SA Rugby announce unexpected profit

SA Rugby (Pty) Ltd, the commercial arm of the South African Rugby Union (SARU), has announced a higher than anticipated profit for 2006.

This is because the investments made into the provincial unions of the South Eastern Cape have not been written off as a loss, despite the insolvency of those unions.

SA Rugby’s audited annual financial statements for the year ended 31 December 2006 were presented to, and adopted by, the SARY at its Annual General Council Meeting held in Cape Town on Friday.

Although an operating profit of R20.0 million was achieved, the group income statement for the year reflects a net profit before tax of only R14.3 million, due to the impairment of the R5.7 million loan to the South Eastern Cape Super 14 franchise.

The Board of SA Rugby, in reviewing the draft financial statements at its meeting held on Wednesday 21 February 2007, decided that it was not appropriate or necessary to impair the R6.5 million investment in the shares and loan account claims against the three South Eastern Cape three provinces in which it has acquired fifty per cent shareholdings, given that the acquisitions only took place late in the financial year, and that the implementation of the turnaround plans only commenced subsequent to year end. The Board is confident that these strategic investments will be recouped within three years.

But given the technically insolvent state of each of these three associate companies, SA Rugby’s auditors did express that this investment should have been impaired in full in terms of Generally Accepted Accounting Practice.

The net profit after tax is R7.8 million, which is a slightly better than the R6.4 million earned in the previous year.

Group reserves totalled R47 million at 31 December 2006, which includes R22 million in cash and short-term investments. The decline in cash reserves is attributable to the investments in the South Eastern Cape referred to above, and further net advances to provinces and Super 14 Franchises, whose indebtedness to SA Rugby at balance sheet date totalled R17.4 million.

With 2007 being a Rugby World Cup year, SA Rugby is typically facing an operating loss, due mainly to a reduction in broadcasting revenue and an increase in national team costs, both related to participation in the RWC. However, this loss will be more than covered by a grant payable early in 2008 by the International Rugby Board.

365 Digital

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