05 March 2013

RFC interims – Steady as she goes

by Peter Ewart | CRO Contributor

So the Rangers interims are in – accounts for the seven months to 31 December 2012 – and at first glance the headline figures looked mixed: A £7m loss in seven months and £21m in the bank.

Here is a swift canter through the headlines, some detail and some of the implications.

The operating loss at £7m is not insignificant. This is the result for the day-to-day running of the football club – what games bring in in tickets, TV, merchandise and add-ons, less what it costs in wages, operating costs to run the club. This is the area that needs to be returned first to breakeven then to profit.

The size of the loss isn’t a surprise. In the IPO prospectus an operating loss of £3.8m was shown for the three months to 31 August 2012, a period with only a few home games and therefore lower costs. Over the following four months there was a loss of £3.2m, with increased revenues and costs as more games were played. We are after all a third division side playing in a 5-star UEFA stadium so costs are slightly off-kilter.

What was a pretty perilous situation in the summer is improving gradually. In Brian Stockbridge’s report he states roughly £7m in costs have been removed to similar previous periods. And costs and contracts have been or are being reviewed. Look at contract extension talks with the likes of Neil Alexander as a sign that we can’t keep players on at any cost.

It looks at the minute that we have about £750k a month to find to get to an even keel. To do that it will be necessary to either bring in more money, or decrease costs or both. Further cost cutting will help, but really we need to boost the revenue earning potential. And that is exactly what the club have been doing over the last few months: “Monetising” – Charles Green and other’s corporate speak for squeezing money out of as much as we can at the club. Given the current financial position this is necessary and will get us back to the top more quickly and no fan should oppose that.

Stadium naming rights – Going ahead now anyway and why the hell not? Money for nothing, and it will always be Ibrox to fans. (We at the CRO would prefer to go the whole hog, as it were, and just call it ‘the Mike Ashley’) I hope Sports Direct have paid royally for it. Just view it as a necessary evil in the short term and chuckle when the tims and their friends in the media deny the name of our ground.

You can expect that season ticket prices to go up, another badly kept secret on the back of business plans and talks to potential institutional investors. It will be a fine balance to strike but as long as it isn’t an eye watering increase it is likely to pass without too much grumbling. I’d like the club to throw in some sort of RTV option with a discount as an incentive too.

Merchandising – the club now has a joint venture with Sports Direct to take forward the replicas shirts, training gear, etc etc. Edmiston House ground floor is expected to be converted into a larger megastore and there will be dedicated Rangers areas in Sports Direct shops.

Sponsorship - Puma are now on board as the kit maker on a five year deal, and Blackthorn as the new shirt sponsor for a year. A long term deal with Puma is especially satisfying, while Blackthorn is our response to the Magners “new sponsor” deal signed on the east side a few months back. It’s still the C & C Group, whatever the names on the front of the shirts are.

Rangers TV – only the first couple of RTV broadcast matches will have made it into these results, the first game at East Stirlingshire (warts and all) and the second game at Elgin in December. The RTV team have no doubt learnt a lot from those experiences and with a now slick production the revenue generation opportunities are high. Further matches have already been broadcast on RTV in 2013, while other TV rights remain to be sorted out with SKY/BT and the SPL. That should be fun.

Little of the impact of these deals have made it into the results to 31 December 2012. They will all contribute greatly in the coming months and years.

Other bits – the £2.8m football debts that the SFA/SPL transferred to the NewCo as part of the five way agreement in the summer is in excess of the loss of £7m as they are a “one-off.”

Movements around goodwill eventually result in a reported profit before tax of £9.5m but that is an accounting move and not a cash item, and so can effectively be ignored as a one off.

We have £21m in the bank. There. In black and white. Reported to the London Stock Exchange. No arguments.

The property assets Ibrox, Auchenhowie have been re-valued to £44m and the overall net assets on the Balance Sheet are now £65m.

So what does it all mean. Pretty difficult to tell until we get a full couple of years of the new company under our belt. The message is clear though, keep backing the club the way you have been – good work has been done and more is to be achieved. We’re in safe financial hands.