Financial Certainty

BY DAN

Smart business management is part and parcel of modern sport.

News trickled out Sunday evening that would bring warmth to any fan of the Milk. According to the Australian Financial Review, the Raiders have sold an investment in a Bunnings in Sydney for $56 million, a profit on their investment of near $26.5 million. This sale is an obvious benefit and will provide Canberra with some financial certainty to face the challenge of the coming years.

At the beginning of the coronavirus break there was a lot of concerns for almost every sporting organisation in the world, let alone the people’s National Rugby League team, the Canberra Raiders. The commercial challenge was massive. At the time we wrote that we weren’t concerned for a range of reasons, including short term cash reserves, the likely support of licenced clubs and the relative financial position of the NRL. The relative impact on Australia, and Canberra in particular, only reinforced those assumptions. This sale is more evidence of the solidity of their foundations.

The importance of this cannot be understated. The Raiders no doubt did not earn close to their normal revenue in 2020. While licensed clubs weren’t shut for as long as was initially thought, and while TV revenue saw a substantial, but not insurmountable, reduction, the financial challenges of 2020 were significant. While there’s been no public comment (or specific evidence that I could find), it seems reasonable to think that club revenue is down in 2020.

This is also expected to flow into 2021. The Raiders major sponsor severed their relationship with the club. While the relationship with its former sponsor reportedly has some residual financial benefits, it seems plausible that the shift from major sponsorship by a multi-billion dollar company to a more local business would also result in some reduced payments. Add to this the fact that Peter V’Landys’ new broadcast deal is giving back $27.5m to Channel 9 in 2021 and 2022, there’s no doubt the money flowing to the Milk from the core will be less in 2021 also.

So the profit from this investment is a boon for the club. For perspective, the profit on this single investment is more than the estimated annual revenue for the club (around AUD23 million a year according to Dunn and Bradstreet). The AFR notes it’s not the only property investment the club is managing. Keep in mind when the Queanbeyan League’s Club committed in March to keep the Raiders afloat no matter what, their cash and cash equivalent reserves were about $8m. This is a big deal.

Beyond just ensuring the future of the Raiders, a deal like this may open up new pathways. The Raiders have already put a bid in for a NRLW franchise. Not only could this financial security likely confirm to the NRL that Canberra can financially sustain another top-line team, but it may also allow that team to be able to compete from the get-go. They’ll have access to the Centre of Excellence, and it could ensure the Raiders women can make as many players as possible are properly professional. This amount of cash flow could also be part of the solution to Green Machine issues with finding an appropriate feeder relationship for the men’s team.

The only question that remains is why they sold now. I know nothing about property, or property markets, so for me this question is unanswerable. It’s possible the decision to sell was driven by the need for cash in the face of the 2020 troubles and their flow into 2021. Whether they sold “high” or from need, the important bit is the profit. It’s not the only property investment the Raiders have, and hopefully not the only one that they can turn into a profit.

The key facts though are the the Raiders made a profit, capitalised on a smart investment and in doing so gave themselves some financial security. It’s pleasing to see smart business sense supporting the club.

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