England’s world cup pedigree
No one will cheer more loudly from the terraces than Nick Eastwood, finance director of the Rugby Football Union and die-hard rugby fanatic, if England’s rugby team goes on to lift the Rugby World Cup in Sydney’s Telstra Stadium on 22 November.
For Eastwood, an ICAEW-qualified accountant who spent his early years at Arthur Andersen, a successful England side is intrinsically bound up in the financial success of the game’s governing body. It is vital to ensuring that rugby continues to develop in a country where football dominates.
Eastwood is tall and engaging. Despite the greying hair, you can almost picture him running across the pitch from the back of the scrum during his college days. Here he gained minor representative honours, before injury and his size, relative to other even taller players at university, ended his playing career.
Meeting him in his offices across the road from Twickenham Stadium, where much of England’s recent success has been on display, you immediately find yourself engaged in a conversation about the game.
‘I have always been a massive sports fan, and rugby is the game I love,’ he says. ‘Getting the finance director’s job at the RFU was something of a dream.’
Eastwood can’t wait for the World Cup to kick off, although he admits that he is apprehensive about the pool game against South Africa on 18 October in Perth. A victory would mean a potentially easy passage towards the final. Defeat could spell disaster, most likely resulting in a quarter-final tie with joint favourites New Zealand.
His concern is naturally not based purely on personal passion for the game, but is also a real business issue. He runs the finances of a £70m operation employing 300 people that is almost entirely dependent on the success of the national side for its revenues.
As part of the financial model set up by International Rugby Board, home unions keep all revenues from international games, and reciprocate when touring abroad. This also means that while in Australia the England team’s expenses will be covered by the hosts.
As a result of this agreement, the RFU derives its monies from the six home internationals played at Twickenham every season, with £16m coming in from ticket sales, £19m from hospitality, £15m from TV rights, £10m from sponsorship, £5m in merchandising and £5m from other ventures.
‘Although these are different revenue categories, they all figure around the property of the England team,’ Eastwood points out.
What this means is that the England team and its Twickenham headquarters are the RFU’s primary and most valuable assets – something which they jealously guard.
‘We expect to sell out all the games at Twickenham, except maybe the third of the autumn internationals, usually played against a lesser side.
We set the prices in advance and are fairly comfortable about what the attendance is going to be. TV sponsorships are usually three-year agreements.
Hospitality is a bit like ticketing, we expect it to be full.’
As a result Eastwood says that there is a ‘reasonable amount of certainty about revenue sources’, but leaving no stone unturned, he hauls out an encyclopaedia-thick document, which he explains, leafing through the pages, is the RFU’s detailed financial strategy.
Eastwood has a delicate balancing act to perform: ‘Unlike a business whose primary objective is economic, we have two objectives, the financial remit, an economic measure, and sporting achievement, an athletic measure.
It’s a virtuous circle. Success on the field leads to success off the field, which allows you to invest back in the team.’
Not surprising then that England’s run-up to the World Cup (marred only by a loss to France in a largely meaningless friendly last month) has mirrored the financial health of the game’s governing body.
Eastwood has succeeded in doing what many sporting bodies have failed to do, run such an organisation like a business, debt-free, with strict financial controls and corporate governance measures.
‘We operate as a non-profit distributing business operating around the break-even point and we exist to raise money to invest back into the game.
At the same time we are trying to build a strong balance sheet with appropriate reserves of cash,’ he explains.
As a testimony to Eastwood’s control on the purse strings, last month the RFU announced that it had paid off the final instalment of its £38m four-year loan for the redevelopment of Twickenham. The RFU self-funded this redevelopment and its repayment left the RFU with no debts and a cash balance of £23m.
It has also paved the way for planned redevelopment of the south stand at Twickenham, which will increase the stadium capacity from 75,000 to 82,000.
Eastwood puts this success down to a great management team, as well as the England team’s successes. Although not wanting to sound vain, he admits that his vision has played a key role since he joined from the Body Shop in September 1999, where he was global head of corporate services.
Eastwood’s vision means ‘adopting a plc standard approach’ to the game.
Despite the fact that it is a non-profit organisation, Eastwood says that the RFU complies with all the measures set out under the stock exchange requirements, and ‘provides a level of information to the board which would compare with any plc of similar size’. In that sense, he says he supports the recent changes to the combined code, as a result of the Higgs report, calling them ‘90% common sense’.
In addition, the RFU has an audit committee and a remuneration committee, just like any plc. To ensure independent oversight, the audit committee meets with the RFU’s auditors, Mazars, separately.
As in the case of a public company, the RFU is answerable to its ‘shareholders’.
These are the 12 professional clubs that play in the Zurich Premiership plus the 1,500 amateur ones throughout the country.
They receive an annual report every year, as well as attend the annual general meeting.
But it is not just the finances of the RFU that are on the up. Since Eastwood took charge in 1999, the 12 Zurich Premiership sides have also started managing their finances in a more sensible fashion. Rugby certainly seems to have its finances in order to a greater extent than football, where the trail of Nationwide clubs going into administration now appears to resemble a funeral procession.
The business of professional rugby is managed by England Rugby Limited, jointly owned by the RFU and the clubs, of which Eastwood is also finance director.
This provides the partnership which governs professional rugby. Reports have suggested that some clubs are unhappy with this relationship and want more help from the RFU, but Eastwood is clear about its role. ‘With regard to the finances of professional rugby we provide oversight of the “industry”. But the clubs are all independent legal entities and separate business ventures and are masters of their own destiny,’ he explains.
‘What we do is look at the industry as a whole to see if it is going in the right direction. We don’t get involved in the actual management decisions at the clubs.’
This strategy has seen combined losses for the 12 rugby clubs fall from as high as £15m in 2000 to just £3m in 2003. In addition, the clubs have succeeded in reducing their wage bill for players from around 76% of turnover a few years ago to a respectable 50%.
Clubs finances are also kept in check by a wage cap, which is agreed to by the clubs themselves, not by the RFU, which has left them on a sounder footing than football clubs.
It is an approach that Eastwood actively backs, and which he claims makes for a more exciting season. ‘A wage cap has an equalisation effect and means you do not have one or two sides dominating year in and year out as is the case in football’s Premiership. If you look at the Zurich Premiership table there are four sides competing for the title, and of the two sides at the top at the moment, Bath and Harlequins, Bath narrowly avoided relegation last season.’
Not surprisingly, the change in fortunes for the top clubs has been mirrored by the change of fortune for the national side which has hardly been beaten since 2000.
Talk inevitably returns again to the World Cup. Eastwood is flying out for both the semi-finals and the final, although he is quick to point out that he is heading off to Australia privately, and not in his RFU capacity.
Now that’s dedication.
He laughs and says he can only pray that England will be on the pitch for these games. If they are not amongst the last four teams competing for the trophy, Eastwood will feel the pain, personally and professionally.
Then again if Martin Johnson does lift the Webb Ellis trophy next month, surely no one will wear a broader grin.
ENGLAND’S DATE WITH DESTINY
RFU finance director Nick Eastwood will take his seat in the stands in the Telstra Stadium in Sydney when the World Cup Final takes place on 22 November. But will his beloved England side be there challenging for the Webb Ellis Trophy?
Here is a quick trip down memory lane, looking back at England’s performances in the last four tournaments.
1987 – First Rugby World Cup, held in New Zealand and Australia
During the inaugural tournament, England made an inglorious start losing to Wales 16-3 in Brisbane in the quarterfinals. The tournament was won by the mighty All Blacks who – with star players like Michael Jones, Grant Fox and wing sensation John Kirwan – easily defeated France 29-9 to lift the trophy.
1991 – 2nd World Cup, held across Europe
England progressed all the way to the final, after seeing off France in the quarterfinals and beating Scotland 9-6 in a tense semi in Edinburgh.
Unfortunately home ground advantage, a full house at Twickenham and a number of star players – including Will Carling, Rory Underwood and Rob Andrews – could not propel the side to victory, as Australia ran away with the title by 12-6.
1995 – 3rd World Cup, held in South Africa
The English side delivered a memorable performance when they saw off defending champions Australia 25-22 in the quarterfinals in Cape Town thanks to a drop goal from Rob Andrew. However, they were horribly undone at the semi-final stage by New Zealand, thanks primarily to a rampant Jonah Lomu who destroyed the English defence. The rainbow nation came up trumps on home turf, beating the Kiwis 15-12 in the final in Johannesburg, with South African captain Francois Pienaar receiving the trophy from Nelson Mandela.
1999 – 4th World Cup held in Europe
England were again full of confidence going into this tournament, but they were undone by a world record five drop-goals from the boot of Springbok fly-half Jannie de Beer. On a miserable afternoon in Paris the side went down to a shock 44-21 defeat. The eventual winners were Australia, who beat France 35-12 in the final in Cardiff.