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Rangers' accounts: is it 'help ma boab' time?

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hislopsoffsideagain

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So yeah, this tweet about Rangers' finances got some serious traffic and clogged up my mentions for a couple of days.

Rangers' losses by season:
2012/13 -£14m
2013/14 - £8.1m
2014/15 - £7.5m
2015/16 - £3.3m
2016/17 - £6.7m
2017/18 - £14.3m
2018/19 - £11.3m

Total for last five years - £65.2m
— Narey's Toepoker (@Nareystoepoker) November 1, 2019

Is it worth noting that not one of however many hundred people who saw that tweet noticed the mistake? Apparently I'm not the only one who can't count to seven...

The numbers there though. Ooft.

You don't have to be an accountant - and I'm not - to know that companies don't publish accounts late on a Friday evening if they want attention drawn to them. Though last year Rangers published their accounts on a Wednesday evening during a Rangers match, so I suppose this is a step up from that.

It seems like the distraction has largely worked. Dave King appeared to be channelling the Iraqi Information Minister when he claimed "the financial year under review was again a positive one" but this line appears to have been swallowed by the Scottish media like a piece of, say, succulent lamb? The only piece of criticism I've seen was on Forbes.com. I don't think too many Scottish football fans check that out. (Of course, if you were cruel you could say the same about this site!)

Anyroad, my mentions were filled with fans of other clubs claiming imminent liquidation, criticising the SFA for letting this happen, and suggesting that  UEFA's Financial Fair Play rules were being broken. There was also one apparently genuine Rangers fan who seemed to think Dave King is the Messiah.

People of a certain vintage might remember an Only An Excuse sketch from when Livingston went into administration all those years ago, where a reporter was asked to explain the circumstances in layman's terms and described it as a "help ma boab situation".

So is it Help Ma Boab time down Govan way? Let's see.


Turnover is up
This is the big positive. Not only did income increase, but it shot up dramatically by 63% to £53.2m. The main reason for this is the club's run to the Europa League group stages; income from European competition totalled £14.1m.


So is the wage bill, but that's probably okay
First team wages have more than doubled in two years, up to £23m. Overall staff costs are £34.4m which is still well behind Celtic (£56.6m) but is four times that of Aberdeen. That sounds like a huge figure but the wages-to-turnover ratio is 64.6% which is pretty acceptable.


Those legal fees
I initally misread this figure as £3.6m and thought "how on earth do you spend £3.6m on lawyers?" By picking a fight with Mike Ashley, that's how.  But in fact its a £3.6m increase in legal fees, so the amount is actually higher than that. Crumbs. The bloke at Forbes says the full figure is £9m but that sounds insane and I couldn't find that in the accounts. The saga of Rangers' kit deal with Hummel ain't over yet and seems likely to cost the club a decent seven-figure sum when it is finally concluded.


What debts are there?
"As at 30 June 2019, there are interest-free, unsecured loans with investors amounting to £10.3 million, other commercial loans of £3.0m, whilst the Group also has finance lease agreements totalling £1.2 million".

This is hard for an amateur like me to decipher. What we do know is that Rangers have got by for years on soft loans from directors which have then been converted to equity further down the line. From what I can tell - and I may be talking out of my arse - it seems like all the soft loans from directors have been converted to equity since June 2019 via a share issue. The flipside is that they also state that there have been another £9.7m of investor loans in the last few months.

This shares to equity thing has been ongoing throughout the King era. How long can they keep repeating it?

Meanwhile we know a loan was taken out with financial house Close Brothers in February 2019; this is likely to be the aforementioned 'commerical loan'. The £200,000 of interest payments up till June are presumably related to that loan, which would suggest a pretty high interest rate. This is the problem with not being able to get a loan from a bank.


A ten million quid hole
If the Turnover part is the big positive for Rangers fans, then this is the overwhelming negative.

"At the time of preparation, the forecast identified that the Group would require £10.0m by way of debt or equity funding by the end of season 2019/2020 in order to meet its liabilities as they fall due. The first tranche of funding is required from investors in November 2019".

Ten million quid.

For what its worth, in the last few seasons the accounts have also stated extra funding would be required - I believe it was £4.6m in last year's, and £3m the year before.

Ten million quid.

And that will be despite the expected income from Rangers' 2019/20 campaign, which includes another qualification for the Europa League and another £14m+ from that.

One of King's family trusts, Laird Investments, is apparently going to cover the shortfall. Given that during the Takeover Panel saga King described himself as "penniless" because of a lack of control over family trusts, this is worth a raised eyebrow. That said, another one of his family trusts, NOAL, has converted £8.4m of loans into equity in the recent past so perhaps he is putting his money where his mouth is?


Financial Fair Play
Are Rangers breaking UEFA's FFP rules? The honest answer is "buggered if I know". The received wisdom is that losses of more than 30million Euros over three years are grounds for sanction, and they would be over that limit. However the FFP regulations are a nightmare to understand, which makes me suspect there are loopholes relating to the amount of money spent on infrastructure etc. With European football so critical to the business plan I find it impossible to believe that the club haven't thought of this.


Looking ahead
It feels like Rangers took a huge - even reckless - gamble on progress in Europe last season and this. Lord knows where failure would have left them. But lo and behold Stevie G managed to navigate about a million qualifying rounds and got Rangers access to the Europa League pot of gold.

The thing is that they've had to take the same gamble again this year. And again they've reached the Europa League. Yet despite that they're still £10m short. Presumably that's because of the £11.5m spent on the likes of Ryan Kent and Filip Helander.

Moreover, the turnover figure for 2019/20 is unlikely to be particularly higher than 2018/19 - why would it be? And yet with transfer fees and probably another hike in the wage bill, losses will be higher, unless they sell off prize assets like Alfredo Morelos. And that's before the whole Mike Ashley/Hummel stuff.

So the fear is that the board are taking an even bigger and potentially dangerous punt - on Gerrard delivering the title and access to the untold riches of the Champions League. Pulling that off would solve any financial issues at a single stroke.

And if they fail? There are plenty out there who would love to see an administration event, But whilst the Big Hoose of cards looks pretty fragile it has done so for several years without actually collapsing. Rangers still look like a financial basket case. But people keep putting money into the basket.


And one other thing...

Rangers had a £1.6 million impairment charge for player transfers in 2018/19, which is another way of saying the club signed someone who was pish.
— PriceOfFootball (@KieranMaguire) November 1, 2019

Eros Grezda, I assume?



Lawrie Spence has whinged about Scottish football on Narey's Toepoker since September 2007. He has a life outside this blog. Honestly.

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