The South African Rugby Union (SARU) reported a pre-tax profit of R24m in 2011 – a year during which participation at the IRB Rugby World Cup traditionally increases costs, while depressing the earning capacity of international rugby federations.
“It was a year of severe cost cutting, during which we restructured the operational side of SARU to be more streamlined and efficient,” said SARU CEO, Jurie Roux.
“We converted 16 different divisions into seven new departments, more effectively aligned to deliver on our mission to provide outstanding strategic leadership for the business of rugby. That we were able to do it while containing costs was doubly pleasing.”
Total operating expenditure increased by 12%, largely due to a 76% increase in broadcasting rights allocations to provinces. The increase in operating expenditure however, excluding broadcasting rights allocations to provinces, was contained to only 2%, well below the prevailing inflation rate.
Group revenue grew to R597m (from R505m in 2010) due mainly to a significant increase in revenue from broadcasting rights at the start of a new five-year contract. Sponsorship income grew by 11% as a number of contract renewals were confirmed and new sponsors became involved or others increased their rugby portfolio.
The jump in pre-tax profit from an operating loss before taxation of R5.4m, 12 months ago, was in line with SARU expectations.
“We had forecast a reasonable profit for 2011 and the eventual outcome was ahead of our expectations,” said Basil Haddad, SARU’s chief financial officer. “Given that the new broadcasting agreements and a number of new sponsorship agreements, which commenced in 2011, are essentially fixed until 2015, and that operating cost containment continues to be an operational priority, it is likely that that a reasonable profit will be achieved in 2012.
“We have set ourselves an annual profit target of not less than 5% of annual operating costs, excluding rights allocations to provinces,” said Haddad. “The aim is to build up sufficient cash reserves in order to weather unforeseen growth in expenses beyond inflation.”
SARU’s full financial statements will be presented to the Annual General Meeting in Cape Town on March 30.