While I was busy telling one of my first bosses how much money we were going to make in a year or two, he made a comment which has remained with me since, “If you don’t make some sales next month, we’ll not be around to find out if you’re right.”
Plans for 2022 don’t mean a fart to a company which is haemorrhaging cash, billionaire funders, nomads and auditors, all the consequence of a two year war of attrition as newco Rangers tried to fight off an insurrection.
There are literally thousands of metrics you can use to compare the prospects of football clubs but let me draw your eye to a couple, which will give you real insight into the future.
Last season Celtic had 475 “full time equivalents” in employment, 318 people in non-football roles and a further 157 in football operations (players, coaches etc.). If the average pay of those 318 non-football full-time staff was £25k (I doubt it’s this low), their combined wage bill would be just below £8m. Celtic’s total annual wage bill was £37.766m, total operating expenses were £59.885m.
If you want to win the Scottish Premiership, this is what you’re competing against.
Newco Rangers announced operating expenses (before amortisation) of £15.684m for the six months to 31 December, which included £6.7m wages, covering both football and non-football staff. If the figures for the second half of the year are consistent with the first that would give them around £31m income and a £13.4m spend wages. Income is around half Celtic’s expenses and wages a fraction of Celtic’s
What newco need is tens of millions of pounds of investor cash, the £50m Dave King spoke about ‘when in opposition’ is not an overestimate.
Anything they say before “Here is the £50m investment we need” is there to take attention away from the fact that they haven’t said “Here is the £50m investment we need”. When they say that, they’re in the game, until then, they’re cannon fodder. When they stop talking about the £50m needed, they know it’s not coming.
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!! Bada Bing!!
‘Tired’.
Very generous of you!
GreenPinata,
What makes you think we that we will inevitably join the English top flight? They don’t need us or want us.
Southampton owner Katharina Liebherr says there is no financial pressure to sell right-back Nathaniel Clyne, 23, or midfielder Morgan Schneiderlin, 25, after lending the club another £20m
what are these clubs spending their millions on?
Ginger
09:55 on 1 April, 2015
We didn’t get 5 million for berkovic or anything near it
————-
Was going to say that.
Also Burley had left before MON came in.
Out of interest Neganon,
Were Celtic to endorse Irish Republicanism, how do you think that would play out? Would Celtic have to defend the Birmingham pub bombings for example? Would victims of such violence speak out about Celtic?
A wee wander round the numbers for a minute, bear with me…
The question at hand is: Is there a business model for a football club playing out of Ibrox Stadium that delivers both success on the park and financial sustainability?
In this context, success on the park is a little subjective, but might be measured in terms of trophies won and participation in Europe, while financial sustainability is more easily defined as being able to operate year on year without resort to other people’s money.
Let’s start way back in 1996. Two reasons: Firstly, this is the year that David Murray first determined to take Rangers “to the next level” and brought in £40M of new money from ENIC for this purpose.
Secondly, it marks the point in time when Celtic were re-emerging as a valid competitor on the pitch after 6 years in the grubber.
Period 1 runs form 1996/7 to 1999/2000. On the field, the team won 3 out of 4 Championships and a handful of cups, although European football remained less rewarding. While at the end of the period Rangers were at the same level on the pitch as they were at the start of it, thus the project hadn’t delivered its objective, nevertheless, 3 out of 4 Championships and regular Champions League participation meets the criterion for football success.
Off the field though, Rangers managed to run up losses of a quite unbelievable £70 Million.
Clearly, the onfield success was paid for by an unsustainable business model.
Period 1 fails the test.
Period 2 runs from 2000/01 to 2006/7. During this period, while the club ran through 3 managers – Advocaat, McLeish and Le Guen – the period is characterised by a series of extraordinary financial measures. A series of large scale equity issues, a debt-equity swap, and the securitisation of the club’s merchandising occurred during what I’ll refer to as part 1 of the EBT years.
The football team delivered 2 Championships in 7 years, a handful of domestic cups, and notably, qualified through to the knockout stages of the Champions League. I’m going to guess that 2/7 Championships doesn’t represent ‘success’ for the supporters, not least the ‘ignominy’ (everything’s relative) of finishing in 3rd place in 2006 and suggest that this period saw fleeting success on the pitch, with the team in Celtic’s shadow for most of the time.
Off the pitch, Rangers’ losses for the period ran to a scarcely believable £90 Million. Insolvency was avoided by loading £50M of debt onto parent company MIH, and selling the jerseys in a 10 year deal to JJB Sport.
The losses would have been considerably greater had Rangers not benefitted from £38M of payroll savings in the period through the clever, cunning use of EBTs to pay staff. An alternative view might be that the payroll itself might have been £38M lighter across the period had the scheme not been introduced.
Despite the extraordinary financial measures, Period 2 fails both the football success and financial sustainability criteria.
Period 3 is characterised by the return of Walter Smith as manager, running from 2007/08 to 2010/11, ending with the sale of the club to Craig Whyte. LEt’s call it the EBT Years part 2.
During this period, Rangers won 3 out of 4 Championships, got to the final of the UEFA Cup, and participated in the group stages of the Champions League 3 times. That record certainly meets the football success criterion.
Off the pitch, the club ran down the use of EBTs, then ran them back up again, finally bringing them to an end in 2011. Losses for the period ran to £1.2M, but hide a yo-yo set of returns over the period with the club variously £7M in profit to £12M in loss dependent entirely upon participation in European competition.
Similarly, debt moved from a low of £16M to a high of £33M and back to start again as cash swung as erratically as results in Europe dictated. A further £5.5M was saved from payroll costs using EBTs.
Period 3 is characterised by, on the one hand, football success, and on the other, a financial model reliant entirely on participation in the Champions League.
Period 4 is short lived. Craig Whyte arrived in May 2011, and the Administrators followed in behind 9 months later.
On the pitch, Rangers blew a 15 point lead in the Championship to finish 20 points off the pace, a swing of 25 points over 5 months netting the effect of a 10 point penalty for going into administration.
Off the pitch, Rangers disintegrated. The causes are hotly debated, but the singular defining event was the failure to reach the Champions League, and thereafter the absence of debt or shareholder facilities to cover the resulting losses.
It should be pointed out that Whyte continued the same business model as the previous regime, loss making on domestic income, and profitable only if there was significant Champions League income.
Given the catastrophic effects of being knocked out of Europe – Catastrophe means losing the business – we ought to view Whyte’s short tenure as a continuation of the previous model, and thus, the previous model fails the sustainability test.
Ultimately, it was built on sand, and collapsed when the tide inevitably did its thing.
Since then of course, we’ve seen a new club emerge from the bottom up. It has burned through all of its shareholders’ capital, and requires continuing emergency funding to continue in business.
Football ‘success’ in the period is entirely subjective, with Division 3 and 2 titles in successive years doubtless precipitating great delight, followed by a top 4 finish in division 1 this year. Promotion to the top league remains to be decided.
The word is that, under new Chairman Paul Murray, things will change. Murray has stated that he is intent on returning to the business model implemented during his time on the board of the old club, the period 2008 to 2011.
That’s Period 3 and 4 above, the model that turns on Champions League income.
Entry to the Champions League is now restricted to the winners of the League Championship, who then have to win through a series of qualifying ties.
In the meantime, the club requires to finance a football team that is capable of winning the Championship from a loss making business model. Further, it appears as though the major income stream that is Merchandising is in large part owned by another company, reducing annual income by around £5M per year until 2018 when the deal expires.
We should also point out that in the context of the finances of the current Scottish Game, Number 1 is all. Number 2 is nothing. A major input of fresh capital that results in the team placing no better than second in the league corresponds to an unsustainable series of loss making years.
If we are to believe Murray – that the new club will win the Championship within 3 years, and (his fingers are crossed) participate in the Champions League – we also need to recognise that Champions League in this context is a one-off event, not a steady state.
Allowing an Evens chance of a highly capitalised Ibrox club winning the Championship from season 2017/18, and a subsequent Evens chance in those years of winning through to the Champions League, we can anticipate between 2018 and 2021 that the club might have won 2 Championships and have 1 appearance in the Champions League in the 4 year period to 2021.
In short, the club will require to finance a team capable of winning the Title – 3 years of losses under Murray’s model – followed by three years where they will feature in the Champions League once, implying a further 2 years of losses, and one of profit over the period.
That transcribes as 2 Championships in 6 years, with 5 years of losses along the way. It will require immediate shareholder support to firstly stabilise the finances, then field and wage a competitive team, and further and repeated shareholder support to backfill losses with new cash.
A fag packet might put the number at £10 Million now, £30 Million on a team pretty quickly, and a further £10 Million for 4 of the next 6 years. Assuming of course, the football team delivers the prizes: By no means a given.
In terms of our Football and Finance criteria, it fails both.
Few businesses CANNOT be run sustainably. That is, most businesses can find a model that sustains its cash requirements from continuing operations over the long term.
Equally, few businesses being run on this basis are able to achieve and then sustain the Number One position in their market over the long term. In this market, where Number One is everything, and Number Two is nothing, the business model is binary – it works in only one set of circumstances, and fails in all others.
To get to 2021 using Paul Murray’s ‘plan’, will require a minimum of £80M of new cash, with an exposure of a further £20M plus. Let’s call it a nice round £100M equity project.
My conclusion is, and thanks for bearing with me here…
Within the constraints of the football environment, given the failure of so many different business models over the past 20 years, and given the financial and operating circumstances the club finds itself in…
There is no business model yet conceived that delivers BOTH football success and financial sustainability for a club playing out of Ibrox Stadium.
It’s strictly one or the other, or as likely as not: Neither.
Berkovic was sold to Man City in 2001 for a reported £1.5 million, having been signed for £5.75 million a couple of years previously.
Good bit of business.
HH!!
HT –
It certainly is an expensive business.
I just bought 3 semi-final tickets for the North Stand.
I was in the East Stand for the League Cup semi-final. Never again.
Ronny or Martin O’Neill? Were Ronny to receive the backing which Martin received… Wishful thinking.
Lafferty?……
Some April fool jokes just ain’t funny!
Hearing a rumour that Kenny McDowell is poised for a sensational return to Celtic!
Not in a coaching capacity, however, but as one of the groundsmen at Lennoxtown.
HH!!
Captain Beefheart you are engaging in precisely what the MSM do. Firstly you can make a distinction between a politicial cause and a terrorist organisation. Its easy to do – except in Scotland anything Irish is seen as offensive and all labelled together.
And one further point I would make Captain Beefheart. It should be clear to ALL of us now that Celtic have been party to the corruption. How does that make you feel?
NegAnon2,
I guess it will come as no surprise to yourself that I disagree with most of your post .
I for one feel an empathy with our club. For many supporters Celtic is the only constant in life. Life is full of change, but not surprisingly, by and large the team you have always supported remains the one constant.
Custodians of the club come and go, but supporters are the integral constant.
Questions must always be asked, but not to feel any empathy for the club c/w its supporters must be quite sad.
Captain Beefheart ; True the EPL may not need us, but their media paymasters most certainly want us. At the end of the day this will be the deciding factor.
HH.
Talking about views from The Jungle.
I couldnt see Colin Jackson for one of the big green pillars when he stooped to put us in front in the 4-2 game. I only noticed the ball lying in the back of the net and then the bedlam about the place. One of the “greatest” goals in our history and I didn’t really see it – but wouldn’t want to be standing/sitting anywhere else!
The Battered Bunnet
Cracking post on the moonbeams quality of Mini Murray, meet the new chhoob same as the old choob and who’s going to fund it, why Billy Bear and Sash McCall of course..
Dig deep hunnies your team need you:)))
NegAnon2,
I do not know statistics but :- Is anti English racism more prevalent in Scotland than anti Irish racism ?
For the benefit of any doubt IMO both are equally wrong.
HH.
Neganon2 –
Maybe, like me, Captain Beefheart doesn’t agree that “Celtic have been party to the corruption”.
You say it “should be clear to ALL of us”.
Just because YOU believe something does not make it fact, and you should stop getting hysterical because some people don’t accept everything you claim to be Gospel.
It’s just your opinion, which you are entitled to, but here’s the rub . . . so is everyone else.
Winning Captains:
Of course I don’t mind. I am highly flattered. In fact I love the pictures. Gives it much better polish than it deserves.
I am glad others find it so amusing.
The Battered Bunnet
Beautifully structured explanation of the failed financial strategy that led to the liquidation of Rangers Football Club.
Death or Glory?
Greenpinta I think this depends on what you believe the club is. At the moment those who run the club have no interest in the support in any sense apart from getting money from them. Those who run the club have no empathy whatsoever with the support. So if the club is the legal entity then there is no empathy. If the club is the support and vice versa then the empathy is there and it is our strong point.
So perhaps our disagreement comes down to semantics.
or do you disagree that those who run celtic are part of the corruption?
Ah Tom – Its such a lazy thing to say that its only your opinion. But isnt it a fact that PL made up a 10M loss? Didnt DD tell us how great rangers are and he is looking to see them back? Isnt it true that celtic knew about and agreed to the 5 way agreement? Havent celtic refused to back res12? Havent Celtic refused to say anything publicly about the corruption? Have Celtic done anything about the OB act? Didnt Celtic admit to passing on details to the police (having denied it)? Didnt Celtic ban a load of supporters after the motherwell game withour proving their guilt?
So a straight question Tom – do you believe celtic have participated in the corruption in scottish football?
Árd Macha : Queen [Eliza]Beth
NegAnon2
I truly don’t know if Celtic are part of any corruption. I also do not know if any individuals have acted in their own name rather than in Celtic’s name.
What I do know is that I am more happy with RD’s Celtic now than I have been for some time.
Roll on Friday night.
HH.
Greenpinta on the question of anti english versus anti irish? I dont remember no english signs but I do remember no irish signs. I dont know any english people who were refused jobs or promotions cause they were english but I know plenty cause they were catholic.
I also dont here wanton racist songs against the english but I do against the irish and catholics.
So make your own mind up…..
blantyretim is praying for the knox family
10:53 on 1 April, 2015
Southampton owner Katharina Liebherr says there is no financial pressure to sell right-back Nathaniel Clyne, 23, or midfielder Morgan Schneiderlin, 25, after lending the club another £20m
what are these clubs spending their millions on?
….obscene wages ?
How many times???
Greenpinta making a distinction between say PL acting for himself and acting for Celtic really is reaching isnt it.
But I know a lot of celtic supporters dont want to face this ugly issue because to do so threatens the very existence of celtic.
But I prefer to face reality.
TBB
Thanks for that post. Excellent.
Mea Culpa
Thanks for that post . Excellent.
NegAnon 2
Like you, I would like to see Celtic do some things differently. Unlike you, I accept I do not know enough to know why Celtic do not do some things differently.
JJ
Nrganon,
On the one hand, the board are money grabbing capitalist pigs. Yet,, on the other hand, according to you, the board have sacrificed tens of millions in lost CL revenue in order to support corruption?
Mea Culpa/TBB
Two excellent posts gents, well done.
Tom McG
Thank God Inverness tickets were bought last week!! :-)
Captain Beefheart.
And were Ronny to face a financially doped-up club, able to spend 12 million on one player on top of a 15 million pound net spend that season, with players of the quality of Klos, Numan, Mols and Van Bronkhurst already in the squad?
Too many ‘ifs’.
Suffice to say, Ronny still has a long way to go to emulate Martin, but I sincerely hope he does.
Battered Bunnet 10:59
Absolutely spot on. They (and the MSM) go on about getting back to their “rightful place”, seemingly forgetting that all the success was built on a completely unsustainable business model.
None of them have yet said how they would have ran the club in 2011-12 with no CL money. Maybe an award-winning journalist might ask:-)
The Battered Bunnet
Great post. Although lengthy, it was easy to follow.
Good work. Pat on the back for u
My belief is being beggared daily,
..
Returning Rangers fans tipped to boost Ibrox finances
Rangers post another multi-million pound loss – but do better times lie ahead?
IN comparison with the alarming financial figures produced by Rangers in the last two years, the interim results released yesterday made for pleasant reading.
So according to Lindsay,the figures make “Pleasant reading”
Take away the fact that they also owe MA £5 million,the 3 Bs,£1.5 million,and the attendances were high for the beginning of this period,and the figures are indeed rosy.
For Celtic fans.
We should be used to their fans in the SMSM talking bollox,but even they sometimes still astound.
Neganon2 said:
So a straight question Tom – do you believe celtic have participated in the corruption in scottish football?
No.
My friends in Celtic,
Off to the pub now, as I have only half empty bottles left. :-)
HH to all.
True Beatbhoy.
Green, I doubt the English paymasters want us either. CL humiliations and a half empty stadium certainly won’t entice them.