As promised Rugger Guy came through with his analysis of the RIFC accounts.
I did not expect him to be so quick with this so I am doubly grateful to him.
Indeed, if I didn’t know better then I would think that he was trying to take his mind off a certain rugby match in Yokohama!
The usual rules apply.
I am merely the publisher of these pieces.
This guy is top-notch at what he does and looks at the numbers without any regard to a particular football club in Glasgow.
Ok, here it is:
Review of accounts of Rangers International football club “RIFC” for the year ended 30 June 2019.
Phil as per your request I have reviewed the accounts of RIFC for the year ended 30 June 2019.
On your question regarding the impending shares being issued to club1872, I expressed some concern about the timing of the issue, prior to the accounts being published. I believe the poll closed today and the accounts were released late on Friday evening. I suspect that the poll was largely completed prior to the publication of such results. The first impression of the RIFC accounts for 2019 is that the financial position has deteriorated sharply and should be of grave concern to investors.
As I have explained before, I tend to look at the back of accounts first, I look at post balance sheet events, contingent liabilities, notes to the accounts, cash flow, and auditors report before looking at the operational performance and then the balance sheet.
What stands out is the change in tone of the auditors’ report which needs to be brought upfront.
Auditors Report.
In the accounts of RIFC for last year, attention was drawn to the need for £4.6m funding for the remainder of 2018/19 season, together with a need for a further £3.0m in 2019/20. This funding was to be provided by NOAL, a company controlled by the chairman Dave King, and other investors. The board acknowledged that had these assurances not been secured then a material uncertainty would exist.
In the accounts of RIFC to June 2019, there are not the same assurances. Post-June 2019, the directors and other investors have already provided £8m further funding, however, another £10m may be required till the end of June 2020, and further £5m thereafter. This is due to be provided by Laird Investments Limited, a company controlled by the King family, however, there is no binding agreement to provide this finance. Consequently “the board acknowledge that the uncertainty over the level of additional funds that will be required and a lack of a binding facility indicate that a material uncertainty exists which may cast doubt over the group’s ability to continue as a going concern and therefore its ability to realise its assets and discharge its liabilities in the normal course of business”. Currently, RIFC has no bank credit facilities despite changing to its new bank Barclays. They have a loan from Close Bros.
When Mr King was required to make an offer for shares of 20p from the takeover panel, the independent directors in their letter to shareholders whose prime motivation for their investment is financial, whose appetite for risk is limited and for whom liquidity is vital, recommended that they should accept the offer.
RIFC share value.
At the time when the offer to the shareholders was requested at 20p, there were 81million shares in issue. As of today, prior to new shares being issued, there are now 256m shares in issue.
Assuming the value of RIFC has not changed, despite continuing operating losses and a lack of disposal of assets, the equity value implied per share would be 6p. However, to be fair in evaluating the directors’ contribution to the finances of RIFC the loans have all been converted at 20p per share.
Post Balance Sheet events.
Since 30 June 2019, the investors have provided fresh loans of £8m. In addition except for some £2m, all loans outstanding at 30 June and fresh loans have been converted to equity, in total some £17m post the year-end has been converted to equity. This clearly helps with regard to financial fair play rules in which I am not conversant. The subsidiary company Rangers football club, “Rangers”. Has also bought 4 players on a permanent basis and one on a temporary basis at a cost of £11.5m. They have sold 6 players, loaned 8 Players and this will yield £0.3m.
RIFC has also committed to capital expenditure of £2.1m.
Contingent liabilities
Sports Direct International “SDI” are included in which the courts have stated that RIFC is liable for legal costs and these are included in the 2019 numbers. The extent of damages have not been quantified by the courts and the directors consider it to be prejudicial if it were to disclose the information usually required in the accounts. The accounts show a £3.3m contribution from retail operations. Crudely, assuming that Elite and Hummel make similar profits then the damages could comfortably exceed £6m
Memorial Walls has a claim in which RIFC accepts that some compensation is necessary for abortive work carried out and this has been included in the 2019 numbers. The additional claim is not quantified or provided. There are no other claims listed but there could be further litigation potentially from some of the other retail partners in the event that the court rules heavily in favour of SDI for damages.
Cashflow from operations.
Most people look closely at the cash flow of a business to get a better sense of its performance in the year. Profits don’t necessarily equal the underlying cash position. In 2019 RIFC generated a small surplus from trading, however, there was a net outflow of £6m in player trading, and there was £3m in capital expenditure. The outflows of just over £9 million compared with outflows of £4.5m last year. This was financed by £1.5m of fresh equity from club 1872 predominantly and fresh loans of £8m from directors. Going forward RIFC will be reliant on income from future success in Europe, or player sales otherwise Laird Investments will have to provide ongoing support, but as indicated earlier, this commitment is not binding. The directors have also stated separately that they cannot continue to fund the business indefinitely. Looking solely at player trading alone, RIFC player purchases have an outstanding debt of £24.8m versus receivables for players of £0.7m I will look at the strength of the balance sheet in due course but this is not in a healthy state particularly the working capital (short term funding requirement) base of RIFC.
Operational performance.
Revenues increased by over £20m to £53.2m. Qualification to the group stages of the Europa League, which included a further 6 home matches together with prize money contributed over £14m of this total.
Operating expenses increased by over £19m to £65.4m.
In particular, the staff costs base of RIFC has jumped from £24m to £35m, first-team alone increased by almost £8m.
I have always commented that RIFC needed to make player sales in order to balance the finances and make it a self-sustaining model, rather than relying on directors loans. In the current year, they made a profit on sales of £3.1m vs £1.2m last year. This does not transform their finances.
Other operating charges increased by £9m to £22m. This included additional match day costs, but significant legal and professional charges increased by £3.6m. This is not the absolute number, just the increase.
So overall the loss for the year was £11.3m which compares with a loss of £14.3m last year.
When RIFC produced their interim audited accounts in January 2019, pre-tax profits of £5.2m were disclosed. I indicated my scepticism of these unaudited numbers, but assuming that they were accurate, this indicates a loss in the second half of £16.5m. The second half trend, if accurate, is clearly not the mark of a sustainable operation. I will discuss the balance sheet shortly, but any acquiring football club in doing sensible due diligence will be able to identify the characteristics of a “distressed seller”.
In looking at future revenues and costs of RIFC, the season ticket sales cannot grow much, the average attendances cannot grow much, and the retail operation has large challenges. Consequently, the upside to revenues of a material amount can only come from further success in Europe or player sales. The cost base has increased by at least £15m per annum and although legal and professional costs are high at present, the model needs to be radically altered if it wants to be self-sustaining. The analogy I would draw is a poker player who is “all in”.
Balance Sheet.
One of the best indicators of the liquidity of a company is the strength of its working capital. This is current assets minus current liabilities. In 2019, current assets were £23.9m current liabilities £49.2m a deficit of £25.3m. The deficiency last year was £16.5m, consequently, a sharp deterioration. RIFC has smaller long term liabilities than last year but this is entirely accounted for by the conversion of directors’ loans into equity. Cumulative losses posted in the balance sheet since RIFC was formed are now almost £47m. The overall equity base has strengthened from the conversion of directors loans, but future funding which is not binding must either come from Laird Investments, or a more self-sustaining model. Close bros as reported have provided a short term loan of £3m which is securitised against the car park, Edmiston house and a number of assets at Ibrox. My suspicion is that because RIFC has no credit facilities from a bank then the interest rates may be high. A loan of £3m for a few months in 2019, not exactly sure when it was provided, has yielded an interest cost of £208k, this might equate to an annual rate of 30%.
Conclusion.
The reported revenues for the year ended June 2019, benefitted hugely from the contribution from progress in Europe, but unfortunately the cost base has matched this increase and the problem with a higher cost base, driven largely by a bigger squad size who are on long term contracts then this cost is fixed, and very difficult to cut sharply in the short term. Player sales are an obvious solution in order to avoid external funding. At present RIFC owes £24.8m in respect of player purchases and is due to receive £0.7m. The big problem here with funding is that the accounts have been qualified on a going concern basis, and the further funding commitment is non-binding. This has a knock-on effect on the ability of a selling company to extract the highest value in the sale of players. It feels like the action of a gambler rather than that of building a long term sustainable operation.
Ok, so there it is.
Look again at Rugger Guy’s final sentence “It feels like the action of a gambler rather than that of building a long term sustainable operation.”
That is a reasonable summation of David Cunningham King’s entire business career. I am not sure if the Convict Chairman was cheering on his adopted homeland as they triumphed over the British team at the rugby.
However, he will be certainly be hoping that the newly installed Director of Fantasy at Sevco can seriously downsize the squad in January.
If that does not come to pass then the warnings in these accounts could prove to be eerily prescient.
If they keep going they way they are, they’ll have more shares than worldwide supporters very soon.
has anyone considered the fact that mr more or less would not get a work permit to play in the premiership,i haven’t seen this mentioined anywhere
Given that work permits are issued by the Home Office, and are not a devolved matter, I would assume he already has a work permit.
Where is the financial fair play in all of this?
I don’t doubt Ruggerguy, but it would be helpful if either he or you could point out where in the accounts the figure comes from. On the published report it is difficult to locate.
Oh dear someone is telling porkies (no surprise there ) over at ibrox . Slippy G puts it out there today that Madman Morelos is not for sale in January after todays game . Slippy does not call the shots over there that is left to the Glib & Shameless CHISLING chairman. Slippy said he is not confident but 100% certain Madman Morelos wont be sold . This is Slippy getting his bit in first before the CHISLER so when Madman Morelos goes in January Slippy can say he has had enough with the CHISLER and his FAKE promises and this is why he has quit ibrox .
Gordon Waddell takes the top prize for idiocy this weekend with his bold headline…… Hearts fans will thank Levein one day for the team he left behind!
Really, this journo should be removed from his position immediately before he causes his employer any more embarrassment.
That’s not possible (embarrassment, I mean).
A few random thoughts from reading the accounts:
Note 10
Profit on disposal from player registrations £3.1m ??? Profit in this sense means the difference between the book value and any transfer fee received, but I can’t remember them selling anyone for more than £3 million.
Current Assets
Trade and other Receivables £22.8m
Trade receivables includes £14,739,000 (2018: £14,496,000) in respect of season tickets that are paid by supporters using deferred payment plans or merchant services
Note 20
Of the total trade receivable balance of £19,037,000, £427,000 relates to amounts receivable from other football clubs in relation to player trading, and £9,832,000 relates to amounts due from merchant service providers. Such assets held by the merchant service provider are released to the Club over the course of the season.
Their credit provider/card merchant thinks they might go bust so is holding on to the cash and only releasing it game by game. I don’t think they were doing this last year.
Note 18
£23m of deferred income – Deferred income less than one year comprises season tickets, sponsorship, hospitality and other elements of income that have been received in advance and will be recognised as revenue in the 2019/20 financial year. We know that Tickets are £14.7 (of which the bank are holding on to £9.8m), so £8.3m sponsorship etc received and spent.
Note 14
Cash at bank £1m at the end of June. After £8.3m sponsorship and £4.9m of season tickets paid for up front or in cash. The bank may be doing them a favour by holding on to that season ticket money, otherwise it would all have been pissed away.
Note 16 – transfer fees in instalments
£10m of player registration payables due this year. only £3.7 after that. Last years figures were £7.3m and £5.3m respectively. This suggests that other clubs want cash up front. £11.5m spent after year end but we don’t know how the payments were structured. Reports suggested that Liverpool wanted a big chunk up front for Ryan Kent. Don’t know where Rugger Guy got his £24.8m outstanding from.
Other operating charges has risen from £13m to £22m, i.e by £9m. £3,5 is lawyers fees, but what is the other £5.5m? How much extra does it cost them every time they put on a match at Ibrox? Surely it’s not £0.5m a time for policing, stewards and half time oranges.
I seem to have a twin ‘Bob’.
I guess that the user names on the site are not unique / can be replicated?
Could become confusing… 😦
I see Scotland’s top selling Sunday paper has managed to omit any mention of the horrific 8 figure losses posted by their favourite club.
Its as if it never happened.
Isn’t it amazing how auditors are loath to give up their fee no matter if someone who has been cold shouldered is calling the shots at Ibrox and there is no guarantee from the board that they will meet the forecast cash shortfall in the months ahead.
The Rangers turnover is already maxed out and so far there has been no drastic action taken to reduce the monthly running costs which, taking the accounts at face value, are approximately running at £1m more than revenue. That means that the numbers for the first six months of the current financial year will be showing a loss of £6m by the end of December and thats not taking the Kent transfer into account.
As expected there is no explanation for the huge variation between the fag packet 6 monthly figures for the last financial year prepared by who knows whom, and hailed as ground breaking by King, and the audited figures released last week.
Does the forecast cash shortfall forecast include a provision for the SDI bill?
Any notion that Gerrard can hold onto Morelos at the next window is well and truly buried under the weight of the financial situation.
You’re making the assumption that someone will actually want to buy him. No one has so far.
Hi Phil, can you confirm the claim by another poster that the SFA would be on the hook for the £24.8million that Sevco currently owe to other clubs if they go bust? It would make sense since these clubs are members of other national football associations. If this is the case, I can’t see how the SFA could possibly pay this debt and perhaps another insolvency event would loom large.
Its always been at the back of my mind that if Resolution 12 finally made it to the courts and the SFA were found to be responsible then there would be no getting away from it, the SFA would owe Celtic FC a similar amount that they simply could never pay.
Could this the he real reason that Celtic are reluctant to press forward with the issue?
I’d expect the SFA and spfl to do as they did with Charles Green and insist that football debts are repaid in exchange for the league license and histories of 2 former clubs..
Although…. 25 million £ might be a tad too much for any incoming ‘holding company’ to risk or want to pay.
Took a look at the accounts and the report from rigger guy is very concise and spot on. Chapeau!
The one item that has jumped out to me is the amount owed on outstand player transactions of £24.8M. That figure alone ought to be setting off alarm bells and mandating emergency meetings at SFA. However, when coupled with the going concern warning (or was it prediction) the SFA have to be bricking it.
As you know, I have been banging on about this risk to SFA for a while. The reason is that if Sevco were to go into an Insolvency, then these football related debts have to be covered by the SFA. They don’t have the money themselves to cover those kinds of payments and so would then have their own problems.
Phil; any way you could ask SFA a few relevant questions related to this? This is a very serious matter that needs to be brought to public attention.
They would blank him. If he did get a reply they’d come out with some shite about being unable to discuss the business of member clubs.
Where does it mention that 24.8 million is owed for player purchases?
Cant see that anywhere in the report
Final paragraph, 7th line up.
Thanks, I meant in the actual annual report. I cant see it mentioned anywhere and wondered where rugger guy was getting this from
Yet still they walk among us.
Kingco are reaching their endgame.Fail to win the league this season and the fallout will be of Chernobyl proportions.This has always been their aim if they had any aim at all.Their “wiggle room” is shrinking with every loss.Note forecasts in accounts are “critically” dependent on a number of events specifically player sales-desperate.As usual SMSM are oblivious to this and I’m sure will have the usual recriminations when it all goes tits up.Shambles.
My sides are splitting at the current focus on FF. The models being predicted are from the naive and downright mental. I’ll share a few.
DK has put up £5 million (We need £10 million) so we’ll be fine.
Win the league and get into knock out stages of EL and sell Grufallo at the same time.
Have a line of hungry young players ready to sell year on year.
Fuck MA.
Kent is worth £20+ million (remember he played out his skin to impress JK and Liverpool) done nothing since he came back.
Can someone explain all this to me?
Fans with their head in the sand need to take notice, we’ll be ok.
Met a lawyer while in my local shop who hates us but told me we’re fucked, everyone in the shop laughed.
The list goes on….
No wonder the BENNY’S are getting fleeced (Especially them at club 1872) when Chris Jack from the Evening Rangers fanzine writing about the latest accounts and actually bragging and boasting about an £11 million pounds loss as it’s down 3 million from last year . I blame the editor of the Evening Rangers fanzine as he obviously gave the OK for Chris to write this . Unless it’s a freelance writing it again under Chris Jack name that’s what usually gets put out there when the article goes down badly and people look stupid . Mind you that would not be difficult to do as it is Chris Jack we are talking about here . Watch for a nice wee squirrel story tomorrow if they get gubbed by Hearts today.
Very interesting figures and a fascinating analysis. The part that stands out for me, apart from the £11.3m loss, is that £24.8m is still outstanding on player purchases. Talk about kicking the can down the road! And there’s still the yet unquantifiable bill due to Michael Ashley.
PS
I bought a set of darts from Sports Direct yesterday and I asked the sales assistant to pass on my best regards to Big Mike!
Yes the 25m outstanding on players is an astonishing figure – even assuming it is payable over 3 years
I was interested to see that there creditors debt has gone up from 4.8m last year to almost 10m this year. Looks like a lot of face painters won’t be getting paid
Lol what a disaster of a club the sevco lot are. But it’s the BENNY’S that keep turning up week in week out and encouraging the CHISLER to carry on regardless of the financial state of the club instead of questioning their conman of a chairman they only encourage him . Even on their forums it’s so Hunbelievable how daft they are as one of them has posted that they have over £100 million in player transfers with Barasic Helander Kamara (£50,000) Jack Aribo Morelos and Kent (On catalogue payments) but looking to punt him regardless of who he belongs to (Stuff Liverpool they can get in line for the rest of their cash as administration kicks in ) The thing is they all believe this as the CHISLER is their last and only hope so he can and he will bleed them dry . But once again it will always be someone else to blame when the BENNY’S come back down to earth . They are already blaming the press today if Hearts beat them by saying they are upsetting Morelos by linking him in January with a transfer move to EPL teams such as Liverpool Man Utd and Spurs . They can blame their pal Fatman Traynor for that with his lap dogs RALSTON & JACK getting it out there that sevco want £20 million + for him .
Fair assessment.
And I thought RIFC was “all in” last year…and yet somehow it managed to continue limping along!
Will be interesting to see if Campbell Dallas puts itself up for reappointment as the RIFC Auditor at the upcoming AGM?
I’m guessing that the final Audit discussions with RIFC were somewhat ‘robust’ – and Dave does still suffer from that awful, cold shoulder… 🙂
Very interesting reading , however , in the grand scheme of things what difference do these figures really make ? Let’s say the rangers go bust again admin 2 etc , they will quite simply do exactly as they did before ie , start at the bottom tier , retain their history via their friends in the SFA , and the overall losers will be the fans , not only the rangers fans , but Celtic fans also , do you really think pistol Pete will pay out big wages to top class players in order to beat Hibs, Aberdeen , Ross county etc , of course not ! So we will suffer as well , pistol Pete knows this hence the res 12 fiasco , the big two are in it together don’t be fooled
Celtic will have done 10 in a row however … possibly on the way to 17 or 18 before any NewHuns club is back ‘competing again.
They will long since have been broken. If not entirely financially … in spirit certainly. Celtic will have broken every record they like to pretend they hold. Some (possibly all) will never be surpassed by another club.
This season is the tipping point. If Celtic win 9 then the next will follow.
Whatever form of Rainjurzz is around (if any) to witness it… then it will be the end of them.
Pat, THIS is the season that we can RE-CLAIM THE NINE. Hail Hail
Remember though, SPL/SFA changed the rules after 2012 so “an insolvency event” won’t now require them to start at the bottom, they will just reboot still in the SPL albeit with a points deduction. So, assume we get to last few weeks of the season and we have the league in the bag, woops, insolvency, take the points hit and start the next season still in the top division and debt free and no points deduction as that applies to the previous season.
They can stay in the same league after an administration. Were Sevco to be liquidated that is an entirely different matter. Any offspring club would be a new club and would therefore have to apply for membership of the SPFL. Logically back to square one. AWRIGHT, AWRIGHT!!! Logic and scottish football authorities don’t exactly sit easily together.
PLEASE LET IT BE SO…🤞🏼
Thanks Phil and Rugger Guy,pleasant afternoon dinner read,appreciated🍀
Though I’m finding it difficult to believe that DCK would gamble with something so close to his heart and I’m not meaning his cheque book or wallet here!!.Ah well,it’s getting nearer to Panto season and this all seems very apt.Surprised??…me?? Nah;not likely,I’m kept up-to speed by Our Man In Dún na nGall.
He’s been on the money thus far,who else could we rely on to bring Us All glad tidings of ‘that lot’s’ imminent demise🤞🏼
Cheers Phil🍺
I was waiting with baited breath to read the analysis your man came up with and it hasn’t disappointed.
I’m wondering if anyone on here has read the BBC bit on Rankers last 5 semis?
Won 0
Lost 5
Scored 0
Conceded 10
Wee bit of providence maybe for their game against the Jambos
I’m let’s be honest though, no matter if the evidence shows what a financial mess they’re in, the SFA will do nothing about this. They don’t want another embarrassment of “Rangers” being liquidated etc.
Surely there’s more that can be done to stop Dodgy Dave and RIFC taking the piss again!? Taking every other team in the league for absolute mugs.
Liquidation 2 has supposedly been coming for years and probably should have already, but the corrupt within our game is making sure that doesn’t happen.
So realistically, even with the audit figures, do you honestly think The rainjurs will suffer a fate similar to that of 2012?
Perhaps Sevco can seek financial advice from their shirt sponsors, or failing that, find some words of comfort from Ray Winston. Teehee!!
So basically the gist of this is The 2angers International have been operating at a loss from the get-go,been living beyond their mean without a line of a credit from a Bank,been watering down their shares in order to reduce the mounting debts and gambling all on this Season in order to get their paws on Champions League revenue in order to press reset and do it all again?
Meanwhile the SFA does exactly what it says on the tin ie Sweet FA and the cheeky chap pies continue to make a complete mockery of the disaster in 2012 which apparently put Scoddish Football on the brink of “ Armageddon”.
Not only that the Accounts were signed off on the strength of a serial Glib and Shameless liar providing a financial safety net in order for this joke of Clumpany to see out the Season and beyond?
That’s it I’m defo buying Shares In Hartleys and Walls pronto.
🤡🤹🏻♂️ 🎪
I’ve had a look myself and the printed facts are grim… 31st October would have been a more appropriate release day.
I knew their interim claims of 5.5 mill £ profit would come back to haunt them… as pointed out, if to be believed, then only highlights a 16.5 mill £ loss for the second half. A greater loss (2 mill more) than their entire season last year. Sevco do love to break records.
Revenue up by 19 million – mainly from Europa gate and prize income but interestingly over 3 million from merchandise. Amazing what dog bowls and size XXXXXL orange shirts at a pop-up-shop can bring in. I think it’s safe to say Mr Ashley will take note if that figure.
The increase in revenue is entirely counterbalanced by their 20 million increase in player costs. The 25 million £ still owing for player purchases is staggering but I’m sure they’ll pay up.
Near 2/3 of all revenue spent on the players budget just about says it all.