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Leeds Carnegie to freeze debts as they gamble on Cup qualification
LEEDS CARNEGIE have gambled their long-term stability on short-term success as the ambitious club bids for Heineken Cup qualification this season.
The Yorkshire club's appeal to raise 1m in local investment, launched at the end of the last campaign, has failed and the debt created by a budget deficit of 1.2m from their first season back in the Premiership has risen to 1.5m.
As a result, Leeds have ploughed some of the 1m of central funding – originally earmarked to service the debt – into extending the rugby budget from 4m to 4.5m to increase their chances of a top-six finish. The remainder of the central funding will go into running costs.
They have negotiated with their creditors, believed to be internal backers, to freeze the 1.5m debt for 12 months.
In order to pay that off next summer they need to break even over the coming financial year, meaning the club's future could hinge on what they do on and off the pitch next season.
If they finish in the top six – an improvement of four places on last season – or win the Challenge Cup, they would qualify for European rugby's premier club competition and ensure their financial stability for the future.
Off the pitch, the club needs to generate 500,000 in season-ticket sales and corporate sponsorship just to break even.
Relegation or merely another battle against the drop would not mean curtains for the club formed out of the merger between Headingley and Roundhay in 1992, but chief executive Gary Hetherington conceded: "We would have to cut our cloth accordingly.
"I'm not talking the club going out of business. The threat to the club's future would come if that debt started to rise.
"That's why the board have taken a very responsible view. It cannot allow the debt to threaten the existence of the club. Next year we are striving to break even."
The Leeds board and management are confident an increase in attendances and corporate revenue will provide a return on their investment.
The increase in playing budget takes them off the bottom of the spending table, and while their budget is not as competitive as the teams they hope to be challenging for a top-six place, it has given them more financial clout than the likes of Sale, Newcastle and Exeter.
Andy Key and Neil Back have already made use of the extra funds by bringing in 11 players. And they are on target for eclipsing season ticket sales.
"Season tickets last year were 2,300, we want to get to 2,800," said Hetherington, who revealed more than 3m is being spent on salaries this season as opposed to 2.8m last term.
"Already with six weeks to go we've taken as much in revenue as we did in the whole of last season.
"The challenge for the club, indeed for all stakeholders in Leeds, is to significantly grow the business, both from the terraces and the corporate areas.
"We do not have any ability to lose money this year, we have to operate at break-even or better, otherwise we will suffer the same fate as any other business unable to sustain itself. Any surplus would be put into the rugby budget.
"But we are confident that the team can now continue its upward movement in the Premiership at a time when most clubs are reducing their spending, albeit from a still higher base than ours.
"We are very reliant on the Yorkshire business community and the rugby union fraternity throughout the region to show its support.
"It's a crucial year ahead, we are taking a very bold and pro-active approach in what is a difficult economic climate. But there is a confidence that the club can deliver what it has promised in the past, a competitive team and a sustainable business."
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Thursday 09 February 2012
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