OPERATING AND FINANCIAL REVIEW
continued
Debtors and prepayments increased by £6.3m from £16.4m to £22.7m primarily due to £5.2m being outstanding at year end from minority shareholders in Twickenham Experience and prepayments of £3.3m in respect of travel packages for RWC 2007.
Creditors due within one year increased by £5.6m from £23.3m to £28.9m, with the main single item being deferred income in respect of RWC 2007 travel packages.
Cash decreased in the year by £13.5m from £28.0m to £14.5m. The Group’s operations are strongly cash positive both due to the nature of the revenue streams and the level of the depreciation charge, with net cash flow from operating activities of £31.2m. A total of £5.2m was raised from debentures, of which £3.0m was outstanding at June 2006, with the balance received from the South Stand debenture issue. During the year we drew down £11.0m of our £20.0m facility with Barclays to fund the South Stand development. From these main sources of cash inflow, a total of £40.2m was utilised for capital expenditure (£37.1m on the South Stand project and £3.1m on our ‘regular’ capital expenditure programme) and £19.3m paid to clubs and CBs.
Corporate Governance
One of the objectives in the Union’s Strategic Plan is that the RFU will be managed to Plc standards, particularly regarding effective management and corporate governance. The Management Board acknowledges the value of the principles of good governance as set out in the Combined Code, both in terms of ensuring integrity and accountability in the management of the Union’s affairs, and also in increasing the effectiveness and efficiency of the Union’s business. To that end the Union has adopted certain principles associated with best practice in corporate governance. The following statements describe how these principles have been applied in the period under review.
Management Board
The Management Board’s powers are clearly defined in the Rules of the Rugby Football Union, particularly Rule 12. It has clear terms of reference and standing orders and consists of three executive directors, together with ten other members representing a broad cross section of the game of rugby who do not have executive responsibilities. There is a clear division
of responsibility between the roles of the non-executive Chairman and the Chief Executive, and all executive directors have agreed job descriptions and limits of authority. The Board meets at least ten times each year and considers matters under its terms of reference, which include the development of the Union’s strategic plan, allocation of financial resources, reviewing the performance of executive directors, approval of annual budgets, considering the recommendation of the Board’s Standing Committees, whose responsibilities relate to policy development, and monitoring of the performance of the Union’s subsidiary and associated companies.
In the year the Management Board members were as follows:
Peter Baines
Francis Baron
Bill Beaumont
Nick Eastwood
Nigel Gillingham
Paul Murphy
John Owen
Bob Rogers
John Spencer
Martyn Thomas
John Vale
Paul Vaughan
Peter Wheeler
Risk Management
As part of the commitment to adopt relevant aspects of best practice in corporate governance, the Union has implemented the requirements of the Combined Code relating to Internal Controls (including the provisions relating to risk management). This process is carried out by a formally constituted group, the Risk Management Forum. This Group is chaired by the Finance Director, assisted by the Union’s risk management advisors, and comprises key executives from each of the critical areas of the business. The meetings of the Risk Management Forum are reported to the Management Board and the overall process is supervised and monitored by the Audit and Risk Panel.
The Group monitors the risks currently faced by the Union, identifies and implements controls to manage those risks and, assisted by the Union’s risk management advisors, identifies and evaluates new risks. These risks are evaluated and monitored against a number of criteria including a risk tolerance level of £5m, which is regularly reviewed. As reported last year the one risk that has
The Group's operations are strongly cash positive