Directors Remain Optimistic
The disappointing financial repercussions of the Scarlets’ super-sized stadium at Trostre, Llanelli, threaten the capability of Scarlets Regional Ltd to continue as a going concern, in the view of auditors Broomfield & Alexander.
The accounts for the year to June 30th 2016 show a pre-tax loss of more than £1.5 million, 50% greater than the previous year’s loss of just over £1 million.
The directors have invested in players, and the Scarlets have played pretty well in the current season. They stand 5th in the Pro 12 at the time of writing, below Leinster, Ospreys, Munster and Ulster – but 5th is not 1st, and there is still a way to go.
Broomfield & Alexander point out that, at the end of June 2016, the company’s net current liabilities exceeded assets by £2.718 million. In their view, this indicated “the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern”.
The auditors also question the £9.394 million value of the stadium as reported in the accounts, the implication being that the valuation is too high and may be impossible to realise if Scarlets Regional runs out of money. The stadium, which opened in November 2008, cost £23 million to build.
Despite the Scarlets playing lively rugby, the average gate for Pro 12 home matches in 2015-16 was 7,353, including the 4,000 or so season ticket holders, although the stadium can seat 14,870. The wide expanses of empty seats show that the claim ‘build it and customers will come’, a refrain which has been heard inside Carmarthenshire County Council, is wide of the mark.
The Scarlets owe the county council £2.614 million, which is due for repayment in 2023. Total equity in the rugby company continues to fall and at June 30th 2016 was down to £2.640 million, against £3.826 million a year earlier and £4.169 million the year before that. The county council’s investment on behalf of the people of Carmarthenshire is looking uncertain, despite the fact that a top notch rugby side brings non-financial benefits such as sporting confidence and local pride.
The board of directors, who have dug deep into their pockets to keep the rugby region going, remain optimistic, according to the accounts. Chairman Nigel Short, of Penderyn Distillery, wrote of the board’s determination to “continue to invest in development of talent”, although this had led and could well lead again to the business making a loss.
The directors “have a reasonable expectation that the company has adequate resources to continue in operation for the foreseeable future”, they report in the accounts.
Those resources are likely to include more of their own money. Perhaps a lot more.