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The problem of relative poverty

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A CQN’er prepared this forensic analysis of the relative poverty of Newco (formally named for analysis) compared to Celtic.  It covers where they currently are and, more importantly, brings into sharp focus their financial projections for next season.

A storm is coming.

It’s International week, so it seems like a good time to look forward. Whilst most fans will be focusing on the matches remaining between now and the end of May, Managers and Football boards have to look further ahead. Budgets are being planned, appointments being considered and money, as always , is foremost in the thoughts of Directors and Managers.

Money, if you have it , can solve short term challenges, set in place long term strategy and is a mechanism to energise the fanbase. When you don’t have money, the problems and challenges are of a completely different nature. Celtic have money, a lot of money.

The cash balance on 31 December 2018 was £44m. Of course, some of that money has to be spent on wages and suppliers before the year-end. However, Celtic will also receive stage payments on Dembele sale circa €7m before 30 June (it’s common for large fees to be spread over 2 years), management team contract buyout of £9m, SPFL final distribution for 2018-19 season £2.2m, Valencia gate receipts and Hospitality £2.2m, and close to another £2m in match day ticket sales for the 11 SPFL home games taking place since 1 January.

None of this cash was shown in the Interim accounts. Payments will be received for players sold as well as payments made for players already purchased. The Year End cash balance will be a record high beating last year’s figure of £40m.

Everyone will have an opinion of where and how much we should invest, and that will be the subject of another article nearer the season’s end.

The challenges across the City are of a completely different nature. As always the demands there aren’t supported by financial reality, and having gone all in on Caixinha and Gerrard, a new and more challenging reality is looming.

Rangers posted an operating profit of £3.8 Million in the 6 months to 31 December 2018. The Rangers Chairman in his financial review that accompanied the interim accounts stated, “the Club is forecasting to be close to break-even for EBITDA for the year”.

I’m sure that was designed to provide comfort to shareholders and fans alike, however some context is required.

In the full year to 30 June 2018, Rangers produced an EBITDA of a loss of £4.18m. I guess that’s close to break even in some eyes. In the full year to 30 June 2017, Rangers produced an EBITDA loss of £105k. There is no question that is close to break even.

The problem though is that EBITDA (earnings before interest, tax, depreciation and amortisation) is only part of the picture. The more relevant numbers relate to Operating Profit. That and Cash Flow tell a more complete picture on financial health.

From a 2018 EBITDA loss of £4.18 Million, Rangers produced an operating loss of £13.16m and from a virtual break-even 2017 EBITDA, Rangers produced an operating loss of £6.3m. The 2019 Operating result will be another significant loss.

REVENUES

·      Rangers had Revenue of £35m in the first half of the current financial year

·      Much of that Revenue will not recur in the second half of the year

·      There were 7 home games in the Europa League that will have generated close to £9.6m in gate money

·      Rangers earned £4.4m in Uefa prize money in the first half , nothing in the second half

·      Rangers will play 3 less home SPFL games in the second half resulting in a £3.1m reduction in gate revenue, as season ticket money is allocated to each individual game

·      With 10 less home games in the second half , Hospitality and Match day revenues such as parking, catering and programmes, will be down by possibly £3.3 Million

·      Other less significant revenues will reduce in line with less games played at home in the second half

·      It’s estimated Rangers will have revenues of close to £14.9m for the second half which is 12% growth on the second half of the financial year to 30 June 2018

EXPENSES

·         Rangers won’t have the cost of travel and accommodation for European away games. This should deliver a saving of around £1.5 Million

·         There are 10 less home games, which will deliver savings on part time staff, security, Police and utility costs. Should save around £400k

·         Pena is now gone. It’s unknown if he was paid off or fired without any contractual settlement. It’s anywhere between a £340k saving or if paid in full (unlikely) an extra expense of £2m. Assumption is he got nothing, so a saving achieved

·         Defoe and Davis won’t be cheap, and even Kamara will add a significant amount compared to the first half. Estimate an increase of £1.1m in player wages for these 3 for 6 months

·         The first team squad and the management team will have earned bonuses for Europa League Group entry. That won’t recur in the second half . Estimated at £1.5m

·         Nothing much happened in terms of players being bought, only Kamara for a small fee. Amortisation charge should be similar to the first half

·         All in all, expenses will have reduced by around £2.65m to £26.4m for the second half, making a full year total of £55.5m

The second half of the Year will deliver a large loss of over £14.5m, unless significant player sales are undertaken in June, making an annual operating loss in excess of £11m.

“Be moderate in prosperity, prudent in adversity”, Periander

Nobody could argue against the reality that Rangers have had a mountain of adversity to deal with since 2012. Equally, nobody is ever going to claim they have been prudent. They have borrowed money from the likes of Mike Ashley, raised significant sums in multiple share issues organised by

Charles Green and Dave King, been loaned large interest free sums by shareholders and borrowed at ferocious rates from Close Bros.

What they have never done is provide funding through operational profitability. They are now on their fifth manager since 2012 with none of the major trophies available in Scotland to show for all of the debt and losses incurred. They have only managed to reach one Cup Final in 21 attempts, and even then lost memorably to a Hibernian team inspired by individuals with strong Celtic connections.

The question for Rangers now is what appetite do the shareholders have for risk? There is very little opportunity to grow revenues. Ibrox is full for every game, season books are maxed out. It would take Champions League Group revenue to be a game changer. Celtic are 1/100 to win this year’s SPFL. Rangers are 25/1.

It’s highly unlikely Rangers will even have an opportunity to qualify for the Champions League Group stages before season 2020-21. Even that remains a long shot. In the meantime, the Rangers board have to decide how much appetite they have for risk.

This season is likely, as shown, to deliver an operating loss of £11.2m, which will be reduced by the £2.8m already banked as profit on the sales of Windass and John. Give Gerrard the same budget for 2019-20 and if he delivers the same result, then another £11m operating loss will be the outcome.

Selling Morelos for £20m is the stuff of fantasy . His record pales next to Dembele’s . In fact his record isn’t as good as Leigh Griffiths and we weren’t fending off bids for even 30% of what it’s claimed Morleos will be sold for. Fail to qualify for the Europa League Group Stages and the operating loss will be rocketing towards £22 Million. Who is going to cover that? Will the shareholders continue to fund ever increasing losses for no silverware, or will they prudently use whatever they raise in asset sales to fund some of the losses, and take a long term view by living within their means.. History would suggest they will roll the dice yet again.

As noted earlier, Celtic have very substantial cash reserves. Rangers do not. They effectively have no cash. They exist on Close Bros debt and shareholder loans once the Season Book money runs out, which with the significantly increased budget given to Gerrard, happens earlier than ever and without Europa League Group Revenue, could happen well before the next winter break.

Gerrard improved the European record significantly; he was aided though by as soft a draw in the qualifiers as was possible. There is a strong chance of much better opposition next season.

The Rangers Directors have provided the funds to cover shortfalls up to this point. They are now facing significant challenges. They have seen Gerrard in action for a year. His League and Cup record is no better than Pedro’s. The money from shareholders has all been spent. The Close Bros money will be gone in a few weeks and will then have to be repaid.

Celtic will rebuild in the summer. No guarantees it will be successful, but it will be funded by our own resources and financial reserves. Rangers have no resources of their own and absolutely no financial reserves. At some point those lending money and buying shares will realise this isn’t a calculated risk, it is extreme rashness.

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  1. Silver City 1888 on

    Reminds me of the Friends of Italian Opera scene in Some Like it Hot. “We made £40m before taxes… and we don’t pay no taxes.”

  2. Melbourne Mick on

    Very difficult watching that Scotland debacle on Oz telly today.

     

    Very difficult especially when the night before at our bhoys soccer

     

    club a young Indian couple brought along their son, a very good

     

    player, for a trial with our u 8’s team, and surprised us when he

     

    said ” i know you Scots will make him better ”

     

    FFS, hope he wasn’t watching that.

     

    Surely to god that fud Mckeech will be sacked, and it’s time that

     

    whole stinking SFA cabal are rooted out and put in the compost

     

    bin.

     

    Thats my wee rant over, embdy want to talk Celtic?

     

    H.H Mick

  3. Chairbhoy (on last thread)

     

     

     

     

     

    Not sure you will get much joy out of Supporters Direct. I still get e-mails from them and they represent the myths rather than the truths of Scottish football.

     

     

     

     

     

     

    Their recent survey stated that

     

     

     

     

     

     

    1) 85% of supporters revealed they had witnessed ‘sectarianism’ compared with ‘racism’ (58%), physical abuse (52%) and homophobia (51%)

     

     

     

     

     

     

    2) 41% of respondents said they had been subject to sectarianism and 16% physical abuse. 34% said they would not report it at all

     

     

     

     

     

     

     

     

    3) Positively, supporters are more optimistic (41%) than pessimistic (34%) about the future of Scottish football. And the Scottish Cup is highly rated with 72% of fans saying that the oldest cup competition in the world is a great spectacle.

     

     

     

     

     

     

    4) 64% in favour of alternative European club competition with nations such as Belgium, Holland, Sweden and Denmark

     

     

     

     

     

     

     

     

     

     

    5) Few respondents attend women’s matches with supporters saying that the biggest opportunities to increase attendances would come via:

     

     

     

     

     

     

    Knowing when and where games are on (43%)

     

     

     

     

    Better promotion from media (39%)

     

     

     

     

     

     

     

     

    To which I say, Aye right. This group just wants Saturday 3pm kick offs and the big bad O** F*** punished for sectarianism

     

     

     

     

     

     

     

     

    Much worse than Supporters Direct are Scotland’s National Football Association. I received an e-mail from their representative which stated:-

     

     

     

     

     

     

    “We believe that far more research has to be done to see if strict liability can be adopted in Scotland as an effective way to eradicate sectarian singing at our stadiums. We will be reaching out to members in the weeks ahead to get their input. ”

     

     

     

     

     

     

    No questions are to be asked as to whether Strict Liability IS effective, just the means to get it adopted. This looks to be the Sporting Wing of the SNP and they are organising to get punitive measures imposed on football fans in the name of football fans. I fear we are about to be blindsided. I wrote back to them and, surprisingly, did not receive a reply. Guess I am not one who will be “reached out to for input”.

     

     

     

     

     

     

     

     

    P.S. I think you are wrong to link Andy Roxburgh (and Craig Brown) with the failures of McLeish and Levein. Andy Roxburgh, with Craig Brown, dragged Scottish football coaching into a modern organised era. Up to then, you had to find individuals like Stein and Turnbull, who were operating outside the convential wisdom that coaching was for foreigners. Roxburgh and Brown and others made a formal coaching structure and qualifications that improved the level of all round coaching. My own sport and several other minority sports in Scotland were streets ahead of Scottish football in this regard. Craig Brown, who has many other faults, as a coach and a man, acknowledges how tardy Scottish football was on improving coach education and resources and how much they adapted from other sports. (P.S. the secret to the increased physique of Scottish Rugby players may not be all due to fitness training and a lot more to do with, ahem, supplements). A similar route was taken by Scottish athletes inspired by David Jenkins and Scottih cyclists like David Millar.

     

     

     

     

     

     

    The “Largs” course, of its time, was a success, even though most coaches were trained elsewhere for their earlier badges. Don’t believe me, ask Alex Ferguson and Jose Mourinho!

     

     

     

     

    I feel the deterioration in football ability in the 90s and new millenium has factors other than the improved coaching framework which these two Teachers (Roxburgh & Brown) set up.

  4. As if proof were needed that I know nowt about fitba’..

     

    ….in all the rush to hammer rockets wi’ rockets or “missiles”

     

    ..quite rightly imo..

     

    …what are the authorities doing to foster the idea that a day out at the Football is largely a fun spectacle, something to be enjoyed, looked forward to and a real treat for families and kids……….??? It’s usually entertainment, the odd blip aside…….

     

     

    I wonder what the participation rate of kids is now with regards to playing? If the game isn’t encouraged and supervised properly is it any wonder that in a generation we’ve gone from cheering on the national side at major finals to gettin’ cuffed regularly by anybody?????

     

     

    Fix Fitba’ Empty Hampden and……

     

    ………. Last Orders For Alec Ahauf, Brandy Syphon and Assorted Crafty Cronies.

     

     

    HH.

  5. …there’s too many Robo-Cop wannabe whistlers……….the mentality is wrong.

     

     

    Aw the tough-guy posturin’ is unnecessary and suited to the compromisable narcissist…………

     

    That’s before we even get to the crafty hun cohort…………

  6. Paul67

     

     

    Most people trying to get onto the site get bumped to o2 , making for much frustration.

     

     

    Interesting you think Celtic will be rebuilding in summer, I thought we just needed a RB a CB and we’d be good to go?

     

     

    All depends on what happens from now till June.

  7. GlassTwoThirdsFull on

    Any notion that Sevco can value MoreLoss relative to Dembele is utter guff. Liam Boyce was top scorer a few seasons ago. Moved for 500k?

     

    Anyway, they aren’t selling him… Ahem…..

  8. mike in toronto on

    I was one of those who advocating, as much as possible, burying Rangers, and going it alone. Clearly, I was in the minority.

     

     

    The silence from our Board has been justified by many on here who said that (i) Celtic could do nothing, (ii) Rangers would never be allowed to fail, (iii) we needed them as they bring in significant revenue, (iv) it would destroy the league if all the dirty laundry were aired in public …. that sort of thing.. …

     

     

    But, what this tells me (and this is not new) is that they haven’t learned the lessons of the past, and are doomed to repeat them.

     

     

    As this article suggests, unless they get lucky and qualify for the CL, they are almost inevitably going to end up trading insolvent again…. if they aren’t already.

     

     

    If that would have damaged the league, and Celtic, as was suggested the last time, how will it not damage Celtic this time. In fact, allowing this to happen twice will be a bigger problem for the leauge and Celtic…. I mean it happening once is just careless… but twice…. FFS!?

     

     

    The argument previously was that it was too great a risk to push the issue …. but, it seems that unless someone does, they will keep doing the same thing over and over ….

     

     

    Even if Celtic want a rival (which seems to be the case), Isnt the risk of continuing to let them run their business is such a chaotic way too large a risk for everyone associated with them (including Celtic)?

     

     

    … and then there is the issue of FFP…

  9. MIT – they are already trading while insolvent. But it doesn’t matter the SFA have already said they are only a business (for financial matters) and a club on the park and the club therefore , as club doesn’t have any finances, can NEVER go bust. You should pay closer attention in lodge meetings!!!

  10. mike in toronto on

    Maradmonic…

     

     

    I no longer attend at the ludge, as the last time I went they suggested that my face didn’t really fit .. Which is a shame, because they usually served a nice dinner before we got down to business…

     

     

    and I dont really even know what happened….

     

     

    as I said, last time, we were sitting down to a nice roast beef dinner before we got down to lodgey business…. all I said was ‘hey, shouldn’t we be saying grace before dinner’ and blessed myself…

     

     

    next thing I knew, I was being huckled out of there, and told never to come back!

     

     

    :)

  11. GlassTwoThirdsFull on

    MiT

     

    I think the managerial appointment will tell us a lot. If it is NL that will be an indication that they are happy to regress back to being just better than the rest. If it is someone like Benitez or Martinez it will be making a statement of intent and showing some ambition and making it clear that we want to progress in Europe.

  12. mike in toronto on

    Maradominic

     

     

    I think you may be confusing the Ludge meeting with Eyes Wide Shut….

     

     

    :)

     

     

    G2/3

     

     

    Not sure I agree ….

     

     

    I am a big fan of Benitiez and Martinez as managers … but, I a m not sure that there appointment shows true ambition

     

     

    as I have said for several years now, even the BR appointment was akin to building the nice house in the neighbourhood, but the neighbourhood happens to be over an old toxic waste dump/pit of quicksand (take your pick).

     

     

    You cant really build for the future if you have to be concerned that the league is a house of cards ….

     

     

    and, as we saw with even uberfan like BR, decent coaches will leave our pissy little league at the first chance they can …because the league is a joke.

  13. glasstwothirdsfull

     

     

    i think you are correct if nl wins the cup and league i think he will be our next mgr. for the next few years.

     

     

    unless???.

     

     

    anyway i cant see benitez or martinez coming as we will not give them the backing they would want, i think benitez has had enough of that with newcastle.

  14. mainstream boredom

     

     

    Donald Duck and Mini Mouse go to a motel for se█ but Donald forgot to bring █ondoms

     

    so he phones receptionist and asks for some sent to their room,

     

     

    Receptionist ” – Do you want us to put them on your bill ”

     

     

    Donald ” GTF – Do you think I’m some kind of pervert

     

     

    Mod 2 Delete if risqué CSC

  15. JC2 on 22ND MARCH 2019 2:26 PM

     

     

    Losses in excess of £13m per year over a three-year period are not accepted under EFL rules.

     

     

    Never catching on here anytime soon

  16. Hi Paul67,

     

     

    That’s a very interesting piece and it’s always good to get an expert insight and proper analysis of the numbers.

     

     

    I think it was following your piece on Celtic PLC’s publication of our end of year results in June 2018, that I made a comparison between “potentially” identical businesses in the same City with hugely different financial results due to the way each business was run.

     

     

    Of course Sevco got an out of jail card when they managed to qualify then (over) perform in the Europa.

     

     

    Celtic failed to qualify for the UCL therefore the performance of each business will be much closer this financial year.

     

     

    Of course there are always intangibles in the footballing business and when you are a well run business these tend to have a positive effect and when you are a poorly run business a negative one.

     

     

    For instance, Sevco’s failure to sell Morales or any other player in the January window following their good showing in Europe has them going back to Close Brothers for cash. While our “windfall” from the profitable disposal of our team management and coaching staff means that the shortfall from our UCL failure will be mitigated.

     

     

    However Celtic F C, like The Rangers F C are, or should be, primarily football clubs. That means what happens on the pitch is of paramount importance.

     

     

    The different approaches, Rangers International throwing everything including the kitchen sink at their squad and Celtic PLC being risk averse means, we will go into the Old Firm derby similarly matched. Of course our extra quality should prevail but I’m sure in June 2019 we never thought this imaginable.

     

     

    SFTB’s @ 12:26 PM,

     

     

    “Not sure you will get much joy out of Supporters Direct. I still get e-mails from them and they represent the myths rather than the truths of Scottish football…

     

     

    …To which I say, Aye right. This group just wants Saturday 3pm kick offs and the big bad O** F*** punished for sectarianism

     

     

    Yes, these supporters associations have let down Scottish Football as much as the SFA, the SPL and the SFL. Insofar as they made the right noises at the time but we’re toothless in the face of the corruption and incompetency of these organisations.

     

     

    “…P.S. I think you are wrong to link Andy Roxburgh (and Craig Brown) with the failures of McLeish and Levein. Andy Roxburgh, with Craig Brown, dragged Scottish football coaching into a modern organised era. Up to then, you had to find individuals like Stein and Turnbull, who were operating outside the convential wisdom that coaching was for foreigners. Roxburgh and Brown and others made a formal coaching structure and qualifications that improved the level of all round coaching. My own sport and several other minority sports in Scotland were streets ahead of Scottish football in this regard. Craig Brown, who has many other faults, as a coach and a man, acknowledges how tardy Scottish football was on improving coach education and resources and how much they adapted from other sports. (P.S. the secret to the increased physique of Scottish Rugby players may not be all due to fitness training and a lot more to do with, ahem, supplements). A similar route was taken by Scottish athletes inspired by David Jenkins and Scottih cyclists like David Millar…

     

     

    Well I’m not sure how fair it is comparing known dopers to currently performing Athletes. Also no indication that football is not on a par or worse than rugby, there are many very effective, legal supplements and training techniques out there.

     

     

    We benefit from that ourselves, especially under our last coaching regime… Calvin, Ryan KT etc, certainly have quickly obtained an enhanced pace, endurance and physicality.

     

     

    I take your point though, some of the man-monsters now playing rugby are “at least” freaks of nature;)

     

     

    Now as far as Andy and Craig go, for all the good of Largs, if you don’t have the other necessary management tool-set you will not see improved results. Also if you take an initiative then let it shrink on the vine it has limited medium term and long term benefits.

     

     

    Now the 15 years Andy and Craig run the National Team, SDM was running Rangers, the way he did was certainly detrimental to Scottish Football but Brown and Roxburgh and those who overpromoted them have to take their share of the blame.

     

     

    Andy Roxburgh took over World Cup squad with players from the top British Clubs,* by the millennium when Craig went the National Team was in terminal decline.

     

     

    *After an incomes hiding in Portugal Alan Hansen was quoted as saying… Andy Roxburgh thinks tactics are a mint;)

     

     

    Now, many cite changes in world football as if there was a party going on and we weren’t invited and had to view proceedings with our nose pressed up against the window.

     

     

    That was not the case, we had the same opportunities as the Belgium’s, Icelands and Croatias of the world to innovate and excel.

     

     

    Maybe a fair measure would be the home nations, historically Scotland has been the British Isles second national team, where is the world rankings now…

     

     

    England top ten

     

     

    Wales top twenty

     

     

    Norn Ireland top thirty

     

     

    ROI top forty

     

     

    Scotland top fifty

     

     

    There can be absolutely no excuse for that, we have huge resources, leagues and clubs relative to Norn Ireland and fall way below them in performance.

     

     

    It’s incompetence and corruption that has caused this.

     

     

    Hail Hail

  17. GlassTwoThirdsFull on

    TimHorton

     

    Not sure Benitez would come either, and possibly not even a great fit for what we need. I mentioned him because etims had a bit yesterday linking us with him.

     

    Martinez would be a good fit, but I can’t see him leaving Belgium before the Euros.

     

    I would just like to see us go for someone who no other team in the league could even consider. Plenty of good coaches out there. Not all would be looking for loads of money to spend. Some would back themselves to succeed through their own coaching skills.

     

    The poor standing of the league doesn’t help, but we do have Europe to offer.

     

    Don’t be scared to “think big”. Leeds didn’t think they would get Bielsa, but they obviously offered him a project which he bought into.

     

    I’m not too fussed if they move on after a few years if they have done well and are wanted by teams in bigger leagues. We should have a good structure in place whereby someone with a similar philosophy can just slot in.

  18. DontB @ 3:08 PM,

     

     

    Woohoo…

     

     

    Great news… not just for lent mind;)

     

     

    Hail Hail

  19. Greatly researched economic analysis Paul……Adam Smith would be proud of ye.

     

     

    Welcome back DontBrattbackinanger, any chance of a weather update?

  20. What is the Stars on

    Lawwells stooges obsessed paranoid tims

     

    Keep the Old Firm alive

     

    cmon the 49ers

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