28th Apr

In Conversation – Mr Bond and Wasps Chief Executive David Armstrong

In this exclusive interview Mr Bond tries Wasps’ Chief Exec David Armstrong with some searching questions – and appears to have been converted.

Following its heyday in the early noughties when it won the English Premiership five times and was crowned European champions twice, erstwhile ‘London’ Wasps Rugby Club struggled a little on and off the pitch and even flirted with insolvency in 2012.

However, the club has come back strongly and now, following its acquisition of the Ricoh Arena in Coventry, has ambitious plans that could see it become one of the world’s most affluent rugby clubs.

The Aviva Premiership side today announced the launch of a seven year Sterling retail bond paying 6.5% to be listed on the LSE’s Order Book for Retail Bonds and available with a minimum investment of £2,000.

With a target to raise £35 million it is believed that the bond will be used to repay some outstanding debt and then set about propelling Wasps to the pinnacle of rugby sporting achievement.

When it bought the 32,000 capacity stadium it also acquired a significant conference, exhibition, events and hospitality business which Wasps’ Group Chief Executive David Armstrong, when quoted on BBC Radio Five Live, described as ‘creating a new financial model in rugby’

He added ‘We were previously the second-lowest revenue-generating club in Premiership rugby. We are now the second highest in Europe’. ’In terms of size of revenue, we will overtake Toulouse in the next few months. We are in a very strong position financially.”

Mr Bond was lucky enough to have the opportunity to speak Mr Armstrong to find out a little more about plans at this ambitions club. 

bowWhat are your objectives in launching a Retail Bond?

David Armstrong (DA)  ‘This is predominantly a restructuring exercise following the acquisition of the Ricoh Arena (from Arena Coventry Ltd). There was a certain amount of existing debt on both sides of the business and we believed that market conditions and demand from retail investors were right for a refinancing exercise.’

bow Is Wasps a rugby club with business interests or an events and hospitality business with a rugby team?

DA ‘The acquisition of the Ricoh and the relocation of the club to Coventry has been transformational for the business but we are very much a rugby club with strong business interests and instincts’.

While most of their Aviva Premiership rivals rely on broadcast rights for the bulk of their income, Wasps are now able to profit from a 40,500 capacity concert venue, casino, two restaurants and a hotel at the Ricoh.

DA ‘At Adams Park (Wasps’ previous home at High Wycombe) our flexibility to develop the business was limited because of the terms of our tenancy agreement which affected everything, up to and including ‘pourage’ on the beer that fuelled the faithful; as a result we were loss making.’

‘The old model of either owning a purpose-built rugby stadium, or even being a tenant in somebody else’s stadium, has now been superseded by what we’ve done.’

bow Why did you choose to issue a bond rather than seek other forms of finance?

DA  ‘We believe that a retail bond is the best vehicle for us to leverage Wasps’ strong brand awareness and with a minimum investment of £2,000 deliver an investment opportunity to our supporters and sports fans in general as well as other retail investors. We decided that the issue of a fully listed bond (traded on the London Stock Exchange’s Order Book for Retail Bonds) was the ‘grown up’ approach and we wanted to do things properly’

The bond is secured against Wasps Holdings and Arena Coventry Ltd.

bow Is there any science behind the 6.5% coupon that is being offered?

DA  ‘We wanted to offer something that was within the middle of the range that has been offered by recent issuers in order to deliver what we believe could be an attractive return to investors and reflect market conditions’ 

bow What are the core attributes of Wasps that could make it attractive to a potential investor?

DA  ‘Wasps’ ambition on the pitch is matched away from it. Key to its strategy is the diverse income streams it generates – 65% of its revenue comes from activities outside of rugby which we believe is really important in the creation of a profitable and sustainable business.  Ricoh is one of the largest conference and exhibition businesses in the country – possible number five or six behind the likes of the NEC and Excel – generating revenue 365 days a year and showing excellent year on year growth.’

‘Wasps is now master of its own destiny in so many ways – the ‘pouring rights’ issue has gone away; the contract previously controlled by Carlsberg has been put out to tender with three bidders vying for the business. This is a case of two plus two equalling five’

bow Retail bond issuance has been low, what do you think are the prospects for the sector?

DA  ‘I have been involved with other types of finance but this is my first experience of retail bonds; there appears to be significant demand from investors and it seems to be the ideal product for us reach a wider audience’

bow Do you think that other sports businesses will follow Wasps’ lead and what would be your advice to anyone considering it?

DA  ‘I believe that delivering diversity of income is key to the opportunity – the ability to generate revenue away from the pitch. Business is business but the supporters are the DNA upon which any sports club is founded; I believe that we can deliver on the business aspects without diluting any of that passion and enthusiasm.’

DA  ‘Things are going well, Wasps’ home crowds have tripled since the move to Coventry to 18,569 and the sales of hospitality packages have increased four-fold making the Ricoh the second highest seller of rugby hospitality outside of Twickenham. With match day hospitality starting at just £80 that is all about understanding the requirements of your fans’.

‘We have already sold 31,000 tickets for what should be a spicy encounter with new neighbours Leicester Tigers next week and a sell out crowd would be the highest ever home gate for an Aviva Premiership match.

bow There are concerns that the cost and complexity of providing documents in support of retail bonds have endangered the sector – has the process been onerous?

DA ‘Not at all, the entire process has been relatively painless both in terms of the time expended and the overall cost. We chose to work with Investec because it has strong expertise in sport and has recently delivered a finance package to Arsenal’s Emirates Stadium. The company has very good personal relationships and excellent knowledge of the retail bond sector’

bowNotwithstanding the fact that Wasps’ relative wealth will entitle it to a seat at the sport’s top table, won’t the salary cap always restrict its ambitions in Europe?

Despite already being near the RFU’s salary cap Wasps has pledged to bring in a ‘marquee’ player following its successful refinancing. Given that big-spending French clubs have dominated European competition of late (Toulon and Clermont Auvergne contest the European Champions Cup final at Twickenham on 2nd May) Mr Bond was a little surprised by the Chief Exec’s support for the cap.

DA  ‘We fully support the cap and believe the reason that the French national team is currently so weak whilst its clubs flourish is as a direct result of clubs bringing in players from around the world and neglecting to bring on its home grown talent’

bow ‘Will we be seeing Wasps players in action at the World Cup later this year?’

DA  ‘I certainly hope so. Wasps has played some great rugby this season – currently sixth, we are well placed in the Premiership and played fantastically well in Europe (losing in the quarter finals of the Champions Cup to Toulon).’

‘It would be great to see young guys like Christian Wade, Joe Launchbury and Elliot Daly given a chance and that try by Joe Simpson (against Exeter Chiefs) was something else.

Mr Bond was left with the impression that David Armstrong is a man that has a passion for sport and business in equal measure and that the company he is creating is a fusion of the best elements of each.

Retail Bond Expert will report on the progress of the bond throughout the offer period and would like to hear from you if you have any thoughts on what could become a  new source of finance for sports businesses.

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