Newco: trading loss, commercial gap, High Court. A familiar story unfolds

It doesn’t really matter to you or I who Newco buy or sell, but it is unedifying to see a campaign run over weeks to generate cash on the back of a guy who specialises in goals against the likes of Hamilton and St Mirren.  Yesterday we were asked to believe that Alfredo Morelos declined to go to China as part of a £30m deal.  The like of this story has not been seen at Ibrox since the last days of Oldco under Craig Whyte.

You would be forgiven for worrying that Newco have some cash issues.

In their most recent annual statement, for the year to 30 June 2018, they lost £14.3m.  That season did not include revenue from Europa League group stage qualifications, which the most recent season did, but when the next accounts are published, they will also show a significant increase in expenses.  I expect losses to be in the £7m to £10m region, before adjustments are made due to the recent High Court judgement in favour of Sports Direct.

That judgement, which is no longer subject to a potential appeal, has incredible commercial reach.  If you visit the Shop at rangers.co.uk you can buy match programmes, hospitality, Ibrox tours, pictures, bricks, TV subscriptions and lotto, but you cannot buy so much as a novelty duck, never mind a replica shirt.  Sports Direct are linked from the Partners page, where they sell Puma kit of 2017-18 vintage.

This lack of revenue from club merchandise will hit Newco directly, and indirectly, when their inability to perform to the terms of their contracts with Hummel and distributor Elite Group for this season are calculated.  This is in addition to the compensation they will pay Sports Direct for loss of profits last season and this season, and the compensation they will pay Hummel and Elite Group for their contracts for next season being set aside.

Then there are all the legal costs.  The total cost of Mr Lionel Persey QC’s judgement could easily top £10m.

Should Newco fail to qualify for the Europa League group stages, their top line will take another £10m hit, although expenses will remain well above the figures we have for the year to June 2018.  Under those circumstances, Dave King might consider a £14m loss a “favourable settlement”.

We have been here before, when Craig Whyte faced what looked like impossible obstacles at Oldco.  The biggest mistake observers made then, was assuming Whyte had a plan to keep the club solvent.  He didn’t, there was no such plan.  This fantasy chat about a player who scores against the wee teams in Scotland, despite Steven Gerrard’s confirmation that no bids have been received, looks like an all-too familiar scenario.  It looks like a ‘Hail Mary pass’, if you can conceive such a thing at Ibrox.

This club needs a huge investment to meet this season’s obligations, and will need ongoing financial support until expenditure is brought down to sustainable levels.  It is always possible someone will find the tens of millions required and that they will qualify again for the Europa League, but I see no appetite for living within their means – an enduring anathema at Ibrox.

That being the case, it is a matter of when, not if, reality bites.  None of this means we are going to win nine-in-a-row (we will address this tomorrow), Oldco won the league in 2011 when in dire financial circumstances, but it should inform us that not everyone makes decisions with due concern for the consequences.  It would be interesting to know if HMRC, Sports Direct and other commercial creditors constitute more than 25% of monies owed.