This morning I asked Rugger Guy to give me a quick breakdown of the likely cash flow situation at the basket of assets.
I wanted to get my head around what the Sevco High Command had to find for the eight-year-old club to survive during this imposed lockdown.
This was partly due to the news that Hearts had swiftly moved to cut their staff costs as they faced up to several months without matchday revenues.
I was expecting that he would get round to this in a few days at best.
Top fella that he is I just received the following.
It took him an hour!
Of course, the usual caveats are in place.
This is his expert analysis and I am merely the publisher.
Here it is:
Phil you have asked me to look at the costs of Rangers International football club “RIFC” on a monthly basis to ascertain the level of outflows at present.
This reminds me of the classic phrase, “Revenue is vanity, profit sanity, cash is reality”.
The immediate outlook for RIFC from a cash flow perspective is dire.
I have looked at the 2019 accounts and looked at particular at operating costs, I have also looked at the notes to the accounts and post balance sheet events to highlight items which will have an impact on cash flow, positive and negative.
Looking at the operating costs for 2019, the costs were £65.4m.
However, what is relevant here is cash flow items, not expenditure items of a noncash flow nature.
Staff costs were £34.5m and other operating charges were £22.1m, depreciation and amortisation charges are of a noncash nature so should be disregarded.
RIFC invested heavily in the football department and more realistic annual staff costs will be in excess of £40m.
Other operating charges include match day costs, policing stewarding, pitch costs and legal costs.
It could be argued that the only material costs that need to be paid at present are pitch, training and legal costs.
Taking a prudent estimate of non-match day costs excluding legal costs this may be as low as say £5m.
Aggregating these items gives an annual cost of say £45m so a monthly cost of £3.75m.
In addition, looking at the notes to the accounts, there was a commercial loan of £3m due, I trust this was close bros.
Also, there were £9.6m player registration costs payable before 30 June 2020, which was added to by a further net acquisition of players for £11.2m. Working capital will also suffer but it is difficult to quantify this effect as there is not an up to date balance sheet available.
I cannot quantify the legal costs or legal damage costs, but these could be very substantial and not capable of being deferred.
On revenues it is very difficult to estimate when match day income will resume, the only revenues capable of being received are SFA contributions and UEFA receipts for progress in the Europa League. I am not sure about insurance protection on the loss of matchday revenues and if this is available to RIFC.
So, in summary, what we can be clear about is that at least £3.75m per month is needed to continue in business. In addition, significant liabilities need to be paid shortly, the repayment of close bros loan, transfer liabilities, with the prospect of a very large damages cost. In aggregate, these additional known liabilities exceed £20m. This excludes legal costs and damages. The revenue outlook is not good as there is virtually no visibility here.
I take you back to the accounts which were qualified ongoing concern basis. £10m was needed to complete the season as articulated 4 months ago. Laird investments were suggested as providing a £5m facility but these were non-binding facilities. The final amounts due were dependant on future football performances, European football participation and player trading amongst other factors. The immediate outlook is dire.
That last sentence.
“The immediate outlook is dire.”
Dear reader, that is very unlike him.
He is rarely that unequivocal.
I would treat his analysis seriously.
“Dire…”
Oh dear.
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With next season seemingly a million miles off no one will be bursting a gut to renew Season Tickets till the virus situation is clear and what will next season’s product be. Eg. 14 teams, new format altogether?
Even Celtic fans will be in no hurry to renew, 1st May seems a long way off.
Celtic will be the only Scottish club that has the cash reserves to see out the corona impact.
Rangers, with their huge monthly spend, merchandising issues, court cases, etc, will be impacted very quickly if the ST uptake is slow and doesn’t sell out.
Like Celtic they will already have a flavour of the outcome and in addition to the monthly spend, merchandising issues, court cases etc ,the much hailed £20m ‘investment’ won’t be a nice to have but an absolute necessity.
Once again the MSSM flag up the investment tag whilst ignoring the fact that since 2012 the new club/company has never returned a profit and this year’s results are likely to be worse than the previous year.
Nothing positive will happen to increase the revenue number and turn the numbers black therefore for investment read donation.
Whoever is doing the numbers at Ibrox must be tearing their hair out but hey ho, not to worry, that fine DUP chappy will slip seamlessly onto Traynor’s throne and all will turn out for the best, No Surrender and WATP will be the clarion call.
Have the 800 Celtic fans who had tickets for the cancelled sevco game got their money back?
As much as I wish to see Sevco rewarded for their reckless business practice by going bust, I dont want this to be due to the virus.
Isn’t it the case that they get most of their gate receipts from season ticket sales ? And that this cash flow will be unaffected by the shut down ?
3/5 of their revenue in the year 2018/9 came from ‘Gate receipts and hospitality’. As with many other clubs right now the questions are, will the season be completed and will any refunds be given to fans who paid upfront? Are tickets for the new season even being sold whilst the country is at a stand still?
Thanks, Alastair. But I doubt that their fans will ask for their money back. Would we ?
I can’t answer but the the lack of income is far more important in terms of the club’s cash-flow. Rangers’ accounts already have a meterial uncertainty over ‘going concern’ which indicates that the buisness would be vulnerable in the event of any shocks or downturns.
Would an admin event and 15 point deduction settle the Null and void situation
They don’t do shame. They are, however, doyens at shameless.
If I was Lawell it might be prudent to assume that season 20/21 may not happen or start in the new year. That is not alarmist, there may be multiple waves of this thing. Any intention Gibson had of investing is probably going down with the stock market. That is what Jackson forgot, his interest may have been registered some months back. He may as well get 20m and burn it, a fact of which he is aware. But there is no burn money left. I do not see how any club other than Celtic are going to survive this, without a period of administration. Rangers owe clubs transfer fees. They are going to want them sharpish
Yes, the numbers were looking decidedly bleak well before the Corona virus impacted the UK.
All the signs are there to have an XL bucket of popcorn on standby for one particular club’s imminent demise.
But…
Gut feeling is that – somehow, again – TRFC will stumble along.
Maybe the Directors will dig deep again: at least this SNAFU is not King generated.
Hi Phil, a forensic explanation of finances at the dung hill. I wouldn’t contest Rugger Guys report, but I would suggest some caution. Rugger guy has not taken into account the Lernaen Hydra factor. This practice has been ever present over the last year or so. Detect and destroy one head of the Serpent and up sprouts another. So I await the next dodge from Glibby or Slippy. Hey Presto!
When’s the day the teddy bears have their pig nicked?
Phil nothing to worry about here . There is a guy willing to shovel £20 million into the club for nothing other than he is fan meanwhile the CHISLING chairman still floating about in charge while a mug fan ploughs megamillions into King’s club. . You would think with Jackass Jackson getting his fingers burnt before he would be a bit more wiser this time and handle this story with asbestos gloves . But nope the so called award winning journalist saw another opporchancity sorry opportunity to grab a headline for the Klan . Hearts dire consequences today is nickel & dime stuff compared to sevco . I think ADMINISTRATION is about to make a special guest star appearance at ibrox.
Your accountant has missed a very important point. Due to courts being closed the amount they are due MA and the litigation with Hummel, will not be announced for some time, giving them that breathing space.The close Bros loans are another matter along with player fees.
James…your point about the courts is well made…its the first thing I thought of.
And as I’ve said many times before …and will no doubt say again…
If they fell out of a window…they’d float up onto the roof.
I know they’re in deep trouble anyway…but if the court’s decision was imminent and handed down….then they’d be gone for sure.
As it is…I’ll believe it when I see it.
So, sevco are bringing Mr Gibson as a potential investor/chairman, and Mr Graham as their new PR guru. Would it be too far-fetched to expect a certain Mr Knopfler as their financial guy? After all, if you’re gonna be in dire straits, you might as well get their lead guitarist!!
Your patter is pish pal
And Douglas won’t be selling too many cars or renting out buses
It is vitally important to remember that OTHER car selling and bus rental companies are available….:0)
The media have ripped into Hearts when they have acted swiftly to make sure the damage to every employee is kept to a minimum. Yet not a single word is said against Sevco. If they honestly think this guy is going to ” donate” £20 mill by the end of the month they are living in a dream, I await the cover up when Sevco announce they too are cutting wages.
It would also be nice if the GFA ( Glasgow football ass. ) would say whether admin would result in the usual points deduction or if they will change the rules again to suit the new club.
More likely, with a sense of deja vu, they will trot out the same club/going for 55 nonsense – why change the habit of a lifetime or, in their case, two lifetimes?
There’s zero money going in.
Wages due in 12 days or on Friday 28th March, 9 days.
Debt due, litigation due, £3.75m per month due with no income, no income insurance, …
Twisting millionaires arms in the tabloids to force them into giving £20m…. shameful desperation.