Another communiqué from the scrum

Once more I am grateful to Rugger Guy.

I asked him to carry out an analysis of the accounts of Rangers International Football Club (RIFC).

Specifically, I asked him to look at the cash flow situation over the lifetime of the Four-year-old institution.

I know that he has a very busy schedule and these valuable communiqués are often created for me in airport departure lounges, etc.

Consequently, I’m indebted to him.

However, unlike a club that used to play at Ibrox, I pay my debts in full.

Ok, here it is:


Bottomless pit?

Following on from the recent reports on RIFC accounts, this has raised several comments and queries, and in this regard Phil has asked me to carry out an analysis of the main cash flow movements of RIFC in its four-year history in order for people to get a sense of the shift in options for fund raising of RIFC. Phil has asked me to consider whether this entity is a bottomless pit, in that good money is being thrown after bad and will this ever end?

In this regard, I have looked at the operating performance of the entity to get a clearer picture of the underlying cash flow movements, rather than just looking in detail at the balance sheet, notes to the accounts and other areas. What is very striking is that in the four years of operating, this business has incurred operating losses of almost £37million. The balance sheet shows only accumulated losses of £18, but critically operating performance is the key indicator.

I will deal with this difference between these two amounts as I set out the performances in each of the four years trading history.


Year 1 13 month period ended 30 June 2013.

In this first year, RIFC raised monies ahead of its IPO (Initial public offer), together with the IPO itself. Together these raised almost £30million (after professional costs of c £3m), and in this period incurred an operating loss of £14m.The company posted a small profit due to the “release of negative goodwill” of £1m. In essence this related to the purchase of assets for £6.7m which at that time had a value of £27.2m. The subject of asset revaluation and assessment of fair value is in its own right worthy of a separate review, but I am not planning to comment on this here.

The good news was that RIFC had cash in the bank of just over £11m.


Year 2 of trading, period ending 30 June 2014.

In the second year of trading, RIFC incurred operating losses of just under £10m.

Closing cash balances were £4.6m, and in this year because of its listing on the AIM market, the entity raised £3m from the issue of shares but in addition to this, Mr Easdale, a director, and Mr Letham provided loans of £0.5m and £1m respectively. Losses posted in the balance sheet were slightly lower but the key area to look at for underlying performance is the operating aspect.


Year 3 of trading, period ending 30 June 2015.

Once again, RIFC incurred operating losses of £10m. In this financial year, RIFC lost its listing in the AIM market, and I will not go into the full details behind this as I believe that this has been well documented. This took place in March 2015, but prior to this event, RIFC was able to raise just under £3m from this market together with a further £5m from Mike Ashley’s company, and further director loans over £2m. However, the closing cash balances were now just a fraction over £1m. As some people say “the trend is your friend.” As most people may or not may know, RIFC does not have a credit line from any bank.


Year 4 of trading, period ending 30 June 2016.

Once again, the accounts have received an emphasis of matter qualification by the auditors as a going concern. From a financial results perspective, there has been an improvement to losses of under £3m, and net new loans received of £1.3m. However, there are some bullish comments made by the directors of a 40% increase in the footballing squad and a commitment to spend in the infrastructure at Ibrox and Auchenhowie. It also appears that a number of legal cases pending could have a substantial effect on the cash flow of the company. In this month a further loan of £3m has been made by the directors and other related parties, with a further promise to provide whatever funding is required.



What does this mean for the future of RIFC, a bottomless pit?

To put this in some context, RIFC has incurred total operating losses approaching £40m in its four-year existence. RIFC has to raise £36million net courtesy of the AIM market.

As of today, RIFC has loans primarily from directors of £13m

Is the company likely to make operating profits in the current year? It needs a lot of things to fall into place for this to happen, but if I were a betting man, I would not place a penny on it.

It is also unfortunate to see that a share price which almost reached £1at one time, is trading on a matched basis only,   currently trading at around 25pence. RIFC equity is in my opinion pretty much worthless. Why? When loans are outstanding, and there is no visibility of any ability to repay this, then the loans may get converted to equity in order to take control of the company.  Existing shareholders value is normally decimated. It is also difficult to know whether directors will continue to fund the losses into perpetuity and if they have the financial clout to do so.

There, dear reader is the unvarnished truth. The directors of the Holding Company Vehicle will need to continue to throw money into Sevco.

If they don’t continue to stump up then, the Engine Room Subsidiary is in serious, serious trouble.

That is what a qualified person can discern by looking at the published accounts of RIFC.

As a lay person, I believe his conclusions make sense.

However, don’t expect to read anything remotely like that in the Daily Radar.

After all, they have a dignified demographic to keep happy.

As ever the coverage here is guaranteed to be free of any contaminated lamb.

No paid PR person was the originator of what you read here.

This article is my idea and the words accompanying an expert analysis are mine and mine alone.

Thanks for reading.

Discover Phil’s dramatic play Rebellion