before he had even taken a dive into the books: "Clearly the game is not in healthy financial shape, we know that, the exact details I'll get across in the coming days".

The bottom line is that the game will scrape through the rest of the year if Super Rugby starts in July and broadcast and sponsorship payments start trickling in again.

How? With the help of an imminent $16 million loan deal from World Rugby; the mammoth player pay deal the organisation cut last month that has wiped 80 per cent of wage costs off its books until the end of September, and office cost-cutting, including mass staff stand-downs and 30 per cent pay cuts for senior executives. A government assistance package through the Coalition of Major Professional are Participation Sports, which is rumoured to be in the pipeline, will also help.

So, no dirty secrets. Just a game that, until March, continued limping through each cycle, with a 2025 Lions tour the next major payday on the horizon and plans to rebuild with a bold bid to host the 2027 World Cup.

Is limping through possible now that this year's global health crisis looks set to reset the economics of global sport?

Players union boss Justin Harrison argued 'no' in a Monday meeting with Clarke. Harrison has 192 professional players in his membership who want to know whether their contracts will be honoured beyond the current pay deal.

There is now a firm belief Australia must ditch Super Rugby in its current form. It is too expensive and too on the nose with fans.

If Foxtel can be lured back to the negotiating table at all in the next month or two - the organisation has made no public comment on the matter - it is almost certain to be with drastically reduced spending power.

RA could be forced to look to private equity or private capital to provide the shortfall, or risk losing its best players overseas.