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Shirt sponsorship helps NZRU return to profit
The New Zealand Rugby Union (NZRU) has announced its first operating profit since 2008, with the governing body citing its controversial five-and-a-half year shirt sponsorship deal with AIG as having played a key role in the turnaround.
The NZRU made an operating profit of $3.2 million in the 12 months ending 31st December 2012, beating the breakeven target predicted, and turning around an operating loss of $3.1 million in 2011.
This week's announcement comes with the iconic All Blacks jersey now carrying a sponsor's branding for only the second time in its history after the NZRU confirmed a five-and-a-half-year deal with insurance company AIG in October.
While the logo of beer brand Steinlager was emblazoned on the right side of the jersey during the mid-1990s, the famous All Black kit had remained clean of a sponsor's brand on the front of the jersey since the team began playing in the late 1880s.
However, NZRU Chief Executive Steve Tew highlighted the importance of the deal when commenting on the current financial position of New Zealand rugby.
Tew explained "this is an extremely satisfying result and underlines our success in driving greater commercial revenue and containing our costs.
We are now in a much stronger financial position. The new partnership with insurance company AIG has made a difference.
"Significantly, we have secured a major portion of our commercial revenues over the medium term through the relationships with principal partner adidas, broadcast partner Sky and now AIG."
The NZRU has been looking at ways to make the game more profitable, as provincial unions face the squeeze from dwindling attendance and, in some cases, poorly managed finances. The most recent initiative has been the sale of Super franchises.
Tew added that nine of the 15 provincial unions in the ITM Cup had been profitable last year, with a combined surplus of $626,000 compared to a total deficit of $631,000 a year earlier.
Tew continued "it's important to remember that in recent years we maintained an annual investment of around $19 million in funding to Provincial Unions and Investec Super Rugby franchises in order to safeguard the game during challenging times.
"The consequence of that was a reduction in reserves and successive operating losses. That was clearly not sustainable. Our improved position gives New Zealand Rugby a sound base to make decisions on future investment in the game.
"We will now take the time to review an appropriate level of reserves for an organisation of our size and risk profile."
The NZRU will be scrutinising provincial union funding this year, and will also review its reserves policy once it has completed pay negotiations with players.
Last year the administrator said it expected to have $45 million in cash reserves by the end of 2012.
Tew concluded "there has been a clear focus by the unions on living within their means.
"We are not out of the woods by any means and it remains a very challenging environment for any union to grow revenue from sponsorships and crowds."
As part of its strategy plan towards 2016, the NZRU wants the sport to be financially self-sustaining across all levels. To help achieve that, it plans to build a shared service model for back office functions and create real-time reporting and forecasting tools for all provincial member unions to use.
18th December 2012 - INTERNATIONAL SPORT FEDERATIONS GENERATE $2 BILLION IN SPONSORSHIP
13th November 2012 - MANAGEMENT CHANGES IN NEW ZEALAND SUPER RUGBY
9th September 2011 - COMPANIES THAT SPONSOR OUTPERFORM THOSE THAT DON’T
25th August 2011 - ADIDAS APOLOGISES OVER ALL BLACKS JERSEY PRICING
23rd April 2011 - NZRU REVEALS FINANCIAL LOSS AND APPOINTS BRYAN WILLIAMS AS NEW PRESIDENT
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