OPERATING AND FINANCIAL REVIEW

2006/07 was a successful year financially with record revenues and operating profits of £103.7m and £28.1m, respectively. Our net worth increased to £134.6m which gives us a solid foundation on which to complete the South Stand development and to commence the next phase of development of the professional game, based on the new agreement with the Premiership clubs.

Revenues

Total revenues increased by £21.0m from £82.7m to £103.7m with the main drivers being significant increases in ticket income, hospitality and catering and other revenues.

Ticket income increased by £10.7m from £14.4m to £25.1m due to the impact of the match programme and, to a lesser extent, the increase in capacity of the new South Stand. Revenue from the autumn international matches increased by £5.8m, with £4.1m due to the South Stand opening match against the All Blacks and the balance mainly due to the increased available capacity of 15,800 in the South Stand (in 2005 only the lower tier was available due to the construction programme). In 2007 we held three Six Nations home matches, against Scotland, France and Italy, as opposed to two in 2006 and this drove an increase in ticket income of £5.6m in total, with £4.0m being due to the extra game and £1.6m due to increased available capacity compared to 2006 of 10,800. Offsetting these increases, we did not stage an England v Barbarians match in 2007, due to the timing of the 2007 Rugby World Cup, and the consequent impact on the end of season structure, resulting in a decrease in ticket income of £0.7m.

Broadcasting revenue increased by £1.3m from £19.6m to £20.9m primarily because of the fourth autumn international against New Zealand. Other minor changes included an increase in Six Nations revenues of £0.3m due to the third place finish (against fourth place in 2006).

Sponsorship revenue decreased by £0.6m from £13.9m to £13.3m with the main changes being a decrease in primary sponsorship income of £1.3m following the renewal of one of our major contracts, a decrease in the total surplus from the EDF cup of £0.6m, offset by increases due to the England v New Zealand match of £0.4m and from a number of secondary sponsorship contracts of £0.6m.

Hospitality and catering revenues increased by £5.1m from £21.6m to £26.7m, mainly due to the impact of the match and event programme. The major contributory factor was an increase in public food and beverage sales of £2.5m due to the increase over 2005/06 in the number of major events. Hospitality income from the Six Nations matches improved by £1.0m, of which £0.6m was due to the extra match. Box sales also increased by £0.9m principally due to the construction of 38 new boxes in the South Stand (in 2005/06 no boxes were available in the South Stand due to the construction programme).