Interim Rugby Australia chief executive Rob Clarke. Picture: Getty Images
Interim Rugby Australia chief executive Rob Clarke. Picture: Getty Images

$7m shadow over Rugby Australia solvency

CONCERNS over Rugby Australia's solvency have been raised by its accountants KPMG due to an additional $7 million owed to former sponsor HSBC, as a result of a currency hedging strategy.

It is understood RA has liabilities in excess of $20 million and KPMG have yet to sign off on the 2019 annual report.

There are questions about whether any funding available from World Rugby will be enough to meet all the organisation's's known liabilities plus the hedge.

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NSW chairman Roger Davis has major concerns about rugby's future, the game currently facing a $120m revenue black hole because of COVID-19.

"I am seriously worried about the financial viability of the game," Davis said. "It is running at a big loss. Our financial position is dire because we have no revenue. There's cash pressure, no broadcast money; the solvency of the game is at risk. It's why there are rumours that we are close to voluntary administration and trading insolvent …

"We don't have six months to fix this, Rome is burning, until the Easter bunny, Santa Claus, whatever comes along, we are running fast out of cash. This is a cash game. The game is under threat."

The game of rugby union continues to slip further into the mire.
The game of rugby union continues to slip further into the mire.

The currency hedge was first set up under the leadership of then chief executive Bill Pulver and chair Michael Hawker. The board had hoped the currency hedge was going to go up and claw back some of the losses but it had not eventuated before COVID-19 hit.

The annual report remains unaudited and is yet to be submitted to the Australian Securities and Investments Commission.

World Rugby's rescue package is understood to be in the region of $17 million and sources say it is expected to arrive next week.

The Australian understands RA is trying to renegotiate its hedging strategy with its bank HSBC. As one observer said Rugby Australia is currently "kicking the can" down the road.

Before RA director Peter Wiggs' sudden resignation after Monday night's heated board meeting - after his request to install Matt Carroll as CEO was shot down by his fellow RA directors - the Archer Capital boss had been looking at the books. Wiggs had paid for two of his own staff to go through the RA financials.

After looking at some of the financial details Wiggs reportedly said at a rugby meeting: "This the worst-run business I have ever seen."

Nick Farr Jones, one of the 11 Wallabies captains who signed a letter two weeks ago calling for transformational change at RA, said he was impressed by Wiggs' financial nous early on and was disappointed he had left.

"He alerted the board to the flashing red lights and he was the one who understood his duties as a director, and he was the one who raised; 'hey guys are you sure we are a going concern'?" Farr-Jones said. "I think the board is partly hiding behind the new softening of the ASIC 'going concern' rules during the COVID-19 period. They are relying on this expectation of income coming from World Rugby."

Farr-Jones was disappointed by Wiggs' resignation.

Nick Farr-Jones says communication with Peter Wiggs just seemed to dry up.
Nick Farr-Jones says communication with Peter Wiggs just seemed to dry up.

Over two weeks ago Wiggs met former Wallabies captains Farr-Jones and Phil Kearns, as well as RUPA boss Justin Harrison, to listen to their concerns and help push the game forward.

Wiggs told them that over four days he would do a "deep dive" with "due diligence" into Rugby Australia to learn more about what the issues were and then he would set up "three pods" of experts to review the game over a month.

"I was extremely comfortable with what we agreed going forward," Farr-Jones said. "That was for Peter to effectively do a deep dive, with one of his work guys, into the operations of Rugby Australia including, as I understand meeting with a lot of the former chief executive's direct reports.

"The process that we agreed after that, was there would be three pods put in place. Which would effectively deal with the whole of the national game, from a sustainable business up to the community game. All aspects of the game."

Farr-Jones said representatives from the member unions would be involved in the 'pods', as well as RUPA, and Rugby Australia. Each group would do a one-month review.

"Then they would come back with recommendations for approval by Rugby Australia," he said.

Farr-Jones said there had been a good response from Wiggs but soon communication dried up.

"And then, I don't know because I haven't spoken to Peter Wiggs since, we have exchanged one or two texts where I've tried to understand where he is coming from," he said.

"This is not a criticism of Peter, but he went off-piste, and that was disappointing. I thought we had a process.

"What I gather is the board just didn't like or accept that all of a sudden Peter came in with various demands as to who would become CEO etc … I understand that. I get that. You want to do things by ­consensus."

 

Originally published as $7m shadow over Rugby Australia solvency



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