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Rangers 2014 Accounts Analysed

Everything that comes out of Ibrox seems to come with a health warning. Rangers recently released their annual accounts and it is fair to say that they did not come under as much scrutiny as the previous year’s accounts. Not because they are good, but possibly because everyone had been hardened over what to expect. This article is an attempt to look at the accounts in a simplified manner and put them into more basic terms to ease the understanding.

Although people anticipate that the annual accounts reveal everything, that is not the case. The accounts disclose only what is required by the Companies Act and financial regulations. If I make any assumptions in trying to explain items that are not absolutely obvious, I will say so.

 What period do the accounts cover?

They cover the 12 month period from 1st July 2013 to 30th June 2014. Comparative figures are given for the previous period, a 13-month period, the period from when the assets and trade were acquired from the administrators of the old company up until 30th June 2013.

What businesses are included in the accounts?

The accounts show information for the holding company (Rangers International Football Club Plc) and for the group. As such, it includes the financial information for Rangers Football Club Ltd (which operates the club), Rangers Media Ltd and Garrion Security Services Ltd which are all fully owned. Rangers also own 51% of Rangers Retail Ltd and its figures are included within the group accounts.

Layout of the Accounts

The accounts follow a traditional format – there is a lengthy Board report and Business Review, followed by the Auditors’ Report, then the main accounting statements – the Income Statement, Balance Sheet and Cash Flow Statement. These are followed by the Notes to the Accounts (page 29 on) which provide supporting information and required disclosures.

The accounts show only the group position. Little information is given on the subsidiary companies and the detail of these subsidiary company accounts will not be obtainable until they are filed with Companies House in 2015.

Consolidated Income Statement (page 23)

This is more commonly known as the Profit and Loss Account and it summarises the income and expenditure that relate to the period being reported on. As such, any season ticket income for 2014/15 or other income which relates to future periods is not included.

The accounts show that Rangers generated £25.2m in the year, of which £12.3m came from gate receipts and hospitality, and £7.6, came from the retail side. The remainder of the income came from sponsorship, advertising, broadcasting, commercial and other activities. That’s an increase of £6.1m on the previous period with the increase coming almost entirely on the retail side. A drop of £0.9m in gate receipts and a fall of £0.3m in commercial income was offset by increases in the areas of sponsorship, advertising, broadcasting and other income.

The operating expenses for the year totalled £33.8m (£33.7m in the previous 13-month period). That total is made up of staff costs of £14.7m and general operating costs of £16.4 (covering the running costs of the business – everything from upkeep and maintenance, heat and light, telephones, etc). The increase in the general operating costs is put down to the increased cost of the retail operations although this amount is not specified.

Curiously, the breakdown of operating costs on page 11 differs from the breakdown in note three to the accounts on page 35. An additional item ‘cost of inventories recognised as an expense’ appears in that note in the amount of £4.6m. My guess would be that this represents the cost of generating the retail sales of £7.6m. But I’ll return to Rangers Retail Ltd later.

Along with some other items, the end result is a £8.1m loss for the year. The interim six-month accounts showed a loss of £3.7m. The first six months would generally be expected to bring in a higher profit (or lower loss) but the operating costs for the 2nd six months are slightly higher than the first half of the year. With revenue for the second half lower, it is disappointing and worrying that no great inroads have been made into the operating costs.

Consolidated Balance Sheet (page 25)

The balance sheet summarises the position at the year-end date (30th June 2014). It is split into sections: Non-Current (or Fixed) Assets (the property, equipment, the brand and the player registrations), Current Assets (the trade assets such as stock, debtors and cash), Current Liabilities (amounts to be paid or income to be earned in the next year), and Non-Current Liabilities (the portion of liabilities that will require to be paid in more than a year’s time).

The fixed assets are stated at £65m, relatively unchanged from last year. There was £1.8m of additions in the year, mainly on stadium wi-fi, LED advertising boards and stadium screens. Offsetting these additions were depreciation charges of £1.3m. Player registrations are also treated as assets and written off against income over the length of the contracts.

The current assets of £8.2m include £4.6m in the bank and £3.4m in debtors. Of that £3.4m, £926,000 relates to money to be collected from season tickets for 2014/15 which were sold up to 30th June and a further £1.1m relates to a combination of income due in for the year or expenses paid in advance at the year end. One key point to note is that of the £4.6m in the bank, £3.1m was held within Rangers Retail and was not available for use outside the retail business.

The Current Liabilities figure of £15.3m is slightly misleading as it includes £6.2m of income which has been earned in advance and has been deferred until the following year. This is a mix of season ticket renewals, sponsorship, advertising etc in advance of the 2014/15 season. The remaining liabilities are a mix of creditors and finance leases, with £1.3m due to HMRC re PAYE and VAT at the year-end date; and £1.5m in loans subsequently repaid to Mr Letham and Mr Easdale.

There is, however, provision of £552,000 for stock obligations and onerous leases which I’ll return to under Rangers Retail.

The Non-Current Liabilities of £7.8m include £476k of finance lease payments in relation to the refurbishment of the food outlets, £266k in payments to acquire player contracts, and £6.7m in future tax liabilities that may emerge (but only if properties are disposed of at their revalued amounts) as well as a further £281,000 provision re Rangers Retail.

Overall, the balance sheet shows that Rangers had net assets of £50m, £47m of which was represented by the value of property and equipment.

Consolidated Statement of Cash Flows (page 27)

So where has the cash gone in the year? Firstly, the revenue generated in the year from day-to-day operations wasn’t enough to meet the day-to-day costs and the cash needed to fund this shortfall was £5.7m.

The group had started the year with cash reserves of £11.1m. In addition to the operating revenue coming in through the business, £1.5m was received in loans and a further £360,000 was received from the sale of player contracts.

That money has been used up as follows:

To fund the day-to-day operational cash shortfall: £5.7m

To purchase property and equipment: £1.5m

To purchase players’ contracts: £0.3m

To make finance lease payments: £0.7m

Interest charges incurred: £74,000

Dividends to the 49% shareholders in Rangers Retail: £109,000

That leaves the balance of £4.6m in the bank.

That is a shortened summary of the main financial statements in the accounts, but what else is of interest in the accounts?

Auditors’ Report (page 21)

The auditors have issued an unqualified audit report. That means that, among other things, they are satisfied that the accounts give a true and fair view. They do, however, emphasise the need for funding and they detail continuing issues that are concerning enough to suggest material uncertainty over the company remaining a going concern for the next 12 months if these funding requirements are not met. That is 12 months from the date of signing the audit report (not 12 months from the year-end).

They have referred to a potential liability arising from legal claims made by Craig Whyte and Aidan Earley, stating that the outcome of these claims cannot be determined at this stage but that no change to the position has arisen over the last year

Auditors' Fees

The auditors have charged £155,000 for the audit of the group. That is up from £90,000 the previous year and the level of the fees is no doubt reflective of the issues that they have to consider. However, that is a substantial increase and a very high fee for the type of business Rangers should be. As a comparison, Celtic’s fees for their audit were disclosed in their accounts at £34,000.

Given the size of the audit fees, it is disappointing that the odd error still creeps into the accounts. For instance, if you are confused by page 26, that appears to be the Company Balance Sheet, although it is not headed up as such. I think the disclosure in note three is wrong, whereby the ‘cost of inventories’ is shown as if it is separate from ‘other operating charges’ whereas I believe it is included within the total of other operating charges. And I have come across the occasional typo as well.

Staff Costs

Staff costs in the year were £14.7m, with the 1st team squad wages stated to be £6.5m. National insurance and pensions account for £1.5m, directors’ remuneration for £787,000, with the balance of £6m being non-1st team squad players, non-playing and non-football staff. The total wages represent 58.3% of total revenue. As a comparison, Celtic’s wages were also 58.3% of total revenue.

Directors' Remuneration

Directors received £787,000 in the year. The main recipients were the executive directors, Graham Wallace and Brian Stockdale. Of the existing board, David Somers received £50,000 and Norman Crighton £26,664.

Unlike last year, remuneration of key management for Rangers is not shown. It seems clear that the disclosure of the salary of Ally McCoist last year was for political reasons and not because it was required.

Rangers Retail Ltd

It is clear from these accounts that the Rangers Retail business has a major impact on the figures in Rangers accounts so it is disappointing that there is not clear segmental reporting rather than having to fish around for figures. From a turnover of £7.6m from the retail business, it appears that the Sports Direct owners of the business (i.e., the 49% minority shareholders in Rangers Retail Ltd) earned profits of £567,000 in the year.

However, additional earnings to Sports Direct would seem to arise on the obligation of Rangers Retail Ltd to acquire its stock for 2013/14 at a cost higher than its resale value (yes, exactly!). There has also been a provision made for Rangers Retail on lease obligations where the retail stores are operating at a loss.

Because of the nature of the operating arrangements within Rangers Retail, it is probably not the case that the profits are split in proportion of the shareholdings so it is difficult to assess how valuable this area of the business is to Rangers. It is certainly a question worth raising at the AGM for the board to specify the level of profit, if any, Rangers themselves earned from Rangers Retail in the year.


Rangers are clearly hamstrung by the lack of cash within the business. Ignoring the cash locked in Rangers Retail, there was £1.5m cash available at the year-end (which was soon repaid to those that had provided £1.5m in loans). There is little evidence that inroads have been made into the level of operating costs and it is clear that the group needs a major input of funds to be able to continue. We will see at the AGM a proposal to go to the market again to raise substantial funds.

This is my interpretation of the group’s accounts. It does not constitute investment advice.

Arnold Black is a Chartered Accountant and lifelong Rangers fan.