Aviva Premiership: something exciting happens

[paddyor]

Charlie Morgan in the kipper

Premiership clubs will discuss introducing an emergency salary-cap dispensation to sign Worcester Warriors players that are forced to leave the financially-stricken West Midlands side in the coming weeks.

The proposal, which would require unanimous support to be passed, is sure to divide decision-makers around the competition. Some have already branded it as ‘unworkable’, ‘unfair’ and even ‘ludicrous’.

It has been reported that Worcester players will be allowed to leave if the club goes into administration and is unable to pay wages at the end of August. A further announcement is expected on Monday, although Steve Diamond told the Sunday Times: “In the current climate, it is unlikely that a white horse is going to ride into town.”

Should an exodus ensue, players such as Duhan van der Merwe, Rory Sutherland, Ted Hill and Ollie Lawrence would be among the most attractive assets. Kyle Hatherell, the hard-hitting back-rower, and fly-half Owen Williams are two more significant draws.

Under current regulations, though, it would seem difficult to pick up a job in a Premiership that has been operating under a reduced salary cap with 10 or 11 clubs spending within five per cent of the ceiling cap. Others have taken the active decision to stay under it. Multiple sources have suggested, therefore, that any sums paid to former Worcester players could be rendered exempt.

The vast majority of clubs have finalised their playing budgets for this season, with some already completing deals for 2023-24. Gloucester have agreed a four-year deal with Zach Mercer, for instance. Fin Smith, the 20-year-old Worcester fly-half, is thought to be the subject of serious interest from Northampton Saints as Dan Biggar’s contract approaches its end next year.
'Madness' to increase the cap

Decreasing the league’s salary cap to £5m, plus a maximum of £1.4m in credits, was a measure made in 2020 with sustainability in mind. Although there is widespread sympathy for Worcester’s players, one source said it would be “madness” to increase the cap in order to facilitate a scramble to acquire them in the top flight.

There is a feeling that future planning in accordance with the cap should be rewarded and that allowing big spenders to bolster their squads at short notice would compromise the integrity of the Premiership. Another consideration is the added sense that endorsing spending sprees could be construed as irresponsible because the number one objective of the salary cap is to maintain financial viability.

Besides anything else, the likelihood is that the Premiership would move to become a 12-team league in the event that Worcester are unable to compete next season. With finances already fragile, each club would therefore lose a home game and the associated revenue of between £250,000 and £600,000, depending on attendances. A small comfort is that the broadcasting deal is thought to be unaffected by any such changes.

Increasing the salary cap for the current season requires unanimous approval from all stakeholder clubs. The cut-off date for the 2022-23 season to start was July 1.

Each Premiership team does have £400,000 to spend beyond the cap for injury cover, while the Championship is another potential destination. Ealing Trailfinders are thought to have discussed adding two or three Worcester players if they become available.

Moves abroad to France, Japan and Major League Rugby in America most likely for Worcester’s top earners, but even those cannot be relied upon given the timing of this situation. The hope for prospective England internationals would be that the RFU would relax their current selection policy and allow them to be called up by Eddie Jones should they head to another nation.

As recently as last week, Diamond had been looking forward to the season and explained that he had been given licence to spend up to the salary cap with Van der Merwe taking up one of the excluded slots.

“I’ve got a different job on my hands than most people,” he told Telegraph Sport. “I’m trying to get Worcester to be highly competitive, which I know I can do.”
Q&A: What happens if Worcester go into administration and the impact on players and the Premiership

An update on Worcester Warriors’ future is expected on Monday and the initial scenario, amid a plethora of unknown factors, would appear reasonably bleak.

The club is reportedly around £6 million in debt to HMRC and administration seems to be in the offing with new ownership apparently necessary. From there, a number of possibilities could arise.
Would Worcester be able to play in the Premiership this season if they go into administration?

This first question comes down to the Rugby Football Union, because they are the regulators of the Premiership. According to the governing body’s regulation 5.5.5, which covers insolvency events at a club, automatic relegation will be the outcome if administration occurs during a season.

Should it happen before the start of a season and after schedules have been determined for the upcoming campaign, a 35-point penalty will be doled out. This would not be the end of the world in a ringfenced league, of course, although it would surely end Steve Diamond’s immediate hopes of shooting for the top eight.

Worcester will have certainly explored regulation 5.5.9, which covers “no-fault insolvency events”, where administration has been “beyond the control or without the fault of negligence of the affected club”. This force majeure clause lists “riot, war, invasion, acts of foreign enemies, acts of terrorism, earthquake, flood, fire or other physical natural disaster, strikes at national level and any epidemic or pandemic as categorised as such by the UK Government and/or the World Health Organisation”.

Covid would obviously qualify here, and the RFU “may in its absolute discretion reduce or waive in its entirety any sanction that would otherwise apply to a club”. It is understood that viability for the 5.5.9 clause will be assessed once administrators are in place and if Worcester apply for it to be considered.

Of course, that would probably be immaterial if the club cannot pay staff at the end of this month. Equally, and importantly, it is not uncommon for organisations to go into administration having already agreed on how their debt will be restructured.
Where would the players go if the club folds?

Worcester’s entire staff, as well as their fans, face a horribly uncertain time. There is no sugar-coating that. They all deserve support and sympathy.

For the players, having the freedom to look for other clubs does not guarantee employment at this stage of the year – especially in a Premiership operating under salary cap that will remain at its current level until the 2024-25 campaign.

The vast majority of clubs have finalised their budgets for this season, with most looking to 2023-24 and beyond. It is understood that 10 or 11 clubs are within five per cent of the salary cap, which is currently at £5m with a maximum of £1.4m in various credits. For some clubs, staying under the mark is an active choice.

Indeed, the decision to reduce the league’s salary cap in 2020 was made with sustainability in mind. Raising it again specifically for this season, or allowing for special dispensations to pick up Worcester players, would need the agreement of all clubs. It is hard to see that coming off.

Why would a club allow a rival to swoop in for Duhan van der Merwe, Rory Sutherland, Ted Hill and Ollie Lawrence, if they had the means to do so? And is allowing big-spenders to reach beyond the salary-cap ceiling to hoover up contracts, on the back of a summer when a number of respected players were squeezed out of squads, a good look?
Scotland's Duhan van der Merwe looks on during the international rugby union match between Argentina and Scotland
Duhan van der Merwe would be one of Worcester's most prized talents Credit: AFP

One source suggested that clubs keen on Worcester players could impose pay-cuts in order to manufacture salary cap space. Their point was clear.

Premiership sides do have £400,000 each for injury cover, which may mean that Worcester players could be brought in later in the season if they keep themselves fit. Ealing Trailfinders, poised for a promotion push from the Championship, would be another viable destination and are understood to have been weighing up an approach for two or three players.

Moves abroad to France, Japan and Major League Rugby in America are most likely for Worcester’s top earners, although some of those suitors will have to adhere to league regulations on foreign players and may already have sorted that quota.

The hope is at least that the RFU would not bar any prospective England internationals should they head to another nation.
How would Worcester’s withdrawal affect other clubs?

Losing one home match, and the revenue associated with that, would be a blow for any Premiership club, particularly at this late stage. Depending on attendances, clubs generate between £250,000 and £600,000 for these fixtures. As far as profits, though, £150,000 is a very good result here. Either way, one small comfort is that income from the existing broadcasting deal will be unaffected if the competition drops down to 12 sides.
How would it affect scheduling?

It is understood that there are currently no plans to whisk up Ealing – or any other Championship team – to preserve a 13-club Premiership schedule for the coming season, should the competition be reduced to 12. The regular season could therefore be played out over 22 rounds prior to the play-offs, as it was as recently as 2020-21. Far more disruptive would be a change to 11 sides, for whatever reason.

The next stage for the administrators ahead of the 2022-23 season would be to ascertain when the in-season breaks would come and whether clubs could organise friendly fixtures to make up for lost revenue. On the bright side, that offers an unforeseen opportunity to reduce clashes between league and international fixtures.
Could this change the Premiership landscape?

A decade ago, Exeter Chiefs stumped up £5m to buy ‘P’ shares from Leeds, who had been out of the top flight for more than a year. Worcester’s plight could mean that their ‘P’ shares, of which there are 13 and which entitle their owners to a greater share of revenue from broadcasting and other central streams, are picked up by an ambitious Championship outfit.

Ealing would appear to be in a decent position in this regard, although the question of Government debt following the winter survival package will have to be factored into any sale.

[paddyor]

Wasps

It's PAYE/NIC and VAT they owe rather than corporation tax (they had £46m of unused tax losses as of June 2021 so highly unlikely to face any CT even if by some miracle they did turn a profit).

At June 2021 they had £7.6m of liabilities relating to social security and other taxes. They were supposed to pay £3.3m of that this year and repay the other £4.3m over a longer timescale. Plus they would have the PAYE/NIC and VAT for the June 2022 year end.

If they've not been keeping to their payment schedule I'd expect HMRC would be coming after the whole lot to be repaid immediately.

oof

[The Doc]

C&P from another site.

From local Worcester news reporter Marcello Cossali-Francis on twitter -

Warriors update: so it sounds very much as if the club will go into administration, likely to be public knowledge on Monday morning.
There remains concern about the fact Warriors the club and land are now separate businesses. Makes it tricky for a buyer if that’s the case.
There are people within the club who no longer are on side with the owners & there is a big worry for staff over their jobs.
Question make over salaries for all at the club. They want a sale of all assets but that might not be what the owners want anymore.
Tax bill is big.
I believe we’ve hit a point where there is serious unrest as the club and a real worry about the future of it.
What needs to happen now is a full sale of all assets to ensure the club do not go bust. But what buyer would take the club and not the land?
Its a real mess folks.
They have split the land into separate businesses from the club. Set up three new ones in the last couple of months.
Sixways Property Limited (July 2022)
Sixways Stadium Limited (June 2022)
Sixways Medical Limited (March 2022)
All separate from WRFC Trading Limited.

They have been "selling" a lot of the property to other entities - I think the latest was the sale of the car park last week. It makes an asset sale virtually impossible - all the professional club seems to have at this stage is the share of the premiership

[paddyor]

I'm guessing the asset sale is what triggered HMRC to issue the winding up order. Anything done within 6 months is preferential treatment of creditors which I'm guessing the owners are via directors loans and as such is reversible AIUI. Basically they dared them to do it.

[hugonaut]

Just reading a bit about Worcester's ownership history here [link: https://rugbydome.com/who-owns-worcester-warriors/ ] and it is sad to see a club founded in 1874 end up in such a sad state and in the ownership of a pair of chancers.

It sounds as if Wasps are in serious trouble as well. I was going to write that it sounds as if Wasps are f*cked, and I probably should have just stuck with that. And if Wasps are f*cked, it's difficult to see how Newcastle aren't f*cked too. Nobody goes to their games – their average attendance last season was 5840 [highest 6746, lowest 3376] – that's a good bit worse than Worcester.

[FLIP]

I heard from someone that used to be in the backroom at Gloucester that the rumours are that another 2 sides are being investigated - one up North and one in the South West.

Although Hugo thinks it's Newcastle, given most of these issues are with payroll taxes, my money is on Sale being in trouble with their big name signings and big salaries

[ronk]

I'm guessing the asset sale is what triggered HMRC to issue the winding up order. Anything done within 6 months is preferential treatment of creditors which I'm guessing the owners are via directors loans and as such is reversible AIUI. Basically they dared them to do it.

That would make sense.

[IanD]

https://www.theguardian.com/sport/2022/ ... dApp_Other

From the above link.

"The owners of the Premiership club Worcester Warriors say they are “working through a number of options” as they try to find the “best solution” to their financial predicament but their statement indicated that not all of the options include rugby remaining at Sixways."

Owners might have no club but have a nice bit of land.

[ronk]

https://www.theguardian.com/sport/2022/ ... dApp_Other

From the above link.

"The owners of the Premiership club Worcester Warriors say they are “working through a number of options” as they try to find the “best solution” to their financial predicament but their statement indicated that not all of the options include rugby remaining at Sixways."

Owners might have no club but have a nice bit of land.

Holding themselves hostage to create pressure for a better deal. Not all that uncommon. 1 club is easy, if it's 3 it runs the risk of spreading wider.

[the spoofer]

Maybe the IRFU have some idea how to run rugby and are not just a bunch of entitled blazers?

[hugonaut]

I heard from someone that used to be in the backroom at Gloucester that the rumours are that another 2 sides are being investigated - one up North and one in the South West.

Although Hugo thinks it's Newcastle, given most of these issues are with payroll taxes, my money is on Sale being in trouble with their big name signings and big salaries

I was thinking more of commercial viability – debts increasing, a company in similar situations going to the wall, and the future looking bleaker rather than more encouraging. People everywhere, not least in northern England, are going to have far less disposable income to spend this winter due to a huge increase in costs of ... everything. That means less people through the gate, people cutting back on BT Sport, advertising revenue down. Newcastle were almost wound up in 2018 and have spent two of the last ten seasons in the Championship.

They were able to pull through the Covid-19 season [2020-21] thanks to £6m in supplementary funding - £2.2m from the British government and £3.8m from PRL Investors Ltd [link: https://www.business-live.co.uk/enterpr ... s-24643007 ] which is basically a financial vehicle run by the Premiership Club owners who have a very obvious interest in not seeing Premiership clubs go to the wall. If every club got £3.8m, that's a £50m investment in one year from PRL Investors Ltd ... hardly likely to be repeated.

[PRL Investors Ltd officers: https://find-and-update.company-informa ... 2/officers - i.e. the owners or managing directors of the Premiership clubs].

According to this article: https://www.business-live.co.uk/enterpr ... s-20974468# , the club owed £19.3m to its owner/majority shareholder, Semore Kurdi, back in 2020. He seems like a decent fellah, but that is a lot of wedge to be down. He bought in in September 2010, so he has lost more than £1.5m/year on it in financial terms.

[Dexter]

So basically the Premiership overall is in pretty dire straits?

[hugonaut]

So basically the Premiership overall is in pretty dire straits?

You need to get people through the gates – it's still a big income stream. There's three clubs who are really struggling there: Newcastle, Sale and Worcester.

Newcastle: 64,246 [11 Premiership games]
Sale: 71,383 [12 games]
Worcester: 83, 817 [12 games]

In European competition, Newcastle had
3430 vs Worcester
3200 vs Zebre
4120 vs Bath
... so essentially 75,000 attendance for the entire season, or an average attendance of around 5355/game.

I had a look at Newcastle's website, and from what I could see, tickets range from £12-50 ... I'm not going to waste my time going through how many of each, so if you say an average of £25/game, over the course of the season: 75k x £25 = £1.875m. For the Premiership fixtures, it's 64246 x 25 = £1.6m

BT's most recent contract [signed 2020] is down £3.3m/year on the previous deal: it had been £40m/year, now it's £36.6m/year, or about £2.8m/year per club [13 clubs]. There will be other income streams from EPCR, merchandise, vendors etc., but just comparing Premiership TV money with Premiership ticket money, it's £2.8m to £1.6m.

We tend to think of the premiership as a bloc, but there is huge disparity between the clubs. For example, Leicester had 264,613 Premiership attendances and 59,010 European attendances, i.e. 323,623 through the gates. Even if you level out ticket prices between Newcastle and Leicester, i.e. just take a figure of £25, Leicester pulled in a nominal £8.09m, more than four times what Newcastle would have made through the gate.

Getting people to go to your games is a big, big deal.

[The Doc]

BT's most recent contract [signed 2020] is down £3.3m/year on the previous deal: it had been £40m/year, now it's £36.6m/year, or about £2.8m/year per club [13 clubs]. There will be other income streams from EPCR, merchandise, vendors etc., but just comparing Premiership TV money with Premiership ticket money, it's £2.8m to £1.6m.

.

Add to this the recent CVC deal which means commercial revenue from the league gets further reduced by 20% (or whatever share the sold). In effect taking a one off payment for reduced future revenue streams.





Sent from my LE2123 using Tapatalk

[paddyor]

So basically the Premiership overall is in pretty dire straits?

You need to get people through the gates – it's still a big income stream. There's three clubs who are really struggling there: Newcastle, Sale and Worcester.

Newcastle: 64,246 [11 Premiership games]
Sale: 71,383 [12 games]
Worcester: 83, 817 [12 games]

In European competition, Newcastle had
3430 vs Worcester
3200 vs Zebre
4120 vs Bath
... so essentially 75,000 attendance for the entire season, or an average attendance of around 5355/game.

I had a look at Newcastle's website, and from what I could see, tickets range from £12-50 ... I'm not going to waste my time going through how many of each, so if you say an average of £25/game, over the course of the season: 75k x £25 = £1.875m. For the Premiership fixtures, it's 64246 x 25 = £1.6m

BT's most recent contract [signed 2020] is down £3.3m/year on the previous deal: it had been £40m/year, now it's £36.6m/year, or about £2.8m/year per club [13 clubs]. There will be other income streams from EPCR, merchandise, vendors etc., but just comparing Premiership TV money with Premiership ticket money, it's £2.8m to £1.6m.

We tend to think of the premiership as a bloc, but there is huge disparity between the clubs. For example, Leicester had 264,613 Premiership attendances and 59,010 European attendances, i.e. 323,623 through the gates. Even if you level out ticket prices between Newcastle and Leicester, i.e. just take a figure of £25, Leicester pulled in a nominal £8.09m, more than four times what Newcastle would have made through the gate.

Getting people to go to your games is a big, big deal.

Similar problems with the Welsh regions. IIRC Scarlets gate income the year they won the Pro12 was only €400k.

WRT the bolded does that account for the 27% sell off to CVC? In which case it's 26.7m or 2.05m per club.

Edit noted by DeDoc

[IanD]

Wasps still signing players so can't be that bad.

BBC News - Cam Dodson: Wasps sign second row from Major League Rugby
https://www.bbc.co.uk/sport/rugby-union/62674999

[IanD]

BBC News - Worcester Warriors players and staff remain 'in the dark' over future
https://www.bbc.co.uk/sport/rugby-union/62672579

From the link above.

"While the coaches and playing group have continued to train, the non-playing staff have been told not to come into work.

It is understood the club's bank accounts have also been frozen."

"It is thought club staff have had little direct dialogue with the owners, and only saw the statement shortly before it was released.

Sources have also told the BBC their wages have been paid sporadically for the past few months, and that they are not expecting to receive their wages on time next week."

[Ruckedtobits]

Staff awges unpaid is a huge danger sign from past experience of Sport's Club on verge of administration.

[paddyor]

Wasps turn down a merger with Wuss.

Wuss can’t pay the wages tomorrow.

[blockhead]

Worcester beat 4pm wages deadline to survive for another month.