Rangers: Crisis Over, Or Just Beginning?
It is little wonder that Scotland’s Mainstream Media (SMSM) get a hard time when, aside from any perceived Celtic/Rangers/Old Firm bias, they make such elementary errors. The Rangers International Football Club (RIFC) interim results revealed operating losses of £3.6m between July 1st and December 31st 2013, which the Daily Record and the Herald newspapers called “the seven months to the end of last year/2013.” And this from a media which spent weeks trumpeting Rangers manager Ally McCoist’s annual salary as £826,000 when this figure appeared in RIFC’s first full accounts, over big blue letters stating “For the 13 month period to 30 June 2013.” So it wasn’t as if the SMSM had no elementary errors from which to learn.
Meanwhile, the results boosted Rangers fans’ campaign to have potential benefactor Dave King’s money installed at Ibrox. This from fans whose hatred of former benefactor David Murray has inspired an unofficial rebranding of the club’s Murray Park training facility as “Auchenhowie.” Learning from past errors is obviously not all-the-rage in Scotland. RIFC directors took comfort from RIFC’s reduced operating losses, from last year’s headline-grabbing £1m-per-month to £600,000-per-month. Rangers’ “enemies” took comparable comfort from the “material uncertainties” over RIFC’s ability to operate “as a going concern.” Most Rangers fans have recoiled in horror at both.
Rangers are, of course, far from the only football club to put a “spin” on ghastly accounts – recent Northern Echo newspaper headlines declared Middlesbrough “happy with financial situation despite FOURTEEN… MILLION… QUID…loss” (my emphasis).
But last year’s RIFC interims were spun beyond reason by the then-CEO Charles Green. And history has certainly not been kind to his reports of “great strides in a short spell,” “a key milestone in our plans for bringing Rangers back to its glory days,” (that was the “Initial Public Offer” of shares – the IPO – in case you didn’t recognise it from the description) and…“comfort from having positive cash balances which will be spent wisely in the future.” Yes, he really said that.
Current CEO Graham Wallace is more Planet Earth-rooted than Green. His best “spin” was real damned-by-faint-praise material: “it has, to a degree, been a more positive trading period.” And he was scarcely more convincing in a “Question and Answer session” with the Herald newspaper, which was a management-speak masterclass in the art of talking at length while saying nothing. For instance: “What we can say in terms of how we are running the business now and managing the cash and how we are managing our ability to run the business, I am very comfortable with where we are and…the progress we have in place now to give us a proper level of comfort and assurance on the way the money is being spent.” And, yes, I DID shorten that.
I think he thinks costs are adequately under control. But I had to go to the toilet halfway through. Or, as Wallace might say: “What I can say in terms of bladder excavation is that I am happy with the progress I have in place to give me a proper level of comfort and assurance on the way my underpants have not been wet.” The directors felt “satisfied that the Group would continue to operate within the existing cash balances, working capital facilities and contracted finance lease arrangements, and therefore…is able to meet its liabilities as they become due.” But simple arithmetic shows how precarious that view is. Multi-million operating losses and a cash balance reduction from £21.2m to £3.5m in 2013 tell an unambiguous story. The money’s running out. “Post-balance sheet events” suggest it is STILL running out. And when it’s gone, the club’s gone.
Recent news that £1m of emergency loan funding was to be available on slightly less onerous terms than originally offered was greeted semi-triumphantly by Rangers fans. Yet the accounts tell a less encouraging tale of even that limited good news. RIFC originally announced that the £1m to be loaned by major RIFC shareholders and hedge fund managers Laxey Partners would attract a “premium payment” of £150,000 and was due for repayment by September 1st 2014 (though documents published on the STV website said 1st September 2015). The replacement loan, from “lifelong Rangers fan” George Letham, was “subject to the same terms and conditions with the exception that the premium payment has been reduced to £45,000.” However, the accounts’ “post-balance sheet events” section adds that the facility “carries a potential annualised interest charge of 10% should repayment not be made before 2 July 2014.”
The desperation of Rangers’ financial plight was exposed by the Auditor’s “Emphasis of Matter” – defined as “a paragraph of such importance that it is fundamental to (the) understanding of financial statements” – being so, well, emphatic. Last month, rumours of impending administration, or at least detailed planning by RIFC directors for it, were sparked by Deloitte, the emphatic auditors, being in lengthy discussions with said directors. It is now apparent that these discussions centred on the uncertainties surrounding RIFC remaining a going concern. The board, it seems, believe that their cost-cutting strategies (called “cost management measures” in the results), however slowly they are evolving, could avoid an insolvency event. They made a list of “key assumptions” focusing on season-ticket sales and based on the twin inevitabilities of a return to Scottish football’s top-flight and a resultant increase in revenue. And “after applying what the directors consider to be reasonable downside scenarios to the key assumptions underpinning the forecasts,” they were “satisfied that the Group would continue to operate within the existing cash balances, working capital facilities and contracted finance lease arrangements, and therefore the Group is able to meet its liabilities as they become due.”
Enter Dave King.
King has been a perennial sideline figure in Rangers’ saga. And he remains so, for now, despite his and his many disciples’ best efforts to put him at the centre-stage. These efforts have, however, worked on RIFC’s directors. They have been panicked by the mere suggestion – which is all it is yet – that Rangers fans divert their 2014/15 season-ticket money into a “trust fund” unless or until “fans” receive “security” over RIFC’s main assets, Ibrox Stadium and Murray Park/Auchenhowie training ground – as if it were some form of loan rather than a reduced-rate payment for admission to designated games. Details of the fund are not yet public. So we don’t know: Who will administer the fund? To whom specifically will security of Ibrox and Auchenhowie be granted? How will those people be chosen? And, most pertinently, what if security cannot be granted to “fans”? After all, it couldn’t be granted to potential lenders when Wallace sought emergency funding from City of London financial institutions in January, because former Rangers owner and one-time saviour Craig Whyte last year set out a potential legal claim on those assets.
However, despite all these uncertainties, Somers devoted two paragraphs of his ‘Chairman’s Statement’ to “external comment and ill-informed opinion” – phraseology usually reserved for Rangers’ enemies (“Celtic-minded” websites/bloggers, the media, everyone else…) which had “caused a level of uncertainty” over “season-ticket cash flowing into the club.” Deloitte blamed the season-ticket spat for “the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern and…realise its assets and discharge its liabilities in the normal course of business.” And the spat, Somers concluded, “clearly would not be in the best interests of Rangers and would likely have a significant impact on our ability to progress the development of the Club in the planned manner.” This suggested fans might kill off Rangers by backing King to any significant degree, which Sunday Mail journalist Gordon Waddell labelled “emotional blackmail” on STV’s Scotland Tonight programme.
Somers garnered less attention with his “reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.” Because most reactions centred on rapidly diminishing cash balances, persistently high operating costs…and Dave Bloody King. Thanks to his recent trip to Britain and his subsequent willingness to talk, at length, into any microphone, telephone or Dictaphone, King is now regarded by the huge majority of vocal Rangers fans as “the solution.” Paradoxically, however, this is largely despite what he said, not because of it.
On Scotland Tonight, Chris Graham, a spokesman for the “Union of Fans” (UOF), the latest Rangers supporters group of… erm… Rangers supporters groups, was asked what he thought Dave King could “bring.” He answered: “£30m.” Graham is STV’s staple supporters’ spokesman, despite a chronic charisma deficiency and a near-allergy to astute analysis – he backed Craig Whyte and Charles Green and declared 13 months ago that there were “no dark clouds hanging over Ibrox.” His latest analysis was true to form. To be fair, he is not alone in believing in King the benefactor. “We urge the board to accept Dave King’s offer of £30m,” said a statement on behalf of all UOF member groups. And a contributor to Rangers fans’ website FollowFollow noted: “We need a huge injection of cash and Dave King is the only credible source of it.” But there was a shade more nuance in what King actually said.
He told Glasgow’s Evening Times newspaper: “The club needs £30m-£50m over the next five years and I am willing to share the shortfall as to what I get from other people. I would like as much as possible from other people.” Scottish Daily Mail readers were told “I don’t even want to put new money in… I am the last resort guy, no more than that.” And he even distanced himself from “his” trust fund. In February he said: “I propose the fans pay their money into a trust and funds are released in full to the club…against security of the club property.” Last week it was: “All I have said to fans’ groups is that while I think it is a very big ask to say to Rangers fans, ‘please withhold your season ticket money,’ it may become necessary.” Trusting King’s words is, of course, fraught with danger, as many in South Africa’s justice system would testify. But, as yet, his “£30m” is not “in the post.”
Protagonists are now waiting for the “120-day review” of Rangers’ business operations, promised by Wallace at RIFC’s AGM. After the Board’s and King’s vague public statements on their recent meeting, the UOF felt able to proclaim that the board “are no longer considering the massive scaling back of club operations.” This, I suspect, was news to Wallace. And so it goes on…and on. The SMSM still makes factual errors – BBC Scotland’s Richard Wilson still believes “the £1.5m loan…is due to be paid back by 1 September.” And Rangers fans still feel entitled to the multi-million pound generosity of others to correct their clubs’ mistakes. It is little wonder both groups get such a hard time.
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