west*wales*news*review

West Wales News Review — analysis with a sustainability slant

Stadium Casts Long Shadow Over Scarlets’ Financial Outlook

With a lot of support from deep-pocketed directors, the Scarlets rugby region soldiers on. The accounts for Scarlets Regional Ltd to June 30th 2015, signed off in March 2016, reveal a net loss of £987,615 — nearly £1 million — and net liabilities of £4.543 million.

The Scarlets, currently fifth in the Guinness Pro 12 league of Irish, Welsh, Scottish and Italian clubs, is the best-performing Welsh club of the season, only two points behind fourth-placed Ulster, and the players and coaching staff have worked heroically to keep the squad at the pinnacle of Welsh rugby, but the stadium is, like gravity, continually pulling them back down the mountain.

The Parc y Scarlets stadium at Llanelli’s Pemberton Retail Park, seating 14,870 people, is valued in the accounts at just on £9.621 million. The auditors, Broomfield & Alexander, point out that: “The trading conditions referred to above [in their report], along with the other matters explained in the accounting policies to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the carrying value of the stadium. Were these key assumptions to which the accounting policies refer not realised, the result would be a requirement to reduce the carrying value of the stadium.”

The average gate in 2014-15, according to the chairman, Welsh Whisky Company’s Nigel Short, was 7,000. That’s less than half capacity, and less than 2012-13’s average of over 8,000, but not bad at all considering that the whole population of Llanelli town and the surrounding urban area is only around 45,000.

This begs the question: why was such a large, expensive stadium constructed, when filling even half of it with local paying customers would require one in six of the urban population – from babes in arms to centenarians – to buy tickets? The business plan was just too rose-tinted. And would anyone else be willing to pay £9.621 million for the stadium, on land which the Scarlets do not own?

The debts exceed even the optimistic £9.621 million valuation of the stadium. Scarlets Regional Ltd’s debts, repayable after more than a year, rose to £12.194 million from £12.037 million the previous year.

The crunch year will be 2023, when £2.614 million should be repaid to Carmarthenshire County Council (which also provided the land for the stadium, at a nominal rent for 150 years, and allowed the club to sell part of the site to pub chain Marstons for £850,000 and to keep all but £200,000 of it).

It’s hard to see where the money to repay the county council is to come from. Scarlets Regional’s turnover did rise almost 13% in 2014-15, to £8.977 million from £7.953 million the year before, and the loss for the year almost halved from £1.746 million to £987,615 – but it was still a loss, and to repay its debts in the crucial year, 2023, the company has either to generate profits exceeding £1.5 million for each year between 2016 and 2023, or raise the money on assets, essentially the stadium.

In January 2016, before the latest Scarlets Regional accounts were released, its formerly dormant subsidiary Llanelli RFC Ltd suddenly increased the director count from one, Huw Dewi Evans (to whom Scarlets Regional owes over £2.179 million) to six, four of whom – Huw Dewi Evans, Phillip John Morgan, Jonathan David Daniels and Richard Meurig Griffiths – are also directors of the parent company. The flurry of new directors suggests that a revitalised role for Llanelli RFC Ltd may be in the offing.

While Mr Evans has more money outstanding to Scarlets Regional than any other director, according to the 2014-15 accounts, Mr Timothy Philip Griffiths, chief executive of the Jersey-registered Cpaush Ltd and of 17 other companies in addition to Scarlets Regional, is owed nearly £1.003 million, Mr Granville Harold Wise £1.491 million, and real estate company Nednil Ltd, £2.117 million. Nednil’s chief executive Philip James Davies is also on the Scarlets Regional board. Three more directors have smaller loans to the company, ranging from £40,000 to £420,000.

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The Trostre steelworks,  put on the market by dumping-damaged Tata Steel Europe, are over the road from the Scarlets’ stadium. Trostre’s uncertain future is casting a shadow over the stadium — and over the whole of Llanelli.

Tata Steel Europe’s Trostre steelworks, close by the Scarlets’ home at Pemberton Retail Park, could well play a role in the future of this story. Tata has put its UK steel operations onto the dumping-deluged market, and the approximately 650 jobs at Trostre, home of tinplated steel, are by no means safe. If Trostre went, the economic impact on Llanelli would be horrible, and Scarlets Regional would not be able to escape the hurt.

Of course, the steel crisis might moderate, but even if Llanelli escapes an economic mauling, the Scarlets’ own stretched finances cast a long shadow over the club’s prospects.

 

 

 

 

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2 thoughts on “Stadium Casts Long Shadow Over Scarlets’ Financial Outlook

  1. Sian Caiach on said:

    Like many impecunious parts of the UK economy, the Scarlets are able to struggle on despite having no obvious opportunity to recover from their indebtedness. I believe the valuation of the stadium in the accounts at 9.6 million refers to the Stadium’s fixtures and fittings, not the structure itself. Despite the free 150 yr ground rent, the stadium is still the possession of Carmarthenshire County Council who built it for around 27 million. We Councillors have always been reassured that” if the club became” insolvent”CCC would have the lease and ownership of the stadium returned to them immediately. The club has always, as far as I can see, been basically insolvent but clearly cannot default on a free ground rental. The concern I have is that the stadium itself doesn’t belong to them and why is it so overvalued in the accounts.Do they want to give the false impression that they actually own the bricks and mortar? Fantasy finance doesn’t pay the bills

    • Very interesting, I hadn’t seen the figure £27m before, only that the county council made a grant of £10.3m, and that £5.56 from Section 106 contributions from the Stradey Park housing development would also go to Parc y Scarlets. The 2014-15 accounts show payment of £82,500 for operating leases which expire in more than 5 years, but don’t give further information. The accounts refer to “the carrying value of the stadium” but do not differentiate between freehold and leased property. If the only owned fixed assets are fixtures and fittings, the following extract from note 1.10 to the accounts raises a serious question: “Although the Companies Act would normally require the systematic annual depreciation of fixed assets, the directors believe that the policy of not providing depreciation is necessary in order to give a true and fair view, since the current value of investment properties, and changes to that current value, are of prime importance rather than a calculation of systematic annual depreciation.”
      Personally I think the Scarlets are important to the county, and not everything can be reduced to finance, but the arrangements should be more transparent so that the public can monitor the use of what is, effectively, their money.

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