KEY POINTS:
The New Zealand Rugby Union jumped on the plunging dollar last week, converting tranches of foreign currency so they could bolster the balance sheet.
The union had been hoping to break even in 2008 and now might be looking at posting a small profit. With the New Zealand dollar dropping to below US$0.69 for periods, the NZRU decided to convert enough money to also improve the outlook for 2009.
Foreign currency exchange strategy is critical in determining the profit and loss of the NZRU.
Both the adidas sponsorship deal and News Corporation broadcast agreement - the two biggest revenue generators for the NZRU that account for almost 60 per cent of income - are paid in US dollars.
Significant income is also earned in British pounds from playing tests in the UK outside the IRB window where the host union pays some of the gate revenue to the All Blacks.
With millions of dollars sitting in foreign currency, it is vital the NZRU gets the best price when it comes to converting money. In the late 1990s, someone at the NZRU made the inspired decision to take out a hedging contract at around US$0.43, which meant the union continued to make significant profits through to 2005 even when the New Zealand dollar was trading at unprecedented high levels.
When that deal expired, the NZRU posted small losses in 2006 and 2007 and last year were forced to cut back discretionary spending. Those cut-backs had an impact.
"We didn't cut back on core activity spending," said NZRU chief executive Steve Tew, "but we did cut back on our operational activity.
"That affected the business because we didn't go and see as many people as we would have liked, so relationships were not as robust as they could have been.
"When we were knocked out of the World Cup, it was noticeable that some of our relationships were not as robust as they had been. You can't keep saving money so we are conscious of that and travelling a lot more this year."
The improved financial position of the union has more direct links, though, in terms of the money it can spend on players and funding the various competitions.
With talks ongoing about the future shape of Super Rugby and the provincial competition, the NZRU can entertain more options knowing the money is safely in the bank, converted to the appropriate currency.
With regards to those competitions, Tew says talks at the end of this week in South Africa should push towards making a decision about whether to expand the play-offs in the 2009 Super 14.
A plan has been proposed to increase to six the number of teams involved in the knock-out phase. The NZRU are in favour of the concept in principle but can't sign it off with their Sanzar partners until they have specifics around the logistics of accommodating the extra round.
"At the moment we are working through the logistics," Tew said. "We have to see how it can work in detail as there are issues around the scheduling and we want to avoid teams having to travel from South Africa more than once."
The All Blacks have test commitments against France scheduled for June 13, which means the Super 14 can't be pushed back and it is probable that the only solution will be to start the competition a week early, in the first weekend of February.
