administrator

The New Zealand Rugby Union lost nearly $5 million last year in a massive $28.5 million slump that reveals how severely exposed it is to the whims of the foreign exchange rate.

About two-thirds of the NZRU's income (which will not be revealed till the annual meeting in April) is paid in foreign currency and it is forecasting bleak times ahead.
It was on track last October to break even but the rise in the New Zealand dollar, and the NZRU's decision not to protect itself, meant it was hit hard when the dollar continued to climb in November and December.
Now the NZRU has been forced to slash $2m from this year's budget and is warning it could still lose $10m if the dollar stays around US70c.
The $4.8m loss, released yesterday because of the decision to cut this year's budget, is slightly better than the forecast $5.2m loss, but is further proof of the NZRU's exposure to the foreign exchange rate.
Its reserves of $77m were built on the back of a well-timed decision to hedge its income from adidas and News Ltd in 1999, but that future proofing ran out in 2005 when the union made $23.7m profit.
NZRU chief executive Chris Moller said the loss was all the more disappointing as the NZRU had been on track to break even last October.
"This result highlights the fact that, with two-thirds of our revenue generated in foreign currency, we are vulnerable to exchange rate movements and, like many other New Zealand organisations, our results are very sensitive to the high value of the New Zealand dollar being experienced at the present time." He said the reserves meant key programmes would continue, as would the funding to provincial unions and national competitions. There were also no plans for staff cuts and nor would the budget to host the 2011 World Cup be affected.
The $3m bill to win this year's World Cup in France was also safe as it had been budgeted for. But the decision to cut this year's budget by $2m was a sign that nothing was really safe while the dollar remained high – not even the reserves which are in foreign currencies.
"If the 2007 calendar year was to end with the New Zealand dollar at the level it is today (about US70c and 35<<1/2 British pence), the NZRU would incur a loss of up to $10m.
"In stark contrast, however, if the New Zealand dollar weakened to the levels predicted by many observers by the end of the year, the NZRU would break even in 2007," Moller said.
"Such a huge swing clearly demonstrates the challenges that the NZRU faces in managing its financial results on an annual basis and underlines the need to take a medium-term view of its financial position in the best interests of maintaining and continuing to grow rugby in New Zealand."
Moller said if the dollar did drop the NZRU would consider switching some of its reserves to New Zealand dollars to "recover some or all of the unrealised losses". "Despite this, it is clear, however, that incurring major losses on an on-going basis is not sustainable.
"We are in the fortunate position of being able to continue our core programmes. At the same time, we need to prepare for the potential of a prolonged exposure to the high Kiwi dollar."