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Rangers International Football Club PLC - Annual Report 2023 - Andy McGowan’s headline analysis:

Football finance was once a topic ignored by fans and maybe football was more enjoyable for it back then. But as we all know, money makes the world go round, and it most definitely makes the football world go round.

When I started commenting on the Rangers accounts on “Heart & Hand” a few years back, the state of our football club meant that the finances were a much needed and awaited weathervane for our club’s progress, prospects, ambitions, and even our ability to survive. The average football fan maynot necessarily be able to instantly digest a set of accounts and compute what the implications are,but after 2012, the landscape changed for Rangers fans and we all needed to know where our club was in a way that allowed comfort that we were at least heading in the right direction off the field, even if we stuttered on it...

My interpretations of the accounts through the years have been generally positive, and despite onfield failure at times pulling at the threads of that positivity, I’ve tried to paint the picture of financial recovery being built upon year on year. I have always hinted at us eventually reaching that most banal of utopias: financial normality.

So speaking of financial normality, on to this year’s accounts!

I think it is a very fair thing to say that the vast majority of our fairly unique dramas are nowvanquished, and yes, normality is here.

Here we go:

·         Total revenue (money coming in) was down slightly from £86.8m to £83.7m

Why? – put simply we played 4 less European home games and missed out on that revenue

You may ask how can we make less money when we were in the Champions League this year?! Well again it is simply because our previous year’s Europa Final run was exceptional and created income comparable to Champions League participation from the Europa League prize money and gate receipts.

·         Operating expenses (money we spent) was up a fair chunk from £85.5m to £95.2m, I’m guessing most likely half of that is attributable to Champions League bonuses.

·         We took in another £900k of “other” income, took in £23.6m on players sales for the period (Bassey and Aribo), and amortised £12.8m of player purchases for the period.

·         This all resulted in a modest but very welcome operating profit £252k aka “NORMALITY”!!! This is the second consecutive year of operating profit

·         We then had £1.3m of non-recurring one off costs (legal costs and resolution of contractual settlements), £2.02m of finance costs, and just over £1m of tax, leaving a £4.1m consolidated loss.

The loss is attributable to squad and infrastructure investment, player amortisation and depreciation of £15.0m. So no real worries in that, the repeat of an operating profit is very positive.

Other things that matter to us:

·         The business report confirms, “squad investment of £17.5m in the year under review, added tothe £7.5m in the previous year and was supplemented further by £21.0m of spend since the year end, in the summer transfer window. Further to that, £18.9m has been invested in the Stadium, Training Ground and New Edmiston House over the past two year period.”

So that’s circa £46m on the squad, and almost £19m in bricks and mortar in recent years. This does not suggest a club standing still, quite the opposite.

·         Edmiston House – too early for this facility or the museum to have any impact on these accounts, I stand by my estimate that we will be targeting £1m profit each year from this once the event rhythm is in place.

·         Our season ticket sales are rock solid at 45,172, despite an increase on average ST price of 13% since 2019 (to be expected I suppose). Also our average attendance is back to pre-covid levels at 49,116 after a 4k drop last year. We are indeed the people.

·         Castore - Retail income of £7.2 million is included and relates to this season’s merchandising arrangements, this is up on the previous year’s £5.5m. Rangers receive a guaranteed partnership payment each year plus a share of royalties depending on sales

– I’d guess our phenomenal sales numbers have ratcheted it up to the £7.2m number. MORE NORMALITY! This is always compared to Celtic who book their merchandise on a gross basis which can inflate their overall turnover. All that matters is profit, and I’d be very interested to compare ours with theirs as we will be equal or surpassing their levels I feel. The Castore deal is now proving its worth and our supports’ buying power is apparent on the books once again – this track record can help future commercial negotiations.

·         Commercial – the commercial department was responsible for bringing in £28m for the 2nd consecutive year from their combined activities, including retail, sponsorships, partnerships, hospitality. This is a high performing department and the challenge is on newly appointed Chief Commercial Officer Karim Virani to maintain or exceed.

·         We continue to benefit from having a group of investors willing to put their money in. Their support cannot be understated in how vital they are to what we are trying to achieve. Note 27 of the accounts is explicit in this regard. There are/were director loans from:

John Bennett had £7.14m secured against Ed House and £5m unsecured at 4% interest – which is an incredibly low rate in the market – in fact if you’re reading John I’ll take a loan at that rate if there’s any left, ta.

Douglas Park had £2m loan repaid but continues his support by pumping in £500k per year from his Parks of Hamilton sponsorship, with another £4.5m to come over the agreement.

Alastair Johnston converted a £0.07m loan to shares Perron Investments LLC had £1m loan converted to shares

Julian Wolhardt loaned £1.28m secured against Ed House and repayable at the same market beating low interest rate of 4%

Interest free loans totalling £1.5m came from George Letham, George Taylor, Janet McAlpine and Stuart Gray. Interest free – not to be taken for granted and kudos to these Rangers men and women.

·         As at 30 June 2023, there are loans with investors amounting to £13.4 million, other loans of £3.1 million, whilst the Group also has lease agreements totaling £1.8 million. So circa £16.5m of loans, 80% of which is to our investors. This is a very envious “friendly” borrowing position to be in as a football club, and huge credit to our investors is due as always.

·         The Group held £5.3 million within cash and bank balances. This is simply a snapshot and fluctuates monthly.

·         Our first team wage bill sits at 51% of turnover which makes it circa £42m (our highest ever?) though it’s unclear if Champions League bonuses are included (I’d say they are). This is a very sensible and manageable ratio and leaves headroom should our turnover decrease (eg disastrous euro campaign)

·         With regard UEFA Financial Sustainability rules (Financial Fair Play to you and me) I have previously flagged this as a consideration not to be ignored in terms of how they might impinge our running of the club. From these accounts and my overall observations, we look like we are in a good position. Should/could we increase our first team wage bill and ratio to turnover? Not in my opinion.

£42m pa is a good balance for first team resources and doesn’t overload our commitments, keeping us agile with regards UEFA Sustainability rules. I expect however that rather than pushing this to the wire our board will be prudent on this and look to ensure that we are never in peril should the worst happen and we miss group stage European football for a season or two – for example it’s clear that the wage and Champions League bonus structure is designed to ensure agility and to avoid loading unsustainable demands on our resources - overcautious? Maybe, but if the board focus on healthy cashflow and operating profitability then the sustainability will take care of itself.

·         A theme of constant investment is something I have tried to highlight each year, often overlooked as it doesn’t show on the park but vital to our progress and sustainability as a club – in my humble opinion we must avoid short termism to reach our potential

So what have we had in this regard lately and in near future? Edmiston House and the fanzone/museum and non-matchday options, but also Blue Sky Lounge, the Gordon Ramsay Hospitality suite, the incoming G51 sports bar, and the long overdue disabled facilities which the club hope to achieve whilst also delivering actual increase in overall capacity. And lastly, there will be a Walter Smith statue in the spring, one which I’m sure will be revered and cherished as the man himself was.

·         The 4 pillars

The board and now chairman John Bennett in particular have spoken of the “4 pillars” namely Ticket Income, Commercial Income, European Football Income, and Player Trading Income

It is telling that chairman John Bennett comments: “While the first of these components will never be taken for granted, it is the fourth that requires attention.” This obviously speaks to the imminent new appointment of a Director of Football and no doubt recruitment will be the priority assigned to that person. Further he states: “Player trading will always be inherently volatile, yet Rangers must replace sporadic ‘wins’ with systematic success. It is a given that it all begins with player recruitment.

This is an area of priority for your Board, and we anticipate that the coming months will see a strengthening in the leadership and processes of our football department, specifically with this in mind.”

One thing I will say on the player trading and supporter expectations: do not expect every year there to be a revolving door of players out / in resulting in perfectly balanced player trading sums. This particular pillar should be judged over a cycle of 3 to 5 years, something I cannot emphasise enough, not only for the sanity of the support but to afford the club the breathing space to achieve their goals in this area.

·         On John Bennett, within his chairman’s report there are some very interesting comments worthy of note. He opens by thanking the departed chairman Douglas Park and of the need to "raise the bar" and most tellingly "Having spent recent months getting closer to the daily operations of the club, it is clear to me that there is widespread scope for improvement"

With the appointments of a new Chief Commercial Officer Karim Virani, new Chief Financial Officer James Taylor and Director of Football Ops Creag Robertson since - 3 key positions – it all points to a recognition that the previous set up was insufficient and more bodies and more talent was needed to spread the responsibility of raising the bar as required.

I can’t resist but to close on Bennett’s remarks that have more than a hint of his background as a fund manager and beating the stockmarket, and point towards how we should expect the club to be run under Bennett & Bisgrove:

“Football is a business which is particularly prone to being reactive. While this may be inherent to the industry, sustainable success can only come when we are systematic in our processes and in our actions. It is my firm conviction that this is a pre-cursor to returning the club to the status of serial winners.”

I like this because it really speaks of a central theme I’ve tried to preach throughout the entire time of my Rangers accounts analysis – don’t panic, and almost always - ignore the noise. “Sustainable Success” sums up what we should all be aiming for and expecting from now on.

Summary

These are very robust results, and for the second year in succession. As always there will be challenges ahead and next year it will be a challenge to match the current turnover given there is no Champions League participation and a repeat run to the Europa League final is unlikely. However we appear to be in a very good position to navigate any choppy waters we may face, and it seems we have serious and driven people in place with our investors pulling in the same direction. As a support we just need to keep doing what we do, and always have done. The off field aspect of the club is in the best health since 2012, hopefully our beloved team on the park follow suit soon.